8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 8-K

Current Report

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

Date of Report (Date of earliest event reported): 11/9/2007

LookSmart, Ltd.

(Exact name of registrant as specified in its charter)

Commission File Number: 000-26357

Delaware	13-3904355
(State or other jurisdiction of incorporation)	(IRS Employer Identification No.)

625 Second Street

San Francisco, CA. 94107

(Address of principal executive offices, including zip code)

415-348-7000

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.01 Completion of Acquisition or Disposition of Assets.

On November 5, 2007, LookSmart, Ltd. (the “Company”), entered into an Asset Purchase Agreement (the “Purchase Agreement”), with CNET Networks, Inc (“CNET”), pursuant to which CNET purchased substantially all of the assets, which included certain fixed assets and intangible assets of the Company’s FindArticles.com consumer property in an all cash transaction valued at approximately $20.5 million in cash (“the Asset Sale”).

The Purchase Agreement contains customary representations and warranties, as well as covenants by each of the parties thereto, and indemnification provisions whereby each party agrees to indemnify the other for breaches of representations, warranties and covenants and certain other matters. The Asset Sale was completed on November 9, 2007.

The foregoing description of the Agreement does not purport to be complete and is qualified in its entirety by reference to such document, a copy of which was filed with the Company’s current report on Form 8-K on November 7, 2007 and is incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits

(b) Pro forma financial information

The following unaudited pro forma condensed consolidated financial statements and notes thereto are filed herewith as Exhibit 99.1 and are incorporated herein by this reference:

1. Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Nine Months Ended September 30, 2007

2. Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Year Ended December 31, 2006

3. Unaudited Pro Forma Condensed Consolidated Balance Sheet as of September 30, 2007

4. Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements

This unaudited pro forma financial information should be read in conjunction with the Company’s 2006 Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 16, 2007 and the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2007 filed with the Securities and Exchange Commission on November 9, 2007.

(d)	Exhibit No.	Description
	2.1	Asset Purchase Agreement between LookSmart, Ltd. and CNET Networks, Inc. dated as of November 5, 2007 (Filed with the SEC on the Company’s Current Report on Form 8-K on November 7, 2007).
	99.1	Unaudited Pro Forma Condensed Consolidated Financial Statements as of September 30, 2007, and for the year ended December 31, 2006 and the nine months ended September 30, 2007.

Signature(s)

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

		LookSmart, Ltd.
Date: November 16, 2007	By:	/s/ Edward West
		Edward West Interim Chief Executive Officer and President

Exhibit Index

Exhibit No.	Description
2.1	Asset Purchase Agreement between LookSmart, Ltd. and CNET Networks, Inc. dated as of November 5, 2007 (Filed with the SEC on the Company’s Current Report on Form 8-K on November 7, 2007).
99.1	Unaudited Pro Forma Condensed Consolidated Financial Statements as of September 30, 2007, and for the year ended December 31, 2006 and the nine months ended September 30, 2007.

EX-99.1

Exhibit 99.1

LookSmart, Ltd.

Unaudited Pro Forma Condensed Consolidated Statement of Operations

(in thousands, except per share data)

	For the Nine Months Ended September 30, 2007
	As Reported			Pro Forma Adjustments			Pro Forma
Revenues	$	40,479		$	(3,109	)a	$	37,370
Cost of revenues		22,901			(1,204	)a		21,697
Gross profit		17,578			(1,905	)		15,673
Operating expenses:
Sales and marketing		6,232			—			6,232
Product development		11,970			(517	)a		11,453
General and administrative		9,146			(85	)a		9,061
Restructuring charges		224			—			224
Impairment charges		1,645			—			1,645
Total operating expenses		29,217			(602	)		28,615
Other operating income, (loss)		(99	)		—			(99	)
Loss from operations		(11,738	)		(1,303	)		(13,041	)
Non-operating income, net		1,522			—			1,522
Loss from continuing operations before income taxes		(10,216	)		(1,303	)		(11,519	)
Income tax (expense) benefit		(6	)		(521	)g		515
Loss from continuing operations	$	(10,222	)	$	(782	)	$	(11,004	)
Basic and diluted net loss per common share:
Loss from continuing operations	$	(0.45	)				$	(0.48	)
Weighted average shares outstanding used in per share calculation		22,913						22,913

See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements

LookSmart, Ltd.

Unaudited Pro Forma Condensed Consolidated Statement of Operations

(in thousands, except per share data)

	For the Year Ended December 31, 2006
	As Reported			Pro Forma Adjustments			Pro Forma
Revenues	$	48,673		$	(2,592	)a	$	46,081
Cost of revenues		30,489			(1,384	)a		29,105
Gross profit		18,184			(1,208	)		16,976
Operating expenses:
Sales and marketing		7,930			—			7,930
Product development		15,989			(527	)a		15,462
General and administrative		10,324			(63	)a		10,261
Restructuring charges		(290	)		—			(290	)
Total operating expenses		33,953			(590	)		33,363
Loss from operations		(15,769	)		(618	)		(16,387	)
Non-operating income, net		2,141			—			2,141
Loss from continuing operations before income taxes		(13,628	)		(618	)		(14,246	)
Income tax (expense) benefit		(5	)		(247	)g		242
Loss from continuing operations	$	(13,633	)	$	(371	)	$	(14,004	)
Basic and diluted net loss per common share:
Loss from continuing operations	$	(0.60	)				$	(0.61	)
Weighted average shares outstanding used in per share calculation		22,822						22,822

See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements

LookSmart, Ltd.

Unaudited Pro Forma Condensed Consolidated Balance Sheet

(in thousands, except share data)

	As of September 30, 2007
	As Reported			Pro Forma Adjustments			Pro Forma
ASSETS
Current Assets:
Cash and cash equivalents	$	18,921		$	18,075	b	$	36,996
Short-term investments		18,476			—			18,476
Total cash, cash equivalents, and short-term investments		37,397			18,075			55,472
Accounts receivable, net		4,355			—			4,355
Prepaid expenses		650			—			650
Other current assets		513			1,025	c		1,538
Total current assets		42,915			19,100			62,015
Long-term investments		—			—			—
Property and equipment, net		3,338			—			3,338
Capitalized software and other assets, net		2,851			—			2,851
Intangible assets, net		319			—			319
Goodwill		10,296			—			10,296
Assets held for sale		4,331			(4,331	)d		—
Total assets	$	64,050		$	14,769		$	78,819
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable	$	2,689		$	—		$	2,689
Accrued expenses and other current liabilities		6,907			367	e		7,274
Deferred revenue and other customer deposits		1,691			—			1,691
Current portion of lease restructuring and other long-term liabilities		1,348			—			1,348
Total current liabilities		12,635			367			13,002
Lease restructuring and other long-term liabilities, net of current portion		2,215			—			2,215
Total liabilities		14,850			367			15,217
Stockholders’ equity:
Convertible preferred stock, $0.001 par value; Authorized: 5,000 at September 30, 2007 and December 31, 2006; Issued and Outstanding: none at September 30, 2007 and December 31, 2006		—			—			—
Common stock; $0.001 par value; Authorized: 200,000 at September 30, 2007 and December 31, 2006; Issued and Outstanding: 22,913 at September 30, 2007 and 22,974 at December 31, 2006, respectively		23			—			23
Additional paid-in-capital		276,450			—			276,450
Other equity		14			—			14
Accumulated deficit		(227,287	)		14,402	f		(212,885	)
Total stockholders’ equity		49,200			14,402			63,602
Total liabilities and stockholders’ equity	$	64,050		$	14,769		$	78,819

See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements

CNET Networks, Inc.

Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements

NOTE 1 Description of Transaction

On November 5, 2007, LookSmart, Ltd. (the “Company”), entered into an Asset Purchase Agreement (the “Purchase Agreement”) with CNET Networks, Inc. (“CNET”) pursuant to which CNET purchased substantially all of the assets, which included certain fixed assets and intangible assets of the Company’s FindArticles.com consumer property, in an all cash transaction valued at approximately $20.5 million in cash (the “Asset Sale”) of which 5% will be held in escrow for the six months following the completion of the Asset Sale. The Asset Sale was completed on November 9, 2007. In connection with the Asset Sale, Looksmart will provide certain transition services to CNET for an interim period.

NOTE 2 Pro Forma Adjustments

The accompanying unaudited pro forma condensed consolidated financial information has been prepared to reflect the effect of the Asset Sale on the Company’s historical results of operations and financial position. The unaudited pro forma condensed consolidated financial statements for the nine months ended September 30, 2007 and the year ended December 31, 2006 presents the Company’s results of operations and financial position as if the Asset Sale had occurred on January 1, 2006. The unaudited pro forma condensed consolidated balance sheet gives effect to the Asset Sale as if the transaction had occurred on September 30, 2007.

The pro forma adjustments presented herein are based on estimates and certain information that is currently available and may change as additional information becomes available. The unaudited pro forma condensed consolidated financial statements have been presented for informational purposes only and are not necessarily indicative of the results of operations or the financial position that would have been achieved had the Asset Sale been completed at the beginning of or as of the periods presented, nor are they indicative of the future results of operations or future financial position of the Company. The adjustments are described in the notes to the unaudited pro forma condensed consolidated financial statements and are set forth in the “Pro Forma Adjustments” column.

The pro forma adjustments are as follows:

a. These adjustments are recorded to eliminate the revenues and operating expenses that LookSmart believes are directly attributable to the FindArticles.com Asset Sale and will not continue after completion of the transaction.

b. To record the cash consideration received from CNET, net of cash consideration in escrow and net of transaction costs paid directly by CNET.

c. To record the portion of cash consideration in escrow.

d. To eliminate the assets sold to CNET and to eliminate the goodwill allocated to the FindArticles business.

e. To accrue for estimated transaction costs associated with the sale.

f. To record the preliminary gain on the sale of the FindArticles business as if the transaction had been consummated on September 30, 2007

Proceeds from sale	$	20,500
Assets sold		(205	)
Goodwill		(4,126	)
Transaction costs		(1,767	)
Pro forma gain on sale	$	14,402

g. An income tax expense has been provided relating to the pretax income from the FindArticles operations and a corresponding income tax benefit has been provided relating to the pretax loss from the remaining continuing operations of the Company for the year ended December 31, 2006 and for the nine months ended September 30, 2007. These adjustments are based on the Company’s statutory rate. This benefit and corresponding expense have been computed in accordance with Regulation S-X Article 11 pro forma information which requires the disposition of FindArticles be treated as a discontinued operation for the purposes of the proforma financial information. This treatment is for purposes of reporting the disposal in accordance with Article 11, however the ultimate treatment in the Company’s historical financial statements to be included in its Annual Report on Form 10K for the year ending December 31, 2007 will not provide for such treatment unless the operations of FindArticles are presented as discontinued operations.