x

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

For the Quarterly Period Ended March 31, 2003

OR

o

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

For the Transition Period from ________ to __________.

Commission File Number: 000-26357

LOOKSMART, LTD.

(Exact Name of Registrant as Specified in its Charter)

Delaware

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

Yes   x

No   o

Page

PART I   FINANCIAL INFORMATION

ITEM 1:

Condensed Consolidated Financial Statements (unaudited)

3

Condensed Consolidated Balance Sheets as of March 31, 2003 and December 31, 2002

3

Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2003 and 2002

4

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2003 and 2002

6

Notes to Condensed Consolidated Financial Statements

7

ITEM 2:

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

14

Factors Affecting Operating Results

24

ITEM 3:

Quantitative and Qualitative Disclosures About Market Risk

32

ITEM 4:

Controls and Procedures

33

PART II   OTHER INFORMATION

ITEM 1:

Legal Proceedings

33

ITEM 2:

Changes in Securities and Use of Proceeds

34

ITEM 6:

Exhibits and Reports on Form 8-K

34

ITEM 7:

Signature

34

CERTIFICATIONS

35

EXHIBIT INDEX

37

March 31,
2003

December 31,
2002

ASSETS

Current assets:

Cash and cash equivalents

$

54,524

$

47,696

Short-term investments

162

3,568

Trade accounts receivable, net

15,834

15,852

Due from related party

1,894

1,438

Prepaid expenses

1,837

2,048

Other current assets

739

428

Total current assets

74,990

71,030

Property and equipment, net

9,707

9,404

Security deposits and other assets

4,760

5,086

Intangible assets, net

6,957

6,182

Goodwill

8,852

8,852

Total assets

$

105,266

$

100,554

LIABILITIES & STOCKHOLDERS’ EQUITY

Current liabilities:

Long term debt, current portion

$

1,305

$

1,188

Trade accounts payable

3,509

3,333

Other accrued liabilities

20,063

18,429

Deferred revenue

6,835

7,798

Total current liabilities

31,712

30,748

Long term debt

1,042

983

Other long term liabilities

859

921

Total liabilities

33,613

32,652

Commitments and contingencies (Note 5)

Stockholders’ equity:

Common stock, $.001 par value; Authorized: 200,000 at March 31, 2003 and December 31, 2002; Issued and Outstanding: 102,079, and 101,421 at March 31, 2003 and December 31, 2002

101

100

Additional paid-in capital

251,721

249,244

Other equity

849

718

Accumulated deficit

(181,018

)

(182,160

)

Total stockholders’ equity

71,653

67,902

Total liabilities and stockholders’ equity

$

105,266

$

100,554

Three Months Ended
March 31,

2003

2002

Revenues:

Listings

$

29,434

$

16,341

Licensing

3,969

3,709

Total revenues

33,403

20,050

Cost of revenues

16,667

5,119

Gross profit

16,736

14,931

Operating expenses:

Sales and marketing

5,337

7,182

Product development

7,182

7,017

General and administrative

3,054

2,696

Total operating expenses

15,573

16,895

Income (loss) from operations

1,163

(1,964

)

Non-operating income (expense):

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

148

(1,337

)

Share of joint venture loss

(256

)

(1,077

)

Income (loss) from continuing operations before income taxes and extraordinary gain

1,055

(4,378

)

Income tax expense

(116

)

(14

)

Income (loss) from continuing operations before extraordinary gain

939

(4,392

)

Loss from discontinued operations

—  

(972

)

Income (loss) before extraordinary gain

939

(5,364

)

Extraordinary gain from the purchase of BTLS joint venture entities, net of tax

202

—  

Net income (loss)

1,141

(5,364

)

Other comprehensive income (loss):

Change in unrealized gain on securities during the period

293

1

Change in translation adjustment

68

201

Comprehensive income (loss)

$

1,502

$

(5,162

)

Three Months Ended
March 31,

2003

2002

Net income (loss) per share:

Basic net income (loss) per share:

Income (loss) from continuing operations

$

0.01

$

(0.05

)

Loss from discontinued operations

—  

(0.01

)

Extraordinary gain from the purchase of BTLS joint venture entities, net of tax

0.00

—  

Net income (loss)

$

0.01

$

(0.06

)

Diluted net income (loss) per share:

Income (loss) from continuing operations

$

0.01

$

(0.05

)

Loss from discontinued operations

—  

(0.01

)

Extraordinary gain from the purchase of BTLS Joint Venture entities, net of tax

0.00

—  

Net income (loss)

$

0.01

$

(0.06

)

Weighted average shares outstanding used in per share calculation—basic

100,374

93,408

Weighted average shares outstanding used in per share calculation—diluted

109,314

93,408

Three Months Ended
March 31,

2003

2002

Cash flows from operating activities:

Net income (loss)

$

1,141

$

(5,364

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Share of joint venture loss

261

1,077

Depreciation and amortization

1,872

1,820

Stock based compensation

969

2,900

(Gain) loss from sale of assets and other non-cash charges

(1

)

215

Loss from discontinued operations

—  

972

Extraordinary gain from the purchase of BTLS joint venture entities

(202

)

—  

Changes in operating assets and liabilities, net of effects of acquisitions and disposals:

Trade accounts receivable

18

951

Prepaid expenses

211

247

Other assets

(158

)

(445

)

Trade accounts payable

176

(1,055

)

Other accrued liabilities

1,657

1,496

Deferred revenue

(963

)

(1,414

)

&n