UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2012

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE EXCHANGE ACT OF 1934

For the transition period from             to             

Commission File Number: 001-34197

LOCAL 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 Number)

7555 Irvine Center Drive

Irvine, CA 92618

(Address of principal executive offices, including 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  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

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	¨	Accelerated filer	x
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

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

As of October 31, 2012, there were 22,118,217 shares of the registrant’s common stock, $0.00001 par value, outstanding.

LOCAL CORPORATION

Table of Contents

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets As of September 30, 2012 and December 31, 2011		3
	Condensed Consolidated Statements of Operations For the three and nine months ended September 30, 2012 and 2011		4
	Condensed Consolidated Statements of Cash Flows For the nine months ended September 30, 2012 and 2011		5
	Notes to Condensed Consolidated Financial Statements		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		29
Item 4.	Controls and Procedures		29
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings		29
Item 1A.	Risk Factors		30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		30
Item 3.	Defaults Upon Senior Securities		30
Item 4.	Mine Safety Disclosures		30
Item 5.	Other Information		31
Item 6.	Exhibits		32
	Signatures		35
	Index to Exhibits		36

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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

LOCAL CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except par value)

	September 30,			December 31,
	2012			2011
ASSETS
Current assets:
Cash	$	3,706		$	10,394
Restricted cash		42			10
Accounts receivable, net of allowances of $553 and $550, respectively		13,954			13,456
Notes receivable - current portion		392			392
Prepaid expenses and other current assets		518			732
Assets held for sale		2,517			2,187
Total current assets		21,129			27,171
Property and equipment, net		7,116			8,018
Goodwill		25,870			31,370
Intangible assets, net		4,426			8,833
Long-term portion of note receivable		183			350
Deposits		60			69
Total assets	$	58,784		$	75,811
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	12,156		$	12,193
Accrued compensation		968			2,152
Deferred rent		485			551
Warrant liability		34			207
Other accrued liabilities		1,421			2,422
Revolving line of credit		7,627			8,000
Deferred revenue		229			281
Liabilities held for sale		49			32
Total current liabilities		22,969			25,838
Deferred income taxes		265			265
Total liabilities		23,234			26,103
Commitments, contingencies and subsequent events
Stockholders’ equity (deficit):
Convertible preferred stock, $0.00001 par value; 10,000 shares authorized; none issued and outstanding for all periods presented		—			—
Common stock, $0.00001 par value; 65,000 shares authorized; 22,095 and 22,082 issued and outstanding, respectively		—			—
Additional paid-in capital		121,261			119,068
Accumulated deficit		(85,711	)		(69,360	)
Stockholders’ equity		35,550			49,708
Total liabilities and stockholders’ equity	$	58,784		$	75,811

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

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LOCAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Revenue	$	24,771		$	20,688		$	76,875		$	52,960
Operating Expenses:
Cost of revenues		18,463			12,487			55,798			34,273
Sales and marketing		4,152			5,905			14,443			13,340
General and administrative		2,522			2,975			7,706			8,882
Research and development		1,227			1,511			3,684			4,396
Amortization of intangibles		1,865			1,255			3,608			3,585
Impairment of goodwill and intangible assets		—			—			6,451			—
Total operating expenses		28,229			24,133			91,690			64,476
Operating income (loss)		(3,458	)		(3,445	)		(14,815	)		(11,516	)
Interest and other income (expense), net		(131	)		(227	)		(325	)		(312	)
Change in fair value of warrant liability		65			513			173			2,483
Income (loss) from continuing operations before income taxes		(3,524	)		(3,159	)		(14,967	)		(9,345	)
Provision for income taxes		22			47			121			107
Net income (loss) from continuing operations		(3,546	)		(3,206	)		(15,088	)		(9,452	)
Income (loss) from discontinued operations (net of taxes)		(256	)		(825	)		(1,263	)		(1,301	)
Net income (loss)	$	(3,802	)	$	(4,031	)	$	(16,351	)	$	(10,753	)
Per share data:
Basic net income (loss) per share from continuing operations	$	(0.16	)	$	(0.15	)	$	(0.68	)	$	(0.45	)
Basic net income (loss) per share from discontinued operations	$	(0.01	)	$	(0.04	)	$	(0.06	)	$	(0.06	)
Basic net income (loss) per share	$	(0.17	)	$	(0.18	)	$	(0.74	)	$	(0.51	)
Diluted net income (loss) per share from continuing operations	$	(0.16	)	$	(0.15	)	$	(0.68	)	$	(0.45	)
Diluted net income (loss) per share from discontinued operations	$	(0.01	)	$	(0.04	)	$	(0.06	)	$	(0.06	)
Diluted net income (loss) per share	$	(0.17	)	$	(0.18	)	$	(0.74	)	$	(0.51	)
Basic weighted average shares outstanding		22,092			21,940			22,087			21,151
Diluted weighted average shares outstanding		22,092			21,940			22,087			21,151

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

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LOCAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

	Nine Months Ended September 30,
	2012			2011
Cash flows from operating activities:
Net income (loss)	$	(16,351	)	$	(10,753	)
Adjustments to reconcile net income (loss) to cash (used in) provided by operating activities:
Depreciation and amortization		6,581			5,981
Provision for doubtful accounts		138			25
Stock-based compensation expense		2,176			2,948
Change in fair value of warrant liability		(173	)		(2,483	)
Impairment of goodwill and intangible assets		6,451			—
Changes in operating assets and liabilities:
Accounts receivable		(636	)		(871	)
Note receivable		167			200
Prepaid expenses and other		223			821
Accounts payable and accrued liabilities		(2,248	)		789
Deferred revenue		(75	)		1,152
Net cash (used in) provided by operating activities		(3,747	)		(2,191	)
Cash flows from investing activities:
Capital expenditures		(2,553	)		(3,144	)
Increase in restricted cash		(32	)		—
Issuance of notes receivable		—			(1,085	)
Proceeds from notes receivable		—			1,085
Acquisitions, net of cash acquired		—			(15,969	)
Purchases of intangible assets		—			(762	)
Net cash used in investing activities		(2,585	)		(19,875	)
Cash flows from financing activities:
Proceeds from the exercise of options		22			170
Proceeds from the public offering of common stock		—			18,227
Payment of revolving credit facility		(1,373	)		(7,000	)
Proceeds from revolving credit facility		1,000			8,000
Payment of financing related costs		(5	)		(291	)
Net cash (used in) provided by financing activities		(356	)		19,106
Net increase (decrease) in cash		(6,688	)		(2,960	)
Cash, beginning of the period		10,394			13,079
Cash, end of the period	$	3,706		$	10,119
Supplemental cash flow information:
Interest paid	$	320		$	136
Income taxes paid	$	12		$	11

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

5

LOCAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. The Company and Summary of Significant Accounting Policies

Nature of operations

We are a local media company that specializes in connecting local businesses with online consumers. We reach consumers on our proprietary sites, as well as third-party sites (collectively, “Consumer Properties”), which includes our Owned & Operated web sites such as Local.com and Krillion.com (collectively, “O&O”), as well as our network of over 1,000 third-party U.S. regional media websites (collectively, “Network”). We provide a variety of digital media services to small and medium sized businesses (“SMBs”) to enable these customers to reach consumers both on our Consumer Properties, as well as on the major search engines (collectively, “Business Solutions”) and we also enable third parties to distribute their advertiser listings on our Consumer Properties, for which we generate ad revenues. We generate revenue from performance ad units such as daily deals, pay-per-click, pay-per-call and lead generation, subscription ad units, and Cost per Thousand Impressions (“CPM”) ad units, among others.

Our Consumer Properties serve over 30 million consumers each month. We use patented and proprietary search technologies and systems to provide users of our O&O websites and our Network with relevant search results for local businesses, products and services, incorporating daily deals, event information, ratings and reviews, driving directions and more. By distributing this information across our Consumer Properties, we are able to reach users that our direct advertisers and advertising partners desire to reach.

Our Business Solutions business serves over 7,000 SMB’s with a variety of digital media products. The products are sold primarily via telesales. Our sales efforts focus principally around our Launch by Local product suite, which offers a variety of digital media features including web hosting, search engine optimization services, display ads, mobile ads, and social media presence management. Over 6,000 of our direct SMB customers use a legacy web hosting and/or listing solution and approximately 900 of our direct SMB customers are enrolled in our new Launch by Local product. An average Launch by Local subscription generates approximately the same monthly revenue as six legacy customers. Our Business Solutions technologies also power a variety of platform products targeted towards larger businesses such as regional media publishers and ad agencies. We expect our legacy web hosting and listing solution SMB customers to phase out by the end of 2012.

On September 14, 2012, the Company changed its name from Local.com Corporation to Local Corporation. The Company amended its Amended and Restated Certificate of Incorporation in connection with a merger of a wholly-owned subsidiary of the Company with and into the Company in accordance with Section 253 of the Delaware General Corporation Law.

Principles of consolidation and basis of presentation

Our condensed consolidated financial statements include the accounts of Local Corporation and its wholly-owned subsidiaries, Krillion, Inc. and Screamin Media Group, Inc (“SMG”). All intercompany balances and transactions were eliminated. We have evaluated all subsequent events through the date the condensed consolidated financial statements were issued.

The unaudited interim condensed consolidated financial statements as of September 30, 2012, and for the three and nine months ended September 30, 2012 and 2011, included herein, have been prepared by us, 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 nine months ended September 30, 2012, 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, 2011, included in our Form 10-K filed with the Securities and Exchange Commission on March 15, 2012.

Discontinued Operations

As a result of the Company’s decision to sell all of the assets and liabilities relating to the Rovion business, the Company has reclassified and presented all related historical financial information as it relates to these assets and liabilities as “discontinued operations” in the accompanying condensed consolidated balance sheets and condensed consolidated statements of operations. In addition, all related activities have been excluded from footnote disclosures unless specifically referenced. These reclassifications have no effect on previously reported net income (loss). The Rovion business was sold on October 19, 2012, for $3.9 million, of which approximately $3.5 million was received in cash with the remainder placed in escrow to be settled within 18 months.

6

Use of estimates

The preparation of consolidated financial statements in conformity with United States generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. On an ongoing basis, we evaluate our estimates, including those related to the accounts receivable and sales allowances, fair values of financial instruments, intangible assets and goodwill, useful lives of intangible assets and property and equipment, fair values of stock-based awards, income taxes, and contingent liabilities, among others. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could materially differ from those estimates.

Fair Value of Financial Instruments

Our financial instruments consist principally of accounts receivable, long and short term notes receivable, revolving line of credit, accounts payable and our warrant liability. The carrying amount of the revolving line of credit approximates its fair value because the interest rate on these instruments fluctuates with market interest rates. The long term note receivable has a fixed interest rate considered to be at market rates and therefore the carrying value also approximates its fair value. We believe that the recorded values of all of our other financial instruments approximate their current fair values because of their nature and respective relatively short maturity dates or durations.

The fair value of the warrant liability is determined using the Black-Scholes valuation method, a “Level 3” input, based on the quoted price of our common stock, volatility based on the historical market activity of our stock, the expected life based on the remaining contractual term of the warrants and the risk free interest rate based on the implied yield available on U.S. Treasury Securities with a maturity equivalent to the warrants’ contractual life.

Intangible Assets

Intangible assets are amortized over their estimated useful lives, generally on a straight-line basis over two to four years. The small business subscriber relationships are amortized based on how we expect the customer relationships to contribute to future cash flows. As a result, amortization of the small business subscriber relationships intangible assets is accelerated over a period of approximately four years with the weighted average percentage amortization for all small business subscriber relationships acquired to date being approximately 60% in year one, 21% in year two, 14% in year three and 5% in year four. The Company’s third party billing providers were notified that certain Local Exchange Carrier’s (“LEC’s”) would not be providing billing services for our products and services with respect to these small business subscriber relationships. In the third quarter 2012, the Company accelerated amortization relating to these small business subscriber relationships intangible assets based on the expected remaining future cash flows. The effect of such accelerated amortization on third quarter 2012 results was approximately $1.2 million.

Impairment of Long-lived Assets

We account for the impairment and disposition of definite life intangible and long-lived assets in accordance with U.S. GAAP guidance on accounting for the impairment or disposal of long-lived assets. In accordance with the guidance, such assets to be held are reviewed for events, or changes in circumstances, which indicate that their carrying value may not be recoverable. We periodically review related carrying values to determine whether or not impairment to such value has occurred. During the second quarter 2012, management recorded impairment charges for certain capitalized software assets and intangible assets of $152,000 and $799,000, respectively, related to the Spreebird business unit.

Revenue Recognition

We recognize revenue when all of the following conditions are satisfied: (1) there is persuasive evidence of an arrangement; (2) the service or product has been provided to the customer; (3) the amount of fees to be paid by the customer is fixed or determinable; and (4) the collection of our fees is probable.

We generate revenue when it is realizable and earned, as evidenced by click-throughs occurring on advertisers’ sponsored listings, the display of a banner advertisement, the fulfillment of subscription listing obligations, the sale of deal of the day vouchers, or the delivery of Exact Match products to our customers. We enter into contracts to distribute sponsored listings and banner advertisements with our direct and indirect advertisers. Most of these contracts are short-term, do not contain multiple elements and can be cancelled at anytime. Our indirect advertisers provide us with sponsored listings with bid prices

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(for example, what their advertisers are willing to pay for each click-through on those listings). We recognize our portion of the bid price based upon our contractual agreement. Sponsored listings and banner advertisements are included within pages that display search results, among others, in response to keyword searches performed by consumers on our Local.com website and network partner websites. Revenue is recognized when earned based on click-through and impression activity to the extent that collection is reasonably assured from credit worthy advertisers. Management has analyzed our revenue recognition and determined that our web hosting revenue will be recognized net of direct costs.

During the year ended December 31, 2010, we entered into multiple-deliverable arrangements for the sale of domains and for providing services relating to such domains. Management evaluated the agreements in accordance with the provision of the revenue recognition topic that addresses multiple-deliverable revenue arrangements. The multiple-deliverable arrangements entered into consisted of various units of accounting such as the sale of domains, website development fees, content delivery and hosting fees. Such elements were considered separate units of accounting due to each element having value to the customer on a stand-alone basis. The selling price for each of the units of accounting was determined using a combination of vendor-specific objective evidence and management estimates. Revenue relating to domains was recognized with the transfer of title of such domains. Revenue for website development, content delivery and hosting fees are recognized as such services are performed or delivered. The agreements did not include any cancellation, termination or refund provisions that we consider probable. Subsequent to December 31, 2010 the Company did not enter into any significant multiple deliverable arrangements.

We launched our Spreebird daily deals business in May 2011. Revenue relating to the Spreebird daily deals business is recorded exclusive of the portion of gross billings paid as merchant revenue share, since we generally act as the agent, rather than the principal, when connecting merchants with online customers. Spreebird deal vouchers are sold primarily through email marketing and our www.spreebird.com website. Revenue for our Spreebird business is recognized when earned. Revenue is considered to be earned once all revenue recognition criteria have been satisfied.

We evaluate whether it is appropriate to record the gross amount of sales and related costs or the net amount earned as revenue. Generally, when we are primarily obligated in a transaction, are subject to inventory risk, have latitude in establishing prices and selecting suppliers, or have several but not all of these indicators, revenue is recorded at the gross sales price. We generally record the net amounts as revenue earned if we are not primarily obligated and do not have latitude in establishing prices. Such amounts earned are determined using a fixed percentage, a fixed-payment schedule, or a combination of the two. All revenue, other than Spreebird daily deals revenue and web hosting revenue, is recognized on a gross basis.

Cost of Revenues

Cost of revenues consists of traffic acquisition costs, revenue sharing payments that we make to our network partners, and other cost of revenues. Traffic acquisition costs consist primarily of campaign costs associated with driving consumers to our Local.com website, including personnel costs associated with managing traffic acquisition programs. Other cost of revenues consists of Internet connectivity costs, data center costs, amortization of certain software license fees and maintenance, depreciation of computer equipment used in providing our paid-search services, and payment processing fees (credit cards and fees for LEC billings). We advertise on large search engine websites such as Google, Yahoo!, MSN/Bing and Ask.com, as well as other search engine websites, by bidding on certain keywords we believe will drive traffic to our Local.com website. During the three and nine months ended September 30, 2012, approximately 61% and 62%, of our overall traffic was purchased from other search engine websites. During the three and nine months ended September 30, 2012, advertising costs to drive consumers to our Local.com website were $15.2 million and $46.4 million respectively. Of the total advertising cost for the three and nine months ended September 30, 2012, $10.3 million and $32.1 million were attributable to Google, Inc. and $4.3 million and $12.7 million were attributable to Yahoo!, respectively. During the three and nine months ended September 30, 2011, approximately 68% and 66% respectively, of our overall traffic was purchased from other search engine websites. During the three and nine months ended September 30, 2011, advertising costs to drive consumers to our Local.com website were $9.4 million and $25.0 million respectively. Of the total advertising cost for the three and nine months ended September 30, 2011, $6.6 million and $18.4 million were attributable to Google, Inc. and $1.3 million and $4.1 million were attributable to Yahoo!, respectively.

Recent Accounting Pronouncements

On July 27, 2012, the Financial Accounting Standards Board (“FASB”) issued guidance on testing indefinite-lived intangible assets for impairment. The new guidance provides an entity the option to first perform a qualitative assessment to determine whether it is more likely than not that the indefinite-lived intangible asset is impaired. If an entity concludes that it is more than 50% likely that an indefinite-lived intangible asset is not impaired, no further analysis is required. However, if an entity concludes otherwise, it would be required to determine the fair value of the indefinite-lived intangible asset to measure the amount of actual impairment, if any, as currently required under US GAAP. The new guidance is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted.

In May 2011, the FASB issued an accounting standard update that changes certain fair value measurement principles and enhances the disclosure requirements, particularly Level 3 fair value measurements. The Company adopted this accounting literature effective January 1, 2012. The adoption is only related to disclosures in the Company’s condensed consolidated financial statements and accordingly did not have any impact on the condensed consolidated results of operations or financial position.

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2. Notes Receivable

During 2010, the Company entered into a promissory note and security agreement with one of its customers related to the sale of domain names and services. The promissory note totaled $1,000,000, carrying interest at 5% per annum payable in twelve equal quarterly payments of $54,000 beginning on March 31, 2011, and continuing on the last day of each calendar quarter thereafter until December 31, 2013, and three additional annual balloon payments of $80,000, $210,000 and $157,238 due on the 31st day of December of 2011, 2012 and 2013, respectively. The Company considered the credit quality of the customer and determined that no allowance for credit losses is necessary. As of September 30, 2012, no portion of the note receivable balance was past due. The note receivable is secured by the domain names sold to the customer.

3. Assets and liabilities held for sale and discontinued operations

As a result of the decision by the Company to sell all of the assets related to the Rovion business, all assets and liabilities to be sold were classified as held for sale in the accompanying condensed consolidated balance sheets at September 30, 2012 and December 31, 2011. The results of operations relating to the held for sale assets and liabilities have been reclassified to discontinued operations in the condensed consolidated statements of operations for all periods presented. Assets and liabilities held for sale are valued at the lower of net depreciable value or net realizable value.

Assets and liabilities held for sale consisted of the following (in thousands):

	September 30, 2012			December 31, 2011
Goodwill	$	1,169		$	1,169
Intangible assets, net		581			789
Property and equipment, net		767			229
Assets held for sale	$	2,517		$	2,187
Accrued liabilities	$	(38	)	$	—
Deferred revenue		(11	)		(32	)
Liabilities held for sale	$	(49	)	$	(32	)

The Company actively marketed these assets and liabilities for sale during the quarter and the Company’s results of discontinued operations will be affected by the disposal of properties related to the discontinued operations to the extent that proceeds from the sale exceed or are less than net book value. The Rovion business was sold on October 19, 2012, for $3.9 million, of which approximately $3.5 million was received in cash with the remainder placed in escrow to be settled within 18 months.

Revenue and pretax income (loss) related to discontinued operations are as follows (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Revenue	$	179		$	189		$	553		$	296
Pretax income (loss)	$	(256	)	$	(825	)	$	(1,240	)	$	(1,298	)
Provision (benefit) for income taxes		—			—			23			3
Income (loss) from discontinued operations (net of taxes)	$	(256	)	$	(825	)	$	(1,263	)	$	(1,301	)

All revenue from discontinued operations is part of the Company’s paid search segment.

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4. Intangible assets

Intangible assets, net, consisted of the following (in thousands):

	September 30, 2012									December 31, 2011
	Gross Carrying Amount		Accumulated Amortization/ Impairment			Net Carrying Amount		Weighted Average Useful Life		Gross Carrying Amount		Accumulated Amortization/ Impairment			Net Carrying Amount		Weighted Average Useful Life
								(years)									(years)
Developed technology	$	7,238	$	(5,159	)	$	2,079		4	$	6,488	$	(3,339	)	$	3,149		4
Non-compete agreements		153		(97	)		56		2		153		(56	)		97		2
Vendor-related		300		(125	)		175		3		300		(50	)		250		3
Customer-related		14,344		(13,974	)		370		0.3		14,194		(11,149	)		3,045		4
Patents		431		(431	)		—		3		431		(431	)		—		3
Domain names - indefinite life		1,601		—			1,601				1,601		—			1,601
Trademarks and Trade Name		900		(771	)		129		4		700		(534	)		166		4
License agreements		600		(584	)		16		4		600		(75	)		525		4
	$	25,567	$	(21,141	)	$	4,426			$	24,467	$	(15,634	)	$	8,833

As of June 30, 2012, a review of the Spreebird business unit’s intangible assets, current and forecasted operating results (Level 3 Fair Value Measurement) indicated that the carrying amount of these finite-lived intangible assets may not be recoverable from the sum of future undiscounted cash flows. As a result, these finite-lived intangible assets were written down to their fair value, based on the sum of future discounted cash flows, resulting in an impairment charge of approximately $799,000 included in Impairment of goodwill and intangible assets in the accompanying condensed consolidated statements of operations. The impairment charge of $799,000 included $420,000 related to license agreements, $272,000 related to developed technology, $100,000 related to customer related intangible assets and $7,000 related to a non-compete agreement. In determining the fair value of the Spreebird developed technology and vendor relationships intangible assets, the Company used the replacement cost approach. Unobservable inputs used in determining the fair value included remaining useful lives of two years and an income tax rate of approximately 20 percent. The Spreebird subscriber relationship intangible assets fair value was determined using the income approach and unobservable inputs used included a remaining useful life of two years, an income tax rate of 20 percent and a 30 percent discount rate. The fair value of the Spreebird license agreement intangible asset was determined using the market approach which included the use of unobservable inputs such as a remaining useful life of four year, an income tax rate of 20 percent, a discount rate of 30 percent and a royalty rate of 0.5 percent. No additional impairment charges were recorded in the third quarter 2012. However, accelerated amortization of customer related balances of approximately $1.2 million was recognized in the third quarter of 2012 given the reduced subscriber activity associated with the LEC business.

5. Goodwill and Other Intangible Assets

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 names are recorded at cost. Intangible assets, such as goodwill and domain names, which are determined to have an indefinite life, are not amortized. The first step in determining if there is any goodwill impairment is a comparison of the estimated fair value of an internal reporting unit with its carrying amount, including goodwill. If the estimated fair value of the reporting unit exceeds its carrying value, goodwill of the reporting unit is not considered impaired and the second step is unnecessary. If the carrying value of the reporting unit exceeds its estimated fair value, the second step is performed to measure the amount of impairment by comparing the carrying amount of the goodwill to a determination of the implied value of the goodwill. If the carrying amount of goodwill is greater than the implied value, an impairment charge is recognized for the difference. We engage an independent appraiser to assist management in the valuation. We perform annual impairment reviews during the fourth fiscal quarter of each year or earlier if indicators of potential impairment exist. For other intangible assets with indefinite lives, we compare the fair value of related assets to the carrying value to determine if there is impairment. For other intangible assets with definite lives, we compare future undiscounted cash flow forecasts prepared by management to the carrying value of the related intangible asset group to determine if there is impairment. We performed our annual impairment analysis as of December 31, 2011, and determined that the estimated fair value of the reporting units exceeded its carrying value and therefore no impairment existed. The Spreebird business unit was identified as a separate reporting unit for evaluation of goodwill impairment. Due to lower than expected financial performance by the Spreebird business unit and a significant decrease in the market capitalization of comparable public companies during the second quarter of fiscal 2012, the Company determined that there were potential indicators of impairment at June 30, 2012. Goodwill was tested for impairment by estimating the fair value of the reporting unit using a consideration of market multiples (Level 3 Fair Value Measurement) and was written down to its estimated implied fair value, which was approximately $6.7 million as of June 30, 2012, resulting in an estimated impairment charge of approximately $5.5 million, which is included in Impairment of goodwill and intangible assets in the accompanying condensed consolidated statements of operations. The Company finalized the goodwill impairment review of the Spreebird business unit and the related impairment charge recorded in the second quarter 2012 during the third quarter 2012. The finalization of the Spreebird goodwill impairment review did not result in any adjustments to the initial impairment charge recorded in the second quarter 2012. The Company noted no potential indicators of impairment related to the Spreebird goodwill as of September 30, 2012.

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The change in the carrying amount of goodwill, using significant unobservable inputs, for the nine months ended September 30, 2012, is as follows (in thousands):

	Spreebird Business unit			Other		Total
Balance at December 31, 2011	$	12,169		$	19,201	$	31,370
Asset impairment		(5,500	)		—		(5,500	)
Balance at September 30, 2012	$	6,669		$	19,201	$	25,870

6. Website development costs and computer software developed for internal use

U.S. GAAP requires that development 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. U.S. GAAP further requires that costs incurred in the preliminary project and operating stage of website development be expensed as incurred and that certain costs incurred in the development stage of website development be capitalized and amortized over its useful life. Capitalized website costs are included in property and equipment, net. During the second quarter 2012, the Company recorded an impairment charge of $152,000 relating to capitalized software of the Spreebird business unit.

The following table sets forth the additional capitalized website development costs and the amortization of capitalized website development costs for the period indicated (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Additional capitalized website development costs	$	457		$	668		$	1,704		$	2,397
Amortization of capitalized website development costs	$	(606	)	$	(552	)	$	(1,649	)	$	(1,357	)

7. Net income (loss) per share

Basic net income (loss) per share is calculated using the weighted average shares of common stock outstanding during the periods. Diluted net income (loss) per share is calculated using the weighted average number of common and potentially dilutive common shares outstanding during the period, using the treasury stock method for options and warrants.

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

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Numerator:
Net income (loss) from continuing operations	$	(3,546	)	$	(3,206	)	$	(15,088	)	$	(9,452	)
Net income (loss) from discontinued operations	$	(256	)	$	(825	)	$	(1,263	)	$	(1,301	)
Denominator:
Denominator for historical basic calculation weighted average shares		22,092			21,940			22,087			21,151
Dilutive common stock equivalents:*
Options
Warrants
Denominator for historical diluted calculation weighted average shares		22,092			21,940			22,087			21,151
Net income (loss) from continuing operations per share:
Historical basic net income (loss) from continuing operations per share	$	(0.16	)	$	(0.15	)	$	(0.68	)	$	(0.45	)
Historical diluted net income (loss) from continuing operations per share	$	(0.16	)	$	(0.15	)	$	(0.68	)	$	(0.45	)
Net income (loss) from discontinued operations per share:
Historical basic net income (loss) from discontinued operations per share	$	(0.01	)	$	(0.04	)	$	(0.06	)	$	(0.06	)
Historical diluted net income (loss) from discontinued operations per share	$	(0.01	)	$	(0.04	)	$	(0.06	)	$	(0.06	)
Net income (loss) per share:
Historical basic net income (loss) per share	$	(0.17	)	$	(0.18	)	$	(0.74	)	$	(0.51	)
Historical diluted net income (loss) per share	$	(0.17	)	$	(0.18	)	$	(0.74	)	$	(0.51	)

* For the three and nine months ended September 30, 2012, potentially dilutive securities, which consist of options to purchase 4,447,544 shares of common stock at prices ranging from $1.41 to $16.59 per share and warrants to purchase 1,238,660 shares of common stock at prices ranging from $2.87 to $8.09 per share were not included in the computation of diluted net income (loss) per share because such inclusion would be antidilutive.

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* For the three and nine months ended September 30, 2011, potentially dilutive securities, which consist of options to purchase 4,565,730 shares of common stock at prices ranging from $1.41 to $16.59 per share and warrants to purchase 1,477,936 shares of common stock at prices ranging from $4.32 to $8.09 per share were not included in the computation of diluted net income per share because such inclusion would be antidilutive.

8. Property and equipment

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

	September 30, 2012			December 31, 2011
Furniture and fixtures	$	979		$	935
Office equipment		506			496
Computer equipment		3,417			3,180
Computer software		11,066			9,659
Leasehold improvements		899			898
		16,867			15,168
Less accumulated depreciation and amortization		(9,751	)		(7,150	)
Property and equipment, net	$	7,116		$	8,018

9. Interest and other income, net

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

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Interest income	$	8		$	12		$	26		$	44
Interest expense		(139	)		(239	)		(351	)		(356	)
Interest and other income (expense), net	$	(131	)	$	(227	)	$	(325	)	$	(312	)

10. Credit facilities

On August 3, 2011, we entered into a Loan and Security Agreement (the “Loan Agreement”) with Square 1 Bank, as amended by the First Amendment on March 28, 2012, the Second Amendment on April 11, 2012, and the Third Amendment on August 17, 2012. The Loan Agreement provides us with a revolving credit facility of up to $12.0 million (the “Facility”). Subject to the terms of the Loan Agreement, the borrowing base used to determine loan availability under the Facility is based on a formula equal to 80% of eligible accounts receivable, with account eligibility measured in accordance with standard determinations as more particularly defined in the Loan Agreement (the “Formula Revolving Line”). Notwithstanding the foregoing, we may borrow up to $3.0 million from the Facility at any time and up to $5.0 million from the Facility in any thirty day period of a calendar quarter, irrespective of our borrowing base (the “Non-Formula Revolving Line”), provided that total advances under the Facility will not exceed $12.0 million and we are otherwise in compliance with the terms of the Agreement. The Facility expires on August 3, 2013.

All amounts borrowed under the Facility are secured by a general security interest on our assets, except for our intellectual property, which we have instead agreed to remain unencumbered during the term of the Loan Agreement.

Except as otherwise set forth in the Loan Agreement, borrowings made pursuant to the Formula Revolving Line will bear interest at a rate equal to the greater of (i) 5.0% or (ii) the Prime Rate (as announced by Square 1 Bank) plus 1.75% and borrowings made pursuant to the Non-Formula Revolving Line will bear interest at a rate equal to the greater of (i) 5.25% or (ii) the Prime Rate (as announced by Square 1 Bank) plus 2.0%. In connection with establishing the Facility, we incurred fees payable to Square 1 Bank of approximately $10,000. Additionally, there is an annual fee of $25,000 and an unused line fee equal to 0.25% of the unused line if less than 40% of the Facility is in use.

The Loan Agreement contains customary representations, warranties, and affirmative and negative covenants for facilities of this type, including certain restrictions on dispositions of assets, changes in business, change in control, mergers and acquisitions, payment of dividends, and incurrence of certain indebtedness and encumbrances. The Loan Agreement also contains customary events of default, including payment defaults and a breach of representations and warranties and

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covenants. If an event of default occurs and is continuing, Square 1 Bank has certain rights and remedies under the Loan Agreement, including declaring all outstanding borrowings immediately due and payable, ceasing to advance money or extend credit, and rights of set-off.

The Company must meet certain financial covenants during the term of the Facility, including (i) maintaining a minimum liquidity ratio, which is defined as cash on hand plus the most recently reported borrowing base less the aggregate amount outstanding under the Non-Formula Revolving Line divided by outstanding bank debt less the Non-Formula Revolving Line, and (ii) certain Adjusted EBITDA covenants, as defined, as more particularly described in the Agreement and amendments to the Agreement (such Adjusted EBITDA amounts are for financial covenant purposes only, and do not represent projections of the Company’s financial results). As of September 30, 2012, the Company is in compliance with all financial covenants.

On March 28, 2012, the Loan Agreement was amended to modify the borrowing base eligibility criteria under the Loan Agreement, to provide a five (5) day cure period for any Liquidity Ratio violations before any such violation would be deemed an Event of Default under the Agreement, and to establish certain Adjusted EBITDA financial covenant levels for fiscal 2012 pursuant to the Loan Agreement.

On April 12, 2012, the Loan Agreement was amended to modify the maximum allowable borrowings under the non-formula line by increasing the maximum to $5.0 million from $3.0 million under certain circumstances. Additionally, the Liquidity Ratio was redefined to provide that non-formula borrowings only require a 1.0:1.0 ratio, as opposed to a 1.25:1.0 ratio.

On August 17, 2012, the Loan Agreement was amended to lower the maintenance limits for its depository and operating accounts to 90% and to amend the definition of Adjusted EBITDA to exclude any non-cash expenses, as well as to provide a waiver of a technical violation of the Adjusted EBITDA covenant described in Section 6.7(a) of the Agreement that occurred prior to the definition amendment noted above.

At the end of the third quarter 2012, the Company had $7.6 million outstanding on the Facility. As of September 30, 2012, the Company had approximately $2.2 million available of the $4.4 million unused on the Facility.

11. Operating information

The Company manages its business functionally and has two reportable operating segments: Paid Search and Daily Deals. Paid Search consists of the Company’s online businesses that collectively reach customers with a variety of local online advertising products and web hosting. The Company’s Daily Deals segment consists of the Company’s business that reaches its customers with discounted offers for goods and services provided by merchants.

Management relies on an internal management reporting process that provides revenue and segment operating income (loss) for making financial decisions and allocating resources. Management believes that segment revenues and operating income (loss) are appropriate measures of evaluating the operational performance of the Company’s segments.

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The following is a summary of operating results from continuing operations and assets by business segment:

	Three Months Ended September 30, 2012									Nine Months Ended September 30, 2012
	Daily Deals			Paid Search			Totals			Daily Deals			Paid Search			Totals
Segment revenue	$	406		$	24,365		$	24,771		$	1,476		$	75,399		$	76,875
Depreciation and amortization	$	137		$	2,663		$	2,800		$	568		$	5,744		$	6,312
Operating loss	$	(366	)	$	(3,092	)	$	(3,458	)	$	(8,504	)	$	(6,311	)	$	(14,815	)
Interest and other income (expense), net								(131	)								(325	)
Change in fair value of warrant liability								65									173
Provision for income taxes								(22	)								(121	)
Net income (loss) from continuing operations							$	(3,546	)							$	(15,088	)
Segment assets as of September 30, 2012										$	7,809		$	50,975		$	58,784
Goodwill as of September 30, 2012										$	6,669		$	19,201		$	25,870
	Three Months Ended September 30, 2011									Nine Months Ended September 30, 2011
	Daily Deals			Paid Search			Totals			Daily Deals			Paid Search			Totals
Segment revenue	$	614		$	20,074		$	20,688		$	614		$	52,346		$	52,960
Depreciation and amortization	$	164		$	1,940		$	2,104		$	221		$	5,565		$	5,786
Operating loss	$	(2,354	)	$	(1,091	)	$	(3,445	)	$	(2,932	)	$	(8,584	)	$	(11,516	)
Interest and other income (expense), net								(227	)								(312	)
Change in fair value of warrant liability								513									2,483
Provision for income taxes								(47	)								(107	)
Net income (loss) from continuing operations							$	(3,206	)							$	(9,452	)
Segment assets as of December 31, 2011										$	15,092		$	60,719		$	75,811
Goodwill as of December 31, 2011										$	12,169		$	19,201		$	31,370

The following table presents summary operating geographic and product information as required by the entity-wide disclosure requirements (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Revenue by geographic region:
United States	$	24,771	$	20,688	$	76,875	$	52,960
Revenue by product:
Pay-Per-Click (PPC)		19,780		15,931		60,134		40,020
Subscription Advertising Products		569		883		2,008		2,703
Domain Sales and Services		681		1,428		3,674		4,747
Display and Banner Advertising Services		3,335		1,833		9,584		4,877
Spreebird Daily Deals		406		613		1,475		613
Total revenue	$	24,771	$	20,688	$	76,875	$	52,960

12. Stock-based compensation

Stock option activity under the equity incentive plans during the nine months ended September 30, 2012, was as follows:

	Shares			Weighted Average Exercise Price		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2011		5,005,584		$	4.30
Granted		354,750			2.38
Exercised		(13,306	)		1.62
Cancelled		(899,484	)		3.72
Outstanding at September 30, 2012		4,447,544		$	4.27	$	118
Exercisable at September 30, 2012		2,876,384		$	4.85	$	110

The weighted-average fair value at grant date for the options granted during the nine months ended September 30, 2012 and 2011, was $1.65 and $2.57 per option, respectively.

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The aggregate intrinsic value of all options exercised during the nine months ended September 30, 2012 and 2011, was $10,000 and $202,000, respectively.

The following table summarizes information regarding options outstanding and exercisable at September 30, 2012:

	Options Outstanding
			Weighted			Options Exercisable
			Average	Weighted				Weighted
			Remaining	Average				Average
			Contractual	Exercise				Exercise
Range of Exercise Prices	Shares		Life	Price		Shares		Price
$0.00 - $2.00		284,319	5.6 years	$	1.57		256,319	$	1.56
$2.01 - $3.00		1,073,902	6.2 years		2.38		132,919		2.42
$3.01 - $4.00		961,612	6.6 years		3.59		666,878		3.58
$4.01 - $5.00		1,025,786	4.6 years		4.62		902,089		4.62
$5.01 - $6.00		215,385	4.4 years		5.54		189,465		5.58
$6.01 - $7.00		542,531	6.8 years		6.18		390,583		6.21
$7.01 - $8.00		200,833	1.7 years		7.52		196,830		7.52
$8.01 - $9.00		62,500	3.3 years		8.90		60,625		8.91
$9.01 - $10.00		15,000	2.7 years		9.90		15,000		9.90
$10.01 - $16.59		65,676	2.3 years		15.76		65,676		15.76
		4,447,544					2,876,384

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 September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Risk-free interest rate		0.63	%		1.35	%		0.76	%		1.70	%
Expected lives (in years)		5.1 years			5.2 years			5.1 years			5.2 years
Expected dividend yield		None			None			None			None
Expected volatility		89.35	%		85.35	%		89.35	%		85.35	%

Restricted stock unit activity under the 2011 Omnibus Plan for the nine months ended September 30, 2012, is as follows:

				Weighted Average
				Grant Date Fair
	Shares			Value
Unvested at December 31, 2011		111,547		$	2.29
Granted		273,048			2.25
Vested		—			—
Cancelled		(17,170	)		2.29
Unvested at September 30, 2012		367,425		$	2.26

Performance stock unit activity under the 2011 Omnibus Plan for the nine months ended September 30, 2012, is as follows:

	Shares			Weighted Average Grant Date  Fair Value
Outstanding at December 31, 2011		—		$	—
Granted		258,166			2.28
Exercised		—			—
Cancelled		(627	)		2.29
Outstanding at September 30, 2012		257,539		$	2.28
Exercisable at September 30, 2012		—		$	—

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Total stock-based compensation expense related to continuing operations recognized for the three and nine months ended September 30, 2012 and 2011, was as follows (in thousands, except per share amount):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Cost of revenues	$	22	$	12	$	61	$	165
Sales and marketing		261		306		846		955
General and administrative		320		491		988		1,427
Research and development		63		87		163		313
Total stock-based compensation expense	$	666	$	896	$	2,058	$	2,860
Basic and diluted net stock-based compensation expense per share	$	0.03	$	0.04	$	0.09	$	0.14

13. Warrants

On January 20, 2011, in connection with the completion of the offer and sale to the underwriter of 4,600,000 shares of common stock and in accordance with the anti-dilution provisions contained in each of the warrants to purchase up to 537,373 shares of common stock at an exercise price of $7.89 per share that were issued in a private placement transaction on August 1, 2007 (the “Series A Warrants”) and the warrants to purchase up to 537,373 shares of common stock at an exercise price of $9.26 per share that were issued in the same private placement transaction on August 1, 2007 (the “Series B Warrants”), the exercise price of the Series A Warrants and the Series B Warrants was reduced to $7.02 per share and $8.09 per share, respectively, and the Company issued an additional 66,207 Series A Warrants at an exercise price of $7.02 per share, which are immediately exercisable (the “New Series A Warrants”), and an additional 77,707 Series B Warrants at an exercise price of $8.09 per share, which are immediately exercisable (the “New Series B Warrants” and together with the New Series A Warrants, the “New Warrants”). The Series A Warrants and the Series B Warrants are exercisable until February 1, 2013, and February 3, 2014, respectively, and the New Series A Warrants and the New Series B Warrants are exercisable until February 1, 2013, and February 3, 2014, respectively.

Warrant activity for the nine months ended September 30, 2012, was as follows:

	Shares			Weighted Average Exercise Price
Outstanding at December 31, 2011		1,497,936		$	7.05
Issued		—			—
Exercised		—			—
Expired		(259,276	)		5.00
Outstanding at September 30, 2012		1,238,660		$	7.48
Exercisable at September 30, 2012		1,238,660		$	7.48

The following table summarizes information regarding warrants outstanding and exercisable at September 30, 2012:

	Warrants Outstanding						Warrants Exercisable
Range of Exercise Price	Shares		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price
$ 2.00 - $ 4.99		20,000		2.1 years	$	2.87		20,000	$	2.87
$ 5.00 - $ 7.99		603,580		0.3 years		7.02		603,580		7.02
$ 8.00 - $ 8.99		615,080		1.3 years		8.09		615,080		8.09
		1,238,660		0.9 years	$	7.48		1,238,660	$	7.48

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14. Fair Value Measurement of Financial Assets and Liabilities

The following table summarizes our financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2012 (in thousands):

Description	As of September 30, 2012		Significant Unobservable Inputs (Level 3)
Liabilities:
Warrant liability	$	34	$	34

The following table summarizes our financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2011 (in thousands):

Description	As of December 31, 2011		Significant Unobservable Inputs (Level 3)
Liabilities:
Warrant liability	$	207	$	207

As of September 30, 2012, our warrant liability was based on measurement at fair value without observable market values that required a high level of judgment to determine fair value (Level 3) using pricing models that take into account the contract terms as well as multiple inputs where applicable, such as our stock price, risk-free interest rates and expected volatility.

The fair value of the warrant liability was estimated at September 30, 2012, using a Black-Scholes option pricing model with the following assumptions:

	Exercise Price of Related Warrants
	$8.09	$7.02
Risk-free interest rate	0.17%	0.10%
Expected lives (in years)	1.3 years	0.3 years
Expected dividend yield	None	None
Expected volatility	71.13%	53.18%

The following table presents a reconciliation for our warrant liability measured and recorded at fair value on a recurring basis, using significant unobservable inputs (Level 3) (in thousands):

	Level 3
Balance at December 31, 2011	$	207
Change in fair value of warrant liability		(173	)
Balance at September 30, 2012	$	34

15. Subsequent events

On October 19, 2012, the Company announced that it had completed its divestiture of its Rovion technology platform to Rovion, LLC (the “Buyer”), a subsidiary of Point Roll, Inc. (“Point Roll”) in accordance with the terms of that certain Asset Purchase Agreement dated October 19, 2012 (the “Rovion Agreement”) by and among the Registrant, Buyer and Point Roll. Total consideration for the assets sold was approximately $3.9 million, subject to balance sheet adjustments and subsequent claims against escrow, if any. The Company received consideration of approximately $3.5 million in cash at the closing of the transaction. An additional $390,000 is being held in escrow for a period of eighteen months from the date of sale in the event certain indemnification claims or final balance sheet adjustments are asserted against the Company. The assets sold include a self-service, rich media advertising platform and related toolset. Additionally the Buyer will be assuming certain assets and liabilities related to the assets sold, including accounts receivable, certain personnel and lease obligations related to the Rovion business.

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

This Quarterly Report on Form 10-Q or certain information included or incorporated by reference in this report, contains or may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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. These statements relate to our future operations, prospects, potential products, services, developments and business strategies. These statements can, in some cases, be identified by the use of terms such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “project,” and “potential” or the negative of such terms or other comparable terminology. 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 Part II 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, 2011, and for the year ended December 31, 2011, included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 15, 2012.

Overview

We are a local media company that specializes in connecting local businesses with online consumers. We reach consumers on our proprietary sites, as well as third-party sites (collectively, “Consumer Properties”), which includes our Owned & Operated web sites such as Local.com and Krillion.com (collectively, “O&O”), as well as our network of over 1,000 third-party U.S. regional media websites (collectively, “Network”). We provide a variety of digital media services to small and medium sized businesses (“SMBs”) to enable these customers to reach consumers both on our Consumer Properties as well as on the major search engines (collectively, “Business Solutions”) and we also enable third parties to distribute their advertiser listings on our Consumer Properties, for which we generate ad revenues. We generate revenue from performance ad units such as daily deals, pay-per-click, pay-per-call and lead generation, subscription ad units, and CPM ad units, among others.

Our Consumer Properties serve over 30 million consumers each month. We use patented and proprietary search technologies and systems to provide users of our O&O websites and our Network with relevant search results for local businesses, products and services, incorporating daily deals, event information, ratings and reviews, driving directions and more. By distributing this information across our Consumer Properties we are able to reach users that our direct advertisers and advertising partners desire to reach.

Our Business Solutions offer a variety of digital media products. The products are sold primarily via telesales. Our sales efforts focus principally around our Launch by Local product suite, which offers a variety of digital media features including web hosting, search engine optimization services, display ads, mobile ads, and social media presence management. Approximately 900 direct SMB customers are enrolled in our new Launch by Local product. An average Launch by Local subscription generates approximately the same monthly revenue as six legacy customers. Our Business Solutions technologies also power a variety of platform products targeted towards larger businesses such as regional media publishers and ad agencies. Over 6,000 of our direct SMB customers use a legacy web hosting and/or listing solution that will be phased out by the end of 2012.

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We regularly develop and deploy new products and product features based on our powerful technology platform, for which we have 9 issued patents and 11 pending. We have a long-term focus on building three key drivers for our business – traffic, technology and advertisers. Our traffic is at record levels, our technology platform has been dramatically expanded, and we are generating record revenues from our own direct Launch by Local customers. We also recently launched our Local.com mobile device application with the intent to capitalize on an ever expanding mobile device market.

Recent Developments

On March 28, 2012, we entered into the First Amendment to the Loan and Security Agreement with Square One Bank, which amends the Loan and Security Agreement by and between us and Square One Bank dated August 3, 2011 (“Loan Agreement”). The First Amendment to the Loan Agreement modifies the borrowing base eligibility criteria under the Loan Agreement, provides a five (5) day cure period for any liquidity ratio violations before any such violation would be deemed an event of default under the Loan Agreement, and establishes certain Adjusted EBITDA financial covenant, as defined, levels for fiscal 2012 pursuant to the Loan Agreement. On April 11, 2012, we entered into the Second Amendment to Loan Agreement with Square One Bank, which amends the Loan Agreement by and among the Company and Square One Bank dated August 3, 2011. The Second Amendment of the Loan Agreement modifies the maximum allowable borrowings under the non-formula line by increasing the maximum to $5.0 million from $3.0 million under certain circumstances. Additionally, it redefines the liquidity ratio to provide that non-formula borrowings only require a 1.0:1.0 ratio, rather than the 1.25:1.0 ratio. On August 17, 2012, we entered into the Third Amendment of the Loan Agreement to lower the maintenance limits for its depository and operating accounts to 90% and to amend the definition of Adjusted EBITDA to exclude any non-cash expenses, as well as to provide a waiver of a technical violation of the Adjusted EBITDA covenant described in Section 6.7(a) of the Agreement that occurred prior to the definition amendment noted above.

During the second quarter 2012, we decided to sell all assets relating to the Rovion business. The Rovion business, which is considered a usage model, did not align with our intent to become both a local media publisher and local advertising sales and marketing organization. On October 19, 2012, we sold all assets relating to the Rovion business. We licensed the Rovion technology as part of the asset purchase agreement and will continue to use the technology in its Launch by Local product offering.

At June 30, 2012, we performed an impairment valuation of goodwill as it relates to the Spreebird business unit. The evaluation was triggered by the continued decline in the market capitalization of comparable public companies and lower than expected financial performance of the Spreebird business unit during the second quarter of 2012. The evaluation resulted in an estimated impairment charge of $5.5 million to goodwill. The goodwill impairment valuation was finalized in the third quarter and no additional impairment charges were recorded. During the second quarter of 2012, we also recorded an impairment charge relating to intangible assets and capitalized software of the Spreebird business unit for $799,000 and $152,000, respectively.

On September 14, 2012, we changed our name from Local.com Corporation to Local Corporation. We amended our Amended and Restated Certificate of Incorporation in connection with a merger of our wholly-owned subsidiary with and into us in accordance with Section 253 of the Delaware General Corporation Law.

During the third quarter 2012, revenue from our LEC-billed subscriber bases decreased significantly due to a decision by certain LEC’s to no longer provide billing services for our products and services. The majority of the LEC billing ceased at the end of August 2012 and we expect the remainder of the LEC billing to cease at the end of November 2012. In connection therewith, we accelerated the amortization of our subscriber base to align with the expected related future cash flows.

On November 1, 2012, we entered into a new Yahoo! Publisher Network Agreement with Yahoo! Inc., which provides for the distribution of Yahoo! Inc.’s paid search results by us for which we are compensation a certain percentage of the adjusted gross revenue (as defined in the agreement) derived by Yahoo! from such paid search results. The agreement with Yahoo ends on October 31, 2017, unless earlier terminated by the parties.

Outlook for Our Business

According to BIA/Kelsey, the U.S. online advertising market is an over $47 billion a year industry. “Local search,” that is, searches for products, services and businesses within a geographic region is an increasingly significant segment of the online advertising industry. Local search allows consumers to search for local businesses’ products or services by including geographic area, zip code, city and other geographically targeted search parameters in their search requests. According to a May 2011 study, BIA/Kelsey estimates that the local search market in the United States will grow from $5.1 billion in 2010, to $8.2 billion by 2015. Consumers who conduct local searches on the Internet (“local searchers”) tend to convert into buying customers at a higher rate than other types of Internet users. As a result, advertisers often pay a significant premium to place their ads in front of local searchers on websites like those powered by our Consumer Properties business, including Local.com or our network partners’ websites. Additionally, local SMBs that would not normally compete at the national level for advertising opportunities are increasingly engaging in and competing for local advertising opportunities, including local search, to promote their products and services.

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Local online search is still relatively new, and as a result, it is difficult to determine our current market share, or predict our future market share. However, we have a number of competitors that have announced an intention to increase their focus on local search with regard to U.S. online advertising, including some of the leading online advertising companies in the world, including Google, Yahoo!, and Microsoft, among many others, with greater experience and resources than we have.

The U.S. online advertising industry, including the local search segment, is regularly impacted and changed by new and emerging technologies, including, for instance, ad targeting and mobile technologies, as well as the increased fragmentation of the online advertising industry in general, from different technology platforms, to different advertising formats, targeting methodologies and the like. Those companies within our industry that are able to quickly adapt to new technologies, as well as offer innovations of their own, have a better chance of succeeding than those that do not.

We believe that local search will be an increasingly significant segment of the online advertising industry. Although search advertising has been used primarily by businesses that serve the national market, local businesses are increasingly using online advertising to attract local customers. Our Consumer Properties and Business Solutions are all designed to serve this market of consumers, advertisers and publishers, which we believe will provide an opportunity for growth from increased local search volumes by consumers, as well as increased competition by advertisers to display their ad listings in front of those consumers.

Our revenue, profitability and future growth depend not only on our ability to execute our business plan, but also, the growth of the paid-search market and our ability to effectively compete with other providers of local, and paid-search technologies and services among other things.

As we continue to diversify our technologies and traffic sources, we remain focused on local media offerings that will improve the experience for our end users, enable our SMBs to better reach their potential customers, and allow our regional media network partners to enhance their service offerings and lower their costs. While we are still very focused on the local search industry, we believe there are additional opportunities in local media that we and our customers can benefit from, while diversifying our revenue sources. We intend to continue making significant investments in initiatives to diversify our revenue sources and promote our future growth.

As we continue to invest in our core offerings, while pursuing the acquisitions noted above, we have increased our operating expenses, mainly related to traffic acquisition costs, the deployment of new features and functionality across our business and the support of our acquired companies. We cannot give assurances that our efforts to improve our results of operations through this strategy will be successful.

Sources of Revenue

We generate revenue primarily on our Consumer Properties from both direct and indirect advertiser relationships, via:

• click-throughs on sponsored listings;

• calls to cost-per-call advertiser listings;

• lead generation;

• banner ads;

• subscription advertiser listings;

• domain sales and services;

• web hosting services; and

• daily deal offerings.

Operating Expenses

Cost of Revenues

Cost of revenues consists of traffic acquisition costs, revenue sharing payments that we make to our network partners, and other cost of revenues. Traffic acquisition costs consist primarily of campaign costs associated with driving consumers to our Local.com website, including personnel costs associated with managing traffic acquisition programs. Other cost of revenues consists of Internet connectivity costs, data center costs, amortization of certain software license fees and maintenance, depreciation of computer equipment used in providing our paid-search services, and payment processing fees (credit cards and fees for LEC billings). We advertise on large search engine websites such as Google, Yahoo!, MSN/Bing and Ask.com, as well as other search engine websites, by bidding on certain keywords we believe will drive traffic to our Local.com website. During the three and nine months ended September 30, 2012, approximately 61% and 62%, of our overall traffic was purchased from other search engine websites. During the three and nine months ended September 30, 2012, advertising

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costs to drive consumers to our Local.com website were $15.2 million and $46.4 million respectively. Of the total advertising cost for the three and nine months ended September 30, 2012, $10.3 million and $32.1 million were attributable to Google, Inc. and $4.3 million and $12.7 million were attributable to Yahoo!, respectively. During the three and nine months ended September 30, 2011, approximately 68% and 66% respectively, of our overall traffic was purchased from other search engine websites. During the three and nine months ended September 30, 2011, advertising costs to drive consumers to our Local.com website were $9.4 million and $25.0 million respectively. Of the total advertising cost for the three and nine months ended September 30, 2011, $6.6 million and $18.4 million were attributable to Google, Inc. and $1.3 million and $4.1 million were attributable to Yahoo!, respectively.

Sales and Marketing

Sales and marketing expenses consist of sales commissions and salaries for our internal and outsourced sales force, customer service staff and marketing personnel, advertising and promotional expenses. We record advertising costs and sales commission in the period in which the expense is incurred. We expect our sales and marketing expenses will increase in absolute dollars as we continue to experience growth.

General and Administrative

General and administrative expenses consist of salaries and other costs associated with employment of our executive, finance, human resources and information technology staff, legal, tax and accounting, and professional service fees.

Research and Development

Research and development expenses consist of salaries and other costs of employment of our development staff, outside contractor costs and amortization of capitalized website development costs.

Critical Accounting Policies

The preparation of our consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and equity and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reported period. We review our estimates on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the result of which forms the basis for making judgments about the carrying values of assets and liabilities and the reported amounts of revenue and expenses. Actual results may differ materially from these estimates under different assumptions or conditions. Our significant accounting policies described in more detail in Note 1 to our condensed consolidated financial statements included in this Report on Form 10-Q, involve judgments and estimates that are significant to the presentation of our condensed consolidated financial statements.

Revenue Recognition

We recognize revenue when all of the following conditions are satisfied: (1) there is persuasive evidence of an arrangement; (2) the service or product has been provided to the customer; (3) the amount of fees to be paid by the customer is fixed or determinable; and (4) the collection of our fees is probable.

We generate revenue when it is realizable and earned, as evidenced by click-throughs occurring on advertisers’ sponsored listings, the display of a banner advertisement, the fulfillment of subscription listing obligations, the sale of deal of the day vouchers, or the delivery of Exact Match products to our customers. We enter into contracts to distribute sponsored listings and banner advertisements with our direct and indirect advertisers. Most of these contracts are short-term, do not contain multiple elements and can be cancelled at anytime. Our indirect advertisers provide us with sponsored listings with bid prices (for example, what their advertisers are willing to pay for each click-through on those listings). We recognize our portion of the bid price based upon the execution of our contractual obligations. Sponsored listings and banner advertisements are included within pages that display search results, among others, in response to keyword searches performed by consumers on our Local.com website and network partner websites. Revenue is recognized when earned based on click-through and impression activity to the extent that collection is reasonably assured from credit worthy advertisers. Management has analyzed our revenue recognition and determined that our web hosting revenue is recognized net of direct costs.

During the year ended December 31, 2010, we entered into multiple-deliverable arrangements for the sale of domains and for providing services relating to such domains. Management evaluated the agreements in accordance with the provision of the revenue recognition topic that addresses multiple-deliverable revenue arrangements. The multiple-deliverable arrangements entered into consisted of various units of accounting such as the sale of domains, website development fees, content delivery and hosting fees. Such elements were considered separate units of accounting due to each element having value to the

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customer on a stand-alone basis. The selling price for each of the units of accounting was determined using a combination of vendor-specific objective evidence and management estimates. Revenue relating to domains was recognized with the transfer of title of such domains. Revenue for website development, content delivery and hosting fees are recognized as such services are performed or delivered. The agreements did not include any cancellation, termination or refund provisions that we consider probable. Subsequent to December 31, 2010, we did not enter into any significant multiple deliverable arrangements.

We launched our Spreebird daily deals business in May 2011. Revenue relating to the Spreebird daily deals business is recorded exclusive of the portion of gross billings paid as merchant revenue share, since we generally act as the agent, rather than the principal, when connecting merchants with online customers. Spreebird deal vouchers are sold primarily through email marketing and our www.spreebird.com website. Revenue for our Spreebird business is recognized when earned. Revenue is considered to be earned once all revenue recognition criteria have been satisfied.

We evaluate whether it is appropriate to record the gross amount of sales and related costs or the net amount earned as revenue. Generally, when we are primarily obligated in a transaction, are subject to inventory risk, have latitude in establishing prices and selecting suppliers, or have several but not all of these indicators, revenue is recorded at the gross sales price. We generally record the net amounts as revenue earned if we are not primarily obligated and do not have latitude in establishing prices. Such amounts earned are determined using a fixed percentage, a fixed-payment schedule, or a combination of the two. All revenue, other than Spreebird daily deals revenue and web hosting revenue, is recognized on a gross basis.

Allowance for Doubtful Accounts

Our management estimates the losses that may result from that portion of our accounts receivable that may not be collectible as a result of the inability of our customers to make required payments. Management specifically analyzes accounts receivable and historical bad debt, customer concentration, customer credit-worthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. If we believe that our customers’ financial condition has deteriorated such that it impairs their ability to make payments to us, additional allowances may be required. We review past due accounts on a monthly basis and record an allowance for doubtful accounts generally equal to any accounts receivable that are over 90 days past due and for which collectability is not reasonably assured.

As of September 30, 2012 and December 31, 2011, two customers, Yahoo! and Google represented 56% and 47% of our total accounts receivable, respectively. These customers have historically paid within the payment period provided for under their contracts and management believes these customers will continue to do so.

Goodwill and Other Intangible Assets

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 names are recorded at cost. Intangible assets, such as goodwill and domain names, which are determined to have an indefinite life, are not amortized. The first step in determining if there is any goodwill impairment is a comparison of the estimated fair value of an internal reporting unit with its carrying amount, including goodwill. If the estimated fair value of the reporting unit exceeds its carrying value, goodwill of the reporting unit is not considered impaired and the second step is unnecessary. If the carrying value of the reporting unit exceeds its estimated fair value, the second step is performed to measure the amount of impairment by comparing the carrying amount of the goodwill to a determination of the implied value of the goodwill. If the carrying amount of goodwill is greater than the implied value, an impairment charge is recognized for the difference. We engage an independent appraiser to assist management in the valuation. We perform annual impairment reviews during the fourth fiscal quarter of each year or earlier if indicators of potential impairment exist. For other intangible assets with indefinite lives, we compare the fair value of related assets to the carrying value to determine if there is impairment. For other intangible assets with definite lives, we compare future undiscounted cash flow forecasts prepared by management to the carrying value of the related intangible asset group to determine if there is impairment. We performed our annual impairment analysis as of December 31, 2011, and determined that the estimated fair value of the reporting units exceeded its carrying value and therefore no impairment existed. The Spreebird business unit was identified as a separate reporting unit for evaluation of goodwill impairment. Due to lower than expected financial performance by the Spreebird business unit and a significant decrease in the market capitalization of comparable public companies during the second quarter of fiscal 2012, we determined that there were potential indicators of impairment at June 30, 2012. Goodwill was tested for impairment by estimating the fair value of the reporting unit using a consideration of market multiples (Level 3 Fair Value Measurement) and was written down to its estimated implied fair value, which was approximately $6.7 million as of June 30, 2012, resulting in an estimated impairment charge of approximately $5.5 million, which is included in Impairment of goodwill and intangible assets in the accompanying condensed consolidated statements of operations. We finalized the goodwill impairment review of the

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Spreebird business unit and the related impairment charge recorded in the second quarter 2012 during the third quarter 2012. The finalization of the Spreebird goodwill impairment review did not result in any adjustments to the initial impairment charge recorded in the second quarter 2012. The Company noted no potential indicators of impairment related to the Spreebird goodwill as of September 30, 2012.

Stock Based Compensation

Total stock-based compensation expense related to continuing operations recognized for the three and nine months ended September 30, 2012 and 2011, is as follows (in thousands, except per share amount):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Cost of revenues	$	22	$	12	$	61	$	165
Sales and marketing		261		306		846		955
General and administrative		320		491		988		1,427
Research and development		63		87		163		313
Total stock-based compensation expense	$	666	$	896	$	2,058	$	2,860
Basic and diluted net stock-based compensation expense per share	$	0.03	$	0.04	$	0.09	$	0.14

Results of Operations

The following table sets forth our historical operating results as a percentage of revenue for the three and nine months ended September 30, 2012 and 2011:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Revenue		100.0	%		100.0	%		100.0	%		100.0	%
Operating expenses:
Cost of revenues		74.5			60.4			72.6			64.7
Sales and marketing		16.8			28.5			18.8			25.2
General and administrative		10.2			14.4			10.0			16.8
Research and development		5.0			7.3			4.8			8.3
Amortization of intangibles		7.5			6.1			4.7			6.8
Impairment of goodwill and intangible assets		—			—			8.4			—
Total operating expenses		114.0			116.7			119.3			121.7
Operating income (loss)		(14.0	)		(16.7	)		(19.3	)		(21.7	)
Interest and other income (expense), net		(0.5	)		(1.1	)		(0.4	)		(0.6	)
Change in fair value of warrant liability		0.3			2.5			0.2			4.7
Income (loss) from continuing operations before income taxes		(14.2	)		(15.3	)		(19.5	)		(17.6	)
Provision for income taxes		0.1			0.2			0.2			0.2
Net income (loss) from continuing operations		(14.3	)		(15.5	)		(19.6	)		(17.8	)
Income (loss) from discontinued operations (net of taxes)		(1.0	)		(4.0	)		(1.6	)		(2.5	)
Net income (loss)		(15.3	)%		(19.5	)%		(21.3	)%		(20.3	)%

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Three and nine months ended September 30, 2012 and 2011

Revenue (dollars in thousands):

	Three Months Ended September 30,										Percent change			Nine Months Ended September 30,										Percent change
	2012		(*)			2011		(*)						2012		(*)			2011		(*)
Owned and operated	$	18,340		74.0	%	$	13,457		65.0	%		36.3	%	$	56,791		73.9	%	$	33,200		62.7	%		71.1	%
Network		4,961		20.0	%		4,364		21.1	%		13.7	%		13,289		17.3	%		11,805		22.3	%		12.6	%
Business solutions		1,470		5.9	%		2,867		13.9	%		-48.7	%		6,795		8.8	%		7,955		15.0	%		-14.6	%
Total revenue	$	24,771		100.0	%	$	20,688		100.0	%		19.7	%	$	76,875		100.0	%	$	52,960		100.0	%		45.2	%

(*) – Percent of total revenue

Owned and operated revenue for the three and nine months ended September 30, 2012, increased 36.3% and 71.1%, respectively, compared to the same periods in 2011. The increase in revenue for the three and nine months ended September 30, 2012, compared to the same period in 2011 is mainly due to increased traffic to our Local.com website, together with an increase in monetization as our revenue per thousand visitors (“RKV”) increased to $276 and $287, respectively for the three and nine months ended September 30, 2012, from $254 and $220, respectively for the three and nine months ended September 30, 2011. The increase in RKV was primarily a result of changes made to our advertising partner relationships. The increase in RKV due to a new advertising partner relationship was partially offset by a significant decrease in revenue from one of our large advertising partners. The lower RKV for the three and nine months ended September 30, 2011, was primarily due to the Yahoo!/Bing alliance, which resulted in changes to the Yahoo! search and advertising platform. Starting in August 2011 we entered into a new advertising partner relationship that resulted in a significant increase in monetization of traffic to our owned and operated properties. The increase in RKV due to a new advertising partner relationship was partially offset by a significant decrease in revenue from one of our large advertising partners. The increase in traffic to our owned and operated properties are the result of higher cost of revenues to attract users as well as increased organic search traffic over the same period.

As noted above, in August 2011, we entered into an agreement with a new advertising partner. The revenue generated from such partner has been subject to seasonality, which has similarly subjected all of our owned and operated revenue results to seasonality. As such, owned and operated revenue was seasonally lower for the third quarter of fiscal 2012 compared to the first and second quarter of fiscal 2012.

Periodically traffic providers will make changes to their policies and guidelines. These changes could impact both our advertising campaigns to purchase traffic and the monetization of our search results pages. During October 2012, our largest traffic provider made certain changes to their policies and guidelines. We are working closely with this traffic provider to refine our traffic acquisition approach and user experience on our search results pages. We are assessing the impact and expect see a reduction in both traffic and monetization, which will have a negative impact on our fourth quarter of fiscal 2012 revenue and results of operations.

Network revenue for the three and nine months ended September 30, 2012, increased 13.7% and 12.6%, compared to the same periods in 2011. The increase is primarily due to increased traffic to our network partner websites and the increase in revenue per click (“RPC”) from our advertising partner feed. The increase in traffic is a combination of increased cost of revenues to attract users to the network partner sites together with an increase in organic traffic over the same period.

Business Solutions revenue for the three and nine months ended September 30, 2012, decreased 48.7% and 14.6%, respectively compared to the same periods in 2011. The decrease in revenue is due to a decrease in revenue from our LEC-billed subscriber bases, partially offset by an increase in revenue from our Launch by Local product suite and revenue from our Spreebird business. The decrease in revenue from our LEC-billed subscriber bases are due to a decision by certain LEC’s to no longer provide billing services for our products and services. The majority of the LEC billing ceased at the end of August 2012 and we expect the remainder of the LEC billing to cease at the end of November 2012. We remain focused on selling our new products from our Launch by Local product suite, which are billed via credit card and are entirely unaffected by LEC billing. As of September 30, 2012, we had over 800 Launch by Local customers which are billed monthly at an average charge that is approximately six times as much as one legacy subscription customer. There can be no assurance that our efforts to secure new Launch by Local customers will be capable of offsetting the revenue and net income losses we experience from the loss of our revenue and net income by our legacy subscribers.

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The growth in small business subscribers in prior years was a result of acquisitions of subscriber bases and internal and outsourced sales efforts. The following table provides the revenue relating to the acquisition of subscriber bases and revenue relating to internal and outsourced sales efforts (dollars in thousands):

	Three Months Ended September 30,										Percent change			Nine Months Ended September 30,										Percent change
	2012		(*)			2011		(*)						2012		(*)			2011		(*)
Revenue from internal and outsourced sales	$	1,002		68.2	%	$	1,507		52.6	%		-33.5	%	$	4,203		61.9	%	$	3,109		39.1	%		35.2	%
Revenue from acquired bases		468		31.8	%		1,360		47.4	%		-65.6	%		2,592		38.1	%		4,846		60.9	%		-46.5	%
Total sales and advertiser services revenue	$	1,470		100.0	%	$	2,867		100.0	%		-48.7	%	$	6,795		100.0	%	$	7,955		100.0	%		-14.6	%

Based on the above, total revenue for the three and nine months ended September 30, 2012, increased 19.7% and 45.2%, respectively, compared to the same periods in 2011.

The following table identifies our major customers that represented greater than 10% of our total revenue in the periods presented:

	Percentage of Total Revenue						Percentage of Total Revenue
	Three Months Ended September 30,						Nine Months Ended September 30,
Customer	2012			2011			2012			2011
Google, Inc		44.3	%		21.7	%		45.0	%		9.3	%
Yahoo! Inc.		20.2	%		16.2	%		18.3	%		28.0	%
SuperMedia Inc.		1.8	%		25.4	%		1.8	%		23.8	%

Operating expenses:

Operating expenses were as follows (dollars in thousands):

	Three Months Ended September 30,										Percent Change			Nine Months Ended September 30,										Percent Change
	2012		Percent of Total Revenue			2011		Percent of Total Revenue						2012		Percent of Total Revenue			2011		Percent of Total Revenue
Cost of revenues	$	18,463		74.5	%	$	12,487		60.4	%		47.9	%	$	55,798		72.6	%	$	34,273		64.7	%		62.8	%
Sales and marketing	$	4,152		16.8	%	$	5,905		28.5	%		(29.7	)%	$	14,443		18.8	%	$	13,340		25.2	%		8.3	%
General and administrative	$	2,522		10.2	%	$	2,975		14.4	%		(15.2	)%	$	7,706		10.0	%	$	8,882		16.8	%		(13.2	)%
Research and development	$	1,227		5.0	%	$	1,511		7.3	%		(18.8	)%	$	3,684		4.8	%	$	4,396		8.3	%		(16.2	)%
Amortization of intangibles	$	1,865		7.5	%	$	1,255		6.1	%		48.6	%	$	3,608		4.7	%	$	3,585		6.8	%		0.6	%
Impairment of goodwill and intangible assets	$	—		—	%	$	—		—	%		NM		$	6,451		8.4	%	$	—		NM			NM
Total operating expenses	$	28,229		114.0	%	$	24,133		116.7	%		17.0	%	$	91,690		119.3	%	$	64,476		121.7	%		42.2	%

Cost of revenues

Cost of revenues for the three and nine months ended September 30, 2012, increased by 47.9% and 62.8%, respectively, compared to the same periods in 2011. The increase during the three and nine months ended September 30, 2012 compared to the same periods in 2011 is due to an increase in traffic acquisition costs associated with driving consumers to our Local.com website. The increase of cost of revenues as a percentage of total revenues is mainly due to a decrease in high margin LEC revenues as well as a decrease in high margin revenue from one of our advertising partners. Included in cost of revenues for the three and nine months ended September 30, 2012 is $56,000 and $166,000, respectively, relating to the Daily Deals segment. Included in cost of revenues for the three and nine months ended September 30, 2011 is $208,000 and $238,000, respectively, relating to the Daily Deals segment, which commenced operations in May 2011.

Sales and marketing

Sales and marketing expenses for the three months ended September 30, 2012, decreased 29.7% compared to the same period in 2011. The decrease is mainly due to a decrease in personnel-related cost as part of our continued cost savings efforts. Sales and marketing expenses for the nine months ended September 30, 2012, increased 8.3% compared to the same period in 2011. The increase in due to acquisitions that occurred in the second half of 2011, partially offset by decreases in personnel related cost as part of our continued cost savings efforts. Included in sales and marketing expense for the three and nine months ended September 30, 2012 is $617,000 and $2.9 million, respectively, relating to the Daily Deals segment. Included in sales and marketing expense for the three and nine months ended September 30, 2011 is $2.6 million and $3.1 million, respectively, relating to the Daily Deals segment, which commenced operations in May 2011. The reduction in sales and marketing expense for the Daily Deals segment is mainly due to a reduction in personal related cost.

General and administrative

General and administrative expenses for the three and nine months ended September 30, 2012, decreased by 15.2% and 13.2%, respectively, compared to the same periods in 2011. The decrease was mainly due to a decrease in compensation expense for the quarter, partially offset by an increase in personnel related cost due to acquisitions. Costs incurred related to the Daily Deals segment was immaterial for the three and nine months ended September 30, 2012 and 2011.

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Research and development

Research and development expenses for the three and nine months ended September 30, 2012, decreased by 18.8% and 16.2%, respectively, compared to the same periods in 2011. The decrease is mainly due to our effort to reduce technology related costs together with a larger percentage of total technology related cost being capitalized as we invest in improving existing and newly acquired technologies.

The following table sets forth research and development expenses, additional capitalized website development costs and amortization of capitalized website development costs for the periods indicated (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Research and development expense	$	1,227		$	1,511		$	3,684		$	4,396
Capitalized website development costs	$	457		$	668		$	1,704		$	2,397
Amortization of capitalized website development costs	$	(606	)	$	(552	)	$	(1,649	)	$	(1,357	)

Amortization of intangibles

Amortization of intangibles expense was $1.9 million and $3.6 million for the three and nine months ended September 30, 2012, respectively, compared to $1.3 million and $3.6 million for the same periods in 2011. The increase in amortization expense was primarily due to the acceleration of amortization related to the LEC-billed subscriber bases, as the majority of billings relating to such subscriber bases ceased due to LEC’s decision not to provide future billing services as it relates to our products.

Impairment of goodwill and intangible assets

During the second quarter 2012, we recorded an impairment charge of $6.5 million, which consisted of the impairment of goodwill, intangible assets and capitalized software related to the Spreebird business unit.

Interest and other income (expense), net

Interest and other income (expense), net were ($131,000) and ($325,000) for the three and nine months ended September 30, 2012, respectively, compared to ($227,000) and ($312,000) for the same periods in 2011. The decrease for the quarter is due to an increase in interest expense for the third quarter 2011, as all prepaid finance charges relating to the Silicon Valley Bank line of credit were expensed when the line of credit was cancelled.

Provision for income taxes

Provision for income taxes was $22,000 and $121,000 for the three and nine months ended September 30, 2012 and $47,000 and $107,000 for the three and nine months ended September 30, 2011. Taxes are primarily due to anticipated tax amortization on indefinite-lived assets, partially offset by California research and development credits.

Liquidity and Capital Resources

Liquidity and capital resources highlights (in thousands):

	September 30,			December 31,
	2012			2011
Cash and cash equivalents	$	3,706		$	10,394
Working capital (deficit)	$	(1,806	)	$	1,540

Cash flow highlights (in thousands):

	Nine Months Ended September 30,
	2012			2011
Net cash (used in) provided by operating activities	$	(3,747	)	$	(2,191	)
Net cash used in investing activities		(2,585	)		(19,875	)
Net cash provided by financing activities		(356	)		19,106

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We have funded our business, to date, primarily from issuances of equity securities as well as through debt facilities. Cash was $3.7 million as of September 30, 2012, and $10.4 million as of December 31, 2011. We had a working capital deficit of $1.8 million as of September 30, 2012, and working capital of $1.5 million as of December 31, 2011. As of September 30, 2012, we had a total of $7.6 million outstanding on the revolving credit facility with Square 1 Bank. The decrease in working capital is largely due to a decrease in cash of approximately $6.7 million, which was mainly due to the payment of expenses accrued for at December 31, 2011, and capital expenditures during the first three quarters of 2012. This decrease was partially offset by the timing of payments to vendors and cash receipts from customers. Working capital excludes the warrant liability and includes assets and liabilities held for sale.

Net cash used in operating activities was $3.7 million for the nine months ended September 30, 2012. Net loss adjusted for non-cash charges (adding back depreciation and amortization, stock-based compensation expense, change in fair value of warrant liability and asset impairment) used was approximately $1.2 million, and changes in operating assets and liabilities used cash of $2.6 million for the nine months ended September 30, 2012. Net cash used in operating activities was $2.2 million for the nine months ended September 30, 2011. Net loss adjusted for non-cash charges (adding back depreciation and amortization, stock-based compensation expense, change in fair value of warrant liability and asset impairment) used was approximately $4.3 million. Changes in operating assets and liabilities provided cash of $2.1 million.

There are four primary drivers that affect cash provided by or (used in) operations: net income (loss); non-cash adjustments to net income (loss); changes in accounts receivable; and changes in accounts payable. For the nine months ended September 30, 2012, the terms of our accounts receivable and accounts payable remained unchanged.

The table below substantiates the change in net cash provided by (used in) operating activities for the nine months ended September 30, 2012 and 2011 (in thousands):

	Nine Months Ended September 30,
	2012			2011			Change
Net income (loss)	$	(16,351	)	$	(10,753	)	$	(5,598	)
Non-cash (1)		15,173			6,471			8,702
Subtotal		(1,178	)		(4,282	)		3,104
AR, AP and Other		(2,569	)		2,091			(4,660	)
Net cash (used in) provided by operations	$	(3,747	)	$	(2,191	)	$	(1,556	)

(1) Includes depreciation, amortization, change in fair value of warrant liability, asset impairment, non-cash expense related to stock-based compensation and provision for doubtful accounts.

Net cash used in investing activities was $2.6 million for the nine months ended September 30, 2012, and consisted of $2.6 million of capital expenditures, primarily related to website development costs. Net cash used in financing activities was $356,000 for the nine months ended September 30, 2012, and consisted of a repayment on the Square 1 Bank line of credit of $1.4 million, partially offset by a draw on the line of credit of $1.0 million.

Net cash used in investing activities was $19.9 million for the nine months ended September 30, 2011, and consisted of $3.1 million for capital expenditures, $16.0 million acquisition related cost and $0.8 million for purchases of customer-related intangible assets. Net cash provided by financing activities was $19.1 million for the nine months ended September 30, 2011, primarily consisted of $18.2 million from a public offering of the Company’s common stock, $8.0 million drawn on the our new revolving credit facility with Square 1 Bank, partially offset by the repayment of the $7.0 million outstanding balance of the revolving credit facility with SVB.

During the second half of 2011, and continuing through the third quarter 2012, we were able to reduce our operating losses (excluding impairment charges) through the restructuring of agreements with current partners, entering into agreements with new partners and continued efforts to optimize monetization on our O&O and Network properties. These changes resulted in a significant improvement in monetization compared to the prior quarters. Part of the improvement related to a new significant ad partner which was effective August 1, 2011. We have been able to increase traffic to our O&O and Network sites resulting in record traffic for the past twelve months. During October 2012, our largest traffic partner made changes to their policies and guidelines. We expect that these changes will have a negative impact on our revenues and results of operations for the fourth quarter 2012. Although we have increased investments in recently acquired businesses, much of the investment became discretionary marketing spend beginning in the second quarter of 2012, and is accordingly now controlled based on available working capital. On October 19, 2012, we sold the Rovion business for $3.9 million. Of the $3.9 million sales price, we received $3.5 million in cash on the date of sale, while the remaining balance will be held in escrow for eighteen months and released based on the terms as stipulated in the sales agreement. The additional cash and the cost savings from the sale of Rovion should have a positive impact on our cash flow and liquidity in the fourth quarter of 2012.

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Management believes that based upon projected operating needs, cash from operations and investing activities and availability on our revolving credit facility will be sufficient to fund our operations for at least the next 12 months. However, we continue to evaluate our operating plan and manage our cost in line with estimated revenues, including contingencies for further cost reductions if projected revenue and improvements in operating results are not fully realized. Furthermore, if the projections and assumptions used by management to form its opinion prove incorrect, then we may require additional capital to fund our operations over the next 12 months. Management cannot provide assurances that, if required, any additional equity or debt arrangements will be available to us in the future or that the required capital would be available on terms acceptable to us, if at all, or that any such activity would not be dilutive to our stockholders.

Shelf Registration Statement

On January 14, 2011, we filed a new shelf registration statement with the Securities and Exchange Commission pursuant to which we registered 8,000,000 shares of our common stock. On March 23, 2011, we filed an amendment to the new shelf registration statement with an effective date of April 12, 2011. The new shelf registration statement is set to expire in April 2014. We may periodically offer all or a portion of the shares of common stock registered on the new shelf registration statement, when it becomes effective, at prices and on terms to be announced when and if the shares of common stock are so offered. The specifics of any future offerings, along with the use of proceeds of any common stock offered, will be described in detail in a prospectus supplement, or other offering materials, at the time of the offering. Our ability to sell our common stock, including on terms and at prices that are acceptable to the Company, is subject to market conditions and other factors, such as contractual commitments of our previously issued warrants.

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.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in our disclosures regarding market risk since December 31, 2011. See also Item 7A in our Annual Report on Form 10-K for the year ended December 31, 2011 for further sensitivity analysis regarding our market risk related to interest rates and derivative liabilities.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

In accordance with Rule 13a-15 of the Securities Exchange Act of 1934 (the “Exchange Act”), as of the end of the period covered by this Quarterly Report on Form 10-Q, our management evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a- 15(e) and Rule 15d-15(e) under the Exchange Act). Based upon their evaluation of these disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer have concluded that the disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time we may initiate or be subject to a variety of legal proceedings and claims in the ordinary course of business, including claims seeking to enforce our intellectual property rights, claims that allege we infringe the intellectual property rights of another party and claims arising in connection in the ordinary course of business. Other than the litigations discussed below, we are not currently a party to any material legal proceedings.

GEOTAG Litigation

On July 23, 2010, a lawsuit alleging patent infringement was filed in the United States District Court for the Eastern District of Texas against us and others in our sector, by GEOTAG, Inc., a Delaware corporation with its principal offices in Plano, Texas. The complaint alleges that we infringe U.S. Patent No. 5,930,474 (hereinafter, the “ ‘474 Patent”) as a result of the operation of our website at www.local.com. GEOTAG, Inc. purports to be the rightful assignee of all right, title and interest in and to the ‘474 Patent. The complaint seeks unspecified amounts of damages and costs incurred, including attorney fees, as well as a permanent injunction preventing us from continuing those activities that are alleged to infringe the ‘474 Patent. We are investigating the merits of the claims and intend to vigorously defend ourselves.

Fry’s Electronics Litigation

On June 18, 2012, we filed a lawsuit against Fry’s Electronics, Inc. (“Fry’s”) alleging that Fry’s violates our registered U.S. Patent No. 7,062,453, which is entitled “Methods and systems for dynamic networked commerce architecture.” The lawsuit was filed in the Central District of California. We are seeking an injunction against Fry’s and an award of damages in an amount to be determined at trial, as well as attorney’s fees. There can be no guarantees as to the outcome of the litigation.

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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, 2011, filed with the Securities and Exchange Commission on March 15, 2012. 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, 2011, except as follows:

If our billing partners lose the ability to bill our monthly subscription customers through LECs on those monthly subscription customers’ telephone bills it would adversely impact our consolidated results of operations.

We currently maintain a billing relationship with certain third parties that bill some of our monthly subscription customers for us through each customer’s LEC. These third parties are approved to bill our products and services directly on most of our monthly subscription customers’ local telephone bills through their LEC, commonly referred to as their local telephone company. In fiscal 2011, approximately 83% of our monthly subscription customers were billed via LEC billing and revenue from LEC billing represented 10% of our total revenue in fiscal 2011. The existence of the LECs is the result of federal legislation. As such, Congress could pass future legislation that obviates the existence of or the need for the LECs. Additionally, regulatory agencies could limit or prevent the ability of our third-party partners to use the LECs to bill our monthly subscription customers. Similarly, the introduction of and advancement of new technologies, such as WiFi technology or other wireless-related technologies, could render unnecessary the existence of fixed telecommunication lines, which also could obviate the need for and access to the LECs. Finally, our third-party billing partners have historically been affected by the LECs’ internal policies. With respect to many LECs, such policies are becoming more stringent. In April 2012, we became aware that certain of our third party billing partners had received notices from their partners that certain LECs would no longer be accepting billing for our products and services on our monthly subscription customers’ local telephone bills. On August 8, 2012, we received a notice from our billing partner, LaRoss Partners that they would not be able to bill approximately 70% of our legacy monthly subscribers historically billed through LEC after August 2012. Further, based on information presently available to us, we believe that after November 2012, the remaining approximately 30% of our legacy monthly subscription customers billed via LEC billing or 4,100 of our total monthly subscription customers will be impacted by these decisions. If we are unable to bill our monthly subscription customers, our results will be negatively impacted. We estimate that the impact after the effectiveness of these actions will be a loss starting at approximately $257,000 per month in revenue and $200,000 per month in net income both of which would decrease over time with expected churn. These changes could also impact the collectability and or delay the collection of our LEC related receivables in the future. The inability on the part of our third-party billing partners to use the LECs to bill our advertisers through their monthly telephone bills will increase the churn rate of our existing monthly subscription customers and would have a material adverse impact on our consolidated financial condition and results of operations.

Our ability to efficiently bill our monthly subscription customers depends upon our third-party billing partners.

We currently depend upon our third-party billing partners to efficiently bill and collect monies through LEC billing. We currently have agreements with two third-party billing partners. Any disruption in these third parties’ ability to perform these functions could adversely affect our financial condition and results of operations. In April 2012, we became aware that certain of our third party billing partners had received notices from their partners that certain LECs would no longer be accepting billing for our products and services on our monthly subscription customers’ local telephone bills. On August 8, 2012, we received a notice from our billing partner, LaRoss Partners that they would not be able to bill approximately 70% of our legacy monthly subscribers historically billed through LEC after August 2012. In August 2012, approximately 9,000 of our total monthly subscription customers were impacted by these decisions. Further, based on information presently available to us, we believe that after November 2012, the remaining approximately 30% of our legacy monthly subscription customers billed via LEC billing or 4,100 of our total monthly subscription customers will be impacted by these decisions. The inability on the part of our third-party billing partners to use the LECs to bill our advertisers through their monthly telephone bills will increase the churn rate of our existing monthly subscription customers and will have a material adverse impact on our financial condition and results of operations.

Our advertising partners may impose editorial restrictions on how we display the advertiser listing they provide to us, including the content and structure of the web pages on which such advertiser listings appear. If we fail to comply with these restrictions, our advertising partners may cease providing us with access to their advertisers, which would have an adverse impact on our business. If we comply with these restrictions, our ability to maximize the monetization of our web pages could be adversely effected, which would have an adverse impact on our business.

We rely on our advertising partners to provide us with advertiser listings in order to generate revenue. We must adhere to the restrictions they impose on us with respect to the display of the advertiser listings they provide to us, including restrictions with respect to the content and structure of the web pages on which such advertiser lists appear. This impacts where advertising appears, when it appears, and how much of it appears, among other things. Since advertising is the primary source of revenue on our web pages, the restrictions imposed by our partners can impact our revenue opportunities materially. If we fail to adhere to such restrictions, our advertising partners may cease providing us with access to their advertisers, which would have an adverse impact on our operating results and financial condition. Furthermore, if we adhere to such restrictions, our ability to maximize the monetization of our web pages could be adversely effected, which would have any adverse impact on our operating results and financial condition.

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

None

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

None

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Item 5. Other Information

None

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Item 6. Exhibits

Exhibit Number	Description
1.1 (1)	Underwriting Agreement dated January 14, 2011, by and between Registrant and Canaccord Genuity Inc.
2.1 (2)	Agreement and Plan of Merger by and among Local.com Corporation, Agile Acquisition Corporation, Screamin Media Group, Inc. and Dan Griffith, as stockholders’ agent dated July 8, 2011.
3.1 (3)	Amended and Restated Certificate of Incorporation of the Registrant.
3.2 (4)	Amendment to Restated Certificate of Incorporation of the Registrant.
3.2 (5)	Amended and Restated Bylaws of the Registrant.
3.3 (6)	Certificate of Ownership and Merger of Interchange Merger Sub, Inc. with and into Interchange Corporation.
3.4 (7)	Certificate of Designation of Rights, Preferences and Privileges of Series A Participating Preferred Stock of Local.com Corporation.
3.5 (18)	Certificate of Ownership and Merger Merging Wide Out Corporation Into Local.com Corporation.
4.1 (7)	Preferred Stock Rights Agreement, dated as of October 15, 2008, by and between Local.com Corporation and Computershare Trust Company, N.A., as Rights Agent (which includes the form of Certificate of Designation of Rights, Preferences and Privileges of Series A Participating Preferred Stock of Local.com Corporation as Exhibit A thereto, the form of Rights Certificate as Exhibit B thereto, and the Stockholder Rights Plan, Summary of Rights as Exhibit C thereto).
10.1 (8)#	Employment Agreement by and between the Registrant and Erick Herring dated January 9, 2012.
10.2 (9)†	Amendment Number Two to Google Services Agreement with an effective date of February 1, 2012, by and between the Registrant and Google Inc.
10.3 (10)	First Amendment to Loan and Security Agreement dated March 28, 2012, by and among the Registrant, Krillion, Inc., Screamin Media Group, Inc. and Square 1 Bank.
10.4 (11)	Second Amendment to Loan and Security Agreement dated April 11, 2012, by and among the Registrant, Krillion, Inc., Screamin Media Group, Inc. and Square 1 Bank.
10.5 (11)†	Amendment Number 5 date April 12, 2012, to Yahoo! Publisher Network Contract dated August 30, 2010, by and between the Registrant and Yahoo! Inc.
10.6 (12)†	Amendment Number Three to Google Services Agreement with an effective date of May 1, 2012, by and between the Registrant and Google Inc.
10.7 (13)†	AOL Advertising Insertion Order dated May 29, 2012, by and between the Registrant and AOL Advertising.
10.8 (13)†	Amendment Number 6 dated May 29, 2012, to Yahoo! Publisher Network Contract dated August 30, 2010, by and among the Registrant, Yahoo! Inc., and Yahoo! SARL.
10.9 (13)†	Amendment Number Four to Google Services Agreement with an effective date of June 1, 2012, by and between the Registrant and Google Inc.
10.10 (14)#	2011 Omnibus Incentive Plan, as amended.
10.11 (15)#	Description of the Material Terms of the Registrant’s Bonus Program as of June 20, 2012.
10.12 (16)†	Amendment Number 7 dated August 1, 2012, to Yahoo! Publisher Network Contract, as amended, dated August 30, 2010, by and among the Registrant, Yahoo! Inc., and Yahoo! SARL.
10.13 (17)	Third Amendment to Loan and Security Agreement dated August 17, 2012, by and among the Registrant, Krillion, Inc., Screamin Media Group, Inc. and Square 1 Bank.
10.14 (19)	Amendment Number 8 dated September 29, 2012, to Yahoo! Publisher Network Contract, as amended, dated August 30, 2010, by and among the Registrant, Yahoo! Inc., and Yahoo! SARL.
10.15 (20)	Asset Purchase Agreement by and among the Registrant, Rovion, LLC and Point Roll, Inc., dated October 19, 2012.
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.
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.

* Filed herewith.

# Indicates management contract or compensatory plan.

32

** To be filed by amendment.

† Application has been made with the Securities and Exchange Commission to seek confidential treatment of certain provisions. Omitted material for which confidential treatment has been requested has been filed separately with the Securities and Exchange Commission.

(1) Incorporated by reference from the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 14, 2011.

(2) Incorporated by reference from the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on July 14, 2011.

(3) Incorporated by reference from the Registrant’s Statement on Form SB-2, Amendment No. 2, filed with the Securities and Exchange Commission on September 16, 2004.

(4) Incorporated by reference from the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on August 17, 2009

(5) Incorporated by reference from the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on November 2, 2007.

(6) Incorporated by reference from the Registrant’s Current Report on Form 8-K/A, filed with the Securities and Exchange Commission on November 2, 2006.

(7) Incorporated by reference from the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on October 15, 2008.

(8) Incorporated by reference from the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 13, 2012.

(9) Incorporated by reference from the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on February 9, 2012.

(10) Incorporated by reference from the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on March 30, 2012.

(11) Incorporated by reference from the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on April 16, 2012.

(12) Incorporated by reference from the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on May 16, 2012.

(13) Incorporated by reference from the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on June 4, 2012.

(14) Incorporated by reference from the Registrant’s definitive proxy statement on Schedule 14A filed with the Securities and Exchange Commission on June 12, 2012.

(15) Incorporated by reference from the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on June 20, 2012.

(16) Incorporated by reference from the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on August 7, 2012.

(17) Incorporated by reference from the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on August 23, 2012.

(18) Incorporated by reference from the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on September 19, 2012.

33

(19) Incorporated by reference from the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on October 1, 2012.

(20) Incorporated by reference from the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on October 19, 2012.

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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 CORPORATION
November 9, 2012	/s/ Heath B. Clarke
Date	Heath B. Clarke
	Chief Executive Officer
	(principal executive officer) and Chairman
November 9, 2012	/s/ Kenneth S. Cragun
Date	Kenneth S. Cragun
	Chief Financial Officer (principal financial
	and accounting officer) and Secretary

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INDEX TO EXHIBITS

Exhibit Number	Description
1.1 (1)	Underwriting Agreement dated January 14, 2011, by and between Registrant and Canaccord Genuity Inc.
2.1 (2)	Agreement and Plan of Merger by and among Local.com Corporation, Agile Acquisition Corporation, Screamin Media Group, Inc. and Dan Griffith, as stockholders’ agent dated July 8, 2011.
3.1 (3)	Amended and Restated Certificate of Incorporation of the Registrant.
3.2 (4)	Amendment to Restated Certificate of Incorporation of the Registrant.
3.2 (5)	Amended and Restated Bylaws of the Registrant.
3.3 (6)	Certificate of Ownership and Merger of Interchange Merger Sub, Inc. with and into Interchange Corporation.
3.4 (7)	Certificate of Designation of Rights, Preferences and Privileges of Series A Participating Preferred Stock of Local.com Corporation.
3.5 (18)	Certificate of Ownership and Merger Merging Wide Out Corporation Into Local.com Corporation.
4.1 (7)	Preferred Stock Rights Agreement, dated as of October 15, 2008, by and between Local.com Corporation and Computershare Trust Company, N.A., as Rights Agent (which includes the form of Certificate of Designation of Rights, Preferences and Privileges of Series A Participating Preferred Stock of Local.com Corporation as Exhibit A thereto, the form of Rights Certificate as Exhibit B thereto, and the Stockholder Rights Plan, Summary of Rights as Exhibit C thereto).
10.1 (8)#	Employment Agreement by and between the Registrant and Erick Herring dated January 9, 2012.
10.2 (9)†	Amendment Number Two to Google Services Agreement with an effective date of February 1, 2012, by and between the Registrant and Google Inc.
10.3 (10)	First Amendment to Loan and Security Agreement dated March 28, 2012, by and among the Registrant, Krillion, Inc., Screamin Media Group, Inc. and Square 1 Bank.
10.4 (11)	Second Amendment to Loan and Security Agreement dated April 11, 2012, by and among the Registrant, Krillion, Inc., Screamin Media Group, Inc. and Square 1 Bank.
10.5 (11)†	Amendment Number 5 date April 12, 2012, to Yahoo! Publisher Network Contract dated August 30, 2010, by and between the Registrant and Yahoo! Inc.
10.6 (12)†	Amendment Number Three to Google Services Agreement with an effective date of May 1, 2012, by and between the Registrant and Google Inc.
10.7 (13)†	AOL Advertising Insertion Order dated May 29, 2012, by and between the Registrant and AOL Advertising.
10.8 (13)†	Amendment Number 6 dated May 29, 2012, to Yahoo! Publisher Network Contract dated August 30, 2010, by and among the Registrant, Yahoo! Inc., and Yahoo! SARL.
10.9 (13)†	Amendment Number Four to Google Services Agreement with an effective date of June 1, 2012, by and between the Registrant and Google Inc.
10.10 (14)#	2011 Omnibus Incentive Plan, as amended.
10.11 (15)#	Description of the Material Terms of the Registrant’s Bonus Program as of June 20, 2012.
10.12 (16)†	Amendment Number 7 dated August 1, 2012, to Yahoo! Publisher Network Contract, as amended, dated August 30, 2010, by and among the Registrant, Yahoo! Inc., and Yahoo! SARL.
10.13 (17)	Third Amendment to Loan and Security Agreement dated August 17, 2012, by and among the Registrant, Krillion, Inc., Screamin Media Group, Inc. and Square 1 Bank.
10.14 (19)	Amendment Number 8 dated September 29, 2012, to Yahoo! Publisher Network Contract, as amended, dated August 30, 2010, by and among the Registrant, Yahoo! Inc., and Yahoo! SARL.
10.15 (20)	Asset Purchase Agreement by and among the Registrant, Rovion, LLC and Point Roll, Inc., dated October 19, 2012.
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.
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.

* Filed herewith.

# Indicates management contract or compensatory plan.

36

** To be filed by amendment.

† Application has been made with the Securities and Exchange Commission to seek confidential treatment of certain provisions. Omitted material for which confidential treatment has been requested has been filed separately with the Securities and Exchange Commission.

(1) Incorporated by reference from the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 14, 2011.

(2) Incorporated by reference from the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on July 14, 2011.

(3) Incorporated by reference from the Registrant’s Statement on Form SB-2, Amendment No. 2, filed with the Securities and Exchange Commission on September 16, 2004.

(4) Incorporated by reference from the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on August 17, 2009

(5) Incorporated by reference from the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on November 2, 2007.

(6) Incorporated by reference from the Registrant’s Current Report on Form 8-K/A, filed with the Securities and Exchange Commission on November 2, 2006.

(7) Incorporated by reference from the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on October 15, 2008.

(8) Incorporated by reference from the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 13, 2012.

(9) Incorporated by reference from the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on February 9, 2012.

(10) Incorporated by reference from the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on March 30, 2012.

(11) Incorporated by reference from the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on April 16, 2012.

(12) Incorporated by reference from the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on May 16, 2012.

(13) Incorporated by reference from the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on June 4, 2012.

(14) Incorporated by reference from the Registrant’s definitive proxy statement on Schedule 14A filed with the Securities and Exchange Commission on June 12, 2012.

(15) Incorporated by reference from the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on June 20, 2012.

(16) Incorporated by reference from the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on August 7, 2012.

(17) Incorporated by reference from the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on August 23, 2012.

(18) Incorporated by reference from the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on September 19, 2012.

37

(19) Incorporated by reference from the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on October 1, 2012.

(20) Incorporated by reference from the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on October 19, 2012.

38