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LookSmart Reports Second Quarter 2010 Results

Revenues from the Company's Advertiser Network were $12.1 million in the second quarter of 2010, an increase of 1% from $12.0 million in the second quarter of 2009 and a decrease of 3% from $12.4 million in the first quarter of 2010. Revenues from the Company's Publisher Solutions were $0.9 million in the second quarter of 2010, a decrease of 24% from $1.2 million in the second quarter of 2009 and an increase of 7% from the first quarter of 2010. 

Gross margins from continuing operations increased to 42% in the second quarter of 2010 from 40% in the second quarter of 2009 and from 32% in the first quarter of 2010. The strong sequential improvement in gross margins reflects the diligent execution to monitor and adjust the Company's traffic acquisition costs (TAC).

Total operating expenses in the second quarter of 2010 were $4.9 million, which includes $0.2 million of non-cash, share-based compensation charges. Operating expenses for the second quarter of 2009 were $6.7 million, which includes $0.5 million of non-cash, share-based compensation charges, a $0.2 million impairment charge and $0.2 million of expenses related to the evaluation of strategic growth alternatives. Operating expenses for the first quarter of 2010 were $4.8 million, which includes $0.2 million of non-cash, share-based compensation charges and $0.2 million of severance expense. The Company's improved operating expenses on a year-over-year basis include the benefit of the relocation of headquarters in November 2009.   

Non-GAAP net income (net income before discontinued operations and excluding stock based compensation and impairment charges) for the second quarter of 2010 was $0.7 million compared to a non-GAAP net loss of $0.7 million in the second quarter of 2009. Non-GAAP net loss for the first quarter of 2010 was $0.4 million.

An explanation of LookSmart's use of non-GAAP financial measures, including the limitations of such measures relative to GAAP measures and reconciliation between GAAP and non-GAAP measures where appropriate, is included later in this release.

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