Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
LIVE > SEC Filings for LIVE > Form 10-Q on 14-May-2013All Recent SEC Filings

Show all filings for LIVEDEAL INC | Request a Trial to NEW EDGAR Online Pro

Form 10-Q for LIVEDEAL INC


14-May-2013

Quarterly Report


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

For a description of our significant accounting policies and an understanding of the significant factors that influenced our performance during the three and six months ended March 31, 2013, 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. 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, respectively, the results have at this juncture not had a material impact on our revenues for our fiscal year 2012 or the three and six months ended March 31, 2013. 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: (i) to make our product offerings more appealing in the evolving market for assisting SMBs with their online marketing challenges; and (ii) 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 $821,701 and $1,673,114 for the three and six months ended March 31, 2012, respectively, to $555,084 and $1,127,619 for the three and six months ended March 31, 2013, respectively.

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 on July 15, 2011 while we re-evaluated our current and future sales programs.

While 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 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 line and transferred the remaining customers to Reach Local. In connection therewith, we eliminated seven full-time employee positions and recorded non cash impairment charges of $367,588, consisting of the write-off of net intangible assets, in fiscal 2011. The Direct Sales business segment accounted for $0 of net revenues for the three and six months ended March 31, 2013 and 2012.

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 two other 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 Chief Executive Officer, effective as of January 20, 2012.

On or about January 20, 2012, Mr. 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 M. Tomsic, the Company's Chief Financial Officer, was terminated. We are in the process of evaluating our needs for a Chief Financial Officer or Controller. Currently, Jon. Isaac is functioning as our Principal Financial Officer.

Effective as of January 20, 2012, the Company appointed Jon Isaac to serve as its Chief Executive Officer and President.. Although the Company did not enter into a written employment agreement with Mr. Isaac, he was paid an annual salary of $1 for his services as the Company's Chief Executive Officer and President and was eligible to receive bonuses in such forms and amounts as determined by the Company's Compensation Committee.

On February 14, 2013, the Company entered into a written Employment Agreement with Mr. Isaac (the "Agreement"), pursuant to which he will continue serving as its Chief Executive Officer and President for the period from January 1, 2013 to January 1, 2016. The material terms of the Agreement are as follows:

· $200,000 annual base salary throughout the term of the Agreement;

· Eligibility to receive performance-based bonuses in the sole discretion of the Company's Compensation Committee;

· A one-time discretionary bonus of $150,000 for services performed as President and Chief Executive Officer for the previous 12 months, to be paid in cash on or before March 31, 2013. This bonus was approved by the Company's Compensation Committee;

· Reimbursement for reasonable housing expenses; and

· Grant of options to purchase 150,000 shares of the Company's common stock, subject to continued employment on the applicable vesting dates and the other terms and conditions summarized below:

o 50,000 shares will vest on the first anniversary of the date of grant and be exercisable for five years after vesting at an exercise price of $5.00 per share;

o 50,000 shares will vest in 12 equal monthly installments, beginning on the date that is 13 months after the date of grant and ending on the second anniversary of the date of grant, and be exercisable for five years after vesting at an exercise price of $7.50 per share; and

o 50,000 shares will vest in 12 equal monthly installments, beginning on the date that is 25 months after the date of grant and ending on the third anniversary of the date of grant, and be exercisable for five years after vesting at an exercise price of $10.00 per share.

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 deals 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 assets utilized in connection with the business of LiveOpenly. That business sourced, published and sold discounted offers for goods and services through local retail merchants. Under the terms of the asset 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 and six months ending March 31, 2013 as compared to three and six months ending March 31, 2012.

Results of Operations

The following sets forth a discussion of our financial results for the three and six months ended March 31, 2013 as compared to the three and six months ended March 31, 2012. 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



                                                        Net Revenues
                                     2013            2012           Change        Percent
Three Months Ended March 31,     $   555,084     $   821,701     $ (266,617 )       (32%)
Six Months Ended March 31,       $ 1,127,619     $ 1,673,114     $ (545,495 )       (33%)

Net revenues decreased in the second quarter and the first six months of fiscal 2013 as compared to the second quarter and the first six months 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



                                                 Cost of Services
                                  2013          2012          Change        Percent

Three Months Ended March 31,   $ 116,913     $ 226,608     $ (109,695 )        (48% )
Six Months Ended March 31,     $ 219,549     $ 462,427     $ (242,878 )        (53% )

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

Gross Profit



                                                    Gross Profit
                                 2013           2012           Change        Percent

Three Months Ended March 31,   $ 438,171     $   595,093     $ (156,922 )        (26% )
Six Months Ended March 31,     $ 908,070     $ 1,210,687     $ (302,617 )        (25% )

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

General and Administrative Expenses



                                            General and Administrative Expenses
                                     2013            2012          Change        Percent
Three Months Ended March 31,     $ 1,231,531     $   821,434     $ 410,097           50%
Six Months Ended March 31,       $ 1,993,907     $ 1,588,242     $ 405,665           26%

General and administrative expenses increased in three months ended March 31, 2013 as compared to the three months ended March 31, 2012 primarily due to the following:

· Increased compensation costs of approximately $430,804 due to the opening of the call center in October of 2012.

· Increased professional fees of $22,260 related to:

· Increase in marketing consultant fees of $138,

· Increase in other miscellaneous consultant costs of $17,352, due to use of accounting consultant.

· Increase in IT consultant fees of $3,929, due to programmer for CRM.

· Increase in accounting fees of $37,029, due to increased audit fees, partially offset by a

· Reduction of legal fees of $36,188, due to using cost effective attorneys.

· Decreased depreciation and amortization expense of $2,318 related to assets being fully depreciated.

· Other expense decreases of $40,649, 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.

General and administrative expenses increased in the first six months of fiscal 2013 as compared to the first six months of fiscal 2012 primarily due to the following:

· Increased compensation costs of approximately $525,541 due to the opening of the call center in October of 2012.

· Increased professional fees of $123,254 related to:

· Increase of legal fees of $29,477, related to LiveOpenly purchase and intellectual property review,

· Increase in other miscellaneous consultant costs of $47,055, due to use of accounting and sales and marketing consultants,

· Increase in marketing consultant fees of $2,095 due to corporate marketing,

· Increase in accounting fees of $58,292, primarily due to additional audit fees , partially offset by a

· Decrease in IT consultant fees of $13,665, due to change in programmers,

· Decreased depreciation and amortization expense of $8,033 related to assets being fully depreciated..

· Other expense decreases of $235,099, 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:

                                         Q2 2013  Q1 2013  Q4 2012   Q3 2012  Q2 2012
Compensation for employees, leased
employees, officers and directors        726,137  436,062  242,490   378,700  295,333
Professional fees                        248,663  234,799  254,549   110,706  226,403
Depreciation and Amortization             65,073   63,566   67,635    55,669   67,391
Other general and administrative
costs                                    191,658   27,947  244,740   347,278  232,301

Sales and Marketing Expenses



                                       Sales and Marketing Expenses
                                 2013       2012       Change      Percent

Three Months Ended March 31,   $  7,166     $ 519     $  6,647        1281%
Six Months Ended March 31,     $ 26,607     $ 579     $ 26,028        4495%

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

Operating Loss



                                                    Operating Loss
                                   2013            2012          Change        Percent

Three Months Ended March 31,   $   (800,526 )   $ (226,860 )   $ (573,666 )        253%
Six Months Ended March 31,     $ (1,112,444 )   $ (378,134 )   $ (734,310 )        194%

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

Total Other Income (Expense)



                                                 Total Other Expense
                                   2013           2012           Change        Percent
Three Months Ended March 31,   $ (2,414,941 )   $ (32,362 )   $ (2,382,579 )      7362%
Six Months Ended March 31,     $ (3,165,495 )   $ (76,306 )   $ (3,089,189 )      4048%

The large increase in other income (expense) is primarily due to interest expense relating to the issuance of debt and the conversion of the Notes to warrants in December 2012 and March 2013. See Note 5 for more discussion.

Net Loss



                                                       Net Loss
                                   2013            2012           Change        Percent

Three Months Ended March 31,   $ (3,215,017 )   $ (258,993 )   $ (2,956,024 )     (1141% )
Six Months Ended March 31,     $ (4,275,526 )   $ (450,631 )   $ (3,824,895 )      (849% )

The increase in net loss for the second quarter and the first six months of fiscal 2013, as compared to the second quarter and the first six months 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 $(1,112,603) for the first six months of fiscal 2013 as compared to cash provided by operating activities of approximately $5,684 for the first six months of fiscal 2012. This change was due to an increase of $3,824,895 in our net loss partially offset by an increase of non-cash expenses of approximately $3,300,963 which included $3,291,466 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 $395,047 during the first six months of fiscal 2013 as compared to an increase in operating cash flows of $199,308 for the first six months of fiscal 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.

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 six months of fiscal 2013 consisted of $117,500 of expenditures for intangible assets and approximately $28,000 of purchases of equipment. Our cash flows used in investing activities during the first six months of fiscal 2012 consisted of $8,169 of expenditures for intangible assets.

During the first six months of fiscal 2013, our cash flows from financing activities consisted of $1,250,000 received from the issuance of convertible debt and warrants. During the first six months of fiscal 2012, our cash flows from financing activities consisted of $2,150,000 received from the issuance of stock to investors, partially offset by $31,622 of payments on capital lease obligations and $250,000 of repayments of notes payable.

We had working capital of $743,695 as of March 31, 2013 compared to $370,780 as of September 30, 2012 with current assets decreasing by $49,007 and current liabilities decreasing by $421,922 from September 30, 2012 to March 31, 2013. Such changes in working capital are primarily attributable to the increase in our operating net loss and the results of our financing activities.

On March 20, 2013, the Company filed a Registration Statement on Form S-3 (File No. 333-187397) with the Securities and Exchange Commission (the "SEC"). On May 6, 2013, the Company filed an amendment to such Registration Statement on Form S-3 (as amended, the "Shelf Registration Statement"). Pursuant to the Shelf Registration Statement, which is subject to further review by the SEC and has not been declared effective as of the date of the filing of this Report, the Company may offer and sell, from time to time in one or more offerings, any combination of common stock, preferred stock, debt securities, warrants, or units having a maximum aggregate offering price of $10,000,000. Except as otherwise provided in the applicable prospectus supplement, the Company intends to use the net proceeds from any sale of securities covered by the Shelf Registration Statement and the prospectus contained therein for general corporate purposes, which may include (without limitation) working capital, capital expenditures, research and development expenditures, and acquisitions of new technologies or businesses. The precise amount, use and timing of the application of such proceeds would depend upon the Company's funding requirements and the availability and cost of other capital. No securities of the Company will be offered or sold unless and until: (i) the SEC declares the Shelf Registration Statement to be effective; and (ii) the Company files with the SEC and makes available to investors a prospectus supplement containing the specific terms of the securities to be offered and sold.

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
. . .
  Add LIVE to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for LIVE - All Recent SEC Filings
Sign Up for a Free Trial to the NEW EDGAR Online Pro
Detailed SEC, Financial, Ownership and Offering Data on over 12,000 U.S. Public Companies.
Actionable and easy-to-use with searching, alerting, downloading and more.
Request a Trial      Sign Up Now


Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.