For a description of our significant accounting policies and an understanding of the significant factors that influenced our performance during the three months ended December 31, 2012, this "Management's Discussion and Analysis of Financial Condition and Results of Operations" (hereafter referred to as "MD&A") should be read in conjunction with the condensed consolidated financial statements, including the related notes, appearing in Part I, Item 1 of this Quarterly Report on Form 10-Q, as well as our Annual Report on Form 10-K for the fiscal year ended September 30, 2012.

Note About Forward-Looking Statements

This Quarterly Report on Form 10-Q includes statements that constitute "forward-looking statements." These forward-looking statements are often characterized by the terms "may," "believes," "projects," "intends," "plans," "expects," or "anticipates," and do not reflect historical facts. Specific forward-looking statements contained in this portion of the Quarterly Report include, but are not limited to our (i) expectation that continued growth in business demand for online advertising and websites will drive increased revenues; (ii) expectation that cost of sales will continue to be directly correlated to our use of our internal fulfillment of customers costs, (iii) belief that our existing cash on hand, together with additional cash generated from operations or obtained from other sources, such sources of cash possibly including stock issuances and loans will provide us with sufficient liquidity to meet our operating needs for the next 12 months, (iv) belief that our gross profit margin and selling, general and administrative costs will support the Company's business plans and opportunities and (v) plans to expand into new lines of business.

Forward-looking statements involve risks, uncertainties and other factors, which may cause our actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking statements. Factors and risks that could affect our results and achievements and cause them to materially differ from those contained in the forward-looking statements include those identified in our Annual Report on Form 10-K for the fiscal year ended September 30, 2012 under Item 1A "Risk Factors", as well as other factors that we are currently unable to identify or quantify, but that may exist in the future.

In addition, the foregoing factors may generally affect our business, results of operations and financial position. Forward-looking statements speak only as of the date the statements were made. We do not undertake and specifically decline any obligation to update any forward-looking statements. Any information contained on our website www.livedeal.com or any other websites referenced in this Quarterly Report are not part of this Quarterly Report.

Our Company

Our Company

LiveDeal, Inc., which, together with its subsidiaries, we refer to as the Company, LiveDeal, "we", "us" or "our", provides online customer acquisition services for small-to-medium sized local businesses, or SMBs. We offer affordable tools for SMBs to extend their marketing reach to relevant prospective customers via the internet. We also provide SMBs promotional marketing with the ability to offer special deals and activities through our online publishing partners.

Our principal offices are located at 6240 McLeod Drive, Suite 120, Las Vegas, Nevada 89120, our telephone number is (702) 939-0230, and our corporate website (which does not form part of this report) is located at www.livedeal.com. Our common stock trades on the NASDAQ Capital Market under the symbol "LIVE".

Summary Business Description

We provide marketing solutions that boost customer awareness and merchant visibility on the internet. We recently launched two new business lines under new management after a period of re-evaluating our sales program, products, distribution methods and vendor programs. In November 2012, we commenced the sale of marketing tools that help local businesses manage their online presence under our Velocity Local™ brand, which we refer to as online presence marketing. In August 2012, we commenced sourcing local deal and activities to strategic publishing partners under our LiveDeal® brand, which we refer to as promotional marketing. We continue to actively develop, revise and evaluate these products and services and our marketing strategies and procedures.

As these business lines were launched in August 2012 and November 2012, the results have at this juncture not had a material impact on our revenues for our fiscal year 2012 or the quarter ended December 31, 2012. We continue to generate most of our revenue from servicing our existing customers under our legacy product offerings, primarily our InstantProfile® line of products and services. Because of the change in our business strategy and product lines, we no longer accept new customers under our legacy product offerings.

Changes in Business Strategies

We have been engaged in a significant re-evaluation of and adjustment to our business strategy over the last several years. The focus of these efforts has been twofold: first, to make our product offerings more appealing in the evolving market for assisting SMBs with their online marketing challenges; and second, to move ahead of our competitors in this market segment. In connection with this re-evaluation, we terminated all new sales under our direct sales business line on December 1, 2010, and on July 15, 2011, we discontinued all new sales of our InstantProfile® product. As a result of the cessation of our marketing efforts to acquire new customers, and the attrition of existing customers, our net revenues continued to decline, from $1.0 million for the three months ended December 31, 2010 to $0.85 million and $0.57 million for the three months ended December 31, 2011 and 2012, respectively.

At the same time, we have been actively engaged in efforts to reduce our ongoing costs and expenses. As a result, our total operating expenses declined from $12.0 million for the year ended September 30, 2010 to $5.8 million for the year ended September 30, 2011 and $3.3 million for the year ended September 30, 2012. Operating expenses were $1.0 million for the three months ending December 31, 2012.

In March 2010, we evaluated our business and adopted a new business strategy that addressed each of our business segments as separate entities and re-launched and restructured our legacy line of business. This evaluation was necessitated by the challenges facing our direct sales business lines that provide internet-based customer acquisition strategies for SMBs, as well as declining revenues from our traditional business line (i.e. directory services). Additionally, current economic and regulatory forces, both general and specific to our industry, impacted our consideration of our existing business model and strategy.

As a result, we decided during the second quarter of fiscal 2010 to move our strategic focus towards our directory services business and to bring it up to current market standards and regulatory requirements and away from our direct sales business line. This strategy culminated in the termination of all new sales under our direct sales business line on December 1, 2010. In March 2011, we made the strategic decision to discontinue our direct sales business and product offerings, and in May 2011 we transferred the remaining customers to Reach Local in exchange for 10% and 5% percent of gross revenues derived from such customers during the first and second year, respectively.

Our strategic focus then switched to delivering a suite of internet-based, local search driven, customer acquisition services for SMBs, sold via telemarketing using LEC billing channels as well as other billing channels and targeting all segments of the SMB market through our Velocity Marketing Concepts, Inc. subsidiary. We paused new Velocity sales July 15, 2011 while we re-evaluated our current and future sales programs.

While continue to generate most of our revenue from servicing our existing customers under our legacy product offerings, primarily our InstantProfile® line of products and services, because of the changes in our business strategy and product lines, we no longer accept new customers for these products.

Restructuring Activities

In May 2011, we ceased the direct sales business and transferred the remaining customers to Reach Local. In connection therewith, we terminated seven employees and recorded non cash impairment charges of $367,588, consisting of the write-off of net intangible, in fiscal 2011. The direct sales business segment accounted for $0 of net revenues for the three months ended December 31, 2012 and 2011.

Changes in Principal Officers and Directors

On December 12, 2011, we entered into a Securities Purchase Agreement with each of Isaac Capital Group LLC, or ICG, John Kocmur, Kingston Diversified Holdings LLC, or Kingston, and two other investors, pursuant to which we issued and sold an aggregate of 1,612,899 shares of our common stock for an aggregate purchase price of $2.0 million. Each of ICG, Kocmur and Kingston, whom we refer to as the lead purchasers, invested $500,000 and were issued 403,225 shares of stock, and the investors each invested $250,000 and were issued 201,612 shares of stock.

Pursuant to the Securities Purchase Agreement, on December 12, 2011, our Board increased the number of authorized directors of the Company to eight directors and appointed Jon Isaac, the owner of ICG, Tony Isaac, the father of Jon Isaac, and John Kocmur to fill the vacancies created by the increase in the size of the full Board. These directors were designated for appointment to our board by the lead purchasers in accordance with their rights under the Securities Purchase Agreement described above.

On January 13, 2012, our Board terminated the employment of Kevin Hall, our CEO, effective as of January 20, 2012, and on that date, our board appointed Jon Isaac to serve as our President and Chief Executive Officer.

On or about January 20, 2012, Kevin Hall and Sheryle Bolton resigned as members of our Board, and on January 25, 2012, our Board appointed Dennis Gao as a director to fill the vacancy created by Ms. Bolton's resignation.

On May 20, 2012, the employment of Larry Tomsic, the Company's Chief Financial Officer, terminated. We are in the process of evaluating and defining our needs for a Chief Financial Officer or Controller. Currently, Jon. Isaac is functioning as our principal financial officer.

Current Business Strategy

Under new management, we continued the process of evaluating our business strategy and to cut costs. In August 2012, we commenced sourcing local deal and activities to strategic publishing partners under our LiveDeal® brand, which we refer to as promotional marketing. In November 2012, we commenced the sale of marketing tools that help local businesses manage their online presence under our Velocity Local™ brand, which we refer to as online presence marketing. We continue to actively develop, revise and evaluate these products and services and our marketing strategies and procedures.

In connection with our new promotional marketing business line, on August 16, 2012, we completed our acquisition of substantially all of the assets of LiveOpenly, Inc., a California corporation, which we refer to as LiveOpenly. The acquired business sourced, published and sold discounted offers for goods and services through local retail merchants. Under the terms of the acquisition, we acquired LiveOpenly's sourcing contracts, software, customer lists, trademarks, domain names, and related assets in exchange for the issuance of 75,000 shares of our common stock. In connection with this acquisition, the Company recorded $420,000 of net assets, consisting entirely of intangible assets. No goodwill was recognized as the purchase price equaled the net assets received. In connection with this acquisition, we engaged Ejimofor Umenyiora, the former Director of Sales of LiveOpenly, as an independent contractor.

Because of the infancy of our new lines of business, we have yet to generate significant revenue from our online presence marketing or our promotional marketing lines of business. Given that we have not been accepting new customers for our legacy product offerings since July 2011 and that we did not launch our new product offerings until August 2012, our revenues have declined in the three months ending December 31, 2012 as compared to three months ending December 31, 2011.

Results of Operations

The following sets forth a discussion of our financial results for the three months ended December 31, 2012 as compared to the three months ended December 31, 2011. In evaluating our business, management reviews several key performance indicators including new customers, total customers in each line of business, revenues per customer, and customer retention rates. However, given the changing nature of our business strategy, we do not believe that presentation of these metrics would reveal any meaningful trends in our operations that are not otherwise apparent from the discussion of our financial results below.

Net Revenues

Three Months Ended December 31, $ 572,535 $ 851,413 $ (278,878 ) (33 )%

Net revenues decreased in in first quarter of fiscal 2013 as compared to the first quarter of fiscal 2012 primarily due to the decrease in legacy revenues, which was slightly offset by increases in revenues for new products.

Cost of Services

Three Months Ended December 31, $ 102,636 $ 235,819 $ (133,183 ) (56 )%

Cost of services decreased in the first quarter of fiscal 2013 as compared to the first quarter of fiscal 2012 primarily due to decreased costs associated with the decline in the number of our customers and the provisioning of fulfillment activities, which are now done by us rather than outside vendors.

Gross Profit

Three Months Ended December 31, $ 469,899 $ 615,594 $ (145,695 ) (24 )%

Gross profit decreased in the first quarter of fiscal 2013 as compared to the first quarter of fiscal 2012 primarily due to the decreased cost of fulfillment services and decrease in revenues as described above.

General and Administrative Expenses

Three Months Ended December 31, $ 762,376 $ 766,808 $ (4,432 ) (1 )%

General and administrative expenses decreased in the first quarter of fiscal 2013 as compared to the first quarter of fiscal 2012 primarily due to the following:

· Increased compensation costs of approximately $95,000 due to the opening of the call center in October of 2012.

· Decreased professional fees of $100,994 related to:

· Legal fees of $65,665, due to reduction of litigation,

· Other miscellaneous consultant costs of $29,703,

· Reductions in IT consultant fees of $17,594 as we moved our IT function to virtual servers,

· Accounting fees of $21,263, and

· Marketing consultant fees of $1,957.

· Decreased depreciation and amortization expense of $5,715 related to the reduction of direct sales related assets.

· Decreased software costs of $1,395 reflecting a decrease in IT infrastructure and product development costs.

· Other expense decreases of $193,000, including rent and utilities, services and fees, office and supplies expenses, office closure expenses, travel and entertainment and other corporate expenses associated with our office closures, reductions in force and other cost containment initiatives.

The following table sets forth our recent operating performance for general and administrative expenses:

                                  Q1 2013   Q4 2012   Q3 2012   Q2 2012   Q1 2012
Compensation for employees,
leased employees, officers and
directors                         436,062   242,490   378,700   295,333   341,325
Professional fees                 234,799   254,549   110,706   226,403   143,805
Depreciation and Amortization     63,566    67,635    55,669    67,391    69,281
Other general and administrative
costs                             27,947    244,740   347,278   232,301   212,403

Sales and Marketing Expenses

Three Months Ended December 31, $ 19,441 $ 60 $ 19,381 32302 %

Sales and marketing expenses increased in the first quarter of fiscal 2013 as compared to the first quarter of fiscal 2012 primarily due to promotional video costs of approximately $17,000.

Operating Loss

Three Months Ended December 31, $ (311,918 ) $ (151,274 ) $ (160,644 ) (106 )%

The increase in operating loss for the first quarter of fiscal 2013 as compared to the first quarter of 2012 reflect a variety of changes in net revenues, cost of sales, general and administrative expenses and sales and marketing expenses, each of which is described above.

Total Other Income (Expense)

Three Months Ended December 31, $ (750,554 ) $ (43,944 ) $ (706,610 ) (1608 )%

The large increase in other income (expense) is primarily due to interest expense relating to the issuance of debt and the conversion of that note to warrants in December 2012. See Note 6 for more discussion.

Income from Discontinued Operations

Three Months Ended December 31, $ 1,963 $ 3,580 $ (1,617 ) 45 %

In March 2011, we decided to discontinue the direct sales business and closed that business segment in May 2011 and reflected the change for previously reported periods. For more information, see discussions under the heading "Recent Developments-Discontinued Operations" above. The decline in income between the three months ended December 31, 2012 as compared to the three months ended December 31, 2011 reflects a decline in expenses as we discontinued that business in May 2011.

Net Loss

Three Months Ended December 31, $ (1,060,509 ) $ (191,638 ) $ (868,871 ) (453) %

The increase in net loss for the first quarter of fiscal 2013 as compared to the first quarter of 2012 is primarily attributable to changes in operating income, other income (expense) and discontinued operations, each of which is described above.

Liquidity and Capital Resources

Net cash used in operating activities was approximately $261,000 for the first three months of fiscal 2013 as compared to cash provided by operating activities of approximately $49,000 for the first three months of fiscal 2012, a decrease of $310,000. This decrease was due to an increase of approximately $869,000 in our net loss partially offset by an increase of non-cash expenses of approximately $717,000 which included $750,754 of interest expense associated with convertible debt and warrants, depreciation expense, stock compensation and bad debt expense. Changes in working capital and other current assets caused a decrease in operating cash flows of $160,000 during the first three months of fiscal 2013 as compared to an increase in operating cash flows of $109,000 for the first three months of 2012. This working capital variance resulted primarily from the changes in accrued liabilities, prepaid expenses and other current assets. Our primary source of cash inflows has historically been net remittances from directory services customers processed in the form of ACH billings and LEC billings.

We discontinued the direct sales services business in March 2011 as discussed above under the heading "Recent Developments-Discontinued Operations". We previously received upfront payments averaging approximately one-sixth of the gross contract amount. Subsequent payments were received on an installment basis after the application of the initial payment amounts and were billed ratably over the remaining life of the contract.

Our most significant cash outflows include payments for general operating expenses, including payroll costs, and general and administrative expenses that typically occur within close proximity of expense recognition.

Our cash flows used in investing activities during the first quarter of 2013 consisted of approximately $110,000 of expenditures for intangible assets and approximately $16,000 of purchases of equipment. There were no investing activities during the first quarter of fiscal 2012.

During the first three months of fiscal 2013, our cash flows from financing activities consisted of $250,000 received from the issuance of convertible debt and warrants. During the first three months of fiscal 2012, our cash flows from financing activities consisted of $2,000,000 received from the issuance of stock to investors, partially offset by $16,000 of payments on capital lease obligations and $100,000 of repayments of notes payable.

We had working capital of $274,000 as of December 31, 2012 compared to $371,000 as of September 30, 2012 with current assets increasing by $80,000 and current liabilities increasing by $177,000 from September 30, 2012 to December 31, 2012. Decreases in working capital are primarily attributable to the increase in our operating net loss and the results of our financing activities.

While we believe that our existing cash on hand is sufficient to finance our operations for the next twelve months, there can be no assurance that we will generate profitability or positive operating cash flows in the near future. To the extent that we cannot achieve profitability or positive operating cash flows, our business will be materially and adversely affected. Further, our business is likely to experience significant volatility in our revenues, operating losses, personnel involved, products or services for sale, and other business parameters, as management implements our new strategies and responds to operating results.

Contractual Obligations



The following table summarizes our contractual obligations at December 31, 2012
and the effect such obligations are expected to have on our future liquidity and
cash flows:



                                                       Payments Due by Fiscal Year
                       Total         2013          2014          2015          2016         2017         Thereafter
Operating lease
commitments          $ 503,817     $ 131,303     $ 180,065     $ 140,616     $ 51,833     $       -     $          -
Noncanceleable
service contracts            -             -             -             -            -                              -
                     $ 503,817     $ 131,303     $ 180,065     $ 140,616     $ 51,833     $       -     $          -

Off-Balance Sheet Arrangements

At December 31, 2012, we had no off-balance sheet arrangements, commitments or guarantees that require additional disclosure or measurement.