| ORGANIZATION AND BASIS OF PRESENTATION |
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1.
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ORGANIZATION
AND BASIS OF PRESENTATION
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The
accompanying consolidated financial statements include the accounts
of LiveDeal, Inc. (formerly YP Corp.), a Nevada corporation, and
its wholly owned subsidiaries (collectively the
“Company”). The Company delivers local
customer acquisition services for small and medium-sized businesses
combined with online listing services to deliver an affordable way
for businesses to extend their marketing reach to local, relevant
customers via the Internet.
The
Company’s new strategic focus is on delivering a suite of
Internet-based, local search driven, customer acquisition services
for small and medium-sized businesses, sold via telemarketing and
supported by its websites and internally developed
software.
The
following sets forth historical transactions with respect to the
Company’s organizational development:
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Telco
Billing, Inc. was formed in April 1998 to provide advertising and
directory listings for businesses on its Internet website in a
“Yellow Pages” format. Telco provides those
services to its subscribers for a monthly fee. These
services are provided primarily to businesses throughout the United
States. Telco became a wholly owned subsidiary of the
Company after the June 1999 acquisition.
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At
the time that the transaction was agreed to, the Company had
12,567,770 common shares issued and outstanding. As a
result of the merger transaction with Telco, there were 29,567,770
common shares outstanding, and the former Telco stockholders held
approximately 57% of the Company’s voting
stock. For financial accounting purposes, the
acquisition was a reverse acquisition of the Company by Telco,
under the purchase method of accounting, and was treated as a
recapitalization with Telco as the acquirer. Consistent
with reverse acquisition accounting, (i) all of Telco’s
assets, liabilities, and accumulated deficit were reflected at
their combined historical cost (as the accounting acquirer) and
(ii) the preexisting outstanding shares of the Company (the
accounting acquiree) were reflected at their net asset value as if
issued on June 16, 1999.
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On
June 6, 2007, the Company completed its acquisition of LiveDeal,
Inc. (“LiveDeal”), a California
corporation. LiveDeal operated an online local
classifieds marketplace, www.livedeal.com, which listed millions of
goods and services for sale across the United
States. The technology acquired in the acquisition
offered such classifieds functionality as fraud protection,
identity protection, e-commerce, listing enhancements, photos,
community-building, package pricing, premium stores, featured
Yellow Page business listings and advanced local search
capabilities. This business has since been discontinued
– see Note 3.
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On
July 10, 2007, the Company acquired substantially all of the assets
and assumed certain liabilities of OnCall Subscriber Management
Inc., a Manila, Philippines-based company that provided
telemarketing services. The acquisition took place
through the Company’s wholly-owned subsidiary, 247 Marketing
LLC, a Nevada limited liability company, which remains in existence
but is inactive.
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On
August 10, 2007, the Company filed amended and restated articles of
incorporation with the Office of the Secretary of State of the
State of Nevada, pursuant to which the Company’s name was
changed to LiveDeal, Inc., effective August 15,
2007. The name change was approved by the
Company’s Board of Directors pursuant to discretion granted
to it by the Company’s stockholders at a special meeting on
August 2, 2007.
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During
2009, the Company made strategic changes that impacted the
Company’s consolidated financial statements in the following
manner:
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Impairment
charges of $16,111,494 were recorded related to the write-down of
the Company’s goodwill and other intangible
assets;
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The
Company commenced a plan to discontinue its classifieds business
and initiated shutdown activities and has reflected the operating
results of this line of business as discontinued operations in the
accompanying consolidated statements of operations;
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The
Company sold a portion of its customer list associated with its
directory services business and recorded a gain of $3,040,952;
and
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The
Company established a valuation allowance of $10,586,854 related to
its deferred tax assets, as described in Note 12.
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During
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 small business, as well as declining
revenues from our traditional business line (i.e. directory
services).
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As
a result, we made significant changes to our business strategy
during the second quarter of fiscal 2010. We decided to
move our strategic focus towards our directory services business
and 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 the Direct Sales business line on December
1, 2010.
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During
2011, as part of our strategy to evaluate each of our business
segments as separate entities, management noted that the Direct
Sales business segment had incurred operating losses and declining
revenues and did not fit with our change in strategic
direction. Accordingly, in March 2011, we made the
strategic decision to discontinue our Direct Sales business and
product offerings. Prior year financial statements have been
restated to present the Direct Sales business segment as a
discontinued operation.
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We
initiated shutdown activities in March 2011 and completed such
activities in May 2011. In conjunction with the
discontinued operations, we recorded the following charges in
fiscal 2011:
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Employee
contract termination charges of $7,083 reflecting the reduction in
force of 7 employees;
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Non
cash impairment charges $367,588 consisting of the write-off of net
intangible assets;
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The Company had a net loss of $5.5 million for the year ended
September 30, 2011, and $7.5 million for the year ended
September 30, 2010. The Company had a negative operating cash flow
of $4.3 million for the year ended September 30, 2011, and $3.9
million for the year ended September 30, 2010. The
Company borrowed $1.0 million in May 2011 which is due May 2012 and
the Company had cash of $244,470 as of September 30,
2011. Subsequent to September 30, 2011, the Company was
able to obtain $2.0 million in equity financing – see Note
17. The Company has significantly reduced operating
expenses by reviewing all expenses and improving operating
efficiencies. Management believes the Company’s
cash on hand and additional cash generated from operations together
with potential sources of cash such as obtaining advances from the
Company’s LEC clearing houses or leveraging off of its
accounts receivable will provide the Company with sufficient
liquidity for the next 12 months.
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