|
x
|
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
|
o
|
TRANSITION
REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
OF
1934
|
Nevada
|
85-0206668
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|||
(State
or Other Jurisdiction of Incorporation or Organization)
|
(IRS
Employer Identification No.)
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4840
East Jasmine Street, Suite
105,
Mesa,
Arizona
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85205
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|||
(Address
of principal executive offices)
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(Zip
Code)
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Large
accelerated filer o
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Accelerated
filer o
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Non-accelerated
filer x
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Page
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Part
I
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Item
1.
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2
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Item
1A.
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9
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Item
1B.
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19
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Item
2.
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19
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Item
3.
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19
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Item
4.
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20
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||
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Part
II
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|||
Item
5.
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20 | ||
Item
6.
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22
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Item
7.
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23
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Item
7A.
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36
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Item
8.
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37
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||
38
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|||
40
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|||
41
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|||
42
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|||
43
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44
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|||
Item
9.
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62
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||
Item
9A.
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62
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||
Item
9B.
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63
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Part
III
|
|||
Item
10.
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63
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||
Item
11.
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63
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Item
12.
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63 | ||
Item
13.
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63
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Item
14.
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63
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Part
IV
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|||
Item
15.
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63
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||
68
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|
·
|
Larger
font.
|
|
·
|
Bolded
business name.
|
|
·
|
A
“tagline” whereby the advertiser can differentiate itself from its
competitors.
|
|
·
|
An
audio advertisement.
|
|
·
|
Map
directions.
|
|
·
|
A
Click2Call™ feature, whereby a user of our website can place a telephone
call to one of our advertising customers by clicking the icon that
is
displayed on the Mini-WebPage. This initiates a telephone call
by the advertiser to the user, in a conference call type format.
Once both
are connected, it functions as a regular telephone
call. Because we cover all charges for this telephone call, it
is free of charge to both the user and the IAP advertiser. We
have an agreement with WebDialogs, Inc. to provide this
service.
|
|
·
|
A
link to the advertiser’s own webpage and email
address.
|
|
·
|
Additional
distribution network for preferred listings. This feature gives additional
exposure to our IAP advertisers by placing their preferred listing
on
several online directory systems. There currently is no charge
to the IAP advertiser for these additional channels of
distribution.
|
|
·
|
Own
source code that includes cutting edge technology (J2EE, Struts,
XML,
Spring, Hybernate, JBoss, Apache,
etc):
|
|
·
|
Linear
scaling architecture using low cost commodity
hardware:
|
|
·
|
An
architecture based on redundancy for scalable quick user
responses:
|
|
·
|
Proven
search technology which scales for large
volumes:
|
|
·
|
Enhanced
security using HTTPS, Encryption, data obfuscation:
and
|
|
·
|
Internationalized
Architecture for quick
localization.
|
|
·
|
More
current and extensive listing
information.
|
|
·
|
Immediate
access to business listings across the nation from any
location.
|
|
·
|
Broad
accessibility via computers and hand-held devices, such as mobile
phones
and personal digital assistants.
|
|
·
|
Features
such as mapping, direct calling to the advertiser, and e-mail at
the click
of a button also may be available.
|
|
·
|
We
have cross-marketing arrangements with reciprocal linking of websites
without any compensation to either party. These arrangements increase
the
page views for our advertisers’ listings by being listed on the linked
websites. These co-promotional arrangements typically are terminable
with
one month’s notice.
|
|
·
|
We
have a license agreement with Palm, Inc. whereby we pay a fee to
be a
provider of Yellow Pages content on hand-held devices using the Palm
operating system. We provide this content to Palm through a
hypertext link from the Palm operating system to our
website.
|
|
·
|
We
have an agreement with Yahoo! Search Services to provide visibility
to our
website so that we can provide traffic to our advertisers. In exchange
for
monthly fees, Yahoo! Search Services assists in helping us to be
one of
the highest placed sites when Yellow Pages searches are done on major
search engines, such as MSN and
Yahoo!.
|
|
·
|
We
utilize WebDialogs in a co-promotional effort to provide automatic
dialing
services to our website users. These services allow these users to
place a
call to one of our IAP advertisers by simply clicking a button. This
function powers our Click2Call
feature.
|
|
·
|
We
will begin featuring Yelp’s 1.8 million customer reviews on its online
classifieds and Yellow Pages platforms, giving LiveDeal users an
enormous
wealth of user-generated content about local area
businesses.
|
|
·
|
some
competitors have longer operating histories and greater financial
and
other resources than we have and are in better financial condition
than we
are;
|
|
·
|
some
competitors have better name recognition, as well as larger, more
established, and more extensive marketing, customer service, and
customer
support capabilities than we have;
|
|
·
|
some
competitors may supply a broader range of services, enabling them
to serve
more or all of their customers’ needs. This could limit our sales and
strengthen our competitors’ existing relationships with their customers,
including our current and potential IAP
advertisers;
|
|
·
|
some
competitors may be able to better adapt to changing market conditions
and
customer demand; and
|
|
·
|
barriers
to entry are not significant. As a result, other companies that
are not currently involved in the Internet-based Yellow Pages advertising
business may enter the market or develop technology that reduces
the need
for our services.
|
|
·
|
fluctuating
demand for our services, which may depend on a number of factors
including
|
|
o
|
changes
in economic conditions and our IAP advertisers’
profitability,
|
|
o
|
varying
IAP advertiser response rates to our direct marketing
efforts,
|
|
o
|
our
ability to complete direct mailing solicitations on a timely basis
each
month,
|
|
o
|
changes
in our direct marketing efforts,
|
|
o
|
IAP
advertiser refunds or cancellations,
and
|
|
o
|
our
ability to continue to bill through LEC billing, ACH billing or credit
card channels rather than through direct
invoicing;
|
|
·
|
market
acceptance of new or enhanced versions of our services or
products;
|
|
·
|
price
competition or pricing changes by us or our
competitors;
|
|
·
|
new
product offerings or other actions by our
competitors;
|
|
·
|
the
ability of our check processing service providers to continue to
process
and provide billing information regarding our solicitation
checks;
|
|
·
|
the
amount and timing of expenditures for expansion of our operations,
including the hiring of new employees, capital expenditures, and
related
costs;
|
|
·
|
technical
difficulties or failures affecting our systems or the Internet in
general;
|
|
·
|
a
decline in Internet traffic at our
website;
|
|
·
|
the
cost of acquiring, and the availability of, information for our database
of potential advertisers; and
|
|
·
|
the
fixed nature of a significant amount of our operating
expenses.
|
|
·
|
the
pace of expansion of our
operations;
|
|
·
|
our
need to respond to competitive pressures;
and
|
|
·
|
future
acquisitions of complementary products, technologies or
businesses.
|
|
·
|
We
paid a settlement fee of $2,000,000 to the state consortium, which
was
distributed among themselves;
|
|
·
|
We
discontinued the use of activation checks as a promotional
incentive;
|
|
·
|
We
temporarily suspended billing of any active customer that was acquired
in
connection with the use of an activation check while notifying
the
customer of their legal rights to cancel the service and providing
them a
60-day opportunity to receive a refund equivalent to the customer’s last
two payments; and
|
|
·
|
We
agreed not to employ any collection efforts with respect to past-due
accounts of customers that were secured through the use of an activation
check.
|
|
·
|
cease
selling or using any of our products that incorporate the challenged
intellectual property, which would adversely affect our
revenue;
|
|
·
|
obtain
a license from the holder of the intellectual property right alleged
to
have been infringed, which license may not be available on reasonable
terms, if at all; and
|
|
·
|
redesign
or, in the case of trademark claims, rename our products or services
to
avoid infringing the intellectual property rights of third parties,
which
may not be possible and in any event could be costly and
time-consuming.
|
|
·
|
changes
that might result from regulatory requirements, exchange rates, tariffs
and/or other economic barriers;
|
|
·
|
difficulties
in staffing and managing the operations of our Philippine
subsidiary;
|
|
·
|
differing
technology and systems standards;
|
|
·
|
conflicting
laws and/or political conditions;
and
|
|
·
|
risks
relating to accounting practices and/or tax laws enforced in foreign
jurisdictions.
|
|
·
|
rapid
technological change;
|
|
·
|
changes
in advertiser and user requirements and
preferences;
|
|
·
|
frequent
new product and service introductions embodying new technologies;
and
|
|
·
|
the
emergence of new industry standards and practices that could render
our
existing service offerings, technology, and hardware and software
infrastructure obsolete.
|
|
·
|
enhance
our existing services and develop new services and technology that
address
the increasingly sophisticated and varied needs of our prospective
or
current IAP advertisers;
|
|
·
|
license,
develop or acquire technologies useful in our business on a timely
basis;
and
|
|
·
|
respond
to technological advances and emerging industry standards and practices
on
a cost-effective and timely basis.
|
|
·
|
decreased
demand in the Internet services
sector;
|
|
·
|
variations
in our operating results;
|
|
·
|
announcements
of technological innovations or new services by us or our
competitors;
|
|
·
|
changes
in expectations of our future financial performance, including financial
estimates by securities analysts and
investors;
|
|
·
|
our
failure to meet analysts’
expectations;
|
|
·
|
changes
in operating and stock price performance of other technology companies
similar to us;
|
|
·
|
conditions
or trends in the technology
industry;
|
|
·
|
additions
or departures of key personnel; and
|
|
·
|
future
sales of our common stock.
|
|
·
|
the
authority of our board to issue up to 5,000,000 shares of serial
preferred stock and to determine the price, rights, preferences,
and
privileges of these shares, without stockholder
approval;
|
|
·
|
all
stockholder actions must be effected at a duly called meeting of
stockholders and not by written consent unless such action or proposal
is
first approved by our board of
directors;
|
|
·
|
special
meetings of the stockholders may be called only by the Chairman of
the
Board, the Chief Executive Officer, or the President of our company;
and
|
|
·
|
cumulative
voting is not allowed in the election of our
directors.
|
|
·
|
A
proposal to give the Company’s Board of Directors discretion to effect a
reverse stock split with respect to issued and outstanding shares
of our
common stock; and
|
|
·
|
A
proposal to amend and restate the Company’s Restated Articles of
Incorporation to change the Company’s name from “YP Corp.” to “LiveDeal,
Inc.”
|
Votes
For
|
Votes
Against
|
Abstentions
and Broker Non-Votes
|
|
Proposal
to Give the Company’s Board of Directors Discretion to Effect a Reverse
Stock Split with Respect to Issued and Outstanding Shares of our
Common
Stock
|
52,886,335
|
3,962,852
|
371,700
|
Votes
For
|
Votes
Against
|
Abstentions
and Broker Non-Votes
|
|
Proposal
to Amend and Restate the Company’s Restated Articles of Incorporation to
Change the Company’s Name from “YP Corp.” to “LiveDeal,
Inc.”
|
56,443,009
|
162,052
|
625,826
|
Fiscal Year
|
Quarter Ended
|
High
|
Low
|
||||||
2006
|
December
31, 2005
|
$ |
9.40
|
$ |
4.00
|
||||
March
31, 2006
|
$ |
10.30
|
$ |
5.10
|
|||||
June
30, 2006
|
$ |
13.00
|
$ |
9.50
|
|||||
September
30, 2006
|
$ |
10.80
|
$ |
7.90
|
|||||
2007
|
December
31, 2006
|
$ |
10.70
|
$ |
7.20
|
||||
March
31, 2007
|
$ |
12.10
|
$ |
7.60
|
|||||
June
30, 2007
|
$ |
8.70
|
$ |
6.60
|
|||||
September
30, 2007
|
$ |
8.00
|
$ |
6.00
|
Period
|
(a)
Total Number of Shares
(or Units)
Purchased
|
(b)
Average Price Paid
per Share
(or Unit)
|
(c)
Total Number of Shares
(or Units)
Purchased
as Part of Publicly
Announced Plans
or Programs2
|
(d)
Maximum Number (or
Approximate Dollar Value)
of Shares (or Units)
that May Yet Be Purchased
Under the Plans
or Programs
|
||||||||||||
July
2007
|
-
|
N/A
|
-
|
$ |
1,000,000
|
|||||||||||
August
2007
|
44,224 | 1 | $ |
6.95
|
-
|
$ |
1,000,000
|
|||||||||
September
2007
|
-
|
N/A
|
-
|
$ |
1,000,000
|
|||||||||||
Total
|
44,224
|
$ |
6.95
|
-
|
$ |
1,000,000
|
Year
Ended September
30,
|
||||||||||||||||||||
2007
|
2006
|
2005
(1)
|
2004
|
2003
|
||||||||||||||||
Statement
of Operations
Data
|
||||||||||||||||||||
Net
revenues
|
$ |
26,340,361
|
$ |
31,957,947
|
$ |
24,361,995
|
38,954,823
|
$ |
26,396,093
|
|||||||||||
Cost
of services
|
4,204,276
|
4,030,280
|
3,137,756
|
6,544,598
|
4,102,395
|
|||||||||||||||
Gross
profit
|
22,136,085
|
27,927,667
|
21,224,239
|
32,410,225
|
22,293,698
|
|||||||||||||||
Operating
income (loss)
|
3,326,679
|
(1,562,357 | ) |
985,256
|
11,465,946
|
7,281,886
|
||||||||||||||
Net
income (loss)
|
1,753,918
|
(1,050,920 | ) |
725,146
|
8,184,930
|
6,472,705
|
||||||||||||||
Net
income (loss) per common share:
|
||||||||||||||||||||
Basic
|
$ |
0.34
|
$ | (0.23 | ) | $ |
0.16
|
$ |
1.73
|
$ |
1.43
|
|||||||||
Diluted
|
$ |
0.33
|
$ | (0.23 | ) | $ |
0.16
|
$ |
1.70
|
$ |
1.42
|
|||||||||
Weighted
average common shares outstanding:
|
||||||||||||||||||||
Basic
|
5,108,551
|
4,495,868
|
4,639,036
|
4,737,593
|
4,532,672
|
|||||||||||||||
Diluted
|
5,336,439
|
4,495,868
|
4,665,992
|
4,807,570
|
4,559,159
|
|||||||||||||||
Cash
dividends declared per common share
|
$ |
-
|
$ |
-
|
$ |
0.30
|
$ |
0.30
|
$ |
-
|
||||||||||
Statement
of Cash Flows
Data
|
||||||||||||||||||||
Net
cash provided by operating activities
|
$ |
1,765,496
|
$ |
2,422,001
|
$ |
6,990,161
|
$ |
4,818,203
|
$ |
4,762,238
|
||||||||||
Net
cash used in investing activities
|
(2,175,802 | ) | (1,904,201 | ) | (2,440,792 | ) | (2,192,500 | ) | (2,798,500 | ) | ||||||||||
Net
cash used in financing activities
|
(309,936 | ) | (237,336 | ) | (2,011,587 | ) | (1,428,022 | ) | (351,998 | ) | ||||||||||
Balance
Sheet
Data
|
||||||||||||||||||||
Cash
and cash equivalents
|
$ |
5,674,533
|
$ |
6,394,775
|
$ |
6,114,311
|
$ |
3,576,529
|
$ |
2,378,848
|
||||||||||
Working
capital
|
11,315,872
|
13,908,560
|
13,374,171
|
12,484,833
|
6,615,537
|
|||||||||||||||
Property
and equipment, net
|
423,563
|
178,883
|
396,862
|
725,936
|
731,142
|
|||||||||||||||
Intangible
assets, net
|
7,372,147
|
5,722,604
|
6,108,823
|
3,326,274
|
3,512,952
|
|||||||||||||||
Total
assets
|
40,042,466
|
27,977,227
|
23,632,916
|
26,289,604
|
20,356,163
|
|||||||||||||||
Total
long term liabilities
|
-
|
-
|
-
|
848,498
|
-
|
|||||||||||||||
Total
stockholders' equity
|
37,707,871
|
22,376,373
|
22,065,266
|
23,572,393
|
15,709,315
|
(1)
|
Includes
an increase to income of approximately $100,000 (net of income taxes
of
approximately $54,000) resulting from the cumulative effect of an
accounting change for forfeitures of restricted stock granted to
employees, executives and
consultants
|
Current
assets
|
$ |
962,877
|
||
Property,
plant and equipment
|
70,000
|
|||
Goodwill
|
7,349,366
|
|||
Intangible
assets
|
2,130,000
|
|||
Deferred
tax assets
|
3,545,618
|
|||
Other
non-current assets
|
10,846
|
|||
Total
assets acquired
|
14,068,707
|
|||
Current
liabilities
|
1,368,012
|
|||
Total
liabilities assumed
|
1,368,012
|
|||
Net
assets acquired
|
$ |
12,700,695
|
|
·
|
A
proposal to give our Board of Directors discretion to effect a reverse
stock split with respect to issued and outstanding shares of our
common
stock; and
|
|
·
|
A
proposal to amend and restate our Restated Articles of Incorporation
to
change our name from “YP Corp.” to “LiveDeal,
Inc.”
|
|
·
|
Certain
investment accounts totaling $815,785 have been reclassified from
cash and
cash equivalents to
certificates of deposit and other investments based on the maturity
dates
of the underlying investments
|
|
·
|
Accrued
refunds and fees of $1,250,000 relating to the Attorneys’ General
settlement described in Note 10 have been reclassified from accounts
receivable, net to accrued liabilities in the accompanying consolidated
balance sheet as of September 30,
2006.
|
|
·
|
Certain
miscellaneous receivables totaling $23,819 at September 30, 2006
were
reclassified from prepaid expenses and other current assets to accounts
receivable, net in the accompanying consolidated balance
sheet.
|
|
·
|
Dilution
and charge backs have
been reclassified from cost of services to a reduction in net revenues
in
the consolidated statement of
operations.
|
|
·
|
Monitoring
fees related to our
LEC billing channel have been reclassified from general and administrative
expenses to cost of
services.
|
|
·
|
Depreciation
and amortization
expenses that were previously separately stated are now included
in
general and administrative expenses in the consolidated statement of
operations.
|
|
·
|
Litigation
and related expenses
that were previously included in other income and expense are now
separately stated as a component of operating expenses in the consolidated
statement of
operations.
|
|
·
|
We
paid a settlement fee of $2,000,000 to the state consortium, which
was
distributed among themselves;
|
|
·
|
We
discontinued the use of activation checks as a promotional
incentive;
|
|
·
|
We
temporarily suspended billing of any active customer that was acquired
in
connection with the use of an activation check while notifying the
customer of their legal rights to cancel the service and providing
them a
60-day opportunity to receive a refund equivalent to the customer’s last
two payments; and
|
|
·
|
We
agreed not to employ any collection efforts with respect to past-due
accounts of customers that were secured through the use of an activation
check.
|
Q4
2007
|
Q3
2007
|
Q2
2007
|
Q1
2007
|
Q4
2006
|
Q3
2006
|
Q2
2006
|
Q1
2006
|
|||||||||||||||||||||||||
Net
Revenues
|
$ |
7,120,697
|
$ |
5,989,437
|
$ |
6,106,544
|
$ |
7,123,683
|
$ |
8,335,284
|
$ |
8,577,639
|
$ |
7,997,623
|
$ |
7,047,401
|
||||||||||||||||
Gross
margin
|
$ |
5,860,893
|
$ |
5,113,544
|
$ |
5,148,835
|
$ |
6,012,813
|
$ |
6,697,106
|
$ |
7,506,947
|
$ |
7,213,184
|
$ |
6,510,430
|
||||||||||||||||
Operating
expenses
|
$ |
4,956,356
|
$ |
4,537,182
|
$ |
4,043,109
|
$ |
5,272,759
|
$ |
9,053,783
|
$ |
6,276,713
|
$ |
7,081,323
|
$ |
7,078,205
|
||||||||||||||||
Operating
income (loss)
|
$ |
904,537
|
$ |
576,362
|
$ |
1,105,726
|
$ |
740,054
|
$ | (2,356,677 | ) | $ |
1,230,234
|
$ |
131,861
|
$ | (567,775 | ) | ||||||||||||||
Net
income (loss)
|
$ |
376,053
|
$ |
266,405
|
$ |
626,262
|
$ |
485,198
|
$ | (1,680,673 | ) | $ |
826,847
|
$ |
129,998
|
$ | (327,092 | ) |
|
§
|
Fourth
quarter of fiscal 2007 – includes an increased bad debt reserve of
approximately $377,000 resulting from the Chapter 11 Bankruptcy filing
of
one of our LEC aggregators, representing our entire pre-petition
outstanding receivable balance. The aggregator continues to
operate as debtor-in-possession. We have since transitioned
this portion of our business to another
aggregator.
|
|
§
|
Second
quarter of fiscal 2007 – includes the reversal of approximately $200,000
of accrued expenses related to the Attorneys’ General
settlement.
|
|
§
|
First
quarter of fiscal 2007 – includes approximately $1,000,000 of direct
response advertising costs incurred in October 2006 for which we
derived
no benefit based on the Attorneys’ General settlement that was agreed to
in December 2006.
|
|
§
|
Fourth
quarter of fiscal 2006 – includes the following charges associated with
the Attorneys’ General settlement:
|
|
o
|
$2,000,000
payment to cover regulatory and related
expenses
|
|
o
|
$1,250,000
of accrued refunds and processing fees for existing customers that
wish to
cancel their service in response to the correspondence to be sent
per the
terms of the agreement
|
|
o
|
$275,000
of legal and professional fees
|
|
§
|
Second
quarter of fiscal 2006 – includes an increase of general and
administrative expenses of approximately $80,000 related to separation
costs with our former Chief Financial Officer and $39,000 related
to
separation costs with other
employees.
|
|
§
|
First
quarter of fiscal 2006 – includes an increase of general and
administrative expenses totaling approximately $338,000 related to
separation costs with our former Chief Executive Officer and an increase
in other expenses associated with an additional expense of $162,000
relating to an outstanding legal
matter.
|
·
|
Customer
refunds. We have a customer refund policy that allows
the customer to request a refund if they are not satisfied with the
service within the first 120 days of the subscription. We
accrue for refunds based on historical experience of refunds as a
percentage of new billings in that 120-day period. Customer
refunds are reserved and charged against gross
revenue.
|
·
|
Non-paying
customers. There are customers who may not pay the fee
for our services even though we believe they are valid
subscribers. Included in cost of services is an accrual for
estimated non-paying customers that are recorded at the time of
billing.
|
·
|
Dilution. We
recognize revenue during the month for which the service is provided
based
on net billings accepted by the billing aggregators. We
recognize revenue only for accepted records. However,
subsequent to this acceptance, there are instances in the LEC billing
process where a customer cannot be billed due to changes in telephone
numbers, telephone carriers, data synchronization issues,
etc. These amounts that ultimately cannot be billed, as well as
certain minor billing adjustments by the LECs are commonly referred
to as
“dilution.” Dilution is estimated at the time of billing and
charged to cost of services.
|
·
|
Fees. Both
the aggregator and the LEC charge processing
fees. Additionally, the LEC charges fees for responding to
billing inquiries by its customers, processing refunds, and other
customer-related services. Such fees are estimated at the time
of billing and charged to cost of
services.
|
Year Ended
September 30,
|
Net
Revenues
|
Change from
Prior Year
|
Percent Change
from Prior Year
|
|||||||||
2007
|
$ |
26,340,361
|
$ | (5,617,586 | ) | (17.6 | )% | |||||
2006
|
$ |
31,957,947
|
$ |
7,595,952
|
31.2 | % | ||||||
2005
|
$ |
24,361,995
|
Year Ended
September 30,
|
Cost of
Services
|
Change from
Prior Year
|
Percent Change
from Prior Year
|
|||||||||
2007
|
$ |
4,204,276
|
$ |
173,996
|
4.3 | % | ||||||
2006
|
$ |
4,030,280
|
$ |
892,524
|
28.4 | % | ||||||
2005
|
$ |
3,137,756
|
2007
|
2006
|
2005
|
||||||||||
LEC
billing
|
63 | % | 48 | % | 30 | % | ||||||
ACH
billing
|
30 | % | 46 | % | 56 | % | ||||||
Direct
billing
|
4 | % | 6 | % | 14 | % | ||||||
Classified
|
3 | % | 0 | % | 0 | % |
Year Ended
September 30,
|
Gross
Profit
|
Change from
Prior Year
|
Percent Change
from Prior Year
|
|||||||||
2007
|
$ |
22,136,085
|
$ | (5,791,582 | ) | (20.7 | )% | |||||
2006
|
$ |
27,927,667
|
$ |
6,703,428
|
31.6 | % | ||||||
2005
|
$ |
21,224,239
|
Year Ended
September 30,
|
General &
Administrative
Expenses
|
Change from
Prior Year
|
Percent Change
from Prior Year
|
|||||||||
2007
|
$ |
12,518,620
|
$ | (1,832,133 | ) | (12.8 | )% | |||||
2006
|
$ |
14,350,753
|
$ | (249,861 | ) | (1.7 | )% | |||||
2005
|
$ |
14,600,614
|
|
·
|
A
decrease in compensation expense of approximately $1,887,000 resulting
from (i) a fiscal 2007 reduction in workforce stemming from the
discontinuance of our check mailer program and other business changes
which reduced our need for administrative support and (ii) a decrease
of
severance costs of $352,000 that were incurred in fiscal
2006;
|
|
·
|
A
reduction in customer related expenses of approximately $1,093,000
resulting from charges of approximately $924,000 in fiscal 2006 associated
with reconfirming customers acquired through our check activator
program
and $169,000 of other decreased customer related and collection expenses
as we reduced our usage of direct billing methods in fiscal
2007;
|
|
·
|
An
increase in our software and data license expenses of approximately
$360,000 primarily attributable to license fees associated with a
new
customer relationship management system acquired during fiscal
2007;
|
|
·
|
An
increase in travel costs of approximately $313,000 related to increased
investor relations activities, acquisitions in California and the
Philippines, and increased travel between our offices in Nevada and
Arizona;
|
|
·
|
An
increase in amortization expense of approximately $124,000 resulting
from
increased capitalized intangible assets, the most significant of
which
were marketing and technology-related intangible assets that were
acquired
through our acquisition of LiveDeal,
Inc.;
|
|
·
|
An
increase in investor relations expenses of $124,000 as we seek to
expand
and attract new investors; and
|
|
·
|
Other
cost increases of approximately
$227,000.
|
|
·
|
A
decrease in mailing and other customer costs of approximately $662,000
associated with the reduction of paper invoices and other methods
of
correspondence with customers for which payment is unlikely to
be
received;
|
|
·
|
A
decrease in depreciation and amortization expense of approximately
$135,000 as a significant amount of our fixed assets and intangible
assets
recently became fully depreciated;
and
|
|
·
|
An
increase in consulting and professional fees of approximately $233,000,
primarily driven by $162,000 of executive search and placement services
and other miscellaneous activities;
|
|
·
|
An
increase in compensation expense of approximately $476,000 associated
with
the general increase in revenues and business activity in fiscal
2006. This increase was comprised of increases of approximately
(i) $352,000 of severance costs associated with the termination of
former
officers and other personnel, (ii) non-cash compensation costs of
$179,000
associated with restricted stock awards, (iii) $307,000 for Directors’
compensation and Executive bonuses, and (iv) increases in leased
and
contract employees and other miscellaneous compensation expenses
of
$131,000. These costs were partially offset by a decrease in
executive consulting fees of approximately
$493,000;
|
|
·
|
General
cost reductions of approximately
$162,000.
|
Q4
2007
|
Q3
2007
|
Q2
2007
|
Q1
2007
|
Q4
2006
|
Q3
2006
|
Q2
2006
|
Q1
2006
|
|||||||||||||||||||||||||
Compensation
for employees, leased employees, officers and directors
|
$ |
1,535,115
|
$ |
1,760,439
|
$ |
1,877,103
|
$ |
1,873,582
|
$ |
2,073,646
|
$ |
1,908,099
|
$ |
2,475,244
|
$ |
2,476,713
|
||||||||||||||||
Professional
fees
|
184,507
|
529,139
|
319,948
|
394,028
|
347,247
|
313,533
|
282,148
|
416,088
|
||||||||||||||||||||||||
Reconfirmation,
mailing, billing and other customer-related costs
|
33,662
|
24,269
|
34,042
|
23,715
|
39,180
|
245,597
|
396,883
|
491,947
|
||||||||||||||||||||||||
Depreciation
and amortization
|
460,554
|
396,759
|
364,724
|
336,887
|
316,688
|
351,342
|
369,519
|
397,005
|
||||||||||||||||||||||||
Other
general and administrative costs
|
757,136
|
522,583
|
531,915
|
558,513
|
390,093
|
325,405
|
360,276
|
374,100
|
Year Ended
September 30,
|
Sales &
Marketing
Expenses
|
Change from
Prior Year
|
Percent Change
from Prior Year
|
|||||||||
2007
|
$ |
6,491,504
|
$ | (4,960,961 | ) | (43.3 | )% | |||||
2006
|
$ |
11,452,465
|
$ |
6,142,229
|
115.7 | % | ||||||
2005
|
$ |
5,310,236
|
Year Ended
September 30,
|
Litigation and
Related Expenses
|
Change from
Prior Year
|
Percent Change
from Prior Year
|
|||||||||
2007
|
$ | (200,718 | ) | $ | (3,887,524 | ) | (105.4 | )% | ||||
2006
|
$ |
3,686,806
|
$ |
3,358,673
|
1023.6 | % | ||||||
2005
|
$ |
328,133
|
Year Ended
September 30,
|
Operating
Income (Loss)
|
Change from
Prior Year
|
Percent Change
from Prior Year
|
|||||||||
2007
|
$ |
3,326,679
|
$ |
4,889,036
|
312.9 | % | ||||||
2006
|
$ | (1,562,357 | ) | $ | (2,547,613 | ) | (258.6 | )% | ||||
2005
|
$ |
985,256
|
Year Ended
September 30,
|
Other Income
(Expense)
|
Change from
Prior Year
|
Percent Change
from Prior Year
|
|||||||||
2007
|
$ |
10,945
|
$ |
35,463
|
144.6 | % | ||||||
2006
|
$ | (24,518 | ) | $ |
197,758
|
(89.0 | )% | |||||
2005
|
$ | (222,276 | ) |
Year Ended
September 30,
|
Income Tax
Provision (Benefit)
|
Change from
Prior Year
|
Percent Change
from Prior Year
|
|||||||||
2007
|
$ |
1,855,675
|
$ |
2,167,454
|
695.2 | % | ||||||
2006
|
$ | (311,779 | ) | $ | (683,816 | ) | (183.8 | )% | ||||
2005
|
$ |
372,037
|
Year Ended
September 30,
|
Net Income
(Loss)
|
Change from
Prior Year
|
Percent Change
from Prior Year
|
|||||||||
2007
|
$ |
1,753,918
|
$ |
2,804,838
|
266.9 | % | ||||||
2006
|
$ | (1,050,920 | ) | $ | (1,776,066 | ) | (244.9 | )% | ||||
2005
|
$ |
725,146
|
Payments
Due by Fiscal
Year
|
||||||||||||||||||||||||||||
Total
|
2008
|
2009
|
2010
|
2011
|
2012
|
Thereafter
|
||||||||||||||||||||||
Operating
lease commitments
|
$ |
2,942,292
|
$ |
830,833
|
$ |
800,639
|
$ |
509,923
|
$ |
407,523
|
$ |
314,789
|
$ |
78,585
|
||||||||||||||
Noncanceleable
service contracts
|
1,551,000
|
777,000
|
674,000
|
100,000
|
-
|
-
|
-
|
|||||||||||||||||||||
$ |
4,493,292
|
$ |
1,607,833
|
$ |
1,474,639
|
$ |
609,923
|
$ |
407,523
|
$ |
314,789
|
$ |
78,585
|
Page
|
||
Report
of Independent Registered Public Accounting Firm
|
38
|
|
Consolidated
Financial Statements:
|
||
Consolidated
Balance Sheets at September 30, 2007 and 2006
|
40
|
|
Consolidated
Statements of Operations for the years ended September 30, 2007,
2006, and
2005
|
41
|
|
Consolidated
Statements of Stockholders’ Equity for the years ended September 30, 2007,
2006, and 2005
|
42
|
|
Consolidated
Statements of Cash Flows for the years ended September 30, 2007,
2006, and
2005
|
43
|
|
Notes
to Consolidated Financial Statements
|
44
|
September
30,
|
||||||||
Assets
|
2007
|
2006
|
||||||
(as
restated)
|
||||||||
Cash
and equivalents
|
$ |
5,674,533
|
$ |
6,394,775
|
||||
Certificates
of deposit and other investments
|
-
|
3,082,053
|
||||||
Accounts
receivable, net
|
6,919,180
|
8,015,600
|
||||||
Prepaid
expenses and other current assets
|
510,609
|
235,250
|
||||||
Deferred
tax asset
|
546,145
|
1,781,736
|
||||||
Total
current assets
|
13,650,467
|
19,509,414
|
||||||
Accounts
receivable, long term portion, net
|
1,941,996
|
1,140,179
|
||||||
Property
and equipment, net
|
423,563
|
178,883
|
||||||
Deposits
and other assets
|
103,057
|
91,360
|
||||||
Intangible
assets, net
|
7,372,147
|
5,722,604
|
||||||
Goodwill
|
11,683,163
|
-
|
||||||
Deferred
tax asset, long term
|
4,551,644
|
1,334,787
|
||||||
Income
taxes receivable
|
316,429
|
-
|
||||||
Total
assets
|
$ |
40,042,466
|
$ |
27,977,227
|
||||
Liabilities
and Stockholders'
Equity
|
||||||||
Liabilities:
|
||||||||
Accounts
payable
|
$ |
1,138,265
|
$ |
773,653
|
||||
Accrued
liabilities
|
1,196,330
|
4,565,439
|
||||||
Income
taxes payable
|
-
|
261,762
|
||||||
Total
current liabilities
|
2,334,595
|
5,600,854
|
||||||
Total
liabilities
|
2,334,595
|
5,600,854
|
||||||
Commitments
and contingencies
|
||||||||
Stockholders'
Equity:
|
||||||||
Series
E convertible preferred stock, $.001 par value, 200,000 shares authorized,
127,840 issued and outstanding, liquidation preference
$38,202
|
10,866
|
10,866
|
||||||
Common
stock, $.001 par value, 100,000,000 shares authorized, 6,693,676
and
5,002,159 issued and outstanding
|
6,694
|
5,002
|
||||||
Treasury
stock (328,566 and 284,342 shares carried at cost)
|
(2,714,698 | ) | (2,407,158 | ) | ||||
Paid
in capital
|
23,325,888
|
12,294,186
|
||||||
Deferred
stock compensation
|
-
|
(2,854,122 | ) | |||||
Retained
earnings
|
17,079,121
|
15,327,599
|
||||||
Total
stockholders' equity
|
37,707,871
|
22,376,373
|
||||||
Total
liabilities and stockholders' equity
|
$ |
40,042,466
|
$ |
27,977,227
|
Year
ended September
30,
|
||||||||||||
2007
|
2006
|
2005
|
||||||||||
(as
restated)
|
(as
restated)
|
|||||||||||
Net
revenues
|
$ |
26,340,361
|
$ |
31,957,947
|
$ |
24,361,995
|
||||||
Cost
of services
|
4,204,276
|
4,030,280
|
3,137,756
|
|||||||||
Gross
profit
|
22,136,085
|
27,927,667
|
21,224,239
|
|||||||||
Operating
expenses:
|
||||||||||||
General
and administrative expenses
|
12,518,620
|
14,350,753
|
14,600,614
|
|||||||||
Sales
and marketing expenses
|
6,491,504
|
11,452,465
|
5,310,236
|
|||||||||
Litigation
and related expenses
|
(200,718 | ) |
3,686,806
|
328,133
|
||||||||
Total
operating expenses
|
18,809,406
|
29,490,024
|
20,238,983
|
|||||||||
Operating
income (loss)
|
3,326,679
|
(1,562,357 | ) |
985,256
|
||||||||
Other
income (expense):
|
||||||||||||
Interest
expense and other financing costs
|
-
|
-
|
(8,610 | ) | ||||||||
Interest
income
|
271,969
|
224,176
|
242,965
|
|||||||||
Other
income (expense)
|
10,945
|
(24,518 | ) | (222,276 | ) | |||||||
Total
other income (expense)
|
282,914
|
199,658
|
12,079
|
|||||||||
Income (loss) before income taxes and cumulative effect of accounting change |
3,609,593
|
(1,362,699 | ) |
997,335
|
||||||||
Income
tax provision (benefit)
|
1,855,675
|
(311,779 | ) |
372,037
|
||||||||
Cumulative
effect of accounting change (net of income taxes of $53,764 in
2005)
|
-
|
-
|
(99,848 | ) | ||||||||
Net
income (loss)
|
$ |
1,753,918
|
$ | (1,050,920 | ) | $ |
725,146
|
|||||
Net
income (loss) per common share:
|
||||||||||||
Basic:
|
||||||||||||
Income
(loss) applicable to common stock before cumulative effect of accounting
change
|
$ |
0.34
|
$ | (0.23 | ) | $ |
0.14
|
|||||
Cumulative
effect of accounting change
|
$ |
-
|
$ |
-
|
$ |
0.02
|
||||||
Net
income applicable to common stock
|
$ |
0.34
|
$ | (0.23 | ) | $ |
0.16
|
|||||
Diluted:
|
||||||||||||
Income
(loss) applicable to common stock before cumulative effect of accounting
change
|
$ |
0.33
|
$ | (0.23 | ) | $ |
0.14
|
|||||
Cumulative
effect of accounting change
|
$ |
-
|
$ |
-
|
$ |
0.02
|
||||||
Net
income (loss) applicable to common stock
|
$ |
0.33
|
$ | (0.23 | ) | $ |
0.16
|
|||||
Weighted
average common shares outstanding:
|
||||||||||||
Basic
|
5,108,551
|
4,495,868
|
4,639,036
|
|||||||||
Diluted
|
5,336,439
|
4,495,868
|
4,665,992
|
Common
Stock
|
Preferred
Stock
|
Treasury
|
Paid-In
|
Deferred
|
Retained
|
|||||||||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Stock
|
Capital
|
Compensation
|
Earnings
|
Total
|
||||||||||||||||||||||||||||
Balance,
October 1, 2004
|
5,085,879
|
$ |
5,086
|
128,340
|
$ |
10,909
|
$ |
-
|
$ |
12,197,719
|
$ | (5,742,814 | ) | $ |
17,101,493
|
$ |
23,572,393
|
|||||||||||||||||||
Common
stock issued for services
|
10,000
|
10
|
-
|
-
|
-
|
119,490
|
-
|
-
|
119,500
|
|||||||||||||||||||||||||||
Treasury
stock received as partial settlement of amounts due from
affiliates
|
(188,957 | ) | (189 | ) |
-
|
-
|
(1,606,131 | ) |
189
|
-
|
-
|
(1,606,131 | ) | |||||||||||||||||||||||
Treasury
stock acquired as part of stock repurchase program
|
(60,125 | ) | (60 | ) |
-
|
-
|
(565,609 | ) |
60
|
-
|