##### Table of Contents

---

U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549

FORM 10-Q

|x                                                              | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 
|-------------------------------------------------------------- | ----------------------------------------------------------------------------------------
|                                                               |                                                                                         
|For the Quarterly Period Ended March 31, 2003                 
|                                                              
|OR                                                            
|                                                               |                                                                                         
|o                                                              | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|                                                               |                                                                                         
|For the Transition Period from ________ to __________.        
|                                                              
|Commission File Number: 000-26357                             
|                                                              
|LOOKSMART, LTD.                                               
|(Exact Name of Registrant as Specified in its Charter)        
|                                                              
|Delaware                                                       |                                                                                         
|(State or other jurisdiction of incorporation or organization) |                                                                                         
|                                                               |                                                                                         
|625 Second Street                                             
|San Francisco, California 94107                               
|(Address of Principal Executive Offices and Zip Code)         
|                                                              
|(415) 348-7000                                                
|(Registrants Telephone Number, Including Area Code)          
|                                                               |                                                                                         

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the preceding
12months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

|Yes x | No o
|----- | ----

Indicate by check mark whether the registrant is
an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

|Yes x | No o
|----- | ----

As of May 9, 2003, there were 103,080,319 shares
of the registrants common stock outstanding.

---



---

##### Table of Contents

FORM 10-Q INDEX

|                               |                                                                                                                           | Page
|------------------------------ | ------------------------------------------------------------------------------------------------------------------------- | ----
|                               |                                                                                                                           |     
|PART I   FINANCIAL INFORMATION |                                                                                                                          
|                               |                                                                                                                           |     
|ITEM 1:                        | Condensed Consolidated Financial Statements (unaudited)                                                                   | 3   
|                               | Condensed Consolidated Balance Sheets as of March 31, 2003 and December 31, 2002                                          | 3   
|                               | Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2003 and 2002 | 4   
|                               | Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2003 and 2002                        | 6   
|                               | Notes to Condensed Consolidated Financial Statements                                                                      | 7   
|                               |                                                                                                                           |     
|ITEM 2:                        | Managements Discussion and Analysis of Financial Condition and Results of Operations                                     | 14  
|                               | Factors Affecting Operating Results                                                                                       | 24  
|                               |                                                                                                                           |     
|ITEM 3:                        | Quantitative and Qualitative Disclosures About Market Risk                                                                | 32  
|                               |                                                                                                                           |     
|ITEM 4:                        | Controls and Procedures                                                                                                   | 33  
|                               |                                                                                                                           |     
|PART II   OTHER INFORMATION    |                                                                                                                          
|                               |                                                                                                                           |     
|ITEM 1:                        | Legal Proceedings                                                                                                         | 33  
|                               |                                                                                                                           |     
|ITEM 2:                        | Changes in Securities and Use of Proceeds                                                                                 | 34  
|                               |                                                                                                                           |     
|ITEM 6:                        | Exhibits and Reports on Form 8-K                                                                                          | 34  
|                               |                                                                                                                           |     
|ITEM 7:                        | Signature                                                                                                                 | 34  
|                               |                                                                                                                           |     
|CERTIFICATIONS                 | 35                                                                                                                       
|EXHIBIT INDEX                  | 37                                                                                                                       

2



---

##### Table of Contents

PART I  FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS

LOOKSMART, LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands, except per share data) (Unaudited)

|                                                                                                                                                                                 |  | March 31, 2003 |          | December 31, 2002 |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | -------- | ----------------- | -
|                                                                                                                                                                                 |  |                |          |                   |  
|ASSETS                                                                                                                                                                           |  |                |          |                   |  
|Current assets:                                                                                                                                                                  |  |                |          |                   |  
|Cash and cash equivalents                                                                                                                                                        |  | $              | 54,524   |                   | $
|Short-term investments                                                                                                                                                           |  |                | 162      |                   |  
|Trade accounts receivable, net                                                                                                                                                   |  |                | 15,834   |                   |  
|Due from related party                                                                                                                                                           |  |                | 1,894    |                   |  
|Prepaid expenses                                                                                                                                                                 |  |                | 1,837    |                   |  
|Other current assets                                                                                                                                                             |  |                | 739      |                   |  
|                                                                                                                                                                                 |  |                |          |                   |  
|Total current assets                                                                                                                                                             |  |                | 74,990   |                   |  
|Property and equipment, net                                                                                                                                                      |  |                | 9,707    |                   |  
|Security deposits and other assets                                                                                                                                               |  |                | 4,760    |                   |  
|Intangible assets, net                                                                                                                                                           |  |                | 6,957    |                   |  
|Goodwill                                                                                                                                                                         |  |                | 8,852    |                   |  
|                                                                                                                                                                                 |  |                |          |                   |  
|Total assets                                                                                                                                                                     |  | $              | 105,266  |                   | $
|                                                                                                                                                                                 |  |                |          |                   |  
|LIABILITIES & STOCKHOLDERS EQUITY                                                                                                                                               |  |                |          |                   |  
|Current liabilities:                                                                                                                                                             |  |                |          |                   |  
|Long term debt, current portion                                                                                                                                                  |  | $              | 1,305    |                   | $
|Trade accounts payable                                                                                                                                                           |  |                | 3,509    |                   |  
|Other accrued liabilities                                                                                                                                                        |  |                | 20,063   |                   |  
|Deferred revenue                                                                                                                                                                 |  |                | 6,835    |                   |  
|                                                                                                                                                                                 |  |                |          |                   |  
|Total current liabilities                                                                                                                                                        |  |                | 31,712   |                   |  
|Long term debt                                                                                                                                                                   |  |                | 1,042    |                   |  
|Other long term liabilities                                                                                                                                                      |  |                | 859      |                   |  
|                                                                                                                                                                                 |  |                |          |                   |  
|Total liabilities                                                                                                                                                                |  |                | 33,613   |                   |  
|Commitments and contingencies (Note 5)                                                                                                                                           |  |                |          |                   |  
|Stockholders equity:                                                                                                                                                            |  |                |          |                   |  
|Common stock, $.001 par value; Authorized: 200,000 at March 31, 2003 and December 31, 2002; Issued and Outstanding: 102,079,
and 101,421 at March 31, 2003 and December 31, 2002 |  |                | 101      |                   |  
|Additional paid-in capital                                                                                                                                                       |  |                | 251,721  |                   |  
|Other equity                                                                                                                                                                     |  |                | 849      |                   |  
|Accumulated deficit                                                                                                                                                              |  |                | (181,018 | )                 |  
|                                                                                                                                                                                 |  |                |          |                   |  
|Total stockholders equity                                                                                                                                                       |  |                | 71,653   |                   |  
|                                                                                                                                                                                 |  |                |          |                   |  
|Total liabilities and stockholders equity                                                                                                                                       |  | $              | 105,266  |                   | $
|                                                                                                                                                                                 |  |                |          |                   |  

The accompanying notes are an integral part of these consolidated financial
statements.

3



---

##### Table of Contents

LOOKSMART, LTD.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME/(LOSS) (In Thousands, except per share data) (Unaudited)

|                                                                                    |  | Three Months Ended March 31, |       
|----------------------------------------------------------------------------------- |  | ---------------------------- | ------
|                                                                                    |  |                              |       
|                                                                                    |  | 2003                         |       
|                                                                                    |  |                              |       
|Revenues:                                                                           |  |                              |       
|Listings                                                                            |  | $                            | 29,434
|Licensing                                                                           |  |                              | 3,969 
|                                                                                    |  |                              |       
|Total revenues                                                                      |  |                              | 33,403
|Cost of revenues                                                                    |  |                              | 16,667
|                                                                                    |  |                              |       
|Gross profit                                                                        |  |                              | 16,736
|                                                                                    |  |                              |       
|Operating expenses:                                                                 |  |                              |       
|Sales and marketing                                                                 |  |                              | 5,337 
|Product development                                                                 |  |                              | 7,182 
|General and administrative                                                          |  |                              | 3,054 
|                                                                                    |  |                              |       
|Total operating expenses                                                            |  |                              | 15,573
|                                                                                    |  |                              |       
|Income (loss) from operations                                                       |  |                              | 1,163 
|Non-operating income (expense):                                                     |  |                              |       
|Interest and other non-operating income (expense), net                              |  |                              | 148   
|Share of joint venture loss                                                         |  |                              | (256  
|                                                                                    |  |                              |       
|Income (loss) from continuing operations before income taxes and extraordinary gain |  |                              | 1,055 
|Income tax expense                                                                  |  |                              | (116  
|                                                                                    |  |                              |       
|Income (loss) from continuing operations before extraordinary gain                  |  |                              | 939   
|Loss from discontinued operations                                                   |  |                              |      
|                                                                                    |  |                              |       
|Income (loss) before extraordinary gain                                             |  |                              | 939   
|Extraordinary gain from the purchase of BTLS joint venture entities, net of tax     |  |                              | 202   
|                                                                                    |  |                              |       
|Net income (loss)                                                                   |  |                              | 1,141 
|Other comprehensive income (loss):                                                  |  |                              |       
|Change in unrealized gain on securities during the period                           |  |                              | 293   
|Change in translation adjustment                                                    |  |                              | 68    
|                                                                                    |  |                              |       
|Comprehensive income (loss)                                                         |  | $                            | 1,502 
|                                                                                    |  |                              |       

The accompanying notes are an integral part of these consolidated financial statements.

4



---

##### Table of Contents

LOOKSMART, LTD.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME/(LOSS), CONTINUED (In Thousands, except per share data)  (Unaudited)

|                                                                                |  | Three Months Ended March 31, |        
|------------------------------------------------------------------------------- |  | ---------------------------- | -------
|                                                                                |  |                              |        
|                                                                                |  | 2003                         |        
|                                                                                |  |                              |        
|Net income (loss) per share:                                                    |  |                              |        
|Basic net income (loss) per share:                                              |  |                              |        
|Income (loss) from continuing operations                                        |  | $                            | 0.01   
|Loss from discontinued operations                                               |  |                              |       
|Extraordinary gain from the purchase of BTLS joint venture entities, net of tax |  |                              | 0.00   
|                                                                                |  |                              |        
|Net income (loss)                                                               |  | $                            | 0.01   
|                                                                                |  |                              |        
|Diluted net income (loss) per share:                                            |  |                              |        
|Income (loss) from continuing operations                                        |  | $                            | 0.01   
|Loss from discontinued operations                                               |  |                              |       
|Extraordinary gain from the purchase of BTLS Joint Venture entities, net of tax |  |                              | 0.00   
|                                                                                |  |                              |        
|Net income (loss)                                                               |  | $                            | 0.01   
|                                                                                |  |                              |        
|Weighted average shares outstanding used in per share calculationbasic         |  |                              | 100,374
|Weighted average shares outstanding used in per share calculationdiluted       |  |                              | 109,314
|                                                                                |  |                              |        

The accompanying notes are an integral part of these consolidated financial
statements.

5



---

##### Table of Contents

LOOKSMART, LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) (Unaudited)

|                                                                                           |  | Three Months Ended March 31, |       
|------------------------------------------------------------------------------------------ |  | ---------------------------- | ------
|                                                                                           |  |                              |       
|                                                                                           |  | 2003                         |       
|                                                                                           |  |                              |       
|Cash flows from operating activities:                                                      |  |                              |       
|Net income (loss)                                                                          |  | $                            | 1,141 
|Adjustments to reconcile net income (loss) to net cash provided by operating activities:   |  |                              |       
|Share of joint venture loss                                                                |  |                              | 261   
|Depreciation and amortization                                                              |  |                              | 1,872 
|Stock based compensation                                                                   |  |                              | 969   
|(Gain) loss from sale of assets and other non-cash charges                                 |  |                              | (1    
|Loss from discontinued operations                                                          |  |                              |      
|Extraordinary gain from the purchase of BTLS joint venture entities                        |  |                              | (202  
|Changes in operating assets and liabilities, net of effects of acquisitions and disposals: |  |                              |       
|Trade accounts receivable                                                                  |  |                              | 18    
|Prepaid expenses                                                                           |  |                              | 211   
|Other assets                                                                               |  |                              | (158  
|Trade accounts payable                                                                     |  |                              | 176   
|Other accrued liabilities                                                                  |  |                              | 1,657 
|Deferred revenue                                                                           |  |                              | (963  
|                                                                                           |  |                              |       
|Net cash provided by operating activities                                                  |  |                              | 4,981 
|                                                                                           |  |                              |       
|Cash flows from investing activities:                                                      |  |                              |       
|Acquisition of assets of Grub, Inc.                                                        |  |                              | (612  
|Proceeds from sale of short-term investments                                               |  |                              | 3,406 
|Funding to joint venture and subsidiaries                                                  |  |                              | (500  
|Restricted cash                                                                            |  |                              |      
|Payments for property, equipment and capitalized software development                      |  |                              | (1,503
|Proceeds from the sale of property and equipment                                           |  |                              | 1     
|                                                                                           |  |                              |       
|Net cash provided by investing activities                                                  |  |                              | 792   
|                                                                                           |  |                              |       
|Cash flows from financing activities:                                                      |  |                              |       
|Repayment of notes                                                                         |  |                              | (428  
|Proceeds from issuance of common stock                                                     |  |                              | 1,415 
|                                                                                           |  |                              |       
|Net cash provided by financing activities                                                  |  |                              | 987   
|                                                                                           |  |                              |       
|Effect of exchange rate changes on cash                                                    |  |                              | 68    
|                                                                                           |  |                              |       
|Increase in cash and cash equivalents                                                      |  |                              | 6,828 
|Cash and cash equivalents, beginning of period                                             |  |                              | 47,696
|                                                                                           |  |                              |       
|Cash and cash equivalents, end of period                                                   |  | $                            | 54,524
|                                                                                           |  |                              |       

The accompanying notes are an integral part of these consolidated financial
statements.

6



---

##### Table of Contents

LOOKSMART, LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1.       Summary of
Significant Accounting Policies

Nature of Business and Principles of Consolidation

LookSmart, Ltd. (the Company) is a leading provider of Internet search solutions for portals, Internet service providers and media companies, as well as a leading
provider of marketing products for advertisers who want to be included in relevant search results.

The consolidated financial statements
include the accounts of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Investments in 20% to 50% owned partnerships and affiliates are accounted for by the equity
method and investments in less than 20% owned affiliates, over which the Company does not exert any significant influence, are accounted for by the cost method.

Use of Estimates

The financial statements have been prepared in conformity with accounting principles generally accepted in the United States. This
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and revenues and expenses during the reporting period. Actual results could differ from those estimates.

Reclassifications

Certain prior years balances have been reclassified to conform to the current
years presentation.

Concentration of Business Risk

The Company
derived approximately 64% and 33% of listings revenues in the three months ended March 31, 2003 and 2002, respectively, from its relationship with Microsoft. Either party may terminate the agreement with Microsoft for any reason on six months
notice and the agreement expires on December 3, 2003.

The Company derives all of its licensing revenue from its agreement with
Microsoft, which expires on December 3, 2003.

Stock-Based Compensation

The
Company accounts for stock-based employee compensation under the recognition and measurement principles of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, (APB No. 25) and related interpretations.
Under APB No. 25, compensation cost is equal to the difference, if any, on the date of grant between the fair value of the Companys stock and the amount an employee must pay to acquire the stock. SFAS No. 123, Accounting for Stock-based
Compensation, established accounting and disclosure requirements using a fair value based method of accounting for stock-based employee compensation plans. As allowed by SFAS No. 123, the Company has elected to continue to apply the intrinsic
value based method of accounting described above, and has adopted the disclosure requirements of SFAS No. 123 and related SFAS No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure.

7



---

##### Table of Contents

The following table illustrates the effect on net income (loss) and net income (loss) per share if the Company had
applied the fair value recognition provisions of SFAS No. 123 to stock-based compensation (in thousands, except per share data):

|                                                                                                                      |  | Three Months EndedMarch 31, |       
|--------------------------------------------------------------------------------------------------------------------- |  | --------------------------- | ------
|                                                                                                                      |  |                             |       
|                                                                                                                      |  | 2003                        |       
|                                                                                                                      |  |                             |       
|Net income (loss) as reported                                                                                         |  | $                           | 1,141 
|Add: Stock-based employee compensation expense included in reported net income, net of related tax effects            |  |                             | 969   
|Deduct: Total stock-based employee compensation expense determined under fair value method for all awards, net of
tax |  |                             | (4,401
|                                                                                                                      |  |                             |       
|Pro forma net income (loss)                                                                                           |  | $                           | (2,291
|                                                                                                                      |  |                             |       
|Basic net income (loss) per share                                                                                     |  |                             |       
|As reported                                                                                                           |  | $                           | 0.01  
|Pro forma                                                                                                             |  | $                           | (0.02 
|Diluted net income (loss) per share                                                                                   |  |                             |       
|As reported                                                                                                           |  | $                           | 0.01  
|Pro forma                                                                                                             |  | $                           | (0.02 

Net Loss Per Share

SFAS No. 128, Earnings per Share, establishes standards for computing and presenting earnings per share. Basic earnings per share is calculated using the
weighted average shares of common stock outstanding. Diluted earnings per share is calculated using the weighted average number of common and potentially dilutive common shares outstanding during the period, using the as-if converted method for
convertible preferred stock and the treasury stock method for options and warrants.

Segment Information

Starting on January 1, 2003, the Company has two operating segments: listings and licensing.  The Company exited the ecommerce segment after the second quarter
of 2002 and ceased reporting the advertising segment after the fourth quarter of 2002, as it no longer manages advertising as a separate product. With the exception of accounts receivable and deferred revenue and goodwill, information (for the
purposes of making decisions about allocating resources) available to the chief operating decision makers, primarily the Chief Executive Officer and the Chief Financial Officer, of the Company does not include allocations of assets and liabilities
or operating costs to the Companys segments.

International revenues from the Companys foreign subsidiaries were less than
10% of total revenue in the three months ended March 31, 2003 and 2002 and were derived from its operations in Australia, Japan and the United Kingdom.

As of March 31, 2003 and December 31, 2002, all of the Companys accounts receivable, intangible assets and goodwill related to the listings segment.

8



---

##### Table of Contents

LOOKSMART, LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS,
CONTINUED (Unaudited)

As of March 31, 2003 and December 31, 2002, deferred revenue by segments is as follows (in thousands):

|          |  | March 31, 2003 |       | December 31, 2002 |  
|--------- |  | -------------- | ----- | ----------------- | -
|          |  |                |       |                   |  
|Listings  |  | $              | 4,469 |                   | $
|Licensing |  |                | 2,366 |                   |  
|          |  |                |       |                   |  
|Total     |  | $              | 6,835 |                   | $
|          |  |                |       |                   |  

Recently Issued Accounting Pronouncements

In July 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities.  This statement requires companies to
recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. Examples of costs covered by the standard include lease termination costs and certain employee
severance costs that are associated with a restructuring, discontinued operation, plant closing, or other exit or disposal activity. The adoption of SFAS No. 146 at the beginning of 2003 did not have a material impact on the Companys
consolidated financial position or results of operations.

In November 2002, the EITF reached a consensus on Issue No. 00-21,
Revenue Arrangements with Multiple Deliverables. This issue addresses how revenue arrangements with multiple deliverables should be divided into separate units of accounting and how the arrangement consideration should be allocated to
the identified separate accounting units. EITF No. 00-21 is effective for fiscal periods beginning after June 15, 2003. The Company is currently evaluating the impact of adopting EITF No. 00-21 on its results of operations and
financial position.

In January 2003, the FASB issued FIN No. 46, Consolidation of Variable Interest Entities. FIN No.
46 expands upon and strengthens existing accounting guidance that addresses when a company should include in its financial statements the assets, liabilities and activities of another entity. A variable interest entity is a corporation, partnership,
trust, or any other legal structure used for business purposes that either (a) does not have equity investors with voting rights or (b) has equity investors that do not provide sufficient financial resources for the entity to support its
activities. FIN No. 46 requires a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entitys activities or is entitled to receive a majority of the
entitys residual returns or both. The consolidation requirements of FIN No. 46 apply immediately to variable interest entities created after January 31, 2003. The consolidation requirements apply to older entities in the first fiscal year
or interim period beginning after June 15, 2003. Disclosure requirements apply to any financial statements issued after January 31, 2003. The Company has considered the provisions of FIN No. 46 and believes it will not be necessary to
include in the Companys financial statements any assets, liabilities, or activities of BT LookSmart, Ltd., its joint venture with British Telecommunications. The Company will continue to evaluate the impact of FIN No. 46 on the consolidated
financial statements and related disclosures.

9



---

##### Table of Contents

LOOKSMART, LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS,
CONTINUED (Unaudited)

2.       Unaudited Interim Financial Information

The accompanying unaudited condensed consolidated financial statements reflect all adjustments which are normal and recurring in nature and, in the opinion of
management, are necessary for a fair statement of the results of operations for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for any full fiscal year or for any future
period.

Certain information and note disclosures normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to the Securities and Exchange Commissions rules and regulations. These unaudited interim condensed consolidated financial statements should be read in conjunction with
LookSmarts audited consolidated financial statements and notes for the year ended December 31, 2002 included in its Annual Report on Form 10-K filed with the Securities and Exchange Commission.

3.       Acquisition of Technology

In January 2003, the Company
acquired intellectual property rights from Grub, Inc. and an individual for total consideration of $1.3 million, consisting of $0.6 million cash payment, including $12,000 of direct costs and the commitment to issue 217,000 shares of LookSmart
common stock valued at $0.7 million.

The intellectual property rights are classified as intangible assets on the balance sheet and have
an estimated useful life of three years.

4.       Goodwill and Intangible Assets

The Companys intangible assets consist primarily of purchased technology and have estimated useful lives of three to seven years. The Company has reassessed the
expected useful lives of existing intangible assets. This reassessment did not result in any significant changes to the useful lives. Goodwill and intangible assets are as follows (in thousands):

|                              |  | March 31, 2003 |        | December 31, 2002 |  
|----------------------------- |  | -------------- | ------ | ----------------- | -
|                              |  |                |        |                   |  
|Goodwill                      |  | $              | 11,546 |                   | $
|Less accumulated amortization |  |                | 2,694  |                   |  
|                              |  |                |        |                   |  
|Goodwill                      |  | $              | 8,852  |                   | $
|                              |  |                |        |                   |  
|Intangible assets             |  | $              | 9,763  |                   | $
|Less accumulated amortization |  |                | 2,806  |                   |  
|                              |  |                |        |                   |  
|Intangible assets, net        |  | $              | 6,957  |                   | $
|                              |  |                |        |                   |  

10



---

##### Table of Contents

LOOKSMART, LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS,
CONTINUED (Unaudited)

Intangible asset amortization expense was $0.5 million and $0.2 million for the three months ended March
31, 2003 and 2002, respectively, and was included in cost of revenue and product development costs. Estimated future intangible amortization expense is as follows (in thousands):

|Year       |  | Estimated Amortization of Intangibles |      
|---------- |  | ------------------------------------- | -----
|           |  |                                       |      
|2003       |  | $                                     | 1,352
|2004       |  |                                       | 1,352
|2005       |  |                                       | 1,352
|2006       |  |                                       | 923  
|2007       |  |                                       | 923  
|Thereafter |  |                                       | 1,154

5.       Commitments and Contingencies

Legal Proceedings

In May 2002, Legal Staffing Partners, Inc., an express listing customer,
filed a proposed class action lawsuit in Superior Court in San Francisco County. The complaint alleged breach of contract, unfair business practices and false advertising in connection with the launch of the Companys new Small Business
Listings product announced in April 2002. The complaint sought restitution, unspecified compensatory damages, injunctive relief and attorneys fees. In July 2002, Curt Kramer, an express listing customer, filed a proposed class action lawsuit
in Superior Court in San Francisco County alleging claims that were substantially similar to those alleged by Legal Staffing Partners. In October 2002, the two plaintiffs agreed to withdraw their complaints and file a single consolidated amended
complaint containing substantially the same allegations as the prior two complaints.  In November 2002, the Company filed a motion to dismiss the claims in the amended complaint. The court denied the motion in January 2003. The Company filed an
answer to the amended complaint in January 2003.  Plaintiffs have served document and deposition requests, but no other discovery is being sought at this time.

From time to time the Company is involved in lawsuits, claims, investigations and proceedings, in addition to those identified above, consisting of intellectual
property, commercial, employment and other matters, which arise in the ordinary course of business. In accordance with SFAS No. 5, the Company makes a provision for a liability when it is both probable that a liability has been incurred and the
amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the effects of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a
particular case. Litigation is inherently unpredictable. However, the Company believes that it has valid defenses with respect to the legal matters pending against it. It is possible, nevertheless, that cash flows or results of operations could be
affected in any particular period by the resolution of one or more of these contingencies.

Joint Venture Funding

Pursuant to the settlement agreement with BT for the dissolution of the joint venture, the Company and BT are jointly liable for the costs incurred to close the
operations of the joint venture. The Company does not expect to incur significant additional expenses to dissolve the joint venture.

11



---

##### Table of Contents

LOOKSMART, LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS,
CONTINUED (Unaudited)

Indemnities

In the normal course of business,
the Company makes indemnities, commitments and guarantees under which it may be required to make payments in relation to certain transactions. These indemnities include intellectual property indemnities to the Companys customers in connection
with the sales of its products, indemnities to distribution partners in connection with the distribution of the Companys listings, indemnities to various lessors in connection with facility leases for certain claims arising from such facility
or lease, and indemnities to directors and officers of the Company to the maximum extent permitted under the laws of the State of Delaware.

6.       Net
Income (Loss) Per Share:

In accordance with the requirements of SFAS No. 128, a reconciliation of the numerator and denominator of
basic and diluted loss per share is provided as follows (in thousands, except per share amounts):

|                                            |  | Three Months Ended March 31, |        
|------------------------------------------- |  | ---------------------------- | -------
|                                            |  |                              |        
|                                            |  | 2003                         |        
|                                            |  |                              |        
|NumeratorBasic and diluted:                |  |                              |        
|Net income (loss)                           |  | $                            | 1,141  
|                                            |  |                              |        
|Denominator                                 |  |                              |        
|Weighted average common shares outstanding: |  |                              |        
|Shares used to compute basic EPS            |  |                              | 100,374
|Dilutive common equivalent shares:          |  |                              |        
|Options                                     |  |                              | 7,210  
|Warrants                                    |  |                              | 540    
|Escrow Shares                               |  |                              | 1,190  
|                                            |  |                              |        
|Shares used to compute diluted EPS          |  |                              | 109,314
|                                            |  |                              |        
|Net income (loss) per share:                |  |                              |        
|Basic                                       |  | $                            | 0.01   
|Diluted                                     |  | $                            | 0.01   

Options and warrants
to purchase common stock are not included in the diluted income (loss) per share calculations if their effect is antidilutive. The antidilutive securities included potential common stock relating to stock options and warrants as follows (in
thousands):

|                          |  | March 31, 2003 |     | March 31, 2002 | 
|------------------------- |  | -------------- | --- | -------------- | 
|                          |  |                |     |                | 
|Options                   |  |                | 496 |                | 
|Warrants                  |  |                | 32  |                | 
|                          |  |                |     |                | 
|Total antidilutive shares |  |                | 528 |                | 
|                          |  |                |     |                | 

12



---

##### Table of Contents

LOOKSMART, LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS,
CONTINUED (Unaudited)

7.       Related Party Transactions:

As of March 31, 2003 and December 31, 2002 the Company had related party receivables of $1.9 million and $1.4 million, respectively, from BT LookSmart. These
receivables represent reimbursable distribution costs incurred for paid clicks provided by one of the Companys distribution partners to BT LookSmart and have been classified on the balance sheet as due from related party.

In April 2002, the Company loaned an executive officer of the Company $0.3 million. The loan is interest free and may be forgiven
ratably over a period of four years, subject to certain performance measures being met. In addition, the Company has agreed to pay taxes due related to forgiveness of the loan and imputed interest. In the event that the officers employment
terminates during the four-year period, the outstanding unforgiven balance is due upon the next anniversary date of the loan. The amount being forgiven, plus imputed interest and payments to cover taxes are charged to operations ratably over the
life of the loan and was $0.1 million for the three months ended March 31, 2003.

8.       Loss from Discontinued Operations

In the first quarter of 2002, the Company transferred its 52.8% ownership interest in its consolidated subsidiary, Futurecorp, to the minority shareholders. The
Company paid Futurecorp AU$90,000 (approximately US$47,000) and issued 16,437 shares of LookSmart common stock in connection with the transfer. As required by SFAS No. 144, the Company reported the results of operations of this component as a loss
from discontinued operations of $1.0 million, which includes a $1.0 million loss on disposal in the three months ended March 31, 2002.  Revenue included in the loss on disposal was $0 and $0.6 million in the three months ended March 31, 2003
and 2002, respectively. Pretax net income (loss) reported in discontinued operations was $0 and $63,000 in the three months ended March 31, 2003 and 2002, respectively. Loss from discontinued operations was $0 in 2003 and $1.0 million in
2002.

9.       Extraordinary Gain on Acquisition of Joint Venture Entities

In the first quarter of 2003, the Company recognized an extraordinary gain, net of tax, of $0.2 million in connection with the dissolution of BT LookSmart and
the assumption of its Japan and United Kingdom operations. This amount represents the fair value of net assets of the Japan and United Kingdom operating entities of BT LookSmart. The Company acquired these net assets on March 14, 2003 for nominal
consideration. The results of these operating entities have been included in the Companys consolidated financial statements as of March 1, 2003.

13



---

##### Table of Contents

ITEM 2.     MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the consolidated financial statements and the notes to those statements which appear elsewhere in this
Quarterly Report on Form 10-Q. The following discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We use words
such as believes, intends, expects, anticipates, plans, may, will and similar expressions to identify forward-looking statements. All forward looking statements,
including but not limited to, projections or estimates concerning our business, including demand for our products and services, mix of revenue streams, ability to control and/or reduce operating expenses, anticipated cost of revenues, expenses and
operating results, cost savings, product development efforts, general outlook of our business and industry, opportunities abroad, competitive position, stock compensation, adequate liquidity to fund our operations and meet our other cash
requirements for the next 12 months and disclosure controls and procedures, are inherently uncertain as they are based on our expectations and assumptions concerning future events.  These forward-looking statements are subject to numerous known
and unknown risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements for many reasons, including our ability to maintain net profitability in future quarters, our continuing
relationship with Microsoft, our ability to expand our network of distribution partners, the success of our listings business and all other risks described below in the section entitled Risk Factors and elsewhere in this report. All
forward-looking statements in this document are made as of the date hereof, based on information available to us as of the date hereof, and we assume no obligation to update any forward-looking statements.

Overview

LookSmart is a leading provider of Internet search solutions for portals, Internet service
providers and media companies, as well as a leading provider of marketing products for advertisers who want to be included in relevant search results. Our LookListings suite of products provides businesses of all sizes the opportunity to have
listings for their company and products included in our broadly distributed web search results, so that their listings are available to Internet users at the moment when they are searching for relevant information. By enabling advertisers to reach
millions of users in a highly targeted search context, we provide a proven method of acquiring customers, converting advertising leads into sales and generating useful marketing information for individual customer campaigns. Our campaign reporting
technology enables advertisers to monitor the performance of their search marketing campaigns and request additions or changes to their listings through the use of password-protected online accounts.

We distribute our search results across a distribution network by partnering with leading Internet portals, Internet service providers (ISPs), search engines and
media companies. These companies have increasingly recognized the valuable nature of search services for their web sites.  We offer distribution partners a search solution with two important benefits.  First, our search solution provides
highly relevant search results for their users, which can help to maintain the users satisfaction and increase repeat visits of those users.  Second, we share with our distribution partners a portion of the listings revenues that we
generate from clicks on paid listings in those search results.

Critical Accounting Policies

The financial condition and results of operations of the Company are based upon certain critical accounting policies, which include estimates, assumptions, and
judgments on the part of management. The following discussion highlights those policies and the underlying estimates and assumptions, which management considers critical to an understanding of the financial information in this report.

Revenue Recognition.    The Company generates revenues from listings and licensing. We exited the ecommerce
segment after the second quarter of 2002 and ceased reporting the advertising segment after the fourth quarter of 2002, as we no longer manage avertising as a separate product. Revenues associated with listings products, including directory listings
and affiliate commissions are generally recognized once

14



---

##### Table of Contents

collectibility is established, as delivery of services occurs, once all performance obligations have been satisfied, and when no refund obligations exist. Upfront fees are
recognized ratably over the longer of the term of the contract or the expected relationship with the customer, which is currently estimated to be twelve months. This estimate is reviewed on an annual basis.

Affiliate revenues are based on commissions received for participation in affiliate programs. Affiliate programs are programs operated by affiliate network services
or online merchants, in which merchants pay traffic providers on a cost-per-acquisition basis. By participating in affiliate programs, we generate revenues when Internet users make a purchase from a participating merchants web site after
clicking on the merchants listing in our search results. Revenues from affiliates are earned on a per-sale basis or as a percentage of sale rather than a per-click basis.  Revenue is recognized in the period in which a merchant finalizes
a sale and reports to the Company via its affiliate network.

Advertising revenues are recognized as impressions or clicks are
delivered over the period in which the advertisement is displayed, provided that no significant Company obligations remain at the end of the period and collection of the resulting receivable is reasonably assured. Company obligations typically
include guarantees of a minimum number of impressions. An impression is an appearance of an advertisement in pages viewed by users of the Companys or its partners online properties.

Revenues associated with our licensing agreement with Microsoft are recognized in the period in which URLs are added to the database and the database is delivered to
Microsoft, per the agreement, all performance obligations have been satisfied, and no refund obligations exist. Payments from Microsoft received in advance of delivery are recorded as deferred revenues. We recognize quarterly licensing revenues
under this contract based on the number of URL listings added to our database during the quarter relative to the total number of URL listings we are required to add to our database during the relevant six-month period. As a result, to the extent
that we satisfy our database update obligations unevenly, the revenues we recognize under this contract may be skewed on a quarter-to-quarter basis.

Determination of collectibility of payments requires significant judgment on the part of management and includes performing initial and ongoing credit evaluations of
customers. The Company provides a reserve for doubtful accounts receivable based upon expected collectibility, which reflects managements judgment based on ongoing credit evaluation. In addition, the Company provides a reserve against revenue
for estimated credits resulting from billing adjustments and sales adjustments in the event of product returns. The amount of this reserve is evaluated quarterly based upon historical trends.

Stock-Based Compensation.   The Company accounts for stock-based employee compensation arrangements in accordance with Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, (APB No. 25) and related interpretations, and complies with the disclosure provisions of SFAS No. 123, Accounting for Stock-based
Compensation and SFAS No. 148 Accounting for Stock-Based Compensation - Transition and Disclosure. The disclosure provisions of SFAS No. 123 and SFAS No. 148 require judgments by management as to the estimated lives of
the outstanding options. Management has based the estimated life of the options on historical option exercise patterns. If the estimated life of the options increases, the valuation of the options will increase as well.

As a result of the repricing of stock options, which primarily occurred in the first quarter of 2001, the Company will incur a charge for compensation expense or a
reversal of a charge in connection with variable accounting for outstanding repriced stock options, depending on the market price of the Companys common stock at the end of each quarter.

15



---

##### Table of Contents

Goodwill and Intangible Assets.    We have recorded goodwill and intangible assets in
connection with our business acquisitions. Management exercises judgment in the assessment of the related useful lives, and the fair value and recoverability of these assets. The majority of intangible assets are amortized over three to seven years,
the period of expected benefit. In accordance with SFAS No. 142, Goodwill and Other Intangible Assets, the Company periodically reassesses the valuation of intangible assets to conform to changes in managements estimates of future
performance.  Management considers existing and anticipated competitive and economic conditions in such assessments. Goodwill is reviewed for impairment at least annually. The Company did not record a goodwill impairment charge in the first
quarter of 2003. Cash flow forecasts used in evaluation of goodwill and intangibles are based on trends of historical performance and managements estimate of future performance.

Internal Use Software Development Costs.    The Company accounts for internal use software in accordance with American Institute of
Certified Public Accountants (AICPA) Statement of Position No. 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use (SOP 98-1). In accordance with the capitalization criteria of SOP 98-1,
the Company has capitalized external direct costs of materials and services consumed in developing and obtaining internal-use computer software and the payroll and payroll-related costs of employees who devote time to the internal-use computer
software project.

Management judgment is required in determining the point at which various projects enter the stages at which costs may
be capitalized, in assessing the ongoing value of the capitalized costs, and in determining the estimated useful lives over which the costs are amortized. We expect to continue to invest in internally developed software and to capitalize these costs
in accordance with SOP 98-1.

Deferred Taxes.We recognize deferred tax assets and liabilities based on the differences
between the financial statement carrying values and the tax bases of assets and liabilities. LookSmart regularly reviews its deferred tax assets for recoverability and establishes a valuation allowance based on historical taxable income, projected
future taxable income, and the expected timing of the reversals of existing temporary differences. If we operate at a loss or are unable to generate sufficient future taxable income, or if there is a material change in the actual effective tax rates
or time period within which the underlying temporary differences become taxable or deductible, we could be required to increase the valuation allowance against all or a significant portion of our deferred tax assets which could substantially
increase our effective tax rate for such period. Alternatively, if our future taxable income is significantly higher than expected and/or we are able to utilize our tax credits, we may be required to reverse all or a significant part of our
valuation allowance against such deferred tax assets which could substantially reduce our effective tax rate for such period. Therefore, any significant changes in statutory tax rates or the amount of our valuation allowance could have a material
impact on the value of our deferred tax assets and liabilities, and our reported financial results.

Allowance for Doubtful
Accounts. The Company maintains an allowance for doubtful accounts for estimated losses resulting from the failure of our customers to make required payments. This valuation allowance is reviewed on a periodic basis to determine whether a
provision or reversal is required. The review is based on factors including the application of historical collection rates to current receivables. The Company will record a reversal of its allowance for doubtful accounts if there is a significant
improvement in collection rates or economic conditions are more favorable than the Company has anticipated. Additional allowances for doubtful accounts may be required if there is deterioration in past due balances, if economic conditions are less
favorable than the Company has anticipated or for customer-specific circumstances, such as bankruptcy. Management judgment is required in the periodic review of whether a provision or reversal is warranted.

16



---

##### Table of Contents

Results of Operations

Revenues

Starting on January 1, 2003, LookSmart reports two operating segments: listings and licensing.  We exited the ecommerce segment after the second quarter of 2002
and ceased reporting the advertising segment after the fourth quarter of 2002, as we no longer manage advertising as a separate product.  For purposes of historical comparison, advertising and, in 2002, ecommerce are included in the listings
segment on our statement of operations for the first quarter of 2003 and 2002.

Listings.We derive
listings revenues from our LookListings suite of products, including Directory Listings, Affiliate Partner Commissions, Small Business Listings, Sponsored Listings and Index Listings and Advertising. Revenues from Directory Listings, Sponsored
Listings, and Index Listings are primarily composed of per-click fees that we charge customers, and often also include one-time review fees or set-up fees when generating listings for customers and including them in our directories.  Revenues
from Small Business Listings are primarily composed of per-click fees that we charge customers, and also include a one-time set-up fee for preparing listings and including them in our directories.

Listings revenues also include revenues generated through our participation in affiliate programs. Affiliate programs are programs operated by affiliate network
services or online merchants, in which merchants pay traffic providers on a cost-per-acquisition basis. By participating in affiliate programs, we generate revenues when Internet users make a purchase from a participating merchants web site
after clicking on the merchants listing in our search results.

Advertising revenues, which are now included in listings
revenues, are typically derived from short-term agreements requiring the Company to deliver a minimum number of advertising impressions or clicks over the term of the agreement. We offer advertisers the ability to specify the category of traffic for
their advertisements.  Some advertising categories are priced at a premium, depending on the associated economic value, the location of the advertisement on the page and the size of the audience requesting the page.

Listings revenues were $29.4 million for the three months ended March 31, 2003, representing an 80% increase over listings revenue of $16.3 million for the three
months ended March 31, 2002. The growth is due to our sales and marketing efforts, which led to an increase in the number of customers and listings, and improved relevance of our search results, which improves user click-through rate. Listings
revenue accounted for 88% of total revenues for the three months ended March 31, 2003, compared to 82% for the three months ended March 31, 2002.

We believe listings revenues will continue to grow both in absolute dollars and as a proportion of our overall revenues as paid inclusion continues to be adopted by
customers as an effective marketing tool. Our listings revenues depend on the number of queries delivered by our distribution partners. Changes in our distribution network may cause listings revenues to fluctuate over time.

Paid clicks increased to 176.2 million for the three months ended March 31, 2003. This represents an increase of 150% compared to 70.4 million in the three
months ended March 31, 2002. The Company expects paid clicks to increase as we grow our listings business.

Listings revenue per click,
the average cost per click to advertisers, decreased slightly to $0.17 per click for the three months ended March 31, 2003 from $0.18 per click for the three months ended March 31, 2002. This decrease was primarily the result of declining rates for
graphical advertising clicks from the previous year and the introduction of LookListings Small Business product at $0.15 per click in April 2002. The Company expects revenue per click to remain relatively constant in the near term.

We derived approximately 64% of our listings revenues in the three months ended March 31, 2003 and approximately 33% of our listings revenues in the
three months ended March 31, 2002 from our relationship with Microsoft.  Internet search traffic is increasingly concentrated among a small number of

17



---

##### Table of Contents

portals and ISPs, of which Microsoft is one.  The increase in the proportion of our listings revenues attributable to Microsoft was due primarily to the addition of
LookListings Small Business in Microsofts search results in the second quarter of 2002, the growing popularity of Microsofts MSN search service among Internet users and changes in Microsofts search service which resulted in more
clicks on our search results.

If we increase our distribution from other sources in future quarters, our percentage of listings revenues
attributable to Microsoft will likely decline.  However, it is difficult to predict whether the percentage of our listings revenues attributable to Microsoft will increase or decrease in the future.  In the first quarter of 2003, Microsoft
announced its intention to increase its investment in its search services. Microsoft may change the implementation of its search results, which could reduce the paid clicks and listings revenues we derive from our relationship with Microsoft. In any
case, we are likely to remain significantly dependent upon Microsoft for listings revenues in 2003.  Either party may terminate our agreement with Microsoft for any reason on six months notice and the agreement expires on December 3,
2003.

Licensing.    We license our database content to Microsoft and customize it for their use. We expect
revenues from licensing to fluctuate from period to period because these revenues are dependent upon the terms of our licensing arrangement, and the timing of our delivery of URLs during each six-month period.

Licensing revenue was $4.0 million for the three months ended March 31, 2003 compared to $3.7 million for the three months ended March 31, 2002. The Company derives
all of its licensing revenue from its agreement with Microsoft, which expires on December 3, 2003.

Cost of Revenues

Cost of revenues primarily consists of revenue-sharing payments to distribution partners, connectivity costs, sales operations personnel and amortization of certain
intangible assets. In cases where there is no LookSmart branding or other direct sales or marketing effort associated with the generation of listings revenues, payments to distribution partners are reflected as cost of revenue. The cost of revenue
associated with affiliate partner commissions consists of fees paid to distribution partners based on the affiliate vendor commissions earned by the Company. Cost of revenues also consists of personnel costs of our sales operations employees,
including stock-based compensation, equipment depreciation, expenses relating to hosting advertising operations and commissions paid to advertising agencies. Payments to distribution partners for referral of customers to our LookListings Small
Business program are reflected as sales and marketing expense because LookSmart branding is associated with the promotion of these products.

Cost of revenues were $16.7 million for the three months ended March 31, 2003, representing an increase of 226% over cost of revenues of $5.1 million for the three
months ended March 31, 2002. The increase was primarily attributable to the growth in revenue, higher contractual revenue sharing costs for the listings products due to the tiered structure of our revenue sharing agreements and the introduction of
revenue sharing obligations on Small Business Listings clicks with our partners starting in the second quarter of 2002. Our distribution agreement with Microsoft is structured in tiers and provides that we share a greater proportion of our revenue
with Microsoft as we receive more revenue, up to certain levels.

Distribution costs as a percentage of revenue increased to 53%
for the quarter ended March 31, 2003 from 34% for the three months ended March 31, 2002. This increase was attributable to the growth in revenue which results in higher contractual revenue sharing costs for the listings products due to the tiered
structure of our revenue sharing agreements and revenue sharing obligations on Small Business Listings clicks with our partners which we did not have in the quarter ended March 31, 2003. We expect distribution costs as a percent of revenue to be
approximately 53-55% in 2003, assuming no significant changes to our current distribution levels. If we enter into agreements with additional significant distribution partners, average distribution costs as a percentage of revenue may
increase.

18



---

##### Table of Contents

Operating Expenses

For purposes of managing our
resources, we do not track operating expenses by reportable segment, but treat these as shared overhead of our reportable segments.

Sales and Marketing.   Sales and marketing expenses include salaries, commissions, stock-based compensation and other costs of employment for the
Companys sales force, sales administration and customer service staff, payments to distribution partners for directing online users to LookSmart search results and referring Small Business customers when LookSmart branding is used, overhead,
facilities, allocation of depreciation and the provision for and reversals of reserves for doubtful trade receivables.  Sales and marketing expenses also include the costs of advertising, trade shows and public relations activities. Sales and
marketing expenses changed as follows (dollar figures are in thousands):

|                                               |  | Three Months Ended March 31, |      
|---------------------------------------------- |  | ---------------------------- | -----
|                                               |  |                              |      
|                                               |  | 2003                         |      
|                                               |  |                              |      
|Amortization of deferred stock compensation    |  | $                            | 23   
|Stock compensation related to variable options |  |                              | 261  
|Bad debt provision (reversal)                  |  |                              | (481 
|Other sales and marketing expense              |  |                              | 5,534
|                                               |  |                              |      
|Total sales and marketing expense              |  | $                            | 5,337
|As % of revenue                                |  |                              | 16   

Sales and marketing expenses for the
three months ended March 31, 2003 declined compared to three months ended March 31, 2002 in actual dollars and as a percentage of revenue.

Stock-based compensation decreased $0.8 million for the three months ended March 31, 2003 compared to the three months ended March 31, 2002. Amortization of deferred
stock compensation is related to stock granted to employees at less than market value. This expense will continue to decline in 2003 as it becomes fully amortized. Stock compensation related to variable options is the result of repriced stock
options. It is based on the Companys stock price at the end of each quarter and will continue to fluctuate as the Companys stock price fluctuates.

Bad debt provision (reversal) increased $1.1 million from the first quarter of 2002 to the first quarter of 2003. In the first quarter of 2003, the Company reversed
$0.5 million of reserves for bad debts. The reversal was due to the improvement in the Companys rate of collections and applying the improved collection rates to the Companys accounts receivable balance as of March 31, 2003, net of cash
collected subsequent to the end of the period.

Other sales and marketing expenses remained relatively flat at $5.5 million in the three
months ended March 31, 2003 compared to $5.6 million in the three months ended March 31, 2002. We expect sales and marketing expenses to increase slightly in 2003 as revenues increase.

Product Development.Product development costs include all costs related to development and engineering of new products and continued
development of our search databases and customer account features. These costs include salaries and associated costs of employment, including stock-based compensation, overhead, facilities and amortization of intangible assets. Costs related to the
development of software for internal use in the business, including salaries and associated costs of employment are capitalized. Software licensing and computer equipment depreciation related to supporting product development functions are also
included in product development expenses. Product development expenses changed as follows (dollar figures are in thousands):

19



---

##### Table of Contents

|                                               |  | Three Months Ended March 31, |      
|---------------------------------------------- |  | ---------------------------- | -----
|                                               |  |                              |      
|                                               |  | 2003                         |      
|                                               |  |                              |      
|Amortization of deferred stock compensation    |  | $                            | 49   
|Stock compensation related to variable options |  |                              | 520  
|Other product development expense              |  |                              | 6,613
|                                               |  |                              |      
|Total product development expense              |  | $                            | 7,182
|As % of revenue                                |  |                              | 22   

Product development expenses in
absolute dollars remained relatively flat and declined as a percent of revenue in the three months ended March 31, 2003 compared to the first three months of 2002.

Stock-based compensation expense decreased $0.6 million in the three months ended March 31, 2003 compared to the three months ended March 31, 2002. Amortization of
deferred stock compensation is related to stock granted to employees at less than market value. This expense will continue to decline in 2003 as it becomes fully amortized. Stock compensation related to variable options is the result of repriced
stock options. It is based on the Companys stock price at the end of the period and will continue to fluctuate as the Companys stock price fluctuates.

The increase in other product development expenses of $0.8 million was due to primarily to $0.6 million in additional salary and benefit expenses incurred as we
continue to invest in our search product portfolio.

We expect product development costs in absolute dollars to increase as we continue
to develop new products for the distribution market and improve the size, scope and freshness of our search index and as we continue to invest in developing enhancements to our search algorithm, our editorial model and our paid inclusion platform.
Where appropriate, we expect to capitalize these costs in accordance with SOP 98-1.

General and
Administrative.    General and administrative expenses include overhead costs such as executive management, human resources, finance, legal and facilities personnel. These costs include salaries and associated costs of
employment, including stock-based compensation, overhead, facilities and allocation of depreciation. General and administrative expenses also include legal, tax and accounting consulting and professional service fees. General and administrative
expenses changed as follows (dollar figures are in thousands):

|                                               |  | Three Months Ended March 31, |      
|---------------------------------------------- |  | ---------------------------- | -----
|                                               |  |                              |      
|                                               |  | 2003                         |      
|                                               |  |                              |      
|Amortization of deferred stock compensation    |  | $                            | 5    
|Stock compensation related to variable options |  |                              | 110  
|Other general and administrative expense       |  |                              | 2,939
|                                               |  |                              |      
|Total general and administrative expense       |  | $                            | 3,054
|As % of revenue                                |  |                              | 9    

20



---

##### Table of Contents

General and administrative expenses increased in absolute dollars and declined as a percent of revenue in the three
months ended March 31, 2003 compared to the first three months of 2002.

Stock-based compensation expense decreased $0.5 million in the
three months ended March 31, 2003 compared to the three months ended March 31, 2002. Amortization of deferred stock compensation is related to stock granted to employees at less than market value. This expense will continue to decline in 2003 as it
becomes fully amortized. Stock compensation related to variable options is the result of repriced stock options. It is based on the Companys stock price at the end of the period and will continue to fluctuate as the Companys stock price
fluctuates.

Other general and administrative expense increased to $2.9 million in the three months ended March 31, 2003 compared to
$2.1 million in the three months ended March 31, 2002, which was due primarily to an increase of $0.6 million additional consulting fees related to legal compliance, tax consulting and compliance with the Sarbanes-Oxley Act. General and
administrative expenses may vary significantly over time, due to changes in amounts spent on litigation, tax consulting, and Sarbanes-Oxley and other regulatory compliance.

Non-Operating
Expenses

Interest and Other Non-Operating expenses, net.Interest and other non-operating expense declined to $0.1
million for the three months ended March 31, 2003 compared to $1.3 million for the three months ended March 31, 2002. This decrease was primarily the result of the settlement of the Companys loan with Transceptgate, a subsidiary of BT in
December 2002.

Share of Joint Venture Loss.Share of joint venture loss includes LookSmarts 50%
share of the loss of BT LookSmart. LookSmart recorded $0.1 million of expense for the three months ended March 31, 2003, compared to $1.1 million in expense recorded in the three months ended March 31, 2002. In December 2002, LookSmart entered into
a settlement agreement with BT to terminate the joint venture.  The decrease in the loss was the result of this settlement and LookSmart does not expect significant gains or losses from the joint venture in the future.

Income Tax Expense

The provision for income taxes was $0.1 million for the three months
ended March 31, 2003 and $14,000 for the three months ended March 31, 2002.  Our effective tax rate was 4.6% for the three months ended March 31, 2003 and was due primarily to statutory tax rates associated with our Japan entity. The Company
did not incur tax expense on 2002 U.S. net income due to loss carryforwards and tax credits. Income tax expense for the three months ended March 31, 2002 was primarily associated with our Australian operations.  The effective tax rate in the
upcoming quarters and for the year ending December 31, 2003 may vary due to a variety of factors, including but not limited to, the relative income contribution by tax jurisdiction, changes in statutory tax rates, the amount of tax exempt interest
income generated during the year, the ability to utilize foreign tax credits and foreign net operating losses, and any non-deductible items related to acquisitions or other non-recurring charges.

Loss from Discontinued Operations

In the first quarter of 2002, the Company transferred its 52.8% ownership interest in its consolidated subsidiary,
Futurecorp, to the minority shareholders and discontinued operations of Futurecorp. As required by SFAS No. 144, the Company reported the results of operations of this component as a loss from discontinued operations of $1.0 million in 2002, which
includes a $1.0 million loss on disposal.  Revenue included in the loss on disposal was $0 and $0.6 million in the three months ended March 31, 2003 and 2002, respectively. Pretax net income (loss) reported in discontinued operations was $0 and
$63,000 in the three months ended March 31, 2003 and 2002, respectively.

21



---

##### Table of Contents

Extraordinary Gain on Acquisition of BT LookSmart Entities

In February 2000, LookSmart entered into a joint venture agreement with British Telecommunications (BT). LookSmart and BT took an equal equity interest in the joint
venture, BT LookSmart, which provided localized directory services in Europe and Asia. We accounted for our investment in the joint venture using the equity method of accounting. Our share of the joint ventures net loss is reported as
non-operating income or expense.

In December 2002, LookSmart entered into a settlement agreement with BT to terminate the joint
venture.  LookSmart and BT are jointly liable for the estimated settlement costs of $2.3 million expected to be incurred during the dissolution of the joint venture. These estimated costs were recorded in the fourth quarter of 2002 by the joint
venture.

In the first quarter of 2003, as part of the dissolution of the joint venture, BT LookSmart transferred ownership of its
directories and of its European and Japanese subsidiaries to LookSmart. LookSmart received net assets of $0.2 million along with the ongoing operating and revenue-generating relationships contained in these entities as part of the dissolution and
settlement for nominal consideration. In connection with the acquisition of the joint venture entities, the Company recorded an extraordinary gain of $0.2 million, which represents the fair value of net assets we recorded in excess of the
consideration paid upon the acquisition.

Liquidity and Capital Resources

The Company invests cash pending use in investment grade debt and equity instruments with maturities of less than one year, with the intent to make such funds
available for operating purposes. As of March 31, 2003, the Company had $54.7 million of unrestricted cash, cash equivalents and short-term investments.

Operating activities provided $5.0 million of cash in the three months ended March 31, 2003 compared to $1.4 million in the three months ended March 31, 2002. The
improvement in cash provided by operating activities is primarily attributable to increased revenue in the three months ended March 31, 2003 compared to the same period in 2002, reduced employee-related expenses and continuing cost management.

Net cash provided by investing activities was $0.8 million in the three months ended March 31, 2003, compared to $10.3 million in the
three months ended March 31, 2002. Investment activity in each of the periods consisted of purchases and sales of investments, purchases of fixed assets and funding of the BT LookSmart. In the three months ended March 31, 2003 and 2002, securities
classified as short-term matured and were converted to cash and cash equivalents in the amount of $3.4 million and $10.7 million, respectively.  We expect to invest a total of approximately $6 to $7 million in capital expenditures in
2003.

Net cash provided by financing activities was $1.0 million in the three months ended March 31, 2003, compared to $0.9 million in
the three months ended March 31, 2002. The cash provided by financing activities in both periods was due primarily to proceeds received from the issuance of common stock in connection with employee stock option exercises.

We believe that our working capital will provide adequate liquidity to fund our operations and meet other cash requirements for the next 12 months. If
operations do not perform as expected management may seek to raise additional capital through public or private debt or equity financings in order to fund our operations and capital expenditures, take advantage of favorable business opportunities,
develop and upgrade our technology infrastructure, develop new product and service offerings, take advantage of favorable conditions in capital markets or respond to competitive pressures. In addition, unanticipated developments in the short term,
such as the entry into agreements which require large cash payments or the acquisition of businesses with negative cash flows, may necessitate additional financing. We cannot assure you that additional financing will be available on terms favorable
to us, or at all. If we issue additional equity or convertible debt securities, our existing stockholders may experience substantial dilution.

22



---

##### Table of Contents

We do not have any off balance-sheet arrangements, investments in special purpose entities or undisclosed
borrowings or debt. Additionally, we are not a party to any derivative contracts or synthetic leases.

Contractual Obligations and Commercial Commitments

We incur various contractual obligations and commercial commitments in our normal course of business. Such obligations and commitments primarily consist of the
following:

Capital Lease ObligationsWe have one capital lease for the purchase of telephone equipment.

Operating Lease ObligationsWe have various operating leases covering facilities in San Francisco, New York and Los Angeles and various
international offices. We also have some minor operating leases relating to equipment rentals that amount to less than $0.3 million per year.

Note ObligationsWe have entered into note agreements to finance an insurance policy and to finance tenant improvements.

Guarantees Under Letters of CreditWe have obtained standby letters of credit from time to time as security for certain liabilities. At March 31, 2003,
outstanding letters of credit related to security of building leases and the repayment of a loan to finance insurance premiums and totaled $3.2 million.

As of March 31, 2003, future payments related to contractual obligations and commercial commitments are as follows:

|                              |  | March 31, 2003                        |       
|----------------------------- |  | ------------------------------------- | ------
|                              |  |                                       |       
|                              |  | Payments Due by Period (in thousands) |       
|                              |  |                                       |       
|                              |  | Total                                 |       
|                              |  |                                       |       
|Contractual Obligations       |  |                                       |       
|Operating leases              |  | $                                     | 31,087
|Capital leases                |  |                                       | 119   
|Other Commercial Commitments: |  |                                       |       
|Note obligations              |  |                                       | 1,165 
|Deferred rent                 |  |                                       | (1,334

Recently Issued Accounting Pronouncements

See Note 1 in the Notes to Condensed Consolidated Financial Statements.

23



---

##### Table of Contents

FACTORS AFFECTING OPERATING RESULTS

You should carefully consider
the risks described below before making an investment decision regarding our common stock. If any of the following risks actually occurs, our business, financial condition and results of operations could be harmed. In that case, the trading price of
our common stock could decline and you could lose all or part of your investment.

We recently achieved profitability and may not be able to maintain profitability in future quarters

We reached profitability for the first time in the fourth quarter of 2002.  Prior to that time, we incurred net losses in every
quarter since inception, including net losses of approximately $6.6 million in the first three quarters of 2002, $59.6 million in 2001, $62.6 million in 2000 and $64.7 million in 1999. As of March 31, 2003, we had an accumulated deficit of
approximately $181.0 million. We may be unable to maintain profitability in future quarters, depending on our ability to contain expenses, grow revenues and maintain and expand our distribution network. We expect to spend significant amounts to:

| | maintain and expand our network of distribution partners and make revenue sharing payments to our distribution partners,
|- | ------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                         
| | continue to develop and expand our databases of Internet listings, both in the U.S. and abroad,                         
|  |                                                                                                                         
| | develop new listings products and enhance our search services,                                                          
|  |                                                                                                                         
| | develop our international business, particularly in the United Kingdom, Australia and Japan, and                        
|  |                                                                                                                         
| | acquire complementary technologies and businesses.                                                                      

Because of the foregoing factors, and others
outlined in this report, we may be unable to maintain profitability on a quarterly or annual basis.

We derive a significant amount of our revenues from Microsoft, and if Microsoft terminates
its contract with us, our business could be harmed

Microsoft accounted for approximately 73% of our paid clicks and 64% of our
listings revenues in the first quarter of 2003. It is difficult to predict whether the percentage of our listings revenues attributable to Microsoft will increase or decrease in the future. In the first quarter of 2003, Microsoft announced its
intention to increase its investment in its search services. Microsoft may change the implementation of its search results, which could reduce the paid clicks and listings revenues we derive from our relationship with Microsoft. In any case, we are
likely to remain significantly dependent upon Microsoft for listings revenues in 2003. Either party may terminate the agreement for any reason on six months notice and the agreement expires on December 3, 2003. If the distribution portion of
the agreement is terminated or is not renewed on terms similar to those in the existing agreement, then our paid clicks and listings revenues would decline significantly and our results of operations would suffer.

Revenues from the licensing portion of our agreement with Microsoft accounted for all of our licensing revenues in the first quarter of 2003. If the licensing portion
of the agreement is terminated or is not renewed on terms similar to those in the existing agreement, then our licensing revenues and results of operations would decline significantly.

The cash payments we receive for each six-month period under the licensing portion of the agreement are subject to full or partial refund if we fail to provide the
stated number of URL listings during that period. After the agreement is terminated, Microsoft has the right to continue to use the content we delivered during the term of the agreement. Microsoft also has the right to sublicense these rights to
others, both during and for up to two years after the term of the agreement.

Our success depends on maintaining and expanding our network of distribution partners

Our ability to generate paid clicks depends on the distribution of our listings through our network of portals, ISPs and media companies. Because our
revenues depend on clicks on our customers listings, growth in our listings business depends on increasing the volume of traffic on our distribution network. We

24



---

##### Table of Contents

have invested, and will continue to invest, a significant amount of our human and capital resources to expand this network. However, we face competition from other paid
listing providers, some of whom have greater technical and capital resources than we do. We cannot assure you that we will maintain and expand our distribution network on financially favorable terms, if at all. If we are unsuccessful in maintaining
and expanding our distribution network, then our ability to generate revenues would be seriously harmed.

Our quarterly revenues and operating results may fluctuate, each of which may
negatively affect our stock price

Our revenues and operating results may fluctuate significantly from quarter to quarter as a
result of a variety of factors, including:

| | changes in our distribution network, such as the gain or loss of distribution partners, changes to the terms of our distribution agreements, or changes by our distribution
partners in their web sites that affect the number of clicks on our search results,                                                                                                                                                                                                                                                                   
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | the number of advertisers who purchase our listings, or the number of listings purchased by our large business customers,                                                                                                                                                                                                                                                                                                                                                                                                         
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | the cost-per-click we receive from advertisers, or other factors that affect the demand for, and prevailing prices of, Internet advertising and marketing services,                                                                                                                                                                                                                                                                                                                                                               
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | the timing of revenue recognition under our listings and licensing contracts,                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | the timing of our entry into and termination of new contracts for distribution and licensing,                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | technical difficulties and systems downtime or failures, whether caused by us, third party service providers or hackers, and whether occurring on our web site or the web sites
of our distribution partners,                                                                                                                                                                                                                                                                                                                     
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | the effect of variable accounting for stock options, which requires that we book an operating expense in connection with some of our outstanding stock options at the end of each
quarter, depending on the closing price of our common stock on the last trading day of the quarter and the number of stock options subject to variable accounting, or                                                                                                                                                                           
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | the timing of our delivery of URL listings under our contract with Microsoft. We recognize quarterly licensing revenues under this contract based on the number of URL listings
added to our database during the quarter relative to the total number of URL listings we are required to add to our database during the relevant six-month period. As a result, to the extent that we satisfy our database update obligations unevenly,
the revenues we recognize under this contract may be skewed on a quarter-to-quarter basis.

Our expenses are based
in part on expectations of future revenues and, to a large extent, are fixed. We may be unable to adjust spending quickly enough to compensate for any unexpected revenue shortfall. Our operating results may vary as a result of changes in our
expenses and costs. Also, we may incur stock compensation expenses as a result of changes in our stock price, and these expenses could negatively affect our net income.  Due to the above factors, we believe that period-to-period comparisons of
our financial results are not necessarily meaningful, and you should not rely on them as indicators of our future performance. If our financial results in any future period fall below the expectations of securities analysts and investors, the market
price of our securities would likely decline.

Our growth prospects depend on the success of our listings business

To increase our revenues and maintain profitability, we will need to continue expanding our listings business. Listings accounted for $29.4 million or 88% of our
revenues in the first quarter of 2003.

25



---

##### Table of Contents

Our success will depend upon the extent to which advertisers choose to use our listings products. Some of our products will require both modification of existing software and
systems and the creation or acquisition of new software and systems. We may lack the managerial, editorial and technical resources necessary to expand our product offerings in a timely manner.  Even if we expand our product offerings, customers
may not adopt our products at projected rates. For these and other reasons, these initiatives may not generate sufficient revenues to reach our profitability goals. If we are unable to generate significant additional revenues from our listings
business, our results of operations and financial condition will suffer.

Although we expect our listings revenues to continue to
increase as an absolute number and as a percentage of total revenues, this may not occur due to continued weakness in the online advertising market, reductions in advertising expenditures, and downward pressure on advertising rates industry-wide. We
compete with traditional media such as television, radio and print, as well as online advertisers and high-traffic web sites, for a share of our customers total advertising expenditures. We have experienced, and may continue to experience,
downward pressure on advertising prices in the industry due to cost-cutting efforts by businesses and the increasing amount of advertising inventory becoming available on the Internet. As the Internet evolves, advertisers may find search marketing
to be a less effective means of promoting their products or services relative to other advertising media and may reduce or eliminate their expenditures on search marketing. Many potential advertisers and advertising agencies have only limited
experience advertising on the Internet and have not devoted a significant portion of their advertising expenditures to search marketing. Acceptance of the search marketing among advertisers will depend, to a large extent, on its perceived
effectiveness and the continued growth of commercial usage of the Internet.

We may face liability for claims related to our listings business, and these claims may be costly to resolve

We offer listings services and make listings information available to users of our search services, both on our web site and our
distribution partners web sites. Although we do not believe that the services we offer or the listings in our database violate any rights of others, we cannot assure you that others will not assert claims against us in the future or that these
claims will not be successful. We have been subject to purported class action lawsuits in connection with our listings services, and we or our distribution partners could be subject to other claims for defamation, invasion of privacy, trademark
infringement, product liability, breach of contract, unfair advertising, unfair competition or other theories based on our listings and services. In addition, we are obligated under some agreements to indemnify our partners in the event that they
are subject to claims that our listings or services infringe on the rights of others. Regardless of whether such claims result in liability to us or our distribution partners, we could incur significant costs and diversion of management time in
investigating and defending against them. Our insurance may not adequately cover claims of this type, if at all.

We face risks of claims from third parties for intellectual property
infringement and other matters that could adversely affect our business

We make Internet search services available to our users
through the use of our proprietary algorithms and databases. This creates the potential for claims to be made against us, either directly or through indemnification provisions in contracts with partners and customers. These claims might, for
example, be made for trademark, copyright or patent infringement, defamation, negligence, personal injury, invasion of privacy or other claims. Allegations are made against us from time to time concerning these types of matters. Litigating these
claims could consume significant amounts of time and money, divert managements attention and resources, cause delays in integrating acquired technology or releasing new products, or require us to enter into royalty or licensing agreements.
Royalty or licensing agreements, if required, may not be available on acceptable terms, if at all. If a court were to determine that some aspect of our search services or listings infringed upon or violated the rights of others, we could be
prevented from offering some or all of our services, which would negatively impact our revenues and business. There can be no assurance that our services do not infringe the intellectual property rights of third parties. A successful claim of
infringement against us and our failure or inability to license the infringed or similar technology could have a material adverse effect on our business, operating results and financial condition.

26



---

##### Table of Contents

We face growing competitive pressures in the search marketing industry

We compete in the relatively new and rapidly evolving paid inclusion industry, which presents many uncertainties that could require us to further refine our business
model. Our success will depend on many factors, including our ability to:

| | profitably establish and expand our listings product offerings,                                                                      
|- | -------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                      
| | compete with our competitors, some of whom have greater capital or technical resources than we do,                                   
|  |                                                                                                                                      
| | expand and maintain our network of distribution relationships, thereby increasing the amount of traffic using our search results, and
|  |                                                                                                                                      
| | attract and retain a large number of advertisers from a variety of industries.                                                       

We compete with companies that provide pay-for-placement products, paid inclusion products, and other forms of search marketing, including About.coms Sprinks,
AOL Time Warner, Ask Jeeves, FindWhat, Google, Inktomi, Microsofts MSN, Terra Lycos and Yahoo. In the paid inclusion field, we compete for advertisers on the basis of the relevance of our search results, the price per click charged to
advertisers, the volume of clicks that we can deliver to advertisers, tracking and reporting of campaign results, customer service and other factors. Some of our competitors have greater capital or technical resources, larger distribution networks
or proprietary user bases, longer operating histories and greater brand recognition than we have.

The search industry has recently
experienced rapid consolidation, particularly with the announcement of proposed acquisitions of companies offering algorithmic search indices and paid inclusion programs. In March 2003, Yahoo! acquired Inktomi, which offers a paid inclusion program
for its algorithmic search index. In April 2003, Overture Services acquired AltaVista and the web search unit of FAST Search & Transfer, each of which also offers a paid inclusion program and algorithmic search indices. Industry consolidation
may result in larger competitors with a greater focus on paid inclusion products. If these industry trends continue, or if we are unable to compete in the paid inclusion industry, our financial results may suffer.

Some of our customers represent credit risks

We derive a significant portion of our revenues from the
sale of listings to companies that represent credit risks. Some of our customers have gone out of business, have limited operating histories or are operating at a loss. Moreover, many of these companies have limited cash reserves and limited access
to additional capital. We have in some cases experienced difficulties collecting outstanding accounts receivable and our allowance for doubtful accounts receivable as of March 31, 2003 was $2.8 million or 15% of our total accounts receivable. We may
continue to have these difficulties in the future, and if a significant part of our customer base experiences financial difficulties or is unable or unwilling to pay our search marketing fees for any reason, our business will suffer.

We face risks associated with acquisition of businesses and technologies; acquisitions will likely also dilute our existing stockholders

If we are presented with appropriate opportunities, we intend to make acquisitions of, or significant investments in, complementary companies or technologies to
increase our technological capabilities and expand our service offerings. Acquisitions may divert the attention of management from the day-to-day operations of LookSmart. It may be difficult to retain key management and technical personnel of the
acquired company during the transition period following an acquisition. Acquisitions or other strategic transactions may also result in dilution to our existing stockholders if we issue additional equity securities and may increase our debt. We may
also be required to amortize significant amounts of

27



---

##### Table of Contents

intangible assets or record impairment of goodwill in connection with future acquisitions, which would adversely affect our operating results.

We have acquired businesses and technologies, including the acquisition of WiseNut, Inc. in the second quarter of 2002 and the acquisition of the intellectual
property assets of Grub, Inc. in the first quarter of 2003. Integration of acquired companies and technologies into LookSmart could be expensive, time-consuming and strain our managerial resources. We may not be successful in integrating any
acquired businesses or technologies and these transactions may not achieve anticipated business benefits.

Our stock price is extremely volatile and investors may not be able to resell their
shares for a profit

The stock market has experienced significant price and volume fluctuations in recent years, and the stock
prices of Internet companies have been extremely volatile. Because of our limited operating history, it is extremely difficult to evaluate our business and prospects. You should evaluate our business in light of the risks, uncertainties, expenses,
delays and difficulties associated with managing and growing a relatively new business, many of which are beyond our control. Our stock price may decline, and you may not be able to sell your shares for a profit, as a result of a number of factors
including:

| | changes in the market valuations of Internet companies in general and comparable companies in particular,                                                                                                                                                                                                   
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                             
| | quarterly fluctuations in our operating results,                                                                                                                                                                                                                                                            
|  |                                                                                                                                                                                                                                                                                                             
| | the termination or expiration of our distribution agreements,                                                                                                                                                                                                                                               
|  |                                                                                                                                                                                                                                                                                                             
| | our potential failure to meet our forecasts or analyst expectations on a quarterly basis,                                                                                                                                                                                                                   
|  |                                                                                                                                                                                                                                                                                                             
| | changes in ratings or financial estimates by analysts,                                                                                                                                                                                                                                                      
|  |                                                                                                                                                                                                                                                                                                             
| | announcements of new partnerships, technological innovations, acquisitions or products or services by us or our competitors,                                                                                                                                                                                
|  |                                                                                                                                                                                                                                                                                                             
| | the sales of substantial amounts of our common stock in the public market by participants in our pre-IPO equity financings or by owners of businesses we have acquired, or the
perception that such sales could occur,                                                                                      
|  |                                                                                                                                                                                                                                                                                                             
| | the exchange by CDI holders of CDIs for shares of common stock and resale of such shares in the Nasdaq National Market (as of April 30, 2003, the CDIs registered for trading on
the Australian Stock Exchange were exchangeable into an aggregate of approximately 17.6 million shares of common stock), or
|  |                                                                                                                                                                                                                                                                                                             
| | conditions or trends in the Internet that suggest a decline in rates of growth of advertising-based Internet companies.                                                                                                                                                                                     

In the past, securities class action litigation has often been instituted after periods of volatility in the market price of a companys securities. A securities class action suit against us could result in substantial
costs and the diversion of managements attention and resources, regardless of the merits or outcome of the case.

We may need additional capital in the future to support our growth and
additional financing may not be available to us

Although we believe that our working capital will provide adequate liquidity to
fund our operations and meet our other cash requirements for the foreseeable future, unanticipated developments in the short term, such as the entry into agreements which require large cash payments or the acquisition of

28



---

##### Table of Contents

businesses with negative cash flows, may necessitate additional financing. We may seek to raise additional capital through public or private debt or equity financings in order
to:

| | fund our operations and capital expenditures,                                                                                                  
|- | -----------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                
| | take advantage of favorable business opportunities, including geographic expansion or acquisitions of complementary businesses or technologies,
|  |                                                                                                                                                
| | develop and upgrade our technology infrastructure,                                                                                             
|  |                                                                                                                                                
| | develop new product and service offerings,                                                                                                     
|  |                                                                                                                                                
| | take advantage of favorable conditions in capital markets, or                                                                                  
|  |                                                                                                                                                
| | respond to competitive pressures.                                                                                                              

The
capital markets, and in particular the public equity market for Internet companies, have historically been volatile. It is difficult to predict when, if at all, it will be possible for Internet companies to raise capital through these markets. We
cannot assure you that the additional financing will be available on terms favorable to us, or at all. If we issue additional equity or convertible debt securities, our existing stockholders may experience substantial dilution.

We may be unable to address capacity constraints on our software and infrastructure systems in a timely manner

We have developed custom, proprietary software for use by our editors to create the LookSmart directories, and we also use proprietary and licensed software to search
the database, distribute the directories and serve advertising to associated web pages. Any of these software systems may contain undetected errors, defects or bugs or may fail to operate with other software applications. The following developments
may strain our capacity and result in technical difficulties with our web site or the web sites of our distribution partners:

| | substantial increases in editorial activity or the number of listings in our directory,
|- | ---------------------------------------------------------------------------------------
|  |                                                                                        
| | customization of our directory for distribution to particular partners,                
|  |                                                                                        
| | substantial increases in the number of search queries to our database, or              
|  |                                                                                        
| | the addition of new products, features or changes in our directory structure.          

If we fail to address these issues in a timely manner, we may lose the confidence of advertisers and partners, our revenues may decline and our business could suffer.
In addition, as we expand our service offerings and enter into new business areas, we may be required to significantly modify and expand our software and infrastructure systems. If we fail to accomplish these tasks in a timely manner, our business
will likely suffer.

The performance of our operating systems is critical to our business and reputation

Any system failure, including network, software or hardware failure, whether caused by us, a third party service provider, power interruptions, unauthorized intruders
and hackers, or natural disasters, that causes an interruption in our service or a decrease in the responsiveness of the web pages that we serve could result in reduced clicks and revenues. A system failure that prevents us from tracking paid clicks
or reporting accurate information to our customers online accounts could adversely affect our reputation and

29



---

##### Table of Contents

financial results. The occurrence of a natural disaster or unanticipated problems at our principal headquarters or at a third-party facility could cause interruptions or
delays in our business, loss of data or could render us unable to provide some services. Our California facilities exist on or near known earthquake fault zones and a significant earthquake could cause an interruption in our services. We do not have
back-up sites for our main customer operations center and editorial department which are both located at our San Francisco, California office. An interruption in our ability to provide customer support and editorial services would adversely affect
our business.

Our users, partners and customers depend on ISPs, online service providers and other third parties for access to the
LookSmart search results. These service providers have experienced significant outages in the past and could experience outages, delays and other operating difficulties in the future. The occurrence of any or all of these events could adversely
affect our reputation, brand and business, which could have a material adverse effect on our financial results.

We have agreements with
Savvis Communications, Inc. and AboveNet Communications, Inc. to house our networking and web serving hardware equipment. Our networking hardware infrastructure is now fully redundant at separate locations. However, we do not presently maintain
fully redundant click tracking, customer account and web serving systems at both locations.  Accordingly, our operations depend on each of Savvis and AboveNets ability to protect the systems in its data center from system failures,
earthquake, fire, power loss, water damage, telecommunications failure, hackers, vandalism and similar events. Neither Savvis nor AboveNet guarantees that our Internet access will be uninterrupted, error-free or secure. We have deployed firewall
hardware at each facility to thwart hacker attacks. We have not developed a disaster recovery plan to respond in the event of a catastrophic loss of our primary systems. Although we maintain property insurance and business interruption insurance, we
cannot guarantee that our insurance will be adequate to compensate us for all losses that may occur as a result of a catastrophic system failure.

Our success depends on our ability to attract
and retain key personnel

Our success depends, in part, on the continued service of our key management personnel. The loss of the
services of any of our key employees could adversely affect our business. Our success also depends on our ability to identify, attract, retain and motivate highly skilled search development, technical, marketing and other management personnel. We
cannot assure you that we will be able to retain our key employees or that we can identify, attract and retain highly skilled personnel in the future.

If we become subject to unfair hiring
claims, we could be prevented from hiring needed personnel, incur liability for damages and incur substantial costs in defending ourselves

Companies in our industry whose employees accept positions with competitors frequently claim that these competitors have engaged in unfair hiring practices or that
the employment of these persons would involve the disclosure or use of trade secrets. These claims could prevent us from hiring personnel or cause us to incur liability for damages. We could also incur substantial costs in defending ourselves or our
employees against these claims, regardless of their merits. Defending ourselves from these claims could also divert the attention of our management away from our operations.

We may incur
unforeseen expenses and liabilities in connection with the dissolution of BT LookSmart

In the fourth quarter of 2002, we and BT
agreed to close our joint venture, BT LookSmart. We are still in the process of dissolving the joint venture and may incur unforeseen expenses in connection with the dissolution.  Also, we have assumed the operations of BT LookSmart in the
United Kingdom and Japan and we may incur costs in excess of the amounts we forecasted in connection with the operation of those businesses.

30



---

##### Table of Contents

Our business prospects depend on the continued growth in the use of the Internet

Our business is dependent upon continued growth in the use of the Internet as a medium for search marketing and commercial transactions. Internet usage for these
purposes may not grow at projected rates for various reasons, such as:

| | user inability or frustration in locating and accessing required information;                                             
|- | --------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                           
| | actual or perceived lack of security of information;                                                                      
|  |                                                                                                                           
| | limitations of the Internet infrastructure resulting in traffic congestion, reduced reliability or increased access costs;
|  |                                                                                                                           
| | inconsistent quality of service,                                                                                          
|  |                                                                                                                           
| | government regulation, such as tax or privacy laws, and                                                                   
|  |                                                                                                                           
| | uncertainty regarding intellectual property ownership and rights on the Internet.                                         

If these or other
factors negatively affect the growth in the commercial use of the Internet, our business could be harmed.

Privacy-related regulation of the Internet could limit the ways we currently collect
and use personal information which could decrease our advertising revenues or increase our costs

Internet user privacy has become
an issue both in the United States and abroad. The Federal Trade Commission and government agencies in some states and countries have investigated some Internet companies, and lawsuits have been filed against some Internet companies, regarding their
handling or use of personal information. Any laws imposed to protect the privacy of Internet users may affect the way in which we collect and use personal information. We could incur additional expenses if new laws or court judgments, in the United
States or abroad, regarding the use of personal information are introduced or if any agency chooses to investigate our privacy practices.

As is typical with most web sites, our web site places information, known as cookies, on a users hard drive, generally without the users knowledge or
consent. This technology enables web site operators to target specific users with a particular advertisement and to limit the number of times a user is shown a particular advertisement. Although some Internet browsers allow users to modify their
browser settings to remove cookies at any time or to prevent cookies from being stored on their hard drives, many consumers are not aware of this option or are not knowledgeable enough to use this option. Some privacy advocates and governmental
bodies have suggested limiting or eliminating the use of cookies. If this technology is reduced or limited, the Internet may become less attractive to advertisers and sponsors, which could result in a decline in our revenues.

We and some of our partners or advertisers retain information about our users. If others were able to penetrate the network security of these user databases
and access or misappropriate this information, we and our partners or advertisers could be subject to liability. These claims may result in litigation, our involvement in which, regardless of the outcome, could require us to expend significant time
and financial resources.

New regulation of search engines may adversely affect the commercial use of the Internet and our financial results

The Federal Trade Commission, in response to a petition from a private organization, reviewed the way in which search engines disclose paid placement or paid
inclusion practices to Internet users. Recently, the FTC staff issued guidance on the matter in the form of letters to the petitioner and to members of the industry, including LookSmart. The letters stated the staffs position on what
disclosures are necessary to

31



---

##### Table of Contents

avoid misleading users about the possible effects of paid placement or paid inclusion listings on the search results. This guidance may differ from the existing practices of
some in the industry, including our practices and those of some of our distribution partners. The FTC has not yet taken any enforcement action to date against us or any of our distribution partners. If the FTC were to require changes in the labeling
or other disclosure of our listings, it may reduce the desirability of our services, and our business and the business of some of our distribution partners could be harmed. We and some of our distribution partners have recently adjusted the
disclosures on our search results pages on a voluntary basis, or are likely to do so in the future, and such disclosures may reduce the desirability of our listings, which could adversely affect our business.

New tax treatment of companies engaged in Internet commerce may adversely affect the commercial use of the Internet and our company

Tax authorities at the international, federal, state and local levels are currently reviewing the appropriate tax treatment of companies engaged in Internet commerce.
New or revised state tax regulations may subject us or our advertisers to additional state sales, income and other taxes. We cannot predict the effect of current attempts to impose sales, income or other taxes on commerce over the Internet. New or
revised taxes and, in particular, sales taxes, would likely increase the cost of doing business online and decrease the attractiveness of advertising and selling goods and services over the Internet. Any of these events could have an adverse effect
on our business and results of operations.

Provisions of Delaware corporate law and provisions of our charter and bylaws may discourage a takeover attempt

Our charter and bylaws and provisions of Delaware law may deter or prevent a takeover attempt, including an attempt that might result in a premium over the market
price for our common stock. Our board of directors has the authority to issue shares of preferred stock and to determine the price, rights, preferences and restrictions, including voting rights, of those shares without any further vote or action by
the stockholders. The issuance of preferred stock, while providing desirable flexibility in connection with possible acquisitions and other corporate purposes, could have the effect of making it more difficult for a third party to acquire a majority
of our outstanding voting stock. In addition, our charter and bylaws provide for a classified board of directors. These provisions, along with Section 203 of the Delaware General Corporation Law, prohibiting certain business combinations with an
interested stockholder, could discourage potential acquisition proposals and could delay or prevent a change of control.

ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk.The Companys exposure to market risk for interest rate changes relates primarily to its short-term
investments. The Company had no derivative financial instruments as of March 31, 2003 or 2002. The Company invests its excess cash in debt and equity instruments of high-quality corporate issuers with original maturities greater than three
months and current maturities less than twelve months. The amount of credit exposure to any one issue, issuer and type of instrument is limited.

Foreign Currency Risk.International revenues from the Companys foreign subsidiaries were less than 10% of total revenues for the
three months ended March 31, 2003 and were derived from our Australian, United Kingdom and Japanese operations. The Companys international business is subject to risks typical of an international business, including but not limited to
differing economic conditions, changes in political climate, differing tax structures, other regulations and restrictions and foreign exchange rate volatility. The effect of foreign exchange rate fluctuations on the Company for the three months
ended March 31, 2003 and 2002 was not material.

32



---

##### Table of Contents

ITEM 4.     CONTROLS AND PROCEDURES

Within
90 days prior to the filing date of this Quarterly Report on Form 10-Q, LookSmart carried out an evaluation, under the supervision and with the participation of the Companys management, including the Chief Executive Officer and the Chief
Financial Officer, of the effectiveness of the design and operation of LookSmarts disclosure controls and procedures and internal controls pursuant to Item 307 of Regulation S-K. Disclosure controls and procedures
are designed with the objective of ensuring that (i) information required to be disclosed in the Companys reports filed under the Securities Exchange Act of 1934, is recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commissions rules and forms, and (ii) information is accumulated and communicated to management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.
Internal controls are procedures designed with the objective of providing reasonable assurance that our transactions are properly authorized, assets are safeguarded against unauthorized or improper use, and transactions are properly recorded and
reported to permit the preparation of our financial statements in conformity with generally accepted accounting principles.

The
evaluation of our disclosure controls and procedures and internal controls included a review of their objectives and processes, implementation and effect on the information generated for use in this report. In the course of this evaluation, we
sought to identify any significant deficiencies or material weaknesses in our controls, and whether we had identified any acts of fraud involving personnel who have a significant role in our internal controls, and to confirm that any necessary
corrective action, including process improvements, were being undertaken. The overall goals of these evaluation activities are to monitor our disclosure and internal controls and to make modifications as necessary. We intend to maintain these
controls as processes that may be appropriately modified as circumstances warrant.

Based on the evaluation described above and subject
to the discussion below, our CEO and CFO concluded that our controls and procedures are effective in timely alerting them to material information (including our consolidated subsidiaries) required to be included in this report. There have been no
significant changes in our internal controls or in other factors that could significantly affect those controls since the date of their last evaluation.

However, a control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system
are met. Management necessarily applied its judgment in assessing the benefits of controls relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control
issues, if any, within LookSmart have been detected.

PART II. OTHER INFORMATION

ITEM 1.     LEGAL PROCEEDINGS

In May 2002, Legal
Staffing Partners, Inc., an express listing customer, filed a proposed class action lawsuit in Superior Court in San Francisco County. The complaint alleged breach of contract, unfair business practices and false advertising in connection with the
launch of our new Small Business Listings product announced in April 2002. The complaint sought restitution, unspecified compensatory damages, injunctive relief and attorneys fees. In July 2002, Curt Kramer, an express listing customer, filed
a proposed class action lawsuit in Superior Court in San Francisco County alleging claims that were substantially similar to those alleged by Legal Staffing Partners. In October 2002, the two plaintiffs agreed to withdraw their complaints and file a
single consolidated amended complaint containing substantially the same allegations as the prior two complaints. In November 2002, we filed a motion to dismiss the claims in the amended complaint. The court denied the motion in January 2003. We
filed an answer to the amended complaint in January 2003. Plaintiffs have served document and deposition requests, but no other discovery is being sought at this time. LookSmart believes that the allegations against it are without merit and intends
to contest the allegations vigorously.

We are not a party to any other material legal proceedings.

33



---

##### Table of Contents

ITEM 2.     CHANGES IN SECURITIES AND USE OF PROCEEDS

In January 2003, in connection with the acquisition of substantially all of the assets of Grub, Inc., LookSmart issued or reserved for issuance an aggregate of
217,000 shares of common stock.  There were no underwriters employed in connection with the transaction.  The issuance of the securities was deemed to be exempt from registration under the Securities Act in reliance on Section 4(2) of the
Securities Act as a transaction by an issuer not involving a public offering.  The recipients acquired the securities for investment only and not in connection with any distribution thereof and appropriate legends were affixed to the share
certificates or other instruments issued in the transaction.  All recipients either received adequate information about LookSmart or had access to such information.

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

(a)          Exhibits

Please see the exhibit list following the certifications of this report.

(b)          Form 8-K

The Company filed Current Reports on Form 8-K on January 30, 2003 (fourth quarter 2002 financial results), and May 5, 2003 (first quarter 2003 financial results).

SIGNATURE

Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

|Date:  May 15, 2003 | LOOKSMART, LTD.
|------------------- | ---------------
|                    |                
|                    | By:            
|                    |                
|                    |                

34



---

##### Table of Contents

CERTIFICATIONS

I, Jason Kellerman, certify that:

|1.     I have reviewed this quarterly report on Form 10-Q of LookSmart, Ltd.;                                                                                                                                                                                                                                                                                                                   
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                
|2.     Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                
|3.     Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                                
|4.     The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                
|(a)     designed such disclosure controls and procedures to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                
|(b)     evaluated the effectiveness of the registrants disclosure controls and procedures as of a
date within 90 days prior to the filing date of this quarterly report (the Evaluation Date); and                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                
|(c)     presented in this quarterly report our conclusions about the effectiveness of the disclosure
controls and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                
|5.     The registrants other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants auditors and
the audit committee of registrants board of directors (or persons performing the equivalent function):                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                
|(a)     all significant deficiencies in the design or operation of internal controls which could
adversely affect the registrants ability to record, process, summarize and report financial data and have identified for the registrants auditors any material weaknesses in internal controls; and                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                
|(b)     any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrants internal controls; and                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                
|6.     The registrants other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material
weaknesses.



|Date:  May 15, 2003 | /s/ JASON KELLERMAN                    
|------------------- | ---------------------------------------
|                    |                                        
|                    | Jason Kellerman Chief Executive Officer

35



---

##### Table of Contents

I, Dianne Dubois, certify that:

|1.     I have reviewed this quarterly report on Form 10-Q of LookSmart, Ltd.;                                                                                                                                                                                                                                                                                                                   
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                
|2.     Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                
|3.     Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                                
|4.     The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                
|(a)     designed such disclosure controls and procedures to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                
|(b)     evaluated the effectiveness of the registrants disclosure controls and procedures as of a
date within 90 days prior to the filing date of this quarterly report (the Evaluation Date); and                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                
|(c)     presented in this quarterly report our conclusions about the effectiveness of the disclosure
controls and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                
|5.     The registrants other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants auditors and
the audit committee of registrants board of directors (or persons performing the equivalent function):                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                
|(a)     all significant deficiencies in the design or operation of internal controls which could
adversely affect the registrants ability to record, process, summarize and report financial data and have identified for the registrants auditors any material weaknesses in internal controls; and                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                
|(b)     any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrants internal controls; and                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                
|6.     The registrants other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material
weaknesses.



|Date:  May 15, 2003 | /s/ DIANNE DUBOIS                    
|------------------- | -------------------------------------
|                    |                                      
|                    | Dianne Dubois Chief Financial Officer

36



---

##### Table of Contents

EXHIBIT INDEX

|Exhibit Number |  | Description of Document                                                                                                                                                                  
|-------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|               |  |                                                                                                                                                                                          
|3.1(1)         |  | Restated Certificate of Incorporation                                                                                                                                                    
|               |  |                                                                                                                                                                                          
|3.2(1)         |  | Bylaws                                                                                                                                                                                   
|               |  |                                                                                                                                                                                          
|4.1(2)         |  | Form of Specimen Stock Certificate                                                                                                                                                       
|               |  |                                                                                                                                                                                          
|4.2(1)         |  | Second Amended and Restated Investor Rights Agreement dated March 24, 1999                                                                                                               
|               |  |                                                                                                                                                                                          
|10.1(1)        |  | Form of Indemnification Agreement entered into between the Registrant and each of its directors and officers                                                                             
|               |  |                                                                                                                                                                                          
|10.2(1)        |  | Amended and Restated 1998 Stock Plan                                                                                                                                                     
|               |  |                                                                                                                                                                                          
|10.3(1)        |  | 1999 Employee Stock Purchase Plan                                                                                                                                                        
|               |  |                                                                                                                                                                                          
|10.4+(1)       |  | License and Update Agreement with Microsoft Corporation                                                                                                                                  
|               |  |                                                                                                                                                                                          
|10.6+(1)       |  | Development Agreement with Cox Interactive Media, Inc.                                                                                                                                   
|               |  |                                                                                                                                                                                          
|10.7(3)        |  | Zeal Media, Inc. 1999 Stock Plan                                                                                                                                                         
|               |  |                                                                                                                                                                                          
|10.8(5)        |  | Wisenut, Inc. 1999 Stock Incentive Plan                                                                                                                                                  
|               |  |                                                                                                                                                                                          
|10.12(1)       |  | Lease Agreement with Rosenberg SOMA Investments III, LLC for property located at 625 Second Street, San Francisco, California, dated May 5, 1999                                         
|               |  |                                                                                                                                                                                          
|10.13(1)       |  | Consent to Sublease Agreement with Ninety Park Property LLC, and First Manhattan Consulting Group Inc. for property located at 90 Park Avenue, New York, New York, dated October
22, 1998
|               |  |                                                                                                                                                                                          
|10.14(1)       |  | Lease Agreement with Euro Asia Properties Pty Ltd for property located at Level 5, 388 Lonsdale Street, Melbourne, Australia, dated September 1, 1998                                    
|               |  |                                                                                                                                                                                          
|10.15(1)       |  | Lease Agreement with Tonicalon Pty Limited for property located at Level 3, 68 Alfred Street, Milsons Point, Sydney, Australia, dated June 1, 1999                                       
|               |  |                                                                                                                                                                                          
|10.16(1)       |  | Summary Plan Description of 401(k) Plan                                                                                                                                                  
|               |  |                                                                                                                                                                                          
|10.21(4)       |  | Employment Agreement with Kevin Berk dated September 29, 2000                                                                                                                            
|               |  |                                                                                                                                                                                          
|10.22(4)       |  | Employment Agreement with Brian Goler dated September 29, 2000                                                                                                                           
|               |  |                                                                                                                                                                                          
|10.24(6)       |  | Secured Promissory Note between LookSmart, Ltd. and Dianne Dubois, dated April 2, 2002                                                                                                   
|               |  |                                                                                                                                                                                          
|10.25(6)       |  | Side Letter between LookSmart, Ltd. and Dianne Dubois, dated July 16, 2002                                                                                                               

37



---

##### Table of Contents

|10.26+(6) |  | Amendment No. 4 to the License and Update Agreement between LookSmart, Ltd. and Microsoft Corporation dated as of April 9, 2002                                          
|--------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|          |  |                                                                                                                                                                          
|10.27(7)  |  | Letter agreement between the Registrant and Robert Goldberg dated March 4, 2002                                                                                          
|          |  |                                                                                                                                                                          
|10.28(7)  |  | Letter agreement between the Registrant and Brian Cowley dated May 30, 2002                                                                                              
|          |  |                                                                                                                                                                          
|10.29(7)  |  | Letter agreement between the Registrant and Martin Roberts dated July 1, 2002                                                                                            
|          |  |                                                                                                                                                                          
|10.30(7)  |  | Letter agreement between the Registrant and Jason Kellerman dated September 24, 2002                                                                                     
|          |  |                                                                                                                                                                          
|10.31 (8) |  | Settlement Agreement between the Registrant, Transceptgate Ltd., LookSmart Barbados, Inc., BT LookSmart, Ltd. and British Telecommunications Plc., dated December 3,
2002
|          |  |                                                                                                                                                                          
|10.32     |  | Letter agreement between the Registrant and Peter Adams dated September 17, 2001                                                                                         
|          |  |                                                                                                                                                                          
|99.1      |  | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                           
|          |  |                                                                                                                                                                          

---

|(1) | Filed in connection with the Companys Registration Statement on Form S-1 (File No. 333-80581) filed with the SEC on June 14, 1999.                       
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Filed in connection with the Companys Amendment No. 1 to the Registration Statement on Form S-1 (File No. 333-80581) filed with the SEC on July 27, 1999.
|(3) | Filed in connection with the Companys Registration Statement on Form S-8 filed with the SEC on, December 7, 2000.                                        
|(4) | Filed in connection with the Companys Annual Report on Form 10-K filed with the SEC on March 16, 2001.                                                   
|(5) | Filed in connection with the Companys Registration Statement on Form S-8 filed with the SEC on April 18, 2002.                                           
|(6) | Filed in connection with the Companys Quarterly Report on Form 10-Q filed with the SEC on August 14, 2002.                                               
|(7) | Filed in connection with the Companys Quarterly Report on Form 10-Q filed with the SEC on November 12, 2002.                                             
|(8) | Filed in connection with the Companys Annual Report on Form 10-K filed with the SEC on March 14, 2003.                                                   
|(+) | Confidential treatment has been granted with respect to portions of the exhibit.                                                                          

38