##### 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 March 31, 2011
 OR
 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 Number)
 7555 Irvine Center Drive
Irvine, CA 92618
 (949) 784-0800
 
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filero
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



LOCAL.COM CORPORATION
 Table of Contents
 PagePART I. FINANCIAL INFORMATIONItem 1. Financial StatementsCondensed Consolidated Balance Sheets
As of March 31, 2011 (Unaudited) and December 31, 2010
    
    
    3Condensed Consolidated Statements of Operations
For the three months ended March 31, 2011 and 2010 (Unaudited)
    
    
    4Condensed Consolidated Statements of Cash Flows
For the three months ended March 31, 2011 and 2010 (Unaudited)
    
    
    5Notes to Condensed Consolidated Financial Statements (Unaudited)
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    16Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    27Item 4. Controls and Procedures
    
    
    27PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    27Item 1A. Risk Factors
    
    
    27Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    28Item 3. Defaults Upon Senior Securities
    
    
    28Item 4. Removed and Reserved
    
    
    28Item 5. Other Information
    
    
    28Item 6. Exhibits
    
    
    29Signatures
    
    
    31Index to Exhibits
    
    
    32EX-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
  March 31,
    
    
    December 31,2011
    
    
    2010(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    20,213
    
    
    $
    13,079Accounts receivable, net of allowances of
$297 and $297, respectively
    
    
    13,094
    
    
    
    11,912Notes receivable  current portion
    
    
    624
    
    
    
    249Prepaid expenses and other current assets
    
    
    802
    
    
    
    1,454Total current assets
    
    
    34,733
    
    
    
    26,694Property and equipment, net
    
    
    7,405
    
    
    
    7,119Goodwill
    
    
    17,339
    
    
    
    17,339Intangible assets, net
    
    
    8,360
    
    
    
    8,989Long-term portion of note recievable
    
    
    706
    
    
    
    751Deposits
    
    
    52
    
    
    
    52Total assets
    
    $
    68,595
    
    
    $
    60,944LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    6,913
    
    
    $
    7,626Accrued compensation
    
    
    1,461
    
    
    
    1,906Deferred rent
    
    
    622
    
    
    
    641Warrant liability
    
    
    1,281
    
    
    
    2,840Other accrued liabilities
    
    
    421
    
    
    
    651Revolving line of credit
    
    
    
    
    
    
    7,000Deferred revenue
    
    
    537
    
    
    
    699Total current liabilities
    
    
    11,235
    
    
    
    21,363Deferred income taxes
    
    
    188
    
    
    
    188Total liabilities
    
    
    11,423
    
    
    
    21,551Commitments and contingenciesStockholders equity:Convertible preferred stock, $0.00001 par value; 10,000 shares authorized;
none issued and outstanding for all periods presented
    
    
    
    
    
    
    Common stock, $0.00001 par value; 65,000 shares authorized; issued and
outstanding 21,224 and 16,584, respectively
    
    
    
    
    
    
    Additional paid-in capital
    
    
    113,291
    
    
    
    94,194Accumulated deficit
    
    
    (56,119
    )
    
    
    (54,801
    )Stockholders equity
    
    
    57,172
    
    
    
    39,393Total liabilities and stockholders equity
    
    $
    68,595
    
    
    $
    60,944
  3




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##### Table of Contents



LOCAL.COM CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
   Three Months Ended March 31,2011
    
    
    2010Revenue
    
    $
    16,795
    
    
    $
    18,631Operating Expenses:Cost of revenues
    
    
    10,988
    
    
    
    10,802Sales and marketing
    
    
    3,282
    
    
    
    3,098General and administrative
    
    
    2,610
    
    
    
    1,914Research and development
    
    
    1,528
    
    
    
    1,112Amortization and write-down of intangibles
    
    
    1,198
    
    
    
    1,230Total operating expenses
    
    
    19,606
    
    
    
    18,156Operating income (loss)
    
    
    (2,811
    )
    
    
    475Interest and other income (expense), net
    
    
    (55
    )
    
    
    (56
    )Change in fair value of warrant liability
    
    
    1,559
    
    
    
    (272
    )Income (loss) before income taxes
    
    
    (1,307
    )
    
    
    147Provision for income taxes
    
    
    11
    
    
    
    13Net income (loss)
    
    $
    (1,318
    )
    
    $
    134Per share data:Basic net income (loss) per share
    
    $
    (0.07
    )
    
    $
    0.01Diluted net income (loss) per share
    
    $
    (0.07
    )
    
    $
    0.01Basic weighted average shares outstanding
    
    
    20,241
    
    
    
    14,605Diluted weighted average shares outstanding
    
    
    20,241
    
    
    
    15,918
  4




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##### Table of Contents



LOCAL.COM CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
   Three Months Ended March 31,2011
    
    
    2010Cash flows from operating activities:Net income (loss)
    
    $
    (1,318
    )
    
    $
    134Adjustments to reconcile net income (loss) to cash (used in) provided by operating
activities:Depreciation and amortization
    
    
    1,847
    
    
    
    1,476Stock-based compensation expense
    
    
    972
    
    
    
    624Change in fair value of warrant liability
    
    
    (1,559
    )
    
    
    272Changes in operating assets and liabilities:Accounts receivable
    
    
    (1,182
    )
    
    
    (1,914
    )Note receivable
    
    
    45
    
    
    
    Prepaid expenses and other
    
    
    652
    
    
    
    53Accounts payable and accrued liabilities
    
    
    (1,407
    )
    
    
    1,219Deferred revenue
    
    
    (162
    )
    
    
    (154
    )Net cash (used in) provided by operating activities
    
    
    (2,112
    )
    
    
    1,710Cash flows from investing activities:Capital expenditures
    
    
    (935
    )
    
    
    (356
    )Issuance of notes receivable
    
    
    (375
    )
    
    
    Purchases of intangible assets
    
    
    (520
    )
    
    
    (1,216
    )Net cash used in investing activities
    
    
    (1,830
    )
    
    
    (1,572
    )Cash flows from financing activities:Proceeds from issuance of common stock:Exercise of options
    
    
    74
    
    
    
    716Public offering
    
    
    18,227
    
    
    
    Payment of financing related costs
    
    
    (225
    )
    
    
    Payment of revolving credit facility
    
    
    (7,000
    )
    
    
    Net cash provided by financing activities
    
    
    11,076
    
    
    
    716Net increase in cash and cash equivalents
    
    
    7,134
    
    
    
    854Cash and cash equivalents, beginning of the period
    
    
    13,079
    
    
    
    10,080Cash and cash equivalents, end of the period
    
    $
    20,213
    
    
    $
    10,934Supplemental cash flow information:Interest paid
    
    $
    31
    
    
    $
    26Income taxes paid
    
    $
    9
    
    
    $
    169
  5




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##### Table of Contents



LOCAL.COM CORPORATION
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  1. The Company and Summary of Significant Accounting Policies
 Nature of operations
  Principles of consolidation and basis of presentation
    Use of estimates
  Fair Value of Financial Instruments
   6




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##### Table of Contents



Intangible Assets
  2. Notes receivable
   3. Intangible assets
  March 31, 2011
    
    
    December 31, 2010Gross
    
    
    
    
    
    
    Net
    
    
    Weighted
    
    
    Gross
    
    
    
    
    
    
    Net
    
    
    WeightedCarrying
    
    
    Accumulated
    
    
    Carrying
    
    
    Average
    
    
    Carrying
    
    
    Accumulated
    
    
    Carrying
    
    
    AverageAmount
    
    
    Amortization
    
    
    Amount
    
    
    Useful Life
    
    
    Amount
    
    
    Amortization
    
    
    Amount
    
    
    Useful Life(years)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (years)Developed technology
    
    $
    4,488
    
    
    $
    (2,584
    )
    
    $
    1,904
    
    
    
    4
    
    
    $
    3,933
    
    
    $
    (2,446
    )
    
    $
    1,487
    
    
    
    4Non-compete agreements
    
    
    98
    
    
    
    (32
    )
    
    
    66
    
    
    
    2
    
    
    
    83
    
    
    
    (25
    )
    
    
    58
    
    
    
    2Customer-related
    
    
    12,939
    
    
    
    (8,556
    )
    
    
    4,383
    
    
    
    4
    
    
    
    12,939
    
    
    
    (7,534
    )
    
    
    5,405
    
    
    
    4Patents
    
    
    431
    
    
    
    (431
    )
    
    
    
    
    
    
    3
    
    
    
    431
    
    
    
    (431
    )
    
    
    
    
    
    
    3Domain names  indefinite life
    
    
    1,601
    
    
    
    
    
    
    
    1,601
    
    
    
    
    
    
    
    1,601
    
    
    
    
    
    
    
    1,601Trademarks and Trade Name
    
    
    500
    
    
    
    (94
    )
    
    
    406
    
    
    
    4
    
    
    
    500
    
    
    
    (62
    )
    
    
    438
    
    
    
    4$
    20,057
    
    
    $
    (11,697
    )
    
    $
    8,360
    
    
    
    
    
    
    $
    19,487
    
    
    $
    (10,498
    )
    
    $
    8,989
 4. Acquisition
  5. Goodwill and Other Intangible Assets
  7




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##### Table of Contents



6. Web site development costs and computer software developed for internal use
  7. Net income (loss) per share
   Three Months Ended March 31,2011
    
    
    2010Numerator:Net income (loss)
    
    $
    (1,318
    )
    
    $
    134Denominator:Denominator for historical basic calculation weighted average shares
    
    
    20,241
    
    
    
    14,605Dilutive common stock equivalents:*Options
    
    
    
    
    
    
    966Warrants
    
    
    
    
    
    
    347Denominator for historical diluted calculation weighted average shares
    
    
    20,241
    
    
    
    15,918Net income (loss) per share:Historical basic net income (loss) per share
    
    $
    (0.07
    )
    
    $
    0.01Historical diluted net income (loss) per share
    
    $
    (0.07
    )
    
    $
    0.01
 
 *
    
    For the three months ended March 31, 2011, potentially dilutive securities, which
consist of options to purchase 4,104,161 shares of common stock at prices ranging from $1.28
to $16.59 per share and warrants to purchase 1,477,936 shares of common stock at prices
ranging from $4.32 to $8.09 per share were not included in the computation of diluted net
income per share because such inclusion would be antidilutive.  8




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8. Composition of certain balance sheet and statement of operations captions
  March 31,
    
    
    December 31,2011
    
    
    2010Furniture and fixtures
    
    $
    852
    
    
    $
    835Office equipment
    
    
    399
    
    
    
    397Computer equipment
    
    
    2,848
    
    
    
    2,737Computer software
    
    
    7,046
    
    
    
    6,249Leasehold improvements
    
    
    893
    
    
    
    88612,038
    
    
    
    11,104Less accumulated depreciation and
amortization
    
    
    (4,633
    )
    
    
    (3,985
    )Property and equipment, net
    
    $
    7,405
    
    
    $
    7,119
  Three Months Ended March 31,2011
    
    
    2010Interest income
    
    $
    17
    
    
    $
    6Interest expense
    
    
    (72
    )
    
    
    (62
    )Interest and other income (expense), net
    
    $
    (55
    )
    
    $
    (56
    )
 9. Credit facility
     9




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10. Operating information
  Three Months Ended March 31,2011
    
    
    2010Revenue by geographic region:United States
    
    $
    16,795
    
    
    $
    18,631Revenue by product:Pay-Per-Click (PPC)
    
    $
    12,427
    
    
    $
    14,797Local Promote (Subscription)
    
    
    963
    
    
    
    1,554Domain Sales and Services
    
    
    1,873
    
    
    
    1,173Banner Advertisement
    
    
    1,532
    
    
    
    1,095Local Connect (License)
    
    
    
    
    
    
    12Total revenue
    
    $
    16,795
    
    
    $
    18,631
 11. Stock-based compensation
  Weighted
    
    
    AggregateAverage
    
    
    Intrinsic ValueShares
    
    
    Exercise Price
    
    
    (in thousands)Outstanding at December 31, 2010
    
    
    4,037,768
    
    
    $
    5.02Granted
    
    
    172,300
    
    
    
    4.43Exercised
    
    
    (31,919
    )
    
    
    2.33Cancelled
    
    
    (73,988
    )
    
    
    4.43Outstanding at March 31, 2011
    
    
    4,104,161
    
    
    $
    5.03
    
    
    $
    1,310Exercisable at March 31, 2011
    
    
    2,038,507
    
    
    $
    4.98
    
    
    $
    868
  10




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Options OutstandingWeighted
    
    
    
    
    
    
    Options ExercisableAverage
    
    
    Weighted
    
    
    
    
    
    
    WeightedRemaining
    
    
    Average
    
    
    
    
    
    
    AverageContractual
    
    
    Exercise
    
    
    
    
    
    
    ExerciseRange of Exercise Prices
    
    Shares
    
    
    Life
    
    
    Price
    
    
    Shares
    
    
    Price$1.01 - $2.00
    
    
    419,120
    
    
    5.9 years
    
    $
    1.57
    
    
    
    303,801
    
    
    $
    1.57$2.01 - $3.00
    
    
    105,310
    
    
    7.0 years
    
    
    2.31
    
    
    
    44,375
    
    
    
    2.33$3.01 - $4.00
    
    
    726,060
    
    
    6.4 years
    
    
    3.69
    
    
    
    434,790
    
    
    
    3.71$4.01 - $5.00
    
    
    1,221,860
    
    
    7.0 years
    
    
    4.57
    
    
    
    640,197
    
    
    
    4.63$5.01 - $6.00
    
    
    282,591
    
    
    7.4 years
    
    
    5.50
    
    
    
    152,951
    
    
    
    5.64$6.01 - $7.00
    
    
    839,182
    
    
    9.1 years
    
    
    6.18
    
    
    
    119,105
    
    
    
    6.40$7.01 - $8.00
    
    
    221,862
    
    
    5.1 years
    
    
    7.49
    
    
    
    190,112
    
    
    
    7.51$8.01 - $9.00
    
    
    190,000
    
    
    7.7 years
    
    
    8.51
    
    
    
    55,000
    
    
    
    8.98$9.01 - $10.00
    
    
    15,000
    
    
    4.2 years
    
    
    9.90
    
    
    
    15,000
    
    
    
    9.90$10.01 - $16.59
    
    
    83,176
    
    
    3.3 years
    
    
    15.62
    
    
    
    83,176
    
    
    
    15.624,104,161
    
    
    7.1 years
    
    $
    5.03
    
    
    
    2,038,507
    
    
    $
    4.98
  Three Months Ended March 31,2011
    
    
    2010Risk-free interest rate
    
    
    2.04
    %
    
    
    3.28
    %Expected lives (in years)
    
    5.2 years
    

    
    6.1 yearsExpected dividend yield
    
    None
    

    
    NoneExpected volatility
    
    
    85.35
    %
    
    
    92.60
    %
  Three Months Ended March 31,2011
    
    
    2010Cost of revenues
    
    $
    86
    
    
    $
    20Sales and marketing
    
    
    319
    
    
    
    156General and administrative
    
    
    448
    
    
    
    301Research and development
    
    
    119
    
    
    
    147Total stock-based compensation expense
    
    $
    972
    
    
    $
    624Basic and diluted net stock-based compensation expense per share
    
    $
    0.05
    
    
    $
    0.04
 12. Stock repurchase program
  11




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13. Warrants
   WeightedAverageShares
    
    
    Exercise PriceOutstanding at December 31, 2010
    
    
    1,334,022
    
    
    $
    7.88Issued
    
    
    143,914
    
    
    
    7.60Exercised
    
    
    
    
    
    
    Expired
    
    
    
    
    
    
    Outstanding at March 31, 2011
    
    
    1,477,936
    
    
    $
    7.11Exercisable at March 31, 2011
    
    
    1,477,936
    
    
    $
    7.11
  Warrants Outstanding and ExercisableAverageRemaining
    
    
    WeightedContractual
    
    
    AverageRange of Exercise Price
    
    Shares
    
    
    Life
    
    
    Exercise Price$4.00 - $4.99
    
    
    129,638
    
    
    0.9 years
    
    $
    4.60$5.00 - $5.99
    
    
    129,638
    
    
    0.9 years
    
    
    5.41$7.00 - $7.99
    
    
    603,580
    
    
    1.8 years
    
    
    7.02$9.00 - $9.99
    
    
    615,080
    
    
    2.8 years
    
    
    8.091,477,936
    
    
    2.1 years
    
    $
    7.11
 12




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14. Fair Value Measurement of Assets and Liabilities
  As of
    
    
    Active Markets
    
    
    SignificantMarch 31,
    
    
    for Identical
    
    
    UnobservableDescription
    
    2011
    
    
    Assets (Level 1)
    
    
    Inputs (Level 3)Assets:Cash and cash equivalents:Bank deposits and money market funds
    
    $
    20,213
    
    
    $
    20,213
    
    
    $
    Total financial assets
    
    $
    20,213
    
    
    $
    20,213
    
    
    $
    Liabilities:Warrant liability
    
    $
    1,281
    
    
    $
    
    
    
    $
    1,281
  Quoted Prices inAs of
    
    
    Active Markets
    
    
    SignificantDecember 31,
    
    
    for Identical
    
    
    UnobservableDescription
    
    2010
    
    
    Assets (Level 1)
    
    
    Inputs (Level 3)Assets:Cash and cash equivalents:Bank deposits and money market funds
    
    $
    13,079
    
    
    $
    13,079
    
    
    $
    Total financial assets
    
    $
    13,079
    
    
    $
    13,079
    
    
    $
    Liabilities:Warrant liability
    
    $
    2,840
    
    
    $
    
    
    
    $
    2,840
   Exercise Price ofRelated Warrants$8.09
    
    
    $7.02Risk-free interest rate
    
    
    1.29
    %
    
    
    0.80
    %Expected lives (in years)
    
    2.8 years
    

    
    1.8 yearsExpected dividend yield
    
    None
    

    
    NoneExpected volatility
    
    
    81.80
    %
    
    
    70.22
    %
  Level 3Balance at December 31, 2010
    
    $
    2,840Change in fair value of warrant liability
    
    
    (1,559
    )Balance at March 31, 2011
    
    $
    1,281
 13




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15. Subsequent Events
 Rovion
   
    
    A rich media advertising platform, which allows for the
sale, creation, delivery and tracking of animated and
video-based ads for both national and local advertisers,
including In-Person the online video spokesperson, as
well as virtually all other forms of rich media
advertisements;
    
    A rich media advertising toolset, known as the Rovion Ad
Management Platform (RAMP), targeted to local media
publishers and medium to small ad agencies, which allows
for self-service rich media ad creation by professional
media developers and novices alike, and subsequently
enables the delivery, tracking and reporting of all ad
activity through the RAMP control panel;
    
    A workflow/tracking toolset that facilitates the schedules
and tracking of In-Person ad requests, scheduling of actors
and studios and the approval of scripts; and
    
    Two professional quality green-screen studios and the
maintenance of a network of relationships for access to
additional professional quality green-screen studios
throughout the United States.
   Krillion
   
    
    patent-pending local product search platform, the Krillion Localization Engine that
helps connect customers with in-stock products at local retailers;
    
    real-time StockCheck tool that enables web-savvy shoppers to find, compare and buy
products at particular retail locations near them;
    
    the ability for consumers to take advantage of in-store pickup and other convenience
services offered by multichannel retailers and;
    
    local product information that is available as a data service that powers the websites
and applications of manufacturers and content providers, mobile providers and applications,
and the rich media for marketers
 14




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15




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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 within the meaning of the Private
Securities Litigation Reform Act of 1995. 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. These statements relate to our future operations, prospects, potential products,
services, developments and business strategies. These statements can, in some cases, be identified
by the use of terms such as may, will, should, could, would, expect, plan,
anticipate, believe, estimate, predict, project, and potential or the negative of such
terms or other comparable terminology. 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, 2010 and for the year ended December 31, 2010 included in our Annual Report on Form
10-K/A filed with the Securities and Exchange Commission on April 29, 2011.
 Overview
     Recent Developments
  16




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##### Table of Contents



Outlook for Our Business
     17




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##### Table of Contents



Sources of Revenue
  
    
    click-throughs on sponsored listings;
    
    calls to cost-per-call advertiser listings;
    
    lead generation;
    
    banner ads;
    
    subscription advertiser listings;
    
    domain sales and services; and
    
    web hosting services.
 Operating Expenses
 Cost of Revenues
  18




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##### Table of Contents



Sales and Marketing
  General and Administrative
  Research and Development
  Critical Accounting Policies
  Revenue Recognition
    19




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##### Table of Contents



Allowance for Doubtful Accounts
   Goodwill and Other Intangible Assets
  Stock Based Compensation
  Three Months Ended March 31,2011
    
    
    2010Cost of revenues
    
    $
    86
    
    
    $
    20Sales and marketing
    
    
    319
    
    
    
    156General and administrative
    
    
    448
    
    
    
    301Research and development
    
    
    119
    
    
    
    147Total stock-based compensation expense
    
    $
    972
    
    
    $
    624Basic and diluted net stock-based compensation expense per share
    
    $
    0.05
    
    
    $
    0.04
 20




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##### Table of Contents



Results of Operations
  Three Months Ended March 31,2011
    
    
    2010Revenue
    
    
    100.0
    %
    
    
    100.0
    %Operating expenses:Cost of revenues
    
    
    65.4
    
    
    
    58.0Sales and marketing
    
    
    19.5
    
    
    
    16.6General and administrative
    
    
    15.5
    
    
    
    10.3Research and development
    
    
    9.1
    
    
    
    6.0Amortization and write-down of intangibles
    
    
    7.1
    
    
    
    6.6Total operating expenses
    
    
    116.7
    
    
    
    97.5Operating income (loss)
    
    
    (16.7
    )
    
    
    2.5Interest and other income (expense), net
    
    
    (0.3
    )
    
    
    (0.3
    )Change in fair value of warrant liability
    
    
    9.3
    
    
    
    (1.5
    )Income (loss) before income taxes
    
    
    (7.8
    )
    
    
    0.8Provision for income taxes
    
    
    0.1
    
    
    
    0.1Net income (loss)
    
    
    (7.8)
    %
    
    
    0.7
    %
 Three months ended March 31, 2011 and 2010
 Revenue (dollars in thousands)
 Three Months Ended March 31,

    
    
    Percent2011
    
    
    (*)
    
    
    2010
    
    
    (*)
    
    
    change(in thousands)
    
    
    
    
    
    
    (in thousands)Owned and operated
    
    $
    10,242
    
    
    
    61.0
    %
    
    $
    10,717
    
    
    
    57.5
    %
    
    
    (4.4
    )%Network
    
    
    3,723
    
    
    
    22.2
    %
    
    
    5,189
    
    
    
    27.9
    %
    
    
    (28.3
    )%Sales and advertiser services
    
    
    2,830
    
    
    
    16.8
    %
    
    
    2,725
    
    
    
    14.6
    %
    
    
    3.9
    %Total revenue
    
    $
    16,795
    
    
    
    100.0
    %
    
    $
    18,631
    
    
    
    100.0
    %
    
    
    (9.9
    )%
    21




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##### Table of Contents



Three Months Ended March 31,
    
    
    Percent2011
    
    
    (*)
    
    
    2010
    
    
    (*)
    
    
    changeRevenue from internal and outsourced sales
    
    $
    824
    
    
    
    29.1
    %
    
    $
    825
    
    
    
    30.3
    %
    
    
    (0.1
    )%Revenue from acquired bases
    
    
    2,006
    
    
    
    70.9
    %
    
    
    1,900
    
    
    
    69.7
    %
    
    
    5.6
    %Total sales and advertiser services revenue
    
    $
    2,830
    
    
    
    100.0
    %
    
    $
    2,725
    
    
    
    100.0
    %
    
    
    3.9
    %
     Percentage of Total RevenueThree Months Ended March 31,Customer
    
    2011
    
    
    2010Yahoo! Inc.
    
    
    37.0
    %
    
    
    49.4
    %SuperMedia Inc.
    
    
    22.7
    %
    
    
    20.7
    %
 Operating expenses:
  Three Months Ended March 31,Percent of
    
    
    
    
    
    
    Percent ofTotal
    
    
    
    
    
    
    Total
    
    
    Percent2011
    
    
    Revenue
    
    
    2010
    
    
    Revenue
    
    
    ChangeCost of revenues
    
    $
    10,988
    
    
    
    65.4
    %
    
    $
    10,802
    
    
    
    58.0%
    
    
    
    1.7
    %Sales and marketing
    
    
    3,282
    
    
    
    19.5
    %
    
    
    3,098
    
    
    
    16.6%
    
    
    
    5.9
    %General and administrative
    
    
    2,610
    
    
    
    15.5
    %
    
    
    1,914
    
    
    
    10.3%
    
    
    
    36.4
    %Research and development
    
    
    1,528
    
    
    
    9.1
    %
    
    
    1,112
    
    
    
    6.0%
    
    
    
    37.4
    %Amortization and write-down of intangibles
    
    
    1,198
    
    
    
    7.1
    %
    
    
    1,230
    
    
    
    6.6%
    
    
    
    (2.6
    )%Total operating expenses
    
    $
    19,606
    
    
    
    116.7
    %
    
    $
    18,156
    
    
    
    97.5%
    
    
    
    8.0
    %
 Cost of revenues
  22




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##### Table of Contents



Sales and marketing
  General and administrative
  Research and development
  Amortization of intangibles
  Interest and other income (expense), net
  Provision for income taxes
  Liquidity and Capital Resources
  March 31,
    
    
    December 31,2011
    
    
    2010Cash and cash equivalents
    
    $
    20,213
    
    
    $
    13,079Working capital
    
    $
    24,779
    
    
    $
    8,171
  Three Months Ended March 31,2011
    
    
    2010Net cash (used in) provided by operating activities
    
    $
    (2,112
    )
    
    $
    1,710Net cash used in investing activities
    
    
    (1,830
    )
    
    
    (1,572
    )Net cash provided by financing activities
    
    
    11,076
    
    
    
    716
 23




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##### Table of Contents



Three Months Ended March 31,2011
    
    
    2010
    
    
    ChangeNet income (loss)
    
    $
    (1,318
    )
    
    $
    134
    
    
    $
    (1,452
    )Non-cash (1)
    
    
    1,260
    
    
    
    2,372
    
    
    
    (1,112
    )Subtotal
    
    
    (58
    )
    
    
    2,506
    
    
    
    (2,564
    )AR, AP and Other
    
    
    (2,054
    )
    
    
    (796
    )
    
    
    (1,258
    )Net cash (used in) provided by operations
    
    $
    (2,112
    )
    
    $
    1,710
    
    
    $
    (3,822
    )
 
 (1)
    
    Includes depreciation, amortization, change in fair value of warrant liability and non-cash
expense related to stock option issuances.    Credit facility
   24




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##### Table of Contents



Shelf Registration Statement
  Stock repurchase program
  25




---



##### Table of Contents



Subsequent events
  
    
    A rich media advertising platform, which allows for the
sale, creation, delivery and tracking of animated and
video-based ads for both national and local advertisers,
including In-Person the online video spokesperson, as
well as virtually all other forms of rich media
advertisements;
    
    A rich media advertising toolset, known as the Rovion Ad
Management Platform , targeted to local media publishers
and medium to small ad agencies, which allows for
self-service rich media ad creation by professional media
developers and novices alike, and subsequently enables the
delivery, tracking and reporting of all ad activity through
the RAMP control panel;
    
    A workflow/tracking toolset that facilitates the schedules
and tracking of In-Person ad requests, scheduling of actors
and studios and the approval of scripts; and
    
    Two professional quality green-screen studios and the
maintenance of a network of relationships for access to
additional professional quality green-screen studios
throughout the United States.
    
    
    patent-pending local product search platform, the Krillion Localization Engine that
helps connect customers with in-stock products at local retailers;
    
    real-time StockCheck tool that enables web-savvy shoppers to find, compare and buy
products at particular retail locations near them;
    
    the ability for consumers to take advantage of in-store pickup and other convenience
services offered by multichannel retailers and;
    
    local product information that is available as a data service that powers the websites
and applications of manufacturers and content providers, mobile providers and applications,
and the rich media for marketers
  Off-Balance Sheet Arrangements
  26




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
  
 PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  GEOTAG Litigation
 www.local.com
 Leite Litigation
  
 Item 1A. Risk Factors
  27




---



##### Table of Contents



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Removed and Reserved
  
 Item 5. Other Information
  28




---



##### Table of Contents



Item 6. Exhibits
 ExhibitNumber
    
    Description1.1(1)
    
    Underwriting Agreement dated January 14, 2011, by and between Registrant and Canaccord Genuity Inc.3.1 (2)
    
    Amended and Restated Certificate of Incorporation of the Registrant3.2 (3)
    
    Amendment to Restated Certificate of Incorporation of the Registrant3.2 (4)
    
    Amended and Restated Bylaws of the Registrant3.3 (5)
    
    Certificate of Ownership and Merger of Interchange Merger Sub, Inc. with and into Interchange
Corporation3.4 (6)
    
    Certificate of Designation of Rights, Preferences and Privileges of Series A Participating
Preferred Stock of Local.com Corporation.4.1 (6)
    
    Preferred Stock Rights Agreement, dated as of October 15, 2008, by and between Local.com
Corporation and Computershare Trust Company, N.A., as Rights Agent (which includes the form of
Certificate of Designation of Rights, Preferences and Privileges of Series A Participating
Preferred Stock of Local.com Corporation as Exhibit A thereto, the form of Rights Certificate as
Exhibit B thereto, and the Stockholder Rights Plan, Summary of Rights as Exhibit C thereto).10.1 (7)#
    
    Fourth Amended and Restated Employment Agreement by and between the Registrant and Kenneth S.
Cragun dated January 5, 2011.10.2 (8)
    
    Asset Purchase Agreement by and among the Registrant and DigitalPost Interactive, Inc. dated February 11, 2011.10.3 (9)
    
    Promissory note by and among the Registrant and DigitalPost Interactive, Inc. dated March 10, 2011.10.4 (10)
    
    Termination of Asset Purchase Agreement dated February 11, 2011 by and among the Registrant and
DigitalPost Interactive, Inc. dated March 23, 2011.31.1*
    
    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 2002.31.2*
    
    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 2002.32.1*
    
    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.#
    
    Indicates management contract or compensatory plan.(1)
    
    Incorporated by reference from the Registrants Current Report on Form 8-K, filed with the
Securities and Exchange Commission on January 14, 2011.(2)
    
    Incorporated by reference from the Registrants Statement on Form SB-2, Amendment No. 2,
filed with the Securities and Exchange Commission on September 16, 2004.(3)
    
    Incorporated by reference from the Registrants Current Report on Form 8-K, filed with the
Securities and Exchange Commission on August 17, 2009(4)
    
    Incorporated by reference from the Registrants Current Report on Form 8-K, filed with the
Securities and Exchange Commission on November 2, 2007.(5)
    
    Incorporated by reference from the Registrants Current Report on Form 8-K/A, filed with the
Securities and Exchange Commission on November 2, 2006.(6)
    
    Incorporated by reference from the Registrants Current Report on Form 8-K, filed with the
Securities and Exchange Commission on October 15, 2008.(7)
    
    Incorporated by reference from the Registrants Current Report on Form 8-K, filed with the
Securities and Exchange Commission on January 5, 2011.(8)
    
    Incorporated by reference from the Registrants Current Report on Form 8-K, filed with the
Securities and Exchange Commission on February 16, 2011. 29




---



##### Table of Contents



(9)
    
    Incorporated by reference from the Registrants Current Report on Form 8-K, filed with the
Securities and Exchange Commission on March 15, 2011.(10)
    
    Incorporated by reference from the Registrants Current Report on Form 8-K, filed with the
Securities and Exchange Commission on March 29, 2011. 30




---



##### Table of Contents



SIGNATURES
  LOCAL.COM CORPORATIONDate May 10, 2011
    /s/ Heath B. ClarkeHeath B. ClarkeChief Executive Officer
(principal executive officer) and ChairmanDate May 10, 2011
    /s/ Kenneth S. CragunKenneth S. CragunChief Financial Officer (principal financial
and accounting officer) and Secretary 31




---



##### Table of Contents



INDEX TO EXHIBITS
 ExhibitNumber
    
    Description1.1(1)
    
    Underwriting Agreement dated January 14, 2011, by and between Registrant and Canaccord Genuity Inc.3.1 (2)
    
    Amended and Restated Certificate of Incorporation of the Registrant3.2 (3)
    
    Amendment to Restated Certificate of Incorporation of the Registrant3.2 (4)
    
    Amended and Restated Bylaws of the Registrant3.3 (5)
    
    Certificate of Ownership and Merger of Interchange Merger Sub, Inc.
with and into Interchange Corporation3.4 (6)
    
    Certificate of Designation of Rights, Preferences and Privileges of
Series A Participating Preferred Stock of Local.com Corporation.4.1 (6)
    
    Preferred Stock Rights Agreement, dated as of October 15, 2008, by
and between Local.com Corporation and Computershare Trust Company,
N.A., as Rights Agent (which includes the form of Certificate of
Designation of Rights, Preferences and Privileges of Series A
Participating Preferred Stock of Local.com Corporation as Exhibit A
thereto, the form of Rights Certificate as Exhibit B thereto, and
the Stockholder Rights Plan, Summary of Rights as Exhibit C
thereto).10.1 (7)#
    
    Fourth Amended and Restated Employment Agreement by and between the
Registrant and Kenneth S. Cragun dated January 5, 2011.10.2 (8)
    
    Asset Purchase Agreement by and among the Registrant and DigitalPost Interactive, Inc. dated February 11, 2011.10.3 (9)
    
    Promissory note by and among the Registrant and DigitalPost
Interactive, Inc. dated March 10, 2011.10.4 (10)
    
    Termination of Asset Purchase Agreement dated February 11, 2011 by
and among the Registrant and DigitalPost Interactive, Inc. dated
March 23, 2011.31.1*
    
    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 2002.31.2*
    
    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 2002.32.1*
    
    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.#
    
    Indicates management contract or compensatory plan.(1)
    
    Incorporated by reference from the Registrants Current Report on Form 8-K, filed with the
Securities and Exchange Commission on January 14, 2011.(2)
    
    Incorporated by reference from the Registrants Statement on Form SB-2, Amendment No. 2,
filed with the Securities and Exchange Commission on September 16, 2004.(3)
    
    Incorporated by reference from the Registrants Current Report on Form 8-K, filed with the
Securities and Exchange Commission on August 17, 2009(4)
    
    Incorporated by reference from the Registrants Current Report on Form 8-K, filed with the
Securities and Exchange Commission on November 2, 2007.(5)
    
    Incorporated by reference from the Registrants Current Report on Form 8-K/A, filed with the
Securities and Exchange Commission on November 2, 2006.(6)
    
    Incorporated by reference from the Registrants Current Report on Form 8-K, filed with the
Securities and Exchange Commission on October 15, 2008.(7)
    
    Incorporated by reference from the Registrants Current Report on Form 8-K, filed with the
Securities and Exchange Commission on January 5, 2011. 32




---



##### Table of Contents



(8)
    
    Incorporated by reference from the Registrants Current Report on Form 8-K, filed with the
Securities and Exchange Commission on February 16, 2011.(9)
    
    Incorporated by reference from the Registrants Current Report on Form 8-K, filed with the
Securities and Exchange Commission on March 15, 2011.(10)
    
    Incorporated by reference from the Registrants Current Report on Form 8-K, filed with the
Securities and Exchange Commission on March 29, 2011. 33