##### 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, 2009
 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
    
    33-0849123(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification Number)
 One Technology Drive, Building G
Irvine, CA 92618
 (949) 784-0800
 
 þ o
 o o
  Large accelerated filer o
Accelerated filer o
Non-accelerated filer o(Do not check if a smaller reporting company)
Smaller reporting company þ
 o þ




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##### 



LOCAL.COM CORPORATION
 Table of Contents
 PagePART I. FINANCIAL INFORMATIONItem 1.
    
    Financial StatementsCondensed Consolidated Balance Sheets As of September 30, 2009 (Unaudited) and December 31, 2008
    
    
    3Condensed Consolidated Statements of Operations For the three and nine months ended September 30, 2009 and 2008 (Unaudited)
    
    
    4Condensed
Consolidated Statements of Comprehensive Income (Loss) For the three and nine months ended September 30, 2009 and 2008 (Unaudited)
    
    
    5Condensed Consolidated Statements of Cash Flows For the nine months ended September 30, 2009 and 2008 (Unaudited)
    
    
    6Notes to Condensed Consolidated Financial Statements (Unaudited)
    
    
    7Item 2.
    
    Management's Discussion and Analysis of Financial Condition and Results of Operations
    
    
    13Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    20Item 4T.
    
    Controls and Procedures
    
    
    20PART II. OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    22Item 1A.
    
    Risk Factors
    
    
    22Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    22Item 3.
    
    Defaults Upon Senior Securities
    
    
    22Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    23Item 5.
    
    Other Information
    
    
    23Item 6.
    
    Exhibits
    
    
    24Signatures
    
    
    26Index to Exhibits
    
    
    27EX-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 31,2009
    
    
    2008(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    7,153
    
    
    $
    12,142Restricted cash
    
    
    35
    
    
    
    31Accounts receivable, net of allowances of $206 and $60, respectively
    
    
    8,879
    
    
    
    5,270Prepaid expenses and other current assets
    
    
    392
    
    
    
    374Total current assets
    
    
    16,459
    
    
    
    17,817Property and equipment, net
    
    
    1,876
    
    
    
    1,073Goodwill
    
    
    13,231
    
    
    
    13,231Intangible assets, net
    
    
    4,547
    
    
    
    2,158Long-term restricted cash
    
    
    
    
    
    
    35Deposits
    
    
    12
    
    
    
    12Total assets
    
    $
    36,125
    
    
    $
    34,326LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    8,344
    
    
    $
    5,608Accrued compensation
    
    
    1,250
    
    
    
    545Deferred rent
    
    
    103
    
    
    
    199Other accrued liabilities
    
    
    889
    
    
    
    564Deferred revenue
    
    
    92
    
    
    
    64Total liabilities, all current
    
    
    10,678
    
    
    
    6,980Commitments 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; 65,000,000 shares authorized; 14,379,838
and 14,446,107 issued and outstanding, respectively
    
    
    
    
    
    
    Additional paid-in capital
    
    
    86,643
    
    
    
    85,141Accumulated deficit
    
    
    (61,196
    )
    
    
    (57,795
    )Stockholders equity
    
    
    25,447
    
    
    
    27,346Total liabilities and stockholders equity
    
    $
    36,125
    
    
    $
    34,326
  3




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##### Table of Contents



LOCAL.COM CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
 Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Revenue
    
    $
    15,128
    
    
    $
    10,196
    
    
    $
    39,918
    
    
    $
    28,684Operating Expenses:Search serving
    
    
    1,286
    
    
    
    1,331
    
    
    
    3,406
    
    
    
    4,104Sales and marketing
    
    
    10,130
    
    
    
    8,455
    
    
    
    28,533
    
    
    
    23,997General and administrative
    
    
    2,220
    
    
    
    1,271
    
    
    
    7,009
    
    
    
    4,113Research and development
    
    
    964
    
    
    
    725
    
    
    
    2,555
    
    
    
    2,358Amortization of intangibles
    
    
    722
    
    
    
    200
    
    
    
    1,801
    
    
    
    798Total operating expenses
    
    
    15,322
    
    
    
    11,982
    
    
    
    43,304
    
    
    
    35,370Operating loss
    
    
    (194
    )
    
    
    (1,786
    )
    
    
    (3,386
    )
    
    
    (6,686
    )Interest and other income (expense), net
    
    
    (18
    )
    
    
    72
    
    
    
    (14
    )
    
    
    290Loss before income taxes
    
    
    (212
    )
    
    
    (1,714
    )
    
    
    (3,400
    )
    
    
    (6,396
    )Provision for income taxes
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    1Net loss
    
    $
    (212
    )
    
    $
    (1,714
    )
    
    $
    (3,401
    )
    
    $
    (6,397
    )Per share data:Basic net loss per share
    
    $
    (0.01
    )
    
    $
    (0.12
    )
    
    $
    (0.24
    )
    
    $
    (0.45
    )Diluted net loss per share
    
    $
    (0.01
    )
    
    $
    (0.12
    )
    
    $
    (0.24
    )
    
    $
    (0.45
    )Basic weighted average shares outstanding
    
    
    14,333
    
    
    
    14,358
    
    
    
    14,365
    
    
    
    14,268Diluted weighted average shares outstanding
    
    
    14,333
    
    
    
    14,358
    
    
    
    14,365
    
    
    
    14,268
  4




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##### Table of Contents



LOCAL.COM CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net loss
    
    $
    (212
    )
    
    $
    (1,714
    )
    
    $
    (3,401
    )
    
    $
    (6,397
    )Other comprehensive income (loss):Net unrealized gain (loss) on marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Total comprehensive loss
    
    $
    (212
    )
    
    $
    (1,714
    )
    
    $
    (3,401
    )
    
    $
    (6,396
    )Supplemental comprehensive income (loss) information:Net unrealized gain (loss) on marketable securities
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    1
  5




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##### Table of Contents



LOCAL.COM CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Nine Months Ended September 30,2009
    
    
    2008Cash flows from operating activities:Net loss
    
    $
    (3,401
    )
    
    $
    (6,397
    )Adjustments to reconcile net loss to cash provided by (used) in operating activities:Depreciation and amortization
    
    
    2,265
    
    
    
    1,478Provision for doubtful accounts
    
    
    175
    
    
    
    10Stock-based compensation expense
    
    
    1,672
    
    
    
    1,801Changes in operating assets and liabilities:Accounts receivable
    
    
    (3,722
    )
    
    
    (2,740
    )Prepaid expenses and other
    
    
    (18
    )
    
    
    152Accounts payable and accrued liabilities
    
    
    3,670
    
    
    
    2,178Deferred revenue
    
    
    28
    
    
    
    (94
    )Net cash provided by (used in) operating activities
    
    
    669
    
    
    
    (3,612
    )Cash flows from investing activities:Capital expenditures
    
    
    (1,267
    )
    
    
    (315
    )Proceeds from sales of marketable securities
    
    
    
    
    
    
    2,000Decrease in restricted cash
    
    
    31
    
    
    
    30Purchases of intangible assets
    
    
    (4,252
    )
    
    
    2Net cash (used in) provided by investing activities
    
    
    (5,488
    )
    
    
    1,717Cash flows from financing activities:Proceeds from issuance of common stock:Exercise of warrants
    
    
    
    
    
    
    188Exercise of options
    
    
    167
    
    
    
    397Repurchases of common stock
    
    
    (336
    )
    
    
    Swing sale profit contribution
    
    
    
    
    
    
    3Payment of financing related costs
    
    
    (1
    )
    
    
    (25
    )Net cash (used in) provided by financing activities
    
    
    (170
    )
    
    
    563Net decrease in cash and cash equivalents
    
    
    (4,989
    )
    
    
    (1,332
    )Cash and cash equivalents, beginning of period
    
    
    12,142
    
    
    
    14,258Cash and cash equivalents, end of period
    
    $
    7,153
    
    
    $
    12,926Supplemental Cash Flow Information:Interest paid
    
    $
    24
    
    
    $
    Income taxes paid
    
    $
    1
    
    
    $
    1
  6




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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
  Accounting Standards Adopted
   7




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##### Table of Contents



2. Purchase of customer-related intangible assets
   3. Intangible assets
      September 30,
    
    
    December 31,2009
    
    
    2008Developed technology
    
    $
    2,233
    
    
    $
    2,233Non-compete agreements
    
    
    13
    
    
    
    13Customer-related
    
    
    5,210
    
    
    
    1,020Patents
    
    
    431
    
    
    
    431Domain name  indefinite life
    
    
    701
    
    
    
    7018,588
    
    
    
    4,398Less accumulated amortization
    
    
    (4,041
    )
    
    
    (2,240
    )Intangible assets, net
    
    $
    4,547
    
    
    $
    2,158
 4. Goodwill
  8




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##### Table of Contents



5. Web site development costs and computer software developed for internal use
  6. Net loss per share
     Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Numerator:Net loss
    
    $
    (212
    )
    
    $
    (1,714
    )
    
    $
    (3,401
    )
    
    $
    (6,397
    )Denominator:Denominator for basic calculation weighted average shares
    
    
    14,333
    
    
    
    14,358
    
    
    
    14,365
    
    
    
    14,268Dilutive common stock equivalents:Options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Denominator for diluted calculation weighted average shares
    
    
    14,333
    
    
    
    14,358
    
    
    
    14,365
    
    
    
    14,268Net loss per share:Basic net loss per share
    
    $
    (0.01
    )
    
    $
    (0.12
    )
    
    $
    (0.24
    )
    
    $
    (0.45
    )Diluted net loss per share
    
    $
    (0.01
    )
    
    $
    (0.12
    )
    
    $
    (0.24
    )
    
    $
    (0.45
    )
 7. Composition of certain balance sheet and statement of operations captions
  September 30,
    
    
    December 31,2009
    
    
    2008Furniture and fixtures
    
    $
    215
    
    
    $
    203Office equipment
    
    
    139
    
    
    
    132Computer equipment
    
    
    1,721
    
    
    
    1,392Computer software
    
    
    2,676
    
    
    
    1,760Leasehold improvements
    
    
    585
    
    
    
    5835,336
    
    
    
    4,070Less accumulated depreciation and amortization
    
    
    (3,460
    )
    
    
    (2,997
    )Property and equipment, net
    
    $
    1,876
    
    
    $
    1,073
 9




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Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Interest income
    
    $
    2
    
    
    $
    72
    
    
    $
    10
    
    
    $
    290Interest expense
    
    
    (20
    )
    
    
    
    
    
    
    (24
    )
    
    
    Interest and other income (expense), net
    
    $
    (18
    )
    
    $
    72
    
    
    $
    (14
    )
    
    $
    290
 8. Credit facility
     9. Operating information
  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Revenue by geographic region:United States
    
    $
    15,128
    
    
    $
    9,968
    
    
    $
    39,786
    
    
    $
    28,143Europe
    
    
    
    
    
    
    228
    
    
    
    132
    
    
    
    541Total revenue
    
    $
    15,128
    
    
    $
    10,196
    
    
    $
    39,918
    
    
    $
    28,684Revenue by product:Pay-per-click (PPC)
    
    $
    12,235
    
    
    $
    9,308
    
    
    $
    32,249
    
    
    $
    26,261Local promote and web hosting (subscription)
    
    
    2,021
    
    
    
    413
    
    
    
    5,637
    
    
    
    867Banner advertisement
    
    
    859
    
    
    
    412
    
    
    
    1,981
    
    
    
    1,315Local connect (license) (1)
    
    
    13
    
    
    
    63
    
    
    
    51
    
    
    
    241Total revenue
    
    $
    15,128
    
    
    $
    10,196
    
    
    $
    39,918
    
    
    $
    28,684
 
 (1)
    
    This includes software and patent licensing fees 10




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10. Stock-based compensation
  Weighted
    
    
    AggregateAverage
    
    
    Intrinsic ValueShares
    
    
    Exercise Price
    
    
    (in thousands)Outstanding at December 31, 2008
    
    
    3,070,790
    
    
    $
    4.87Granted
    
    
    1,290,316
    
    
    
    2.74Exercised
    
    
    (61,929
    )
    
    
    2.52Cancelled
    
    
    (301,250
    )
    
    
    4.43Outstanding at September 30, 2009
    
    
    3,997,927
    
    
    $
    4.25
    
    
    $
    5,209Exercisable at September 30, 2009
    
    
    1,782,273
    
    
    $
    5.48
    
    
    $
    1,370
    Options Outstanding
    
    Options ExercisableWeightedAverage
    
    Weighted
    
    
    
    
    
    WeightedRemaining
    
    Average
    
    
    
    
    
    AverageRange of Exercise Price
    
    Shares
    
    Contractual Life
    
    Exercise Price
    
    Shares
    
    Exercise Price$1.01 - $2.00
    
    
    793,789
    
    
    9.2 years
    
    $
    1.57
    
    
    
    61,896
    
    
    $
    1.50$2.01 - $3.00
    
    
    206,161
    
    
    7.0 years
    
    
    2.28
    
    
    
    74,627
    
    
    
    2.26$3.01 - $4.00
    
    
    1,034,111
    
    
    6.7 years
    
    
    3.65
    
    
    
    640,318
    
    
    
    3.74$4.01 - $5.00
    
    
    1,347,539
    
    
    8.4 years
    
    
    4.58
    
    
    
    394,611
    
    
    
    4.62$5.01 - $6.00
    
    
    105,959
    
    
    5.7 years
    
    
    5.70
    
    
    
    104,707
    
    
    
    5.70$6.01 - $7.00
    
    
    108,773
    
    
    4.5 years
    
    
    6.41
    
    
    
    106,521
    
    
    
    6.40$7.01 - $8.00
    
    
    190,112
    
    
    5.9 years
    
    
    7.51
    
    
    
    188,110
    
    
    
    7.52$8.01 - $10.00
    
    
    103,333
    
    
    3.9 years
    
    
    8.85
    
    
    
    103,333
    
    
    
    8.85$15.01 - $16.59
    
    
    108,150
    
    
    4.2 years
    
    
    15.62
    
    
    
    108,150
    
    
    
    15.623,997,927
    
    
    7.5 years
    
    $
    4.25
    
    
    
    1,782,273
    
    
    $
    5.48
  Three Months Ended September 30,
    
    Nine Months Ended September 30,2009
    
    2008
    
    2009
    
    2008Risk-free interest rate
    
    
    3.34
    %
    
    
    3.54
    %
    
    
    2.68
    %
    
    
    3.49
    %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 September 30,
    
    
    Nine Months Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Sales and marketing
    
    $
    151
    
    
    $
    218
    
    
    $
    519
    
    
    $
    692General and administrative
    
    
    375
    
    
    
    293
    
    
    
    907
    
    
    
    919Research and development
    
    
    111
    
    
    
    67
    
    
    
    246
    
    
    
    190Total stock-based compensation expense
    
    $
    637
    
    
    $
    578
    
    
    $
    1,672
    
    
    $
    1,801Basic and diluted net stock-based
compensation expense per share
    
    $
    0.04
    
    
    $
    0.04
    
    
    $
    0.12
    
    
    $
    0.13
 11




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11. Warrants:
  WeightedAverageShares
    
    
    Exercise PriceOutstanding at December 31, 2008
    
    
    3,290,220
    
    
    $
    7.55Issued
    
    
    49,525
    
    
    
    2.31Exercised
    
    
    
    
    
    
    Expired
    
    
    
    
    
    
    Outstanding at September 30, 2009
    
    
    3,339,745
    
    
    $
    7.47Exercisable at September 30, 2009
    
    
    3,290,220
    
    
    $
    7.55
  Warrants Outstanding and ExercisableWeightedAverageRemaining
    
    WeightedContractual
    
    AverageRange of Exercise Price
    
    Shares
    
    Life
    
    Exercise Price$2.00 - $3.99
    
    
    49,525
    
    
    1.5 years
    
    $
    2.31$4.00 - $4.99
    
    
    867,662
    
    
    2.4 years
    
    
    4.36$5.00 - $5.99
    
    
    867,662
    
    
    2.4 years
    
    
    5.17$7.00 - $7.99
    
    
    537,373
    
    
    2.8 years
    
    
    7.89$9.00 - $9.99
    
    
    537,373
    
    
    2.8 years
    
    
    9.26$10.00 - $19.99
    
    
    315,750
    
    
    0 years
    
    
    10.00$20.00 - $25.53
    
    
    164,400
    
    
    0.2 years
    
    
    25.533,339,745
    
    
    2.2 years
    
    $
    7.47
 12. Stock repurchase program
  12




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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, 2008 and for the year ended December 31, 2008 included in our Annual Report on Form
10-K filed with the Securities and Exchange Commission on March 30, 2009.
 Overview
     Recent Developments
    13




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##### Table of Contents



Outlook for Our Business
       Sources of Revenue
  
    
    click-throughs on sponsored listings;
    
    calls to cost-per-call advertiser listings;
    
    lead generation;
    
    banner ads;
    
    subscription advertiser listings; and
    
    subscription web hosting services.
 Operating Expenses
 Search Serving
  Sales and Marketing
   14




---



##### Table of Contents



General and Administrative
  Research and Development
  Critical Accounting Policies
  Revenue Recognition
   Allowance for Doubtful Accounts
   15




---



##### Table of Contents



Stock Based Compensation
  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Sales and marketing
    
    $
    151
    
    
    $
    218
    
    
    $
    519
    
    
    $
    692General and administrative
    
    
    375
    
    
    
    293
    
    
    
    907
    
    
    
    919Research and development
    
    
    111
    
    
    
    67
    
    
    
    246
    
    
    
    190Total stock-based compensation expense
    
    $
    637
    
    
    $
    578
    
    
    $
    1,672
    
    
    $
    1,801Basic and diluted net stock-based compensation expense per share
    
    $
    0.04
    
    
    $
    0.04
    
    
    $
    0.12
    
    
    $
    0.13
 Results of Operations
  Three Months Ended September 30,
    
    Nine Months Ended September 30,2009
    
    2008
    
    2009
    
    2008Revenue
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Operating Expenses:Search serving
    
    
    8.5
    
    
    
    13.0
    
    
    
    8.5
    
    
    
    14.3Sales and marketing
    
    
    67.0
    
    
    
    82.9
    
    
    
    71.5
    
    
    
    83.6General and administrative
    
    
    14.7
    
    
    
    12.5
    
    
    
    17.6
    
    
    
    14.3Research and development
    
    
    6.4
    
    
    
    7.1
    
    
    
    6.4
    
    
    
    8.2Amortization and write-down of intangibles
    
    
    4.8
    
    
    
    2.0
    
    
    
    4.5
    
    
    
    2.9Total operating expenses
    
    
    101.3
    
    
    
    117.5
    
    
    
    108.5
    
    
    
    123.3Operating loss
    
    
    (1.3
    )
    
    
    (17.5
    )
    
    
    (8.5
    )
    
    
    (23.3
    )Interest and other income (expense)
    
    
    (0.1
    )
    
    
    0.7
    
    
    
    (0.0
    )
    
    
    1.0Loss before income taxes
    
    
    (1.4
    )
    
    
    (16.8
    )
    
    
    (8.5
    )
    
    
    (22.3
    )Provision for income taxes
    
    
    
    
    
    
    
    
    
    
    0.0
    
    
    
    0.0Net loss
    
    
    (1.4
    )%
    
    
    (16.8
    )%
    
    
    (8.5
    )%
    
    
    (22.3
    )%
 Three and nine months ended September 30, 2009 and 2008
 Revenue (dollars in thousands)
 Three Months Ended September 30,
    
    
    
    
    
    
    Nine Months Ended September 30,Percent of Total
    
    
    
    
    
    
    Percent of Total
    
    
    Percent
    
    
    
    
    
    
    Percent of Total
    
    
    
    
    
    
    Percent of Total
    
    
    Percent2009
    
    
    Revenue
    
    
    2008
    
    
    Revenue
    
    
    Change
    
    
    2009
    
    
    Revenue
    
    
    2008
    
    
    Revenue
    
    
    ChangeLocal domestic
    
    $
    15,014
    
    
    
    99.2
    %
    
    $
    9,799
    
    
    
    96.1
    %
    
    
    53.2
    %
    
    $
    39,354
    
    
    
    98.6
    %
    
    $
    26,987
    
    
    
    94.1
    %
    
    
    45.8
    %Local international
    
    
    
    
    
    
    
    %
    
    
    228
    
    
    
    2.2
    %
    
    
    (100.0
    )%
    
    
    132
    
    
    
    0.3
    %
    
    
    541
    
    
    
    1.9
    %
    
    
    (75.6
    )%Total local
    
    
    15,014
    
    
    
    99.2
    %
    
    
    10,027
    
    
    
    98.3
    %
    
    
    49.7
    %
    
    
    39,486
    
    
    
    98.9
    %
    
    
    27,528
    
    
    
    96.0
    %
    
    
    43.4
    %National
    
    
    114
    
    
    
    0.8
    %
    
    
    169
    
    
    
    1.7
    %
    
    
    (32.5
    )%
    
    
    432
    
    
    
    1.1
    %
    
    
    1,156
    
    
    
    4.0
    %
    
    
    (62.6
    )%Total revenue
    
    $
    15,128
    
    
    
    100.0
    %
    
    $
    10,196
    
    
    
    100.0
    %
    
    
    48.4
    %
    
    $
    39,918
    
    
    $
    100
    %
    
    $
    28,684
    
    
    
    100.0
    %
    
    
    39.2
    %
   16




---



##### Table of Contents



Percentage of Total Revenue
    
    Percentage of Total RevenueThree Months Ended September 30,
    
    Nine Months Ended September 30, 20092009
    
    2008
    
    2009
    
    2008Across all
    
    Local.com
    
    Across all
    
    Local.com
    
    Across all
    
    Local.com
    
    Across all
    
    Local.comCustomer
    
    product lines
    
    website only
    
    product lines
    
    website only
    
    product lines
    
    website only
    
    product lines
    
    website onlyYahoo! Inc.
    
    
    41.7
    %
    
    
    37.1
    %
    
    
    55.0
    %
    
    
    43.9
    %
    
    
    44.8
    %
    
    
    39.3
    %
    
    
    53.7
    %
    
    
    45.1
    %Idearc Media Corp.
    
    
    22.0
    %
    
    
    13.3
    %
    
    
    18.5
    %
    
    
    15.1
    %
    
    
    21.6
    %
    
    
    14.2
    %
    
    
    19.2
    %
    
    
    16.7
    %
  Operating expenses:
  Three Months Ended September 30,
    
    
    
    
    
    
    Nine Months Ended September 30,Percent of Total
    
    
    
    
    
    
    Percent of Total
    
    
    Percent    
    
    
    
    
    
    Percent of Total
    
    
    
    
    
    
    Percent of Total
    
    
    Percent2009
    
    
    Revenue
    
    
    2008
    
    
    Revenue
    
    
    Change
    
    
    2009
    
    
    Revenue
    
    
    2008
    
    
    Revenue
    
    
    ChangeSearch serving
    
    $
    1,286
    
    
    
    8.5
    %
    
    $
    1,331
    
    
    
    13.1
    %
    
    
    (3.4
    )%
    
    $
    3,406
    
    
    
    8.5
    %
    
    $
    4,104
    
    
    
    14.3
    %
    
    
    (17.0
    )%Sales and marketing
    
    
    10,130
    
    
    
    67.0
    %
    
    
    8,455
    
    
    
    82.9
    %
    
    
    19.8
    %
    
    
    28,533
    
    
    
    71.5
    %
    
    
    23,997
    
    
    
    83.7
    %
    
    
    18.9
    %General and administrative
    
    
    2,220
    
    
    
    14.7
    %
    
    
    1,271
    
    
    
    12.5
    %
    
    
    74.7
    %
    
    
    7,009
    
    
    
    17.6
    %
    
    
    4,113
    
    
    
    14.3
    %
    
    
    70.4
    %Research and development
    
    
    964
    
    
    
    6.4
    %
    
    
    725
    
    
    
    7.1
    %
    
    
    33.0
    %
    
    
    2,555
    
    
    
    6.4
    %
    
    
    2,358
    
    
    
    8.2
    %
    
    
    8.4
    %Amortization and write-down of intangibles
    
    
    722
    
    
    
    4.8
    %
    
    
    200
    
    
    
    2.0
    %
    
    
    261.0
    %
    
    
    1,801
    
    
    
    4.5
    %
    
    
    798
    
    
    
    2.8
    %
    
    
    125.7
    %Total operating expenses
    
    $
    15,322
    
    
    
    101.3
    %
    
    $
    11,982
    
    
    
    117.5
    %
    
    
    27.9
    %
    
    $
    43,304
    
    
    
    108.5
    %
    
    $
    35,370
    
    
    
    123.3
    %
    
    
    22.4
    %
 Search serving
  Sales and marketing
   17




---



##### Table of Contents



General and administrative
  Research and development
  Amortization of intangibles
  Interest and other income (expense), net
  Provision for income taxes
  Liquidity and Capital Resources
  September 30,
    
    
    December 31,2009
    
    
    2008Cash and cash equivalents
    
    $
    7,153
    
    
    $
    12,142Working capital
    
    $
    5,781
    
    
    $
    10,837
  Nine Months Ended September 30,2009
    
    2008Net cash provided by (used in) operating activities
    
    $
    669
    
    
    $
    (3,612
    )Net cash (used in) provided by investing activities
    
    $
    (5,488
    )
    
    $
    1,717Net cash (used in) provided by financing activities
    
    $
    (170
    )
    
    $
    563
  18




---



##### Table of Contents



Nine Months Ended September 30,2009
    
    
    2008
    
    
    ChangeNet loss
    
    $
    (3,401
    )
    
    $
    (6,397
    )
    
    $
    2,996Non-cash(1)
    
    
    4,112
    
    
    
    3,289
    
    
    
    823Subtotal
    
    
    711
    
    
    
    (3,108
    )
    
    
    3,819Deferred revenue
    
    
    28
    
    
    
    (94
    )
    
    
    122AR, AP and Other
    
    
    (70
    )
    
    
    (410
    )
    
    
    340Net cash provided by (used in) operations
    
    $
    669
    
    
    $
    (3,612
    )
    
    $
    4,281
 
 (1)
    
    Includes depreciation, amortization, non-cash expense related to stock option issuances and
provision for doubtful accounts.    Credit facility
    19




---



##### Table of Contents



Stock repurchase program
  Recent Accounting Pronouncements
  Off-Balance Sheet Arrangements
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4T. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
    20




---



##### Table of Contents



Managements Report on Internal Control over Financial Reporting
  Internal
Control-Integrated Framework
 Changes in Internal Control over Financial Reporting
  21




---



##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  One of our significant advertising partners filed voluntary petitions for reorganization under
Chapter 11 of the U.S. Bankruptcy Code.
  We are dependent on our Local Syndication Network (LSN) partners and Local Distribution Network
(LDN) partners to provide us with local search traffic and access to local advertisers, and if
they do not, our business could be harmed.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  Approximate DollarValue of SharesTotal Number of
    
    
    that May Yet beTotal Number
    
    
    Average
    
    
    Shares Purchased as
    
    
    Purchased Under theof Shares
    
    
    Price Paid
    
    
    Part of a Publicly
    
    
    ProgramsPurchased (1)
    
    
    per Share
    
    
    Announced Program
    
    
    (in 000s) (1)January 1  January 31, 2009
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    2,000February 1  February 28, 2009
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    2,000March 1  March 31, 2009
    
    
    99,065
    
    
    $
    2.40
    
    
    
    99,065
    
    
    $
    1,763April 1  April 30, 2009
    
    
    17,874
    
    
    $
    2.82
    
    
    
    17,874
    
    
    $
    1,713May 1  May 31, 2009
    
    
    14,300
    
    
    $
    3.43
    
    
    
    14,300
    
    
    $
    1,663June 1  June 30, 2009
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    1,663July 1  July 31, 2009
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    1,663August 1  August 31, 2009
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    1,663September 1  September 30, 2009
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    1,663Total
    
    
    131,239
    
    
    $
    2.56
    
    
    
    131,239
 
 (1)
    
    The shares repurchased in the nine months ended September 30, 2009 were under our stock
repurchase program that was announced in October 2008 with an authorized level of $2.0
million. The shares repurchased were retired. This program will expire in April 2010. 
 Item 3. Defaults Upon Senior Securities
  22




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##### Table of Contents



Item 4. Submission of Matters to a Vote of Security Holders
  
    
    The election of two directors as Class II members of the Companys Board of Directors,
each for a three-year term expiring in 2012;
    
    The ratification of the appointment of Haskell & White LLP as our independent registered
public accounting firm for the fiscal year ending December 31, 2009;
    
    The approval of an amendment to the Companys Amended and Restated Certificate of
Incorporation to increase its authorized shares of stock from 40,000,000 to 75,000,000 and
the number of authorized shares of common stock, par value $0.00001 per share (the Common
Stock) from 30,000,000 to 65,000,000 as described in the attached proxy;
    
    The approval of an amendment to the Companys 2008 Equity Incentive Plan (the Plan) to
increase the maximum aggregate number of shares of Common Stock which may be issued under
the Plan from 1,000,000 to 3,000,000 as described in the attached proxy;
   Director
    
    For
    
    Withheld
    
    Broker Non-VotesTheodore E. Lavoie
    
    
    9,575,671
    
    
    
    982,303
    
    
    
    0John E. Rehfeld
    
    
    9,556,671
    
    
    
    1,001,303
    
    
    
    0
   For
    
    Against
    
    Abstain
    
    Broker Non-Votes10,475,695
    
    
    65,541
    
    
    
    16,738
    
    
    
    0
   For
    
    Against
    
    Abstain
    
    Broker Non-Votes8,651,873
    
    
    1,700,973
    
    
    
    205,128
    
    
    
    0
   For
    
    Against
    
    Abstain
    
    Broker Non-Votes1,554,812
    
    
    954,102
    
    
    
    69,314
    
    
    
    7,979,746
  
 Item 5. Other Information
  23




---



##### Table of Contents



Item 6. Exhibits
 ExhibitNumber
    
    Description3.1 (1)
    
    Amendment to Restated Certificate of Incorporation for Local.com Corporation10.1 (2)
    
    Asset Purchase and Fulfillment Agreement, dated as of February 18, 2009, by and between
LaRoss Partners, Inc. and the Registrant10.2 (3)#
    
    Separation and General Release Agreement, dated as of February 23, 2009, by and between
Douglas S. Norman and the Registrant10.3 (3)#
    
    Employment Agreement, dated as of February 23, 2009, by and between Brenda Agius and the
Registrant10.4 (4)
    
    Second Amendment to Amended and Restated PFP Advertiser Distribution Agreement, dated as
of February 27, 2009, by and between Idearc Media Corp. and the Registrant10.5 (5)
    
    Asset Purchase Agreement, dated as of March 9, 2009, by and between LiveDeal, Inc., Telco
Billing, Inc., a wholly owned subsidiary of LiveDeal, Inc and the Registrant10.6 (6)
    
    Amendment No. 4 to Yahoo! Publisher Network Agreement dated April 16, 2009 by and among
the Registrant and Yahoo! Inc.10.7 (7)
    
    Amendment No. 5 to Yahoo! Publisher Network Agreement dated June 12, 2009 by and among
the Registrant and Yahoo! Inc.10.8 (8)
    
    Loan and Security Agreement dated June 26, 2009, by and among Registrant, Square 1 Bank,
and Local.com PG Acquisition Corporation.10.9 (9)#
    
    Description of the Material Terms of the Registrants Bonus Program as of July 29, 2009.10.10 (9)#
    
    Employment Agreement by and between the Registrant and Heath Clarke dated July 30,
2009.10.11 (9)#
    
    Employment Agreement by and between the Registrant and Stanley B. Crair dated July 30,
2009.10.12 (10)
    
    2008 Equity Incentive Plan, as amended10.13 (11)
    
    First Amendment dated September 28, 2009 to Loan and Security Agreement dated June 26,
2009, by and among Registrant, Square 1 Bank, and Local.com PG Acquisition Corporation.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 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.#
    
    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 August 11, 2009.(2)
    
    Incorporated by reference from the Registrants Current Report on Form 8-K, filed with
the Securities and Exchange Commission on February 23, 2009. Confidential portions omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2
promulgated under the Securities and Exchange Act of 1934, as amended.(3)
    
    Incorporated by reference from the Registrants Current Report on Form 8-K, filed with
the Securities and Exchange Commission on February 27, 2009. 24




---



##### Table of Contents



(4)
    
    Incorporated by reference from the Registrants Current Report on Form 8-K, filed with
the Securities and Exchange Commission on March 5, 2009. Confidential portions omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2
promulgated under the Securities and Exchange Act of 1934, as amended.(5)
    
    Incorporated by reference from the Registrants Current Report on Form 8-K, filed with
the Securities and Exchange Commission on March 12, 2009.(6)
    
    Incorporated by reference from the Registrants Current Report on Form 8-K, filed with
the Securities and Exchange Commission on April 22, 2009. Confidential portions omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2
promulgated under the Securities and Exchange Act of 1934, as amended.(7)
    
    Incorporated by reference from the Registrants Current Report on Form 8-K, filed with
the Securities and Exchange Commission on June 17, 2009. Confidential portions omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2
promulgated under the Securities and Exchange Act of 1934, as amended.(8)
    
    Incorporated by reference from the Registrants Current Report on Form 8-K, filed with
the Securities and Exchange Commission on July 2, 2009. Confidential portions omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2
promulgated under the Securities and Exchange Act of 1934, as amended.(9)
    
    Incorporated by reference from the Registrants Current Report on Form 8-K, filed with
the Securities and Exchange Commission on August 3, 2009.(10)
    
    Incorporated by reference from the Registrants Schedule 14A filed with the Securities
and Exchange Commission on June 24, 2009.(11)
    
    Incorporated by reference from the Registrants Current Report on Form 8-K, filed with
the Securities and Exchange Commission on September 29, 2009. 
 25




---



##### Table of Contents



SIGNATURES
  LOCAL.COM CORPORATIONNovember 9, 2009
    /s/ Heath B. ClarkeDate
    Heath B. ClarkeChief Executive Officer
(principal executive officer) and ChairmanNovember 9, 2009
    /s/ Brenda AgiusDate
    Brenda AgiusChief Financial Officer (principal financial
and accounting officer) and Secretary 26




---



##### Table of Contents



INDEX TO EXHIBITS
 ExhibitNumber
    
    Description3.1 (1)
    
    Amendment to Restated Certificate of Incorporation for Local.com Corporation10.1 (2)
    
    Asset Purchase and Fulfillment Agreement, dated as of February 18, 2009, by and between
LaRoss Partners, Inc. and the Registrant10.2 (3)#
    
    Separation and General Release Agreement, dated as of February 23, 2009, by and between
Douglas S. Norman and the Registrant10.3 (3)#
    
    Employment Agreement, dated as of February 23, 2009, by and between Brenda Agius and the
Registrant10.4 (4)
    
    Second Amendment to Amended and Restated PFP Advertiser Distribution Agreement, dated as
of February 27, 2009, by and between Idearc Media Corp. and the Registrant10.5 (5)
    
    Asset Purchase Agreement, dated as of March 9, 2009, by and between LiveDeal, Inc., Telco
Billing, Inc., a wholly owned subsidiary of LiveDeal, Inc and the Registrant10.6 (6)
    
    Amendment No. 4 to Yahoo! Publisher Network Agreement dated April 16, 2009 by and among
the Registrant and Yahoo! Inc.10.7 (7)
    
    Amendment No. 5 to Yahoo! Publisher Network Agreement dated June 12, 2009 by and among
the Registrant and Yahoo! Inc.10.8 (8)
    
    Loan and Security Agreement dated June 26, 2009, by and among Registrant, Square 1 Bank,
and Local.com PG Acquisition Corporation.10.9 (9)#
    
    Description of the Material Terms of the Registrants Bonus Program as of July 29, 2009.10.10 (9)#
    
    Employment Agreement by and between the Registrant and Heath Clarke dated July 30,
2009.10.11 (9)#
    
    Employment Agreement by and between the Registrant and Stanley B. Crair dated July 30,
2009.10.12 (10)
    
    2008 Equity Incentive Plan, as amended10.13 (11)
    
    First Amendment dated September 28, 2009 to Loan and Security Agreement dated June 26,
2009, by and among Registrant, Square 1 Bank, and Local.com PG Acquisition Corporation.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 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.#
    
    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 August 11, 2009.(2)
    
    Incorporated by reference from the Registrants Current Report on Form 8-K, filed with
the Securities and Exchange Commission on February 23, 2009. Confidential portions omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2
promulgated under the Securities and Exchange Act of 1934, as amended.(3)
    
    Incorporated by reference from the Registrants Current Report on Form 8-K, filed with
the Securities and Exchange Commission on February 27, 2009. 27




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(4)
    
    Incorporated by reference from the Registrants Current Report on Form 8-K, filed with
the Securities and Exchange Commission on March 5, 2009. Confidential portions omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2
promulgated under the Securities and Exchange Act of 1934, as amended.(5)
    
    Incorporated by reference from the Registrants Current Report on Form 8-K, filed with
the Securities and Exchange Commission on March 12, 2009.(6)
    
    Incorporated by reference from the Registrants Current Report on Form 8-K, filed with
the Securities and Exchange Commission on April 22, 2009. Confidential portions omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2
promulgated under the Securities and Exchange Act of 1934, as amended.(7)
    
    Incorporated by reference from the Registrants Current Report on Form 8-K, filed with
the Securities and Exchange Commission on June 17, 2009. Confidential portions omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2
promulgated under the Securities and Exchange Act of 1934, as amended.(8)
    
    Incorporated by reference from the Registrants Current Report on Form 8-K, filed with
the Securities and Exchange Commission on July 2, 2009. Confidential portions omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2
promulgated under the Securities and Exchange Act of 1934, as amended.(9)
    
    Incorporated by reference from the Registrants Current Report on Form 8-K, filed with
the Securities and Exchange Commission on August 3, 2009.(10)
    
    Incorporated by reference from the Registrants Schedule 14A filed with the Securities
and Exchange Commission on June 24, 2009.(11)
    
    Incorporated by reference from the Registrants Current Report on Form 8-K, filed with
the Securities and Exchange Commission on September 29, 2009. 28