Local (LOCMQ) 10-Q/A 2008 Q2 Quarterly report (amended)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period endedJune 30, 2008

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE EXCHANGE ACT

For the transition period from                     to                     

Commission File Number: 000-50989

LOCAL.COM CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	33-0849123
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

One Technology Drive, Building G
Irvine, CA 92618
(Address of principal executive offices)(Zip Code)

(949) 784-0800
(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 of 1934 during the preceding 12 months (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 þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer o 
Non-accelerated filer þ
(Do not check if a smaller reporting company) Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Number of shares outstanding at July 31, 2008:	Common: 14,309,243
	Preferred: 0

This form 10-Q/A (Amendment No. 1) amends the Form 10-Q filed on August 6, 2008 by Local.com Corporation with respect to the quarter ended June 30, 2008. This amendment is being filed in order to correct Exhibit 32.1 which inadvertently identified the period ended date of the Form 10-Q. Other than the change to the Exhibit, no other portion of the Form 10-Q has been amended.

LOCAL.COM CORPORATION
TABLE OF CONTENTS

		Page
	PART I — FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of June 30, 2008 (Unaudited) and December 31, 2007		3
	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2008 and 2007 (Unaudited)		4
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2008 and 2007 (Unaudited)		5
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2008 and 2007 (Unaudited)		6
	Notes to Condensed Consolidated Financial Statements (Unaudited)		7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		19
Item 4T.	Controls and Procedures		19
	PART II — OTHER INFORMATION
Item 1.	Legal Proceedings		21
Item 1A.	Risk Factors		21
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		21
Item 3.	Defaults Upon Senior Securities		21
Item 4.	Submission of Matters to a Vote of Security Holders		21
Item 5.	Other Information		21
Item 6.	Exhibits		22
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1

2

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

LOCAL.COM CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)

	June 30,			December 31,
	2008			2007
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	13,737		$	14,258
Restricted cash		30			30
Marketable securities		—			1,999
Accounts receivable, net of allowances of $25 and $15, respectively		5,138			3,595
Prepaid expenses and other current assets		161			292
Total current assets		19,066			20,174
Property and equipment, net		1,100			1,473
Intangible assets, net		2,558			3,156
Goodwill		13,231			13,233
Long-term restricted cash		66			66
Deposits		12			12
Total assets	$	36,033		$	38,114
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	4,729		$	4,029
Accrued compensation		723			456
Deferred rent		261			316
Other accrued liabilities		496			194
Deferred revenue		88			177
Total liabilities, all current		6,297			5,172
Commitments and contingencies
Stockholders’ equity:
Convertible preferred stock, $0.00001 par value; 10,000,000 shares authorized; none issued and outstanding for all periods presented		—			—
Common stock, $0.00001 par value; 30,000,000 shares authorized; 14,309,243 and 14,204,110 issued and outstanding, respectively		—			—
Additional paid-in capital		83,652			82,176
Accumulated comprehensive loss		—			(1	)
Accumulated deficit		(53,916	)		(49,233	)
Stockholders’ equity		29,736			32,942
Total liabilities and stockholders’ equity	$	36,033		$	38,114

See accompanying notes to the condensed consolidated financial statements.

3

LOCAL.COM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
(Unaudited)

	Three months ended						Six months ended
	June 30,						June 30,
	2008			2007			2008			2007
Revenue	$	9,646		$	5,098		$	18,488		$	9,979
Operating expenses:
Search serving		1,320			961			2,773			1,767
Sales and marketing		7,900			4,701			15,543			9,400
General and administrative		1,400			1,178			2,842			2,510
Research and development		755			551			1,632			1,251
Amortization of intangibles		280			244			598			481
Total operating expenses		11,655			7,635			23,388			15,409
Operating loss		(2,009	)		(2,537	)		(4,900	)		(5,430	)
Interest and other income (expense), net		84			(614	)		218			(806	)
Loss before income taxes		(1,925	)		(3,151	)		(4,682	)		(6,236	)
Provision for income taxes		—			—			1			1
Net loss	$	(1,925	)	$	(3,151	)	$	(4,683	)	$	(6,237	)
Per share data:
Basic net loss per share	$	(0.14	)	$	(0.34	)	$	(0.33	)	$	(0.67	)
Diluted net loss per share	$	(0.14	)	$	(0.34	)	$	(0.33	)	$	(0.67	)
Basic weighted average shares outstanding		14,242,162			9,325,817			14,223,136			9,312,125
Diluted weighted average shares outstanding		14,242,162			9,325,817			14,223,136			9,312,125

See accompanying notes to the condensed consolidated financial statements.

4

LOCAL.COM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
(Unaudited)

	Three months ended						Six months ended
	June 30,						June 30,
	2008			2007			2008			2007
Net loss	$	(1,925	)	$	(3,151	)	$	(4,683	)	$	(6,237	)
Other comprehensive income (loss):
Net unrealized gain (loss) on marketable securities		—			5			1			11
Total comprehensive loss	$	(1,925	)	$	(3,146	)	$	(4,682	)	$	(6,226	)
Supplemental comprehensive income (loss) information:
Unrealized holding gains (losses) arising during period	$	—		$	5		$	1		$	11
Reclassification adjustment for losses included in net loss		—			—			—			—
Net unrealized gain (loss) on marketable securities	$	—		$	5		$	1		$	11

See accompanying notes to the condensed consolidated financial statements.

5

LOCAL.COM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)

	Six months ended
	June 30,
	2008			2007
Cash flows from operating activities:
Net loss	$	(4,683	)	$	(6,237	)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization		1,036			1,025
Provision for doubtful accounts		10			9
Non-cash stock based compensation		1,223			836
Non-cash interest expense		—			612
Changes in operating assets and liabilities:
Accounts receivable		(1,553	)		(1,051	)
Prepaid expenses and other		164			(369	)
Accounts payable and accrued liabilities		1,214			979
Deferred revenue		(89	)		(28	)
Net cash used in operating activities		(2,678	)		(4,224	)
Cash flows from investing activities:
Capital expenditures		(98	)		(315	)
Proceeds from sales of marketable securities		2,000			—
Decrease in restricted cash		—			41
Change in acquisition,price		2			—
Net cash provided by (used in) investing activities		1,904			(274	)
Cash flows from financing activities:
Proceeds from issuance of senior secured convertible notes		—			8,000
Proceeds from issuance of common stock from exercise of options		158			14
Proceeds from issuance of common stock from exercise of warrants		112			7
Proceeds from swing-sale profits		3			5
Payment of notes payable		—			(63	)
Payment of financing related costs		(20	)		(3	)
Net cash provided by financing activities		253			7,960
Net (decrease) increase in cash and cash equivalents		(521	)		3,462
Cash and cash equivalents, beginning of period		14,258			3,264
Cash and cash equivalents, end of period	$	13,737		$	6,726
Supplemental cash flow information:
Interest paid	$	—		$	134
Income taxes paid	$	1		$	1
Non-cash investing and financing transactions:
Debt discount related to issuance of senior secured convertible notes				$	6,221
Warrants issued for financing costs				$	458
Common stock issued for asset purchase				$	431

See accompanying notes to the condensed consolidated financial statements.

6

LOCAL.COM CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. Basis of presentation

The unaudited interim condensed consolidated financial statements as of June 30, 2008 and for the three and six months ended June 30, 2008 and 2007, included herein, have been prepared by the Company, without audit, pursuant to rules and regulations of the Securities and Exchange Commission, and, in the opinion of management, reflect all adjustments (consisting of only normal recurring adjustments), which are necessary for a fair presentation. The consolidated results of operations for the three and six months ended June 30, 2008 are not necessarily indicative of the results for the full year. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2007 included in the Company’s Form 10-K filed with the Securities and Exchange Commission.

2. Significant accounting policies

Principles of consolidation

From January 1, 2007 to June 30, 2007, the Company’s financial statements include only the accounts of Local.com Corporation because the Company did not have any subsidiaries during that period. Subsequent to July 1, 2007, the Company’s financial statements include the accounts of Local.com Corporation and its wholly-owned subsidiary Local.com PG Acquisition Corporation. All intercompany balances and transactions were eliminated.

Intangible assets

Developed technology arising from acquisitions is recorded at cost and amortized on a straight-line basis over five years. Accumulated amortization at June 30, 2008 was $1,488,667. Accumulated amortization at December 31, 2007 was $1,265,367.

Non-compete agreements arising from acquisitions are recorded at cost and amortized on a straight-line basis over three years. Accumulated amortization at June 30, 2008 was $267,185. Accumulated amortization at December 31, 2007 was $248,335.

Purchased technology arising from acquisitions is recorded at cost and amortized on a straight-line basis over three years. Accumulated amortization at June 30, 2008 was $1,239,238. Accumulated amortization at December 31, 2007 was $1,056,794.

Patents are recorded at cost and amortized on a straight-line basis over three years. Accumulated amortization at June 30, 2008 was $150,781. Accumulated amortization at December 31, 2007 was $78,981.

Customer-related intangibles arising from acquisitions are recorded at cost and amortized on a straight-line basis over five years. Accumulated amortization at June 30, 2008 was $194,129. Accumulated amortization at December 31, 2007 was $92,129.

Goodwill

Goodwill representing the excess of the purchase price over the fair value of the net tangible and intangible assets arising from acquisitions and purchased domain name are recorded at cost. Intangible assets, such as goodwill and domain name, which are determined to have an indefinite life, are not amortized in accordance with SFAS No. 142,Goodwill and Other Intangible Assets. The Company performs annual impairment reviews during the fourth fiscal quarter of each year, or earlier, if indicators of potential impairment exist. The Company performed its annual impairment analysis as of December 31, 2007 and determined that no impairment existed. Future impairment reviews may result in charges against earnings to write-down the value of non-amortized assets.

7

Web site development costs and computer software developed for internal use

Statement of Position 98-1,Accounting for the Costs of Computer Software Developed or Obtained for Internal Use(SOP 98-1), requires that costs incurred in the preliminary project and post-implementation stages of an internal use software project be expensed as incurred and that certain costs incurred in the application development stage of a project be capitalized. Emerging Issues Task Force Issue No. 00-02Accounting for Web Site Development Costs(EITF 00-02), requires that costs incurred in the preliminary project and operating stage of web site development be expensed as incurred and that certain costs incurred in the development stage of web site development be capitalized and amortized over its useful life. During the three and six months ended June 30, 2008, the Company did not capitalize any expenses related to the web site development. Amortization of capitalized web site costs was $70,000 and $140,000 for the three and six months ended June 30, 2008, respectively. During the three and six months ended June 30, 2007, the Company capitalized an additional $154,000 and $221,000, respectively, related to the web site development with a useful life of three years. Amortization of capitalized web site costs was $42,000 and $85,000 for the three and six months ended June 30, 2007, respectively. Capitalized web site costs are included in property and equipment, net.

Stock-based compensation

The Company adopted Statement of Financial Accounting Standards (SFAS) No. 123R,Share-Based Paymenton January 1, 2006, the beginning of its first quarter of fiscal 2006, using the modified-prospective transition method.

The fair values of these options were estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions:

	Three months ended						Six months ended
	June 30,						June 30,
	2008			2007			2008			2007
Risk-free interest rate		3.49	%		4.70	%		3.47	%		4.78	%
Expected lives (in years)		7.0			7.0			7.0			7.0
Expected dividend yield	None			None			None			None
Expected volatility		100.00	%		100.00	%		100.00	%		100.00	%

Total stock-based compensation expense recognized for the three and six months ended June 30, 2008 and 2007 is as follows (in thousands, except per share amount):

	Three months ended				Six months ended
	June 30,				June 30,
	2008		2007		2008		2007
Sales and marketing	$	234	$	93	$	474	$	213
General and administrative		286		200		626		492
Research and development		52		53		123		132
Total stock-based compensation expense	$	572	$	346	$	1,223	$	837
Basic and diluted net compensation expense per share	$	0.04	$	0.04	$	0.09	$	0.09

Net loss per share

SFAS No. 128,Earnings per Share, establishes standards for computing and presenting earnings per share. Basic net loss per share is calculated using the weighted average shares of common stock outstanding during the periods. Diluted net loss 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 senior secured convertible notes, and the treasury stock method for options and warrants.

For the three and six months ended June 30, 2008, potentially dilutive securities, which consist of options to purchase 2,830,057 shares of common stock at prices ranging from $2.00 to $16.59 per share and warrants to purchase 3,434,282 shares of common stock at prices ranging from $3.00 to $25.53 per share were not included in the computation of diluted net income per share because such inclusion would be antidilutive.

8

For the three and six months ended June 30, 2007, potentially dilutive securities, which consist of options to purchase 1,944,495 shares of common stock at prices ranging from $0.40 to $16.59 per share, warrants to purchase 2,774,013 shares of common stock at prices ranging from $3.00 to $25.53 per share and senior secured convertible notes that could convert into 1,990,050 shares of common stock were not included in the computation of diluted net income per share because such inclusion would be antidilutive.

The following table sets forth the computation of basic and diluted net loss per share for the periods indicated (in thousands, except per share amounts):

	Three months ended						Six months ended
	June 30,						June 30,
	2008			2007			2008			2007
Numerator:
Net loss	$	(1,925	)	$	(3,151	)	$	(4,683	)	$	(6,237	)
Denominator:
Denominator for basic calculation weighted average shares		14,242			9,326			14,223			9,312
Dilutive common stock equivalents:
Options		—			—			—			—
Warrants		—			—			—			—
Denominator for diluted calculation weighted average shares		14,242			9,326			14,223			9,312
Net loss per share:
Basic net loss per share	$	(0.14	)	$	(0.34	)	$	(0.33	)	$	(0.67	)
Diluted net loss per share	$	(0.14	)	$	(0.34	)	$	(0.33	)	$	(0.67	)

New accounting pronouncements

In May 2008, the Financial Accounting Standards Board (FASB) issued SFAS No. 162,The Hierarchy of Generally Accepted Accounting Principles, which identifies the sources of accounting principles and framework for the selecting the principles to be used in the preparation of financial statements in conformity with accounting generally accepted accounting principles (GAAP) in the United States. SFAS No. 162 categorizes in descending order the sources of accounting principles that are generally accepted. The provisions of SFAS No. 162 are effective 60 days following the Securities and Exchange Commission’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411,The Meaning ofPresent Fairly in Conformity With Generally Accepted Accounting Principles. Any effects of applying the provisions of the Statement shall be reported as a change in accounting principle in accordance with SFAS No. 154,Accounting Changes and Error Corrections. The Company is currently analyzing the effect of the adoption of SFAS No. 162.

3. Composition of certain balance sheet and statement of operations captions

Property and equipment consisted of the following (in thousands):

	June 30,			December 31,
	2008			2007
Furniture and fixtures	$	203		$	203
Office equipment		119			119
Computer equipment		1,964			1,889
Computer software		1,831			1,841
Leasehold improvements		583			583
		4,700			4,635
Less accumulated depreciation and amortization		(3,600	)		(3,162	)
Property and equipment, net	$	1,100		$	1,473

9

Intangible assets consisted of the following (in thousands):

	June 30,			December 31,
	2008			2007
Developed technology	$	2,233		$	2,233
Non-compete agreements		274			274
Purchased technology		1,239			1,239
Customer-related		1,020			1,020
Patents		431			431
Domain name		701			701
		5,898			5,898
Less accumulated amortization		(3,340	)		(2,742	)
Intangible assets, net	$	2,558		$	3,156

Interest and other income (expense) consisted of the following (in thousands):

	Three months ended					Six months ended
	June 30,					June 30,
	2008		2007			2008		2007
Interest income	$	84	$	96		$	218	$	167
Interest expense		—		(258	)		—		(361	)
Interest expense — non-cash		—		(452	)		—		(612	)
Interest and other income (expense), net	$	84	$	(614	)	$	218	$	(806	)

4. Operating segment information

SFAS No. 131,Disclosures about Segments of an Enterprise and Related Information(SFAS No. 131), requires that public business enterprises report certain information about operating segments. The Company has one reporting segment: paid-search. The following table presents summary operating geographic information as required by SFAS No. 131 (in thousands):

	Three months ended				Six months ended
	June 30,				June 30,
	2008		2007		2008		2007
Revenue by geographic region:
United States	$	9,471	$	4,980	$	18,175	$	9,854
Europe		175		118		313		125
Total revenue	$	9,646	$	5,098	$	18,488	$	9,979

5. Stock option plans

1999 Plan

In March 1999, the Company adopted the 1999 Equity Incentive Plan (1999 Plan). The 1999 Plan provides for the grant of non-qualified and incentive stock options to employees, directors and consultants of options to purchase shares of the Company’s stock. Options are granted at exercise prices equal to the fair market value of the common stock on the date of grant. Prior to 2006, 25% of the options were available for exercise at the end of nine months, while the remainder of the grant were exercisable ratably over the next 27 month period, provided the optionee remained in service to the Company. For options granted in 2006, 33.33% of the options are available for exercise at the end of one year, while the remainder of the grant is exercisable ratably over the next 8 quarters, provided the optionee remains in service to the Company. The options generally expire ten years from the date of grant. The Company has reserved 500,000 shares for issuance under the 1999 Plan, of which 141,760 were outstanding and 496 were available for future grant at June 30, 2008.

10

2000 Plan

In March 2000, the Company adopted the 2000 Equity Incentive Plan (2000 Plan). The 2000 Plan provides for the grant of non-qualified and incentive stock options to employees, directors and consultants of options to purchase shares of the Company’s stock. Options are granted at exercise prices equal to the fair market value of the common stock on the date of grant. Prior to 2006, 25% of the options were available for exercise at the end of nine months, while the remainder of the grant were exercisable ratably over the next 27 month period, provided the optionee remained in service to the Company. For options granted in 2006, 33.33% of the options are available for exercise at the end of one year, while the remainder of the grant is exercisable ratably over the next 8 quarters, provided the optionee remains in service to the Company. The options generally expire ten years from the date of grant. The Company has reserved 500,000 shares for issuance under the 2000 Plan, of which 329,681 were outstanding and 334 were available for future grant at June 30, 2008.

2004 Plan

In January 2004, the Company adopted the 2004 Equity Incentive Plan (2004 Plan). In August 2004, the Company amended the 2004 Plan and in September 2004, the stockholders of the Company approved the 2004 Plan, as amended. The 2004 Plan provides for the grant of non-qualified and incentive stock options to employees, directors and consultants of options to purchase shares of the Company’s stock. Options are granted at exercise prices equal to the fair market value of the common stock on the date of grant. Prior to 2006, 25% of the options were available for exercise at the end of nine months, while the remainder of the grant were exercisable ratably over the next 27 month period, provided the optionee remained in service to the Company. For options granted in 2006, 33.33% of the options are available for exercise at the end of one year, while the remainder of the grant is exercisable ratably over the next 8 quarters, provided the optionee remains in service to the Company. The options generally expire ten years from the date of grant. The Company has reserved 600,000 shares for issuance under the 2004 Plan, of which 476,345 were outstanding and 4,191 were available for future grant at June 30, 2008.

2005 Plan

In August 2005, the Company adopted and the stockholders of the Company approved the 2005 Equity Incentive Plan (2005 Plan). The 2005 Plan provides for the grant of non-qualified and incentive stock options to employees, directors and consultants of options to purchase shares of the Company’s stock. Options are granted at exercise prices equal to the fair market value of the common stock on the date of grant. Prior to 2006, 25% of the options were available for exercise at the end of nine months, while the remainder of the grant were exercisable ratably over the next 27 month period, provided the optionee remained in service to the Company. For options granted in 2006 and thereafter, 33.33% of the options are available for exercise at the end of one year, while the remainder of the grant is exercisable ratably over the next 8 quarters, provided the optionee remains in service to the Company. The options generally expire ten years from the date of grant. The Company has reserved 1,000,000 shares for issuance under the 2005 Plan, of which 911,160 were outstanding and 4,921 were available for future grant at June 30, 2008.

2007 Plan

In August 2007, the Company adopted and the stockholders of the Company approved the 2007 Equity Incentive Plan (2007 Plan). The 2007 Plan provides for the grant of non-qualified and incentive stock options to employees, directors and consultants of options to purchase shares of the Company’s stock. Options are granted at exercise prices equal to the fair market value of the common stock on the date of grant. 33.33% of the options are available for exercise at the end of one year, while the remainder of the grant is exercisable ratably over the next 8 quarters, provided the optionee remains in service to the Company. The options generally expire ten years from the date of grant. The Company has reserved 1,000,000 shares for issuance under the 2007 Plan, of which 968,111 were outstanding and 31,889 were available for future grant at June 30, 2008.

2008 Plan

In June 2008, the Company adopted and the stockholders of the Company approved the 2008 Equity Incentive Plan (2008 Plan). The 2008 Plan provides for the grant of non-qualified and incentive stock options to employees, directors and consultants of options to purchase shares of the Company’s stock. Options are granted at exercise prices equal to

11

the fair market value of the common stock on the date of grant. 33.33% of the options are available for exercise at the end of one year, while the remainder of the grant is exercisable ratably over the next 8 quarters, provided the optionee remains in service to the Company. The options generally expire ten years from the date of grant. The Company has reserved 1,000,000 shares for issuance under the 2008 Plan, of which 3,000 were outstanding and 997,000 were available for future grant at June 30, 2008.

Stock option activity under the plans during the six months ended June 30, 2008 is as follows:

						Aggregate
				Weighted Average		Intrinsic Value
	Shares			Exercise Price		(in thousands)
Outstanding at December 31, 2007		2,703,850		$	5.04
Granted		341,556			4.65
Exercised		(69,762	)		2.26
Cancelled		(145,587	)		3.65
Outstanding at June 30, 2008		2,830,057		$	5.13	$	461
Exercisable at June 30, 2008		1,433,585		$	5.51	$	438

The weighted-average fair value at grant date for the options granted during the six months ended June 30, 2008 and 2007 was $3.89 and $3.52 per option, respectively.

The aggregate intrinsic value of all options exercised during the six months ended June 30, 2008 and 2007 was $156,000 and $10,000, respectively.

Stock option summary information for the plans at June 30, 2008 is as follows:

	Options Outstanding
			Weighted			Options Exercisable
			Average	Weighted				Weighted
			Remaining	Average				Average
			Contractual	Exercise				Exercise
Range of Exercise Prices	Shares		Life	Price		Shares		Price
$1.01 - $2.00		140,000	4.5 years	$	2.00		140,000	$	2.00
$2.01 - $3.00		94,792	5.6 years	$	2.25		94,792	$	2.25
$3.01 - $4.00		711,912	6.5 years	$	3.70		510,768	$	3.72
$4.01 - $5.00		1,210,554	9.3 years	$	4.67		124,945	$	4.54
$5.01 - $6.00		133,459	7.7 years	$	5.68		103,677	$	5.69
$6.01 - $7.00		117,578	7.4 years	$	6.39		104,422	$	6.38
$7.01 - $8.00		190,112	7.2 years	$	7.51		173,331	$	7.54
$8.01 - $10.00		120,000	7.8 years	$	8.76		70,000	$	9.17
$15.01 - $16.59		111,650	6.1 years	$	15.61		111,650	$	15.61
		2,830,057	7.8 years	$	5.13		1,433,585	$	5.51

6. Warrants

Warrant activity during the six months ended June 30, 2008 is as follows:

				Weighted Average
	Shares			Exercise Price
Outstanding at December 31, 2007		3,470,278		$	7.34
Exercised		(35,371	)		3.18
Expired		(625	)		4.00
Outstanding and exercisable at June 30, 2008		3,434,282		$	7.38

12

Warrant summary information at June 30, 2008 is as follows:

	Warrants Outstanding and Exercisable
			Weighted
			Average		Weighted
			Remaining		Average
			Contractual		Exercise
Range of Exercise Prices	Shares		Life		Price
$0.00 — $3.99		144,062		0.3	$	3.60
$4.00 — $4.99		867,662		3.6	$	4.36
$5.00 — $5.99		867,662		3.6	$	5.17
$7.00 — $7.99		537,373		4.1	$	7.89
$9.00 — $9.99		537,373		4.1	$	9.26
$10.00 — $19.99		315,750		1.3	$	10.00
$20.00 — $25.53		164,400		1.5	$	25.53
		3,434,282		3.3	$	7.38

13

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

This Quarterly Report onForm 10-Q or certain information included or incorporated by reference in this report, contains or may contain forward-looking statements that involve risks, uncertainties and assumptions. All statements, other than statements of historical fact, are statements that could be deemed “forward- looking statements” within the meaning of the federal securities laws. In addition, important factors to consider in evaluating such forward-looking statements include changes or developments in social, economic, market, legal or regulatory circumstances, changes in our business or growth strategy or an inability to execute our strategy due to changes in our industry or the economy generally, the emergence of new or growing competitors, the actions or omissions of third parties, including customers, competitors and governmental authorities, and various other factors, including those described or referred to in Item 1A of this Quarterly Report. Should any one or more of these risks or uncertainties materialize, or the underlying estimates or assumptions prove incorrect, our actual results could differ materially from those expressed in the forward-looking statements and there can be no assurance that the forward-looking statements contained in this report will in fact occur.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the attached condensed consolidated financial statements and related notes thereto, and with the audited consolidated financial statements and related notes thereto as of December 31, 2007 and for the year ended December 31, 2007 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 10, 2008.

Overview

We provide paid-search services that enable businesses to reach consumers through targeted online advertising. Our services enable businesses to advertise their products and services by listing them in our search results. We supply these sponsored listings on our web site, Local.com, and through our Local Connect private label network in response to targeted keyword searches performed by Internet users.

We generate revenue each time an Internet user initiates a search on our Local.com web site or on our Local Connect partner’s web site and clicks-through on a sponsored listing. We also generate revenue each time we display a banner advertisement on our Local.com web site and through the fulfillment of subscription advertisement listings.

Stock-based compensation

We adopted Statement of Financial Accounting Standards (SFAS) No. 123R,Share-Based Payment,on January 1, 2006, the beginning of our first quarter of fiscal 2006, using the modified-prospective transition method.

Total stock-based compensation expense recognized for the three and six months ended June 30, 2008 and 2007 is as follows (in thousands, except per share amount):

	Three months ended				Six months ended
	June 30,				June 30,
	2008		2007		2008		2007
Sales and marketing	$	234	$	93	$	474	$	213
General and administrative		286		200		626		492
Research and development		52		53		123		132
Total stock-based compensation expense	$	572	$	346	$	1,223	$	837
Basic and diluted net compensation expense per share	$	0.04	$	0.04	$	0.09	$	0.09

14

Results of Operations

The following table sets forth our historical operating results as a percentage of revenue for the periods indicated and is derived from our unaudited financial statements, which, in the opinion of our management, reflect all adjustments that are of a normal recurring nature, necessary to present such information fairly:

	Three months ended						Six months ended
	June 30,						June 30,
	2008			2007			2008			2007
Revenue		100.0	%		100.0	%		100.0	%		100.0	%
Operating expenses:
Search serving		13.7			18.9			15.0			17.7
Sales and marketing		81.9			92.2			84.1			94.2
General and administrative		14.5			23.1			15.4			25.2
Research and development		7.8			10.8			8.8			12.5
Amortization of intangibles		2.9			4.8			3.2			4.8
Total operating expenses		120.8			149.8			126.5			154.4
Operating loss		(20.8	)		(49.8	)		(26.5	)		(54.4	)
Interest and other income (expense), net		0.9			(12.0	)		1.2			(8.1	)
Loss before income taxes		(19.9	)		(61.8	)		(25.3	)		(62.5	)
Provision for income taxes		—			—			0.0			0.0
Net loss		(19.9	)%		(61.8	)%		(25.3	)%		(62.5	)%

Revenue

Revenue by business categories was as follows (dollars in thousands):

	Three months ended June 30,										Percent			Six months ended June 30,										Percent
	2008		(*)			2007		(*)			change			2008		(*)			2007		(*)			change
Local domestic	$	9,150		94.9	%	$	4,011		78.7	%		128.1	%	$	17,188		93.0	%	$	8,096		81.1	%		112.3	%
Local international		175		1.8	%		118		2.3	%		48.3	%		313		1.7	%		125		1.3	%		150.4	%
Total local		9,325		96.7	%		4,129		81.0	%		125.8	%		17,501		94.7	%		8,221		82.4	%		112.9	%
National		321		3.3	%		969		19.0	%		(66.9	)%		987		5.3	%		1,758		17.6	%		(43.9	)%
Total revenue	$	9,646		100.0	%	$	5,098		100.0	%		89.2	%	$	18,488		100.0	%	$	9,979		100.0	%		85.3	%

(*) — Percent of total revenue.

Domestic local search revenue for the three months ended June 30, 2008 increased $5.1 million, or 128.1%, compared to the same period in 2007. Domestic local search revenue for the six months ended June 30, 2008 increased $9.1 million, or 112.3%, compared to the same period in 2007. The increases in revenue were primarily due to increased monetization as our revenue per thousand visitors (RKV) increased to $254 for the three months ended June 30, 2008 from $158 for the three months ended June 30, 2007 and increased to $241 for the six months ended June 30, 2008 from $144. The increase in RKV was a result of additional ad units per page, optimization of search results to improve page yields, greater revenue share received from our advertising partners and improved search engine marketing.

15

International local search revenue for the three months ended June 30, 2008 increased $57,000, or 48.3%, compared to the same period in 2007. International local search revenue for the six months ended June 30, 2008 increased $188,000, or 150.4%, compared to the same period in 2007. The increases in revenue were primarily due to an increase in revenue-generating click-throughs from an increase in traffic to our uk.local.com web site.

National revenue for the three months ended June 30, 2008 decreased $648,000, or 66.9%, compared to the same period in 2007. National revenue for the six months ended June 30, 2008 decreased $771,000, or 43.9%, compared to the same period in 2007. The decrease in revenue was primarily due to a decrease in revenue-generating click-throughs as we have transitioned away from national search to focus our business efforts on local search.

Total revenue for the three months ended June 30, 2008 increased $4.5 million, or 89.2%, compared to the same period in 2007. Total revenue for the six months ended June 30, 2008 increased $8.5 million, or 85.3%, compared to the same period in 2007.

The following table identified our major customers that represented greater than 10% of our total revenue in any of the period presented:

	Percentage of total revenue
	Three months ended						Six months ended
	June 30,						June 30,
Customer	2008			2007			2008			2007
Yahoo! Inc.		44.0	%		48.9	%		45.7	%		48.4	%
Idearc Media Corp.		20.4	%		12.0	%		17.6	%		13.7	%

Operating expenses:

Operating expenses were as follows (dollars in thousands):

	Three months ended June 30,										Percent			Six months ended June 30,										Percent
	2008		(*)			2007		(*)			change			2008		(*)			2007		(*)			change
Search serving	$	1,320		13.7	%	$	961		18.9	%		37.4	%	$	2,773		15.0	%	$	1,767		17.7	%		56.9	%
Sales and marketing		7,900		81.9	%		4,701		92.2	%		68.0	%		15,543		84.1	%		9,400		94.2	%		65.4	%
General and administrative		1,400		14.5	%		1,178		23.1	%		18.8	%		2,842		15.4	%		2,510		25.2	%		13.2	%
Research and development		755		7.8	%		551		10.8	%		37.0	%		1,632		8.8	%		1,251		12.5	%		30.5	%
Amortization of intangibles		280		2.9	%		244		4.8	%		14.8	%		598		3.2	%		481		4.8	%		24.3	%
Total operating expenses	$	11,655		120.8	%	$	7,635		149.8	%		52.6	%	$	23,388		126.5	%	$	15,409		154.4	%		51.8	%

(*) — Percent of total revenue.

Search serving

Search serving expenses for the three months ended June 30, 2008 increased $359,000, or 37.4%, compared to the same period in 2007. Search serving expenses for the six months ended June 30, 2008 increased $1.0 million, or 56.9%, compared to the same period in 2007. The increases were primarily due to an increase in payments to our private label partners associated with the business we acquired from PremierGuide, Inc. We expect search serving expense to increase slightly as a result of an increase in business with our private label partners.

Search serving expenses were 13.7% and 18.9% of total revenue for the three months ended June 30, 2008 and 2007, respectively. Search serving expenses were 15.0% and 17.7% of total revenue for the six months ended June 30, 2008 and 2007, respectively.

Sales and marketing

Sales and marketing expenses for the three months ended June 30, 2008 increased $3.2 million, or 68.0%, compared to the same period in 2007. Sales and marketing expenses for the six months ended June 30, 2008 increased $6.1 million, or 65.4%, compared to the same period in 2007. The increases were primarily due to an increase in advertising and traffic acquisition costs (TAC) for our Local.com web site. We expect sales and marketing expenses to increase as we increase our TAC and marketing efforts for our Local.com web site.

16

Sales and marketing expenses were 81.9% and 68.0% of total revenue for the three months ended June 30, 2008 and 2007, respectively. Sales and marketing expenses were 84.1% and 94.2% of total revenue for the six months ended June 30, 2008 and 2007, respectively.

General and administrative

General and administrative expenses for the three months ended June 30, 2008 increased $222,000, or 18.8%, compared to the same period in 2007. General and administrative expenses for the six months ended June 30, 2008 increased $322,000, or 13.2%, compared to the same period in 2007. The increase was primarily due to an increase payroll and non-cash stock based compensation expense. We expect general and administrative expenses to decrease slightly due to lower non-cash stock based compensation expense.

General and administrative expenses were 14.5% and 18.8% of total revenue for the three months ended June 30, 2008 and 2007, respectively. General and administrative expenses were 15.4% and 25.2% of total revenue for the six months ended June 30, 2008 and 2007, respectively.

Research and development

Research and development expenses for the three months ended June 30, 2008 increased $204,000, or 37.0%, compared to the same period in 2007. Research and development expenses for the six months ended June 30, 2008 increased $381,000, or 30.5%, compared to the same period in 2007. The increases were primarily due to a decrease in capitalized research and development expenses and an increase in amortized web site development expense. We expect research and development expenses to continue at the same level. We did not capitalize any research and development expenses during the three and six months ended June 30, 2008 and we amortized $70,000 and $140,000 during the three and six months ended June 30, 2008, respectively. During the three and six months ended June 30, 2007, we capitalized an additional $154,000 and $221,000, respectively, for web site development and we amortized $42,000 and $85,000 during the three and six months ended June 30, 2007, respectively.

Research and development expenses were 7.8% and 10.8% of total revenue for the three months ended June 30, 2008 and 2007, respectively. Research and development expenses were 8.8% and 12.5% of total revenue for the six months ended June 30, 2008 and 2007, respectively.

Amortization of intangibles

Amortization of intangibles expense was $280,000 and $244,000 for the three months ended June 30, 2008 and 2007, respectively. Amortization of intangibles expense was $598,000 and $481,000 for the six months ended June 30, 2008 and 2007, respectively. This includes the amortization of developed technology and non-compete agreements associated with the Inspire acquisition, the amortization of purchased technology associated with the Atlocal asset purchase and the amortization of non-compete agreement. Amortization of intangibles also includes the amortization of customer-related intangibles and non-compete agreement associated with the PremierGuide acquisition for the three and six months ended June 30, 2008.

Interest and other income (expense)

Interest and other income (expense) consisted of the following (in thousands):

	Three months ended					Six months ended
	June 30,					June 30,
	2008		2007			2008		2007
Interest income	$	84	$	96		$	218	$	167
Interest expense		—		(258	)		—		(361	)
Interest expense — non-cash		—		(452	)		—		(612	)
Interest and other income (expense), net	$	84	$	(614	)	$	218	$	(806	)

17

Interest and other income (expense) was $84,000 and $(614,000) for the three months ended June 30, 2008 and 2007, respectively, representing an increase of $698,000. Interest and other income (expense) was $218,000 and $(806,000) for the six months ended June 30, 2008 and 2007, respectively, representing an increase of $1.0 million. The increases were due to higher interest income as a result of more cash to invest and the elimination of interest expense related to the senior secured convertible notes.

Provision for income taxes

There was no provision for income taxes during the three months ended June 30, 2008 or 2007. Provision for income taxes was $1,000 for the six months ended June 31, 2008 and 2007 respectively. This amount represents the minimum amounts required for state income taxes.

Liquidity and Capital Resources

Liquidity and capital resources highlights (in thousands):

	June 30,		December 31,
	2008		2007
Cash and cash equivalents	$	13,737	$	14,258
Marketable securities		—		1,999
Total cash, cash equivalents and marketable securities	$	13,737	$	16,257
Working capital	$	12,769	$	15,002

Cash flow highlights (in thousands):

	Six months ended June 30,
	2008			2007
Net cash used in operating activities	$	(2,678	)	$	(4,224	)
Net cash provided by (used in) investing activities	$	1,904		$	(274	)
Net cash provided by financing activities	$	253		$	7,960

We have funded our business, to date, primarily from issuances of equity and debt securities. Cash, cash equivalents and marketable securities were $13.7 million as of June 30, 2008 and $16.3 million as of December 31, 2007. We had working capital of $12.8 million as of June 30, 2008 and $15.0 million as of December 31, 2007.

Net cash used in operations was $2.7 million and $4.2 million for the six months ended June 30, 2008 and 2007, respectively. The decrease in cash used in operations was due to a lower operating loss and an increase in accounts payable partially offset by an increase in accounts receivable as a result of higher revenue.

Net cash provided by (used in) investing activities was $1.9 million and $(274,000) for the six months ended June 30, 2008 and 2007, respectively. Investing activity for the six months ended June 30, 2008 consisted of proceeds from the sale of marketing securities of $2.0 million and capital expenditure of $98,000. Investing activity for the six months ended June 30, 2007 included capital expenditure of $315,000 and a decrease in restricted cash of $41,000.

Net cash provided by financing activities was $253,000 and $8.0 million for the six months ended June 30, 2008 and 2007, respectively. During the six months ended June 30, 2008, we raised gross proceeds of $158,000 from the exercise of stock options, $112,000 from the exercise of warrants and $3,000 from swing-sale profits.

Management believes, based upon projected operating needs, that our working capital is sufficient to fund our operations for at least the next 12 months.

18

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our investors.

New Accounting Pronouncements

In May 2008, the Financial Accounting Standards Board (FASB) issued SFAS No. 162,The Hierarchy of Generally Accepted Accounting Principles, which identifies the sources of accounting principles and framework for the selecting the principles to be used in the preparation of financial statements in conformity with accounting generally accepted accounting principles (GAAP) in the United States. SFAS No. 162 categorizes in descending order the sources of accounting principles that are generally accepted. The provisions of SFAS No. 162 are effective 60 days following the Securities and Exchange Commission’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411,The Meaning ofPresent Fairly in Conformity With Generally Accepted Accounting Principles. Any effects of applying the provisions of the Statement shall be reported as a change in accounting principle in accordance with SFAS No. 154,Accounting Changes and Error Corrections. We are currently analyzing the effect of the adoption of SFAS No. 162.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

As of June 30, 2008, we have no exposure to market risk relating to interest rate changes or foreign currency exchange rates, commodity prices, equity prices, or other changes that affect market risk sensitive instruments.

Item 4T. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and that our management was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed by, or under the supervision of, our principal executive and principal financial officer and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of our internal control over financial reporting as of June 30, 2008. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) inInternal Control-Integrated Framework. Based upon its assessment, management concluded that, as of June 30, 2008, our internal control over financial reporting was effective.

19

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended) during the quarter ended June 30, 2008 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

20

PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

None

Item 1A. Risk Factors.

Information on risk factors can be found in “Part I, ITEM 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2007. There were no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2007.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None

Item 3. Defaults upon Senior Securities.

None

Item 4. Submission of Matters to a Vote of Security Holders.

On June 3, 2008, we held our annual meeting of stockholders. Our stockholders voted as follows:

Election of Directors

	FOR		AGAINST		ABSTAIN
Norman K. Farra Jr.		10,944,011		0		358,322
Philip K. Fricke		10,942,134		0		360,199

Messrs. Farra and Fricke were re-elected.

Ratification of the appointment of Haskell & White LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2008

FOR	AGAINST		ABSTAIN
11,085,272		207,805		9,256

The appointed was ratified.

Approval of the 2008 Equity Incentive Plan

FOR		AGAINST		ABSTAIN		NON-VOTES
	1,522,564		405,981		31,649		9,342,139

The 2008 Equity Incentive Plan was approved.

Item 5. Other Information.

None

21

Item 6. Exhibits.

Exhibit
Number		Description
	31.1*	Certification of Principal Executive Officer Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	31.2*	Certification of Principal Financial Officer Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	32.1*	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

* Filed herewith.

22

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	LOCAL.COM CORPORATION
August 14, 2008	/s/ Heath B. Clarke
Date	Heath B. Clarke
	Chief Executive Officer (principal executive officer) and Chairman
	/s/ Douglas S. Norman
	Douglas S. Norman
	Chief Financial Officer (principal financial and accounting officer) and Secretary

23

EXHIBITS FILED WITH THIS REPORT

Exhibit
Number		Description
	31.1*	Certification of Principal Executive Officer Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	31.2*	Certification of Principal Financial Officer Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	32.1*	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

* Filed herewith.

24