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Local Corporation Reports Second Quarter 2012 Financial Results

Our most recent Annual Report on Form 10-K, subsequent Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K and Form 8-K/A, and other Securities and Exchange Commission filings discuss the foregoing risks as well as other important risk factors that could contribute to such differences or otherwise affect our business, results of operations and financial condition. The forward-looking statements in this release speak only as of the date they are made. We undertake no obligation to revise or update publicly any forward-looking statement for any reason.

Non-GAAP Financial Measures

This press release includes the non-GAAP financial measure of “Adjusted Net Income” and “Adjusted Net Loss” which we define as net income (loss) excluding: provision for income taxes; interest and other income (expense), net; depreciation; amortization; stock based compensation charges; gain or loss on warrant revaluation; net income (loss) from discontinued operations; impairment charges and non-recurring items. Adjusted Net Income (Loss), as defined above, is not a measurement under GAAP. Adjusted Net Income (Loss) is reconciled to net income (loss) which we believe is the most comparable GAAP measure. A reconciliation of net income (loss) to Adjusted Net Income (Loss) is set forth at the end of this press release.

Management believes that Adjusted Net Income (Loss) provides useful information to investors about the company’s performance because it eliminates the effects of period-to-period changes in income from interest on the company’s cash and marketable securities, expense from the company’s financing transactions and the costs associated with income tax expense, capital investments, stock-based compensation expense, warrant revaluation charges and non-recurring items which are not directly attributable to the underlying performance of the company’s business operations. Management uses Adjusted Net Income (Loss) in evaluating the overall performance of the company’s business operations.

A limitation of non-GAAP Adjusted Net Income (Loss) is that it excludes items that often have a material effect on the company’s net income and earnings per common share calculated in accordance with GAAP. Therefore, management compensates for this limitation by using Adjusted Net Income (Loss) in conjunction with net income (loss) and net income (loss) per share measures. The company believes that Adjusted Net Income (Loss) provides investors with an additional tool for evaluating the company’s core performance, which management uses in its own evaluation of overall performance, and as a base-line for assessing the future earnings potential of the company. While the GAAP results are more complete, the company prefers to allow investors to have this supplemental metric since, with reconciliation to GAAP; it may provide greater insight into the company’s financial results. The non-GAAP measures should be viewed as a supplement to, and not as a substitute for, or superior to, GAAP net income or earnings per share.

LOCAL.COM CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except par value)
     
June 30, December 31,
  2012     2011  
ASSETS
Current assets:
Cash $ 7,103 $ 10,394
Restricted cash 42 10
Accounts receivable, net of allowances of $453 and $550, respectively 15,224 13,456
Notes receivable – current portion 392 392
Prepaid expenses and other current assets 619 732
Assets held for sale   2,300     2,187  
 
Total current assets 25,680 27,171
 
Property and equipment, net 7,499 8,018
Goodwill 25,870 31,370
Intangible assets, net 6,290 8,833
Long term portion of note receivable 222 350
Deposits   60     69  
 
Total assets $ 65,621   $ 75,811  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 14,514 $ 12,193
Accrued compensation 1,730 2,152
Deferred rent 516 551
Warrant liability 99 207
Other accrued liabilities 1,599 2,422
Revolving line of credit 8,000 8,000
Deferred revenue 203 281
Liabilities held for sale   57     32  
 
Total current liabilities   26,718     25,838  
 
Deferred income taxes   265     265  
 
Total liabilities   26,983     26,103  
 
Commitments and contingencies
 
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; 22,088 and 22,082 issued and outstanding, respectively - -
Additional paid-in capital 120,547 119,068
Accumulated deficit   (81,909 )   (69,360 )
 
Stockholders’ equity   38,638     49,708  
 
Total liabilities and stockholders’ equity $ 65,621   $ 75,811  
 
LOCAL.COM CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
       
Three Months Ended June 30, Six Months Ended

June 30,

  2012       2011     2012       2011  
Revenue $ 27,072   $ 15,477   $ 52,104   $ 32,272  
Costs and expenses:
Cost of revenues 19,990 10,798 37,335 21,786
Sales and marketing 4,628 4,158 10,291 7,435
General and administrative 2,799 3,291 5,185 5,907
Research and development 1,275 1,358 2,456 2,885
Amortization of intangibles 819 1,132 1,743 2,330
Impairment of goodwill and intangible assets   6,451     -     6,451     -  
 
Total operating expenses   35,962     20,737     63,461     40,343  
 
Operating income (loss) (8,890 ) (5,260 ) (11,357 ) (8,071 )
 
Interest and other income (expense), net (97 ) (30 ) (194 ) (85 )
Change in fair value of warrant liability   166     411     108     1,970  
 
Income (loss) from continuing operations before income taxes (8,821 ) (4,879 ) (11,443 ) (6,186 )
 
Provision for income taxes   44     48     99     59  
 
Net income (loss) from continuing operations (8,865 ) (4,927 ) (11,542 ) (6,245 )
Income (loss) from discontinued operations (net of taxes)   (482 )   (477 )   (1,007 )   (477 )
Net Income (loss) $ (9,347 ) $ (5,404 ) $ (12,549 ) $ (6,722 )
 
Per share data:
 
Basic net income (loss) per share from continuing operations $ (0.40 ) $ (0.23 ) $ (0.52 ) $ (0.30 )
Basic net income (loss) per share from discontinued operations $ (0.02 ) $ (0.02 ) $ (0.05 ) $ (0.02 )
Basic net income (loss) per share $ (0.42 ) $ (0.25 ) $ (0.57 ) $ (0.32 )
 
Diluted net income (loss) per share from continuing operations $ (0.40 ) $ (0.23 ) $ (0.52 ) $ (0.30 )
Diluted net income (loss) per share from discontinued operations $ (0.02 ) $ (0.02 ) $ (0.05 ) $ (0.02 )
Diluted net income (loss) per share $ (0.42 ) $ (0.25 ) $ (0.57 ) $ (0.32 )
 
 
Basic weighted average shares outstanding 22,086 21,254 22,084 20,750
Diluted weighted average shares outstanding 22,086 21,254 22,084 20,750
 
Supplemental Consolidated Statements of Operations Information
Stock-based Compensation Expense
(in thousands, except per share data)
     
Three Months Ended June 30, Six Months Ended

June 30,

2012   2011 2012   2011
Cost of revenues $ 18 $ 66 $ 40 $ 153
Sales and marketing 268 330 585 648
General and administrative 332 489 668 936
Research and development   49   106   100   225
Total stock-based compensation expense* $ 667 $ 991 $ 1,393 $ 1,962
 
Basic and diluted net stock-based compensation expense per share $ 0.03 $ 0.05 $ 0.06 $ 0.09
 

*- Excludes impact of discontinued operations.

 
LOCAL.COM CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
         
Six Months Ended June 30,
2012     2011  
Cash flows from operating activities:
Net income (loss) $ (12,549 ) $ (6,722 )
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:
Depreciation and amortization 3,782 3,760
Provision for doubtful accounts 38 -
Stock-based compensation expense 1,473 1,992
Change in fair value of warrant liability (108 ) (1,970 )
Impairment of goodwill and intangible assets 6,451 -
Changes in operating assets and liabilities:
Accounts receivable (1,806 ) 1,191
Note receivable 128 114
Prepaid expenses and other 122 554
Accounts payable and accrued liabilities 1,081 63
Deferred revenue   (93 )   (398 )
Net cash provided by (used in) operating activities   (1,481 )   (1,416 )
 
Cash flows from investing activities:
Capital expenditures (1,784 ) (2,013 )
Increase in restricted cash (32 ) -
Issuance of notes receivable - (1,085 )
Proceeds from notes receivable - 585
Acquisitions, net of cash acquired - (6,217 )
Purchases of intangible assets   -     (554 )
Net cash used in investing activities   (1,816 )   (9,284 )
 
Cash flows from financing activities:
Proceeds from exercise of warrants - -
Proceeds from exercise of options 11 158
Proceeds from the public offering of common stock - 18,227
Payment of revolving credit facility - (7,000 )
Proceeds from revolving credit facility - -
Payment of financing related costs   (5 )   (282 )
Net cash provided by financing activities   6     11,103  
Net increase (decrease) in cash (3,291 ) 403
Cash, beginning of period   10,394     13,079  
Cash, end of period $ 7,103   $ 13,482  
 
Supplemental Cash Flow Information:
Interest paid $ 212   $ 64  
Income taxes paid $ 7   $ 11  
 
LOCAL.COM CORPORATION
RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED NET INCOME
(in thousands, except per share amounts)
(Unaudited)
     
Three Months Ended June 30, Three Months Ended

March 31,

  2012       2011     2012  
GAAP net income (loss) $ (9,347 ) $ (5,404 ) $ (3,202 )
 
Plus interest and other income (expense), net 97 30 97
Plus provision for income taxes 44 48 55
Plus amortization of intangibles 819 1,132 924
Plus depreciation 907 704 860
Plus stock-based compensation 667 991 727
Less revaluation of warrants (166 ) (411 ) 58
Plus net loss from discontinued operations 482 477 525
Plus asset Impairment charge 6,451 - -
Plus non-recurring charges*   514     898     95  
 
Adjusted Net Income (Loss) $ 468   $ (1,535 ) $ 139  
 
Diluted Adjusted Net Income (loss) per share $ 0.02   $ (0.07 ) $ 0.01  
 
Diluted weighted average shares outstanding 22,219 21,254 22,219

* Included in non-recurring charges are costs incurred due to a change in officer as well as severance cost incurred during the quarter.

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