Prospectus Summary
You should read the following summary together with the more detailed information regarding LookSmart and the common stock being sold in this offering and our financial statements and notes thereto appearing elsewhere in this prospectus. The presentation of information in this prospectus assumes the conversion of all LookSmart's preferred stock into common stock as of the date of closing of this offering, and that the underwriters do not exercise the option granted to them by us to purchase additional shares in the offering.
LookSmart
Our Business
We are a leading category-based Internet directory provider which has assembled what we believe to be the largest collection of high-quality, granular (highly specific) content on the Internet. Our LookSmart directory contains over 750,000 unique Uniform Resource Locators (URLs) in over 60,000 categories. Our directory is organized in an easy-to-navigate format that is designed to appeal to an audience of novice, as well as sophisticated, Internet users. We are the only major Internet navigation service provider that chooses not to list pornographic or hate material.
We distribute our proprietary directory to a large number of Internet users through LookSmart-owned Internet properties and through our strategic alliances. Our Internet properties, including looksmart.com, target primarily a focused demographic of female household purchase decision-makers and generate advertising and electronic commerce (ecommerce) transaction revenues. We broaden the reach of the LookSmart directory through syndication and licensing of our content. We currently provide our directory to leading Internet portals, such as The Microsoft Network (MSN), Netscape Netcenter, Excite@Home and Alta Vista, and over 200 Internet Service Providers (ISPs), including IBM.net and NetZero. In addition, users can access our content and services through a network of over 600,000 website affiliates. In April 1999, more than 43 million individual Internet users accessed looksmart.com and the websites of our licensing and syndication partners, according to Media Metrix.
Our Market Opportunity The Navigation Challenge. The massive volume and growth of highly specific content on the Internet has created the need for an organizing layer that can successfully match content producers with end users. We believe that most Internet organization efforts to date, such as traditional Internet directories and search engines, have failed to fully meet this challenge.
The Audience and Advertising Challenge. We believe that current Internet navigation services do not meet the particular needs of what we call the New Media Familysm, a group consisting primarily of female household purchase decision-makers, many of whom are new Internet users. In addition, many advertisers cannot accurately target this audience using the Internet.
The Business Challenge. As the amount and specificity of Internet content has grown, the editorial challenge for ISPs, portals and vertical websites of maintaining high-quality directories has grown proportionally. We believe that these companies have a need for outsourced services to provide their search, directory and content solutions. In addition, the rapid emergence of ecommerce has created challenges for many businesses that hope to tap ecommerce opportunities.
To address these challenges, we offer several solutions to Internet users and businesses.
The Navigation Solution. We provide a leading category-based Internet directory that consists of what we believe to be the largest collection of high-quality, granular content on the Internet organized in an easy-to-navigate format.
The Audience and Advertising Solution. Through looksmart.com, we seek to package the LookSmart directory with other appropriate content and functionality to provide a simple, compelling experience for the New Media Family. Looksmart.com's benefits include: intuitive navigation, inoffensive content environment, differentiated visual design, content, commerce and community functionality. By targeting the New Media Family, we offer advertisers a unique opportunity to reach female household purchase decision- makers. In addition, we offer advertisers the ability to place their advertisements on category and keyword results pages.
The Business Solution. We offer a variety of business solutions.
. We leverage our database by syndicating, licensing and distributing our proprietary content to leading Internet portals, websites and other media companies, and we provide ISPs with a full content solution for their users.
. We offer services that help both new and existing businesses optimize their online presence, including website enhancement services for webmasters and seminars and services that enable small and mid-size business owners to sell their products and services over the Internet.
. We offer a variety of websites that allow buyers and sellers to find each other. These websites include rewardmall.com, an affinity Internet shopping mall site, and "Buy it On the Web", an Internet shopping website that promotes and sells over 30 "As Seen on TV" products.
Our Strategy
Our strategy is to be the leading category-based Internet directory service for global and local information on the Internet and to derive multiple revenue streams by leveraging our directory asset. Key elements to our growth strategy include:
Expand Collection of High-Quality, Granular Content. We intend to expand both the number of high-quality URLs included in our directory, as well as the number of categories into which we classify the URLs by continually adding new websites, communities and ecommerce environments, deleting outdated links and updating editorial annotations.
Build the LookSmart Brand and Audience. To enhance business and consumer awareness of our brand, we plan to pursue an extensive brand development initiative through mass market and targeted advertising. Our consumer branding investments will focus specifically on reaching our target New Media Family audience.
Utilize LookSmart Content to Drive Multiple Revenue Streams. We intend to leverage our unique assets--the LookSmart directory and the people and processes that create it--and monetize them by generating revenues through online advertising, syndication and licensing, Internet outsourcing and ecommerce.
Pursue Strategic Acquisitions and Alliances. We plan to pursue acquisitions and alliances to strengthen our technology, broaden our audience reach, capture new distribution channels or open new revenue streams.
Expand into Select International Markets. As one of only a few companies that have created a significant presence in the United States Internet market with beginnings outside the United States, we believe we are well positioned to enter major international markets in a locally-relevant, culturally-sensitive manner.
Corporate Information We are a Delaware corporation with our principal executive offices located at 487 Bryant Street, San Francisco, CA 94107-1316. Our telephone number is (415) 597-4850. Our fiscal year ends on December 31. We maintain a world wide website at www.looksmart.com. The reference to our world wide web address does not constitute incorporation by reference of the information contained at this website. The LookSmart logo is a registered trademark of LookSmart, and LookSmart Live! and New Media Family are service marks of LookSmart. All other brand names and trademarks appearing in this prospectus are the property of their respective holders.
The Offering
Shares offered by LookSmart................ shares Shares outstanding after this offering(1).. shares Proposed Nasdaq National Market Symbol..... "LOOK" Use of proceeds............................ General corporate purposes, including working capital, marketing and promotional activities, new product development, increased personnel and potential acquisitions.
(1) Based on shares outstanding as of , 1999, including 8,016,616 shares of common stock to be issued upon exercise of outstanding warrants immediately prior to the closing of this offering. The following shares are excluded from this number: 7,904,584 shares of common stock issuable upon the exercise of options outstanding under our 1998 Stock Plan and 2,286,941 shares of common stock issuable upon exercise and conversion of outstanding warrants.
Summary Consolidated Financial Information (in thousands, except per share amounts)
Pro Forma
Fiscal Year Ended Three Months Pro Forma Three Months
------------------------- Ended Year Ended Ended
December 31, December 31, March 31, December 31, March 31,
1997 1998 1999 1998(1) 1999(1)
Consolidated Statement of Operations Data: Net revenues............ $ 949 $ 8,785 $ 6,580 $ 20,143 $ 10,245 Loss from operations.... (7,329) (11,898) (6,689) (17,026) (7,728) Net loss................ (7,514) (12,858) (6,722) (17,988) (7,761) Net loss per share: Basic and diluted..... $ (0.12) $ (1.03) $ (0.52) $ (1.26) $ (0.53) Weighted average shares, basic and diluted...... 61,059,333 12,526,356 12,972,652 14,226,356 14,672,652 Pro forma net loss per share: Basic and diluted..... $ (0.47) $ (0.17) $ (0.59) $ (0.20) Pro forma weighted average shares, basic and diluted............ 27,386,715 39,149,991 30,631,159 39,149,991 At March 31, 1999 Pro Forma Actual As Adjusted(1)(2) Consolidated Balance Sheet Data: ------- -----------------
Cash and cash equivalents........................... $58,429 Working capital..................................... 51,362 Total assets........................................ 84,070 Long-term debt and capital lease obligations, net of current portion.................................... 375 Total stockholders' equity.......................... $52,701
(1) Pro forma financial information reflects the acquisition of BeSeen.com, Inc. and the asset purchase transactions with Guthy-Renker Internet, LLC and ITW NewCorp, Inc. See the unaudited pro forma combined financial information and the notes thereto included elsewhere in this prospectus. (2) As adjusted to reflect the sale of shares of our common stock at an assumed offering price of $ per share, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.