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LIVE > SEC Filings for LIVE > Form 10-Q on 14-Feb-2014All Recent SEC Filings

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Form 10-Q for LIVEDEAL INC


14-Feb-2014

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 months ended December 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, 2013, as amended.

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) belief in the continued growth of internet usage, particularly via mobile devices, and demand for web-based marketing; (ii) belief in the continued growth in the demand for local search and information, (iii) belief that small and medium businesses will continue to outsource their online marketing efforts to third parties; (iv) belief that we can cost-effectively expand into other cities due to the scalability of the LiveDeal.com platform; (v) belief that the cash on hand and additional cash generated from operations together with potential sources of cash through issuance of debt or equity will provide the company with sufficient liquidity for the next 12 months; and (vi) belief that the outcome of pending legal proceedings will not have a material adverse effect on business, financial position and results of operations, cash flow or liquidity.

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, 2013 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 specialized online marketing solutions to small-to-medium sized local businesses, or "SMBs", that boost customer awareness and merchant visibility. 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 Livedeal.com and our online publishing partners.

Our principal offices are located at 325 W. Warm Springs Road, Suite 102, Las Vegas, Nevada 89119. Our telephone number is (702) 939-0231. 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 specialized online marketing solutions that boost customer awareness and merchant visibility on the internet. In September 2013, we launched LiveDeal.com, which redefined the Company's strategy and direction, centering its focus on the new LiveDeal.com platform and growing the base of restaurants utilizing the LiveDeal platform to attract new customers. LiveDeal.com is a unique, real-time "deal engine" connecting merchants with consumers. The Company believes that it has developed the first-of-its-kind web/mobile platform providing restaurants with full control and flexibility to instantly publish customized offers whenever they wish to attract customers.

We also 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 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. We continue to generate a significant portion 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 Strategy; New Products and Services

Change in Business Strategy. 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 two-fold: 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.

Promotional Marketing and Online Presence Marketing (Velocity Local™). In 2012, we launched two new business lines under new management after a period of re-evaluating our sales program, products, distribution methods and vendor programs.

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 offer our SMB customers packages of services to create and maintain an online presence. Products and services we offer include template and custom website design, either optimized for desktop or mobile devices, social media marketing, or SMM, and content marketing, or CM. In combination, these products offer a comprehensive online marketing strategy for SMBs at affordable rates. We believe that our online presence marketing products are useful to a large share of SMBs because they enable potential customers to gain awareness of and locate an SMB and to learn about and purchase its products and services.

LiveDeal.com. In September 2013, we launched LiveDeal.com, which redefined the Company's strategy and direction, centering its focus on the new LiveDeal.com platform and growing the base of restaurants utilizing the LiveDeal platform to attract new customers. LiveDeal.com is a unique, real-time "deal engine" connecting merchants with consumers. The Company believes that it has developed the first-of-its-kind web/mobile platform providing restaurants with full control and flexibility to instantly publish customized offers whenever they wish to attract customers.

Highlights of the new LiveDeal.com include:

- a user-friendly interface enabling restaurants to create limited-time offers and publish them immediately, or on a preset schedule that is fully customizable;

- state-of-the-art scheduling technology giving restaurants the freedom to choose the days, times and duration of the offers, enabling them to create offers that entice consumers to visit their establishment during their slower periods;

- advanced publishing options allowing restaurants to manage traffic by limiting the number of available vouchers to consumers;

- superior geo-location technology allowing multi-location restaurants to segment offers by location, attracting customers to slower locations while eliminating potential over-crowding at busier sites; and

- a user-friendly mobile and desktop web interface allowing consumers to easily browse, download, and instantly redeem "live" offers found on LiveDeal.com based on their location.

Restaurants can sign up to use the LiveDeal platform at our website (www.livedeal.com).

We believe one of the primary challenges facing the dining industry is the inefficient and limited number of ways restaurants are able to market offers and promotions to their potential customers. Daily deal companies typically dictate offer terms, such as the discount amount and redemption details. This not only erodes potential profits for restaurant owners but could also drive traffic during already-busy periods for the restaurants. LiveDeal's model benefits both the restaurant and the consumer because it provides the restaurant the opportunity to create any offer they choose, limit the number of potential claimants of their promotion, publish the offer on days and at times of their choosing, and provides customers with relevant offers they can easily and quickly redeem while creating a cost-effective model for LiveDeal to grow and easily scale its operations. We expect to initially derive revenues through premium placement on the site, and we are also exploring various options for monetizing the website.

The Company, best known for migrating print yellow pages to the Internet in 1994, began to develop the model for LiveDeal.com after having worked closely with well-known publishers in the daily deal market. In mid-2013, we tested the beta platform in a number of cities, and the model has been well received by restaurants, consumers, and various restaurant associations. We launched LiveDeal.com in the San Diego and Los Angeles, California markets in September 2013 and December 2013, respectively. The Company believes it can cost-effectively expand into other cities due to the scalability of the LiveDeal.com platform, as restaurants can curate deals through our account managers or create specials on their own. In addition, individual customers transact directly with the restaurant, eliminating the need for the Company to act as an intermediary in the sale.

Trends in Revenues. We continue to actively develop, revise and evaluate these products and services and our marketing strategies and procedures. We continue to generate a significant portion 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.

Results of Operations

The following sets forth a discussion of our financial results for the three months ended December 31, 2013 as compared to the three months ended December 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 December 31, $ 593,458 $ 572,535 $ 20,923 4%

Net revenues increased in the first quarter of fiscal 2014 as compared to the first quarter of fiscal 2013 primarily due to the increase of online products revenues of approximately $110,000, offset by the decrease in legacy revenues of approximately $89,000.

Cost of Services

Cost of Services
2013 2012 Change Percent

Three Months Ended December 31, $ 121,329 $ 102,636 $ 18,693 18%

Cost of services increased in the first quarter of fiscal 2014 as compared to the first quarter of fiscal 2013 primarily due to fulfillment costs on online products.

Gross Profit

Gross Profit
2013 2012 Change Percent

Three Months Ended December 31, $ 472,129 $ 469,899 $ 2,230 1%

Gross profit increased in the first quarter of fiscal 2014 as compared to the first quarter of fiscal 2013 primarily due to the increased cost of fulfillment services and increase in revenues as described above.

General and Administrative Expenses

General and Administrative Expenses
2013 2012 Change Percent

Three Months Ended December 31, $ 870,699 $ 762,376 $ 108,323 14%

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

· Decreased compensation costs of $5,840 due to the decrease of staffing.

· Increased depreciation and amortization expense of $41,145, due to the increase of intangible assets.

· Decreased professional fees of $104,377 related to:

· Decrease in legal fees of $65,249, due to litigation settlement,

· Decrease in marketing consultant fees of $1,957 due to no longer using marketing consultants,

· Increase in IT consultant fees of $14,534, due to increased use of programmers,

· Decrease in accounting fees of $18,915 due to cost containment initiatives, and

· Decrease in other miscellaneous consultant costs of $32,790, due to decreased use of consultants.

· Other expense increases of $177,391, 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 2014       Q4 2013       Q3 2013       Q2 2013       Q1 2013
Compensation for employees,
leased employees, officers
and directors                    430,228       555,323       528,767       726,137       436,062
Professional fees                140,422       212,465       147,618       248,663       234,799
Depreciation and
amortization                     104,711        70,288        65,183        65,073        63,566
Other general and
administrative costs             195,338       357,204       184,090       191,658        27,947

Sales and Marketing Expenses

Sales and Marketing Expenses
2013 2012 Change Percent

Three Months Ended December 31, $ 27,072 $ 19,441 $ 7,631 39%

Sales and marketing expensed increased in the first quarter of fiscal 2014 as compared to the first quarter of fiscal 2013 primarily due to expenses associated with corporate marketing initiatives.

Operating Loss

Operating Loss
2013 2012 Change Percent

Three Months Ended December 31, $ (425,642 ) $ (311,918 ) $ (113,724 ) 37%

The increase in operating loss for the first quarter of fiscal 2014 as compared to the first quarter of fiscal 2013 resulted from a variety of factors, including increases in the cost of services, general and administrative expenses and sales and marketing expenses, each of which is described above.

Total Other Income (Expense)

Total Other Income (Expense)
2013 2012 Change Percent

Three Months Ended December 31, $ 17,484 $ (750,554 ) $ 768,038 102%

The large improvement in other income (expense) in the first quarter of fiscal 2014 as compared to the first quarter of fiscal 2013 was primarily due to interest expense relating to the issuance of debt and the conversion of the Notes to warrants, which occurred during the three-month period ending December 2012. See Note 5.

Net Loss

Net Loss
2013 2012 Change Percent

Three Months Ended December 31, $ (408,158 ) $ (1,060,509 ) $ 652,351 (62% )

The decrease in net loss for the first quarter of fiscal 2014, as compared to the first quarter of fiscal 2013, was primarily attributable to changes in operating loss and, other income (expense), each of which is described above.

Liquidity and Capital Resources

Net cash used in operating activities was $243,163 for the first three months of fiscal 2014 as compared to $261,372 for the first three months of fiscal 2013. This change was due to a decrease of $652,351 in our net loss, partially offset by a decrease of non-cash expenses of $679,318 which during the first three months of fiscal 2013 included $750,754 of interest expense associated with convertible debt and warrants, depreciation expense, stock compensation and bad debt expense. Cash flows from operations were also impacted by an increase of approximately $46,583 in changes in working capital and other assets in the first quarter of fiscal 2014 as compared to the first quarter of fiscal 2013. This working capital variance resulted primarily from the changes in accounts receivable, accounts payable and accrued liabilities. 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 three months of fiscal 2014 consisted of $563 of expenditures for intangible assets and $6,167 of purchases of equipment. Our cash flows used in investing activities during the first three months of fiscal 2013 consisted of $109,500 of expenditures for intangible assets and $15,813 of purchases of equipment.

There were no financing activities during the first three months of fiscal 2014. Our cash flows from financing activities during the first three months of fiscal 2013 consisted of $250,000 of proceeds received from convertible debt and warrants.

We had negative working capital of $42,314 as of December 31, 2013 compared to working capital of $179,968 as of September 30, 2013 with current assets decreasing by $270,206 and current liabilities decreasing by $46,941 from September 30, 2013 to December 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 became effective on May 16, 2013, 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. The Company recently sold 2,214,612 shares of our common stock, resulting in gross proceeds of $10,000,000, in an at-the-market offering, in which Chardan Capital Markets LLC was our agent. The shares were sold under our Registration Statement on Form S-3 (Reg. No. 333-187397), which was declared effective on May 3, 2013.

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.

Future Sources of Cash; New Products and Services

The Company will require additional capital to finance its planned business operations as it continues to build and market its LiveDeal.com and Velocity Local™ offerings and develop other new products. In addition, the Company may require additional capital to finance acquisitions or other strategic investments in its business. Other sources of financing may include stock issuances; additional loans (for example, through our sale and issuance of convertible notes pursuant to the $5 million line of credit that we entered into in January 2014); or other forms of financing. Any financing obtained may further dilute or otherwise impair the ownership interest of the Company's existing stockholders. If the Company is unable to generate positive cash flows or raise additional capital in a timely manner or on acceptable terms, the Company may (i) not be able to make acquisitions or other strategic investments in its business, (ii) modify, delay or abandon some or all of its business plans, and/or (iii) be forced to cease operations.

Although we stopped new Velocity product sales July 15, 2011, we continued to service existing customers acquired under our Directory Services and InstantProfile product and service lines and we are simultaneously exploring other strategic alternatives. In August 2012, we commenced sourcing local deals and activities to strategic publishing partners under our LiveDeal® brand, and in November 2012, we commenced the sale of marketing tools that help local businesses manage their online presence under our Velocity Local™ brand. In September 2013, we launched LiveDeal.com, which redefined the Company's strategy and direction, centering its focus on the new LiveDeal.com platform and growing the base of restaurants utilizing the LiveDeal platform to attract new customers. LiveDeal.com is a unique, real-time "deal engine" connecting merchants with consumers. There can be no assurance that that these new product lines will generate sufficient revenue or that we will achieve profitability, positive operating cash flows, or sufficient cash flows for operations.

Contractual Obligations



The following table summarizes our contractual obligations consisting of
operating lease agreements at December 31, 2013 and the effect such obligations
are expected to have on our future liquidity and cash flows:



                              2014           155,864
                              2015           175,525
                              2016           121,880
                              2017            53,946
                              2018                 -
                              Thereafter           -
                                           $ 507,215

Off-Balance Sheet Arrangements

At December 31, 2013, we had no off-balance sheet arrangements, commitments or guarantees that require additional disclosure or measurement.

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