##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2006
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT
 For the transition period from  to
 Commission File Number: 000-50989
 LOCAL.COM CORPORATION
  Delaware
    
    33-0849123(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 One Technology Drive, Building G
Irvine, CA 92618
 (949) 784-0800
 þ o
  o o þ
 o þ
 Number of shares outstanding at October 31, 2006:
    
    Common:
    
    
    9,294,725Preferred:
    
    
    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, 2006 (Unaudited) and December 31, 2005
    
    
    3Condensed Consolidated Statements of Operations for the three and nine months ended  September 30, 2006 and 2005 (Unaudited)
    
    
    4Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2006 and 2005 (Unaudited)
    
    
    5Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2006 and 2005 (Unaudited)
    
    
    6Notes 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
    
    
    20Item 4.
    
    Controls and Procedures
    
    
    20PART II  OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    21Item 1A.
    
    Risk Factors
    
    
    21Item 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
    
    
    21EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 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 31,2006
    
    
    2005(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    1,383
    
    
    $
    1,075Restricted cash
    
    
    41
    
    
    
    10Marketable securities
    
    
    5,951
    
    
    
    13,244Accounts receivable, net of allowances of $31 and $30, respectively
    
    
    2,911
    
    
    
    1,138Prepaid expenses and other current assets
    
    
    240
    
    
    
    377Total current assets
    
    
    10,526
    
    
    
    15,844Property and equipment, net
    
    
    2,173
    
    
    
    2,772Intangible assets, net
    
    
    3,050
    
    
    
    3,760Goodwill
    
    
    12,213
    
    
    
    12,445Long-term restricted cash
    
    
    125
    
    
    
    166Deposits
    
    
    47
    
    
    
    47Total assets
    
    $
    28,134
    
    
    $
    35,034LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    3,078
    
    
    $
    1,798Accrued compensation
    
    
    373
    
    
    
    347Deferred rent
    
    
    470
    
    
    
    575Accrued royalties
    
    
    244
    
    
    
    496Other accrued liabilities
    
    
    490
    
    
    
    631Notes payable
    
    
    
    
    
    
    84Deferred revenue
    
    
    271
    
    
    
    295Total liabilities, all current
    
    
    4,926
    
    
    
    4,226Minority interest
    
    
    (1
    )
    
    
    (1
    )Commitments 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;
9,283,935 and 9,171,944 issued and outstanding, respectively
    
    
    
    
    
    
    Additional paid-in capital
    
    
    51,104
    
    
    
    48,706Accumulated comprehensive loss
    
    
    (59
    )
    
    
    (151
    )Accumulated deficit
    
    
    (27,836
    )
    
    
    (17,746
    )Stockholders equity
    
    
    23,209
    
    
    
    30,809Total liabilities and stockholders equity
    
    $
    28,134
    
    
    $
    35,034
  3




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##### Table of Contents



LOCAL.COM CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
   Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Revenue
    
    $
    4,059
    
    
    $
    4,058
    
    
    $
    10,584
    
    
    $
    14,722Operating expenses:Search serving
    
    
    1,126
    
    
    
    3,044
    
    
    
    4,087
    
    
    
    8,857Sales and marketing
    
    
    3,645
    
    
    
    1,456
    
    
    
    9,258
    
    
    
    4,302General and administrative
    
    
    1,295
    
    
    
    983
    
    
    
    4,647
    
    
    
    2,976Research and development
    
    
    643
    
    
    
    654
    
    
    
    2,212
    
    
    
    1,669Amortization of intangibles
    
    
    236
    
    
    
    257
    
    
    
    710
    
    
    
    485Total operating expenses
    
    
    6,945
    
    
    
    6,394
    
    
    
    20,914
    
    
    
    18,289Operating loss
    
    
    (2,886
    )
    
    
    (2,336
    )
    
    
    (10,330
    )
    
    
    (3,567
    )Interest and other income
    
    
    54
    
    
    
    83
    
    
    
    252
    
    
    
    623Loss before income taxes
    
    
    (2,832
    )
    
    
    (2,253
    )
    
    
    (10,088
    )
    
    
    (2,944
    )Provision for income taxes
    
    
    
    
    
    
    514
    
    
    
    2
    
    
    
    520Net loss
    
    $
    (2,832
    )
    
    $
    (2,767
    )
    
    $
    (10,090
    )
    
    $
    (3,464
    )Per share data:Basic net loss per share
    
    $
    (0.31
    )
    
    $
    (0.31
    )
    
    $
    (1.09
    )
    
    $
    (0.42
    )Diluted net loss per share
    
    $
    (0.31
    )
    
    $
    (0.31
    )
    
    $
    (1.09
    )
    
    $
    (0.42
    )Basic weighted average shares outstanding
    
    
    9,257,201
    
    
    
    8,959,076
    
    
    
    9,234,118
    
    
    
    8,280,887Diluted weighted average shares outstanding
    
    
    9,257,201
    
    
    
    8,959,076
    
    
    
    9,234,118
    
    
    
    8,280,887
  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 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Net loss
    
    $
    (2,832
    )
    
    $
    (2,767
    )
    
    $
    (10,090
    )
    
    $
    (3,464
    )Other comprehensive income (loss):Foreign currency translation adjustments
    
    
    (16
    )
    
    
    2
    
    
    
    (5
    )
    
    
    (4
    )Net unrealized gain (loss) on marketable securities
    
    
    58
    
    
    
    (51
    )
    
    
    97
    
    
    
    (118
    )Total comprehensive loss
    
    $
    (2,790
    )
    
    $
    (2,816
    )
    
    $
    (9,998
    )
    
    $
    (3,586
    )Supplemental comprehensive income (loss) information:Foreign currency translation adjustments arising during period
    
    $
    (15
    )
    
    $
    2
    
    
    $
    (4
    )
    
    $
    (4
    )Reclassification adjustment for losses included in net loss
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )
    
    
    Foreign currency translation adjustments
    
    $
    (16
    )
    
    $
    2
    
    
    $
    (5
    )
    
    $
    (4
    )Unrealized holding gains (losses) arising during period
    
    $
    73
    
    
    $
    (51
    )
    
    $
    133
    
    
    $
    (94
    )Reclassification adjustment for losses included in net loss
    
    
    (15
    )
    
    
    
    
    
    
    (36
    )
    
    
    (24
    )Net unrealized gain (loss) on marketable securities
    
    $
    58
    
    
    $
    (51
    )
    
    $
    97
    
    
    $
    (118
    )
  5




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##### Table of Contents



LOCAL.COM CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
   Nine months endedSeptember 30,2006
    
    
    2005Cash flows from operating activities:Net loss
    
    $
    (10,090
    )
    
    $
    (3,464
    )Adjustments to reconcile net loss to cash used in operating activities:Depreciation and amortization
    
    
    1,649
    
    
    
    1,000Provision for doubtful accounts
    
    
    
    
    
    
    19Non-cash stock based compensation
    
    
    1,982
    
    
    
    102Non-cash interest income
    
    
    (7
    )
    
    
    (12
    )Realized loss on marketable securities
    
    
    36
    
    
    
    24Realized loss on foreign exchange translation
    
    
    1
    
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    (1,773
    )
    
    
    425Prepaid expenses and other
    
    
    137
    
    
    
    (56
    )Deferred tax assets
    
    
    
    
    
    
    678Accounts payable and accrued liabilities
    
    
    807
    
    
    
    (439
    )Deferred revenue
    
    
    (24
    )
    
    
    (102
    )Net cash used in operating activities
    
    
    (7,282
    )
    
    
    (1,771
    )Cash flows from investing activities:Capital expenditures
    
    
    (346
    )
    
    
    (2,828
    )Purchases of marketable securities
    
    
    
    
    
    
    (6,982
    )Proceeds from sales of marketable securities
    
    
    7,361
    
    
    
    3,018Increase in restricted cash
    
    
    10
    
    
    
    (112
    )Decrease in minority interest
    
    
    
    
    
    
    (1
    )Proceeds from sale of property and equipment
    
    
    6
    
    
    
    Acquisition, net of cash returned (acquired)
    
    
    232
    
    
    
    (15,285
    )Net cash provided by (used in) investing activities
    
    
    7,263
    
    
    
    (22,200
    )Cash flows from financing activities:Proceeds from issuance of common stock from exercise of options
    
    
    341
    
    
    
    1,267Proceeds from issuance of common stock from exercise of warrants
    
    
    77
    
    
    
    1,103Payment of notes payable
    
    
    (84
    )
    
    
    Swing sale profit contribution
    
    
    1
    
    
    
    Payment of financing related costs
    
    
    (3
    )
    
    
    (174
    )Net cash provided by financing activities
    
    
    332
    
    
    
    2,196Effect of currency changes on cash
    
    
    (5
    )
    
    
    (4
    )Net increase (decrease) in cash and cash equivalents
    
    
    308
    
    
    
    (21,779
    )Cash and cash equivalents, beginning of period
    
    
    1,075
    
    
    
    24,617Cash and cash equivalents, end of period
    
    $
    1,383
    
    
    $
    2,838Supplemental cash flow information:Interest paid
    
    $
    3
    
    
    $
    Income taxes paid
    
    $
    2
    
    
    $
    19Non-cash investing and financing transactions:Common stock issued for asset purchase
    
    
    
    
    
    $
    750Leasehold improvements
    
    
    
    
    
    $
    547
  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
  Foreign currency translation
  Intangible assets
    Goodwill
  7




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##### Table of Contents



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
 Stock-based compensation
 Share-Based Payment
 Accounting for Stock-Based Compensation
  Three months ended
    
    
    Nine months endedSeptember 30, 2006
    
    
    September 30, 2006Sales and marketing
    
    $
    96
    
    
    $
    467General and administrative
    
    
    262
    
    
    
    1,324Research and development
    
    
    42
    
    
    
    191Total stock-based compensation expense
    
    $
    400
    
    
    $
    1,982Basic and diluted net compensation expense per share
    
    $
    0.04
    
    
    $
    0.21
  Risk-free interest rate
    
    
    4.50
    %Expected lives (in years)
    
    
    8.1Expected dividend yield
    
    NoneExpected volatility
    
    
    86.44
    %
 8




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##### Table of Contents



Accounting for Stock Issued to Employees Accounting for Stock-Based Compensation  Transition and Disclosure
  Three months ended
    
    
    Nine months endedSeptember 30, 2005
    
    
    September 30, 2005Net loss, as reported
    
    $
    (2,767
    )
    
    $
    (3,464
    )Add: Stock-based compensation
expense recorded in accordance
with APB No. 25
    
    
    22
    
    
    
    102Deduct: Additional stock-based
employee compensation expense
determined under the fair value
based method for all awards,
net of tax effects
    
    
    (1,214
    )
    
    
    (3,486
    )Pro forma net loss
    
    $
    (3,959
    )
    
    $
    (6,848
    )Net loss per share:Basic  as reported
    
    $
    (0.31
    )
    
    $
    (0.42
    )Basic  pro forma
    
    $
    (0.44
    )
    
    $
    (0.83
    )Net loss per share:Diluted  as reported
    
    $
    (0.31
    )
    
    $
    (0.42
    )Diluted  pro forma
    
    $
    (0.44
    )
    
    $
    (0.83
    )
 Net income (loss) per share
 Earnings per Share
   9




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##### Table of Contents



3. Composition of certain balance sheet and statement of operations captions
  September 30,
    
    
    December 31,2006
    
    
    2005Furniture and fixtures
    
    $
    199
    
    
    $
    195Office equipment
    
    
    94
    
    
    
    93Computer equipment
    
    
    1,759
    
    
    
    1,754Computer software
    
    
    1,358
    
    
    
    1,169Leasehold improvements
    
    
    580
    
    
    
    5803,990
    
    
    
    3,791Less accumulated depreciation and amortization
    
    
    (1,817
    )
    
    
    (1,019
    )Property and equipment, net
    
    $
    2,173
    
    
    $
    2,772
  September 30,
    
    
    December 31,2006
    
    
    2005Developed technology
    
    $
    2,233
    
    
    
    2,233Non-compete agreements
    
    
    261
    
    
    
    261Purchased technology
    
    
    1,239
    
    
    
    1,239Domain name
    
    
    701
    
    
    
    7014,434
    
    
    
    4,434Less accumulated amortization
    
    
    (1,384
    )
    
    
    (674
    )Intangible assets, net
    
    $
    3,050
    
    
    $
    3,760
 10




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##### Table of Contents



4. Geographic reporting information
 Disclosures about Segments of an Enterprise and Related
 Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Revenue by geographic region:United States
    
    $
    4,045
    
    
    $
    3,959
    
    
    $
    10,437
    
    
    $
    14,293Europe
    
    
    14
    
    
    
    99
    
    
    
    147
    
    
    
    429Total revenue
    
    $
    4,059
    
    
    $
    4,058
    
    
    $
    10,584
    
    
    $
    14,722Operating loss by geographic region:United States
    
    $
    (2,748
    )
    
    $
    (2,215
    )
    
    $
    (10,008
    )
    
    $
    (3,477
    )Europe
    
    
    (138
    )
    
    
    (121
    )
    
    
    (322
    )
    
    
    (90
    )Total operating loss
    
    $
    (2,886
    )
    
    $
    (2,336
    )
    
    $
    (10,330
    )
    
    $
    (3,567
    )
 September 30,
    
    
    December 31,2006
    
    
    2005Total assets by geographic region:United States
    
    $
    27,998
    
    
    $
    34,843Europe
    
    
    136
    
    
    
    191Total assets
    
    $
    28,134
    
    
    $
    35,034
 5. Stock option plans
 1999 Plan
  2000 Plan
  11




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##### Table of Contents



2004 Plan
  2005 Plan
   Weight AverageShares
    
    Exercise PriceOutstanding at December 31, 2005
    
    
    1,339,360
    
    
    $
    5.95Granted
    
    
    472,417
    
    
    
    4.40Exercised
    
    
    (81,442
    )
    
    
    4.20Cancelled
    
    
    (175,733
    )
    
    
    6.80Outstanding at September 30, 2006
    
    
    1,554,602
    
    
    $
    5.47Exercisable at September 30, 2006
    
    
    909,018
    
    
    $
    5.33
 12




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##### Table of Contents



Options Outstanding
    
    Options ExercisableWeightedAverage
    
    Weighted
    
    
    
    
    
    WeightedRemaining
    
    Average
    
    
    
    
    
    AverageContractual
    
    Exercise
    
    
    
    
    
    ExerciseRange of Exercise Prices
    
    Shares
    
    Life
    
    Price
    
    Shares
    
    Price$0.00 - $1.00
    
    
    23,625
    
    
    
    1.3
    
    
    $
    0.40
    
    
    
    23,625
    
    
    $
    0.40$1.01 - $2.00
    
    
    175,000
    
    
    
    3.1
    
    
    $
    2.00
    
    
    
    175,000
    
    
    $
    2.00$2.01 - $3.00
    
    
    157,359
    
    
    
    5.8
    
    
    $
    2.25
    
    
    
    140,283
    
    
    $
    2.25$3.01 - $4.00
    
    
    434,752
    
    
    
    6.8
    
    
    $
    3.79
    
    
    
    203,460
    
    
    $
    4.00$4.01 - $5.00
    
    
    76,000
    
    
    
    7.9
    
    
    $
    4.32
    
    
    
    
    
    
    $
    $5.01 - $6.00
    
    
    186,500
    
    
    
    9.1
    
    
    $
    5.67
    
    
    
    79,411
    
    
    $
    5.72$6.01 - $7.00
    
    
    119,064
    
    
    
    9.0
    
    
    $
    6.37
    
    
    
    67,976
    
    
    $
    6.38$7.01 - $8.00
    
    
    186,500
    
    
    
    8.9
    
    
    $
    7.52
    
    
    
    66,816
    
    
    $
    7.56$8.01 - $10.00
    
    
    70,000
    
    
    
    8.7
    
    
    $
    9.17
    
    
    
    64,166
    
    
    $
    9.20$15.01 - $16.59
    
    
    125,802
    
    
    
    7.8
    
    
    $
    15.55
    
    
    
    88,281
    
    
    $
    15.531,554,602
    
    
    
    7.1
    
    
    $
    5.47
    
    
    
    909,018
    
    
    $
    5.33
 6. Warrants
  Weight AverageShares
    
    Exercise PriceOutstanding at December 31, 2005
    
    
    1,279,575
    
    
    $
    8.13Exercised
    
    
    (70,932
    )
    
    
    3.85Expired
    
    
    (44,229
    )
    
    
    3.80Outstanding at September 30, 2006
    
    
    1,164,414
    
    
    $
    8.55Exercisable at September 30, 2006
    
    
    1,164,414
    
    
    $
    8.55
  Warrants Outstanding
    
    Warrants ExercisableWeightedAverage
    
    Weighted
    
    
    
    
    
    WeightedRemaining
    
    Average
    
    
    
    
    
    AverageContractual
    
    Exercise
    
    
    
    
    
    ExerciseRange of Exercise Prices
    
    Shares
    
    Life
    
    Price
    
    Shares
    
    Price$0.00 - $3.99
    
    
    436,450
    
    
    
    1.8
    
    
    $
    3.56
    
    
    
    436,450
    
    
    $
    3.56$4.00 - $5.99
    
    
    232,814
    
    
    
    1.0
    
    
    $
    4.00
    
    
    
    232,814
    
    
    $
    4.00$8.00 - $9.99
    
    
    15,000
    
    
    
    1.0
    
    
    $
    8.00
    
    
    
    15,000
    
    
    $
    8.00$10.00 - $19.99
    
    
    315,750
    
    
    
    3.1
    
    
    $
    10.00
    
    
    
    315,750
    
    
    $
    10.00$20.00 - $25.53
    
    
    164,400
    
    
    
    3.3
    
    
    $
    25.53
    
    
    
    164,400
    
    
    $
    25.531,164,414
    
    
    
    2.2
    
    
    $
    8.55
    
    
    
    1,164,414
    
    
    $
    8.55
 13




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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 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. 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, 2005 and for the year ended December 31, 2005 included in our Annual Report on Form
10-KSB filed with the Securities and Exchange Commission on March 22, 2006.
 Overview
   Recent events
  Stock-based compensation
 Share-Based Payment
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Accounting for
Stock-Based Compensation
  Three months ended
    
    
    Nine months endedSeptember 30, 2006
    
    
    September 30, 2006Sales and marketing
    
    $
    96
    
    
    $
    467General and administrative
    
    
    262
    
    
    
    1,324Research and development
    
    
    42
    
    
    
    191Total stock-based compensation expense
    
    $
    400
    
    
    $
    1,982Basic and diluted net compensation expense per share
    
    $
    0.04
    
    
    $
    0.21
 Results of Operations
  Three months ended
    
    Nine months endedSeptember 30,
    
    September 30,2006
    
    2005
    
    2006
    
    2005Revenue
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Operating expenses:Search serving
    
    
    27.8
    
    
    
    75.5
    
    
    
    38.6
    
    
    
    60.2Sales and marketing
    
    
    89.8
    
    
    
    35.9
    
    
    
    87.5
    
    
    
    29.2General and administrative
    
    
    31.9
    
    
    
    24.2
    
    
    
    43.9
    
    
    
    20.2Research and development
    
    
    15.8
    
    
    
    16.1
    
    
    
    20.9
    
    
    
    11.3Amortization of intangibles
    
    
    5.8
    
    
    
    6.3
    
    
    
    6.7
    
    
    
    3.3Total operating expenses
    
    
    171.1
    
    
    
    157.5
    
    
    
    197.6
    
    
    
    124.2Operating loss
    
    
    (71.1
    )
    
    
    (57.5
    )
    
    
    (97.6
    )
    
    
    (24.2
    )Interest and other income
    
    
    1.3
    
    
    
    2.0
    
    
    
    2.3
    
    
    
    4.2Loss before income taxes
    
    
    (69.8
    )
    
    
    (55.5
    )
    
    
    (95.3
    )
    
    
    (20.0
    )Provision (benefit) for income taxes
    
    
    0.0
    
    
    
    12.7
    
    
    
    0.0
    
    
    
    3.5Net loss
    
    
    (69.8
    )%
    
    
    (68.2
    )%
    
    
    (95.3
    )%
    
    
    (23.5
    )%
 Three months ended September 30, 2006 and 2005
 Revenue
  15




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Search serving
  Sales and marketing
  General and administrative
  Research and development
  16




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Amortization of intangibles
  Interest and other income
  Provision for income taxes
  Net loss
  Nine months ended September 30, 2006 and 2005
 Revenue
      17




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Search serving
  Sales and marketing
  General and administrative
  Research and development
  Amortization of intangibles
  Interest and other income
  18




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##### Table of Contents



Provision for income taxes
  Net loss
  Liquidity and Capital Resources
      Inspire Infrastructure 2i AB acquisition
   19




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Off-Balance Sheet Arrangements
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk.
  Interest Rate Risk
   Foreign Currency Risk
  
 Item 4. Controls and Procedures
     20




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PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings.
  
 Item 1A. Risk Factors.
  Should our operating results not improve as expected, we may be required to seek additional
financing.
  
 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.
  
 Item 6. Exhibits.
 ExhibitNumber
    
    Description31.1
    
    Certification of Principal Executive Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of Principal Financial Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 200232.1
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 21




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##### Table of Contents



SIGNATURES
  LOCAL.COM CORPORATIONNovember 3, 2006
    
    
    
    /s/ Heath B. ClarkeDate
    
    
    
    Heath B. ClarkeChief Executive Officer and Chairman/s/ Douglas S. NormanDouglas S. NormanChief Financial Officer and Secretary
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##### Table of Contents



EXHIBITS FILED WITH THIS REPORT
 ExhibitNumber
    
    Description31.1
    
    Certification of Principal Executive Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of Principal Financial Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 200232.1
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002