##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2008
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission
File Number: 001-34197
 LOCAL.COM CORPORATION
  Delaware
(State or other jurisdiction of 
incorporation or organization)
    
    33-0849123
(I.R.S. Employer
Identification No.)
 One Technology Drive, Building G
Irvine, CA 92618
 (949) 784-0800
 þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer   þ
(Do not check if a smaller reporting company)
    
    Smaller Reporting Company o
 o þ
 Number of shares outstanding at October 31, 2008:
    
    Common: 14,446,107Preferred: 0




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##### 



LOCAL.COM CORPORATION
TABLE OF CONTENTS
  
 PagePART I  FINANCIAL INFORMATIONItem 1.
Financial Statements.Condensed Consolidated Balance Sheets as of September 30, 2008 (Unaudited) and December 31, 2007
    
    3Condensed Consolidated Statements of Operations for the three and nine months ended
    
    4September 30, 2008 and 2007 (Unaudited)Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended
    
    5September 30, 2008 and 2007 (Unaudited)Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2008 and
    
    62007 (Unaudited)Notes to Condensed Consolidated Financial Statements (Unaudited)
    
    7Item 2.
Managements Discussion and Analysis of Financial Condition and Results of Operations.
    
    14Item 3.
Quantitative and Qualitative Disclosures About Market Risk.
    
    19Item 4T.
Controls and Procedures.
    
    19PART II  OTHER INFORMATIONItem 1.
Legal Proceedings.
    
    21Item 1A.
Risk Factors.
    
    21<
A href="#114">Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.
    
    21Item 3.
Defaults Upon Senior Securities.
    
    21Item 4.
Submission of Matters to a Vote of Security Holders.
    
    21Item 5.
Other Information.
    
    21Item 6.
Exhibits.
    
    22EX-31.1EX-31.2EX-32.1
  2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements.
 LOCAL.COM CORPORATION
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
  September 30,
    
    
    December 31,2008
    
    
    2007(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    12,926
    
    
    $
    14,258Restricted cash
    
    
    31
    
    
    
    30Marketable securities
    
    
    
    
    
    
    1,999Accounts receivable, net of allowances of $25 and $15, respectively
    
    
    6,325
    
    
    
    3,595Prepaid expenses and other current assets
    
    
    173
    
    
    
    292Total current assets
    
    
    19,455
    
    
    
    20,174Property and equipment, net
    
    
    1,075
    
    
    
    1,473Intangible assets, net
    
    
    2,358
    
    
    
    3,156Goodwill
    
    
    13,231
    
    
    
    13,233Long-term restricted cash
    
    
    35
    
    
    
    66Deposits
    
    
    12
    
    
    
    12Total assets
    
    $
    36,166
    
    
    $
    38,114LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    5,902
    
    
    $
    4,029Accrued compensation
    
    
    614
    
    
    
    456Deferred rent
    
    
    230
    
    
    
    316Other accrued liabilities
    
    
    427
    
    
    
    194Deferred revenue
    
    
    83
    
    
    
    177Total liabilities, all current
    
    
    7,256
    
    
    
    5,172Commitments and contingenciesStockholders equity:Convertible preferred stock, $0.00001 par value; 10,000,000 shares
authorized; none issued and outstanding for all periods presented
    
    
    
    
    
    
    Common stock, $0.00001 par value; 30,000,000 shares authorized;
14,446,107 and 14,204,110 issued and outstanding, respectively
    
    
    
    
    
    
    Additional paid-in capital
    
    
    84,540
    
    
    
    82,176Accumulated comprehensive loss
    
    
    
    
    
    
    (1
    )Accumulated deficit
    
    
    (55,630
    )
    
    
    (49,233
    )Stockholders equity
    
    
    28,910
    
    
    
    32,942Total liabilities and stockholders equity
    
    $
    36,166
    
    
    $
    38,114
  3




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##### Table of Contents



LOCAL.COM CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
   Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenue
    
    $
    10,196
    
    
    $
    5,614
    
    
    $
    28,684
    
    
    $
    15,593Operating expenses:Search serving
    
    
    1,331
    
    
    
    1,116
    
    
    
    4,104
    
    
    
    2,884Sales and marketing
    
    
    8,455
    
    
    
    5,298
    
    
    
    23,997
    
    
    
    14,698General and administrative
    
    
    1,271
    
    
    
    1,143
    
    
    
    4,113
    
    
    
    3,654Research and development
    
    
    725
    
    
    
    621
    
    
    
    2,358
    
    
    
    1,871Amortization of intangibles
    
    
    200
    
    
    
    315
    
    
    
    798
    
    
    
    796Total operating expenses
    
    
    11,982
    
    
    
    8,493
    
    
    
    35,370
    
    
    
    23,903Operating loss
    
    
    (1,786
    )
    
    
    (2,879
    )
    
    
    (6,686
    )
    
    
    (8,310
    )Interest and other income (expense), net
    
    
    72
    
    
    
    (6,418
    )
    
    
    290
    
    
    
    (7,224
    )Loss before income taxes
    
    
    (1,714
    )
    
    
    (9,297
    )
    
    
    (6,396
    )
    
    
    (15,534
    )Provision for income taxes
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    1Net loss
    
    $
    (1,714
    )
    
    $
    (9,297
    )
    
    $
    (6,397
    )
    
    $
    (15,535
    )Per share data:Basic net loss per share
    
    $
    (0.12
    )
    
    $
    (0.71
    )
    
    $
    (0.45
    )
    
    $
    (1.47
    )Diluted net loss per share
    
    $
    (0.12
    )
    
    $
    (0.71
    )
    
    $
    (0.45
    )
    
    $
    (1.47
    )Basic weighted average shares outstanding
    
    
    14,357,860
    
    
    
    13,106,117
    
    
    
    14,268,372
    
    
    
    10,590,686Diluted weighted average shares outstanding
    
    
    14,357,860
    
    
    
    13,106,117
    
    
    
    14,268,372
    
    
    
    10,590,686
  4




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##### Table of Contents



LOCAL.COM CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
   Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net loss
    
    $
    (1,714
    )
    
    $
    (9,297
    )
    
    $
    (6,397
    )
    
    $
    (15,535
    )Other comprehensive income (loss):Net unrealized gain (loss) on marketable securities
    
    
    
    
    
    
    11
    
    
    
    1
    
    
    
    22Total comprehensive loss
    
    $
    (1,714
    )
    
    $
    (9,286
    )
    
    $
    (6,396
    )
    
    $
    (15,513
    )Supplemental comprehensive income (loss) information:Unrealized holding gains (losses) arising during period
    
    $
    
    
    
    $
    11
    
    
    $
    1
    
    
    $
    22Reclassification adjustment for losses included in net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net unrealized gain (loss) on marketable securities
    
    $
    
    
    
    $
    11
    
    
    $
    1
    
    
    $
    22
  5




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##### Table of Contents



LOCAL.COM CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
   Nine months endedSeptember 30,2008
    
    
    2007Cash flows from operating activities:Net loss
    
    $
    (6,397
    )
    
    $
    (15,535
    )Adjustments to reconcile net loss to cash used in operating activities:Depreciation and amortization
    
    
    1,478
    
    
    
    1,617Provision for doubtful accounts
    
    
    10
    
    
    
    9Non-cash stock based compensation
    
    
    1,801
    
    
    
    1,207Non-cash interest expense
    
    
    
    
    
    
    6,679Changes in operating assets and liabilities:Accounts receivable
    
    
    (2,740
    )
    
    
    (1,160
    )Prepaid expenses and other
    
    
    152
    
    
    
    112Accounts payable and accrued liabilities
    
    
    2,178
    
    
    
    906Deferred revenue
    
    
    (94
    )
    
    
    (39
    )Net cash used in operating activities
    
    
    (3,612
    )
    
    
    (6,204
    )Cash flows from investing activities:Capital expenditures
    
    
    (315
    )
    
    
    (495
    )Proceeds from sales of marketable securities
    
    
    2,000
    
    
    
    Decrease in restricted cash
    
    
    30
    
    
    
    41Acquisition, net of cash returned
    
    
    2
    
    
    
    (2,034
    )Net cash provided by (used in) investing activities
    
    
    1,717
    
    
    
    (2,488
    )Cash flows from financing activities:Proceeds from issuance of senior secured convertible notes
    
    
    
    
    
    
    8,000Proceeds from issuance of common stock in a private placement
    
    
    
    
    
    
    12,963Proceeds from issuance of common stock from exercise of options
    
    
    397
    
    
    
    324Proceeds from issuance of common stock from exercise of warrants
    
    
    188
    
    
    
    1,341Proceeds from swing-sale profits
    
    
    3
    
    
    
    5Payment of notes payable
    
    
    
    
    
    
    (63
    )Payment of financing related costs
    
    
    (25
    )
    
    
    (1,028
    )Net cash provided by financing activities
    
    
    563
    
    
    
    21,542Net (decrease) increase in cash and cash equivalents
    
    
    (1,332
    )
    
    
    12,850Cash and cash equivalents, beginning of period
    
    
    14,258
    
    
    
    3,264Cash and cash equivalents, end of period
    
    $
    12,926
    
    
    $
    16,114Supplemental cash flow information:Interest paid
    
    $
    
    
    
    $
    279Income taxes paid
    
    $
    1
    
    
    $
    1Non-cash investing and financing transactions:Debt discount related to issuance of senior secured convertible notes
    
    
    
    
    
    $
    6,221Conversion of senior secured convertible notes into common stock
    
    
    
    
    
    $
    8,000Warrants issued for financing costs
    
    
    
    
    
    $
    458Common stock issued for asset purchase
    
    
    
    
    
    $
    431
  6




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##### Table of Contents



LOCAL.COM CORPORATION
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  1. Basis of presentation
  2. Significant accounting policies
 Principles of consolidation
  Intangible assets
     Goodwill
 Goodwill and Other Intangible Assets
 Web site development costs and computer software developed for internal use
 Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use Accounting for Web Site Development Costs
 7




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Stock-based compensation
 Share-Based Payment
  Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Risk-free interest rate
    
    
    3.54
    %
    
    
    4.77
    %
    
    
    3.49
    %
    
    
    4.77
    %Expected lives (in years)
    
    
    7.0
    
    
    
    7.0
    
    
    
    7.0
    
    
    
    7.0Expected dividend yield
    
    None
    
    None
    
    None
    
    NoneExpected volatility
    
    
    100.00
    %
    
    
    100.00
    %
    
    
    100.00
    %
    
    
    100.00
    %
  Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Sales and marketing
    
    $
    218
    
    
    $
    151
    
    
    $
    692
    
    
    $
    364General and administrative
    
    
    293
    
    
    
    168
    
    
    
    919
    
    
    
    661Research and development
    
    
    67
    
    
    
    51
    
    
    
    190
    
    
    
    183Total stock-based compensation expense
    
    $
    578
    
    
    $
    370
    
    
    $
    1,801
    
    
    $
    1,208Basic and diluted net compensation expense per share
    
    $
    0.04
    
    
    $
    0.03
    
    
    $
    0.13
    
    
    $
    0.11
 Net loss per share
 Earnings per Share
   8




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##### Table of Contents



Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Numerator:Net loss
    
    $
    (1,714
    )
    
    $
    (9,297
    )
    
    $
    (6,397
    )
    
    $
    (15,535
    )Denominator:Denominator for basic calculation weighted average shares
    
    
    14,358
    
    
    
    13,106
    
    
    
    14,268
    
    
    
    10,591Dilutive common stock equivalents:Options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Denominator for diluted calculation weighted average shares
    
    
    14,358
    
    
    
    13,106
    
    
    
    14,268
    
    
    
    10,591Net loss per share:Basic net loss per share
    
    $
    (0.12
    )
    
    $
    (0.71
    )
    
    $
    (0.45
    )
    
    $
    (1.47
    )Diluted net loss per share
    
    $
    (0.12
    )
    
    $
    (0.71
    )
    
    $
    (0.45
    )
    
    $
    (1.47
    )
 3. Composition of certain balance sheet and statement of operations captions
  September 30,
    
    
    December 31,2008
    
    
    2007Furniture and fixtures
    
    $
    203
    
    
    $
    203Office equipment
    
    
    132
    
    
    
    119Computer equipment
    
    
    1,368
    
    
    
    1,889Computer software
    
    
    1,652
    
    
    
    1,841Leasehold improvements
    
    
    583
    
    
    
    5833,938
    
    
    
    4,635Less accumulated depreciation and amortization
    
    
    (2,863
    )
    
    
    (3,162
    )Property and equipment, net
    
    $
    1,075
    
    
    $
    1,473
  September 30,
    
    
    December 31,2008
    
    
    2007Developed technology
    
    $
    2,233
    
    
    $
    2,233Non-compete agreements
    
    
    13
    
    
    
    274Purchased technology
    
    
    
    
    
    
    1,239Customer-related
    
    
    1,020
    
    
    
    1,020Patents
    
    
    431
    
    
    
    431Domain name
    
    
    701
    
    
    
    7014,398
    
    
    
    5,898Less accumulated amortization
    
    
    (2,040
    )
    
    
    (2,742
    )Intangible assets, net
    
    $
    2,358
    
    
    $
    3,156
 9




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##### Table of Contents



Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Interest income
    
    $
    72
    
    
    $
    175
    
    
    $
    290
    
    
    $
    342Interest expense
    
    
    
    
    
    
    (526
    )
    
    
    
    
    
    
    (887
    )Interest expense  non-cash
    
    
    
    
    
    
    (6,067
    )
    
    
    
    
    
    
    (6,679
    )Interest and other income (expense), net
    
    $
    72
    
    
    $
    (6,418
    )
    
    $
    290
    
    
    $
    (7,224
    )
 4. Operating segment information
 Disclosures about Segments of an Enterprise and Related Information
 Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenue by geographic region:United States
    
    $
    9,968
    
    
    $
    5,426
    
    
    $
    28,143
    
    
    $
    15,280Europe
    
    
    228
    
    
    
    188
    
    
    
    541
    
    
    
    313Total revenue
    
    $
    10,196
    
    
    $
    5,614
    
    
    $
    28,684
    
    
    $
    15,593
 5. Stock option plans
 1999 Plan
  2000 Plan
  10




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##### Table of Contents



2004 Plan
  2005 Plan
  2007 Plan
  2008 Plan
  11




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##### Table of Contents



Shares
    
    
    Weighted
    
    
    AggregateAverage
    
    
    Intrinsic ValueExercise Price
    
    
    (in thousands)Outstanding at December 31, 2007
    
    
    2,703,850
    
    
    $
    5.04Granted
    
    
    492,789
    
    
    
    4.32Exercised
    
    
    (186,626
    )
    
    
    2.13Cancelled
    
    
    (153,092
    )
    
    
    3.75Outstanding at September 30, 2008
    
    
    2,856,921
    
    
    $
    5.17
    
    
    $
    14Exercisable at September 30, 2008
    
    
    1,410,879
    
    
    $
    5.79
    
    
    $
    14
    Options Outstanding
    
    
    Options ExercisableWeightedAverage
    
    
    Weighted
    
    
    
    
    
    
    WeightedRemaining
    
    
    Average
    
    
    
    
    
    
    AverageContractual
    
    
    Exercise
    
    
    
    
    
    
    ExerciseRange of Exercise Prices
    
    Shares
    
    
    Life
    
    
    Price
    
    
    Shares
    
    
    Price$1.01 - $2.00
    
    
    47,500
    
    
    4.3 years
    
    $
    2.00
    
    
    
    47,500
    
    
    $
    2.00$2.01 - $3.00
    
    
    111,828
    
    
    7.1 years
    
    $
    2.40
    
    
    
    70,428
    
    
    $
    2.25$3.01 - $4.00
    
    
    821,191
    
    
    6.8 years
    
    $
    3.73
    
    
    
    547,289
    
    
    $
    3.71$4.01 - $5.00
    
    
    1,209,408
    
    
    9.1 years
    
    $
    4.67
    
    
    
    144,694
    
    
    $
    4.53$5.01 - $6.00
    
    
    131,459
    
    
    7.4 years
    
    $
    5.69
    
    
    
    111,758
    
    
    $
    5.69$6.01 - $7.00
    
    
    113,773
    
    
    7.1 years
    
    $
    6.40
    
    
    
    106,660
    
    
    $
    6.38$7.01 - $8.00
    
    
    190,112
    
    
    6.9 years
    
    $
    7.51
    
    
    
    184,234
    
    
    $
    7.52$8.01 - $10.00
    
    
    120,000
    
    
    7.6 years
    
    $
    8.76
    
    
    
    86,666
    
    
    $
    8.98$15.01 - $16.59
    
    
    111,650
    
    
    5.9 years
    
    $
    15.61
    
    
    
    111,650
    
    
    $
    15.612,856,921
    
    
    7.8 years
    
    $
    5.17
    
    
    
    1,410,879
    
    
    $
    5.79
 6. Warrants
  Weighted AverageShares
    
    
    Exercise PriceOutstanding at December 31, 2007
    
    
    3,470,278
    
    
    $
    7.34Exercised
    
    
    (55,371
    )
    
    
    3.38Expired
    
    
    (63,125
    )
    
    
    3.75Outstanding and exercisable at September 30, 2008
    
    
    3,351,782
    
    
    $
    7.47
 12




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Warrants Outstanding and ExercisableWeightedAverage
    
    WeightedRemaining
    
    AverageContractual
    
    ExerciseRange of Exercise Prices
    
    Shares
    
    Life
    
    Price$0.00  $3.99
    
    
    61,562
    
    
    
    0.2
    
    
    $
    3.40$4.00  $4.99
    
    
    867,662
    
    
    
    3.4
    
    
    $
    4.36$5.00  $5.99
    
    
    867,662
    
    
    
    3.4
    
    
    $
    5.17$7.00  $7.99
    
    
    537,373
    
    
    
    3.8
    
    
    $
    7.89$9.00  $9.99
    
    
    537,373
    
    
    
    3.8
    
    
    $
    9.26$10.00  $19.99
    
    
    315,750
    
    
    
    1.0
    
    
    $
    10.00$20.00  $25.53
    
    
    164,400
    
    
    
    1.2
    
    
    $
    25.533,351,782
    
    
    
    3.2
    
    
    $
    7.47
 7. Subsequent events
 Stock repurchase program
  Stockholder rights plan
 th
  13




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 This Quarterly Report on Form 10-Q or certain information included or incorporated by reference in
this report, contains or may contain forward-looking statements that involve risks, uncertainties
and assumptions. All statements, other than statements of historical fact, are statements that
could be deemed forward- looking statements within the meaning of the federal securities laws.
In addition, important factors to consider in evaluating such forward-looking statements include
changes or developments in social, economic, market, legal or regulatory circumstances, changes in
our business or growth strategy or an inability to execute our strategy due to changes in our
industry or the economy generally, the emergence of new or growing competitors, the actions or
omissions of third parties, including customers, competitors and governmental authorities, and
various other factors, including those described or referred to in Item 1A of Part II of this
Quarterly Report. Should any one or more of these risks or uncertainties materialize, or the
underlying estimates or assumptions prove incorrect, our actual results could differ materially
from those expressed in the forward-looking statements and there can be no assurance that the
forward-looking statements contained in this report will in fact occur.
 The following discussion and analysis of our financial condition and results of operations should
be read in conjunction with the attached condensed consolidated financial statements and related
notes thereto, and with the audited consolidated financial statements and related notes thereto as
of December 31, 2007 and for the year ended December 31, 2007 included in our Annual Report on Form
10-K filed with the Securities and Exchange Commission on March 10, 2008.
 Overview
   Stock-based compensation
 Share-Based Payment,
  Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Sales and marketing
    
    $
    218
    
    
    $
    151
    
    
    $
    692
    
    
    $
    364General and administrative
    
    
    293
    
    
    
    168
    
    
    
    919
    
    
    
    661Research and development
    
    
    67
    
    
    
    51
    
    
    
    190
    
    
    
    183Total stock-based compensation expense
    
    $
    578
    
    
    $
    370
    
    
    $
    1,801
    
    
    $
    1,208Basic and diluted net compensation
expense per share
    
    $
    0.04
    
    
    $
    0.03
    
    
    $
    0.13
    
    
    $
    0.11
 14




---



##### Table of Contents



Results of Operations
  Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenue
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Operating expenses:Search serving
    
    
    13.0
    
    
    
    19.9
    
    
    
    14.3
    
    
    
    18.5Sales and marketing
    
    
    82.9
    
    
    
    94.4
    
    
    
    83.6
    
    
    
    94.3General and administrative
    
    
    12.5
    
    
    
    20.3
    
    
    
    14.3
    
    
    
    23.4Research and development
    
    
    7.1
    
    
    
    11.1
    
    
    
    8.2
    
    
    
    12.0Amortization of intangibles
    
    
    2.0
    
    
    
    5.6
    
    
    
    2.9
    
    
    
    5.1Total operating expenses
    
    
    117.5
    
    
    
    151.3
    
    
    
    123.3
    
    
    
    153.3Operating loss
    
    
    (17.5
    )
    
    
    (51.3
    )
    
    
    (23.3
    )
    
    
    (53.3
    )Interest and other income (expense), net
    
    
    0.7
    
    
    
    (114.3
    )
    
    
    1.0
    
    
    
    (46.3
    )Loss before income taxes
    
    
    (16.8
    )
    
    
    (165.6
    )
    
    
    (22.3
    )
    
    
    (99.6
    )Provision for income taxes
    
    
    0.0
    
    
    
    0.0
    
    
    
    0.0
    
    
    
    0.0Net loss
    
    
    (16.8)
    %
    
    
    (165.6)
    %
    
    
    (22.3)
    %
    
    
    (99.6)
    %
 Revenue
  Three months ended September 30,
    
    
    Percent
    
    
    Nine months ended September 30,
    
    
    Percent2008
    
    
    (*)
    
    
    2007
    
    
    (*)
    
    

change
    
    
    2008
    
    
    (*)
    
    
    2007
    
    
    (*)
    
    
    changeLocal domestic
    
    $
    9,799
    
    
    
    96.1
    %
    
    $
    4,804
    
    
    
    85.6
    %
    
    
    104.0
    %
    
    $
    26,987
    
    
    
    94.1
    %
    
    $
    12,900
    
    
    
    82.7
    %
    
    
    109.2
    %Local international
    
    
    228
    
    
    
    2.2
    %
    
    
    188
    
    
    
    3.3
    %
    
    
    21.3
    %
    
    
    541
    
    
    
    1.9
    %
    
    
    313
    
    
    
    2.0
    %
    
    
    72.8
    %Total local
    
    
    10,027
    
    
    
    98.3
    %
    
    
    4,992
    
    
    
    88.9
    %
    
    
    100.9
    %
    
    
    27,528
    
    
    
    96.0
    %
    
    
    13,213
    
    
    
    84.7
    %
    
    
    108.3
    %National
    
    
    169
    
    
    
    1.7
    %
    
    
    622
    
    
    
    11.1
    %
    
    
    (72.8
    )%
    
    
    1,156
    
    
    
    4.0
    %
    
    
    2,380
    
    
    
    15.3
    %
    
    
    (51.4
    )%Total revenue
    
    $
    10,196
    
    
    
    100.0
    %
    
    $
    5,614
    
    
    
    100.0
    %
    
    
    81.6
    %
    
    $
    28,684
    
    
    
    100.0
    %
    
    $
    15,593
    
    
    
    100.0
    %
    
    
    84.0
    %
 
 (*)
    
    Percent of total revenue.  15




---



##### Table of Contents



Percentage of total revenueThree months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,Customer
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Yahoo! Inc.
    
    
    43.9
    %
    
    
    45.6
    %
    
    
    45.1
    %
    
    
    47.4
    %Idearc Media Corp.
    
    
    15.1
    %
    
    
    15.0
    %
    
    
    16.7
    %
    
    
    14.2
    %
 Operating expenses:
  Three months ended September 30,
    
    
    Percent
    
    
    Nine months ended September 30,
    
    
    Percent2008
    
    
    (*)
    
    
    2007
    
    
    (*)
    
    
    change
    
    
    2008
    
    
    (*)
    
    
    2007
    
    
    (*)
    
    
    changeSearch serving
    
    $
    1,331
    
    
    
    13.0
    %
    
    $
    1,116
    
    
    
    19.9
    %
    
    
    19.3
    %
    
    $
    4,104
    
    
    
    14.3
    %
    
    $
    2,884
    
    
    
    18.5
    %
    
    
    42.3
    %Sales and marketing
    
    
    8,455
    
    
    
    82.9
    %
    
    
    5,298
    
    
    
    94.4
    %
    
    
    59.6
    %
    
    
    23,997
    
    
    
    83.6
    %
    
    
    14,698
    
    
    
    94.3
    %
    
    
    63.3
    %General and administrative
    
    
    1,271
    
    
    
    12.5
    %
    
    
    1,143
    
    
    
    20.3
    %
    
    
    11.2
    %
    
    
    4,113
    
    
    
    14.3
    %
    
    
    3,654
    
    
    
    23.4
    %
    
    
    12.6
    %Research and development
    
    
    725
    
    
    
    7.1
    %
    
    
    621
    
    
    
    11.1
    %
    
    
    16.7
    %
    
    
    2,358
    
    
    
    8.2
    %
    
    
    1,871
    
    
    
    12.0
    %
    
    
    26.0
    %Amortization of intangibles
    
    
    200
    
    
    
    2.0
    %
    
    
    315
    
    
    
    5.6
    %
    
    
    (36.5
    )%
    
    
    798
    
    
    
    2.9
    %
    
    
    796
    
    
    
    5.1
    %
    
    
    0.3
    %Total operating expenses
    
    $
    11,982
    
    
    
    117.5
    %
    
    $
    8,493
    
    
    
    151.3
    %
    
    
    41.1
    %
    
    $
    35,370
    
    
    
    123.3
    %
    
    $
    23,903
    
    
    
    153.3
    %
    
    
    48.0
    %
 
 (*)  Percent of total revenue. Search serving
   Sales and marketing
  16




---



##### Table of Contents



General and administrative
   Research and development
   Amortization of intangibles
  Interest and other income (expense)
  Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Interest income
    
    $
    72
    
    
    $
    175
    
    
    $
    290
    
    
    $
    342Interest expense
    
    
    
    
    
    
    (526
    )
    
    
    
    
    
    
    (887
    )Interest expense  non-cash
    
    
    
    
    
    
    (6,067
    )
    
    
    
    
    
    
    (6,679
    )Interest and other income (expense), net
    
    $
    72
    
    
    $
    (6,418
    )
    
    $
    290
    
    
    $
    (7,224
    )
 17




---



##### Table of Contents



Provision for income taxes
  Liquidity and Capital Resources
  September 30,
    
    
    December 31,2008
    
    
    2007Cash and cash equivalents
    
    $
    12,926
    
    
    $
    14,258Marketable securities
    
    
    
    
    
    
    1,999Total cash, cash equivalents and marketable securities
    
    $
    12,926
    
    
    $
    16,257Working capital
    
    $
    12,199
    
    
    $
    15,002
  Nine months ended September 30,2008
    
    
    2007Net cash used in operating activities
    
    $
    (3,612
    )
    
    $
    (6,204
    )Net cash provided by (used in) investing activities
    
    $
    1,717
    
    
    $
    (2,488
    )Net cash provided by financing activities
    
    $
    563
    
    
    $
    21,542
     18




---



##### Table of Contents



Stock repurchase program
  Stockholder rights plan
 th
  Off-Balance Sheet Arrangements
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk.
  
 Item 4T. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
   19




---



##### Table of Contents



Managements Report on Internal Control over Financial Reporting
  Internal Control-Integrated Framework
 Changes in Internal Control over Financial Reporting
  20




---



##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings.
  
 Item 1A. Risk Factors.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  
 Item 3. Defaults upon Senior Securities.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
  
 Item 5. Other Information.
  21




---



##### Table of Contents



Item 6. Exhibits.
 ExhibitNumber
    
    Description31.1*
    
    Certification of Principal Executive Officer Required by Rule
13a-14(a) of the Securities Exchange Act of 1934, as amended, as
Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2*
    
    Certification of Principal Financial Officer Required by Rule
13a-14(a) of the Securities Exchange Act of 1934, as amended, as
Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1*
    
    Certification of Chief Executive Officer and Chief Financial
Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
 
 *
    
    Filed herewith. 22




---



##### Table of Contents



SIGNATURES
  LOCAL.COM CORPORATIONNovember 7, 2008
    /s/ Heath B. ClarkeDate
    Heath B. ClarkeChief Executive Officer
(principal executive officer) and Chairman/s/ Douglas S. NormanDouglas S. NormanChief Financial Officer (principal financial
and accounting officer) and Secretary 23




---



##### Table of Contents



EXHIBITS FILED WITH THIS REPORT
 ExhibitNumber
    
    Description31.1*
    
    Certification of Principal Executive Officer Required by Rule
13a-14(a) of the Securities Exchange Act of 1934, as amended, as
Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2*
    
    Certification of Principal Financial Officer Required by Rule
13a-14(a) of the Securities Exchange Act of 1934, as amended, as
Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1*
    
    Certification of Chief Executive Officer and Chief Financial
Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
 
 *
    
    Filed herewith. 24