##### Table of Contents



UNITED
    STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
    20549
  Form 10-K
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2006ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission file number:
    000-52026
  LOOPNET, INC.
 (Exact name of registrant as
    specified in its charter)
  Delaware(State or other
    jurisdiction of
    incorporation or organization)

77-0463987(I.R.S. Employer
    Identification No.)185 Berry Street,
    Suite 4000
    San Francisco, CA

94107(Address of principal executive
    offices)   (415) 243-4200 (Registrants
    telephone number, including area code)
  N/A (Former
    name, former address and former fiscal year, if changed since
    last report)
  Securities registered pursuant to Section 12(b) of the
    Act:
   Title of Class

Name of Each Exchange on Which RegisteredCommon Stock

The NASDAQ Stock Market LLC   Securities registered pursuant to Section 12(g) of the
    Act:
    N/A
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. þ
  Rule 12b-2
 o o þ
  Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE
  Items 10 (as to directors), 11, 12, 13 and 14 of
    Part III incorporate by reference information from the
    Registrants Proxy Statement to be filed with the
    Securities and Exchange Commission in connection with the
    solicitation of proxies for the Registrants 2007 Annual
    Meeting of Stockholders.




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##### 



TABLE OF
    CONTENTS
  
  PagePART IItem 1.

Business


4Item 1A.

Risk
    Factors


14Item 1B.

Unresolved Staff
    Comments


25Item 2.

Properties


25Item 3.

Legal
    Proceedings


25Item 4.

Submission of
    Matters to a Vote of Security Holders


25PART IIItem 5.

Market for
    Registrars Common Equity, Related Stockholder Matters and
    Issuer Purchases of Equity Securities


25Item 6.

Selected Financial
    Data


28Item 7.

Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


29Item 7A.

Quantitative and
    Qualitative Disclosures About Market Risk


42Item 8.

Financial
    Statements and Supplementary Data


43Item 9.

Changes in and
    Disagreements with Accountants on Accounting and Financial
    Disclosure


43Item 9A.

Controls and
    Procedures


43Item 9B.

Other
    Information


43PART IIIItem 10.

Directors Executive
    Officers, and Corporate Governance


43Item 11

Executive
    Compensation


44Item 12.

Security Ownership
    of Certain Beneficial Owners and Management and Related
    Stockholder Matters


44Item 13.

Certain
    Relationships and Related Transactions and Director
    Independence


45Item 14.

Principal
    Accountant Fees and Services


45PART IVItem 15.

Exhibits and
    Financial Statement Schedules


45Signatures


47EXHIBIT 10.10EXHIBIT 23.1EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2   2




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Statement
    regarding forward-looking statements
    
    our future financial results;
    our future growth and offering of new products or services;
    our future advertising and marketing activities; and
    our future investment in technology.      Form 10-K
  Internet
    Site
  www.loopnet.com Form 10-K, Form 10-Q, Form 8-K, Form 10-K.
  Where You
    Can Find Additional Information
  Form 10-K, 20549-0102. 1-800-SEC-0330.
 3




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PART I  Item 1.
    Business.  www.LoopNet.com
  free-of-charge,
      Industry
    Background
     4




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The
    LoopNet Model
      Leading commercial real estate online
    marketplace.
 5




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Comprehensive member-generated content
    offering. up-to-date
  Compelling member experience. easy-to-use
    The
    LoopNet Advantage
    Benefits
    to Property Listers
  Broad marketing exposure.
  Cost-effective and measurable marketing
    method.
  Detailed and
    up-to-date
    property listing information.
 6




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Benefits
    to Property Searchers
  Access to a large number of property
    listings.
  Real-time, comprehensive information.
  Customized search engine. sub-type,
  Our
    Strategy
    Expand our base of registered members. word-of-mouth
  Convert basic members to premium members.
  Offer complementary products and services.
 7




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Enhance the functionality of our
    marketplace.
  Expand into new markets.
  Increase opportunities to advertise to our member
    base.
  Products
    and Services
      Basic and premium membership. free-of-charge
 8




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Basic


PremiumMembership


MembershipListing BenefitsDetailed Property Listings


ü



üMyLoopNet  Listing
    Management Center


ü



üEnhanced Listing Exposure






üProspectList  Lead
    Generation






üMarketing Exposure Statistics






üControlled Access Marketing






üSearching BenefitsListings Search Engine


ü



üMyLoopNet  Searching
    Management Center


ü



üEnhanced Listings Access






üPropertyAlert  Email
    Alerts of New Listings


Weekly



DailyReporting and Map-Based
    Presentations






üMapSearch


ü



ü   
    Property listing.  Our property listing service
    allows customers to quickly and easily submit listings on
    properties available for sale or for lease, enabling them to
    reach a large audience of commercial real estate transaction
    participants. All listings submitted to the LoopNet online
    marketplace are processed through a listing quality assessment
    mechanism. Members can submit an unlimited number of listings
    and include detailed property listing information, including
    building description, financial and tenant information,
    photographs and key property characteristics. Our service
    automatically compiles this information into a
    professional-quality online brochure.  
    MyLoopNet.  Members can use MyLoopNet to manage
    various features of their LoopNet membership, including managing
    their listings and tracking the exposure their property profiles
    have received.
    Enhanced Listing Exposure.  Property listings
    submitted by basic members can only be viewed by premium
    members. Property listings submitted by premium members are
    available for viewing by all registered members and have premium
    placement on search results.
    ProspectList.  Premium members have exclusive
    access to ProspectList, a reverse lookup search function that
    enables property listers to market listings to specific agents,
    buyers and tenants who have posted their property purchase or
    lease criteria on LoopNet and requested that they be contacted
    with property listings that match those criteria.
    Marketing Exposure Statistics.  Premium members
    have access in MyLoopNet to various statistics on the number of
    exposures being generated for their listings on LoopNet.
    Controlled Access Marketing.  Premium members
    can use Controlled Access Marketing to password-protect their
    listings. For example, a premium member might choose to limit
    access to a property listing such that searchers can only access
    the listing details after agreeing to a confidentiality
    agreement with the listing agent.  
    Property searching.  We developed our property
    search engine specifically for the commercial real estate
    market. Members use our proprietary search engine to identify
    properties available for sale or for lease on our online
    marketplace that meet their criteria. Members can search for
    properties based on a broad scope of commercial real estate
    specifications, including property type and
    sub-type,
    location, building and lot size, 9




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and price range. Members can also search using map-based
    geographic searching combined with various property listing
    attributes, including a keyword search capability.  
    MyLoopNet.  Members can use MyLoopNet to manage
    various features of their LoopNet membership, including saving
    links to multiple property profiles and detailed search
    parameters for future use. Members can also use MyLoopNet to
    specify the criteria for PropertyAlert emails.
    Enhanced Listings Access.  Basic members are
    able to view summary details of their search results but can
    only view property profiles submitted by premium members.
    Premium members have full access to all property listings and
    profiles.
    PropertyAlert.  Members can use PropertyAlert
    to receive email alerts with new property listings that meet
    their selection criteria. Premium members receive email alerts
    daily, while basic members receive email alerts weekly.
    Reporting and Map-Based Presentations.  Premium
    members can automatically generate professional-quality reports
    and maps of properties they have selected to use for
    presentations to clients and interested parties.
    MapSearch.  Members have access to MapSearch,
    an interactive and dynamic aerial and satellite image map
    interface for property searches.  LoopLink.
  RecentSales.
  Advertising and lead generation.
  BizBuySell.
 10




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Sales and
    Marketing
    word-of-mouth
        Competition
         11




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© ©
    Technology
    and Infrastructure
               12




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Intellectual
    Property
      Employees
    Executive
    Officers
    Name

Age

PositionRichard J. Boyle, Jr.


41


President, Chief Executive Officer
    and Chairman of the Board of DirectorsBrent Stumme


45


Chief Financial Officer and Senior
    Vice President, Finance and AdministrationThomas Byrne


40


Chief Marketing Officer and Senior
    Vice President, Marketing and SalesJason Greenman


39


Chief Product Officer and Senior
    Vice President, Business and Product DevelopmentWayne Warthen


43


Chief Technology Officer and
    Senior Vice President, Information Technology   Richard J. Boyle, Jr.
  Brent Stumme
  Thomas Byrne
 13




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Jason Greenman
  Wayne Warthen
  Item 1A.
    Risk
    Factors.    Our
    business is largely based on a subscription model, and
    accordingly, any failure to increase the number of our customers
    or retain existing customers could cause our revenues to
    decline.
  and/or
   14




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We
    rely on our marketing efforts to generate new registered
    members. If our marketing efforts are ineffective, we could fail
    to attract new registered members, which could reduce the
    attractiveness of our marketplace to current and potential
    customers and lead to a reduction in our revenues.
  word-of-mouth
  We may
    be unable to compete successfully with our current or future
    competitors.
           15




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If we
    are unable to obtain or retain listings from commercial real
    estate brokers, agents, and property owners, our marketplace
    could be less attractive to current or potential customers,
    which could result in a reduction in our revenues.
    Our
    operating results and revenues are subject to fluctuations that
    may cause our stock price to decline, and our quarterly
    financial results may be subject to seasonality, each of which
    could cause our stock price to decline.
  Form 10-K:
  
    rates of member adoption and retention;
    changes in our marketing or other corporate strategies;
    our introduction of new products and services or changes to
    existing products and services;
    the amount and timing of our operating expenses and capital
    expenditures;
    the amount and timing of non-cash stock-based charges;
    costs related to acquisitions of businesses or
    technologies; and
    other factors outside of our control.  end-of-year
  and/or
      
    periods of economic slowdown or recession globally, in the
    United States or locally;
    inflation;
    flows of capital into or out of real estate investment in the
    United States or various regions of the United States; 16




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
    rates of unemployment;
    interest rates;
    wage and salary levels; or
    concerns about any of the foregoing.    
    economic slowdown or recession;
    changes in levels of rent or appreciation of asset values;
    changing interest rates;
    tax and accounting policies;
    the availability and cost of capital;
    costs of construction;
    increased unemployment;
    lower consumer confidence;
    lower wage and salary levels;
    war, terrorist attacks or natural disasters; or
    the public perception that any of these conditions may occur.    If we
    are unable to introduce new or upgraded services or products
    that our customers recognize as valuable, we may fail to attract
    new customers or retain existing customers. Our efforts to
    develop new and upgraded products and services could require us
    to incur significant costs.
   17




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We
    could face liability for information on our
    website.
        If we
    are unable to convince commercial real estate brokers and other
    commercial real estate professionals that our services and
    products are superior to traditional methods of listing,
    searching, and marketing commercial real estate, they could
    choose not to use our marketplace, which could reduce our
    revenues or increase our expenses.
  word-of-mouth,
 18




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We may
    be unable to effectively manage our growth.
    Our
    business depends on retaining and attracting capable management
    and operating personnel.
      If we
    fail to protect confidential information against security
    breaches, or if our members or potential members are reluctant
    to use our marketplace because of privacy concerns, we might
    face additional costs, and activity in our marketplace could
    decline.
     19




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Our
    services may infringe the intellectual property rights of others
    and we may be subject to claims of intellectual property rights
    infringement.
        If we
    are unable to enforce or defend our ownership and use of
    intellectual property, our business, competitive position and
    operating results could be harmed.
       20




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If we
    are not able to successfully identify or integrate future
    acquisitions, our managements attention could be diverted,
    and efforts to integrate future acquisitions could consume
    significant resources.
    
    difficulties in integrating the operations, technologies, and
    products of the acquired companies;
    diversion of managements attention from normal daily
    operations of the business;
    inability to maintain the key business relationships and the
    reputations of acquired businesses;
    entry into markets in which we have limited or no prior
    experience and in which competitors have stronger market
    positions;
    dependence on unfamiliar affiliates and partners;
    insufficient revenues to offset increased expenses associated
    with acquisitions;
    reduction or replacement of the sales of existing services by
    sales of products or services from acquired lines of business;
    responsibility for the liabilities of acquired businesses;
    inability to maintain our internal standards, controls,
    procedures and policies; and
    potential loss of key employees of the acquired companies.    Unless
    we develop, maintain and protect our brand identity, our
    business may not grow and our financial results may
    suffer.
   21




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If we
    are unable to effectively implement enhanced systems and
    internal controls, we may incur increased general and
    administrative costs, which could reduce our profitability, and
    investor confidence in us may decrease, which could cause our
    stock price to decline.
    Changes
    in or interpretations of accounting rules and regulations, such
    as expensing of stock options, could result in unfavorable
    accounting charges or require us to change our compensation
    policies.
  Share-Based Payment Accounting
    for Stock-Based Compensation Accounting for Stock
    Issued to Employees
  If our
    operating results do not meet the expectations of investors or
    equity research analysts, our market price may decline and we
    may be subject to class action litigation.
    If our
    website or our other services experience system failures, our
    customers may be dissatisfied and our operations could be
    impaired.
     22




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Our
    internal network infrastructure could be disrupted or
    penetrated, which could materially impact our ability to provide
    our services and our customers confidence in our
    services.
      We may
    be subject to regulation of our advertising and customer
    solicitation or other newly-adopted laws and
    regulations.
     23




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Our
    stock price may be volatile and you may be unable to sell your
    shares at or above the purchase price.
  Form 10-K,
      Our
    principal stockholders, executive officers and directors own a
    significant percentage of our stock and will continue to have
    significant control of our management and affairs , and they can
    take actions that may be against the best interests of other
    stockholders.
    Our
    charter documents and Delaware law could prevent a takeover that
    stockholders consider favorable and could also reduce the market
    price of our stock.
    
    providing for a classified board of directors with staggered,
    three-year terms;
    not providing for cumulative voting in the election of directors;
    authorizing the board to issue, without stockholder approval,
    preferred stock rights senior to those of common stock;
    prohibiting stockholder action by written consent;
    limiting the persons who may call special meetings of
    stockholders; and
    requiring advance notification of stockholder nominations and
    proposals. 24




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Item 1B.
    Unresolved
    Staff Comments.    Item 2.
    Properties.    Item 3.
    Legal
    Proceedings.    Item 4.
    Submission
    of Matters to a Vote of Security Holders.   PART II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities.  Market
    information
    High


Low2006Second Quarter (June 7 to
    June 30, 2006)

$
19.92


$
14.11Third Quarter

$
19.18


$
10.48Fourth Quarter

$
17.07


$
12.67     Dividend
    policy
   25




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Recent
    Sales of Unregistered Securities
    
    On October 26, 2006, a holder of an outstanding warrant
    exercised its right to purchase 1,334 shares of our common
    stock at $0.308 per share.
    On November 20, 2006, a holder of an outstanding warrant
    exercised its right to purchase 2,668 shares of our common
    stock at $0.308 per share
    On November 22, 2006, a holder of an outstanding warrant
    exercised its right to purchase 2,000 shares of our common
    stock at $0.308 per share on a cashless exercise basis. As
    a result of this cashless exercise, we issued 1,960 shares
    of our common stock to the holder of this warrant and withheld
    issuing 40 shares of our common stock in satisfaction of
    the exercise price under the warrant.
    On November 27, 2006, a holder of an outstanding warrant
    exercised its right to purchase 525,630 shares of our
    common stock at $0.308 per share on a cashless exercise
    basis. As a result of this cashless exercise, we issued
    515,211 shares of our common stock to the holder of this
    warrant and withheld issuing 10,419 shares of our common
    stock in satisfaction of the exercise price under the warrant.  and/or
  Use of
    Proceeds
  Form S-1 No. 333-132138)
        Issuer
    Purchases of Equity Securities
   26




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Performance
    Graph
    Comparative
    Returns
  
  Cumulative Total Return6/7/2006


12/29/2006LOOPNET, INC



100.00




99.87
(1)NASDAQ STOCK MARKET (U.S)



100.00




112.25GOLDMAN SACHS INTERNET TRADING
    INDEX



100.00




116.95   (1)
    
    Based on the initial public offering price of $12.00 per
    share on June 6, 2006, the cumulative total return as of
    December 29, 2006 is $124.83.   27




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Item 6.
    Selected
    Financial Data.  Form 10-K.
  Form 10-K. Form 10-K.
  Year Ended December 31,2002


2003


2004


2005


2006(In thousands, except per share data)Consolidated Statements of
    Operations Data:Revenues

$
7,019


$
10,480


$
17,036


$
30,977


$
48,411Cost of revenue(1)


1,254



1,984



2,562



3,825



5,599Gross profit


5,765



8,496



14,474



27,152



42,812Operating expenses(1):Sales and marketing


1,743



1,704



3,193



6,252



9,506Technology and product development


3,574



2,289



2,686



3,746



4,341General and administrative


3,278



3,180



4,889



5,955



7,803Total operating expenses


8,595



7,173



10,768



15,953



21,650Income (loss) from operations


(2,830
)


1,323



3,706



11,199



21,162Interest income, net


2



21



98



487



2,885Other income (expense), net


232



261



34



7



(2
)Income (loss) from continuing
    operations


(2,596
)


1,605



3,838



11,693



24,045Discontinued operations:Loss from discontinued operations


(223
)














Gain on sale of assets, net


630



287











Income (loss) from discontinued
    operations


407



287











Income (loss) before taxes


(2,189
)


1,892



3,838



11,693



24,045Income tax expense (benefit)






188



118



(7,243
)


8,550Net income (loss)

$
(2,189
)

$
1,704


$
3,720


$
18,936


$
15,495 28




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Year Ended December 31,2002


2003


2004


2005


2006(In thousands, except per share data)Basic net income (loss) per
    shareIncome (loss) from continuing
    operations

$
(0.73
)

$



$
0.06


$
0.58


$
0.42Income from discontinued operations


0.12















Basic net income (loss) per share

$
(0.61
)

$



$
0.06


$
0.58


$
0.42Diluted net income (loss) per
    shareIncome (loss) from continuing
    operations

$
(0.73
)

$



$
0.04


$
0.54


$
0.40Income from discontinued operations


0.12















Diluted net income (loss) per
    share:

$
(0.61
)

$



$
0.04


$
0.54


$
0.40(1) Stock-based compensation is
    allocated as follows:Cost of revenue

$



$



$
1


$
18


$
151Sales and marketing










251



146



686Technology and product development










236



350



195General and administrative










1,188



150



421Total










1,676



664



1,453   As of December 31,2002


2003


2004


2005


2006(In thousands)Consolidated Balance Sheet
    Data:Cash, cash equivalents and
    short-term investments

$
2,461


$
5,174


$
8,724


$
21,865


$
89,028Working capital


999



2,915



5,099



16,939



81,884Total assets


3,840



6,034



12,971



35,177



100,205Total liabilities


2,242



2,727



4,255



6,604



10,202Redeemable convertible preferred
    stock


39,712



39,712



39,712



39,962



Total shareholders (deficit)
    equity


(38,114
)


(36,405
)


(30,996
)


(11,389
)


90,003   Year Ended December 31,2002


2003


2004


2005


2006(In thousands)Consolidated Statement of Cash
    Flows Data:Cash flow provided by operating
    activities

$
(2,528
)

$
2,944


$
6,921


$
14,490


$
23,205Depreciation and amortization


785



377



278



505



611Capital expenditures


(110
)


(243
)


(500
)


(719
)


(665
)   Year Ended December 31,2002


2003


2004


2005


2006(In thousands)Other Operating Data
    (unaudited):LoopNet registered members at end
    of period


327,436



450,876



703,111



1,116,589



1,766,508LoopNet premium members at end of
    period


13,692



21,203



35,482



57,461



78,952  29




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Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations.  You should read the following discussion and analysis by our
    management of our financial condition and results of operations
    in conjunction with our consolidated financial statements and
    the accompanying notes included elsewhere in this Annual Report
    on
    Form 10-K
    . This discussion and other parts of this Annual Report on
    Form 10-K
    contain forward-looking statements that involve risks and
    uncertainties, such as statements of our plans, objectives,
    expectations and intentions. Our actual results could differ
    materially from those discussed in the forward-looking
    statements. Factors that could cause or contribute to such
    differences include, but are not limited to, those discussed in
    Item 1A of Part I, Risk Factors.
  Overview
  www.LoopNet.com free-of-charge,
    Our
    Revenues and Expenses
    
    LoopNet premium membership fees;
    BizBuySell BrokerWorks membership fees and paid listings;
    advertising on, and lead generation from, our marketplaces,
    LoopLink product license fees; and 30




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
    LoopNet RecentSales membership fees.    
    the increased adoption of our premium membership services by the
    commercial real estate industry; and
    our acquisition of BizBuySell in October, 2004, and the
    increased adoption of our services by the operating business for
    sale industry.  www.LoopNet.com www.BizBuySell.com
        Critical
    Accounting Policies and Estimates
      Revenue
    Recognition
   31




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Income
    Taxes
        Website
    Development Costs
  00-2,
  Stock-Based
    Compensation
  Share-Based Payment Accounting
    for Stock-Based Compensation Accounting for Stock
    Issued to Employees
   32




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Seasonality
    and Cyclicality
    end-of-year
   33




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Results
    of Operations
    Year Ended December 31,2004


2005


2006Revenues


100.0
%


100.0
%


100.0
%Cost of revenues


15.0



12.3



11.6Gross profit


85.0



87.7



88.4Operating expenses:Sales and marketing


18.7



20.2



19.6Technology and product development


15.8



12.1



9.0General and administrative


28.7



19.2



16.1Total operating expenses


63.2



51.5



44.7Income from operations


21.8



36.2



43.7Interest income, net


0.5



1.6



6.0Other income, net


0.2



0.0



0.0Income before taxes


22.5



37.8



49.7Income tax expense (benefit)


0.7



(23.3
)


17.7Net income


21.8
%


61.1
%


32.0
%   Comparison
    of Years Ended December 31, 2005 and 2006
  Revenues
  Year Ended December 31,Percent2005


2006


Increase


Change(Dollars in thousands)Revenues

$
30,977


$
48,411


$
17,434



56.3
%Premium members at year-end


57,461



78,952



21,491



37.4
%       Cost
    of Revenues
  Year Ended December 31,Percent2005


2006


Increase


Change(Dollars in thousands)Cost of revenues

$
3,825


$
5,599


$
1,774



46.4
%Percentage of revenues


12.3
%


11.6
%    34




---



##### Table of Contents



Sales
    and Marketing
  Year Ended December 31,Percent2005


2006


Increase


Change(Dollars in thousands)Sales and marketing

$
6,252


$
9,506


$
3,254



52.0
%Percentage of revenues


20.2
%


19.6
%           Technology
    and Product Development
  Year Ended December 31,Percent2005


2006


Increase


Change(Dollars in thousands)Technology and product development

$
3,746


$
4,341


$
595



15.9
%Percentage of revenues


12.1
%


9.0
%         General
    and Administrative
  Year Ended December 31,Percent2005


2006


Increase


Change(Dollars in thousands)General and administrative

$
5,955


$
7,803


$
1,848



31.0
%Percentage of revenues


19.2
%


16.1
%  35




---



##### Table of Contents



Stock-Based
    Compensation
      Year Ended December 31,Increase/


Percent2005


2006


(Decrease)


ChangeCost of revenue

$
18


$
151


$
133



738.9
%Selling and marketing


146



686



540



369.9
%Technology and product development


350



195



(155
)


(44.3
)%General and administrative


150



421



271



180.7
%Total

$
664


$
1,453


$
789



118.8
%   Interest
    Income
    Income
    Taxes
    Comparison
    of Years Ended December 31, 2004 and 2005
  Revenues
  Year Ended December 31,Percent2004


2005


Increase


Change(Dollars in thousands)Revenues

$
17,036


$
30,977


$
13,941



81.8
%Premium members at year-end


35,482



57,461



21,979



61.9
%  36




---



##### Table of Contents



Cost
    of Revenues
  Year Ended December 31,Percent2004


2005


Increase


Change(Dollars in thousands)Cost of revenues

$
2,562


$
3,825


$
1,263



49.3
%Percentage of revenues


15.0
%


12.3
%     Sales
    and Marketing
  Year Ended December 31,Percent2004


2005


Increase


Change(Dollars in thousands)Sales and marketing

$
3,193


$
6,252


$
3,059



95.8
%Percentage of revenues


18.7
%


20.2
%     Technology
    and Product Development
  Year Ended December 31,Percent2004


2005


Increase


Change(Dollars in thousands)Technology and product development

$
2,686


$
3,746


$
1,060



39.5
%Percentage of revenues


15.8
%


12.1
%    37




---



##### Table of Contents



General
    and Administrative
  Year Ended December 31,Percent2004


2005


Increase


Change(Dollars in thousands)General and administrative

$
4,889


$
5,955


$
1,066



21.8
%Percentage of revenues


28.7
%


19.2
%     Stock-Based
    Compensation
        Year Ended December 31,Increase/


Percent2004


2005


(Decrease)


Change(In thousands)Cost of revenue

$
1


$
18


$
17



1700.0
%Selling and marketing


251



146



(105
)


(41.8
)%Technology and product development


236



350



114



48.3
%General and administrative


1,188



150



(1,038
)


(87.4
)%Total

$
1,676


$
664


$
(1,012
)


(60.4
)%   Interest
    Income
    Income
    Taxes
   38




---



##### Table of Contents



Quarterly
    Consolidated Statements of Income Data
    Quarter EndedMar. 31,


June 30,


Sept. 30,


Dec. 31,


Mar. 31,


June 30,


Sept. 30,


Dec. 31,2005


2005


2005


2005


2006


2006


2006


2006Revenues

$
6,213


$
7,261


$
8,379


$
9,124


$
10,226


$
11,631


$
12,707


$
13,847Cost of revenues(1)


872



902



975



1,077



1,228



1,366



1,421



1,584Gross profit


5,341



6,359



7,404



8,047



8,998



10,265



11,286



12,263Operating expenses(1):Sales and marketing


1,196



1,445



1,561



2,050



1,949



2,183



2,776



2,598Technology and product development


1,086



909



852



899



960



1,032



1,146



1,203General and administrative


1,194



1,323



1,582



1,855



1,478



1,751



2,147



2,427Total operating expenses


3,476



3,677



3,995



4,804



4,387



4,966



6,069



6,228Income from operations


1,865



2,682



3,409



3,243



4,611



5,299



5,217



6,035Interest income


59



87



137



204



255



465



1,028



1,137Other income, net






7











(2
)










Income before taxes


1,924



2,776



3,546



3,447



4,864



5,764



6,245



7,172Income tax expense (benefit)


61



77



97



(7,478
)


1,899



2,321



2,479



1,851Net income

$
1,863


$
2,699


$
3,449


$
10,925


$
2,965


$
3,443


$
3,766


$
5,321Net income per share:Basic

$
0.05


$
0.07


$
0.10


$
0.35


$
0.08


$
0.09


$
0.10


$
0.14Diluted

$
0.03


$
0.05


$
0.10


$
0.31


$
0.06


$
0.09


$
0.09


$
0.13     (1)
    
    Includes stock-based compensation as follows:  Quarter EndedMar. 31,


June 30,


Sept. 30,


Dec. 31,


Mar. 31,


June 30,


Sept. 30,


Dec. 31,2005


2005


2005


2005


2006


2006


2006


2006Cost of revenues

$
2


$
5


$
6


$
6


$
8


$
24


$
54


$
65Sales and marketing


31



36



39



40



51



87



301



247Technology and product development


268



35



26



21



23



32



64



76General and administrative


74



25



25



25



32



56



190



143Total

$
375


$
101


$
96


$
92


$
114


$
199


$
609


$
531   39




---



##### Table of Contents



Quarter EndedMar. 31,


June 30,


Sept. 30,


Dec. 31,


Mar. 31,


June 30,


Sept. 30,


Dec. 31,2005


2005


2005


2005


2006


2006


2006


2006Revenues


100.0
%


100.0
%


100.0
%


100.0
%


100.0
%


100.0
%


100.0
%


100.0
%Cost of revenues


14.0



12.4



11.6



11.8



12.0



11.7



11.2



11.4Gross profit


86.0



87.6



88.4



88.2



88.0



88.3



88.8



88.6Operating expenses:Sales and marketing


19.2



20.0



18.6



22.5



19.0



18.8



21.8



18.8Technology and product development


17.5



12.5



10.2



9.9



9.4



8.9



9.0



8.7General and administrative


19.2



18.2



18.9



20.3



14.5



15.1



16.9



17.5Total operating expenses


55.9



50.7



47.7



52.7



42.9



42.7



47.8



45.0Income from operations


30.1



36.9



40.7



35.5



45.1



45.6



41.1



43.6Interest income


0.9



1.2



1.6



2.2



2.5



4.0



8.1



8.2Other income, net


0.0



0.1



0.0



0.0



0.0



0.0



0.0



0.0Income before taxes


31.0



38.2



42.3



37.7



47.6



49.6



49.1



51.8Income tax expense (benefit)


1.0



1.1



1.2



(82.0
)


18.6



20.0



19.5



13.4Net income


30.0
%


37.1
%


41.1
%


119.7
%


29.0
%


29.6
%


29.6
%


38.4
%       Liquidity
    and Capital Resources
    Year Ended December 31,2004


2005


2006(In thousands)Cash provided by operating
    activities

$
6,921


$
14,490


$
23,205Cash (used in) investing activities


(6,415
)


(1,719
)


(665
)Cash provided by financing
    activities


18



296



44,485    40




---



##### Table of Contents



Operating
    Activities
      Investing
    Activities
        Financing
    Activities
      Off-Balance
    Sheet Arrangements
    Tabular
    Disclosure of Contractual Obligations and Known Future Cash
    Requirements
   41




---



##### Table of Contents



Payments Due by Period2007


2008


2009


2010


2011


Total(Dollars in thousands)Operating lease obligations

$
1,143


$
721


$
467


$
476


$
198


$
3,005   Advertising
    and Media Contracts
    Future
    Capital Requirements
    Recent
    Accounting Pronouncements
  Accounting for Uncertainty in Income Taxes
 42




---



##### Table of Contents



Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk.    Item 8.
    Financial
    Statements and Supplementary Data.  Form 10-K.
  Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure.    Item 9A.
    Controls
    and Procedures.  Evaluation of disclosure controls and
    procedures. Form 10-K.
  Changes in internal control over financial
    reporting.
  Rule 12b-2 Form 10-K Rule 12b-2, Form 10-K
  Item 9B.
    Other
    Information.  Rule 10b5-1 Trading Plans
   43




---



##### Table of Contents



2007 Bonus Plan.
  Option Grants to Named Executive Officers.
 PART III  Proxy
    Statement
  Item 10.
    Directors,
    Executive Officers and Corporate Governance.      
    Information regarding directors of the Company who are standing
    for reelection and any persons nominated to become directors of
    the Company is set forth under Nominees and Continuing
    Directors.
    Information regarding the Companys Audit Committee and
    designated audit committee financial experts is set
    forth under Corporate Governance  Board
    Committees  Audit Committee.
    Information on the Companys code of business conduct and
    ethics for directors, officers and employees, also known as the
    Code of Business Conduct and Ethics, is set forth
    under Corporate Governance  Code of Business
    Conduct and Ethics.
    Information regarding Section 16(a) beneficial ownership
    reporting compliance is set forth under Section 16(a)
    Beneficial Ownership Reporting Compliance.  Item 11.
    Executive
    Compensation.    
    Information regarding the Companys compensation of its
    named executive officers is set forth under Executive
    Compensation.
    Information regarding the Companys compensation of its
    directors is set forth under Executive
    Compensation  Director Compensation. 44




---



##### Table of Contents



Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters.    
    Information regarding security ownership of certain beneficial
    owners, directors and executive officers is set forth under
    Common Stock Ownership of Certain Beneficial Owners and
    Management.
    Information regarding the Companys equity compensation
    plan is set forth in the section entitled
    Proposal No. 3: Approval of the Material Terms
    of the 2006 Equity Incentive Plan for the Purposes of
    Section 162(m) of the Internal Revenue Code.  Equity
    Compensation Plan Information
    Number of SecuritiesNumber of





Available forSecurities to be





Issuance UnderIssued Upon


Weighted-Average


Equity CompensationExercise of


Exercise Price of


Plans (ExcludingOutstanding Options,


Outstanding Options,


Securities ReflectedPlan Name and Type

Warrants and Rights


Warrants and Rights


in the First Column)(In thousands)





(In thousands)Equity compensation plans
    approved by stockholders2001 Stock Option and Purchase Plan


2,837,756


$
1.54



2006 Equity Incentive Plan


900,012


$
13.95



6,151,508Total


3,737,768


$
4.53



6,151,508   Item 13.
    Certain
    Relationships and Related Transactions and Director
    Independence.    Item 14.
    Principal
    Accountant Fees and Services.   PART IV  Item 15.
    Exhibits
    and Financial Statement Schedules.      Regulation S-K)
  3
.1

First Amended and Restated
    Certificate of Incorporation (incorporated herein by reference
    to the registrants
    Form 10-Q
    filed on August 4, 2006)3
.2

Bylaws (incorporated herein by
    reference to the registrants
    Form 10-Q
    filed on August 4, 2006)4
.1

Specimen Common Stock Certificate
    (incorporated herein by reference to the registrants
    Form S-1/A
    filed on April 27, 2006) 45




---



##### Table of Contents



4
.2

Amended and Restated Investor
    Rights Agreement by and among LoopNet, Inc. and certain holders
    of preferred stock, dated as of November 30, 2001
    (incorporated herein by reference to the registrants
    Form S-1
    filed on March 1, 2006)10
.1+

LoopNet, Inc. 2001 Stock Option
    and Purchase Plan (incorporated herein by reference to the
    registrants
    Form S-1
    filed on March 16, 2006)10
.2+

Form of Option Agreement under
    2001 Stock Option and Purchase Plan (incorporated herein by
    reference to the registrants
    Form S-1
    filed on March 1, 2006)10
.3+

LoopNet, Inc. 2006 Equity
    Incentive Plan (incorporated herein by reference to the
    registrants
    Form S-1/A
    filed on June 6, 2006)10
.4+

Form of Option Agreement and Form
    of Restricted Stock Unit Agreement under LoopNet, Inc. Equity
    Incentive Plan (incorporated herein by reference to the
    registrants
    Form S-1/A
    filed on April 27, 2006)10
.5+

Form of Indemnification Agreement
    (incorporated herein by reference to the registrants
    Form S-1/A
    filed on April 27, 2006)10
.6

Lease, dated January 14,
    2005, between S&F Huntington Millennium LLC and LoopNet,
    Inc. (incorporated herein by reference to the registrants
    Form S-1
    filed on March 1, 2006)10
.7

Office Lease, dated
    January 8, 2003, between PWREF/MCC-China Basin L.L.C. and
    LoopNet, Inc. (incorporated herein by reference to the
    registrants
    Form S-1/A
    filed on April 3, 2006)10
.8

First Amendment to Office Lease,
    dated August 16, 2005 between Stockbridge/MCC-China Basin
    L.L.C. and LoopNet, Inc. (incorporated herein by reference to
    the registrants
    Form S-1/A
    filed on April 3, 2006)10
.9+

Director Compensation Policy
    (incorporated herein by reference to the registrants
    Form S-1/A
    filed on April 27, 2006)10
.10*+

2007 Bonus Plan23
.1*

Consent of Ernst & Young
    LLP, independent registered public accounting firm24
.1*

Power of Attorney (see signature
    page)31
.1*

Rule 13a-14(a)
    Certification (CEO)31
.2*

Rule 13a-14(a)
    Certification (CFO)32
.1*

Section 1350 Certification
    (CEO)32
.2*

Section 1350 Certification
    (CFO)     *
    
    Filed herewith.+
    
    Management contract or compensatory plan. 46




---



##### Table of Contents



SIGNATURES      By:
    /s/  Richard
    J. Boyle, Jr.  Richard J. Boyle, Jr.
 President, Chief Executive Officer,
 and Chairman of the Board of Directors
    By:
    /s/  Brent
    Stumme  Brent Stumme
 Chief Financial Officer and Senior
 Vice President, Finance and Administration
    POWER OF
    ATTORNEY
  attorneys-in-fact, Form 10-K, attorneys-in-fact,
    Signature

Title

Date/s/  Richard
    J.
    Boyle, Jr.Richard
    J. Boyle, Jr.

President, Chief Executive
    Officer, and Chairman of the Board of Directors (Principal
    Executive Officer)

March 19, 2007/s/  Brent
    StummeBrent
    Stumme

Chief Financial Officer and Senior
    Vice President, Finance and Administration (Principal Financial
    and Accounting Officer)

March 19, 2007/s/  Jeffrey
    D. BrodyJeffrey
    D. Brody

Director

March 19, 2007/s/  Noel
    J. FentonNoel
    J. Fenton

Director

March 19, 2007 47




---



##### Table of Contents



Signature

Title

Date/s/  William
    A.
    MillichapWilliam
    A. Millichap

Director

March 19, 2007/s/  Thomas
    E. UntermanThomas
    E. Unterman

Director

March 19, 2007/s/  Dennis
    ChookaszianDennis
    Chookaszian

Director

March 19, 2007/s/  Scott
    IngrahamScott
    Ingraham

Director

March 19, 2007/s/  William
    ByrnesWilliam
    Byrnes

Director

March 19, 2007  48




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
             
    49




---



##### Table of Contents



LOOPNET,
    INC.
  CONDENSED
    CONSOLIDATED BALANCE SHEETS
  December 31,


December 31,2005


2006(In thousands, except share data)ASSETSCurrent assets:Cash and cash equivalents

$
18,765


$
85,790Short-term investments


3,100



3,238Accounts receivable, net of
    allowance of $27 and $57, respectively


529



1,138Prepaid expenses and other current
    assets


325



1,518Deferred income taxes


824



402Total current assets


23,543



92,086Property and equipment, net


843



1,020Goodwill


2,417



2,417Intangibles, net


1,418



1,312Deferred income taxes


6,798



3,083Deposits and other noncurrent
    assets


158



287Total assets

$
35,177


$
100,205LIABILITIES AND
    STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
65


$
169Accrued compensation and benefits


1,284



2,200Accrued liabilities


599



864Deferred revenue


4,640



6,969Income taxes payable


16



Total current liabilities


6,604



10,202Commitments and contingenciesRedeemable convertible preferred
    stock, $.001 par value, 32,795,752 shares authorized:
    22,541,528 and 0 shares issued and outstanding at
    December 31, 2005 and December 31, 2006, respectively


39,962



Stockholders (deficit)
    equity:Common stock, $.001 par
    value, 125,000,000 shares authorized; 8,514,538 and
    37,897,114 shares issued and outstanding at
    December 31, 2005 and December 31, 2006, respectively


9



38Additional paid in capital


12,482



97,072Deferred stock-based compensation


(827
)


Stockholder notes receivable


(453
)


Other comprehensive (loss)


(29
)


(31
)Accumulated deficit


(22,571
)


(7,076
)Total stockholders (deficit)
    equity


(11,389
)


90,003Total liabilities and
    stockholders (deficit) equity

$
35,177


$
100,205    50




---



##### Table of Contents



LOOPNET,
    INC.
  CONDENSED
    CONSOLIDATED STATEMENTS OF INCOME
  Year Ended December 31,2004


2005


2006(In thousands, except per share data)Revenues

$
17,036


$
30,977


$
48,411Cost of revenue


2,562



3,825



5,599Gross margin


14,474



27,152



42,812Operating Expenses:Sales and marketing


3,193



6,252



9,506Technology and product development


2,686



3,746



4,341General and administrative


4,889



5,955



7,803Total operating expenses


10,768



15,953



21,650Income from
    operations


3,706



11,199



21,162Interest income (expense), net


98



487



2,885Other income, net


34



7



(2
)Income before tax


3,838



11,693



24,045Income tax expense (benefit)


118



(7,243
)


8,550Net Income

$
3,720


$
18,936


$
15,495Net income per shareBasic

$
0.06


$
0.58


$
0.42Diluted

$
0.04


$
0.54


$
0.40Number of shares used in per share
    calculations:Basic


3,767



7,259



36,767Diluted


5,757



35,092



38,686    51




---



##### Table of Contents



LOOPNET,
    INC.
  CONSOLIDATED
    STATEMENT OF STOCKHOLDERS EQUITY (DEFICIT)
  Accumulated


TotalAdditional


Deferred


Stockholders





Other


StockholdersCommon Stock


Paid-in


stock-based


Notes


Accumulated


Comprehensive


EquityShares


Amount


Capital


compensation


Receivable


Deficit


(Loss)


(Deficit)(In thousands)Balance at December 31, 2002


3,582


$
4


$
8,828






$
(15
)

$
(46,931
)

$



$
(38,114
)Exercise of stock options


54







5



















5Net income






















1,704







1,704Balance at December 31, 2003


3,636



4



8,833







(15
)


(45,227
)






(36,405
)Exercise of stock options


2,819



3



279



















282Issuance of Restricted Stock


742







74



















74Stockholders note receivable


















(337
)










(337
)Unrealized loss on Marketable
    Securities


























(6
)


(6
)Stock-based compensation on
    revalued stock options










1,673



















1,673Deferred stock-based compensation
    related to options and restricted stock granted to employees










515



(515
)














Amortization of deferred
    stock-based compensation, net of forfeitures for terminated
    employees














3















3Net income






















3,720







3,720Balance at December 31, 2004


7,197



7



11,374



(512
)


(352
)


(41,507
)


(6
)


(30,996
)Exercise of stock options


828



1



81



















82Issuance of Restricted Stock


490



1



48



















49Stockholders note receivable


















(86
)










(86
)Interest on stockholders note
    receivable


















(15
)










(15
)Unrealized loss on marketable
    securities


























(23
)


(23
)Stock-based compensation on
    revalued options










236



















236Deferred stock-based compensation
    related to options granted to employees










743



(743
)














Amortization of deferred
    stock-based compensation net of forfeitures for terminated
    employees














428















428Net income






















18,936







18,936Balance at December 31, 2005


8,515


$
9


$
12,482


$
(827
)

$
(453
)

$
(22,571
)

$
(29
)

$
(11,389
)Exercise of stock options


549



1



135



















136Exercise of warrants


1,362



1



2



















3Interest on stockholders note
    receivable


















(3
)










(3
)Collection of stockholders
    note receivable


















456











456Unrealized loss on marketable
    securities


























(2
)


(2
)Conversion of reedemable
    convertible preferrred stock


24,000



24



40,387



















40,411SFAS 123R adoption










(827
)


827















Stock-based compensation expense










1,453



















1,453Tax benefit from exercise of stock
    options










1,131



















1,131Net proceeds from issuance of
    common stock, net of transaction costs


3,471



3



42,309



















42,312Net income






















15,495







15,495Balance at December 31, 2006


37,897


$
38


$
97,072


$



$



$
(7,076
)

$
(31
)

$
90,003    52




---



##### Table of Contents



LOOPNET,
    INC.
  CONDENSED
    CONSOLIDATED STATEMENTS OF CASH FLOWS
  Year Ended December 31,2004


2005


2006(In thousands)Cash flows from operating
    activities:Net income

$
3,720


$
18,936


$
15,495Adjustments to reconcile net
    income to net cash provided by operating activities:Depreciation and amortization
    expense


278



505



611Stock-based compensation


1,676



664



1,453Net loss on disposal of assets


2







3Deferred income tax (benefit)






(7,622
)


4,137Changes in operating assets and
    liabilities:Accounts receivable


(132
)


(157
)


(608
)Prepaid expenses and other assets


(152
)


(184
)


(1,484
)Income taxes payable


(100
)


(72
)


(16
)Accounts payable


45



6



103Accrued expenses and other current
    liabilities


213



4



265Accrued compensation and benefits


305



301



917Deferred revenue


1,066



2,109



2,329Net cash provided by operating
    activities


6,921



14,490



23,205Cash flows from investing
    activities:Purchase of property and equipment


(500
)


(719
)


(665
)Purchase of short-term investments


(3,000
)






Net proceeds from the sale of
    business


35







Acquisitions, net of cash


(2,950
)


(1,000
)


Net cash used in investing
    activities


(6,415
)


(1,719
)


(665
)Cash flows from financing
    activities:Proceeds from sale of common
    stock, net of issuance costs paid










42,309Net proceeds from exercise of
    stock options


18



46



139Net proceeds from exercise of
    warrants






250



450Net proceeds from payment of notes
    receivable on options exercised and restricted stock purchased










456Tax benefit from exercise of stock
    options










1,131Net cash provided by financing
    activities


18



296



44,485Net increase in cash and cash
    equivalents


524



13,067



67,025Cash and cash equivalents at
    beginning of period


5,174



5,698



18,765Cash and cash equivalents at
    end of period

$
5,698


$
18,765


$
85,790Supplemental disclosures of cash
    flow information:Cash paid during the period for
    income taxes

$
299


$
449


$
4,115Cash paid during the period for
    interest

$



$



$
    53




---



##### Table of Contents



LOOPNET,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
  (1)  The
    Company and Summary of Significant Accounting Policies
  Organization
    and Basis of Presentation
        Stock
    Split
  three-to-two two-to-one. two-to-one. two-for-one
  Use of
    Estimates
      Cash
    and Cash Equivalents
    Short-term
    Investments
  Accounting for Certain Investments in Debt and
    Equity Securities.
 54




---



##### Table of Contents



LOOPNET,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Concentration
    of Risk
      Fair
    Value of Financial Instruments
    Accounts
    Receivable
    Property
    and Equipment
    Website
    Development Costs
  00-2, Accounting for Web Site Development Costs,
  Long-Lived
    Assets Including Goodwill and other Intangible
    Assets
   55




---



##### Table of Contents



LOOPNET,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Goodwill and
    Other Intangible Assets.
  Accounting for the Impairment of Long-Lived Assets and for
    Long-Lived Assets to Be Disposed.
    Estimated Useful LifeBroker Relationships


8.3 yearsAdvertising Relationships


1.5 yearsTechnology


3 yearsDomain name


Indefinite       Income
    Taxes
    Business
    Segment
    Revenue
    Recognition
  Revenue Recognition
 56




---



##### Table of Contents



LOOPNET,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Cost
    of Revenues
    Sales
    and Marketing
      Technology
    and Product Development
    General
    and Administrative
    Comprehensive
    Income
  available-for-sale
  Stock-Based
    Compensation
  Share-Based
    Payment Accounting for Stock-Based Compensation Accounting
    for Stock Issued to Employees
 57




---



##### Table of Contents



LOOPNET,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Accounting for Stock Issued to Employees, Accounting for Certain Transactions Involving
    Stock Compensation Accounting for Stock-Based Compensation, Accounting for Stock-Based
    Compensation
  Recent
    Accounting Pronouncements
  Accounting for Uncertainty in Income Taxes
  Earnings
    per Share
  No. 03-6, Participating Securities and the Two 
    Class Method under FASB Statement 128 No. 03-6 No. 03-6
  Earnings Per Share
   58




---



##### Table of Contents



LOOPNET,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year Ended December 31,2004


2005


2006Weighted-average common shares
    outstanding used to compute basic net income per share
    (two-class method)


3,767



7,259



8,028Weighted average shares
    outstanding used to compute basic net income per share after
    conversion of redeemable convertible preferred stock; one class
    of common shares was outstanding for the period from June 7 to
    December 31, 2006










36,767Weighted average common shares
    outstanding










23,913Add dilutive common equivalents:Stock options


1,988



2,094



2,562Warrants










259Unvested restricted stock(1)


2



933



568Redeemable convertible preferred
    stock






21,827



10,341Redeemable convertible preferred
    warrants






2,979



1,043Shares used to compute diluted net
    income per share


5,757



35,092



38,686     (1)
    
    Outstanding unvested common stock purchased by employees is
    subject to repurchase by the Company and therefore is not
    included in the calculation of the weighted-average shares
    outstanding for basic earnings per share.    Year Ended December 31,2004


2005


2006Stock Options






24



971Warrants


3,666







Redeemable convertible preferred
    stock


21,729







  59




---



##### Table of Contents



LOOPNET,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year Ended December 31,2004


2005


2006Calculation of basic net income
    per share:Net income(1)

$
3,720


$
18,936


$
6,665Assumed preferred stock dividends

$
2,159


$
2,159


$
978Net income, net of assumed stock
    dividends

$
1,561


$
16,777


$
5,687Percent of net income allocable to
    common shareholders(2)


15
%


25
%


26
%Net income allocable to common
    shareholders


234



4,194



1,479Weighted average common shares
    outstanding


3,767



7,259



8,028Basic net income per
    share  two-class method

$
0.06


$
0.58


$
0.18Net income for period during which
    single class of equity securities was outstanding(1)









$
8,830Weighted average common shares
    outstanding










36,767Basic earnings per share for
    period during which single class of equity securities were
    outstanding









$
0.24Basic earnings per
    share

$
0.06


$
0.58


$
0.42Calculation of diluted net
    income per share:Net Income

$
234


$
18,936


$
15,495Weighted average diluted shares
    outstanding


5,757



35,092



38,686Diluted net income per share

$
0.04


$
0.54


$
0.40     (1)
    
    Net income for the year ended December 31, 2006 was
    allocated between the periods which two classes of equity
    securities were outstanding and during which a single class of
    equity securities was outstanding based on the respective number
    of days.  The reedemable convertible preferred stock was converted to
    common stock on the effective date of the Companys initial
    public offering.  (2)
    
    Calculation of percent of net income allocable to common
    shareholders:  Year Ended December 31,2004


2005


2006Weighted average common shares
    outstanding


3,767



7,259



8,028Weighted average redeemable
    convertible preferred shares outstanding


21,729



21,827



22,896Weighted average common shares and
    preferred shares outstanding


25,496



29,086



30,924Percent of net income allocable to
    common shareholders


15
%


25
%


26
%   (2)  Acquisition
    of BizBuySell, Inc.
     60




---



##### Table of Contents



LOOPNET,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Customer relationships

$
610Technology


98Domain name


850Goodwill


2,417$
3,975             Year EndedDecember 31, 2004(Unaudited)Revenue

$
18,189Net income

$
4,249Net income per share 
    basic

$
0.09Net income per share 
    diluted

$
0.07  61




---



##### Table of Contents



LOOPNET,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  (3)  Property
    and Equipment, net
    As of December 31,2005


2006Computer equipment and purchased
    software

$
4,619


$
5,071Office equipment and furniture
    (includes leasehold improvements)


419



5615,038



5,632Less accumulated depreciation and
    amortization


(4,195
)


(4,612
)$
843


$
1,020   (4)  Intangible
    Assets, net
    As of December 31,2005


2006Cost:Customer relationships

$
610


$
610Technology


98



98Domain name


850



850Total cost


1,558



1,558Accumulated amortization:Customer relationships


(99
)


(172
)Technology


(41
)


(74
)Domain name






Total accumulated amortization


(140
)


(246
)Total

$
1,418


$
1,312   (5)  Income
    Taxes
    Year Ended December 31,2004


2005


2006Current:Federal

$
125


$
287


$
3,631State


(7
)


92



932Total

$
118


$
379


$
4,563Deferred:Federal

$



$
(6,207
)

$
3,259State






(1,415
)


728Total

$



$
(7,622
)

$
3,987Income tax expense (benefit)

$
118


$
(7,243
)

$
8,550  62




---



##### Table of Contents



LOOPNET,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year Ended December 31,2004


2005


2006Statutory federal tax rate


34.0
%


34.0
%


34.0
%State tax rate, net of federal
    benefit


0.0
%


(7.5
)%


4.6
%Change in valuation allowance


(34.0
)%


(88.4
)%


(4.9
)%Other adjustments


0.0
%


0.0
%


1.9
%Effective tax rate


0.0
%


(61.9
)%


35.6
%     As of December 31,2005


2006Deferred tax assets:Net operating loss carryforwards

$
14,830


$
10,945Property and equipment


52



8Tax credits


2,900



1,210Deferred income


1,847



726Valuation allowance


(12,007
)


(9,404
)Total deferred tax assets

$
7,622


$
3,485        63




---



##### Table of Contents



LOOPNET,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   (6)  Redeemable
    Convertible Preferred Stock
    Shares as ofDecember 31, 2005Series A convertible
    preferred stock


14,000,000Series B nonvoting
    convertible preferred stock


397,876Series C convertible
    preferred stock


8,143,650Series E nonvoting
    convertible preferred stock


2Series F nonvoting
    convertible preferred stock


22,541,528       Voting
      Dividends
      Liquidation
   64




---



##### Table of Contents



LOOPNET,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
         Conversion
        (7)  Stock
    Purchase Warrants
    (8)  Stock
    Option Plan
   65




---



##### Table of Contents



LOOPNET,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          Options Outstanding


Options ExercisableWeighted





WeightedAverage





AverageNumber of


Exercise


Number of


ExerciseOptions


Price


Options


PriceBalance at December 31, 2002


4,834,012


$
0.10



2,549,600


$
0.10Granted


938,218


$
0.10Exercised


(54,142
)

$
0.10Cancelled


(201,524
)

$
0.10Balance at December 31, 2003


5,516,564


$
0.10



3,765,292


$
0.10Granted


1,096,448


$
0.10Exercised


(2,818,714
)

$
0.10Cancelled


(909,834
)

$
0.10Balance at December 31, 2004


2,884,464


$
0.10



1,675,286


$
0.10Granted


921,684


$
1.31Exercised


(827,702
)

$
0.10Cancelled


(294,668
)

$
0.17Balance at December 31, 2005


2,683,778


$
0.51



1,214,352


$
0.11Granted


1,803,976


$
9.40Exercised


(548,841
)

$
0.25Cancelled


(201,145
)

$
6.14Balance at December 31, 2006


3,737,768


$
4.53



1,349,454


$
0.76  66




---



##### Table of Contents



LOOPNET,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Options Outstanding


Options ExercisableWeighted











WeightedAverage


Weighted





Weighted


AverageNumber


Remaining


Average





Average


RemainingOptions


Contractual


Exercise


Number


Exercise


ContractualExercise Prices

Outstanding


Life (Years)


Price


Exercisable


Price


Life (Years)$ 0.10


1,475,882



6.31


$
0.10



1,059,876


$
0.10$ 0.23 - $ 4.08


1,361,874



8.85



3.11



269,739



2.45$10.65 - $12.00


311,000



6.44



11.92



4,811



12.00$12.10 - $12.98


113,012



6.70



12.36



4,528



12.34$13.00 - $14.86


158,000



6.63



14.03



10,500



14.21$15.25 - $15.58


180,000



6.46



15.26







$15.83 - $17.51


28,200



6.66



16.49







$18.24 - $19.09


109,800



6.50



18.43







3,737,768



7.29


$
4.53



1,349,454


$
0.76



6.42        67




---



##### Table of Contents



LOOPNET,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Year Ended December 31,2004


2005Net income, as reported

$
3,720


$
18,936Add: Stock-based employee
    compensation expense included in net income available to
    stockholders, net of related tax effects


1,676



664Deduct: Total stock-based employee
    compensation expense determined under fair value based method
    for all awards, net of related tax effects


(1,730
)


(650
)Pro forma net income

$
3,666


$
18,950Earnings per shareBasic  as reported

$
0.06


$
0.58Diluted  as reported

$
0.04


$
0.54Basic  pro forma

$
0.06


$
0.58Diluted  pro forma

$
0.04


$
0.54       Year Ended December 31,2004


2005


2006Risk-free interest rate


3.43
%


4.05
%


4.76
%Expected volatility


0
%


0
%


53
%Expected life


4 years



4 years



5.3 yearsDividend yield


0
%


0
%


0
%      68




---



##### Table of Contents



LOOPNET,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Year Ended December 31,2004


2005


2006Cost of revenues

$
1


$
18


$
151Sales and marketing


251



146



686Technology and product development


236



350



195General and administrative


1,188



150



421Total

$
1,676


$
664


$
1,453   Notes Receivable
    from Stockholders
    (9)  Commitments
    and Contingencies
  Leases
    2007

$
1,1432008


7212009


4672010


4762011


198$
3,005     Litigation
    (10)  401(k)
    Plan
   69




---



##### Table of Contents



EXHIBIT INDEX
  3
.1

First Amended and Restated
    Certificate of Incorporation (incorporated herein by reference
    to the registrants
    Form 10-Q
    filed on August 4, 2006)3
.2

Bylaws (incorporated herein by
    reference to the registrants
    Form 10-Q
    filed on August 4, 2006)4
.1

Specimen Common Stock Certificate
    (incorporated herein by reference to the registrants
    Form S-1/A
    filed on April 27, 2006)4
.2

Amended and Restated Investor
    Rights Agreement by and among LoopNet, Inc. and certain holders
    of preferred stock, dated as of November 30, 2001
    (incorporated herein by reference to the registrants
    Form S-1
    filed on March 1, 2006)10
.1+

LoopNet, Inc. 2001 Stock Option
    and Purchase Plan (incorporated herein by reference to the
    registrants
    Form S-1
    filed on March 16, 2006)10
.2+

Form of Option Agreement under
    2001 Stock Option and Purchase Plan (incorporated herein by
    reference to the registrants
    Form S-1
    filed on March 1, 2006)10
.3+

LoopNet, Inc. 2006 Equity
    Incentive Plan (incorporated herein by reference to the
    registrants
    Form S-1/A
    filed on June 6, 2006)10
.4+

Form of Option Agreement and Form
    of Restricted Stock Unit Agreement under LoopNet, Inc. Equity
    Incentive Plan (incorporated herein by reference to the
    registrants
    Form S-1/A
    filed on April 27, 2006)10
.5+

Form of Indemnification Agreement
    (incorporated herein by reference to the registrants
    Form S-1/A
    filed on April 27, 2006)10
.6

Lease, dated January 14,
    2005, between S&F Huntington Millennium LLC and LoopNet,
    Inc. (incorporated herein by reference to the registrants
    Form S-1
    filed on March 1, 2006)10
.7

Office Lease, dated
    January 8, 2003, between PWREF/MCC-China Basin L.L.C. and
    LoopNet, Inc. (incorporated herein by reference to the
    registrants
    Form S-1/A
    filed on April 3, 2006)10
.8

First Amendment to Office Lease,
    dated August 16, 2005 between Stockbridge/MCC-China Basin
    L.L.C. and LoopNet, Inc. (incorporated herein by reference to
    the registrants
    Form S-1/A
    filed on April 3, 2006)10
.9+

Director Compensation Policy
    (incorporated herein by reference to the registrants
    Form S-1/A
    filed on April 27, 2006)10
.10*+

2007 Bonus Plan23
.1*

Consent of Ernst & Young
    LLP, independent registered public accounting firm24
.1*

Power of Attorney  (see signature
    page)31
.1*

Rule 13a-14(a)
    Certification (CEO)31
.2*

Rule 13a-14(a)
    Certification (CFO)32
.1*

Section 1350 Certification
    (CEO)32
.2*

Section 1350 Certification
    (CFO)     *
    
    Filed herewith.+
    
    Management contract or compensatory plan.