LiveDeal, Inc. — Form 10-K Summary
Entity note: The supplied filing identifies the registrant as LiveDeal, Inc., not LIVE VENTURES Inc. The reporting period is the fiscal year ended September 30, 2012; quarterly figures include the quarter ended September 30, 2012.
Business context and reporting period
LiveDeal provides online customer-acquisition and marketing services to small and medium-sized local businesses. During a strategic transition, it stopped accepting new customers for its legacy InstantProfile services, which still generated most fiscal 2012 revenue. It began promotional marketing in August 2012 and launched online-presence marketing under the Velocity Local brand in November 2012, after the fiscal year-end. The company acquired substantially all of LiveOpenly’s assets in August 2012 for 75,000 shares valued at $420,000.
Financial performance and liquidity
| Metric | FY 2012 | FY 2011 |
|---|---|---|
| Revenue | $3.071 million | $4.083 million |
| Gross profit | $2.355 million | $477,269 |
| Gross margin | 76.7% | 11.7% |
| Operating expenses | $3.302 million | $5.779 million |
| Operating loss | $947,266 | $5.302 million |
| Net loss | $1.575 million | $5.502 million |
| Operating cash flow | $28,984 | $(4.321) million |
Revenue fell 25%, principally because new sales of legacy products had ceased and the new offerings had not yet generated significant revenue. Gross profit improved as service costs fell sharply, while cost-reduction measures cut general and administrative expense by 42%. Net loss narrowed 71% year over year. In Q4 2012, revenue was $619,532 and net loss was $842,807, compared with Q3 revenue of $777,857 and net loss of $281,770.
At September 30, 2012, cash and cash equivalents were $1.306 million, working capital was $371,000, total assets were $4.257 million, and total liabilities were $1.427 million. The company reported no notes payable or current capital lease obligation on its year-end balance sheet. Management said existing cash was insufficient to sustain current operations, but believed additional financing and cash generated from operations could fund the next 12 months; it cautioned that financing was not assured. Operating lease commitments totaled $193,405.
Fiscal 2012 investing cash outflow was $530,677, including $482,413 for intangible assets and website development. Financing provided $1.563 million, including $2.350 million from stock issuance and $250,000 from convertible debt, offset partly by repayment of $1.0 million in notes payable. Interest expense included $489,594 of non-cash charges related to convertible debt and warrants. The initial $250,000 note from Isaac Capital Group, owned by CEO Jon Isaac, was converted in September 2012; the conversion resulted in 109,139 shares and warrants for the same number of shares. Subsequent to year-end, a further $250,000 note was issued and converted, with additional shares and warrants.
Material changes, outlook, and risks
- The company’s operating model and management changed substantially. New offerings remained unproven, and management gave no quantified revenue, earnings, or margin guidance.
- Management identified the loss of third-party local-exchange-carrier (LEC) billing as a major risk: providers were expected to stop billing for third parties by the end of 2012. Fiscal 2012 LEC-billed revenue was approximately $877,000; the company warned that customers and revenue could decline without alternative billing methods.
- Promotional marketing depends on strategic publishing partners, including Travelzoo, Google Local, and Amazon. Agreements may be terminated on short notice and do not guarantee publication of sourced deals.
- Liquidity depends on continued operations and potential financing. Additional equity could dilute existing holders; convertible notes and warrants issued to the CEO-owned investor add related-party and dilution considerations.
- Three stockholders beneficially held approximately 63% of outstanding common shares, and the filing reported prior NASDAQ listing-compliance issues, though the company said it had regained compliance in August 2012.
- Legal matters included a proposed settlement in the Global Education Services case, accrued at $150,000 at year-end, subject to final court approval, and the Sunpark lease dispute, for which $266,000 was accrued. Sunpark sought approximately $357,503 in lost rent plus repair expenses.
- The independent auditor gave an unqualified opinion on the financial statements. Management reported disclosure controls and internal control over financial reporting effective as of September 30, 2012; the auditor did not attest to internal-control effectiveness.
Key facts for investors to verify
- Confirm the issuer identity: the supplied filing is for LiveDeal, Inc., despite request metadata naming LIVE VENTURES Inc.
- Review subsequent filings for actual performance of Velocity Local and promotional marketing, and whether either business achieved meaningful revenue or positive cash flow.
- Determine whether alternative billing channels replaced LEC billing and how subscriber losses affected legacy revenue and collections.
- Check financing availability, cash runway, and the terms and dilution effects of related-party convertible notes, conversions, and warrants.
- Confirm final court approval and total payment for the GES settlement, and the resolution and ultimate cost of the Sunpark matter.
- Reconcile receivable recoverability: the filing reports substantial allowances, including exposures related to a bankrupt LEC aggregator and a disputed receivable.