x

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

o

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

LOOKSMART, LTD.

(Exact Name of Registrant as Specified in its Charter)

Delaware

13-3904355

(State or other jurisdiction of
Incorporation or organization)

(I.R.S. Employer
Identification No.)

625 Second Street
San Francisco, California 94107

(Address of Principal Executive Offices and Zip Code)

(415) 348-7000

(Registrant’s Telephone Number, Including Area Code)

Yes

x

No

o

Page

PART I

FINANCIAL INFORMATION

ITEM 1:

Condensed Consolidated Financial Statements (unaudited)

 3

Condensed Consolidated Balance Sheets as of December 31, 2001 and September 30, 2002

 3

Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2001 and 2002

 4

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2001 and 2002

 5

Notes to Condensed Consolidated Financial Statements

 6

ITEM 2:

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

14

Factors Affecting Operating Results

 23

ITEM 3:

Quantitative and Qualitative Disclosures About Market Risk

32

PART II

OTHER INFORMATION

ITEM 1:

Legal Proceedings

 32

ITEM 4:

Controls and Procedures

 32

ITEM 6:

Exhibits and Reports on Form 8-K

 33

ITEM 7:

Signature

34

December 31,
2001

September 30,
2002

ASSETS

Current assets:

Cash and cash equivalents

$

29,766

$

50,487

Restricted cash

3,728

1,750

Short-term investments

14,346

1,201

Trade accounts receivable, net

9,294

9,995

Accounts receivable from related parties

906

138

Prepaid expenses

2,144

2,595

Other current assets

617

1,043

Total current assets

60,801

67,209

Property and equipment, net

10,272

9,451

Goodwill and intangible assets, net

9,969

15,460

Security deposits

2,878

2,642

Other long-term assets

2,182

2,417

Total assets

$

86,102

$

97,179

LIABILITIES & STOCKHOLDERS’ EQUITY

Current liabilities:

Trade accounts payable

$

2,323

$

3,038

Other accrued liabilities

14,647

15,614

Deferred revenue

9,152

8,038

Current portion of long-term debt

—  

39,280

Total current liabilities

26,122

65,970

Long-term debt

35,777

992

Other liabilities

559

859

Total liabilities

62,458

67,821

Stockholders’ equity:

Capital stock $.001 par value; authorized: 200,000 at December 31, 2001 and September 30, 2002; issued and outstanding: 93,004 and 98,054 at December 31, 2001 and September 30, 2002, respectively

93

98

Additional paid-in capital

234,841

245,190

Other equity (deficit)

(1,198

)

502

Accumulated deficit

(210,092

)

(216,432

)

Total stockholders’ equity

23,644

29,358

Total liabilities and stockholders’ equity

$

86,102

$

97,179

Three Months Ended
September 30,

Nine Months Ended
September 30,

2001

2002

2001

2002

Revenues:

Listings

$

9,140

$

18,747

$

23,651

$

47,403

Advertising

4,501

1,384

19,846

5,665

Licensing

3,421

3,635

11,470

11,135

Ecommerce

499

—  

8,995

573

Total revenues

17,561

23,766

63,962

64,776

Cost of revenues:

Listings

2,321

8,406

5,538

18,655

Advertising

1,250

1,527

3,934

4,250

Ecommerce

221

—  

5,559

64

Total cost of revenues

3,792

9,933

15,031

22,969

Gross profit

13,769

13,833

48,931

41,807

Operating expenses:

Sales and marketing (includes deferred stock and variable option stockcompensation of $338 and $162 in the three months ended September 30, 2001 and 2002, respectively, and $1,362 and $792 in the nine months ended September 30, 2001 and 2002, respectively)

7,723

4,364

34,504

15,800

Product development (includes deferred stock and variable option stockcompensation of $317 and $184 in the three months ended September 30, 2001 and 2002, respectively, and $903 and $855 in the nine months ended September 30, 2001 and 2002, respectively)

8,081

5,108

24,283

17,288

General and administrative (includes deferred stock and variable optionstock compensation of $112 and $(32) in the three months ended September 30, 2001 and 2002, respectively, and $363 and $123 in the nine months ended September 30, 2001 and 2002, respectively)

2,825

2,794

8,831

7,784

Amortization of goodwill

524

—  

3,725

—  

Asset impairment and restructuring charges

—  

—  

11,791

—  

Total operating expenses

19,153

12,266

83,134

40,872

Income (loss) from operations

(5,384

)

1,567

(34,203

)

935

Non-operating income (expenses):

Interest and other non-operating income (expense), net

(2,418

)

(1,161

)

(5,742

)

(3,774

)

Share of joint venture loss

(2,237

)

(874

)

(7,805

)

(2,803

)

Loss from continuing operations before income taxes

(10,039

)

(468

)

(47,750

)

(5,642

)

Income tax and minority interest

21

1

(55

)

(23

)

Loss from continuing operations

(10,018

)

(467

)

(47,805

)

(5,665

)

Loss from discontinued operations

(163

)

—  

(678

)

(972

)

Net loss

$

(10,181

)

$

(467

)

$

(48,483

)

$

(6,637

)

Other comprehensive loss:

Change in foreign currency translation adjustment during the period

54

28

(164

)

426

Change in unrealized gains/(losses) during the period

3

—  

336

(1

)

Comprehensive loss

$

(10,124

)

$

(439

)

$

(48,311

)

$

(6,212

)

Basic and diluted net loss per share:

Loss from continuing operations

(0.11

)

(0.00

)

(0.52

)

(0.06

)

Loss from discontinued operations

(0.00

)