This Annual Report on Form 10-K includesmay include certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. We may also make forward-looking statements that constitute “forward-looking statements.”in other reports filed with the Securities and Exchange Commission , (“the SEC”), in materials delivered to our stockholders, in press releases, or in oral or written statements made by our representatives. These forward-looking statements, which are often characterized by the terms “may,” “believes,” “projects,” “expects,” “plans”, or “anticipates,” and do not reflect historical facts.facts but instead are based on our current assumptions and predictions regarding future events, such as business and financial performance. Specific forward-looking statements contained in Part I of this Annual Report include, but are not limited to, our (i) belief that local exchange carrier, or LEC, billing will continue to be a significant billing channel in the future;continued growth of internet usage, particularly via mobile devices, and demand for web-based marketing; (ii) expectation of increasing revenues through our national accounts programs, fulfillment contracts, web hosting and other arrangements; (iii) belief in the continued growth of Internet usage andin the demand for online marketing;  (iv) belief in the growth of the local search and information, market;(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 existingthe cash on hand and additional cash generated from operations together with additionalpotential sources of cash obtained from other sourcesthrough issuance of debt or equity will provide usthe company with sufficient liquidity to meet our needs for the next 12 months, such other sources of cash possibly including stock issuancesmonths; and loans; (vi) belief that we would be able to obtain advances from our existing LEC clearing houses through their current advance programs; (vii) belief that we could obtain other formsthe outcome of financing secured bypending legal proceedings will not have a material adverse effect on business, financial position and results of operations, cash flow or leveraged off our increasing accounts receivable based on existing programs in place that are being offered to companies similar to ours; and (viii) belief that existing facilities are adequate for our current and anticipated future needs and that our facilities and their contents are adequately covered by insurance.

LiveDeal, Inc., a Nevada corporation (thewhich, together with its subsidiaries, we refer to as the “Company”, “LiveDeal”, “we”, “us” or “our”) ,providesspecialized online marketing solutions to small-to-medium sized local businesses, or SMBs, that boost customer acquisition servicesawareness and merchant visibility. We offer affordable tools for small businesses. LiveDeal, through our two primary wholly-owned subsidiaries (Velocity Marketing Concepts, Inc. and Local Marketing Experts, Inc.), offers an affordable way for businessesSMBs to extend their marketing reach to local, relevant prospective customers via the Internet. 

We provide specialized online marketing solutions that boost customer awareness and merchant visibility on the internet. In September 2013, we launched LiveDeal.com, which redefinedthe 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.

Products and Services

LiveDeal.com.

LiveDeal.com is a unique, real-time “deal engine” connecting merchants with consumers. We believe that the Company 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:

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 YP.com. At the time, YP.com wasdiscount amount and redemption details. This not only erodes potential profits for restaurant owners but could also drive traffic during already-busy periods for the first companyrestaurants. LiveDeal’s model benefits both the restaurant and the consumer because it provides the restaurant the opportunity to bringcreate 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. From there1994, 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 movedtested 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.

Velocity Local^™ Online Presence Marketing.

We are continually developing and marketing a suite of products and services designed to meet the online classifieds business whenmarketing needs of SMBs at affordable prices. Our target customers for our Velocity Local^™and our LiveDeal^®brands are SMB owners who work long hours to deliver real value to their customers in their own communities that do not have the time or expertise to develop the powerful, multi-faceted, online marketing and advertising programs necessary for successful online marketing. Our offerings draw on a decade of experience servicing SMBs in the internet technology environment.

We offer our SMB customers packages of services to create and maintain an online presence. Products and services we merged with LiveDeal in 2007.

Promotional Marketing

We also source local special deals and activities for SMBs. With the growth of special deal promotions, many SMBs are experimenting with special offers to drive new customers to their locations. We offer our clients a solution that utilizes our business channels to market our clients’ products and services to potential customers. To use this service, an SMB will generally offer a discount for select products or services, or create a specially priced bundle. Our salespeople assist and guide the SMBs to create enticing and marketable deals. We then find an appropriate channel to publish the deal to relevant potential customers.

Potential customers can gain awareness of our clients’ businesses through these deal publications, and transact business with our SMB clients by purchasing a deal. Our SMB clients benefit from their increased visibility, additional business and the opportunity to gain loyal customers.

Prior to our launch of LiveDeal.com, our business strategy includes partnering established strategic publishing partners to publish and sell our client’s deals in exchange for a share of the revenue. We have entered into sourcing agreements with several reputable publishers who have large user bases, including Travelzoo, Google Local, and Amazon, and act as an intermediary to connect SMBs to our publishing partners. Our business thus relies in part on the ability of our partners to display our clients’ deals to a large, relevant audience and to sell the offers. With the launch of LiveDeal.com, we intend to focus our promotional marketing efforts and offer a substantial portion of those products and services through our own proprietary platform.

InstantProfile^® (Legacy)

In addition to our current product offerings, we continue to service customers acquired under our legacy product offerings, primarily our InstantProfile^® line of products and services. These services primarily consist of directory listing services. Although we currently generate a significant amount of revenue from these legacy product offerings, we are no longer acquiring customers for them.

Marketing

General. We rely on telemarketing and online lead generation to drive customer acquisition. We have created our own telemarketing sales team which works with highly automated technology and specializes in creating, deploying and managing telemarketing campaigns quickly and efficiently. We believe that our telemarketing structure enables us to build and scale sales programs quickly.

We have long-standing relationships with data and lead providers, which enable us to source high quality leads and to focus our telemarketing efforts toward the demographics we believe most likely to result in long-term customers. We primarily market our products and services to SMBs in lists we acquire from third party data companies.

Online Presence Marketing. Our current strategy is to market our online presence marketing services to small office, home office and local businesses that can take advantageacross the country. Our target customers include retail SMBs, such as restaurants, home repair and services companies, as well as professional firms providing legal, accounting and medical services, which share the common challenges of emerging Internet capabilities will be ablemanaging and optimizing their online presence to acquire and retain customers.

Our Market

More than 27 million SMBs operate in the United States today. While a majority of SMBs have a website, most of them are not optimized for mobile devices and therefore do not effectively generate business for the SMB. SMB owners frequently lack the time, expertise or resources necessary to make their website a relevant, effective part of their marketing efforts, or to exploit the additional internet marketing channels needed for successful online marketing. Our target customers with efficiency never-before-possibleare SMBs which normally do not market their products and that those that cannot will suffer in comparison. So, it is becoming widely recognized among small business owners that masteringservices nationally, but wish to utilize local marketing opportunities, including local search, to promote their products and services.

Effective online marketing requires the Internet arts is essential.

At the same time, we believe that many SMB owners realize that an effective internet presence – including engaging with online and social tools – is essential to their marketing efforts, and SMBs are shifting their marketing budgets from traditional media to online channels. According to BIA/Kelsey forecasts, traditional media business segments such as print advertising, Yellow Pages and newspapers are experiencing large declines in advertising revenues, whereas social media advertising revenues will grow from $5.1 billion in 2010 to $8.2 billion in 2015, representing a compound annual growth rate of 10%. According to internet research firm ComScore, online ad spending increased to just over $30 billion in the U.S. in 2011, a 20.2% increase over 2010.

According to PricewaterhouseCoopers and the Interactive Advertising Bureau, or PWC and IAB, local online/digital advertising revenues in the United States rose 14% in the first half of 2012 and continued to rise steeply through the end of 2012. Searches for products, services or businesses thereforeconstrained by geographical search parameters, such as municipality or zip code, which we refer to as local searches, are an increasingly significant segment of the online marketing industry. According to a May 2011 study, The Kelsey Group estimates that the local search market in the United States will grow from $5.7 billion in 2011 to $10.2 billion in 2016.PWC and IAB also report that revenue from search is 47% of the total internet advertising revenue.

Accordingly, many SMBs need a partner with the necessary expertise and understanding to manage emerging Internetevolving internet audience acquisition services on their behalf. They needservices. We believe that this partner to operate quickly, proactivelycreates a large market opportunity for nimble, reliable and reputable service providers that help companies leverage these new channels efficiently and at affordable prices.

The continued rise in smart phones, which now outsell traditional mobile phones, has changed the lowest possible cost.

We see SMBs quickly adapting to the local and mobile marketing opportunities because of the great potential to retain existing and draw in new customers at affordable prices. We anticipate that soon most online searches will be conducted using a suitemobile phone, which greatly increases the effectiveness of mobile marketing.

Competition

Promotional Marketing. Our promotional marketing business (including our new LiveDeal.com platform) competes for local deals with several large competitors, such as Groupon and LivingSocial, and many smaller competitors. This business is part of a new market which has operated at a substantial scale for only a limited period of time. We expect competition in this market to continue to increase because no significant barriers to entry exist. Contracts with deal publishers typically contain exclusivity provisions which restrict SMBs from offering deals through other outlets.

We seek desirable local products and services designedwhich we can provide to deliver agency quality productsour publishing partners. We believe that we are in a position to compete in this market successfully due to the unique features of our LiveDeal.com platform (as described above), our experienced sales managers, our experience at an affordable cost. This new suitesourcing, selling and servicing large numbers of products delivers high end agencysmall business accounts, the comprehensiveness of our database, the effectiveness of our marketing programs, and the diversity of our publisher distribution network. Our distribution partnerships allow our clients to reach large audiences and promote their products and services without the costs typically associated with a high end, online, agency firm. The suite of services has a variety of online products and various price points. These products allow LiveDeal to become the small business audience acquisition partner.

The principal competitive factors in the markets in which we competethis market include personalization of service, ease of use, quality of directories, quality and responsiveness of search results,services, availability of quality content, value-added products and services, and access to end-users.  consumers, effectiveness at driving business to our clients, and price.

Many boutique firms offer services similar to our online presence marketing products. Generally these small firms cannot provide all the comprehensive services we do. However, these small firms provide many options for web design, social media marketing, internet marketing, and search engine optimization.

Because of efficiencies stemming from our proprietary software and business structure, we are generally able to provide these services at a lower recurring cost and with lower upfront charges to commence a complete marketing campaign and build a client’s mobile-optimized website.

We also compete for advertising listings with the suppliersagainst larger companies which offer a similar or more expanded set of Internet navigational and informational services, high-traffic websites, Internet access providers, and other media.  This competition could result in significantlyproducts. Our principal competitive advantages over these companies are our lower prices for advertising and reductions in advertising revenues.  Increased competition could havethe better quality and service of our website design, particularly our web app platform. We believe our combination of outstanding service and low cost will enable us to provide a material adverse effect onsuite of attractive packages to our business.

General. Many of our competitors have access to greater capital resources than we have.do. These capital resources could allowenable our competitors to engage in advertising and other promotional activities that will enhance their brand name recognition at levels we cannot match.  The LECs and national search engines also have advantages in terms of brand name recognition.

Intellectual Property

Our success will depend significantly on our ability to develop and maintain the small business regardlessproprietary aspects of our technology and operate without infringing upon the price point.

We estimate that reliance upon trade secrets and unpatented proprietary know-how will continue to be our principal method of protecting our trade secrets and other proprietary technologies. While we had 23 full-timehave hired third-party contractors to help develop our proprietary software and no part-time employeesto provide various fulfillment services, we generally own (or have permissive licenses for) the intellectual property provided by these contractors. Our proprietary software is not substantially dependent on any third-party software, although our software does utilize open source code. Notwithstanding the use of this open source code, we do not believe our usage requires public disclosure of our own source code nor do we believe the use of open source code will have a material impact on our business.

We register some of our product names, slogans and logos in the United States. NoneIn addition, we generally require our employees, contractors and many of those with whom we have business relationships to sign non-disclosure and confidentiality agreements. Neither intellectual property laws, contractual arrangements, nor any of the other steps we have taken to protect our intellectual property, can ensure that third parties will not exploit our technologies or develop similar technologies.

Our proprietary publishing system provides an advanced set of integrated tools for design, service, and modifications to support our mobile web app services. Our mobile web app builder software enables easy and efficient design, end user modification and administration, and includes a variety of other tools accessible by our team members.

Employees

As of December 2, 2013, we had 21 full-time employees and one part-time employee in the United States, none of whom is covered by a collective bargaining agreement.

Corporate History

We were originally incorporated in Nevada in 1996 as Renaissance Center, Inc. We started in the online marketing industry with YP.com, which had introduced the print yellow pages to the internet. We moved into the online classifieds business when we acquired LiveDeal, Inc., a California corporation, in June 2007, and changed our corporate name to LiveDeal, Inc. in August 2007.

On July 10, 2007, we acquired a Manila, Philippines-based call center to provide telemarketing services to support our directory services business. In February 2008, we commenced sales of higher-end direct sales products which focused on search engine marketing, website creation services and add-on advertising products. We sold the YP.com domain in March 2009, and in June 2009 discontinued our classifieds business and the operations at our Philippines-based call center.

In March 2010, we began mass market sales of a suite of internet-based, local search driven, customer acquisition services for small businesses using local exchange carrier, or LEC, billing channels, and curtailed sales of our employeeshigher-end direct sales products. In July 2010, we rebranded our traditional yellow page directory service as InstantProfile^® and upgraded our services to provide online subscription tools and services to broadcast information about a business to the most popular internet directories, search engines, social media networks, and Points-of-Interest (POI) databases embedded on the leading navigational devices, as well as a communication suite that enabled both conference call hosting and electronic fax services. On December 1, 2010, we ceased all new sales of our higher-end direct sales products, and in May 2011 we assigned all remaining customers in that business segment to ReachLocal, Inc. On July 15, 2011, we discontinued all new sales of our InstantProfile^® product while we evaluated our sales program, products, distribution methods and vendor programs, but we continue to service existing customers.

In August 2012 we acquired substantially all of the assets of LiveOpenly, Inc., which sourced, published and sold discounted goods and services offered by SMBs.

In addition to our renewed marketing efforts for LiveDeal.com and our other online presence and promotional marketing product lines described above, in the past fiscal year we have continued our efforts to reduce our and streamline our operations. We also intend to seek additional investment and working capital that will enable us to continue to expand and improve our product offerings and grow our revenues.

Available Information

We regularly file reports with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any other filings required by the SEC. We make these reports available free of charge in the investor relations section of our corporate website (http://ir.livedeal.com/) as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. References to our corporate website address in this report are coveredintended to be inactive textual references only, and none of the information contained on our website is part of this report or incorporated in this report by reference.

The public may inspect and copy materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Room 1580, Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. You may also access these materials, and other information regarding issuers like us that file information electronically with the SEC, from the SEC’s internet website at http://www.sec.gov/.

Recent Developments

Engagement Agreement with Chardan Capital Markets LLC (At-The-Market Offering)

On January 7, 2014, we entered into an Engagement Agreement (the “Engagement Agreement”) with Chardan Capital Markets LLC (“Chardan”) pursuant to which we may issue and sell up to a maximum aggregate amount of 660,000 shares of our common stock from time to time through Chardan as our sales agent, under our shelf registration statement on Form S-3 (File No. 333-187397) previously filed with the SEC, pursuant to which any shares that are issued under the Engagement Agreement will be sold.

Upon delivery of a placement notice by the Company, and subject to the terms and conditions of the Engagement Agreement, Chardan may sell the common stock by any collective bargaining agreements.method that is deemed to be an “at-the-market” offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended (the “Securities Act”), including by means of ordinary brokers’ transactions at market prices on the NASDAQ Capital Market, in block transactions, through privately negotiated transactions, or as otherwise agreed by Chardan and us. Chardan will act as sales agent on a commercially reasonable efforts basis consistent with its normal trading and sales practices and applicable state and federal law, rules and regulations and the rules of NASDAQ.

The offering pursuant to the Engagement Agreement will terminate upon the earlier of (i) the sale of all shares of common stock subject to the Engagement Agreement, or (ii) termination of the Engagement Agreement as permitted therein. The Engagement Agreement may be terminated by Chardan or us at any time upon 15 days’ notice to the other party.

We will pay Chardan a commission equal to up to 3% of the gross proceeds from the sale of the common stock sold through Chardan pursuant to the Engagement Agreement and reimburse Chardan up to $15,000 in expenses. We have also provided Chardan with customary indemnification rights. No assurance can be given that we will sell any shares under the Engagement Agreement, or, if we do, as to the price or amount of shares that we will sell, or the dates on which any such sales will take place.

The foregoing description of the Engagement Agreement contained herein does not purport to be complete and is qualified in its entirety by reference to the complete text of the Engagement Agreement, a copy of which is attached to this Annual Report on Form 10-K as Exhibit 1.1 and incorporated herein by reference. This Annual Report on Form 10-K also incorporates by reference the Engagement Agreement into our shelf registration statement on Form S-3 (File No. 333-187397) previously filed with the SEC, pursuant to which any shares that are issued under the Engagement Agreement will be sold.

On January 9, 2014, we delivered a placement notice to Chardan to sell 12,200 shares of our common stock as part of the at-the-market offering. The shares were sold for approximately $8.93 per share, resulting in gross proceeds of approximately $109,000. Net proceeds to us, after payment of Chardan’s 3% commission was approximately $106,000.

Convertible Note Transaction ($5 Million Line of Credit)

On January 7, 2014, the Company entered into a Note Purchase Agreement (“Purchase Agreement”) with Kingston Diversified Holdings LLC (the “Investor”), pursuant to which the Investor agreed to purchase for cash up to $5,000,000 in aggregate principal amount of the Company’s Convertible Notes (“Notes”). The Purchase Agreement and the Notes, which are unsecured, provide that all amounts payable by the Company to the Investor under the Notes will be due and payable on the second (2nd) anniversary of the date of the Purchase Agreement (the “Maturity Date”).

The Purchase Agreement and the Notes provide that:

The foregoing description of the Purchase Agreement, the Notes and the Contingent Warrants contained herein does not purport to be complete and is qualified in its entirety by reference to the complete text of such documents, copies of which are attached to this Annual Report on Form 10-K as Exhibits 10.10, 10.11 and 10.12, respectively, and incorporated herein by reference

2014 Omnibus Equity Incentive Plan

On January 7, 2014, our Board of Directors adopted the 2014 Omnibus Equity Incentive Plan (the “2014 Plan”), which authorizes the issuance of distribution equivalent rights, incentive stock options, non-qualified stock options, performance stock, performance units, restricted ordinary shares, restricted stock units, stock appreciation rights, tandem stock appreciation rights and unrestricted ordinary shares to our officers, employees, directors, consultants and advisors. The Company has reserved up to 600,000 shares of common stock for issuance under the 2014 Plan. Pursuant to Nasdaq Listing Rule 5635(c), the Company intends to seek stockholder approval of the 2014 Plan at our 2014 Annual Meeting of Stockholders.

We depend upon third-party software to operate certain of our services. The failure of this software to perform as expected wouldcould have a material adverse effect on our business. Additionally, although we believe that several alternative sources for this software are available, any failure to obtain and maintain the rights to use such software wouldcould have a material adverse effect on our business, prospects, financial condition, and results of operations. We also depend upon third parties who provide the cloud computing services which host our customers’ websites, including the mobile web apps, to be sufficiently reliable and provide services that allow us to connect to the Internet with sufficient capacity and bandwidth so that our business can function properly and our customers’ websites can handleare responsive to current and anticipated traffic. Any restrictions or interruption in ourthose providers’ services or connection to the Internet wouldinternet could have a material adverse effect on our business, prospects, financial condition, and results of operations. If we are forced to switch hosting facilities, we may not be successful in finding an alternative service provider on acceptable terms or in hosting the required computer servers and implementing the required technology ourselves. We may also be limited in our remedies against these providers in the event of a failure of service.

14

9

---

We expect that our anticipated future growth, including through potential acquisitions, may strain our management, administrative, operational and financial infrastructure, which could adversely affect our business.

We anticipate that significant expansion of our present operations will be required to compensate for the loss of clients related to the cessation of LEC billing and to capitalize on potential growth in market opportunities, and that this expansion will place a significant strain on our management, operational and financial resources. We expect to add a significant number of additional key personnel in the future, including key managerial, sales and technical employees who will have to be fully integrated into our operations. In order to manage our growth, we will be required to continue to implement and improve our operational, marketing and financial systems, to expand existing operations, to attract and retain superior management and personnel, and to train, manage and expand our employee base. We may not be able to expand our operations effectively, our systems, procedures and controls may be inadequate to support our expanded operations, and our management may fail to implement our business plan successfully.

We may not be able to secure additional capital to expand our operations.

Although we currently have no material long-term needs for capital expenditures, we will likely be required to make increased capital expenditures to fund our anticipated growth of operations, infrastructure, and personnel. We currently anticipate that our cash on hand as of September 30, 2010, together with cash flows from operations or obtained from other sources, such other sources of cash possibly including stock issuances, loans and advances from our existing LEC clearing houses through their current advance programs or other forms of financing secured by or leveraged off our increasing accounts receivable based on existing programs in place that are being offered to companies similar to ours will be sufficient to meet our anticipated liquidity needs for working capital and capital expenditures over the next 12 months.  In the future, however, we may need to seek additional capital through the issuance of debt or equity, depending upon our results of operations, market conditions or unforeseen needs or opportunities. Our future liquidity and capital requirements will depend on numerous factors, including the following:

including:

§·

the pace of expansion of our operations;

§·

our need to respond to competitive pressures; and

§·

future acquisitions of complementary products, technologies or businesses.

Our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties and actual results could vary materially as a result of the factors described above.  As we require additional capital resources, we may seek to sell additional equity or debt securities.  Debt financing must be repaid at maturity, regardless of whether or not we have sufficient cash resources available at that time to repay the debt.  

The sale of additional equity or convertible debt securities could result in additional dilution to existing stockholders. We cannot provide assurance that any financing arrangements will be available in amounts or on terms acceptable to us, if at all.

Our business is subject to a strict regulatory environment.

Existing laws and regulations and any future regulation may have a material adverse effect on our business.  For example, we believe that our direct marketing programs meet existing requirements of the United States Federal Trade Commission (“FTC”).  Any changes to FTC requirements or changes in our direct or other marketing practices, however, could result in our marketing practices failing to comply with FTC regulations.

On December 14, 2006, we voluntarily entered into a settlement with thirty-four states’ attorneys general to address their concerns regarding our promotional activities, including the use of our check mailer for customer acquisition.  

There can be no absolute assurance that the other states or other parties, which were not part of the above-mentioned state consortium, would not attempt to file similar claims against us in the future.  However, we believe this risk is somewhat mitigated by the fact that those states did not join the states in filing complaints against us and the fact that we are discontinuing the use of our check activators.  Finally, our utilization of ACH billing has exposed us to greater scrutiny by the National Automated Clearing House Association, or NACHA.  Future actions from these and other regulatory agencies could expose us to substantial liability in the future, including fines and criminal penalties, preclusion from offering certain products or services, and the prevention or limitation of certain marketing practices.

We may not be able to adequately protect our intellectual property rights.

Our success depends both on our internally developed technology and ourlicensed third party technology. We rely on a variety of trademarks, service marks, and designs to promote our brand names and identity. We also rely on a combination of contractual provisions, confidentiality procedures, and trademark, copyright, trade secrecy, unfair competition, and other intellectual property laws to protect the proprietary aspects of our products and services. Legal standards relating to the validity, enforceability, and scope of the protection of certain intellectual property rights in Internet-relatedinternet-related industries are uncertain and still evolving. The steps we take to protect our intellectual property rights may not be adequate to protect our intellectual property and may not prevent our competitors from gaining access to our intellectual property and proprietary information. In addition, we cannot provide assurance that courts will always uphold our intellectual property rights or enforce the contractual arrangements that we have entered into to obtain and protect our proprietary technology.

Third parties, including our partners, contractors or employees, may infringe or misappropriate our copyrights, trademarks, service marks, trade dress, and other proprietary rights. Any such infringement or misappropriation could have a material adverse effect on our business, prospects, financial condition, and results of operations. In addition, the relationship between regulations governing domain names and laws protecting trademarks and similar proprietary rights is unclear. We may be unable to prevent third parties from acquiring domain names that are similar to, infringe upon or otherwise decrease the value of our trademarks and other proprietary rights, which may result in the dilution of the brand identity of our services.

10

---

We may decide to initiate litigation in order to enforce our intellectual property rights to protect our trade secrets, or to determine the validity and scope of our proprietary rights. Any such litigation could result in substantial expense, may reduce our profits, and may not adequately protect our intellectual property rights. In addition, we may be exposed to future litigation by third parties based on claims that our products or services infringe or misappropriate their intellectual property rights. Any such claim or litigation against us, whether or not successful, could result in substantial costs and harm our reputation. In addition, such claims or litigation could force us to do one or more of the following:

§·

cease selling or using any of our products and services that incorporate the challengedsubject intellectual property, which would adversely affect our revenue;

§·

attempt to obtain a license from the holder of the intellectual property right alleged to have been infringed or misappropriated, which license may not be available on reasonable terms, if at all;terms; and

§·

attempt to redesign or, in the case of trademark claims, rename our products or services to avoid infringing or misappropriating the intellectual property rights of third parties, which may not be possible and in any event could be costly and time-consuming.

15

Even if we were to prevail, such claims or litigation could be time-consuming and expensive to prosecute or defend, and could result in the diversion of our management’s time and attention. These expenses and diversion of managerial resources could have a material adverse effect on our business, prospects, financial condition, and results of operations.

Capacity constraints

We may be subject to intellectual property claims that create uncertainty about ownership or use of technology essential to our business and divert our managerial and other resources.

Our success depends, in part, on our ability to operate without infringing the intellectual property rights of others. Third parties may, in the future, claim our current or future services, products, trademarks, technologies, business methods or processes infringe their intellectual property rights, or challenge the validity of our intellectual property rights. We may be subject to patent infringement claims or other intellectual property infringement claims that would be costly to defend and could limit our ability to use certain critical technologies or business methods. We may also become subject to interference proceedings conducted in the patent and trademark offices of various countries to determine the priority of inventions.

The defense and prosecution, if necessary, of intellectual property suits, interference proceedings and related legal and administrative proceedings can become very costly and may divert our technical and management personnel from their normal responsibilities. We may not prevail in any of these suits or proceedings. An adverse determination of any litigation or defense proceedings could require us to pay substantial compensatory and exemplary damages, could restrain us from using critical technologies, business methods or processes, and could result in us losing, or not gaining, valuable intellectual property rights.

Furthermore, due to the voluminous amount of discovery frequently conducted in connection with intellectual property litigation, some of our confidential information could be disclosed to competitors during this type of litigation. In addition, public announcements of the results of hearings, motions or other interim proceedings or developments in the litigation could be perceived negatively by investors, and thus have an adverse effect on the trading price of our common stock.

We may be required to expand or upgrade our infrastructure and advertiser support capabilities.

infrastructure.

Our ability to provide high-quality services largely depends upon the efficient and uninterrupted operation of our computer and communications systems. We (or our third party service providers) may be required to expand or upgrade our (or their) technology, infrastructure, andfulfillment capabilities, or customer support capabilities in order to accommodate any significant growth in customers.customers or to replace aging or faulty equipment or technologies. We (or they) may not be able to project accurately the rate or timing of increases, if any, in the use of our services or expand and upgrade our (or their) systems and infrastructure to accommodate these increases in a timely manner.

Any expansion of our (or our third party service providers’) infrastructure may require us (or them) to make significant upfront expenditures for servers, routers, computer equipment, and additional internet and intranet equipment, as well as to increase bandwidth for internet connectivity. Any such expansion or enhancement may cause system disruptions.

Our (or our third party service providers’) inability to expand or upgrade and expand our technology, infrastructure, andfulfillment capabilities, customer support capabilities or equipment as required or without disruptions could impair the reputation of our brand and our services and diminish the attractiveness of our service offerings to our advertisers.

Any expansion of our infrastructure may require us to make significant upfront expenditures for servers, routers, computer equipment, and additional Internet and intranet equipment, as well as to increase bandwidth for Internet connectivity.  Any such expansion or enhancement will need to be completed and integrated without system disruptions.  An inability to expand our infrastructure or customer service capabilities either internally or through third parties, if and when necessary, would materially and adversely affect our business, prospects, financial condition, and results of operations.

Current economic conditions may adversely affect our industry, business and results of operations.

The U.S. and global economy is currently undergoing a gradual and extended recovery from a prolonged recession and a period of unprecedented volatility.  It is unclear how prolonged this recovery will be and how it will affect our industry in particular. Many believe that the general future economic environment may continue to be less favorable than that of recent years.  If the challenging economic conditions in the U.S. and other key countries persist or worsen, our customers may delay or reduce spending.  This could result in reductions in sales of our products and services, longer sales cycles and increased price competition.  Any of these events would likely harm our business, results of operations and financial condition.

clients.

We may have an adverse resolution of litigation that may harm our operating results or financial condition.

At times, we are a party to lawsuits in the normal course of our business.lawsuits. Litigation can be expensive, lengthy, and disruptive to normal business operations. Moreover, the results of complex legal proceedings are difficult to predict. An unfavorable resolution of a particular lawsuit could require us to pay substantial damages or to comply with court orders that could have a material adverse effect on our business, operating results, or financial condition.

We may fail to retain existing merchants, or add new merchants, in our promotional marketing business.

Our promotional marketing business depends in part on our strategic partners to publish discounted products and services we source from our SMB clients. We depend on our ability to attract and retain SMBs that are prepared to offer products or services on compelling terms through our strategic partners. We are a recent entrant to this market and we do not have long-term arrangements to guarantee the availability of deals that offer attractive quality, value and variety to consumers or favorable payment terms to us. We must continue to attract and retain merchants in various geographical areas to our promotional marketing business in order to increase revenue and achieve profitability. If new merchants do not find our marketing and promotional services effective, or if existing merchants do not believe that utilizing our products provides them with a long-term increase in customers, revenues or profits, they may stop making offers through us. In addition, we may experience attrition in our merchants in the ordinary course of business resulting from several factors, including losses to competitors and merchant closures or bankruptcies. If we are unable to attract new merchants in numbers sufficient to grow our promotional marketing business, or if too many merchants are unwilling to offer products or services with compelling terms through our strategic partners, or to offer favorable payment terms to us, we may sell fewer daily deals and our operating results will be adversely affected.

16

Our promotional marketing business depends heavily on our strategic partners.

Our promotional marketing business is highly dependent upon our ability to sell discounted products and services offered by our SMB clients through our strategic partners. Unlike many of our established competitors, we currently lack a significant subscriber base for selling these offers to potential customers of these SMB clients. Instead, we rely on our strategic partners, some of whom have extremely large user bases, to publish these offers to reach these potential customers. We do not have long-term relationships with these strategic partners. Our agreements with these strategic partners generally permit our partners to terminate the agreement with short or no prior notice, for convenience, and/or do not require our partners to publish the offers we source from our SMB clients.

Our business is subject to the risks of earthquakes, fires, floods and other natural catastrophic events and to interruption by man-made problems such as computer viruses or terrorism.

Our service systems and operations are vulnerable to damage or interruption from earthquakes, fires, floods, power losses, telecommunications failures, terrorist attacks, acts of war, human errors, break-ins and similar events. For example, a significant natural disaster, such as an earthquake, fire or flood, could have a material adverse impact on our business, operating results and financial condition, and our insurance coverage will likely be insufficient to compensate us for losses that may occur. Our servers may also be vulnerable to computer viruses, break-ins and similar disruptions from unauthorized tampering with our computer systems, which could lead to interruptions, delays, loss of critical data or the unauthorized disclosure of confidential intellectual property or client data. We may not have sufficient protection or recovery plans in certain circumstances, such as natural disasters affecting the Las Vegas or San Diego area, and our business interruption insurance may be insufficient to compensate us for losses that may occur. As we rely heavily on our servers, computer and communications systems and the internet to conduct our business and provide high quality customer service, such disruptions could negatively impact our ability to operate our business, which could have a material and adverse effect on our operating results and financial condition.

We have made strategic acquisitions and divestitures in the past few years and may complete similar transactions in the future and cannot assure you that any future transactions will be successful.

We

As part of our business strategy, we have acquired a number of businesses and assets, including our recent acquisition of LiveOpenly, Inc., and we regularly look for opportunities to support our new business strategy through appropriate acquisitions, divestitures and/orand strategic alliances. There can be no assurance that we will be successful in identifying appropriate transaction partners or integrating the results of any such transactionsacquired businesses into our operations in a way that ultimately supports our business strategy.  Any such transactions could also involvestrategy or revenues. We may enter into additional acquisitions, business combinations or strategic alliances in the future. Acquisitions may result in dilutive issuanceissuances of equity securities, and/or theuse of our cash resources, incurrence of debt.debt and amortization of expenses related to intangible assets acquired. In addition, future strategic transactionsthe process of integrating an acquired company, business or technology, which requires a substantial commitment of resources and management’s attention, may involve numerous othercreate unforeseen operating difficulties and expenditures. The acquisition of a company or business is accompanied by a number of risks, including but not limited to:

including:

§·

exposure to unanticipated liabilities of an acquired company (or acquired assets);

§·

difficulties integrating or developing acquired technology into our services or acquired products or services into our operations, and unanticipated expenses or disruptions related to such integration;

·

the potential loss of key customerspartners or key personnel in connection with, or as the result of, a transaction;

11

---

§·

the impairment of relationships with clients of the acquired business, or our own clients, partners or employees, as a result of any integration of operations or the expansion of our offerings;

·

the recording of goodwill and intangible assets that will be subject to impairment testing on a regular basis and potential periodic impairment charges;

§·

the diversion of the attention of our management team from other business concerns, including the day-to-day management of our Company and/businesses or the internal growth strategies that theywe are currently implementing; and

§·

the risk of entering into markets or producing products where we have limited or no experience, including the integration or removal of the purchasedacquired or disposed technologies and products with or from our existing technologies and products.products; and

·

the inability properly to implement or remediate internal controls, procedures and policies appropriate for a public company at businesses that prior to our acquisition were not subject to federal securities laws and may have lacked appropriate controls, procedures and policies.

17

Risks Related to the Internet

We may not be able to adapt as the Internetinternet, mobile technologies and advertisercustomer demands continue to evolve.

The internet, e-commerce, the online marketing industry and mobile devices are characterized by:

·

rapid technological change;

·

changes in customer and user requirements and preferences;

·

frequent new product and service introductions embodying new technologies and business logic; and

·

the emergence of new industry standards and practices that could render our existing service offerings, technology, and hardware and software infrastructure obsolete.

In order to compete successfully in the future, we must:

·

enhance our existing services and develop new services and technology that address the increasingly sophisticated and varied needs of our prospective or current customers;

·

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.

Our failure to respond in a timely manner to changing market conditions or client requirements could have a material adverse effect on our business, prospects, financial condition, and results of operations. The Internet, e-commerce,

Our business could be negatively impacted if the security of our or our partners’ equipment becomes compromised.

To the extent that our activities involve the storage and the online marketing industry are characterized by:

§

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.

In ordertransmission of proprietary information about our customers or users, security breaches could damage our reputation and expose us to compete successfully in the future, we must:

§

enhance our existing services and develop new services and technology that address the increasingly sophisticated and varied needs of our prospective or current 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.

a risk of loss or litigation and possible liability. We may be required to expend significant capital and other resources to protect against security breaches or to minimize problems caused by security breaches. Our (or our third party service providers’) security measures may not prevent security breaches. The failure to prevent these security breaches or a misappropriation of proprietary information may have a material adverse effect on our business, prospects, financial condition, and results of operations.

If we are not able to maintain an effective system of internal controls, we may not be able to accurately or timely report our financial results, which could cause our stock price to fall or result in our stock being delisted.

Effective internal controls are necessary for us to provide reliable and accurate financial reports. We will need to devote significant resources and time to comply with the requirements of Sarbanes-Oxley with respect to internal control over financial reporting. In addition, Section 404 under Sarbanes-Oxley requires that we assess the design and operating effectiveness of our controls over financial reporting. Our ability to comply with the annual internal control report requirement will depend on the effectiveness of our financial reporting and data systems and controls across our company and our operating subsidiaries. We expect these systems and controls to become increasingly complex to the extent that we integrate acquisitions and our business grows. To effectively manage this complexity, we will need to continue to improve our operational, financial, and management controls and our reporting systems and procedures. Any failure to implement required new or improved controls, or difficulties encountered in the implementation or operation of these controls, could harm our operating results or cause us to fail to meet our financial reporting obligations, which could adversely affect our business and jeopardize our listing on the NASDAQ Capital Market, either of which would harm our stock price.

Risks Related to the Internet

We may be unable to keep pace with rapid technological change in the Internetinternet industry.

In order to remain competitive, we will be required continually to enhance and improve the functionality and features of our existing products and services, which could require us to invest significant capital.capital or make substantial changes to our personnel, technologies or equipment. If our competitors introduce new products and services embodying new technologies or if new industry standards and practices emerge, our existing services, technologies, and systems may become obsolete.obsolete or uncompetitive. We may not have the funds or technical know-howknowledge to upgrade our services, technology, andtechnologies, or systems. If we face material delays in introducing new services,or enhanced products and enhancements,services, our advertiserscustomers and users may forego the use of our services and select those of our competitors, in which event our business, prospects, financial condition, and results of operations could be materially and adversely affected.

18

Regulation of the Internetinternet may adversely affect our business.

The laws governing the internet remain largely unsettled, even in areas where legislation has been enacted. It may take years to determine whether and how existing laws, such as those governing intellectual property, privacy, defamation, product liability, and taxation apply to the internet and internet services. Unfavorable resolution of these issues may substantially harm our business and operating results.

Due to the increasing popularity and use of the Internetinternet and online services such as online Yellow Pages, federal, state, local, and foreign governments may adopt laws and regulations, or amend existing laws and regulations, with respect to the Internetinternet and other online services. These laws and regulations may affect issues such as user privacy, pricing, content, taxation, copyrights, distribution, product liability and quality of products and services.  The laws governing the Internet remain largely unsettled, even in areas where legislation has been enacted.  It may take years to determine whether and how existing laws, such as those governing intellectual property, privacy, libel, and taxation apply to the Internet and Internet advertising and directory services. In addition, the growth and development of the market for electronic commerce may prompt calls for more stringent consumer protection laws, both in the United States and abroad, that may impose additional burdens on companies conducting business over the Internet.internet, including those covering user privacy, data protection, spyware, “do not email” lists, “do not call” lists, access to high speed and broadband service. Other laws and regulations that have been adopted, or may be adopted in the future, that may affect our business include pricing, taxation (including sales, value-added and other transactional taxes), tariffs, patents, copyrights, trademarks, trade secrets, export of encryption technology, electronic contracting, click-fraud, acceptable content, search terms, lead generation, behavioral targeting, consumer protection, and quality of products and services. Any new legislation could hinder the growth in use of the Internetinternet generally or in our industry and could impose additional burdens on companies conducting business online, which could, in turn, decrease the demand for our products and services, increase our cost of doing business, or otherwise have a material adverse effect on our business, prospects, financial condition, and results of operations.

12

---

We may not be able to obtain Internetinternet domain names that we would like to have.

We believe that our existing Internetinternet domain names are an extremely important part of our business. We may desire, or it may be necessary in the future, to use these or other domain names in the United States and abroad.internationally. Various Internetinternet regulatory bodies regulate the acquisition and maintenance of domain names in the United States and other countries. These regulations are subject to change. Governing bodies may establish additional top-level domains, appoint additional domain name registrars or modify the requirements for holding domain names. As a result, we may be unable to acquire or maintain relevant domain names in all countries in which we plan to conduct business in the future.

The extent to which laws protecting trademarks and similar proprietary rights will be extended to protect domain names currently is not clear. We therefore may be unable to prevent competitors from acquiring domain names that are similar to, infringe upon or otherwise decrease the value of our domain names, trademarks, trade names, and other proprietary rights. We cannot provide assurance that potential users and advertiserscustomers will not confuse our domain names, trademarks, and trade names with other similar names and marks. If that confusion occurs, we may lose business to a competitor and some advertiserscustomers and users may have negative experiences with other companies that those advertiserscustomers and users erroneously associate with us.  The inability to acquire and maintain domain names that we desire to use in our business, and the use of confusingly similar domain names by our competitors, could have a material adverse affect on our business, prospects, financial conditions, and results of operations in the future.

Our business could be negatively impacted if the security of the Internet becomes compromised.

To the extent that our activities involve the storage and transmission of proprietary information about our advertisers or users, security breaches could damage our reputation and expose us to a risk of loss or litigation and possible liability.  We may be required to expend significant capital and other resources to protect against security breaches or to minimize problems caused by security breaches.  Our security measures may not prevent security breaches. Our failure to prevent these security breaches or a misappropriation of proprietary information may have a material adverse effect on our business, prospects, financial condition, and results of operations.

Our technical systems could be vulnerable to online security risks, service interruptions or damage to our systems.

Our (or our third party service providers’) systems and operations may be vulnerable to damage or interruption from fire, floods, power loss, telecommunications failures, break-ins, sabotage, computer viruses, penetration of our network by unauthorized computer users or “hackers,” natural disaster, and similar events. Preventing, alleviating, or eliminating computer viruses and other service-related or security problems may require interruptions, delays or cessation of service. We may need to expend significant resources protecting against the threat of security breaches or alleviating potential or actual service interruptions. The occurrence of such unanticipated problems or security breaches could cause material interruptions or delays in our business, loss of data, or misappropriation of proprietary or IAP advertiser-related information or could render us unable to provide services to our advertiserscustomers for an indeterminate length of time. The occurrence of any or all of these events could materially and adversely affect our business, prospects, financial condition, and results of operations.

If we are sued for content distributed through, or linked to by, our website or those of our advertisers,customers, we may be required to spend substantial resources to defend ourselves and could be required to pay monetary damages.

We aggregate and distribute third-party data and other content over the Internet.internet. In addition, third-party websites are accessible through our website or those of our advertisers.customers. As a result, we could be subject to legal claims for defamation, negligence, intellectual property infringement, and product or service liability.liability or other torts. Other claims may be based on errors or false or misleading information provided on or through our website or websites of our directory licensees.  Other claims may be basedcustomers, or on links to sexually explicit or gambling websites and sexually explicit advertisements. We may need to expend substantial resources to investigate and defend these claims, regardless of whether we successfully defend against them. While we carry general business insurance, the amount of coverage we maintain may not be adequate. In addition, implementing measures to reduce our exposure to this liability may require us to spend substantial resources and limit the attractiveness of our contentproducts or services to users.

19

If our security measures are breached and unauthorized access is obtained to a client’s data, our service may be perceived as not being secure and clients may curtail or stop using our service.

Our service may involve the storage and transmission of clients’ proprietary information, such as credit card and bank account numbers, and security breaches could expose us to a risk of loss of this information, litigation and possible liability. Our payment services may be susceptible to credit card and other payment fraud schemes, including unauthorized use of credit cards, debit cards or bank account information, identity theft or merchant fraud.

If our security measures are breached in the future as a result of third-party action, employee error, malfeasance or otherwise, and as a result, someone obtains unauthorized access to our clients’ data, our reputation could be damaged, our business may suffer and we could incur significant liabilities. Because techniques used to obtain unauthorized access or to sabotage systems change frequently and frequently are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. If an actual or perceived breach of our security occurs, the market perception of the effectiveness of our security measures could be harmed and we could lose sales and clients.

Our revenue may be negatively affected if we are required to charge sales tax or other transaction taxes on all or a portion of our past and future sales to customers located in jurisdictions where we are currently not collecting and reporting tax.

We generally do not charge, collect or have imposed upon us sales, value added (VAT) or other transaction taxes related to the products and services we sell, except for certain corporate level taxes and transaction level taxes outside of the United States. However, the federal, state, and local governments or one or more foreign countries may seek to impose sales or other transaction tax obligations on us in the future. A successful assertion by any tax jurisdiction in which we do business that we should be collecting sales or other transaction taxes on the sale of our products or services, or the adoption of new laws to require us to collect such taxes, could result in substantial tax liabilities related to past sales, create increased administrative burdens or costs, discourage customers from purchasing or continuing to purchase products or services from us, decrease our ability to compete or otherwise substantially harm our business and results of operations.

Risks Related to Our Securities

We have experienced difficulties maintaining compliance with applicable requirements for the continued listing of our common stock on the NASDAQ Capital Market, and any future failure to comply with such requirements could result in the delisting of common stock from that trading market.

During our 2011 fiscal year, we fell out of compliance with certain requirements for the continued listing of our common stock on The NASDAQ Capital Market, including the requirements that we maintain (i) at least 500,000 “publicly held” shares of common stock (i.e., shares not held by directors, officers or 10% stockholders), (ii) at least $2.5 million of stockholders’ equity, and (iii) a market value of our “publicly held” shares of at least $1.0 million. While we obtained a notice from NASDAQ on August 23, 2012 that we regained compliance with the applicable listing rules, and on November 30, 2012 that we were removed from further compliance monitoring, we can provide no assurance that we will remain in compliance with NASDAQ’s listing requirements, or that our common stock will continue to be traded on The NASDAQ Capital Market or any other market.

Stock prices of technology companies have declined precipitously at times in the past and the trading price of our common stock is likely to be volatile, which could result in substantial losses to investors.

The trading price of our common stock has been highly volatile over the past few years and investors could experience losses in response to factors including the following, many of which are beyond our control:

§·

decreased demand in the Internetinternet services sector;

§·

variations in our operating results;

13

---

§·

announcements of technological innovations or new products or 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;

20

§

·

conditions or trends in the technology industry, the online marketing industry or the mobile device industry;

§·

additions or departures of key personnel;personnel or strategic partners; and

§·

future sales of our debt or equity securities, including common stock.

Domestic and international stock markets often experience significant price and volume fluctuations that are unrelated or disproportionate to the operating performance of companies with securities trading in those markets. These fluctuations, as well as political events, terrorist attacks, threatened or actual war, and general economic conditions unrelated to our performance, may adversely affect the price of our common stock. In the past, securities holders of other companies often have initiated securities class action litigation against those companies following periods of volatility in the market price of those companies’ securities. If the market price of our stock fluctuates and our stockholders initiate this type of litigation, we could incur substantial costs and experience a diversion of our management’s attention and resources, regardless of the outcome. This could materially and adversely affect our business, prospects, financial condition, and results of operations.

Our stock price may be volatile, and the value of an investment in our common stock may decline.

An active, liquid and orderly market for our common stock may not be developed or sustained, which could depress the trading price of our common stock.

The trading price of our common stock may be subject to wide fluctuations in response to various factors, some of which are beyond our control, including:

·

our operating performance and the operating performance of similar companies;

·

the overall performance of the equity markets;

·

the number of shares of our common stock publicly owned and available for trading;

·

threatened or actual litigation;

·

changes in laws or regulations relating to our solutions;

·

any major change in our Board of Directors or management;

·

publication of research reports about us or our industry or changes in recommendations or withdrawal of research coverage by securities analysts;

·

large volumes of sales of our shares of common stock by existing stockholders; and

·

general political and economic conditions.

Due to our concentrated stock ownership, public stockholders may have no effective voice in our management and the trading price of our common stock may be adversely affected.

Three stockholders beneficially own approximately 60.9% of our outstanding shares of common stock, and one of them, our CEO, is the beneficial owner of approximately 39.6% of our outstanding shares of common stock. Each of these three stockholders also has a contractual right to nominate one member of our Board of Directors. These stockholders, collectively, have the ability to determine the outcome of the election of directors at our annual meetings and to determine the outcome of many significant corporate transactions, such as mergers, consolidations, dissolutions or the sale of all or substantially all of our assets, many of which only require the approval of a majority of our voting power. These stockholders may have interests that differ from other stockholders and may vote in a way with which other stockholders disagree and which may be adverse to other stockholders’ interests. Moreover, such a concentration of voting power could have the effect of delaying or preventing a third party from acquiring us at a premium. This significant concentration of share ownership may also adversely affect the trading price for our common stock because investors often perceive disadvantages in owning stock in companies with concentrated stock ownership.

We do not anticipate paying dividends on our common stock in the foreseeable future.

We do not intend to pay cash dividends in the foreseeable future due to our limited funds for operations. Therefore, any return on your investment would likely come only from an increase in the market value of our common stock.

21

Certain provisions of Nevada law, in our organizational documents and in our chartercontracts to which we are party may prevent or delay a change of control of our company.

company.

We are subject to the Nevada anti-takeover laws regulating corporate takeovers. These anti-takeover laws prevent Nevada corporations from engaging in a merger, consolidation, sales of its stock or assets, and certain other transactions with any stockholder, including all affiliates and associates of the stockholder, who owns 10% or more of the corporation’s outstanding voting stock, for three years following the date that the stockholder acquired 10% or more of the corporation’s voting stock, except in certain situations. In addition, our amended and restated articles of incorporation and bylaws include a number of provisions that may deter or impede hostile takeovers or changes of control or management. These provisions include the following:

§·

the authority of our boardBoard of Directors to issue up to 5,000,000 shares of preferred stock and to determine the price, rights, preferences, and privileges of these shares, without stockholder approval;

§·

stockholders must comply with advance notice requirements to transact any business at the annual meeting;

·

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 boardBoard of directors;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

§·

a director may be removed from office only for cause by the holders of at least two-thirds of the voting power entitled to vote at an election of directors;

·

our Board of Directors is expressly authorized to alter, amend or repeal our bylaws;

·

newly-created directorships and vacancies on our Board of Directors may only be filled by a majority of remaining directors, and not by our stockholders; and

·

cumulative voting is not allowed in the election of our directors.

These provisions of Nevada law and our articles and bylaws could prohibit or delay mergers or other takeover or change of control of our company and may discourage attempts by other companies to acquire us, even if such a transaction would be beneficial to our stockholders.

In addition, provisions in a Securities Purchase Agreement we entered into in December 2011 grant each of three of our stockholders the right to nominate one member of our Board of Directors.

Our common stock may be subject to the “penny stock” rules as promulgated under the Securities Exchange Act.

Act of 1934.

In the event that no exclusion from the definition of “penny stock” under the Securities Exchange Act of 1934, as amended, is available, then any broker engaging in a transaction in our common stock will be required to provide its customers with a risk disclosure document, disclosure of market quotations, if any, disclosure of the compensation of the broker-dealer and its sales person in the transaction, and monthly account statements showing the market values of our securities held in the customer’s accounts. The bid and offer quotation and compensation information must be provided prior to effecting the transaction and must be contained on the customer’s confirmation of sale. Certain brokers are less willing to engage in transactions involving “penny stocks” as a result of the additional disclosure requirements described above, which may make it more difficult for holders of our common stock to dispose of their shares.

14

---

Our stock price may result in our failure to maintain compliance with NASDAQ Listing Rules related to minimum stock price requirements, which could result in NASDAQ delisting our common stock.

NASDAQ Listing Rules require us to maintain a closing bid price of $1.00 per share for our common stock.  In the event that our common stock closing bid price falls below $1.00 per share for 30 consecutive business days, we would likely receive notice from NASDAQ that we are not in compliance with Listing Rules, which could ultimately lead to the delisting of our common stock from NASDAQ if we were unable to maintain the requisite minimum stock price during the subsequent probationary period.  In the event that we were delisted from NASDAQ, our common stock would become significantly less liquid, which would adversely affect its value.  Although our common stock would likely be traded over-the-counter or on pink sheets, these types of listings involve more risk and trade less frequently and in smaller volumes than securities traded on NASDAQ.  On April 8, 2010, LiveDeal received a letter from NASDAQ’s Listing Qualifications Department informing the Company of its failure to comply with NASDAQ’s minimum bid price requirement.  At the time, the Company was given a 180-day grace period (until October 5, 2010) to regain compliance, during which time the Company’s common stock continued to be traded on the NASDAQ Capital Market.  Effective on September 7, 2010, LiveDeal implemented a 1-for-10 reverse stock split as a strategy to increase its minimum bid price and regain compliance with NASDAQ rules.  On September 21, 2010, the Company received a letter from NASDAQ confirming that it had regained compliance with the applicable rules, and that the matter was closed.  There can be no assurance, however, that we will maintain compliance with applicable NASDAQ listing rules in the future, or that our common stock will continue to be traded on the NASDAQ Capital Market (or any other securities exchange or market).

ITEM 1B. Unresolved Staff Comments

Not applicable.

22

ITEM 2. Properties

We entered into a long-term lease, which began in November 2007, for a 12,635 square foot facility in

Our principal executive and administrative offices are located at 6240 McLeod Drive, Suite 120, Las Vegas, Nevada, that functions aswhere we lease approximately 2,500 square feet of space in the headquarters and operating facilityMcLeod Business Park. Our current monthly rent is approximately $2,500, subject to annual increases. Our lease for LiveDeal, Inc. and our subsidiaries.  We pay rent of approximately $315,000 annually underthis space ends on November 30, 2015; however, we have the option to extend the lease which expires on December 31, 2012.

for two additional lease terms of three years each. We also have a long-termlease approximately 11,000 square feet of space located at 325 East Warm Springs Road, Suite 100, Las Vegas Nevada, which we utilize as our call center. We currently pay approximately $13,000 in monthly rent for the call center, which is subject to annual increases. Our lease for a 16,772 square foot facility in Mesa, Arizona that was formerly used to house our corporate headquarters.  We pay rent of approximately $120,000 annually under this lease, which expires in June 2011.  Although we are no longer utilizing this space ends on approximately February 29, 2016; however, we have the option to extend the lease for our operations,two additional lease terms of three years each. Our San Diego executive office is located at 12520 High Bluff Drive, San Diego, California, where we are responsible for the remaining lease payments and our accounting treatment with respectutilize approximately 1,600 square feet of space in Plaza Del Mar. This office is currently being provided to us by a company that is a related party to the lease has not changed.

We believe that these facilities are adequate forIsaac Capital Group LLC, one of our currentlargest stockholders which is owned by Jon Isaac, our President and anticipated future needsCEO and that allone of these facilities and their contents are adequately covered by insurance.

our directors.

ITEM 3. Legal Proceedings

Except as described below, as of September 30, 2010, we wereare not a party to, and none of our property was the subject of, any material pending material legal proceedings, other than claims that arise in the normal conduct ofordinary routine litigation incidental to our business. While we currently believe that the ultimate outcome of these routine proceedings will not have a material adverse effect on our consolidated financial condition or results of operations, litigation is subject to inherent uncertainties. If anAn unfavorable ruling were to occur, there exists the possibility ofcould result in a material adverse impact on our net income and financial condition in the period in which a ruling occurs. Our estimate of the potential impact of the following legal proceedings on our financial position and our results of operationMoreover, routine litigation, even if not meritorious, could changeresult in the future.

Joe Cunningham v. LiveDeal, Inc. et al.

On July 16, 2008, Joseph Cunningham, who was at the time a memberexpenditure of LiveDeal’s Board of Directors, filed a complaint with the U.S. Department of Labor's Occupational Safetysignificant financial and Health Administration (“OSHA”) alleging that the Companymanagerial resources and certain members of its Board of Directors had engaged in discriminatory employment practices in violation of the Sarbanes-Oxley Act of 2002’s statutory protections for corporate whistleblowers when the Board of Directors removed him as Chairman on May 22, 2008.  In his complaint, Mr. Cunningham asked OSHA to order his appointment as Chief Executive Officer of the Company or, in the alternative, to order his reinstatement as Chairman of the Board.  Mr. Cunningham also sought back pay, special damagescould adversely affect our net income and litigation costs.

On July 16, 2010, Mr. Cunningham attempted to amend his OSHA complaint to include an additional adverse action allegation.  On September 20, 2010, OSHA issued a letter informing Mr. Cunningham that as a former board member and alleged prospective interim CEO, he is not considered an “employee” under the relevant statute, which is a required element for his claims.  Accordingly, OSHA dismissed Mr. Cunningham’s complaint.

On October 20, 2010, Mr. Cunningham filed objections to OSHA’s findings.  Mr. Cunningham's appeal of OSHA’s ruling is currently pending.

15

---

State of Washington v. LiveDeal, Inc. et al.

On December 16, 2006, the State of Washington Attorney General’s office entered into a Consent Decree with LiveDeal, Inc. (known at the time as YP Corp.) and its subsidiary, Telco Billing, Inc.  Pursuant to the Consent Decree, the Company agreed to provide certain confidential, trade secret information to the Attorney General’s office as part of the settlement of a regulatory dispute between the State of Washington and the Company.

On July 14, 2009, the Attorney General’s office contacted the Company to request certain confidential, trade secret information to which it was entitled under the Consent Decree.  The Company acknowledged its obligation to provide the requested information but asked the Attorney General’s office to verify that it would not provide such information to third parties.  When the Company was informed by opposing legal counsel in a private litigation matter that the Attorney General’s office intended to provide its confidential, trade secret information to such counsel’s client and other third parties immediately upon receipt, the Company began taking certain steps to protect the sensitive information while complying with its obligations under the Consent Decree.

Following unsuccessful settlement discussions in which the Attorney General’s office refused to enter into any agreement not to share the confidential information with third parties (including the Company’s opponents in pending private litigation), the Company sought a protective order in the State of Washington’s King County Superior Court (Case No. 06-2-39213-2 SEA) on September 8, 2009, which was denied on November 16, 2009.  The Company appealed in State of Washington’s Court of Appeals (Division I, Case No. 64539-1) and moved to stay the effect of the November 16, 2009 ruling.  The appeal was denied.  After denial of the appeal, the Company and the Attorney General's office cooperatively resolved their dispute.  The matter is considered closed.

financial condition.

Global Education Services, Inc. v. LiveDeal, Inc.

On June 6, 2008, Global Education Services, Inc. ("GES"), which we refer to as GES, filed a consumer fraud class action lawsuit against us in the Company in King County (Washington) Superior Court. GES has allegedCourt in its complaintthe State of Washington, alleging that the Company'sour use of activator checks violated the Washington Consumer Protection Act.Act and seeking class certification pursuant to Washington law. GES seekssought injunctive relief against the Company'sour use of theactivator checks, as well as judgmentdamages in an amount equal to three times the alleged damages allegedly sustained by GES and the members of the class. LiveDeal hasputative class, exemplary damages for the alleged violation of law and its fees and costs. We denied the allegations.  allegations and commenced defending the litigation.

Early in 2010, the Court denied both parties’ dispositive motions, after oral argument.   Activeat which time they commenced settlement discussions. The parties reached a settlement and entered into a settlement agreement on or about November 5, 2012. The settlement agreement required $150,000 to be paid to plaintiff’s counsel, $10,000 to be paid to GES as the “representative plaintiff” and $70 to be paid to each eligible class member. The Court granted final approval of the settlement on April 26, 2013 and the Court’s order became final on May 27, 2013. All class member claims have been paid and the last attorneys’ fee payment was made on November 23, 2013. Accordingly, the litigation is temporarily suspendedfully resolved and the parties are engaged in settlement discussions.

Complaint filed by Illinois Attorney General againstmatter closed.

J3 Harmon LLC v. LiveDeal, Inc.

As the Company has previously disclosed, on November 12, 2008, the Illinois Attorney General

On February 9, 2012, J3 Harmon LLC, which we refer to as J3, filed a complaintlawsuit against us in the Superior Court againstfor Maricopa County in the Company requesting moneyState of Arizona, alleging breach of a commercial lease agreement. J3 sought damages and injunctive relief for claims thatalleged unpaid rents during the Company employed deceptive and unfair acts and practices in violationlease term as well as alleged damages for storage costs after the expiration of the Illinois Consumer Fraud and Deceptive Business Act in a telemarketing campaign that in part promoted premium Internet yellow page listings to Illinois consumers.  The Companylease term. We denied the allegations and asserted various affirmative defenses. In September 2012, the Maricopa County Superior Court subsequently denied both parties’ dispositive motions.

entered a judgment in favor of J3 in the sum of $62,886.13.   We appealed this judgment.

On September 2, 2010, a FinalOctober 1, 2013, the Arizona Court of Appeals affirmed in part and reversed in part on the principal damages and remanded the matter for judgment. Subsequently, the Maricopa County Superior Court entered Judgment on Mandate against the Company in the principal sum of $46,636.31 and Consent Decree (the “Consent Decree”) providingattorneys’ fees of $5,624.40, with post-judgment interest from October 3, 2012. There is no further basis for the settlement of the Company’s ongoing litigation with the Illinois Attorney General was filedappeal by the Circuit Court ofCompany. The Company anticipates paying the Seventh Judicial Circuit of the State of Illinois (Sangamon County).  The Consent Decree was previously executed by the Company and the Illinois Attorney General.

As set forth in the Consent Decree, the terms of the settlement required the Company to make a $10,000 contribution to the Illinois Attorney General Court Ordered and Voluntary Compliance Payment Projects Fund for Consumer Enforcement and Education.  Illinois consumers who entered into an Internet yellow pages contract on or after January 1, 2007, and who have not already cancelled such listing and received a full refund, were are also entitled to a full refund from the Company (provided that they did not actually and knowingly agree to purchase the Company’s Internet yellow page listings).  Consumers needed to provide written notice of their demand for a refund within 60 days after the entry of the Consent Decree, and the Company had up to 120 days after the date of the Consent Decree to challenge any consumer’s right to a refund.  No consumers submitted a claimjudgment during the claim period.

Among other things,fiscal quarter ending March 31, 2014 and, upon such payment, the Consent Decree restricts the Company from soliciting, billing, or knowingly causing Illinois consumersmatter will be resolved. As of September 30, 2013, we maintained an accrual of $52,261 related to be billed for Internet yellow page listings for a period of five years.

this.

ITEM 4. (Removed and Reserved)Mine Safety Disclosures

Not applicable.

23

16

---

PART II

ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our Common Stock

Our common stock is traded on the NASDAQ Capital Market under the symbol “LIVE”.

The following table sets forth the quarterly high and low sale prices per share of our common stock during the last two fiscal years.   All prices have been adjusted to reflect the reverse stock split that was completed on September 7, 2010.

	Quarter Ended		High				Low
2009	December 31, 2008		$	20.00			$	10.20
	March 31, 2009		$	22.00			$	12.40
	June 30, 2009		$	21.00			$	10.00
	September 30, 2009		$	17.00			$	10.10
2010	December 31, 2009		$	23.80			$	11.70
	March 31, 2010		$	17.00			$	5.50
	June 30, 2010		$	8.40			$	5.00
	September 30, 2010		$	7.41			$	3.30

		Quarter Ended		High				Low
2012		December 31, 2011		$	7.37			$	1.02
		March 31, 2012		$	7.19			$	2.59
		June 30, 2012		$	15.57			$	3.87
		September 30, 2012		$	18.58			$	3.38
2013		December 31, 2012		$	5.34			$	3.04
		March 31, 2013		$	4.10			$	2.11
		June 30, 2013		$	3.43			$	2.51
		September 30, 2013		$	5.19			$	2.38

Holders of Record

On December 1, 2010,January 6, 2014, there were approximately 181154 holders of record of our common stock according to our transfer agent. The Company hasWe have no record of the number of stockholders who hold their stock in “street name” with various brokers.

Dividend Policy

We have one class of authorized preferred stock (Series E Preferred Stock), of which there are currently 127,840 shares issued and outstanding. Each share of Series E Preferred Stock is entitled to and receives a dividend of $0.015 per year. At September 30, 2010,2013, we had accrued but unpaid dividends totaling approximately $10,100.

$15,821.

Presently, we do not pay dividends on our common stock. The timing and amount of future dividend payments byon our Company,common stock, if any, will be determined by our Board of Directors based upon our earnings, capital requirements and financial position, general economic conditions, alternative uses of capital, and other pertinent factors.

Issuer Purchases of Equity Securities

During the yearour fiscal quarter ended September 30, 2009, the Company’s existing repurchase plan which authorized repurchases of up to $1,000,000 of common stock from time to time on the open market was increased by another $500,000, and the Company acquired an aggregate of 34,6112013, neither we nor any “affiliated purchaser”, as defined in Exchange Act Rule 10b-18(a)(3)), repurchased any shares of itsour common stock at market prices at an aggregate cost of $532,521.

During the year ended September 30, 2010, the Company acquired an aggregate of 1,341 shares of its common stock at market prices at an aggregate cost of $25,882.stock. At September 30, 2010 the Company2013, we had retired all but 4,252of our shares of treasury stock.

Securities Authorized for Issuance Under Equity Compensation Plans

Reference is made to Note 1211 of the notes to our consolidated financial statements for certain disclosures about the Company’sour equity compensation plans.

Recent Sales of Unregistered Securities

On August 22, 2013, the Company agreed to issue 15,773 shares of common stock to a software developer in exchange for services valued at an aggregate of $50,000. The per share valuation associated with the issuance was $3.17, which was equal to the closing price of our common stock as reported on the NASDAQ Capital Market on the date of the transaction. Pursuant to applicable NASDAQ Listing Rules, the share issuance is subject to stockholder approval of our new 2014 Omnibus Equity Incentive Plan, which the Company intends to seek at our 2014 Annual Meeting of Stockholders.

24

17

---

Performance Graph

Compare 5-Year Cumulative Total Return

Among LiveDeal, Inc., Wilshire 5000 Index

And Dow Jones Internet Index

Assumes $100 Invested

On September 9, 2013, we issued 200,000 shares to Novalk Apps S.A.S. in exchange for certain customer relationship manager, or CRM, software assets acquired pursuant to an Asset Purchase Agreement dated as of the same date. Such assets were valued at an aggregate of $994,000. The per share purchase price for such shares was $4.97, which was equal to the closing price of our common stock as reported on the NASDAQ Capital Market on the date of the transaction.

On September 30, 2005

Assumes Dividends, if any, Reinvested

Fiscal Year Ended September 30, 2010

		9/30/2005				9/30/2006				9/30/2007				9/30/2008				9/30/2009				9/30/2010
LiveDeal, Inc.		$	100.00			$	103.53			$	75.20			$	17.06			$	18.20			$	5.62
Wilshire 5000 Index		$	100.00			$	108.60			$	125.00			$	96.63			$	88.79			$	97.82
Dow Jones Internet  Services Index		$	100.00			$	123.32			$	144.75			$	119.86			$	137.08			$	188.55

2013, we issued 44,233 shares of common stock to John Kocmur, a member of our Board of Directors, in exchange for a cash payment of $152,160. The per share purchase price for such shares was $3.44, which was equal to the closing price of our common stock as reported on the NASDAQ Capital Market on the date of the transaction.

We offered and sold these shares without registration under the Securities Act of 1933 as amended (the “Securities Act”), in reliance upon the exemption from the registration contained in Section 4(2) of the Securities Act and, in certain cases, Rule 506 of Regulation D thereunder. Such shares may not be offered or sold in the United States in the absence of an effective registration statement or exemption from the registration requirements under the Securities Act. An appropriate legend has been placed on the certificates we issued to represent these securities.

ITEM 6. Selected Financial Data

Not required for smaller reporting companies.

applicable.

ITEM 7. 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 fiscal year ended September 30, 2010,2013, this “Management’s Discussion and Analysis” should be read in conjunction with the Consolidated Financial Statements, including the related notes, appearing in Item 8 of this Annual Report.

Forward-Looking Statements

This portion of this Annual Report on Form 10-K includes statements that constitute “forward-looking statements.”  These forward-looking statements are often characterized by the terms “may,” “believes,” “projects,” “expects,” or “anticipates,” and do not reflect historical facts.  Specific forward-looking statements contained in this portion of the Annual Report include, but are not limited to our (i) expectation that continued investment in online advertising to bring increased traffic to our websites will drive increased revenues; (ii) expectation that there are no further impacts to our results of operations from the Attorneys’ General settlement; (iii) expectation that cost of sales will continue to be directly correlated to our use of the LEC billing channel and (iv) belief that our existing cash on hand,

Executive Overview

Our Company

LiveDeal, Inc., which, together with additional cash generated from operationsits subsidiaries, we refer to as the “Company”, “LiveDeal”, “we”, “us” or obtained from other sources, such other sources of cash possibly including stock issuances, loans“our”,providesspecialized onlinemarketing solutionsto small-to-medium sized local businesses, or SMBs,that boost customerawareness and advances from our existing LEC clearing houses through their current advance programs or other forms of financing secured by or leveraged off our increasing accounts receivable based on existing programs in place that are being offered to companies similar to ours; will provide us with sufficient liquidity to meet our operating needsmerchant visibility. We offer affordable tools for the next 12 months.

18

---

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 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 affect generally our business, results of operations, and financial position.  Forward-looking statements speak only as of the date the statement was made.  We do not undertake and specifically decline any obligation to update any forward-looking statements.

Executive Overview

Our Company

LiveDeal, Inc. provides local customer acquisition services for small businesses. LiveDeal, through our two primary wholly-owned subsidiaries (Velocity Marketing Concepts, Inc. and Local Marketing Experts, Inc.), offers an affordable way for businessesSMBs to extend their marketing reach to local, relevant prospective customers via the Internet. 

LiveDeal first started in the onlineinternet. We also provide SMBs promotional marketing industry as YP.com. At the time, we were the first company to bring the print yellow pages to the Internet in 1994. From there we moved into the online classifieds business when we merged with LiveDeal in 2007.

Today, we have adapted and adjusted our company goals to reflect the latest online trends through the launch of our InstantProfile product through Velocity Marketing Concepts, Inc. and its companion products.

LiveDeal uses the latest technologies to deliver best-in-breed online marketing solutions to our small business customers.  We have online advertising solutions to help small businesses grow their company and realize online success. 

Summary Business Description

LiveDeal delivers affordable acquisition services to the small business segment through the InstantAgency Suite of products and services. These products are currently sold through two wholly owned subsidiaries that target complimentary aspects of the small business market.

The InstantAgency® products include:

InstantProfile distributes a small business’ key contact and service information to the top Internet destinations (based on popularity), including the search engines, internet directories, and social media networks. This gives the advertiser the ability to manage theiroffer special deals and activities through LiveDeal.com and our online publishing partners.

Our principal offices are located at 6240 McLeod Drive, Suite 120, Las Vegas, Nevada 89120, our telephone number is (702) 939-0231, and 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”. 

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 informationstrategy over the last several years. The focus of these efforts has been two-fold: first, to make our product offerings more appealing in one location and maximize their reach to the many destinations a consumer may searchevolving market for local business services.

InstantProfile’s social media platform, InstantBUZZ, not only creates a presence for the advertiser in select social media networks, it also allows them to use one location to broadcast their messages across their entire social media network. By leveraging this automation the advertiser eliminates the need to manage multiple logins for individual websites and duplicate submissions and decreases the time required to broadcast their messages from hours to one click of a button.

Additionally, advertisers with InstantProfile also enjoy a suite of communication tools that assist them in communicating directlyassisting SMBs with their customersonline marketing challenges; and employees. These communication tools include a conferencing solutionsecond, to host conference calls with up to 10 participants and an online electronic fax solution with unlimited faxes included.

The key attribute the InstantAgency® products and services all have in common is high value, low cost marketing options that service the many needs of the small business customer. The suite of products and services were strategically chosen the service entry level products and services that can grow with the small business as it continues to grow. For those starting with the more customized products and services, InstantAgency® can continue to drive more online visitors, callers and in turn customers based on the customer budget.  Our strategic advantage is the ability to service the small business customer regardless of their budget or online knowledge.

Recent Events & Transactions

Financial Performance

We have embarked on a significant change in business strategy to re-emphasize our legacy business (directory services offering) and update it to meet current market requirements and 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 we haveof the cessation of our marketing efforts to acquire new customers, and the attrition of existing customers, our net revenues continued to experience a decline, from $4.1 million in revenuesfiscal 2011 to $3.1 million in fiscal 2012 and gross profit over the last several quarters, but have also reduced our ongoing costs$2.4 million in fiscal 2013.

Promotional Marketing and expenses and reduced ongoing losses. While we have yet to achieve sufficient sales in our new InstantProfile business to allow us to achieve operating profitability, we began to achieve growth in revenues in this business segment during fiscal 2010 with sales officially launching in July 2010.

19

---

Change in Business Strategy

In and around March 2010, we evaluated our business and adopted aOnline Presence Marketing (Velocity Local^™). 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 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 addressed eachour online presence marketing products are useful to a large share of our business segments as separate entitiesSMBs because they enable potential customers to gain awareness of and re-launchedlocate an SMB and restructured our legacy line of business. This evaluation was necessitated by the challenges facing our Direct Sales - Customer Acquisition Services 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).  Additionally, current economicto learn about and regulatory forces, both generalpurchase its products and specific to our industry, impacted our consideration of our existing business model and strategy.  Some of these factors include the following:

services.

§

The current effects of the recovery from the recent recession and general economic downturn;25

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:

§	Our perception—	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 general economic downturn could lead our businessfreedom 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 seek lower-cost customer acquisition methods, primarilyslower 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.

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 declined for fiscal 2013 as compared to fiscal 2012 as we continued to build a foundation for our new products and services and position the Company for future growth through our LiveDeal.com and Velocity Local^™ offerings.

Employment Agreement with President and CEO

On January 13, 2012, our Board of Directors appointed Jon Isaac to serve as our President and Chief Executive Officer. At the time, the Company did not enter into a written Employment Agreement with Mr. Isaac, but he was paid an annual salary of $1 for his services 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 Jon Isaac, pursuant to which he will continue serving as our President and Chief Executive Officer for the period from January 1, 2013 to January 1, 2016.  The material terms of the Employment Agreement are as follows:

·

$200,000 annual base salary throughout the Internet;term of the Employment Agreement.

·

Eligibility to receive performance-based bonuses in the sole discretion of the Company’s Compensation Committee.

26

§

The reconstitution of our management team;

§·

The terminationA one-time discretionary bonus of certain significant directory business contracts related$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 traditional business; andCompany’s Compensation Committee.

§·

Continuing losses in our Direct Sales business.Reimbursement for reasonable housing expenses.

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.

Our new strategic focus is on delivering a suite of Internet-based, local search driven, customer acquisition services for small businesses, sold via telemarketing using LEC billing channels and targeting all segments of the SMB market through our Velocity Marketing Concepts, Inc. subsidiary.

Management Changes

On November 23, 2009, we and Richard F. Sommer, our then-current Chief Executive Officer, entered into an amendment to Mr. Sommer's Employment Agreement dated as of May 19, 2009.  This amendment, provided that Mr. Sommer is entitled to an option to purchase 250,000 shares of our common stock at an exercise price of $1.95 per share, which was equal to the closing price of our common stock on the date of grant.  The option was granted pursuant to our 2003 Stock Plan and was scheduled to vest according to the following schedule: 25% on October 29, 2010 (the first anniversary of the date of grant) and 1/36 of the remainder each month beginning on November 29, 2010.

Previously, the Employment Agreement provided that Mr. Sommer was entitled to a success fee payable in cash equal to 2% of the excess above $9,000,000 of any cash distributed to or received by our stockholders in the form of a dividend, in the event of liquidation or upon a change of control.  Pursuant to this amendment, that provision was deleted and replaced with the option grant described above.  Other than as described above, the original terms of Mr. Sommer’s Employment Agreement remained in full force and effect.

Effective January 2, 2010, Rajeev Seshadri resigned as our Chief Financial Officer and was replaced by Lawrence W. Tomsic.  Mr. Tomsic recently served as Controller for Alliance Residential Company, an apartment complex with 3,221 units and $90 million in annual sales.  Previously, he was a Controller and Chief Financial Officer for various clients of JKL Consulting (including a planned unit development and a concrete contractor) from 2006-2008 and Chief Financial Officer of John R. Wood, Inc. (a real estate brokerage focusing on luxury residential housing and commercial properties) from 1997-2006.  Mr. Tomsic worked as a financial officer and in other management positions for various companies (including U.S. Home Corporation and Collier Enterprises) from 1983-1997.  He was also a senior auditor for Deloitte & Touche for three years.  Mr. Tomsic holds a B.S. in Accounting from the University of Delaware and an M.B.A. from the University of Denver.

On January 4, 2010,  Richard Sommer resigned as our Chief Executive Officer.  As a result of his departure, Mr. Sommer also resigned as a member of our Board of Directors.  Following Mr. Sommer’s departure, Kevin A. Hall was appointed as our interim Chief Operating Officer (COO).  Mr. Hall had been serving as our General Counsel and Vice President of Human Resources and Business Development since April 2009.  Prior to that time, Mr. Hall was a partner in the San Francisco, California and New York, New York offices of Reed Smith LLP, an international law firm with more than 1,500 attorneys worldwide, from 2006 until 2008. Previously, he was a senior associate and later a partner in the New York, New York office of Linklaters, a London-based global law firm, from 1998 until 2006. Mr. Hall, who is admitted to practice law in California and New York, specializes in general corporate law, finance, structured finance, and other complex commercial and financial transactions (including mergers and acquisitions). He holds a B.A. in History and French Literature from Columbia College, a Master's Degree in International Affairs from Columbia University, and a law degree from Cornell School of Law.

20

---

On May 20, 2010, the Board of Directors of LiveDeal appointed Kevin A. Hall as President and Chief Operating Officer of the Company.

Restructuring Activities

On January 4, 2010, our Board of Directors approved a reduction in force that resulted in the termination of approximately 33% of the Company's workforce, effective January 7, 2010.  On February 23, 2010, our Board of Directors approved an additional reduction in force that resulted in the termination of approximately 20% of our workforce, effective March 4, 2010.  These reductions in force were related to our ongoing restructuring and cost reduction efforts as the Board of Directors explores a variety of strategic alternatives, including the potential sale of the Company or certain of its assets and/or the acquisition of other entities or businesses.

We incurred charges of $143,000 in connection with the reductions in force, consisting of one-time employee termination benefits.  All amounts were paid as of June 30, 2010.

On November 30, 2010, our Board of Directors approved a reduction in force that resulted in the termination of 36 employees of the Company, or approximately 60% of the Company’s workforce, effective December 1, 2010.   The reduction in force was related to the Company’s ongoing restructuring and cost reduction efforts and strategy of focusing its resources on the development and expansion of its core InstantProfile product, the successor to the Company’s LEC-billed directory product.  All terminated employees were involved in the marketing and sale of the Company’s InstantPromote product by its subsidiary, Local Marketing Experts, Inc.  There was also a reduction of 14 additional people due to natural attrition.

We incurred expenses of $99,319 in connection with the reduction in force, of which $37,500 was incurred for one-time employee termination benefits payable in cash.  The remaining expenses relate to salaries and wages payable in cash to the affected employees.  Substantially all of these charges will be expensed in the first quarter of fiscal 2011.

·

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

Critical Accounting Estimates and Assumptions

The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires our management to make certainmany estimates and assumptions that may materially affect theboth our consolidated financial statements and related disclosures, such as reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  As such, in accordance withperiod, and the usecomparability of accounting principles generally accepted in the United Statesinformation presented over different reporting periods. Estimates and assumptions are based on management's experience and other information available prior to the issuance of America, our financial statements. Our actual realized results may differ materially from management’s initial estimates as reported. Summaries of our significant accounting policies are detailed in the notes to the consolidated financial statements, which are an integral component of this filing.

The discussion in this section of "critical" accounting estimates and assumptions is according to the disclosure guidelines of the SEC, wherein:

·

the nature of the estimates or assumptions is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change; and

·

the impact of the estimates and assumptions on our  financial condition or operating performance is material.

Besides those meeting these "critical" criteria, we make many other accounting estimates and assumptions in preparing our financial statements and related disclosures. Although not associated with “highly uncertain matters,” these estimates and assumptions are also subject to revision as circumstances warrant, and materially different results may sometimes occur.

The following summarizes critical“critical” estimates and assumptions made by management in the preparation of the consolidated financial statements.

statements and related disclosures.

Revenue Recognition

Local Marketing Experts, Inc. (former Direct Sales – Customer Acquisition Services).  Our direct sales contracts typically involve upfront billing for an initial payment followed by monthly billings over the contractual period.  

We recognize revenue on a straight line basis over the contractual period.  Billings in excess of recognized revenue are included as deferred revenue in the accompanying consolidated balance sheets.

Previously, we recognized the valuefor our services when all of the noncancelable portion of the Direct Sales’ customer contract as a receivablefollowing criteria are satisfied:

·

persuasive evidence of an arrangement exists;

·

services have been performed;

·

the selling price is fixed or determinable; and

·

collectability is reasonably assured.

Through September 30, 2013, we have not generated significant revenue from our two new product offerings: online presence marketing and billed the customer for the amount of the contract over the period of the contract. We only recognized a portion of the contract value as revenue each month, approximately pro-rating the contract to a monthly amount, with the remainder of the noncancelable portion of the contract maintained as a deferred revenue liability. In the quarter ended June 30, 2009, we corrected our balance sheet presentation relatedpromotional marketing.

27

With respect to our direct sales contracts to include in accounts receivable only those amounts that are still outstanding receivables after having been billed in accordance with the terms of the contract.

Velocity Marketing Concepts, Inc. (formerly Directory Services). Welegacy businesses, we generate revenue from customer subscriptions for directory and advertising services. We recognize revenues as services are rendered. In some instances, we receive payments in advance of rendering services, whereupon such revenues are deferred until the related services are rendered. Our billing and collection procedures include significant involvement of outside parties, referred to as aggregators for LEC billing and service providers for ACH billing. We provide allowances for customer refunds, non-paying customers and fees which are estimated at the time of billing.

Allowance for Doubtful Accounts

We estimate allowances for doubtful accounts for accounts that are billed directly by us as well as those serviced by third party aggregators and service providers (Processors)(processors).

21

---

We reflect the

Included in accounts receivable are amounts held in reserve by LEC aggregators as reserves for future refunds, billing adjustments, service fees, etc.  As we have ceased billing activities with many of these service providers, there is some uncertainty as to the Processors as accounts receivable in the accompanying consolidated balance sheets. During the period that we received settlements from our billings through these LEC channels, the level of the reserves held by the Processors changed accordingly and the Processors often calculated the holdback amounts from the settlements due to us as ‘rolling reserves’ that we believe are actuarially estimated by them based on the level of business, the expectation of future billings from which to replenish such reserves, and other factors. The costs and expenses related to such settlements and reserve holdback amounts were recorded as expenses during the period that the settlements were received. With the cessationcollectability of such settlements, the costsreceivables and expenses are now related to the maintenance of the reserves held by the Processors. The reserves now held are not changing due to the cessation of billing activities by us, and accordingly, we have now made estimates of the costs and expenses that we are likely to incur to collect the holdback amounts held as reserves. These estimates lead to an accrual of expected costs over the expected length of the collection period of theincreased our allowance for doubtful accounts receivable and, therefore, to an increase in the allowances, instead of recording such expenses as period costs as they are actually incurred as would have been the case if we continued to have regular billings through the Processors.

The allowance at September 30, 2010 included a reserve allowance of $703,732 resulting from the Chapter 11 Bankruptcy filing of one of our LEC aggregators, representing a reduction in the estimated collectability of our entire pre-petition outstanding receivable balance of $777,755. accordingly. 

The aggregate of accounts receivable balances from the LEC operations that do not have billing activity was $229,270 and $956,524 as of September 30, 2010 was $2,370,029,2013 and 2012, respectively, and the aggregate of corresponding allowances was $1,848,526.$140,085 and $853,452, respectively. These aggregate amounts include the accounts receivable balances and allowances for the accounts held by the Chapter 11 trustee.

bankruptcy filing of one of our LEC aggregators. At September 30, 2013 and 2012 we had $0 and $777,755 of accounts receivable and reserve allowance, respectively, associated with this LEC aggregator. This was settled on April 2, 2013 and $85,550 was received for settlement.

Carrying Value of Intangible Assets

Our intangible assets consist of licenses for the use of Internetinternet domain names or Universal Resource Locators,universal resource locators, or URLs, capitalized website development costs and software, other information technology licenses and marketing and technology relatedtechnology-related intangibles acquired through the acquisition of LiveDeal, Inc.acquisitions. All suchthese assets are capitalized at their original cost (or at fair value for assets acquired through business combinations) and amortized over their estimated useful lives. We capitalize internally generated software and website development costs in accordance with the provisions of the FASB Accounting Standards Codification (“ASC”) ASC 350, “Intangibles – Goodwill and Other”.

We evaluate the recoverability of the carrying amount of intangible assets at least annually and whenever events or changes in circumstances indicate that the carrying amount of these assets may not be fully recoverable. In the event of such changes, impairment would be assessed if the expected undiscounted net cash flows derived for the asset are less than its carrying amount.

Goodwill

We evaluate our goodwill for potential impairment on an annual basis or whenever events or circumstances indicate that an impairment may have occurred in accordance with the provisions of ASC 350, which requires that goodwill be tested for impairment using a two-step process. The first step of the goodwill impairment test, used to identify potential impairment, compares the estimated fair value of the reporting unit containing our goodwill with the related carrying amount. If the estimated fair value of the reporting unit exceeds its carrying amount, the reporting unit’s goodwill is not considered to be impaired andDuring the second step is unnecessary. As a resultquarter of this analysis,fiscal 2011, $367,588 in net intangible assets were written off which were previously used in the discontinued direct sales business. A further evaluation was conducted in the fourth quarter of fiscal 2011 due to continued operating losses; however, it was determined that the entire goodwill balance attributableno further impairment existed at that time. In 2012, due to the Company’s acquisitions of OnCall Subscriber Management and LiveDeal, Inc.improved financial results, there were impaired and were written off during the fiscal year ended September 30, 2009.

Customer Acquisition Costs

We acquire customers primarily through outbound call campaigns whereby we incur costsno changes in events or circumstances which include the acquisition of calling lists, personnel costs, etc.  Customers subscribe to the services by affirmatively responding to those campaigns, which serve as the contract for the subscription.  Calling campaign costs are expensed as incurred.  We historically have also incurred costs to acquire customers in connection with certain fulfillment contracts.  Such costs were capitalized and amortized over the expected life of the related revenue stream.  All suchwould indicate carrying amounts have been fully amortized as of September 30, 2010.

would not be recoverable.

Income Taxes

Income taxes are accounted for using the asset and liability method as prescribed by ASC 740 “Income Taxes”. Under this method, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which these temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance would be provided for those deferred tax assets for which if it is more likely than not that the related benefit will not be realized.

We have estimated net deferred income tax assets (net of valuation allowances) of $0 at September 30, 20102013 and 2009.2012. A full valuation allowance has been established against all net deferred tax assets as of September 30, 20102013 and 20092012 based on estimates of recoverability. While we have optimistic plans for our new business strategy, we determined that such a valuation allowance was necessary given the current and expected near term losses and the uncertainty with respect to our ability to generate sufficient profits from our new business model.lines. Therefore, we established a valuation allowance for all deferred tax assets in excess of those expected to be realizable through the application of operating loss carrybacks.

22

---

We performed an analysis of uncertain tax positions and we did not identify any significant uncertainties that would affect the carrying value of our deferred tax assets and liabilities atas of September 30, 2010.2013 and 2012.

28

Stock-Based Compensation

From time to time, we grant restricted stock awards and options to employees, directors, executives, and consultants.  Such awards are valued based on the grant date fair-value of the instruments, net of estimated forfeitures. The value of each award is amortized on a straight-line basis over the vesting period.  The impacts of changes in such estimates on unamortized deferred compensation cost are recorded as an adjustment to compensation expense in the period in which such estimates are revised.

Results of Operations

Net Revenues

Year Ended September 30,		Net Revenues				Change from Prior Year				Percent Change from Prior Year
2010		$	8,077,434			$	(5,361,221	)			(39.9	)%
2009		$	13,438,655

		Net Revenues
		2013				2012				Change				Percent
Year Ended September 30,		$	2,351,868			$	3,070,503			$	(718,635	)			(23%	)

Net revenues in fiscal 20102013 decreased by approximately $5,361,000, due primarily to changes in our business strategy and the sales of our www.yp.com URL and a portion of our customer list in fiscal 2009.  Net revenues in our directory services business decreased by approximately $5,092,000 to $4,239,000 in fiscal 2010 as compared to $9,331,000 in fiscal 2009.  Net revenues in our customer acquisition services business segment decreased by approximately $269,000 to $3,839,000 in fiscal 2010 as compared to $4,108,000 in fiscal 2009.  We anticipate that revenues from our customer acquisition services business will continue to decline in the future as we refocus our efforts toward our subscription based business using LEC billing channels marketed under our Velocity Marketing Concepts, Inc. subsidiary.

Cost of Services

Year Ended September 30,		Cost of Services				Change from Prior Year				Percent Change from Prior Year
2010		$	3,857,684			$	(2,534,094	)			(39.6	)%
2009		$	6,391,778

Cost of services decreased in fiscal 2010$718,635, as compared to fiscal 2009, as a result of decreased costs in our directory services and increased costs in our customer acquisition services.

Cost of services in our customer acquisition services business were approximately $3,097,000 in fiscal 2010 as compared to $2,768,000 in fiscal 2009.  See discussion of gross margins elsewhere in this section.

Cost of services in our directory services business were approximately $761,000 in fiscal 2010 as compared to $3,624,000 in fiscal 20092012, primarily due to the end of LEC billing, which resulted in a 55% reductiondecrease of approximately $1.2 million, which was partially offset by increases in revenues.  During 2010, we experienced cost decreases in our directoryrevenue of approximately $500,000 from the Company’s online marketing product.

Cost of Services

		Cost of Services
		2013				2012				Change				Percent
Year Ended September 30,		$	916,331			$	715,457			$	200,874				28%

Cost of services business on a per customer basis due to decreases in per-customer charges billed to us from our third party service providers and decreases in bad debt expense.

Gross Profit

Year Ended September 30,		Gross Profit				Change from Prior Year				Percent Change from Prior Year
2010		$	4,219,750			$	(2,827,127	)			(40.1	)%
2009		$	7,046,877

Gross profit decreased approximately $2,827,000increased in fiscal 20102013 as compared to fiscal 2009 reflecting a decrease2012, primarily due toincreased allowances related to the end of the LEC billing, slightly offset by the increases in net revenues and afulfillment costs for the online marketing product.

		Gross Profit
		2013				2012				Change				Percent
Year Ended September 30,		$	1,435,537			$	2,355,046			$	(919,509	)			(39	)%

Gross profit decreased in fiscal 2013 as compared to fiscal 2012 primarily due to the decline in gross margins in our customer acquisition services business as we continue to refine and develop our business strategy.  The following table sets forth changes in our gross marginrevenues described above, which was partially offset by business segment.

23

---

		Year ended September 30,
		2010				2009
Customer acquisition services -
Gross profit		$	741,949			$	1,339,997
Gross margin			19.3	%			32.6	%
Directory services -
Gross profit		$	3,477,801			$	5,706,880
Gross margin			82.1	%			61.2	%

the decreased cost of fulfillment services.

General and Administrative Expenses

Year Ended September 30,		General & Administrative Expenses				Change from Prior Year				Percent Change from Prior Year
2010		$	11,734,122			$	(3,445,859	)			(22.7	)%
2009		$	15,179,981

		General and Administrative Expenses
		2013				2012				Change				Percent
Year Ended September 30,		$	4,114,843			$	3,290,002			$	824,841				25%

General and administrative expenses decreasedincreased in fiscal 20102013 as compared to fiscal 2009 due to the following:

2012 as outlined below:

·

A decrease inIncreased compensation and compensation-related expensescosts of $3,658,000 reflecting the impacts of our restructuring actions and reduction in force during 2009 and 2010 from 111 employees at September 30, 2009 to 73 at September 30, 2010, which employee count, from September 30, 2010 to November 30, 2010, has further decreased from 73 to 60approximately $968,000 due to attrition duringstaffing of sales representatives, fulfillment and customer support for the course of normal business operations, decreased further on December 1, 2010 by 36 employees due to the reduction in force described herein and the resignation of 1 additional employee on December 3, 2010, resulting in an employee count of 23 as of December 20, 2010;revenue products;

·

A decreaseDecreased professional fees of approximately $32,000 related to:

	§	Decreased legal fees of $172,717, due to a reduction in litigation related expenses,
	§	Reductions in marketing consultant fees of $15,695, partially offset by,
	§	Increased other miscellaneous consultant costs of  $87,076,
	§	Increased accounting fees of $27,354; and
	§	Increased IT consultant fees of $42,064

·

Increased depreciation and amortization expense of approximately $644,000 due primarily to the effects of the impairment of amortizable intangible assets that occurred in the second quarter of fiscal 2009;$4,000; and

·

A decrease in rent, utilities and office expenses of approximately $485,000 as a result of the closure of our Santa Clara and New York facilities and other cost-containment initiatives; and

·

Other miscellaneous costexpense decreases of approximately $85,000;  partially offset by$115,000, 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.

29

·

An increase in legal settlement costs of $310,000 reflecting a settlement of $300,000 in the first quarter of fiscal 2010 with On-Call Superior Management (“OSM”) and SMeVentures, Inc. (“SMe”) and a $10,000 payment in the fourth quarter of fiscal 2010 associated with our settlement with the Illinois Attorney General.   See Part I, Item 3.  Legal Proceedings in this report for further information; and

·

An increase in professional fees of $1,116,000 reflecting an increase in IT infrastructure and product development costs of $828,000 as we develop our next-generation of products, increased legal fees of $262,000 as we defend several litigation matters related to our legacy businesses and $26,000 in other miscellaneous increases in professional fees.

The following table sets forth our recent operating performance for general and administrative expenses:

		Q4 2010				Q3 2010				Q2 2010				Q1 2010				Q4 2009				Q3 2009				Q2 2009				Q1 2009
Compensation for employees,  leased employees, officers and directors		$	1,048,094			$	967,323			$	1,352,108			$	2,241,198			$	2,054,709			$	2,392,081			$	2,311,056			$	2,508,836
Professional fees			551,394				677,507				1,023,582				488,993				336,273				421,700				411,564				455,832
Depreciation and amortization			214,617				215,102				218,200				225,653				211,336				186,077				560,383				559,289
Other general and administrative costs			462,278				497,865				544,162				1,006,046				451,300				813,124				771,352				735,070

24

---

expenses by quarter:

		Q4 2013				Q3 2013				Q2 2013				Q1 2013				Q4 2012				Q3 2012				Q2 2012				Q1 2012
Compensation for employees, leased employees, officers and directors			555,323				528,767				726,137				436,062				242,490				378,700				295,333				341,325
Professional fees			212,465				147,618				248,663				234,799				254,549				110,706				226,403				143,805
Depreciation and amortization			70,288				65,183				65,073				63,566				67,635				55,669				67,391				69,281
Other general and administrative costs			357,204				184,090				191,658				27,947				244,740				347,278				232,301				212,403

Sales and Marketing Expenses

Year Ended September 30,		Sales & Marketing Expenses				Change from Prior Year				Percent Change from Prior Year
2010		$	226,442			$	(2,230,621	)			(90.8	)%
2009		$	2,457,063

		Sales and Marketing Expenses
		2013				2012				Change				Percent
Year Ended September 30,		$	58,788			$	12,310			$	46,478				378%

Sales and marketing expenses decreasedincreased in fiscal 20102013 as compared to fiscal 20092012 primarily due to the following:

·

$1,908,000 of decreased telemarketing and other customer acquisition costs as we significantly decreased these activities in light of our changing business strategy and cost containment initiatives; and

·

$323,000 of decreased branding, online advertising and click traffic as part of our cost containment initiatives.

We are currently developing our marketing strategies in lightproduction of our new business focusa promotional video and anticipate that such expenditures will decline in the future.

Impairment of Goodwill and Intangible Assets

Year Ended September 30,		Impairment of Goodwill and Intangible Assets				Change from Prior Year				Percent Change from Prior Year
2010		$	-			$	(7,866,109	)			(100	)%
2009		$	7,866,109

We incurred an impairment charge in the second quarter of fiscal 2009 to write-down goodwill and other intangible assets.  No such charges were incurred in fiscal 2010. 

corporate branding.

Operating Loss

Year Ended September 30,		Operating Loss				Change from Prior Year				Percent Change from Prior Year
2010		$	(7,740,814	)		$	10,715,462				(58.1	)%
2009		$	(18,456,276	)

		Operating Loss
		2013				2012				Change				Percent
Year Ended September 30,		$	(2,738,094	)		$	(947,266	)		$	(1,790,828	)			189%

The decreaseincrease in our operating loss for fiscal 20102013 as compared to fiscal 2009 is primarily due to2012 was a product of the impairment charge, decreased gross profit and changes in operatingnet revenues, cost of services, general and administrative expenses and sales and marketing expenses, each of which is described above.

Total Other Income (Expense)

Year Ended September 30,		Total Other Income (Expense)				Change from Prior Year				Percent Change from Prior Year
2010		$	41,189			$	(7,486,745	)			(99.5	)%
2009		$	7,527,934

		Total Other Income (Expense)
		2013				2012				Change				Percent
Year Ended September 30,		$	(3,011,628	)		$	(640,375	)		$	(2,371,253	)			370%

Other income (expense) in fiscal 20102013 consisted of:

·—

$50,000 adjustment279,403 due to the gain on salereversal of our customer list from fiscal 2009 reflecting adjustmentsvendor invoices due to certain accruals;settlement;

	·
	—	$18,0001,585 of interest income on cash balances; partially offset by
	—	($3,292,616) of interest expense including $3,291,466 of non-cash charges associated with a beneficial conversion feature associated with our convertible debt issued to ICG.

30

Other income (expense) in fiscal 2012 consisted of:

	·	($27,000)613,000) of interest expense, including $489,594 of non-cash charges associated with a beneficial conversion feature associated with our convertible debt issued to ICG;
	·	($30,000) loss on disposal of fixed assets.assets; partially offset by

Other income (expense) in fiscal 2009 consisted of the following:

	·	$3,041,000 from the sale of a portion of our customer list associated with our directory services business;

·

$642,000 from an amendment to another directory services contract in consideration of accelerated payments on our outstanding accounts receivables;

·

$3,806,000 from an agreement to sell our Internet domain name “www.yp.com” to YellowPages.com; and

·

$39,0002,600 of interest income on cash balances and short term investmentsbalances.

25

---

Income Tax Provision (Benefit)

Year Ended September 30,		Income Tax Provision (Benefit)				Change from Prior Year				Percent Change from Prior Year
2010		$	(230,382	)		$	(3,623,897	)			(106.8	)%
2009		$	3,393,515

Income tax benefitfrom Discontinued Operations

		Income from Discontinued Operations
		2013				2012				Change				Percent
Year Ended September 30,		$	2,708			$	12,433			$	(9,725	)			(78	)%

In 2011, the Company decided to discontinue the direct sales business and, accordingly, results from that segment are reflected as discontinued operations in our consolidated financial statements for all periods presented. Our income from direct sales for the year ended September 30, 2013 and 2012 consisted of $230,000 in fiscal 2010 was the result of an adjustment to income tax receivable for net operating loss carrybacks as a result of true-ups to our final 2009 tax return that was filed during fiscal 2010.  There was no income tax benefit recognized related to our fiscal 2010 net loss as we have established a full valuation allowance against all deferred tax assets.

During fiscal 2009, we recognized an income tax provision of approximately $3,394,000 related to the establishmentrecovery of a full valuation allowance against all deferred tax assets in light of the uncertainty surrounding our abilities to utilize such tax benefits in the future.

Income (Loss)bad debt from Discontinued Operations

Year Ended September 30,		Income (Loss) from Discontinued Operations				Change from Prior Year				Percent Change from Prior Year
2010		$	12,525			$	8,281,968				100.2	%
2009		$	(8,269,443	)

During fiscal 2010, we recognized income of $13,000 from discontinued operations, reflecting the adjustment of certain accruals associated with the wind-down of our classifieds operations.

During fiscal 2009, we discontinued our classifieds business.  Included in the loss for fiscal 2009 is the impairment of goodwill and other intangibles related to this business.

a previous period.

Net Loss

Year Ended September 30,		Net Loss				Change from Prior Year				Percent Change  from Prior Year
2010		$	(7,456,718	)		$	15,134,582				(67.0	)%
2009		$	(22,591,300	)

		Net Loss
		2013				2012				Change				Percent
Year Ended September 30,		$	(5,747,014	)		$	(1,575,208	)		$	(4,171,806	)			265%

Changes in net loss are primarily attributable to changes in operating income,loss, other income (expense), and income tax expense andfrom discontinued operations, each of which is described above.

Liquidity and Capital Resources

Fiscal 2013 vs. Fiscal 2012 Cash Flows

Net cash used inprovided by (used in) operating activities increaseddecreased by $977,000, or 33%,$1,833,993 to ($3,940,000)1,805,009) for the fiscal year ended September 30, 2010,2013, compared to ($2,963,000)$28,984 for the fiscal year ended September 30, 2009.  This change in cash flows is attributable to the following: although our2012. Our net loss decreasedincreased by approximately $15,135,000$4.1 million in fiscal 20102013 as compared to fiscal 2009, this2012, which was partially offset by a decreasean increase in non-cash charges and other adjustments of $16,377,000approximately $2.9 million in fiscal 20102013 as compared to fiscal 2009.2012, primarily related to interest expense associated with the beneficial feature of our convertible notes with ICG, a related party. Cash flows from operations were also impacted by an increasea decrease of $265,000approximately $500,000 in changes in working capital and other assets in fiscal 20102013 as compared to fiscal 2009, primarily the result of collections of income tax refunds in fiscal 2010 partially offset by lower accounts receivable collections in fiscal 2009.

2012. Our primary source of cash inflows has historically been net remittances from our directory services customers processed in the form of ACH billings and LEC billings. During fiscal 2009, we were transitioning away from directory services toward our customer acquisition services, whose billings experience shorter collection times.  Accordingly we were able to reduce our collection times and our outstanding accounts receivable balances.  As of September 30, 2010, no single customer2013, three such entities accounted for greater than 10%44%, 25% and 18% of gross accounts receivable.

With respect to our customer acquisition services, we generally receive upfront payments averaging approximately one-sixth of the gross contract amount.  Subsequent payments are received on an installment basis after the application of the initial payment amounts and are billed ratably over the remaining life of the contract. Most customers purchasing these services elect to use their credit cards to effect payments, and therefore our collections are usually made within a few days of the installment due date.

26

---

Our most significant cash outflows include payments for general operating expenses.  General operating cash outflows consist ofexpenses, including payroll costs, and general and administrative expenses that typically occur within close proximity of expense recognition.

Net cash used infor investing activities duringtotaled approximately $141,000 for fiscal 2010 was approximately $286,000,2013, consisting primarily of $91,000 for expenditures for intangible assets primarily made up of software development and purchases of equipment in support of our new product offerings.  Cash flows provided by investing activities in fiscal 2009 totaled approximately $6,494,000, primarily attributable to the sale of our Internet domain name www.yp.com, the sale of a portion of our customer list related to our directory services business, and an amendment to an existing directory services contract, which provided aggregate cash inflows of $7,430,000.  Additionally, in fiscal 2009, we had expenditures$50,000 for purchases of equipment and intangible assets totaling approximately $836,000.  During the year ended September 30, 2009, we also invested $100,000 in certificates of deposit.

equipment. Net cash used for investing activities totaled approximately $531,000 for fiscal 2012, consisting of $482,000 for expenditures for intangible assets (including website investments) and $48,000 for purchases of equipment.

During fiscal 2013, our cash flows from financing activities was approximately $114,000 during fiscal 2010 and consisted of $26,000proceeds from the issuance of treasuryconvertible debt and warrants of $1,250,000 and issuance of stock repurchasesfor cash of $152,160. During fiscal 2012, our cash flows from financing activities consisted of issuance of stock to investors of $2,350,000 and $88,000proceeds for the issuance of principal repaymentsconvertible debt of $250,000, partially offset by payments on notes payable of $1,000,000 and $37,000 of payments on capital lease obligations.  Net cash used for financing activities was approximately $603,000 during fiscal 2009 and was attributable to $533,000 of treasury stock repurchases and $70,000 of principal repayments on capital lease obligations.  

31

We had net working capital of $3,201,000$179,968 as of September 30, 20102013 compared to $9,251,000a working capital of $370,780 as of September 30, 2009.  Our cash position decreased to $3,227,000 at2012, with current assets decreasing by $794,762 and current liabilities decreasing by $603,950 from September 30, 2010 compared2012 to $7,568,000 at September 30, 2009, as2013.

Future Sources of Cash; New Products and Services

While our existing cash on hand is insufficient to sustain our current operating activities, we had a significant decline in cash flows provided by investing activities.

On May 25, 2007, the Company’s Boardbelieve that we will be able to secure additional resources to fund our operations. Other sources of Directors terminated its pre-existingfinancing may include stock repurchase planissuances (for example, pursuant to our Engagement Agreement with Chardan Capital Markets LLC, under which we may issue and replaced it with a new plan authorizing repurchases ofsell up to $1,000,000a maximum aggregate amount of 660,000 shares of our common stock from time to time through Chardan as our sales agent, using our shelf registration statement on Form S-3 (File No. 333-187397) previously filed with the open market orSEC); 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 privately negotiated transactions.  The repurchase plan was increased by another $500,000 on October 23, 2008.  During the years ended September 30, 2010 and 2009, the Company acquired an aggregate of 1,341 and 34,611 shares of common stock for an aggregate repurchase price of $25,882 and $532,521, respectively.

We believe that our existing cash on hand and additional cash generated from operations together with additional cash obtained  through stock issuances, loans, advancesJanuary 2014); or other forms of financings secured byfinancing. We cannot provide any assurance that additional financing arrangements will be available in amounts or leveraged offon terms acceptable to us, if at all Further, our increasing accounts receivablebusiness is likely to experience significant volatility in its revenues, operating losses, personnel involved, products or services for sale, and other business parameters, as management implements its new product and marketing strategies and responds to operating results.

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 redefinedthe 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 provide us withgenerate sufficient liquidity to meet ourrevenue or that we will achieve profitability, positive operating needscash flows, or sufficient cash flows for the next 12 months.

operations.

Contractual Obligations

The following table summarizes our contractual obligations at September 30, 20102013 and the effect such obligations are expected to have on our future liquidity and cash flows:

		Payments Due by Fiscal Year
		Total				2011				2012				2013				2014				2015				Thereafter
Operating lease commitments		$	813,516			$	419,465			$	315,331			$	78,720			$	-			$	-			$	-
Capital lease commitments			101,560				64,143				37,417				-				-				-				-
Noncanceleable service contracts			773,583				635,583				138,000				-				-				-				-
		$	1,688,659			$	1,119,191			$	490,748			$	78,720			$	-			$	-			$	-

		Payments Due by Fiscal Year
		Total				2014				2015				2016				2017				2018				Thereafter
		$	470,680			$	211,767			$	201,630			$	57,283			$	–			$	–			$	–
Operating lease commitments			57,000				19,000				19,000				19,000												–
Noncancellable service contracts		$	527,680			$	230,767			$	220,630			$	76,283			$	–			$	–			$	–

At September 30, 2010,2013, we had no other off-balance sheet arrangements, commitments or guarantees that require additional disclosure or measurement.

ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk

As of September 30, 2010,2013, we did not participate in any market risk-sensitive commodity instruments for which fair value disclosure would be required. We believe that we are not subject in any material way to other forms of market risk, such as foreign currency exchange risk or foreign customer purchases (of which there were none in fiscal 20102013 or 2009)2012) or commodity price risk.

32

27

---

ITEM 8. Financial Statements and Supplementary Data

LIVEDEAL, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

		Page
Report of Independent Registered Public Accounting Firm	29
Consolidated Financial Statements: 34
Consolidated Financial Statements:
AuditedConsolidated Balance Sheets at September 30, 20102013 and 20092012	30
35
Audited Consolidated Statements of Operations for the years endedYears Ended September 30, 20102013 and 20092012	31
36
Audited Consolidated Statements of Stockholders’ Equity for the years endedYears Ended September 30, 20102013 and 20092012	32
37
Audited Consolidated Statements of Cash Flows for the years endedYears Ended September 30, 20102013 and 20092012	33	38
Notes to Consolidated Financial Statements		39

34

33

28

---

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of

and Stockholders

LiveDeal, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of LiveDeal, Inc. and Subsidiaries (the “Company”) as of September 30, 20102013 and 2009,2012, and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the years in the two year period ended September 30, 2010.2013. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of September 30, 20102013 and 2009,2012, and the results of theirits operations and theirits cash flows for each of the years in the two year period ended September 30, 2010,2013, in conformity with U.S. generally accepted accounting principles.

The Company's consolidated financial statements are prepared using the U.S. generally accepted accounting principles generally acceptedapplicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the United Statesnormal course of America.

business. The Company had a net loss of $5,747,014 for the year ended September 30, 2013 and had an accumulated deficit of $27,333,647 as of September 30, 2013. These factors, as discussed in Note 3 to the financial statements raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to the matter are also described in Note 3. The statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Mayer Hoffman McCann P.C.Kabani and Company, Inc.

Kabani and Company, Inc.

Certified Public Accountants

Los Angeles, California

January 10, 2014

34

Phoenix, Arizona

January 5, 2011

29

---

LIVEDEAL, INC. AND SUBSIDIARIES

AUDITED CONSOLIDATED BALANCE SHEETS

		September 30,
		2010				2009
Assets
Cash and cash equivalents		$	3,227,374			$	7,568,030
Certificates of deposit			101,293				100,000
Accounts receivable, net			948,439				1,478,183
Prepaid expenses and other current assets			219,121				326,442
Income taxes receivable			-				1,490,835
Total current assets			4,496,227				10,963,490
Accounts receivable, long term portion, net			330,234				1,039,403
Property and equipment, net			397,382				615,906
Deposits and other assets			49,294				81,212
Intangible assets, net			1,938,952				2,336,714
Total assets		$	7,212,089			$	15,036,725
Liabilities and Stockholders' Equity
Liabilities:
Accounts payable		$	354,440			$	549,681
Accrued liabilities			880,188				1,092,811
Current portion of capital lease obligation			60,327				69,612
Total current liabilities			1,294,955				1,712,104
Long term portion of capital lease obligation			38,283				117,073
Total liabilities			1,333,238				1,829,177
Commitments and contingencies
Stockholders' equity:
Series E convertible preferred stock, $0.001 par value, 200,000 shares authorized,
127,840 issued and outstanding, liquidation preference $38,202			10,866				10,866
Common stock, $0.01 par value, 10,000,000 shares authorized, 609,643 issued and
605,391 outstanding at September 30, 2010 and 613,343 issued and
610,433 outstanding at September 30, 2009			6,096				6,133
Treasury stock (4,252 and 2,910 shares carried at cost) at September 30, 2010 and 2009, respectively			(70,923	)			(45,041	)
Paid in capital			20,436,235				20,280,377
Accumulated deficit			(14,503,423	)			(7,044,787	)
Total stockholders' equity			5,878,851				13,207,548
Total liabilities and stockholders' equity		$	7,212,089			$	15,036,725

See

		September 30,				September 30,
		2013				2012
Assets
Cash and cash equivalents		$	761,458			$	1,305,785
Accounts receivable, net			174,901				439,848
Prepaid expenses and other current assets			67,126				52,614
Total current assets			1,003,485				1,798,247
Accounts receivable, long term portion, net			44,639				374,570
Property and equipment, net			71,162				50,526
Deposits and other assets			25,563				35,707
Intangible assets, net			2,848,401				1,997,671
Total assets		$	3,993,250			$	4,256,721
Liabilities and Stockholders' Equity
Liabilities:
Accounts payable		$	524,053			$	1,017,363
Accrued liabilities			299,464				410,104
Total liabilities			823,517				1,427,467
Stockholders' equity:
Series E convertible preferred stock, $0.001 par value, 200,000 shares authorized, 127,840 issued and outstanding, liquidation preference $38,202			10,866				10,866
Common stock, $0.001 par value, 10,000,000 shares authorized, 3,778,558 and 2,620,486 shares issued and outstanding at September 30, 2013 and September 30, 2012, respectively			3,779				2,620
Paid in capital			30,488,735				24,400,483
Accumulated deficit			(27,333,647	)			(21,584,715	)
Total stockholders' equity			3,169,733				2,829,254
Total liabilities and stockholders' equity		$	3,993,250			$	4,256,721

The accompanying notes toare an integral part of these consolidated financial statements.

35

30

---

LIVEDEAL, INC. AND SUBSIDIARIES

AUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

		Year ended September 30,
		2010				2009
Net revenues		$	8,077,434			$	13,438,655
Cost of services			3,857,684				6,391,778
Gross profit			4,219,750				7,046,877
Operating expenses:
General and administrative expenses			11,734,122				15,179,981
Impairment of goodwill			-				4,350,041
Impairment of intangible assets			-				3,516,068
Sales and marketing expenses			226,442				2,457,063
Total operating expenses			11,960,564				25,503,153
Operating loss			(7,740,814	)			(18,456,276	)
Other income (expense):
Interest income, net			18,186				37,686
Other income (expense)			23,003				7,490,248
Total other income (expense)			41,189				7,527,934
Loss before income taxes			(7,699,625	)			(10,928,342	)
Income tax provision (benefit)			(230,382	)			3,393,515
Loss from continuing operations			(7,469,243	)			(14,321,857	)
Discontinued operations
Income (loss) from discontinued component, including disposal costs			12,525				(8,329,470	)
Income tax benefit			-				(60,027	)
Income (loss) from discontinued operations			12,525				(8,269,443	)
Net loss		$	(7,456,718	)		$	(22,591,300	)
Earnings per share – Basic:
Loss from continuing operations		$	(12.45	)		$	(23.85	)
Discontinued operations			0.02				(13.77	)
Net loss		$	(12.43	)		$	(37.62	)
Earnings per share - Diluted:
Loss from continuing operations		$	(12.45	)		$	(23.85	)
Discontinued operations			0.02				(13.77	)
Net loss		$	(12.43	)		$	(37.62	)
Weighted average common shares outstanding:
Basic			599,928				600,566
Diluted			599,928				600,566

See

		Year Ended September 30,
		2013				2012
Net revenues		$	2,351,868			$	3,070,503
Cost of services			916,331				715,457
Gross profit			1,435,537				2,355,046
Operating expenses:
General and administrative expenses			4,114,843				3,290,002
Sales and marketing expenses			58,788				12,310
Total operating expenses			4,173,631				3,302,312
Operating loss			(2,738,094	)			(947,266	)
Other expense:
Interest expense, net			(3,291,031	)			(610,485	)
Other income			279,403				(29,890	)
Total other expense, net			(3,011,628	)			(640,375	)
Loss from continuing operations			(5,749,722	)			(1,587,641	)
Discontinued operations
Income from discontinued component, including disposal costs			2,708				12,433
Income from discontinued operations			2,708				12,433
Net loss		$	(5,747,014	)		$	(1,575,208	)
Earnings per share - basic and diluted:
Loss from continuing operations		$	(1.84	)		$	(0.77	)
Discontinued operations			0.00				0.01
Net loss		$	(1.84	)		$	(0.76	)
Weighted average common shares outstanding:
Basic and diluted			3,131,420				2,068,828

The accompanying notes toare an integral part of these consolidated financial statements.

36

31

---

LIVEDEAL, INC. AND SUBSIDIARIES

AUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS'STOCKHOLDER'S EQUITY

		Common Stock								Preferred Stock								Treasury				Paid-In				Accumulated
		Shares				Amount				Shares				Amount				Stock				Capital				Deficit				Total
Balance, September 30, 2008			651,368			$	6,514				127,840			$	10,866			$	-			$	20,884,112			$	15,548,431			$	36,449,923	��
Series E preferred stock dividends			-				-				-				-				-				-				(1,918	)			(1,918	)
Common stock issued in restricted stock plan			2,000				20				-				-				-				(20	)			-				-
Stock based compensation - stock options			-				-				-				-				-				82,036				-				82,036
Restricted stock cancellations			(8,325	)			(84	)			-				-				-				84				-				-
Amortization of deferred stock compensation			-				-				-				-				-				(198,672	)			-				(198,672	)
Treasury stock purchases			-				-				-				-				(532,521	)			-				-				(532,521	)
Treasury stock retired			(31,700	)			(317	)			-				-				487,480				(487,163	)			-				-
Net loss			-				-				-				-				-				-				(22,591,300	)			(22,591,300	)
Balance, September 30, 2009			613,343				6,133				127,840				10,866				(45,041	)			20,280,377				(7,044,787	)			13,207,548
Series E preferred stock dividends			-				-				-				-				-				-				(1,918	)			(1,918	)
Stock based compensation - stock options			-				-				-				-				-				38,448				-				38,448
Restricted stock cancellations			(3,700	)			(37	)			-				-				-				37				-				-
Amortization of deferred stock compensation			-				-				-				-				-				117,373				-				117,373
Treasury stock purchases			-				-				-				-				(25,882	)			-				-				(25,882	)
Net loss			-				-				-				-				-				-				(7,456,718	)			(7,456,718	)
Balance, September 30, 2010			609,643			$	6,096				127,840			$	10,866			$	(70,923	)		$	20,436,235			$	(14,503,423	)		$	5,878,851

See

		Common Stock								Preferred Stock
		Shares				Amount				Shares				Amount				Treasury Stock				Paid-In Capital				Accumulated Deficit				Total
Balance, September 30, 2011			698,491			$	698				127,840			$	10,866			$	(70,923	)		$	20,813,082			$	(20,007,589	)		$	746,134
Series E preferred stock dividends																											(1,918	)			(1,918	)
Stock based compensation																							16,942								16,942
Issuance of common stock for cash			1,694,529				1,694																2,348,306								2,350,000
Restricted stock cancellations			(25	)																											–
Issuance of common stock for services			47,827				48																124,718								124,766
Issuance of common stock for intangibles			75,000				75																419,925								420,000
Beneficial conversion feature on convertible debt and warrants																							489,594								489,594
Conversion of note payable			109,139				109																258,835								258,944
Treasury stock retired			(4,475	)			(4	)											70,923				(70,919	)							–
Net loss																											(1,575,208	)			(1,575,208	)
Balance, September 30, 2012			2,620,486				2,620				127,840				10,866				–				24,400,483				(21,584,715	)			2,829,254
Series E preferred stock dividends																											(1,918	)			(1,918	)
Stock based compensation																							173,073								173,073
Issuance of common stock for services			67,476				68																227,644								227,712
Issuance of common stock for cash			44,233				44																152,116								152,160
Issuance of common stock for intangibles			200,000				200																993,800								994,000
Beneficial conversion feature on convertible debt and warrants																							3,291,466								3,291,466
Conversion of note payable			846,363				847																1,250,153								1,251,000
Net loss																											(5,747,014	)			(5,747,014	)
Balance, September 30, 2013			3,778,558				3,779				127,840				10,866				–				30,488,735				(27,333,647	)			3,169,733

The accompanying notes toare an integral part of these consolidated financial statements.

37

32

---

LIVEDEAL, INC. AND SUBSIDIARIES

AUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

		Year ended September 30,
		2010				2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(7,456,718	)		$	(22,591,300	)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization			873,572				2,297,626
Non-cash stock compensation expense			38,448				82,036
Amortization of stock-based compensation			117,373				(198,672	)
Deferred income taxes			-				4,812,623
Provision for uncollectible accounts			921,804				2,703,067
Noncash impairment of goodwill and other intangibles			-				16,111,494
Gain on sale of customer list			-				(3,040,952	)
Gain on sale of internet domain name			-				(3,805,778	)
Gain on amendment of directory services contract			-				(642,268	)
(Gain) loss on disposal of equipment			27,647				36,693
Changes in assets and liabilities:
Accounts receivable			317,109				3,116,762
Prepaid and other current assets			107,321				10,352
Deposits and other assets			31,918				2,335
Accounts payable			(195,241	)			(529,031	)
Accrued liabilities			(214,541	)			(324,867	)
Income taxes receivable			1,490,835				(1,003,303	)
Net cash  used in operating activities			(3,940,473	)			(2,963,183	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of internet domain name			-				3,850,000
Proceeds from sale of customer list			-				2,937,501
Proceeds from amendment of directory services contract			-				642,268
Proceeds from sale of property and equipment			5,000				-
Expenditures for intangible assets			(235,012	)			(734,878	)
Investment in certificates of deposits			(1,293	)			(100,000	)
Purchases of equipment			(54,921	)			(100,821	)
Net cash provided by (used in) investing activities			(286,226	)			6,494,070
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal repayments on capital lease obligations			(88,075	)			(70,123	)
Purchase of treasury stock			(25,882	)			(532,521	)
Net cash used in financing activities			(113,957	)			(602,644	)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			(4,340,656	)			2,928,243
CASH AND CASH EQUIVALENTS, beginning of year			7,568,030				4,639,787
CASH AND CASH EQUIVALENTS, end of year		$	3,227,374			$	7,568,030
Supplemental cash flow disclosures:
Cash paid for interest		$	5,842			$	-
Cash paid for income taxes		$	1,600			$	1,860
Noncash financing and investing activities:
Acquistion of equipment under capital leases		$	-			$	24,821
Accrued and unpaid dividends		$	1,918			$	1,918

See

		Year Ended September 30,
		2013				2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(5,747,014	)		$	(1,575,208	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization			264,112				259,975
Non-cash interest expense associated with convertible debt and warrants			3,291,466				489,594
Stock based compensation expense			173,073				16,942
Non-cash issuance of common stock for services			227,712				124,766
Provision for uncollectible accounts			(293,876	)			(81,026	)
Loss on disposal of property and equipment			–				36,040
Changes in assets and liabilities:
Accounts receivable			888,754				292,902
Prepaid expenses and other current assets			(14,512	)			60,709
Deposits and other assets			10,144				(4,700	)
Accounts payable			(493,310	)			416,455
Accrued liabilities			(111,558	)			(7,465	)
Net cash provided by (used in) operating activities			(1,805,009	)			28,984
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for intangible assets			(91,483	)			(482,413	)
Purchases of property and equipment			(49,995	)			(48,264	)
Net cash used in investing activities			(141,478	)			(530,677	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable			–				(1,000,000	)
Principal repayments on capital lease obligations							(36,992	)
Issuance of common stock for cash			152,160				2,350,000
Proceeds from issuance of convertible debt and warrants			1,250,000				250,000
Net cash provided by financing activities			1,402,160				1,563,008
INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS			(544,327	)			1,061,315
CASH AND CASH EQUIVALENTS, beginning of period			1,305,785				244,470
CASH AND CASH EQUIVALENTS, end of period		$	761,458			$	1,305,785
Supplemental cash flow disclosures:
Noncash financing and investing activities:
Issuance of common stock in connection with the acquisition of LiveOpenly		$	–				420,000
Issuance of common stock for intangibles		$	994,000			$	–
Conversion of notes payable and accrued interest into common stock		$	1,251,000			$	258,944
Accrued and unpaid dividends		$	1,918			$	1,918
Interest paid		$	150			$	97,895

 The accompanying notes toare an integral part of these consolidated financial statements.

33

---

38

1.	ORGANIZATION AND BASIS OF PRESENTATION

LiveDeal, Inc.

Notes to Consolidated Financial Statements

Note 1:

Organization and Basis of Presentation

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 deliveringdeveloping and marketing a suite of Internet-based, local search driven, customer acquisitionaffordable products and services fordesigned to meet the online marketing needs of small and medium-sized businesses soldby boosting customer awareness and merchant visibility on the internet. The Company primarily sells this suite of products and services via telemarketing and supported by its websites and internally developed software.

telemarketing.

The following sets forth historical transactions with respect to the Company’s organizational development:

·

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.

·

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.

·

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 – seediscontinued. See Note 5.4.

·

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.

·

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.

·

During 2009, the Company made strategic changes that impacted the Company’s consolidated financial statements in the following manner:

o

Impairment charges of $16,111,494 were recorded related to the write-down of the Company’s goodwill and other intangible assets as discussed in Note 4;

o

The Company commenced a plan to discontinue its classifieds business and initiated shutdown activities, as discussed in Note 5, and has reflected the operating results of this line of business as discontinued operations in the accompanying consolidated statements of operations;

o

The Company sold a portion of its customer list associated with its directory services business and recorded a gain of $3,040,952, as discussed in Note 14; and

o

The Company established a valuation allowance of $10,586,854 related to its deferred tax assets, as described in Note 10.

·

During 2010, the Company formedevaluated its business and adopted a new business strategy that addressed each of the wholly-owned subsidiaries Local Marketing Experts, Inc.Company’s business segments as separate entities and Velocity Marketing Concepts, Inc.re-launched and restructured the Company’s legacy line of business. This evaluation was necessitated by the challenges facing the Company’s Direct Sales business lines that provide Internet-based customer acquisition strategies for small business, as well as declining revenues from the Company’s traditional business line (i.e. directory services).

·

During 2011, as part of the Company’s strategy to evaluate each of the Company’s 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 the Company’s change in strategic direction. Accordingly, in March 2011, the Company 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.

39

·

On August 16, 2012, the Company acquired substantially all of the assets of LiveOpenly, Inc., a California corporation (“LiveOpenly”), which sourced, published and sold discounted offers for goods and services through local retail merchants, in exchange for the issuance of 75,000 shares of the Company’s common stock. In connection with the 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.

·

During 2012, the Company also launched two new business lines under new management after a period of re-evaluating our sales program, products, distribution methods and vendor programs. First, 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 November 2012. Second, we commenced sourcing local deal and activities to strategic publishing partners under our LiveDeal® brand, which we refer to as promotional marketing, in August 2012. We continue to actively develop, revise and evaluate these products and services.

·

During 2013, the Company 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.

The Company had a net loss of $5.7 million for the year ended September 30, 2013 and $1.6 million for the year ended September 30, 2012. The Company had an operating cash outflow of approximately $(1.8) million for the year ended September 30, 2013 and operating cash inflow of approximately $29,000 for the year ended September 30, 2012. The Company had cash of $761,458 as of September 30, 2013. Management believes the Company’s cash on hand and additional cash generated from operations together with potential sources of cash such through the issuance of debt or equity will provide the Company with sufficient liquidity for the next 12 months.

Note 2:

Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements represent the consolidated financial position and results of operations of the Company and include the accounts and results of operations of the Company, LiveDeal, Local Marketing Experts, Inc., Velocity Marketing Concepts, Inc., 247 Marketing Inc., Telco andBilling, Inc. Telco of Canada, Inc, theInc., and Velocity Local Inc. ,the Company’s wholly owned subsidiaries, for the years ended September 30, 20102013 and 2009,2012, as applicable. All intercompany transactions and balances have been eliminated in consolidation.

34

---

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Significant estimates made in connection with the accompanying consolidated financial statements include the estimate of dilution and fees associated with LEC billings, the estimated reserve for doubtful accounts receivable, estimated forfeiture rates for stock-based compensation, fair values in connection with the analysis of goodwill and long-lived assets for impairment, valuation allowances against net deferred tax assets and estimated useful lives for intangible assets and property and equipment.

Financial Instruments

Financial instruments consist primarily of cash, cash equivalents, accounts receivable, advances to affiliates and obligations under accounts payable, accrued expenses and notes payable. The carrying amounts of cash, cash equivalents, accounts receivable, accounts payable, accrued expenses and notes payable approximate fair value because of the short maturity of those instruments.

Cash and Cash Equivalents:  

This includes all short-term highly liquid investments that are readily convertible to known amounts of cash and have original maturities of three months or less. At times, cash deposits may exceed government-insuredFDIC-insured limits.

40

Principles of Consolidation: The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, LiveDeal,, Local Marketing Experts, Inc., Velocity Marketing Concepts, Inc., 247 Marketing, Telco Billing, Inc. and Telco of Canada, Inc.  All significant intercompany accounts and transactions have been eliminated.

Property and Equipment:  

Property and equipment is stated at cost less accumulated depreciation. Depreciation is recorded on a straight-line basis over the estimated useful lives of the assets ranging from three to five years. Depreciation expense was $240,798$29,357 and $432,897$132,899 for the years ended September 30, 20102013 and 2009,2012, respectively.

Revenue Recognition:

Direct Sales – Customer Acquisition Services.

The Company’s direct sales contracts typically involve upfront billing for an initial payment followed by monthly billings over the contractual period.  The Company recognizes revenue on a straight line basis over the contractual period.  Billings in excess of recognized revenue are included as deferred revenue in the accompanying consolidated balance sheets.

Previously, the Company recognized the value of the noncancelable portion of the Direct Sales’ customer contract as a receivable and billed the customer for the amount of the contract over the period of the contract. The Company only recognized a portion of the contract value as revenue each month, approximately pro-rating the contract to a monthly amount, with the remainder of the noncancelable portion of the contract maintained as a deferred revenue liability.  In the quarter ended June 30, 2009, the Company corrected its balance sheet presentation related to its direct sales contracts to include in accounts receivable only those amounts that are outstanding receivables after having been billed in accordance with the terms of the contract.

Directory Services

Revenue is billed and recognized monthly for services subscribed in that specific month. The Company has historically utilized outside billing companies to perform billing services through two primary channels:

•      direct ACH withdrawals; and

•      inclusion on the customer’s local telephone bill provided by their Local Exchange Carriers, or LECs.

	·	direct ACH withdrawals; and
	·	inclusion on the customer’s local telephone bill provided by their Local Exchange Carriers, or LECs.

For billings via ACH withdrawals, revenue is recognized when such billings are accepted. For billings via LECs, the Company recognizes revenue based on net billings accepted by the LECs. Due to the periods of time for which adjustments may be reported by the LECs and the billing companies, the Company estimates and accrues for dilution and fees reported subsequent to year-end for initial billings related to services provided for periods within the fiscal year. Such dilution and fees are reported in cost of services in the accompanying consolidated statements of operations. Customer refunds are recorded as an offset to gross revenue.

During the second quarter of fiscal 2009, the Company sold its then existing customer list pertaining to its direct customers billed through LECs.  The Company continues to service some wholesale accounts through LEC billing channels and is rebuilding its customer base billed through LECs through its Velocity Marketing Concepts, Inc. subsidiary.

Revenue for billings to certain customers that are billed directly by the Company and not through the outside billing companies is recognized based on estimated future collections. The Company continuously reviews this estimate for reasonableness based on its collection experience.

Deals Revenue

The Company recognizes revenue from its sales through its strategic publishing partners of discounted goods and services offered by its merchant clients (“Deals”) when the following criteria are met: persuasive evidence of an arrangement exists; delivery has occurred; the selling price is fixed or determinable; and collectability is reasonably assured. These criteria are met when the number of customers who purchase the daily deal exceeds the predetermined threshold, where, if applicable, the Deal has been electronically delivered to the purchaser and a listing of Deals sold has been made available to the merchant. At that time, the Company's obligations to the merchant, for which it is serving as an agent, are substantially complete. The Company's remaining obligations, which are limited to remitting payment to the merchant, are inconsequential or perfunctory. The Company records as revenue an amount equal to the net amount it retains from the sale of Deals after paying an agreed upon percentage of the purchase price to the featured merchant excluding any applicable taxes. Revenue is recorded on a net basis because the Company is acting as an agent of the merchant in the transaction.

Deferred Revenues

Revenue

In some instances, the Company receives payments in advance of rendering services, whereupon such revenues are deferred until the related services are rendered. Deferred revenue was $87,574$2,829 and $148,916$2,310 at September 30, 20102013 and 2009,2012, respectively.

35

---

Allowance for Doubtful Accounts:  

The Company maintains an allowance for doubtful accounts, which includes allowances for customer refunds, dilution and fees from LEC billing aggregators and other uncollectible accounts. The Company has increased its allowances for doubtful accounts to 63.5%82.8% of gross accounts receivable at September 30, 20102013 as compared to 52.8%65.7% of gross accounts receivable at September 30, 2009.  This increase2012. The determination of the allowance for doubtful accounts is attributable todependent on many factors, including regulatory activity, which has increased the amount of refunds, increasing fees fromchanges in fee schedules by LEC service providers and recent historical trends.

As of September 30, 2013, approximately 57% of the Company’s changeallowance for doubtful accounts is an allowance against an outstanding receivable balance that is in business strategy,dispute. After excluding these reserves from the related accounts receivable balances the allowance for doubtful accounts as ongoing revenue submissions and settlements with respecta percentage of gross accounts receivable increases to 68%. As of September 30, 2012, approximately 93% of the Company’s allowance for doubtful accounts is an allowance against accounts receivable balances and reserves held by a LEC customers have ceasedthat is in bankruptcy and bad debts, allowances and feesan allowance against an outstanding receivable balance that is in dispute. After excluding these reserves from the related accounts receivable balances, the allowance for doubtful accounts as a percentage of gross accounts receivable decreases to 12.6%. See Note 17.

41

Legal Costs

The Company expenses legal costs associated with loss contingencies as they are deducted from existing holdback amounts.

incurred.

Income Taxes:

Income taxes are accounted for using the asset and liability method. Under this method, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which these temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance would be provided for those deferred tax assets for which if it is more likely than not that the related benefit will not be realized. The Company classifies tax-related penalties and interest as a component of income tax expense for financial statement presentation.

Stock-Based Compensation

The Company from time to time grants restricted stock awards and options to employees and executives. Such awards are valued based on the grant date fair-value of the instruments, net of estimated forfeitures. The value of each award is amortized on a straight-line basis over the vesting period.

Net Income (Loss)Loss Per Share:

Net income (loss)loss per share is calculated in accordance with FASB Accounting Standards Codification (“ASC”)ASC 260, “Earnings Per Share”. Under ASC 260 basic net income (loss)loss per share is computed using the weighted average number of common shares outstanding during the period except that it does not include unvested restricted stock subject to cancellation. Diluted net income (loss)loss per share is computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable upon the exercise of warrants, restricted shares and convertible preferred stock. The dilutive effect of outstanding restricted shares and warrants is reflected in diluted earnings per share by application of the treasury stock method. Convertible preferred stock is reflected on an if-converted basis.

Foreign Currency Translation:  The Company has determined that the United States Dollar is the functional currency for its foreign operations.  Accordingly, gains and losses resulting from the translation of foreign currency amounts to functional currency are included in the consolidated statements of operations in the period in which they occur.  In fiscal 2009, the Company ceased activities with respect to its foreign operations which has eliminated any significant foreign currency exposure.

Financial Instruments: Financial instruments consist primarily of cash, cash equivalents, accounts receivable, advances to affiliates and obligations under accounts payable, accrued expenses and notes payable.  The carrying amounts of cash, cash equivalents, accounts receivable, accounts payable, accrued expenses and notes payable approximate fair value because of the short maturity of those instruments.

Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Significant estimates made in connection with the accompanying consolidated financial statements include the estimate of dilution and fees associated with LEC billings, the estimated reserve for doubtful accounts receivable, estimated customer retention period used for the amortization of customer acquisition costs, estimated forfeiture rates for stock-based compensation, fair values in connection with the analysis of goodwill and long-lived assets for impairment, valuation allowances against net deferred tax assets and estimated useful lives for intangible assets and property and equipment.  Due to the effects of the Company’s change in business strategy, it made significant changes in estimates as it pertains to allowances for accounts receivable, valuation allowances against net deferred tax assets, intangible assets and goodwill as described elsewhere in these notes.

Stock-Based Compensation:  The Company from time to time grants restricted stock awards and options to employees and executives.  Such awards are valued based on the grant date fair-value of the instruments, net of estimated forfeitures. The value of each award is amortized on a straight-line basis over the vesting period.

The Company accounts for stock awards issued to non-employees in accordance with the provisions of FASB ASC 718, “Compensation – Stock Compensation” and FASB ASC 505, “Equity”, and accordingly, stock awards to non-employees are accounted for at fair value at their respective measurement date.

Internally Developed Software and Website Development Costs:  

The Company incurs internal and external costs to develop software and websites to support its core business functions. The Company capitalizes internally generated software and website development costs in accordance with the provisions of the FASB ASC 350, “Intangibles – Goodwill and Other”.

36

---

Impairment of Long-lived Assets:

The Company assesses long-lived assets for impairment in accordance with the provisions of FASB ASC 360 “Property, Plant and Equipment”. A long-lived asset (asset group)(or group of assets) shall be tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. The carrying amount of a long lived asset is not recoverable if it exceeds the sum of the undiscounted net cash flows expected to result from the use and eventual disposition of the asset. The amount of impairment loss, if any, is measured as the difference between the net book value of the asset and its estimated fair value. For purposes of these tests, long-lived assets must be grouped with other assets and liabilities for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities.

42

Recently Issued Accounting Pronouncements

In January 2013, the FASB issued ASU No. 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities, which clarifies which instruments and transactions are subject to the offsetting disclosure requirements originally established by ASU 2011-11. The new ASU addresses preparer concerns that the scope of the disclosure requirements under ASU 2011-11 was overly broad and imposed unintended costs that were not commensurate with estimated benefits to financial statement users. In choosing to narrow the scope of the offsetting disclosures, the FASB determined that it could make them more operable and cost effective for preparers while still giving financial statement users sufficient information to analyze the most significant presentation differences between financial statements prepared in accordance with U.S. GAAP and those prepared under IFRSs. Like ASU 2011-11, the amendments in this update will be impaired duringeffective for fiscal periods beginning on, or after January 1, 2013. The adoption of ASU 2013-01 has not had a material impact on our financial position or results of operations.

In October 2012, the FASB issued ASU No. 2012-04, “Technical Corrections and Improvements, (“ASU 2012-04”).” This update includes source literature amendments, guidance clarification, reference corrections and relocated guidance affecting a variety of topics in the Codification. The update also includes conforming amendments to the Codification to reflect ASC 820’s fair value measurement and disclosure requirements. The amendments in this update that will not have transition guidance are effective upon issuance. The amendments in this update that are subject to the transition guidance will be effective for fiscal periods beginning after December 15, 2012. This ASU is effective for reporting periods beginning on or after January 1, 2013. Our adoption of ASU 2011-11 on January 1, 2013, did not have a material impact our financial statement.

Note 3:

Going Concern

The accompanying Consolidated Financial Statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying Consolidated Financial Statements, the Company had a net loss of $5,747,014 for the year ended September 30, 2009 (See Note 4).

Goodwill:  2013 and had an accumulated deficit of $27,333,647 as of September 30, 2013

Because of the infancy of the Company’s new lines of business, the Company has yet to generate significant revenue from its online presence marketing or promotional marketing lines of business. Given that the Company has not been accepting new customers for its legacy product offerings since July 2011 and that it did not launch its new product offerings until August 2012, the Company’s revenues declined for fiscal 2013 as compared to fiscal 2012 as the Company continued to build a foundation for its new products and services and position the Company for future growth through its LiveDeal.com and Velocity Local^™ offerings.

The Company evaluates goodwill for potential impairmentwill 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 (for example, pursuant to our Engagement Agreement with Chardan Capital Markets LLC, under which we may issue and sell up to a maximum aggregate amount of 660,000 shares of our common stock from time to time through Chardan as our sales agent, using our shelf registration statement on an annual basis or whenever events or circumstances indicate that an impairment may have occurred in accordanceForm S-3 (File No. 333-187397) previously filed with the provisionsSEC); additional loans (for example, through our sale and issuance of FASB ASC 350 “Goodwill and Other Intangible Assets” which requiresconvertible notes pursuant to the $5 million line of credit that goodwill be tested for impairment using a two-step process. The first stepwe entered into in January 2014); or other forms of financing. Any financing obtained may further dilute or otherwise impair the ownership interest of the goodwill impairment test, usedCompany’s existing stockholders. If the Company is unable to identify potential impairment, comparesgenerate positive cash flows or raise additional capital in a timely manner or on acceptable terms, the estimated fair valueCompany 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.

The accompanying Consolidated Financial Statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern.

Note 4:

Discontinued Operations

As part of the reporting unit containingCompany’s strategy to evaluate each of its business segments as separate entities, management noted that the goodwillDirect Sales business segment had incurred operating losses and declining revenues and did not fit with the related carrying amount. IfCompany’s change in strategic direction. Accordingly, in March 2011, the estimated fair value ofCompany made the reporting unit exceedsstrategic decision to discontinue its carrying amount,Direct Sales business and product offerings. Prior year financial statements have been restated to present the reporting unit’s goodwill is not considered to be impairedDirect Sales business segment as a discontinued operation.

43

The Company initiated shutdown activities in March 2011 and closed the second step is unnecessary. As a result of this analysis, first describedDirect Sales business segment in our Quarterly Report on Form 10-Q forMay 2011. In conjunction with the quarterly period ended March 31, 2009 and described elsewherediscontinued operations, the Company recorded the following charges in this Form 10-K, it was determined that the entire goodwill balance attributable to the acquisitions of OnCall Subscriber Management and LiveDeal, Inc. was impaired. There was a goodwill write off during the quarter ended March 31, 2009.  There was no goodwill written off during the year ended September 30, 2010.

Legal Costs:2011:

	·	Employee contract termination charges of $7,083 reflecting the reduction in force of 7 employees; and
	·	Non cash impairment charges of $367,588 consisting of the write-off of net intangible assets.

The direct sales business segment accounted for $0 net revenues for the years ended September 30, 2013 and 2012. Net revenues from this business segment are now included as part of income from discontinued operations in the accompanying consolidated statements of operations. Net income for the year ended September 30, 2013 and 2012 consisted of a recovery on a bad debt from a previous period.

Note 5:

Business Combination

On August 16, 2012 (the “Acquisition Date”), the Company completed its acquisition of substantially all of the assets of LiveOpenly, Inc., a California corporation (“LiveOpenly”), which sourced, published and sold discounted offers for goods and services through local retail merchants. The Company expenses legal costs associated with loss contingencies as they are incurred.

Effectsacquired the assets of Reverse Stock Split: Effective on September 7, 2010,LiveOpenly to assist in the Company implemented a 1-for-10 reverse stock split with respect to issued and outstanding shares ofimplementation its common stock.  Additionally,new business line. Under the Company’s authorized shares of common stock were reduced to 10,000,000 shares.   All share and per share amounts have been retroactively restated for the effects of this reverse stock split.

Recently Issued Accounting Pronouncements:

In December 2007, the FASB amended ASC 805, Business Combinations and FASB ASC 810 “Consolidations”. FASB ASC 805 and FASB ASC 810 are products of a joint project between the FASB and the International Accounting Standards Board.  The revised standards continue the movement toward the greater use of fair values in financial reporting. FASB ASC 805 will significantly change how business acquisitions are accounted for and will impact financial statements both on the acquisition date and in subsequent periods. These changes include the expensing of acquisition related costs and restructuring costs when incurred, the recognition of all assets, liabilities and noncontrolling interests at fair value during a step-acquisition, and the recognition of contingent consideration asterms of the acquisition, date if it is more likely than notthe Company 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. The purchase price for the assets of LiveOpenly was determined by using the value of the stock on the Acquisition Date, which was $420,000. The purchase price was allocated to be incurred.  FASB ASC 810 will change the accountinga customer list and reporting for minority interests, whichmarketing related intangibles of $252,000 and $168,000, respectively. The intangibles will be recharacterized as noncontrolling interests and classified as a component of equity.  The changes to FASB ASC 805 and 810 are effective for both public and private companies for fiscal years beginning on or after December 15, 2008 (January 1, 2009 for companies with calendar year-ends). FASB ASC 805 will be applied prospectively. FASB ASC 810 requires retroactive adoption of the presentation and disclosure requirements for existing minority interests. All other requirements of FASB ASC 810 shall be applied prospectively. Early adoption is prohibited for both these amendments.  The adoption of this amendment did not impact the Company’s financial position or results of operations.

In March 2008, the FASB amended ASC 815, “Derivatives and Hedging”.  FASB ASC 815 modifies existing requirements to include qualitative disclosures regarding the objectives and strategies for using derivatives, fair value amounts of gains and losses on derivative instruments and disclosures about credit-risk-related contingent features in derivative agreements. The pronouncement also requires the cross-referencing of derivative disclosures within the financial statements and notes thereto. The requirements of FASB ASC 815 are effective for interim and annual periods beginning after November 15, 2008 and was effective for the Company on October 1, 2009. The adoption of this amendment did not impact the Company’s financial position or results of operations.

In April 2008, the FASB amended ASC 350 “Intangibles – Goodwill and Other” amends the factors that should be considered in developing renewal or extension assumptions used to determine theamortized over their estimated useful life of aseven years. No goodwill was recognized intangible asset under ASC 350. The intent ofas the amendment is to improve the consistency between the useful life of a recognized intangible asset under ASC 350 and the period of expected cash flows used to measurepurchase price equaled the fair value of the asset under ASC 805. Amendments to ASC 350 are effective for fiscal years beginning after December 15, 2008 and was effective fornet assets received.

In connection with the purchased business from LiveOpenly, the Company on October 1, 2009. The adoptionengaged Ejimofor Umenyiora, the former Director of this amendment did not impactSales of LiveOpenly, and Akeem Adeteju, the Company’s financial position or resultsformer Chief Technology Officer of operations.

In June 2008, the FASB amended ASC 815 to address the determination of whether an instrument (or an embedded feature) is indexed to an entity’s own stock, if an instrument (or an embedded feature) that has the characteristics of a derivative instrument is indexed to an entity’s own stock, it is still necessary to evaluate whether it is classified in stockholders’ equity (or would be classified in stockholders’ equity if it were a freestanding instrument). In addition, some instruments that are potentially subject to the guidance in ASC 815 but do not have all the characteristics of a derivative instrument under paragraphs 6 through 9, it is still necessary to evaluate whether it is classified in stockholders’ equity.  ASC 815 is effective for financial statements issued for fiscal years beginning after December 15, 2008 and was effective for the Company on October 1, 2009.  The adoption of this amendment did not impact the Company’s financial position or results of operations.

37

---

In October 2009, the FASB issued Accounting Standards Update (“ASU”) No. 2009-13, “Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements—a consensus of the FASB Emerging Issues Task Force” (“ASU 2009-13”), which provides guidance on whether multiple deliverables exist, how the arrangement should be separated, and the consideration allocated. ASU 2009-13 requires an entity to allocate revenue in an arrangement using estimated selling prices of deliverables if a vendor does not have vendor-specific objective evidence or third-party evidence of selling price. ASU 2009-13 is effective for the first annual reporting period beginning on or after June 15, 2010 and may be applied retrospectively for all periods presented or prospectively to arrangements entered into or materially modified after the adoption date. Early adoption is permitted provided that the revised guidance is retroactively applied to the beginning of the year of adoption. ASU 2009-13 is effective for the Company on October 1, 2010. We are currently evaluating the impact that the adoption of ASU 2009-13 will have on our financial condition, results of operations, and disclosures.

38

---

LiveOpenly, as independent contractors.

3.Note 6:

BALANCE SHEET INFORMATIONBalance Sheet Information

Balance sheet information is as follows:

		September 30,				September 30,
		2013				2012
Receivables, current, net:
Accounts receivable, current		$	904,197			$	1,863,067
Less: Allowance for doubtful accounts			(729,296	)			(1,423,219	)
		$	174,901			$	439,848
Receivables, long term, net:
Accounts receivable, long term		$	374,708			$	510,587
Less: Allowance for doubtful accounts			(330,069	)			(136,017	)
		$	44,639			$	374,570
Total receivables, net:
Gross receivables		$	1,278,905			$	2,373,654
Less: Allowance for doubtful accounts			(1,059,365	)			(1,559,236	)
		$	219,540			$	814,418

Long term receivables consist of reserves held by LEC processors that are not expected to be settled within 12 months.

As of September 30, 2013, approximately 57% of the Company’s allowance for doubtful accounts was an allowance against an outstanding receivable balance that is in dispute. After excluding these reserves from the related accounts receivable balances the allowance for doubtful accounts as a percentage of gross accounts receivable increases to 68%. As of September 30, 2012, approximately 93% of the Company’s allowance for doubtful accounts was an allowance against accounts receivable balances and reserves held by a LEC that is in bankruptcy and an allowance against an outstanding receivable balance that is in dispute. After excluding these reserves from the related accounts receivable balances, the allowance for doubtful accounts as a percentage of gross accounts receivable decreases to 12.6%. See Note 17.

		September 30,				September 30,
		2010				2009
Receivables, current, net:
Accounts receivable, current		$	2,750,393			$	3,776,966
Less: Allowance for doubtful accounts			(1,801,954	)			(2,298,783	)
		$	948,439			$	1,478,183
Receivables, long term, net:
Accounts receivable, long term		$	680,108			$	1,581,946
Less: Allowance for doubtful accounts			(349,874	)			(542,543	)
		$	330,234			$	1,039,403
Total receivables, net:
Gross receivables		$	3,430,501			$	5,358,912
Allowance for doubtful accounts			(2,151,828	)			(2,841,326	)
		$	1,278,673			$	2,517,586
Components of allowance for doubtful accounts are as follows:
		September 30,				September 30,
		2010				2009
Allowance for dilution and fees on amounts due from billing aggregators		$	2,104,826			$	2,690,895
Allowance for customer refunds			47,002				150,431
		$	2,151,828			$	2,841,326
		September 30,				September 30,
		2010				2009
Property and equipment, net:
Leasehold improvements		$	239,271			$	235,056
Furnishings and fixtures			319,004				336,067
Office, computer equipment and other			704,388				692,317
			1,262,663				1,263,440
Less: Accumulated depreciation			(865,281	)			(647,534	)
		$	397,382			$	615,906
		September 30,				September 30,
		2010				2009
Intangible assets, net:
Domain name and marketing related intangibles		$	1,509,600			$	6,699,600
Non-compete agreements			-				3,465,000
Website and technology related intangibles			1,914,991				4,678,970
			3,424,591				14,843,570
Less:  Accumulated amortization			(1,485,639	)			(12,506,856	)
		$	1,938,952			$	2,336,714
		September 30,				September 30,
		2010				2009
Accrued liabilities:
Deferred revenue		$	87,574			$	148,916
Accrued payroll and bonuses			124,544				289,944
Accruals under revenue sharing agreements			133,119				314,754
Accrued expenses - other			534,951				339,197
		$	880,188			$	1,092,811
		September 30,				September 30,
		2010				2009
Customer acquisition costs, net:
Customer acquisition costs		$	1,700,000			$	1,700,000
Less:  Accumulated amortization			(1,700,000	)			(1,700,000	)
		$	-			$	-

44

4.	INTANGIBLE ASSETS

Components of allowance for doubtful accounts are as follows:

		September 30,				September 30,
		2013				2012
Allowance for dilution and fees on amounts due from billing aggregators		$	730,777			$	1,525,126
Allowance for customer refunds			6,281				34,111
		$	737,058			$	1,559,237

		September 30,				September 30,
		2013				2012
Property and equipment, net:
Furnishings and fixtures		$	101,611			$	94,511
Office, computer equipment and other			404,580				361,685
			506,191				456,196
Less: Accumulated depreciation			(435,029	)			(405,670	)
		$	71,162			$	50,526

		September 30,				September 30,
		2013				2012
Intangible assets, net:
Domain name and marketing related intangibles		$	1,513,708			$	1,511,650
Website and technology related intangibles			2,335,728				1,252,304
			3,849,436				2,763,954
Less: Accumulated amortization			(1,001,035	)			(766,283	)
		$	2,848,401			$	1,997,671

		September 30,				September 30,
		2013				2012
Accrued liabilities:
Deferred revenue		$	2,829			$	2,310
Accrued payroll and bonuses			27,330				28,968
Accruals under revenue sharing agreements			44,167				67,601
Accrued expenses - other			225,138				311,225
		$	299,464			$	410,104

Note 7:

Intangible Assets

The Company’s intangible assets consist of licenses for the use of Internet domain names, Universal Resource Locators, or URLs, capitalized website development costs, other information technology licenses and marketing and technology related intangibles acquired through the acquisition of LiveDeal, Inc. All such assets are capitalized at their original cost and amortized over their estimated useful lives ranging from three to 20 years.

In January 2009,

Based in connection with the strategic changes described in Note 1, the Company’s management, at the directionpart on a third party appraisal of the Company’s Audit Committee, commenced an interim reporting period review of the Company’s goodwill and intangible assets for impairment.  As described in Note 2, the Company evaluates goodwill and other long-lived assets, for impairment on an annual basis or whenever facts and circumstances indicate that impairment may exist.  Current economic and regulatory forces, both general and specific to the Company’s industry, caused management to consider the Company’s existing business model and strategy.  In light of the changes in the Company’s business strategy, the Company determined that a triggering event had occurredno impairment of its long-lived intangible assets existed at September 30, 2013 and initiated an impairment analysis.

2012.

39

---

In conducting this analysis, the Company used a discounted cash flow approach in estimating fair value as market values could not be readily determined given the unique nature of the respective assets.  For the assets identified as being impaired, the cash flows associated with the underlying assets did not support a value greater than zero given the shutdown of the classifieds business and the Philippines call-center operation, the impacts of the sale of a portion of the Company’s customer list and www.yp.com domain name, and other operational changes as a result of the Company’s change in business strategy.

Based upon the analysis, management determined that the following items were impaired:

45

1.

The goodwill acquired by the Company in its acquisition of LiveDeal, Inc., the business focus of which was online classified advertising which was originally intended to be merged with the Company’s existing directory services business;

2.

The goodwill acquired by the Company in its acquisition of a Philippines call-center, OnCall Subscriber Management, the business focus of which was providing telemarketing services to acquire customers for its directory services business;

3.

Assets related to the Company’s call-center operations and non-compete agreements that were effectively made obsolete due to the sale of a portion of the Company’s customer list associated with its directory services business, as described in Note 14; and

4.

Intangible assets related to the Company’s directory services business, including URLs, internally developed software, and other miscellaneous intangible assets.

The following is a summary of these impaired assets and their net book values, which were fully written off in the second quarter of fiscal 2009:

		Continuing Operations				Discontinued Operations				Total Impairment
Goodwill		$	4,350,041			$	7,356,365			$	11,706,406
Domain name and marketing related intangibles			1,879,054				-				1,879,054
Assets related to customer list			1,259,680				-				1,259,680
Website and technology related intangibles			377,334				889,020				1,266,354
		$	7,866,109			$	8,245,385			$	16,111,494

Included in the assets that became obsolete through the sale of a portion of the Company’s customer list were $722,103 related to non-compete agreements and $537,577 of assets associated with the Philippines call-center.

No impairment charges were incurred in fiscal 2010.

The following summarizes the estimated future amortization expense related to intangible assets that have net balances as of September 30, 2010:

Years ended September 30,
2011		$	509,933
2012			290,648
2013			104,527
2014			77,422
2015			77,422
Thereafter			879,000
Total		$	1,938,952

2013:

2014			416,211
2015			406,550
2016			362,316
2017			358,352
2018			324,389
Thereafter			991,583
		$	2,859,401

Total amortization expense related to intangible assets was $632,744$234,751 and $1,222,509$140,667 for the years ended September 30, 20102013 and 2009,2012, respectively.

5.Note 8:

DISCONTINUED OPERATIONSLong-Term Debt

As part

Everest Group Loan

On May 13, 2011, the Company, certain of the Company’s strategywholly owned subsidiaries (collectively with the Company, the “Borrowers”), and Everest Group LLC (“Lender”) entered into a Loan Agreement (the “Loan Agreement”), pursuant to evaluatewhich the Lender agreed to loan the Borrowers an aggregate amount not to exceed $1,000,000 (the “Loan”). The Loan was funded to the Borrowers on May 16, 2011. The Borrowers used the proceeds of the Loan for working capital and other general corporate purposes.

The Loan Agreement provided for a one-year term, unless terminated earlier pursuant to its terms or extended upon the mutual agreement of all parties. The Borrowers paid an annual interest rate equal to 18% on the unpaid principal balance of the Loan. Interest will be payable monthly in arrears commencing on June 1, 2011. Commencing on November 1, 2011, and on the first day of each subsequent calendar month, the Borrowers were required to make $50,000 monthly installment payments of its business segments as separate entities, management notedprincipal on the Loan, with the unpaid principal balance was due and payable on the termination date of the Loan. The Loan was paid off in May 2012.

ICG Convertible Note Transaction

On April 3, 2012 (the “Closing Date”), the Company entered into a Note Purchase Agreement (the “ICG Purchase Agreement”) with Isaac Capital Group, LLC (“ICG”), which is a related party, pursuant to which ICG agreed to purchase for cash up to $2,000,000 in aggregate principal amount of the Company’s unsecured Subordinated Convertible Notes (“Notes”). ICG is owned by Jon Isaac, the Company’s President and Chief Executive Officer and a director on the Company’s Board. Prior to this transaction, Mr. Isaac owned 403,225 shares, or 16.8% of the Company’s outstanding common stock. The Purchase Agreement and the Notes, which are unsecured, provide that all amounts payable by the Company to ICG under the Notes will be due and payable on April 3, 2013 (“Maturity Date”), provided that the classifieds businessCompany has incurred significant operating lossesthe option in its discretion to extend the Maturity Date by up to one (1) year if no Event of Default (as defined in the Purchase Agreement) has occurred and determined that it did not fitis continuing, and the Company is in material compliance with its agreements and covenants under the Purchase Agreement and the Notes, as of the Maturity Date.

On January 14, 2013, the Company and ICG amended the Purchase Agreement to clarify ambiguities and correct inadvertent mistakes related to the warrant issuance timing and the conversion price of a Note, and to amend various anti-dilution features. These changes were consistent with the intent of the parties at the time they entered into the Purchase Agreement and are consistent with the Company’s past practices related to the Notes and warrants. In particular, the amendment clarifies that the warrants will be issued upon conversion (rather than upon issuance) of the Notes and provides that the conversion price of a Note shall be based upon a floor price of $1.00 per share, regardless if the Company’s stock is trading below that amount at the time ICG elects to convert a Note.

The Purchase Agreement and the Notes, as amended, provide that:

·

The Notes will accrue interest at an annual interest rate equal to 8%. All interest will be payable on the Maturity Date or upon the conversion of the applicable Note.

·

The Company has the option to prepay each Note, in whole or in part, at any time without premium or penalty.

·

If ICG elects to convert all or any portion of any Note, the Company must issue to ICG on the date of the conversion a warrant (“Contingent Warrant”) to purchase a number of shares of the Company’s common stock equal to the number of shares issuable upon conversion. This number of shares is subject to adjustment in the event of stock splits or combinations, stock dividends, certain pro rata distributions, and certain fundamental transactions. Each Contingent Warrant will be exercisable for a period of five (5) years following the date of its issuance at an exercise price equal to 120% of the conversion price of the applicable Note (with the exercise price being subject to adjustment under the same conditions as the number of shares for which the warrant is exercisable.) The Contingent Warrants provide that they may be exercised in whole or in part and include a cashless exercise feature.

46

·

The Notes provide that, upon the occurrence of any Event of Default, all amounts payable to ICG will become immediately due and payable without any demand or notice.

·

The Company may issue additional Notes in an aggregate principal amount of up to $1,750,000 to ICG from time to time upon notice to ICG prior to April 3, 2013, provided that each Note must be in a principal amount of at least $100,000.

·

The Company (i) is required to provide certain financial and other information to ICG from time to time, (ii) must maintain its corporate existence, business, assets, properties, insurance and records in accordance with the requirements set forth in the Purchase Agreement, (iii) with certain exceptions, must not incur or suffer to exist any liens or other encumbrances with respect to the Company’s property or assets, (iv) must not make certain loans or investments except in compliance with the terms of the Purchase Agreement, and (v) must not enter into certain types of transactions, including dispositions of its assets or business.

The events of default (“Events of Default”) which trigger the acceleration of the Notes include (among other things): (i) the Company’s failure to make any payment required under the Notes when due (subject to a three-day cure period), (ii) the Company’s failure to comply with its covenants and agreements under the Purchase Agreement, the Notes and any other transaction documents, and (iii) the occurrence of a change of control with respect to the Company.

The Company issued an initial Note in strategic direction.  Accordingly,the principal amount of $250,000 to ICG on the Closing Date. Because the conversion price of $2.53 was less than the stock price, this gave rise to a beneficial conversion feature valued at $166,667. The Company recognized this beneficial conversion feature as a debt discount and additional paid in capital. The discount to the Note is being amortized to interest expense until maturity or its earlier repayment or conversion.

On September 10, 2012, ICG elected to convert a Note with a conversion price of $2.38 per share, resulting in the issuance of 109,139 shares. In accordance with the terms of the agreement, warrants to acquire 109,139 shares were issued upon conversion with an exercise price of ($2.38 x 120%) $2.85 per share. Upon conversion of the convertible debt instrument, the remaining debt discount of $97,222 was immediately recognized as interest expense. The fair value of the warrants issued in connection with the debt conversion was $322,927 and around February 2009,was immediately recognized as interest expense.

On December 11, 2012, the Company madeissued a second Note to ICG in the strategic decision to discontinue its classifieds business and product offerings. The Company initiated shutdown activities in March 2009 and concluded such activities in June 2009, including the shutdownprincipal amount of the website previously used for classified activities.  Accordingly, the Company does not expect any future revenues from this business segment.

40

---

The Company determined that the classified business met the definition of a component as it has separately identifiable operations and cash flows through at least revenues and cost of sales. Costs and expenses related to general and administrative expenses have not been allocated since these expenses cannot be separated due$250,000, pursuant to the prior effortsPurchase Agreement. On December 17, 2012, ICG elected to integrate this businessconvert that Note with the other business linesa conversion price of the Company.  Accordingly, the results of the classifieds business are reflected as discontinued operations$2.02 per share, resulting in the accompanying statementsissuance of operations to the extent that these operations are separately identifiable.

In conjunction with the discontinued operations, the Company recorded charges of $27,328 during the year ended September, 30, 2009 for certain exit costs relating to the shutdown of these operations which is reflected as part of income (loss) from discontinued operations in the accompanying consolidated statement of operations for the year ended September 30, 2009.

The classifieds business accounted for $227,575 of net revenues for year ended September 30, 2009, which are now included as part of loss from discontinued operations in the accompanying consolidated statements of operations.

A net profit of $12,525 from discontinued operations was recognized for the year ended September 30, 2010, reflecting the adjustment of certain accruals associated with the wind-down123,829 shares of the Company’s classifieds operations.

common stock and a warrant to acquire 123,829 additional shares of the Company’s common stock at an exercise price of $2.43 per share. Upon conversion of the convertible debt instrument, the remaining debt discount was immediately recognized as interest expense so that the original amount related to the beneficial conversion feature of 200,738 was fully expensed.

On March 22, 2013 and March 25, 2013, the Company issued a third and fourth Note to ICG in the principal amount of $500,000 and $250,000 respectively, pursuant to the Purchase Agreement. Because the conversion price of $1.38 was less than the stock price, this gave rise to beneficial conversion features valued at $401,386. The Company recognized this beneficial conversion feature as a debt discount and additional paid in capital on March 25, 2013. On March 27, 2013, ICG elected to convert these Notes, resulting in the issuance of 543,962 shares of the Company’s common stock and a warrant to acquire 543,962 additional shares of the Company’s common stock at an exercise price of $1.66 per share. Upon conversion of such Notes, the remaining debt discount of $396,977 was immediately recognized as interest expense. The fair value of the warrants issued in connection with the conversion of these Notes was $1,299,884 and was immediately recognized as interest expense.

On March 28, 2013, the Company issued a fifth Note to ICG in the principal amount of $250,000 pursuant to the Purchase Agreement. Because the conversion price of $1.40 was less than the stock price, this gave rise to a beneficial conversion feature valued at $250,000. The Company recognized this beneficial conversion feature as a debt discount and additional paid in capital on March 28, 2013. On March 28, 2013, ICG elected to convert the Note, resulting in the issuance of 178,572 additional shares of the Company’s common stock and a warrant to acquire 178,572 shares at an exercise price of $1.68 per share. Upon conversion of such Note, the debt discount of $250,000 was immediately recognized as interest expense. The fair value of the warrants issued in connection with the conversion of the Note was $589,442 and was immediately recognized as interest expense.

The Company intends to use the proceeds of all Notes issued in connection with the Purchase Agreement for working capital and other general corporate purposes.

47

6.	CAPITAL LEASES

At September 30, 2010,

Note 9:

Stockholder’s Equity

Issuances of Common Stock

December 2011 Equity Issuance

On December 12, 2011, the Company wasentered into a Securities Purchase Agreement (the “Purchase Agreement”) with each of Isaac Capital Group LLC (“ICG”), which is a related party, John Kocmur (“Kocmur”), Kingston Diversified Holdings LLC (“Kingston”), Augustus Gardini, L.P. (“Augustus”) and Lausanne LLC (“Lausanne” and collectively with ICG, Kocmur, Kingston and Augustus, the “Purchasers”) pursuant to one capital leasewhich the Company’s issued and sold an aggregate of 1,612,899 shares (the “Shares”) of the Company’s common stock for communications equipment acquired duringan aggregate purchase price equal to $2.0 million. Each of ICG, Kocmur and Kingston (the “Lead Purchasers”) invested $500,000 and were issued 403,225 shares of the year ended September 30, 2008 with a cost basis of $255,603.  This lease has a term of 48 months and an imputed interest rate of 3.6%. This capital lease is secured by the underlying equipment.  Equipment acquired under this capital lease is being depreciated over their estimated lives of four years.

Future minimum lease payments due under the capital lease agreements are as follows for the years ended September 30:

2011		$	64,143
2012			37,417
2013			-
2014			-
Thereafter			-
Total minimum lease payments			101,560
Less imputed interest			(2,950	)
Present value of minimum lease payments			98,610
Less: current maturities of capital lease obligations			60,327
Noncurrent maturities of capital lease obligations		$	38,283

7.	STOCKHOLDERS’ EQUITY

Company’s Common Stock, Issued for Services

and each of Augustus and Lausanne invested $250,000 and were issued 201,612 shares of the Company’s Common Stock.

Pursuant to the Purchase Agreement:

·

The per share purchase price was $1.24, which was the closing bid price of the Company’s common stock, as reported by the NASDAQ Capital Market, on December 12, 2011, the date of the closing of the purchase and sale.

·

Each Lead Purchaser was given the right, until the date that purchaser beneficially owns less than 5% of the Company’s issued and outstanding common stock, to nominate one director for election by the Company’s stockholders at each meeting of the stockholders at which directors are to be elected, and to designate a replacement director to fill any vacancy if the director previously designated or nominated by that purchaser ceases for any reason to be a director.

March 2012 Equity Issuance

In March 2012, the Company historically has grantedissued 45,180 shares of its common stock in exchange for a cash payment of $150,000.

June 2012 Equity Issuance

In June 2012, the Company issued 36,364 shares of its common stock in exchange for a cash payment of $200,000.

August 2013 Equity Issuance

On August 22, 2013, the Company agreed to officers, directors and consultantsissue 15,773 shares of common stock to a software developer in exchange for professional services valued at an aggregate of $50,000. The per share valuation associated with the issuance was $3.17, which was equal to the closing price of our common stock as paymentreported on the NASDAQ Capital Market on the date of the transaction. Pursuant to applicable NASDAQ Listing Rules, the share issuance is subject to stockholder approval of our new 2013 Omnibus Equity Incentive Plan, which the Company intends to seek at our 2014 Annual Meeting of Stockholders.

September 2013 Equity Issuance

On September 9, 2013, we issued 200,000 shares to Novalk Apps S.A.S. in exchange for services rendered.certain customer relationship manager, or CRM, software assets acquired pursuant to an Asset Purchase Agreement dated as of the same date. Such assets were valued at an aggregate of $994,000. The value of thoseper share purchase price for such shares was determined based$4.97, which was equal to the closing price of our common stock as reported on the trading valueNASDAQ Capital Market on the date of the transaction.

On September 30, 2013, we issued 44,233 shares of common stock atto John Kocmur, a member of our Board of Directors, in exchange for a cash payment of $152,160. The per share purchase price for such shares was $3.44, which was equal to the closing price of our common stock as reported on the NASDAQ Capital Market on the date atof the transaction.

Note Conversions

In September and December 2012 and March 2013, ICG elected to convert five Notes, resulting in the issuance of shares of the Company’s common stock and warrants to acquire additional shares of the Company’s common stock. See Note 10.

48

Form S-3 Shelf Registration Statement

On March 20, 2013, the Company filed a Registration Statement on Form S-3 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 May 16, 2013, the counterparties’ performance is complete.  No such share issuances were made duringCompany 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 intends to use the years ended September 30, 2010 or 2009.

net proceeds from any sale of securities covered by the Shelf Registration Statement and the prospectus contained therein for general corporate purposes.

Increase in Shares Under Amended and Restated 2003 Stock Plan

At the Company’s 2012 Annual Meeting of Stockholders, our stockholders approved a proposal to increase the number of shares of the Company’s common stock available for issuance under the Company’s Amended and Restated 2003 Stock Plan from 140,000 to 340,000 shares.

Series E Convertible Preferred Stock

During the year ended September 30, 2002, pursuant to an existing tender offer, holders of 13,184 shares of the Company’s common stock exchanged said shares for 131,840 shares of Series E Convertible Preferred Stock, at the then $0.85 market value of the common stock. The shares carry a $0.30 per share liquidation preference and accrue dividends at the rate of 5% per annum on the liquidation preference per share, payable quarterly from legally available funds. If such funds are not available, dividends shall continue to accumulate until they can be paid from legally available funds. Holders of the preferred shares are entitled, after two years from issuance, to convert them into common shares on a hundred-to-one basis together with payment of $0.45 per converted share.

Treasury Stock

The Company’s treasury stock consists of shares repurchased on the open market or shares received through various agreements with third parties.  The value of such shares is determined based on cash paid or quoted market prices.  

41

---

On May 25, 2007, the Company’s Board of Directors terminated its pre-existing stock repurchase plan and replaced it with a new plan authorizing repurchases of up to $1,000,000 of common stock from time to time on the open market or in privately negotiated transactions.  The repurchase plan was increased by another $500,000 on October 23, 2008.  During the years ended September 30, 2010 and 2009, the Company acquired an aggregate of 1,341 and 34,611 shares of common stock for an aggregate repurchase price of $25,882 and $532,521, respectively.

Dividends

During each of the years ended September 30, 20102013 and 2009,2012, the Company accrued dividends of $1,918, and $1,918, respectively, payable to holders of Series E preferred stock. No dividends were paid in 2010.

2013 or 2012.

Note 10:

Warrants

As discussed in Note 8, the Company issued several Notes and converted them into shares of common stock, resulting in the issuance of warrants. The following table summarizes information about the Company’s warrants at September 30, 2013:

		Number of Units				Weighted Average Exercise Price				Weighted Average Remaining Contractual Term (in years)				Intrinsic Value
Outstanding at September 30, 2012			109,139			$	2.85				4.95				253,202
Granted			846,363				1.78
Exercised			–				–
Outstanding at September 30, 2013			955,502			$	1.90				4.39				1,471,998
Exerciseable at September 30, 2013			955,502			$	1.90				4.39				1,471,998

The warrants were valued using the Black-Scholes pricing model with the following assumptions:

Volatility		121%-127%
Risk-free interest rate		.74% -.89%
Expected term		5 years
Forfeiture rate		0%
Dividend yield rate		0%

49

8.

Note 11:

NET LOSS PER SHAREStock Based Compensation

Restricted Stock Awards

The Company previously maintained the 2003 Amended and Restated 2003 Stock Plan (“2003 Plan”), which was approved by the Company’s stockholders, for the issuance of stock-based compensation awards. As amended, the Company was permitted to issue an aggregate of 340,000 shares of common stock under the 2003 Plan. All Company personnel and contractors are eligible to participate in the 2003 Plan. By its terms, the 2003 Plan expired on July 21, 2013 (which was the tenth anniversary of the effective date of the 2003 Plan), and no new awards were made thereafter. The Company anticipates implementing a new equity incentive plan to replace the 2003 Plan.

In September 2011, in an effort to preserve cash, the Board, after consultation with the Compensation Committee, entered into an agreement to compensate the members of the Board for their monthly retainer and other services as directors and/or members of the Board’s various standing committees through the award of shares of the Company’s common stock under the 2003 Plan. Since inception an aggregate of 83,495 shares were issued to members of the Board of Directors. During the year ended September 30, 2013, 26,484 shares were issued to the Board of Directors.

As of September 30, 2013, there were 134,816 shares authorized under the 2003 Plan that were granted and remain outstanding and fully vested.

The following table sets forth the activity with respect to unvested restricted stock grants (results reported in post-split amounts):

Outstanding (unvested) at September 30, 2011			1,342
Granted			–
Forfeited			(26	)
Vested			(1,053	)
Outstanding (unvested) at September 30, 2012			263
Granted			–
Forfeited			–
Vested			(263	)
Outstanding (unvested) at September 30, 2013			0

Stock Option Awards

From time to time, the Company grants stock option awards to officers and employees. Such awards are valued based on the grant date fair value of the instruments, net of estimated forfeitures, using a Black-Scholes option pricing model with the following assumptions:

		Year Ended				Year Ended
		September 30, 2013				September 30, 2012
Volatility			124%-127%				–
Risk-free interest rate			.08%-.66%				–
Expected term			1-3.77 years				–
Forfeiture rate			10%				–
Dividend yield rate			0%				–

The volatility used was based on historical volatility of the Company’s common stock, which management considers to be the best indicator of expected future volatility. The risk free interest rate was determined based on treasury securities with maturities equal to the expected term of the underlying award. The expected term was determined based on the simplified method outlined in Staff Accounting Bulletin No. 110.

Stock option awards are expensed on a straight-line basis over the requisite service period. During the years ended September 30, 2013 and 2012, the Company recognized expense of $173,073 and $16,942, respectively, associated with stock option awards. At September 30, 2013, all stock compensation expense associated with issued awards has been recognized.

50

The following summarizes stock option activity for the year ended September 30, 2013:

Weighted

Weighted

Average

Average

Number of

Exercise

Remaining

Shares

Price

Contractual Life

Intrinsic Value

Outstanding at September 30, 2012

–

Granted

225,000

$

8.47

Exercised

–

Forfeited

–

Outstanding at September 30, 2013

225,000

$

8.47

5.9

–

Exercisable at September 30, 2013

25,000

$

10.00

0.6

–

The following table summarizes information about the Company’s non-vested shares as of September 30, 2013:

						Weighted-Average
		Number of				Grant-Date
Non-vested Shares		Shares				Fair Value
Nonvested at September 30, 2012			–
Granted			200,000			$	2.18
Nonvested at September 30, 2013			200,000			$	2.18

Note 12:

Net Loss Per Share

Net loss per share is calculated using the weighted average number of shares of common stock outstanding during the year. Basic weighted average common shares outstanding do not include shares of restricted stock that have not yet vested, although such shares are included as outstanding shares in the Company’s consolidated balance sheet. Diluted loss per share is computed using the weighted average number of common shares outstanding and if dilutive, potential common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable from restricted shares, stock options, convertible debt and convertible preferred stock. Preferred stock dividends are subtracted from net loss to determine the amount available to common stockholders.

The following table presents the computation of basic and diluted loss per share:

		Year Ended September 30,
		2013				2012
Loss from continuing operations		$	(5,749,722	)		$	(1,587,641	)
Less: preferred stock dividends			(1,918	)			(1,918	)
Loss from continuing operations applicable to common stock			(5,751,640	)			(1,589,559	)
Income (loss) from discontinued operations			2,708				12,433
Net loss applicable to common stock		$	(5,748,932	)		$	(1,577,126	)
Weighted average common shares outstanding - basic and diluted			3,131,420				2,068,828
Earnings per share - basic and diluted:
Loss from continuing operations		$	(1.84	)		$	(0.77	)
Discontinued operations			0.00				0.01
Net loss		$	(1.84	)		$	(0.76	)

51

		Year Ended September 30, 2010				Year Ended September 30, 2009
Net loss from continuing operations		$	(7,469,243	)		$	(14,321,857	)
Less: preferred stock dividends			(1,918	)			(1,918	)
Loss from continuing operations applicable to common stock			(7,471,161	)			(14,323,775	)
Gain (loss) from discontinued operations			12,525				(8,269,443	)
Net loss applicable to common stock		$	(7,458,636	)		$	(22,593,218	)
Basic weighted average common shares outstanding:			599,928				600,566
Add incremental shares for:
Unvested restricted stock			-				-
Series E convertible preferred stock			-				-
Outstanding warrants			-				-
Diluted weighted average common shares outstanding:			599,928				600,566
Earnings per share - Basic:
Loss from continuing operations		$	(12.45	)		$	(23.84	)
Discontinued operations			0.02				(13.76	)
Net loss		$	(12.43	)		$	(37.60	)
Earnings per share - Diluted:
Loss from continuing operations		$	(12.45	)		$	(23.84	)
Discontinued operations			0.02				(13.76	)
Net loss		$	(12.43	)		$	(37.60	)

The following potentially dilutive securities were excluded from the calculation of net loss per share because the effects are antidilutive based on the application of the treasury stock method and/or because the Company incurred net losses during the period:

42

---

		September 30,
		2010				2009
Options to purchase shares of common stock			23,767				40,303
Series E convertible preferred stock			127,840				127,840
Shares of non-vested restricted stock			53,922				152,169
			205,529				320,312

9.    COMMITMENTS AND CONTINGENCIES

		Year Ended September 30,
		2013				2012
Options to purchase shares of common stock			225,000				–
Warrants to purchase shares of common stock			955,502				109,139
Series E convertible preferred stock			127,840				127,840
Shares of non-vested restricted stock			–				263
Total potentially dilutive shares			1,308,342				237,242

Note 13:

Restructuring Activities

In May 2011 the Company ceased the Direct Sales business and migrated the remaining customers to Reach Local in exchange for 10% and 5% of gross revenues derived from such customers during the first and second year, respectively. The Company recorded $816 and $6,053 in revenues for this agreement during the years ended September 30, 2013 and 2012, respectively. In connection with the discontinued Direct Sales business, seven employees were terminated. See Note 4.

Note 14:

Related Party Transactions

Convertible Notes with ICG

As described in Note 8, during 2012 and 2013 the Company entered into a series of convertible note purchase agreements with ICG, an entity owned by Jon Isaac, the Company’s President and Chief Executive Officer and a director on the Company’s Board group. Under these agreements, the Company received gross proceeds of $1,250,000 and $250,000 during the years ended September 30, 2013 and 2012, respectively.

Under the terms of these agreements, ICG executed its conversion option on all then-outstanding notes during the years ended September 30, 2013 and 2012. In exchange for the conversion of $1,250,000 of convertible notes during the year ended September 30, 2013, ICG received an aggregate of 846,363 of shares of common stock and, upon conversion, ICG also received warrants to acquire an additional 846,363 shares of common stock. In exchange for the conversion of $250,000 of convertible notes during the year ended September 30, 2012, ICG received an aggregate of 109,139 of shares of common stock and, upon conversion, ICG also received warrants to acquire an additional 109,139 shares of common stock.

Because the conversion price under ICG’s notes was less than the fair market value of the stock on the date of issuance, the Company recognized a beneficial conversion feature which was treated as a debt discount and amortized on a straight line basis as interest expense until the date of conversion, at which time all remaining debt discount was recognized as interest expense. Additionally, the fair value of the warrants that were contingently issuable to ICG upon conversion were recognized as additional interest expense.

During the years ended September 30, 2013 and 2012, the Company recognized total interest expense of $3,291,466 and $489,594 associated with the ICG notes.

Issuance of Common Stock with ICG

As described in Note 9, during the year ended September 30, 2012, the Company issued 403,225 shares of common stock to ICG in exchange for gross proceeds of $500,000.

Note 15:

Commitments and Contingencies

Operating Leases and Service Contracts

The Company leases its office space and certain equipment under long-term operating leases expiring through fiscal year 2013.2016. Rent expense under these leases was $519,716$152,372 and $733,626$350,822 for the years ended September 30, 20102013 and 2009,2012, respectively. The Company has also entered into several non-cancelable service contracts.

52

As of September 30, 2010,2013, future minimum annual lease payments under operating lease agreements and non-cancelable service contracts for fiscal years ended September 30 are as follows:

		Payments Due by Fiscal Year
		Total				2011				2012				2013				2014				2015				Thereafter
Operating lease commitments		$	813,516			$	419,465			$	315,331			$	78,720			$	-			$	-			$	-
Non-cancelable service contracts			773,583				635,583				138,000				-				-				-				-
		$	1,587,099			$	1,055,048			$	453,331			$	78,720			$	-			$	-			$	-

The Company is also a party to certain capital leases – see Note 6.

Change in Officers and Employment Agreements

On May 22, 2008, the Company’s Board of Directors appointed Mr. Rajesh Navar as its chairman, and Mr. Navar resigned his position as President of the Company.  Mr. Navar resigned as Chairman effective October 15, 2009 in connection with the transition of his primary residence to India.

On June 1, 2008, Michael Edelhart was appointed as Chief Executive Officer and to serve as a director of the Company.  In exchange for his role as Chief Executive Officer, Mr. Edelhart received compensation of $250,000 annually and was eligible to receive a bonus of up to $60,000 per year if the Company achieves certain performance objectives established by the Company's Board of Directors and/or its Compensation Committee.  During the year ended September 30, 2008, Mr. Edelhart received an option to purchase 5,000 shares of the Company’s common stock that was fully vested at September 30, 2008.  Subsequent to September 30, 2008, Mr. Edelhart also received an option to purchase 150,000 shares of the Company's common stock under the Company's 2003 Stock Plan.

On May 19, 2009, Richard F. Sommer was appointed as the Company’s new President and Chief Executive Officer, effective immediately, to replace Michael Edelhart, the outgoing CEO, whose employment terminated the same day.   The Company entered into a separation agreement dated July 8, 2009 that provided for a one-time payment of $62,500 to Mr. Edelhart together with a payment for accrued vacation and certain other expenses.  The Company recognized expenses totaling $93,195 associated with Mr. Edelhart’s departure during the year ended September 30, 2009.  As of September 30, 2009, all amounts pertaining to this separation have been paid.

In connection with the appointment of Mr. Sommer, he and the Company entered into an Employment Agreement effective May 19, 2009 (the “Employment Agreement”).  The Employment Agreement provided for a three-year employment term.  Pursuant to the Employment Agreement, Mr. Sommer was to be paid an annual salary of $300,000 and was eligible to receive a bonus of up to $100,000 per year if the Company achieved certain performance targets established by the Company’s Board of Directors and/or its Compensation Committee.  Mr. Sommer was also entitled to a success fee payable in cash equal to 2% of the excess above $9,000,000 of any cash distributed to or received by the Company’s stockholders in the form of a dividend, in the event of liquidation or upon a change of control.  If the Company terminated Mr. Sommer’s employment prior to the end of his term of employment without cause (as defined in the Employment Agreement) and certain other conditions were met (including that Mr. Sommer provide a valid release of claims in favor of the Company), Mr. Sommer would have been entitled to receive severance payments equal to his then current monthly salary for three months.  The Employment Agreement also provided that the Company would reimburse Mr. Sommer for reasonable business expenses and allow him to participate in its regular benefit programs.

43

---

On November 23, 2009, the Company and Mr. Sommer entered into an amendment to Mr. Sommer’s Employment Agreement.  The amendment, which was effective as of October 29, 2009, provided that Mr. Sommer was entitled to an option to purchase 250,000 shares of the Company’s common stock at an exercise price of $1.95 per share, which was equal to the closing price of the Company’s common stock on the date of grant.  The option was granted pursuant to the Company’s 2003 Stock Plan and was to vest according to the following schedule:  25% on October 29, 2010 (the first anniversary of the date of grant) and 1/36 of the remainder each month beginning on November 29, 2010.  Previously, the Employment Agreement provided that Mr. Sommer was entitled to a success fee payable in cash equal to 2% of the excess above $9,000,000 of any cash distributed to or received by the Company’s stockholders in the form of a dividend, in the event of liquidation or upon a change of control.

On November 25, 2009, Rajeev Seshadri entered into a Separation Agreement and Full Release of Claims with the Company in connection with his departure as Chief Financial Officer of the Company, which was agreed upon on November 19, 2009 and which took effect on January 2, 2010 (the “Resignation Date”).

Under the terms of the Separation Agreement and in accordance with his employment agreement, the Company continued to pay Mr. Seshadri his base salary for three months following the Resignation Date (less applicable taxes and other withholdings).  Mr. Seshadri could also elect to receive such payment (the gross amount of which is $53,750) in a lump sum on the Resignation Date.  The $15,000 bonus to which Mr. Seshadri was entitled under his employment agreement for the Company’s fourth quarter of fiscal 2009 was paid in a lump sum on the Resignation Date.  The Company paid Mr. Seshadri’s COBRA payments for three months and reimbursed his reasonable attorneys’ fees related to the negotiation of the Separation Agreement.  The Separation Agreement also provided for Mr. Seshadri to serve as a consultant to the Company until January 31, 2010 for at least 16 hours per week at a rate of $230 per hour.  Finally, Mr. Seshadri continued to be entitled to exercise his vested stock options in accordance with the terms of the applicable stock option agreements for a period of 180 days from the date of his resignation; his unvested options thereafter would be forfeited and cancelled.

In exchange for the payments described above, Mr. Seshadri provided a full release of claims arising out of, or relating to, his employment with the Company, his termination from the position of Chief Financial Officer of the Company, and/or his resignation.  The Separation Agreement also contained customary provisions with respect to confidentiality and non-solicitation, as well as mutual covenants on the part of Mr. Seshadri and the Company regarding public statements and non-disparagement.  As of September 30, 2010, all amounts pertaining to this separation have been paid.

Also on November 19, 2009, the Company appointed Lawrence W. Tomsic to replace Mr. Seshadri as its Chief Financial Officer, effective on the Resignation Date.  In connection with Mr. Tomsic’s appointment as Chief Financial Officer, he and the Company were to enter into an Employment Agreement.  The Employment Agreement provided for a one-year employment term that could be extended upon the mutual agreement of the Company and Mr. Tomsic.

Pursuant to the Employment Agreement, Mr. Tomsic was to be paid an annual salary of $215,000 and was eligible to receive a bonus of up to $60,000 per year if the Company achieves certain performance targets established by the Company’s Board of Directors and/or its Compensation Committee.  Mr. Tomsic was to be be granted an option to purchase 100,000 shares of the Company’s common stock under the Company’s Amended and Restated 2003 Stock Plan.  Twenty-five percent of the option award was to vest on the first anniversary of Mr. Tomsic’s first formal date of employment, and the remainder was to vest in equal increments over the subsequent 36 months.  The award would immediately vest upon Mr. Tomsic’s termination as an employee of the Company following a change of control of the Company.  If the Company terminated Mr. Tomsic’s employment prior to the end of his term of employment without cause (as defined in the Employment Agreement), Mr. Tomsic was to be entitled to receive a severance payment equal to one month of his then-current salary for each full year of his employment with the Company.  The Employment Agreement also provided that the Company would reimburse Mr. Tomsic for reasonable business expenses and allow him to participate in its regular benefit programs.

On January 4, 2010, Mr. Sommer resigned as Chief Executive Officer of the Company.  As a result of his departure, Mr. Sommer also resigned as a member of our Board of Directors.  Mr. Sommer did not receive any severance as part of his resignation.  All 25,000 options granted on November 23, 2009 were forfeited.  Given this forfeiture, the Company elected not to expense such options because the effects on the financial statements would not have been material.  Following Mr. Sommer’s departure, Kevin A. Hall was appointed as our interim Chief Operating Officer (COO).

On May 20, 2010, the Board of Directors of LiveDeal appointed Kevin A. Hall as President and Chief Operating Officer of the Company.  Mr. Hall’s compensation and benefits were not affected by his appointment as President of the Company.

2014			211,767
2015			201,630
2016			57,283
2017			–
2018			–
Thereafter			–
		$	470,680

Litigation

The Company is party to certain legal proceedings incidental to the conduct of its business. Management believes that the outcome of pending legal proceedings will not, either individually or in the aggregate, have a material adverse effect on its business, financial position, and results of operations, cash flows or liquidity.

Except as described below, as of September 30, 2010,2013, the Company was not a party to any pending material legal proceedings other than claims that arise in the normal conduct of its business. While management currently believes that the ultimate outcome of these routine proceedings will not have a material adverse effect on its consolidated financial condition or results of operations, litigation is subject to inherent uncertainties. If an unfavorable ruling were to occur, there exists the possibility of a material adverse impact on the Company’s net income in the period in which a ruling occurs. The Company’s estimate of the potential impact of the following legal proceedings on its financial position and its results of operation could change in the future.

44

---

Joe Cunningham v. LiveDeal, Inc. et al.

On July 16, 2008, Joseph Cunningham, who was at the time a member of LiveDeal’s Board of Directors, filed a complaint with the U.S. Department of Labor's Occupational Safety and Health Administration (“OSHA”) alleging that the Company and certain members of its Board of Directors had engaged in discriminatory employment practices in violation of the Sarbanes-Oxley Act of 2002’s statutory protections for corporate whistleblowers when the Board of Directors removed him as Chairman on May 22, 2008.  In his complaint, Mr. Cunningham asked OSHA to order his appointment as Chief Executive Officer of the Company or, in the alternative, to order his reinstatement as Chairman of the Board.  Mr. Cunningham also sought back pay, special damages and litigation costs.

On July 16, 2010, Mr. Cunningham attempted to amend his OSHA complaint to include an additional adverse action allegation.  On September 20, 2010, OSHA issued a letter informing Mr. Cunningham that as a former board member and alleged prospective interim CEO, he is not considered an “employee” under the relevant statute, which is a required element for his claims.  Accordingly, OSHA dismissed Mr. Cunningham’s complaint.

On October 20, 2010, Mr. Cunningham filed objections to OSHA’s findings.  Mr. Cunningham's appeal of OSHA’s ruling is currently pending.

State of Washington v. LiveDeal, Inc. et al.

On December 16, 2006, the State of Washington Attorney General’s office entered into a Consent Decree with LiveDeal, Inc. (known at the time as YP Corp.) and its subsidiary, Telco Billing, Inc.  Pursuant to the Consent Decree, the Company agreed to provide certain confidential, trade secret information to the Attorney General’s office as part of the settlement of a regulatory dispute between the State of Washington and the Company.

On July 14, 2009, the Attorney General’s office contacted the Company to request certain confidential, trade secret information to which it was entitled under the Consent Decree.  The Company acknowledged its obligation to provide the requested information but asked the Attorney General’s office to verify that it would not provide such information to third parties.  When the Company was informed by opposing legal counsel in a private litigation matter that the Attorney General’s office intended to provide its confidential, trade secret information to such counsel’s client and other third parties immediately upon receipt, the Company began taking certain steps to protect the sensitive information while complying with its obligations under the Consent Decree.

Following unsuccessful settlement discussions in which the Attorney General’s office refused to enter into any agreement not to share the confidential information with third parties (including the Company’s opponents in pending private litigation), the Company sought a protective order in the State of Washington’s King County Superior Court (Case No. 06-2-39213-2 SEA) on September 8, 2009, which was denied on November 16, 2009.  The Company appealed in State of Washington’s Court of Appeals (Division I, Case No. 64539-1) and moved to stay the effect of the November 16, 2009 ruling.  The appeal was denied.  After denial of the appeal, the Company and the Attorney General's office cooperatively resolved their dispute.  The matter is considered closed.  

Global Education Services, Inc. v. LiveDeal, Inc.

On June 6, 2008, Global Education Services, Inc. ("GES"), which we refer to as GES, filed a consumer fraud class action lawsuit against us in the Company in King County (Washington) Superior Court. GES has allegedCourt in its complaintthe State of Washington, alleging that the Company'sour use of activator checks violated the Washington Consumer Protection Act.Act and seeking class certification pursuant to Washington law. GES seekssought injunctive relief against the Company'sour use of theactivator checks, as well as judgmentdamages in an amount equal to three times the alleged damages allegedly sustained by GES and the members of the class. LiveDeal hasputative class, exemplary damages for the alleged violation of law, and its fees and costs. We denied the allegations.  allegations of the complaint and commenced defending the litigation.

Early in 2010, the Court denied both parties’ dispositive motions, after oral argument.   Activeat which time they commenced settlement discussions. The parties reached a settlement and entered into a settlement agreement on or about November 5, 2012.

The settlement agreement required $150,000 to be paid to plaintiff’s counsel, $10,000 to be paid to GES as the “representative plaintiff,” and $70 to be paid to each eligible class member. The Court granted final approval of the settlement on April 26, 2013 and the Court’s order became final on May 27, 2013. All class member claims have been paid and the last attorneys’ fee payment was made on November 23, 2013. Accordingly, the litigation is temporarily suspendedfully resolved and the parties are engaged in settlement discussions.    

The Company has not recorded any accruals pertainingmatter closed.

J3 Harmon LLC v. LiveDeal, Inc.

On February 9, 2012, J3 Harmon LLC, which we refer to this matter since it does not meet the criteria for accrual under FASB ASC 450.

Complaint filed by Illinois Attorney General against LiveDeal, Inc.

As the Company has previously disclosed, on November 12, 2008, the Illinois Attorney Generalas J3, filed a complaintlawsuit against us in the Superior Court againstfor Maricopa County in the Company requesting moneyState of Arizona, alleging breach of a commercial lease agreement. J3 sought damages and injunctive relief for claims thatalleged unpaid rents during the Company employed deceptive and unfair acts and practices in violationlease term as well as alleged damages for storage costs after the expiration of the Illinois Consumer Fraud and Deceptive Business Act in a telemarketing campaign that in part promoted premium Internet yellow page listings to Illinois consumers.  The Companylease term. We denied the allegations and asserted various affirmative defenses. In September 2012, the Maricopa County Superior Court subsequently denied both parties’ dispositive motions.

entered a judgment in favor of J3 in the sum of $62,886.13.   We appealed this judgment.

On October 1, 2013, the Arizona Court of Appeals affirmed in part and reversed in part on the principal damages and remanded the matter for judgment. Subsequently, the Maricopa County Superior Court entered Judgment on Mandate against the Company in the principal sum of $46,636.31 and attorneys’ fees of $5,624.40, with post-judgment interest from October 3, 2012. There is no further basis for appeal by the Company. The Company anticipates paying the judgment during the fiscal quarter ending March 31, 2014 and, upon such payment, the matter will be resolved. As of September 30, 2013, the Company maintained an accrual of $52,261 related to this matter.

53

45

---

On September 2, 2010,

LEC Billings

The Company has historically billed a Final Judgmentsignificant amount of our legacy business revenues through LEC billing channels. The largest LEC billing companies ceased billing for third parties in 2012. .If we are not able to obtain alternative billing methods for these customers, the number of legacy subscribers and Consent Decree (the “Consent Decree”) providingour revenues will decline, which could materially and adversely affect our operating results and financial condition. The Company had approximately $73,000 of revenues billed through LEC billing channels for the settlement ofyear ended September 30, 2013. LEC billing channel costs related to those revenues equaled approximately $171,000 for the Company’s ongoing litigation withyear ended September 30, 2013.

Except as referenced above, the Illinois Attorney General was filed by the Circuit Court of the Seventh Judicial Circuit of the State of Illinois (Sangamon County).  The Consent Decree was previously executed by the Company and the Illinois Attorney General.

As set forth in the Consent Decree, the terms of the settlement require the Company to make a $10,000 contribution to the Illinois Attorney General Court Ordered and Voluntary Compliance Payment Projects Fund for Consumer Enforcement and Education.  Illinois consumers who entered into an Internet yellow pages contract on or after January 1, 2007, and who have not already cancelled such listing and received a full refund, are also entitled to a full refund from the Company (provided that they did not actually and knowingly agree to purchase the Company’s Internet yellow page listings).  Consumers must provide written notice of their demand for a refund within 60 days after the entry of the Consent Decree, and the Company has up to 120 days after the date of the Consent Decree to challenge any consumer’s right to a refund.  There were no claims made during the claim period.

Among other things, the Consent Decree restricts the Company from soliciting, billing, or knowingly causing Illinois consumers to be billed for Internet yellow page listings for a period of five years.

The Company has not recorded any accruals pertaining to its legal proceedings except as referenced above, as they do not meet the criteria for accrual under FASB ASC 450.

Restructuring Activities

On January 4, 2010, our Board of Directors approved a reduction in force that resulted in the termination of approximately 33% of the Company's workforce, effective January 7, 2010.  On February 23, 2010, our Board of Directors approved an additional reduction in force that resulted in the termination of approximately 20% of our workforce, effective March 4, 2010.  These reductions in force were related to our ongoing restructuring and cost reduction efforts as the Board of Directors explores a variety of strategic alternatives, including the potential sale of the Company or certain of its assets and/or the acquisition of other entities or businesses.

The Company incurred charges of $143,000 in connection with the reductions in force, consisting of one-time employee termination benefits.  All amounts were paid as of September 30, 2010.

On November 30, 2010, our Board of Directors approved a reduction in force that resulted in the termination of 36 employees of the Company, or approximately 60% of the Company’s workforce, effective December 1, 2010.   The reduction in force was related to the Company’s ongoing restructuring and cost reduction efforts and strategy of focusing its resources on the development and expansion of its core InstantProfile product, the successor to the Company’s LEC-billed directory product.  All terminated employees were involved in the marketing and sale of the Company’s InstantPromote product by its subsidiary, Local Marketing Experts, Inc.

The Company incurred expenses of $99,319 in connection with the reduction in force, of which $37,500 was incurred for one-time employee termination benefits payable in cash.  The remaining expenses relate to salaries and wages payable in cash to the affected employees.  Substantially all of these charges will be expensed in the first quarter of fiscal 2011.

Other Contractual Agreements

On November 30, 2008, each of the following agreements was terminated pursuant to notices of termination delivered to the Company by its respective counterparties:

Note 16:

·

Fulfillment and Marketing Agreement dated October 10, 2007, by and between the Company and Sharednet.Provision for Income Taxes

·

Fulfillment and Marketing Agreement dated October 16, 2007, by and between the Company and OneSource Web Hosting.

·

Fulfillment and Marketing Agreement dated October 10, 2007, by and between the Company and Blabb1e Networks.

Under the agreements, the Company provided certain fulfillment and directory services to the customers of Sharednet, OneSource Web Hosting and Blabble Networks, respectively (collectively, the "Wholesalers"). In exchange for such services, the Wholesalers remitted all related fees collected (less their 10% commission) to the Company. Such fees accounted for approximately $5.3 million, or 18%, of the Company’s net revenues in fiscal 2008.  The agreements accounted for about 12,000 of the Company’s approximately 65,000 customers as of that date.

10.	PROVISION FOR INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

46

---

Income taxes for years ended September 30, is summarized as follows:

		2010				2009
Current provision (benefit)		$	(230,382	)		$	(1,071,763	)
Deferred (benefit) provision			-				4,405,251
Net income tax (benefit) provision		$	(230,382	)		$	3,333,488

A reconciliation of the differences between the effective and statutory income tax rates for years ended September 30, is as follows:

		2010								2009
		Amount				Percent				Amount				Percent
Federal statutory rates		$	(2,613,614	)			34	%		$	(6,547,656	)			381	%
State income taxes			(258,378	)			3	%			(647,294	)			38	%
Write off of deferred tax asset
related to vested restricted stock			50,905				(1	)%			48,570				(3	)%
Valuation allowance against net
deferred tax assets			2,786,003				(36	)%			10,586,854				(55	)%
Other			(195,298	)			3	%			(106,986	)			6	%
Effective rate		$	(230,382	)			3	%		$	3,333,488				(194	)%

At September 30, deferred income tax assets and liabilities were comprised of:

		2010				2009
Deferred income tax asset, current:
Book to tax differences in accounts receivable		$	643,209			$	1,118,416
Book to tax differences in prepaid assets and accrued expenses			(43,011	)			(34,829	)
Total deferred income tax asset, current			600,198				1,083,587
Less: valuation allowance			(600,198	)			(1,083,587	)
Deferred income tax asset, current, net			-				-
Deferred income tax asset, long-term:
Net operating loss carryforwards			7,084,995				3,481,786
Book to tax differences for stock based compensation			187,614				218,565
Book to tax differences in intangible assets			7,234,473				7,377,360
Book to tax differences in other assets			326				326
Book to tax differences in depreciation			(1,734,750	)			(1,574,770	)
Total deferred income tax asset, long-term			12,772,658				9,503,267
Less: valuation allowance			(12,772,658	)			(9,503,267	)
Deferred income tax asset, net			-				-
Total deferred income tax asset		$	-			$	-

A full valuation allowance is established against all net deferred tax assets as of September 30, 20102013 and 20092012 based on estimates of recoverability. While the Company has optimistic plans for its new business strategy, it determined that such a valuation allowance was necessary given the current and expected near term losses and the uncertainty with respect to its ability to generate sufficient profits from its new business model.

Because of the impacts of the valuation allowance, there was no income tax expense or benefit for the year ended September 30, 2013.

A reconciliation of the differences between the effective and statutory income tax rates for years ended September 30, is as follows:

		2013								2012
		Amount				Percent				Amount				Percent
Federal statutory rates		$	(1,953,982	)			34%			$	(535,573	)			34%
State income taxes			(193,167	)			3%				(52,946	)			3%
Write off of deferred tax asset related to vested restricted stock			–				0%				10,670				(1%	)
Permanent differences			15,967				(0%	)			3,411				(0%	)
Valuation allowance against net deferred tax assets			2,131,183				(37%	)			574,438				(36%	)
Other							0%								0%
Effective rate		$	–				0%			$	–				0%

At September 30, deferred income tax assets and liabilities were comprised of:

		2013				2012
Deferred income tax asset, current:
Book to tax differences in accounts receivable		$	382,218			$	582,549
Book to tax differences in prepaid assets and accrued expenses			8,425				(7,774	)
Total deferred income tax asset, current			390,643				574,775
Less: valuation allowance			(390,643	)			(574,775	)
Deferred income tax asset, current, net			–				–
Deferred income tax asset, long-term:
Net operating loss carryforwards			12,821,092				10,012,906
Book to tax differences for stock based compensation			6,407				6,407
Book to tax differences in intangible assets			6,693,536				6,961,861
Book to tax differences in other			326				326
Book to tax differences in depreciation			(2,297,221	)			(2,072,674	)
Total deferred income tax asset, long-term			17,224,140				14,908,825
Less: valuation allowance			(17,224,140	)			(14,908,825	)
Deferred income tax asset, net			–				–
Total deferred income tax asset		$	–			$	–

54

The Company has recorded as of September 30, 2013 a valuation allowance of $17,224,140, as it believes that it is more likely than not that the deferred tax assets will not be realize in future years. Management has based its assessment on available historical and projected operating results.

The Company annually conducts an analysis of its tax positions and has concluded that it has no uncertain tax positions as of September 30, 2010.

2013.

As part of its deferred tax assets, the Company has net operating loss carryforwardscarry-forwards resulting from its acquisition of LiveDeal, IncInc. in fiscal 2007. Such amounts are subject to IRS code section 382 limitations and expire in 2027.

The 2007 to 2010 tax years are still subject to audit.

11.Note 17:

CONCENTRATION OF CREDIT RISKConcentration of Credit Risk

The Company maintains cash balances at banks in California Arizona and Nevada. Accounts are insured by the Federal Deposit Insurance Corporation up to $250,000 per institution as of September 30, 2010.

47

---

2013. At times, balances may exceed federally insured limits.

Financial instruments that potentially subject the Company to concentrations of credit risk are primarily trade accounts receivable. The trade accounts receivable are due primarily from business customers over widespread geographical locations within the LEC billing areas across the United States. The Company historically has experienced significant dilution and customer credits due to billing difficulties and uncollectible trade accounts receivable. The Company estimates and provides an allowance for uncollectible accounts receivable. The handling and processing of cash receipts pertaining to trade accounts receivable is maintained primarily by three third-party billing companies. The Company is dependent upon these billing companies for collection of its accounts receivable. The billing companies and LECs charge fees for their services, which are netted against the gross accounts receivable balance. The billing companies also apply holdbacks to the remittances for potentially uncollectible accounts. These amounts will vary due to numerous factors and the Company may not be certain as to the actual amounts on any specific billing submittal until several months after that submittal. The Company estimates the amount of these charges and holdbacks based on historical experience and subsequent information received from the billing companies. The Company also estimates uncollectible account balances and provides an allowance for such estimates. The billing companies retain certain holdbacks that may not be collected by the Company for a period extending beyond one year. Additionally, certain other billings’ channels consisting of billings submitted to LEC Processors through third parties were discontinued. As such, a significant portion of the receivables at September 30, 20102013 and 20092012 pertaining to LEC service providers represent the holdbacks described above.

The Company has concentrations of receivables with respect to certain wholesale accounts and remaining holdbacks with LEC service providers. Three such entities accounted for 27%44%, 27%25% and 16%18% of gross receivables at September 30, 2010.

12.  STOCK-BASED COMPENSATION

Restricted Stock Awards

During the year ended2013 as compared to 35%, 27% and 15% of gross receivables at September 30, 2003,2012.

Note 18:

Segment Reporting

After discontinuing the Company’s board of directors and a majority of it stockholders voted to terminate the Company’s 2002 Employees, Officers & Directors Stock Option Plan and approved the Company’s 2003 Stock Plan.  The 30,000 shares of Company common stock previously allocated to the 2002 Plan were re-allocated to the 2003 Plan.  During the year ended September 30, 2004, an additional 20,000 shares were authorized by the board of directors and approved by the Company’s stockholders to be issued under the 2003 Plan.  All Company personnel and contractors are eligible to participateDirect Sales business as described in the plan.

AsNote 4, as of September 30, 2010, there were 52,294 shares authorized under the 2003 Plan that were granted and remain outstanding, of which 47,836 have vested and 4,658 are in the form of restricted stock.  These shares of restricted stock were granted to the Company’s service providers, officers and directors.  Of the 4,658 restricted shares, 3,000 shares vest on a cliff basis three years from the date of grant and 1,658 shares vest on a cliff basis 10 years from the date of grant.  Certain market performance criteria may accelerate the vesting of a portion of these awards if the stock price exceeds $50 per share.  As of September 30, 2010, total unrecognized compensation cost related to unvested awards was $160,590.  The weighted average period over which such compensation cost is to be recognized is 0.80 years.  Additionally,2013, the Company has 200 shares of unvested restricted stock awards related to the LiveDeal acquisition that were issued outside of the 2003 Plan which vested in June 2010.

The following table sets forth the activity with respect to compensation-related restricted stock grants:

Outstanding (unvested) at September 30, 2008			22,743
Granted			2,000
Forfeited			(8,325	)
Vested			(5,775	)
Outstanding (unvested) at September 30, 2009			10,643
Granted			-
Forfeited			(3,700	)
Vested			(2,285	)
Outstanding (unvested) at September 30, 2010			4,658

The vesting of substantially all shares of restricted stock accelerates upon a change of control, as defined in the 2003 Plan.  Compensation expense is determined at the date of grant, is equal to the stock price at the date of grant, and is deferred and recognized on a straight-line basis over the vesting period. The weighted-average grant-date fair value of awards issued during the year ended September 30, 2009 was $15.6 per share.  The weighted-average grant-date fair value of the shares outstanding is $97.1 per share.

During the years ended September 30, 2010 and 2009 the Company recognized compensation expense of $100,980 and $(198,672), respectively, under the 2003 Plan and other restricted stock issuances.  The net compensation expense reversal in the year ended September 30, 2009 is attributable to a change in estimated forfeiture rate of awards granted to officers, directors and key personnel from 40% to 70% and true-ups to reflect actual forfeiture rates of awards whose vesting period had passed.

48

---

Stock Option Awards:

From time to time, the Company grants stock option awards to officers and employees.  Such awards are valued based on the grant date fair value of the instruments, net of estimated forfeitures, using a Black-Scholes option pricing model with the following assumptions:

		Year Ended				Year Ended
		September 30, 2010				September 30, 2009
Volatility			97	%			97	%
Risk-free interest rate			2.2	%			1.7%-2.8	%
Expected term		6.0 years				6.0 years
Forfeiture rate			40	%			40	%
Dividend yield rate			0	%			0	%

The volatility used was based on historical volatility of the Company’s common stock, which management considers to be the best indicator of expected future volatility.  The risk free interest rate was determined based on treasury securities with maturities equal to the expected term of the underlying award.  The expected term was determined based on the simplified method outlined in Staff Accounting Bulletin No. 110.

On November 23, 2009, the Company granted an aggregate of 25,000 options to Richard Sommer, the Company’s then-current Chief Executive Officer. In connection with Mr. Sommer’s resignation on January 4, 2010, all such options were forfeited.  Given this forfeiture, the Company elected not to expense such options because the effects on the financial statements would not have been material.  No other options were granted during the year ended September 30, 2010.

Stock option awards are expensed on a straight-line basis over the requisite service period.  During the years ended September 30, 2010 and 2009, the Company recognized expense of $38,448 and $82,036, respectively. At September 30, 2010, future stock compensation expense (net of estimated forfeitures) not yet recognized was $128,774 and will be recognized over a weighted average remaining vesting period of 2.1 years.  This future expense does not include the options forfeited by Mr. Sommer in January 2010.  The following summarizes stock option activity for the year ended September 30, 2010:

						Weighted				Weighted				Weighted
						Average				Average				Average				Aggregate
		Number of				Exercise				Fair				Remaining				Intrinsic
		Shares				Price				Value				Contractual Life				Value
Outstanding at September 30, 2009			33,000
Granted at market price			25,000			$	19.50				n/m
Exercised			-			$	-										��
Forfeited			(53,000	)		$	17.00
Outstanding at September 30, 2010			5,000			$	14.50								8.1			$	-
Exercisable			2,292			$	14.50								8.1			$	-

As noted above, Mr. Sommer’s 25,000 options were forfeited in connection with his resignation on January 4, 2010.  Upon the exercise of stock options, the Company may issue new shares or, if circumstances permit, issue shares held as treasury stock.

13.	EMPLOYEE BENEFIT PLAN

The Company maintains a 401(k) retirement plan for its employees who are eligible to participate in the plan.  The Company made contributions of $34,336 and $112,040 to the plan for the years ended September 30, 2010 and 2009, respectively.

14.	OTHER INCOME (EXPENSE)

On November 5, 2008, the Company entered into an agreement to sell its Internet domain name “www.yp.com” to YellowPages.com for a cash payment of $3,850,000.  Although the Company’s future focus is on the sale of customer acquisition services for small businesses, the Company continues to receive revenues from the sale of Internet Advertising Packages, which targeted users of its www.yp.com property.  The Company has transitioned these customers to advertising on www.yellowpages.livedeal.com

On March 9, 2009, in connection with the Company’s shift in strategic focus away from its classified and directory servicesonly operated one business the Company entered into an agreement to sell a portion of its customer list associated with its directory services business.  This customer list was sold for $3,093,202 of which $2,783,097 was paid by the buyer and received during the second quarter of fiscal 2009, with the remaining amount held back in escrow until December 2009 pending the resolution of potential claims, if any.  Such claims are contractually limited to the amount held in escrow.  Approximately 50% of the escrow amount was received during the fourth quarter of fiscal 2009 with no deductions for offsetting claims. In December, 2009, the Company received the remainder of the escrow amount with no deduction. Net of certain accruals for transaction costs and transaction-related contingencies, the Company recorded a gain of $3,040,952, which is reflected in other income in the accompanying consolidated statement of operations.

49

---

The Company analyzed this transaction and determined that it did not meet the definition of a discontinued operation under FASB ASC 360 as the customer list that was sold did not meet the definition of a component of an entity and as the Company expects to have continuing involvement and operations in directory services for the near future.

The Company also amended another directory services contract in consideration of accelerated payments on its outstanding accounts receivables and some anticipated future billings, which resulted in an increase in other income of $642,268 for the year ended September 30, 2009.  Together with the partial customer list sale described above, these customers and contracts accounted for $5,146,073 of revenue in the fiscal 2009.  As a result of these transactions, the Company has no future service obligations to these customers and no longer expects to generate future revenues from these sources.

15.	SEGMENT REPORTING

The Company has two reportable operating segments (excluding the discontinued classifieds business):  Directory Services and Direct Sales - Customer Acquisition Services.  While the product offerings have been changing, the reportable segments have not changed, and management continues to evaluate operating performance of these operating segments.  The Company does not identify and allocate operating costs or impairment charges to its reportable segments below the gross profit level.  Additionally, the reportable segments share many common costs, including, but not limited to, IT support, office and administrative expenses.  Therefore, the following table of operating results does not allocate costs to its reportable segments below the gross profit level:

		Year Ended September 30, 2010
		Directory Services				Direct Sales - Customer Acquisition Services				Unallocated				Consolidated
Net revenues		$	4,238,955			$	3,838,479			$	-			$	8,077,434
Cost of services			761,154				3,096,530				-				3,857,684
Gross profit			3,477,801				741,949				-				4,219,750
Operating expenses			-				-				11,960,564				11,960,564
Operating income (loss)			3,477,801				741,949				(11,960,564	)			(7,740,814	)
Other income (expense)			-				-				41,189				41,189
Income (loss) before income taxes and discontinued operations		$	3,477,801			$	741,949			$	(11,919,375	)		$	(7,699,625	)

		Year Ended September 30, 2009
		Directory Services				Direct Sales - Customer Acquisition Services				Unallocated				Consolidated
Net revenues		$	9,331,057			$	4,107,598			$	-			$	13,438,655
Cost of services			3,624,177				2,767,601				-				6,391,778
Gross profit			5,706,880				1,339,997				-				7,046,877
Operating expenses			-				-				25,503,153				25,503,153
Operating income (loss)			5,706,880				1,339,997				(25,503,153	)			(18,456,276	)
Other income (expense)			-				-				7,527,934				7,527,934
Income before income taxes and discontinued operations		$	5,706,880			$	1,339,997			$	(17,975,219	)		$	(10,928,342	)

The Company has yet to allocate its assets to each respective segment.  While some software costs are specific to each business, most of the Company’s fixed assets and software architecture are shared among its segments.  Therefore, the Company is currently unable to provide asset information with respect to each of its reportable segments, except as it pertains to accounts receivable as set forth below:

50

---

		September 30, 2010
		Directory Services				Direct Sales - Customer Acquisition Services				Total
Accounts receivable, net - short term		$	872,977			$	75,462			$	948,439
Accounts receivable, net - long term			330,234				-				330,234
Total accounts receivable, net		$	1,203,211			$	75,462			$	1,278,673

		September 30, 2009
		Directory Services				Direct Sales - Customer Acquisition Services				Total
Accounts receivable, net - short term		$	1,442,037			$	36,146			$	1,478,183
Accounts receivable, net - long term			1,039,403				-				1,039,403
Total accounts receivable, net		$	2,481,440			$	36,146			$	2,517,586

The Company has no intersegment revenues. All of the Company’s revenues are with external customers, are derived from operations in the United States, and no single customer accounts for more than 10% of the Company’s revenues.

16.  SUBSEQUENT EVENTS

Note 19:

Subsequent Events Disclosure

Engagement Agreement with Chardan Capital Markets LLC (At-The-Market Offering)

On November 29, 2010,January 7, 2014, we entered into an Engagement Agreement (the “Engagement Agreement”) with Chardan Capital Markets LLC (“Chardan”) pursuant to which we may issue and sell up to a maximum aggregate amount of 660,000 shares of our common stock from time to time through Chardan as our sales agent, under our shelf registration statement on Form S-3 (File No. 333-187397) previously filed with the SEC, pursuant to which any shares that are issued under the Engagement Agreement will be sold.

Upon delivery of a placement notice by the Company, and Joint Corporation FeelTech Investment Unit 1subject to the terms and conditions of the Engagement Agreement, Chardan may sell the common stock by any method that is deemed to be an “at-the-market” offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended (the “Purchaser”“Securities Act”), including by means of ordinary brokers’ transactions at market prices on the NASDAQ Capital Market, in block transactions, through privately negotiated transactions, or as otherwise agreed by Chardan and us. Chardan will act as sales agent on a commercially reasonable efforts basis consistent with its normal trading and sales practices and applicable state and federal law, rules and regulations and the rules of NASDAQ.

55

The offering pursuant to the Engagement Agreement will terminate upon the earlier of (i) the sale of all shares of common stock subject to the Engagement Agreement, or (ii) termination of the Engagement Agreement as permitted therein. The Engagement Agreement may be terminated by Chardan or us at any time upon 15 days’ notice to the other party.

We will pay Chardan a commission equal to up to 3% of the gross proceeds from the sale of the common stock sold through Chardan pursuant to the Engagement Agreement and reimburse Chardan up to $15,000 in expenses. We have also provided Chardan with customary indemnification rights. No assurance can be given that we will sell any shares under the Engagement Agreement, or, if we do, as to the price or amount of shares that we will sell, or the dates on which any such sales will take place.

The foregoing description of the Engagement Agreement contained herein does not purport to be complete and is qualified in its entirety by reference to the complete text of the Engagement Agreement, a copy of which is attached to this Annual Report on Form 10-K as Exhibit 1.1 and incorporated herein by reference. This Annual Report on Form 10-K also incorporates by reference the Engagement Agreement into our shelf registration statement on Form S-3 (File No. 333-187397) previously filed with the SEC, pursuant to which any shares that are issued under the Engagement Agreement will be sold.

On January 9, 2014, we delivered a placement notice to Chardan to sell 12,200 shares of our common stock as part of the at-the-market offering. The shares were sold for approximately $8.93 per share, resulting in gross proceeds of approximately $109,000. Net proceeds to us, after payment of Chardan’s 3% commission was approximately $106,000.

Convertible Note Transaction ($5 Million Line of Credit)

On January 7, 2014, the Company entered into a StockNote Purchase Agreement (“Purchase Agreement”) with Kingston Diversified Holdings LLC (the “Investor”), pursuant to which the Investor agreed to purchase for the purchase of $200,000 worthcash up to $5,000,000 in aggregate principal amount of the Company’s Convertible Notes (“Notes”). The Purchase Agreement and the Notes, which are unsecured, provide that all amounts payable by the Company to the Investor under the Notes will be due and payable on the second (2nd) anniversary of the date of the Purchase Agreement (the “Maturity Date”).

The Purchase Agreement and the Notes provide that:

	—	Either the Company or the Investor will have the right to cause the sale and issuance of Notes pursuant to the Purchase Agreement, provided that NASDAQ’s approval of the Purchase Agreement and transactions contemplated thereby is a condition precedent to each party’s right to cause any borrowings to occur under the Purchase Agreement.
	—	Each Note must be in a principal amount of at least $100,000.
	—	The Notes are issuable at a 5% discount and will accrue interest at an annual interest rate equal to 8%. All interest will be payable on the Maturity Date or upon the conversion of the applicable Note.
	—	The Company has the option to prepay each Note, in whole or in part, at any time without premium or penalty.
	—	the Company or the Investor may elect at any time on or before the Maturity Date to convert the principal and accrued but unpaid interest due under any Note into shares of the Company’s common stock. The conversion price applicable to any such conversion will be an amount equal to 70% of the lesser of: (i) the closing bid price of the common stock on the date of the Purchase Agreement (i.e., $9.35 per share); or (ii) the 10-day volume weighted average closing bid price for the common stock, as listed on NASDAQ for the 10 business days immediately preceding the date of conversion (the “Average Price”); provided, however, that in no event will the Average Price per share be less than $1.00. For example, if the Average Price is $0.50 per share, then for purposes of calculating the conversion price, the Average Price per share would be $1.00 per share instead of $0.50 per share.
	—	If either party elects to convert all or any portion of any Note, the Company must issue to the Investor on the date of the conversion a warrant (“Contingent Warrant”) to purchase a number of shares of the Company’s common stock equal to the number of shares issuable upon conversion. This number of shares is subject to adjustment in the event of stock splits or combinations, stock dividends, certainpro rata distributions, and certain fundamental transactions. Each Contingent Warrant will be exercisable for a period of five (5) years following the date of its issuance at an exercise price equal to 110% of the conversion price of the applicable Note (with the exercise price being subject to adjustment under the same conditions as the number of shares for which the warrant is exercisable.) The Contingent Warrants provide that they may be exercised in whole or in part and include a cashless exercise feature.

56

	—	The Notes provide that, upon the occurrence of any Event of Default, all amounts payable to the Investor will become immediately due and payable without any demand or notice. The events of default (“Events of Default”) which trigger the acceleration of the Notes include (among other things): (i) the Company’s failure to make any payment required under the Notes when due (subject to a three-day cure period), (ii) the Company’s failure to comply with its covenants and agreements under the Purchase Agreement, the Notes and any other transaction documents, and (iii) the occurrence of a change of control with respect to the Company.
	—	The Company (i) is required to provide certain financial and other information to the Investor from time to time, (ii) must maintain its corporate existence, business, assets, properties, insurance and records in accordance with the requirements set forth in the Purchase Agreement, (iii) with certain exceptions, must not incur or suffer to exist any liens or other encumbrances with respect to the Company’s property or assets, (iv) must not make certain loans or investments except in compliance with the terms of the Purchase Agreement, and (v) must not enter into certain types of transactions, including dispositions of its assets or business.
	—	The Company agreed to use commercially reasonable efforts to obtain, as promptly as practicable, any approvals of the Company’s stockholders required under applicable law or NASDAQ Listing Rules in connection with the transactions contemplated by the Purchase Agreement. Unless and until any such stockholder approvals are obtained, in no event will the Investor be entitled to convert any Notes and/or exercise any Contingent Warrants to the extent that any such conversion or exercise would result in the Investor acquiring in such transactions a number of shares of the Company’s common stock exceeding 19.99% of the number of shares of common stock issued and outstanding immediately prior to the Company’s entry into the Purchase Agreement.
	—	The Investor will be entitled to certain anti-dilution adjustments if the Company issues shares of its common stock at a lower price per share than the applicable conversion price for any Note(s) issued pursuant to the Purchase Agreement. If any such dilutive issuance occurs prior to the conversion of one or more Notes, the conversion price for such Note(s) will be adjusted downward pursuant to its terms (subject to a floor of $0.70 per share). If any such dilutive issuance occurs after the conversion of one or more Notes, the Investor will be entitled to be issued additional shares of common stock for no consideration, and to an adjustment of the exercise price payable under the applicable Contingent Warrant(s). With respect to each Note actually issued pursuant to the Purchase Agreement, the Investor’s anti-dilution rights will expire two (2) years following the date of issuance.

The foregoing description of the Purchase Agreement, the Notes and the Contingent Warrants contained herein does not purport to be complete and is qualified in its entirety by reference to the complete text of such documents, copies of which are attached to this Annual Report on Form 10-K as Exhibits 10.10, 10.11 and 10.12, respectively, and incorporated herein by reference

2014 Omnibus Equity Incentive Plan

On January 7, 2014, our Board of Directors adopted the 2014 Omnibus Equity Incentive Plan (the “2014 Plan”), which authorizes the issuance of distribution equivalent rights, incentive stock options, non-qualified stock options, performance stock, performance units, restricted ordinary shares, restricted stock units, stock appreciation rights, tandem stock appreciation rights and unrestricted ordinary shares to our officers, employees, directors, consultants and advisors. The Company has reserved up to 600,000 shares of common stock $0.001 par value per share, over a three month period. During December 2010,for issuance under the 2014 Plan. Pursuant to Nasdaq Listing Rule 5635(c), the Company received $100,000 from the Purchaser in exchange for 15,014 sharesintends to seek stockholder approval of the Company’s common stock and will receive an additional $50,000 in2014 Plan at our 2014 Annual Meeting of Stockholders.

Resignation of Director

On January 2011 and $50,000 in February 2011.

On November 30, 2010,9, 2014, John Kocmur informed the Board of Directors approvedof his decision to resign as a reduction in force that resulted in the termination of 36 employeesdirector of the Company, or approximately 60%effective immediately. Mr. Kocmur did not resign because of the Company’s workforce, effective December 1, 2010.   The reduction in force was relatedany disagreement relating to the Company’s ongoing restructuring and cost reduction efforts and strategy of focusing its resources on the development and expansion of its core InstantProfile product, the successor to the Company’s LEC-billed directory product.  All terminated employees were involved in the marketing and sale of the Company’s InstantPromote product by its subsidiary, Local Marketing Experts, Inc.operations, policies or practices.

57

The Company incurred expenses of $99,319 in connection with the reduction in force, of which $37,500 was incurred for one-time employee termination benefits payable in cash.  The remaining expenses relate to salaries and wages payable in cash to the affected employees.  Substantially all of these charges will be expensed in the first quarter of fiscal 2011.

17.  SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

Note 20:

Selected Quarterly Financial Data (Unaudited)

Quarterly financial information for 20102013 and 20092012 follows:

		Quarter Ended
		December 31,				March 31,				June 30,				September 30,
		2011				2012				2012				2012
Net revenues		$	851,413			$	821,701			$	777,857			$	619,532
Gross profit			615,594				595,093				669,196				475,163
Loss from continuing operations			(195,218	)			(259,222	)			(289,714	)			(843,487	)
Income (loss) from discontinued operations			3,580				229				7,944				680
Net loss		$	(191,638	)		$	(258,993	)		$	(281,770	)		$	(842,807	)
Earnings per share information- basic and diluted:
Loss from continuing operations		$	(0.18	)		$	(0.11	)		$	(0.12	)		$	(0.36	)
Discontinued operations
Net loss		$	(0.18	)			(0.11	)		$	(0.12	)		$	(0.35	)
Weighted Avg common shares outstanding			1,043,960				2,345,253				2,402,168				2,487,911

		Quarter Ended
		December 31,				March 31,				June 30,				September 30,
		2012				2013				2013				2013
Net revenues		$	572,535			$	555,084			$	606,867			$	617,382
Gross profit			469,899				438,171				427,946			$	99,521
Loss from continuing operations			(1,062,472	)			(3,215,467	)			(511,464	)		$	(960,319	)
Income (loss) from discontinued operations			1,963				450				295			$	–
Net loss		$	(1,060,509	)		$	(3,215,017	)		$	(511,169	)		$	(960,319	)
Earnings per share information- basic and diluted:
Loss from continuing operations		$	(0.40	)		$	(1.15	)		$	(0.15	)		$	(0.27	)
Discontinued operations
Net loss		$	(0.40	)			(1.15	)		$	(0.15	)		$	(0.27	)
Weighted Avg common shares outstanding			2,653,937				2,793,023				3,437,736				3,570,410

58

51

---

		Quarter Ended
		December 31,				March 31,				June 30,				September 30,
		2009				2010				2010				2010
Net revenues		$	2,477,447			$	2,165,653			$	1,651,107			$	1,783,227
Gross profit			1,648,633				1,143,314				1,014,749				413,054
Loss from continuing operations			(2,527,378	)			(1,773,522	)			(1,339,934	)			(1,828,409	)
Income (loss) from discontinued operations			1,725				-				-				10,800
Net loss		$	(2,525,653	)		$	(1,773,522	)		$	(1,339,934	)		$	(1,817,609	)
Earnings per share information:
Basic income per share
Loss from continuing operations		$	(4.22	)		$	(2.96	)		$	(2.23	)		$	(3.05	)
Discontinued operations			-				-				-				0.02
Net loss		$	(4.21	)		$	(2.96	)		$	(2.23	)		$	(3.03	)
Diluted income per share
Loss from continuing operations		$	(4.22	)		$	(2.96	)		$	(2.23	)		$	(3.05	)
Discontinued operations			-				-				-				0.02
Net loss		$	(4.21	)		$	(2.96	)		$	(2.23	)		$	(3.03	)

		Quarter Ended
		December 31,				March 31,				June 30,				September 30,
		2008				2009				2009				2009
Net revenues		$	5,009,514			$	3,548,275			$	2,448,569			$	2,432,297
Gross profit			3,408,864				2,081,393				1,636,248				(79,628	)
Income (loss) from continuing operations			944,440				(10,797,953	)			(2,116,971	)			(2,351,373	)
Income (loss) from discontinued operations			(57,077	)			(8,285,663	)			4,649				68,648
Net income (loss)		$	887,362			$	(19,083,616	)		$	(2,112,322	)		$	(2,282,725	)
Earnings per share information:
Basic income per share
Income (loss) from continuing operations		$	1.56			$	(18.04	)		$	(3.53	)		$	(3.92	)
Discontinued operations		$	(0.09	)		$	(13.85	)		$	0.01			$	0.12
Net income (loss)		$	1.47			$	(31.89	)		$	(3.52	)		$	(3.80	)
Diluted income per share
Income (loss) from continuing operations		$	1.55			$	(18.04	)		$	(3.53	)		$	(3.92	)
Discontinued operations			(0.09	)			(13.85	)			0.01				0.12
Net income (loss)		$	1.46			$	(31.89	)		$	(3.52	)		$	(3.80	)

52

---

ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures

None.

ITEM 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures.Procedures. We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officerprincipal executive officer and Chief Financial Officer,principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based upon that evaluation, our Chief Executive Officerprincipal executive officer and Chief Financial Officerprincipal financial offer concluded that, as of the end of the period covered in this report, our disclosure controls and procedures were effective to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our Chief Executive Officerprincipal executive officer and Chief Financial Officer,principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting. There was no change in our internal control over financial reporting during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Management’s Report on Internal Control Over Financial Reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)). Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of our internal control over financial reporting as of September 30, 2010.2013. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control — Integrated Framework. Based on our assessment using those criteria, our management concluded that our internal control over financial reporting was effective as of September 30, 2010.

2013.

This annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to a permanent exemption of the Securities and Exchange Commission that permitspermit the Company to provide only management's report in this annual report. Accordingly, our management's assessment of the effectiveness of our internal control over financial reporting as of September 30, 20102013 has not been audited by our auditors, Mayer Hoffman McCann P.C.Kabani & Company, or any other independent registered accounting firm.

ITEM 9B. Other Information

Engagement Agreement with Chardan Capital Markets LLC (At-The-Market Offering)

On January 7, 2014, we entered into an Engagement Agreement (the “Engagement Agreement”) with Chardan Capital Markets LLC (“Chardan”) pursuant to which we may issue and sell up to a maximum aggregate amount of 660,000 shares of our common stock from time to time through Chardan as our sales agent, under our shelf registration statement on Form S-3 (File No. 333-187397) previously filed with the SEC, pursuant to which any shares that are issued under the Engagement Agreement will be sold.

Upon delivery of a placement notice by the Company, and subject to the terms and conditions of the Engagement Agreement, Chardan may sell the common stock by any method that is deemed to be an “at-the-market” offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended (the “Securities Act”), including by means of ordinary brokers’ transactions at market prices on the NASDAQ Capital Market, in block transactions, through privately negotiated transactions, or as otherwise agreed by Chardan and us. Chardan will act as sales agent on a commercially reasonable efforts basis consistent with its normal trading and sales practices and applicable state and federal law, rules and regulations and the rules of NASDAQ.

The offering pursuant to the Engagement Agreement will terminate upon the earlier of (i) the sale of all shares of common stock subject to the Engagement Agreement, or (ii) termination of the Engagement Agreement as permitted therein. The Engagement Agreement may be terminated by Chardan or us at any time upon 15 days’ notice to the other party.

We will pay Chardan a commission equal to up to 3% of the gross proceeds from the sale of the common stock sold through Chardan pursuant to the Engagement Agreement and reimburse Chardan up to $15,000 in expenses. We have also provided Chardan with customary indemnification rights. No assurance can be given that we will sell any shares under the Engagement Agreement, or, if we do, as to the price or amount of shares that we will sell, or the dates on which any such sales will take place.

On January 9, 2014, we delivered a placement notice to Chardan to sell 12,200 shares of our common stock as part of the at-the-market offering. The shares were sold for approximately $8.93 per share, resulting in gross proceeds of approximately $109,000. Net proceeds to us, after payment of Chardan’s 3% commission was approximately $106,000.

59

The foregoing description of the Engagement Agreement contained herein does not purport to be complete and is qualified in its entirety by reference to the complete text of the Engagement Agreement, a copy of which is attached to this Annual Report on Form 10-K as Exhibit 1.1 and incorporated herein by reference. This Annual Report on Form 10-K also incorporates by reference the Engagement Agreement into our shelf registration statement on Form S-3 (File No. 333-187397) previously filed with the SEC, pursuant to which any shares that are issued under the Engagement Agreement will be sold.

Convertible Note Transaction ($5 Million Line of Credit)

On January 7, 2014, the Company entered into a Note Purchase Agreement (“Purchase Agreement”) with Kingston Diversified Holdings LLC (the “Investor”), pursuant to which the Investor agreed to purchase for cash up to $5,000,000 in aggregate principal amount of the Company’s Convertible Notes (“Notes”). The Purchase Agreement and the Notes, which are unsecured, provide that all amounts payable by the Company to the Investor under the Notes will be due and payable on the second (2nd) anniversary of the date of the Purchase Agreement (the “Maturity Date”).

The Purchase Agreement and the Notes provide that:

	—	Either the Company or the Investor will have the right to cause the sale and issuance of Notes pursuant to the Purchase Agreement, provided that NASDAQ’s approval of the Purchase Agreement and transactions contemplated thereby is a condition precedent to each party’s right to cause any borrowings to occur under the Purchase Agreement.
	—	Each Note must be in a principal amount of at least $100,000.
	—	The Notes are issuable at a 5% discount and will accrue interest at an annual interest rate equal to 8%. All interest will be payable on the Maturity Date or upon the conversion of the applicable Note.
	—	The Company has the option to prepay each Note, in whole or in part, at any time without premium or penalty.
	—	Either the Company or the Investor may elect at any time on or before the Maturity Date to convert the principal and accrued but unpaid interest due under any Note into shares of the Company’s common stock. The conversion price applicable to any such conversion will be an amount equal to 70% of the lesser of: (i) the closing bid price of the common stock on the date of the Purchase Agreement (i.e., $9.35 per share); or (ii) the 10-day volume weighted average closing bid price for the common stock, as listed on NASDAQ for the 10 business days immediately preceding the date of conversion (the “Average Price”); provided, however, that in no event will the Average Price per share be less than $1.00. For example, if the Average Price is $0.50 per share, then for purposes of calculating the conversion price, the Average Price per share would be $1.00 per share instead of $0.50 per share.
	—	If either party elects to convert all or any portion of any Note, the Company must issue to the Investor on the date of the conversion a warrant (“Contingent Warrant”) to purchase a number of shares of the Company’s common stock equal to the number of shares issuable upon conversion. This number of shares is subject to adjustment in the event of stock splits or combinations, stock dividends, certainpro rata distributions, and certain fundamental transactions. Each Contingent Warrant will be exercisable for a period of five (5) years following the date of its issuance at an exercise price equal to 110% of the conversion price of the applicable Note (with the exercise price being subject to adjustment under the same conditions as the number of shares for which the warrant is exercisable.) The Contingent Warrants provide that they may be exercised in whole or in part and include a cashless exercise feature.
	—	The Notes provide that, upon the occurrence of any Event of Default, all amounts payable to the Investor will become immediately due and payable without any demand or notice. The events of default (“Events of Default”) which trigger the acceleration of the Notes include (among other things): (i) the Company’s failure to make any payment required under the Notes when due (subject to a three-day cure period), (ii) the Company’s failure to comply with its covenants and agreements under the Purchase Agreement, the Notes and any other transaction documents, and (iii) the occurrence of a change of control with respect to the Company.

60

	—	The Company (i) is required to provide certain financial and other information to the Investor from time to time, (ii) must maintain its corporate existence, business, assets, properties, insurance and records in accordance with the requirements set forth in the Purchase Agreement, (iii) with certain exceptions, must not incur or suffer to exist any liens or other encumbrances with respect to the Company’s property or assets, (iv) must not make certain loans or investments except in compliance with the terms of the Purchase Agreement, and (v) must not enter into certain types of transactions, including dispositions of its assets or business.
	—	The Company agreed to use commercially reasonable efforts to obtain, as promptly as practicable, any approvals of the Company’s stockholders required under applicable law or NASDAQ Listing Rules in connection with the transactions contemplated by the Purchase Agreement. Unless and until any such stockholder approvals are obtained, in no event will the Investor be entitled to convert any Notes and/or exercise any Contingent Warrants to the extent that any such conversion or exercise would result in the Investor acquiring in such transactions a number of shares of the Company’s common stock exceeding 19.99% of the number of shares of common stock issued and outstanding immediately prior to the Company’s entry into the Purchase Agreement.
	—	The Investor will be entitled to certain anti-dilution adjustments if the Company issues shares of its common stock at a lower price per share than the applicable conversion price for any Note(s) issued pursuant to the Purchase Agreement. If any such dilutive issuance occurs prior to the conversion of one or more Notes, the conversion price for such Note(s) will be adjusted downward pursuant to its terms (subject to a floor of $0.70 per share). If any such dilutive issuance occurs after the conversion of one or more Notes, the Investor will be entitled to be issued additional shares of common stock for no consideration, and to an adjustment of the exercise price payable under the applicable Contingent Warrant(s). With respect to each Note actually issued pursuant to the Purchase Agreement, the Investor’s anti-dilution rights will expire two (2) years following the date of issuance.

The foregoing description of the Purchase Agreement, the Notes and the Contingent Warrants contained herein does not purport to be complete and is qualified in its entirety by reference to the complete text of such documents, copies of which are attached to this Annual Report on Form 10-K as Exhibits 10.10, 10.11 and 10.12, respectively, and incorporated herein by reference

2014 Omnibus Equity Incentive Plan

On January 7, 2014, our Board of Directors adopted the 2014 Omnibus Equity Incentive Plan (the “2014 Plan”), which authorizes the issuance of distribution equivalent rights, incentive stock options, non-qualified stock options, performance stock, performance units, restricted ordinary shares, restricted stock units, stock appreciation rights, tandem stock appreciation rights and unrestricted ordinary shares to our officers, employees, directors, consultants and advisors. The Company has reserved up to 600,000 shares of common stock for issuance under the 2014 Plan. Pursuant to Nasdaq Listing Rule 5635(c), the Company intends to seek stockholder approval of the 2014 Plan at our 2014 Annual Meeting of Stockholders.

Resignation of Director

On January 9, 2014, John Kocmur informed the Board of Directors of his decision to resign as a director of the Company, effective immediately. Mr. Kocmur did not resign because of any disagreement relating to the Company’s operations, policies or practices.

Potential Forward Stock Split

On January 8, 2014, the Company’s Board of Directors authorized management to proceed with plans for a forward stock split with respect to the Company’s issued and outstanding common stock. The ratio for the forward stock split would be between 3:1 to 5:1. The forward stock split may be subject to stockholder and/or other approvals, and there is no assurance regarding the timing or ratio at which it will be completed or that it will be completed at all.

61

53

---

PART III

Certain

The information required by Part III is omitted from this Annual Report on Form 10-K because wethe required information will filebe incorporated by reference from our definitive Proxy Statementproxy statement for our 20112014 Annual Meeting of Stockholders, to be filed with the SEC pursuant to Regulation 14A of the Exchange Act (the “Proxy Statement”) not later than 120 days after the end of the fiscal year covered by this Annual Report. Certain information included in the Proxy Statement is incorporated herein by reference.

ITEM 10.

Directors, Executive Officers and Corporate Governance

ITEM 10.Directors, Executive Officers and Corporate Governance

The information required by this Item will be disclosed in ourthe Proxy Statement and is incorporated herein by reference.

reference from the Proxy Statement.

The Company has adopted a Code of Ethics that applies to all of its officers, directors and employees.

ITEM 11.

Executive Compensation

ITEM 11.Executive Compensation

The information required by this Item will be disclosed in ourthe Proxy Statement and is incorporated herein by reference.

reference from the Proxy Statement.

ITEM 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

ITEM 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this Item will be disclosed in ourthe Proxy Statement and is incorporated herein by reference.

reference from the Proxy Statement.

ITEM 13.

Certain Relationships and Related Transactions, and Director Independence

ITEM 13.Certain Relationships and Related Transactions, and Director Independence

The information required by this Item will be disclosed in ourthe Proxy Statement and is incorporated herein by reference.

reference from the Proxy Statement.

ITEM 14.

Principal Accounting Fees and Services

ITEM 14.Principal Accounting Fees and Services

The information required by this Item will be disclosed in ourthe Proxy Statement and is incorporated herein by reference.reference from the Proxy Statement.

62

PART IV

ITEM 15.

Exhibits and Financial Statement Schedules

ITEM 15.Exhibits and Financial Statement Schedules

(1)	Financial Statements are listed on the Index to Consolidated Financial Statements on page 28 of this Annual Report.

(2)	The following represents financial statement schedules required to be filed with this Annual Report:

54

---

SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON SCHEDULE

To the Stockholders and Board of Directors of

LIVEDEAL, INC. AND SUBSIDIARIES

We have audited the consolidated financial statements of LiveDeal, Inc. and Subsidiaries(theits subsidiaries (the “Company”) as of September 30, 20102013 and 20092012 and for the years then ended and have issued our report thereon dated January 5, 2011.10, 2014. Our audit was conducted for the purpose of forming an opinion on the basic consolidated financial statements taken as a whole. The information included in the accompanying Schedule II–Valuation and Qualifying Accounts is presented for purposes of complying with the Securities and Exchange Commission’s rules and is not a required part of the basic consolidated financial statements. Such information for the years ended September 30, 20102013 and 20092012 has been subjected to the auditing procedures applied in the audits of the basic consolidated financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic consolidated financial statements taken as a whole.

/s/ Kabani & Company, Inc.     

Kabani & Company, Inc.

Certified Public Accountants

January 10, 2014

63

/s/ Mayer Hoffman McCann P.C.

Phoenix, Arizona

January 5, 2011

		Balance at				Charged to				Charged to								Balance at
		Beginning				Costs and				Other				Deductions/				End of
Description		of Period				Expenses				Accounts				Writeoffs				Period
Allowance for dilution and fees on amounts due from billing aggregators
Year ended September 30, 2009		$	1,775,276			$	5,196,360			$				$	(4,280,741	)		$	2,690,895
Year ended September 30, 2010		$	2,690,895			$	(354,989	)		$				$	(231,080	)		$	2,104,826
Allowance for customer refunds
Year ended September 30, 2009		$	428,269			$	2,511,706			$				$	(2,789,544	)		$	150,431
Year ended September 30, 2010		$	150,431			$	553,214			$				$	(656,643	)		$	47,002

55

---

SCHEDULE II

Description		Balance at Beginning of Period				Charged to Costs and Expenses				Charged to Other Accounts				Deductions/ Write-offs				Balance at End of Period
Allowance for dilution and fees on amounts due from billing aggregators
Year ended September 30, 2012		$	1,477,769			$	439,672			$	–			$	(392,315	)		$	1,525,126
Year ended September 30, 2013		$	1,525,126			$	199,577			$				$	(993,926	)		$	730,777
Allowance for customer refunds
Year ended September 30, 2012		$	145,862			$	493,927			$				$	(605,678	)		$	34,111
Year ended September 30, 2013		$	34,111			$	133,737			$				$	(161,567	)		$	6,281

(3) The following exhibits are filed with or incorporated by reference into this Annual Report.

Exhibit Number		Description		Previously Filed as Exhibit		Date Previously Filed
1.1		Engagement Agreement, dated as of January 7, 2014, by and between the Registrant and Chardan Capital Markets LLC		Filed herewith
3.1		Amended and Restated Articles of Incorporation		Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on August 15, 2007		8/15/07
3.1.1		Certificate of Change		Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on September 7, 2010		9/7/10
3.1.2		Certificate of Correction		Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on March 11, 2013		3/11/13
3.2		Amended and Restated Bylaws		Exhibit 3.23.1 to the Registrant’s AnnualCurrent Report on Form 10-K for the fiscal year ended September 30, 20078-K filed on December 15, 2011		12/20/0715/11
10.110.1*		LiveDeal, Inc. Amended and Restated 2003 Stock Plan*		Exhibit 10.1 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended September 30, 2007		12/20/07

64

10.1.110.1.1*		First Amendment to Amended and Restated 2003 Stock Plan*		Appendix A to 2009 Proxy Statement		1/29/09
10.210.1.2*		Second Amendment to the LiveDeal, Inc. Amended and Restated 2003 Stock Plan*		Appendix A to 2012 Proxy Statement		1/27/12
10.2*		Form of 2003 Stock Plan Restricted Stock Agreement*		Exhibit 10 to the Registrant’s Quarterly Report on Form 10-QSB for the fiscal quarter endingquarterly period ended March 31, 2005		5/16/05
10.310.3*		Form of 2003 Stock Plan Stock Option Agreement*		Exhibit 10.3 to the Registrant’s Annual Report on Form 10-K for the fiscal year endingended September 30, 2008		12/29/08
10.4		Standard Industrial/Commercial Multi-Tenant Lease for Mesa facility,Securities Purchase Agreement, dated June 1, 1998, betweenas of December  12, 2011, by and among the Registrant, and Art Grandlich, d/b/a McKellips Corporate Squarethe purchasers identified on the signature pages thereto		Exhibit 10.510.1 to the Registrant’s AnnualCurrent Report on Form 10-KSB for the fiscal year ended September 30, 19998-K filed on December 15,		9/19/0012/15/11
10.4.110.5		Amendment No. 1 to Standard Industrial/Commercial Multi-Tenant Lease for Mesa facility,Registration Rights Agreement, dated August 17, 1998, betweenas of December 12, 2011, by and among the Registrant and Arthur Grandlich, d/b/a McKellips Corporate Squarethe purchasers identified on the signature pages thereto		Exhibit 10.410.2 to the Registrant’s AnnualCurrent Report on Form 10-K for the fiscal year ended September 30, 20068-K filed on December 15, 2011		12/29/0615/11
10.4.210.5.1		Amendment No. 21 to Standard Industrial/Commercial Multi-Tenant Lease for Mesa facility,Registration Rights Agreement, dated January 7, 2003, betweenas of December 16, 2011, by and among the Registrant and Arthur Grandlich, d/b/a McKellips Corporate Squarethe purchasers identified on the signature pages thereto		Exhibit 10.14 to Amendment No. 210.11.1 to the Registrant’s Annual Report on Form 10-KSB/A for the fiscal year ended September 30, 200210-K filed on December 29, 2011		7/8/0312/29/11
10.4.310.6		Amendment No.Note Purchase Agreement, dated April 3, to Standard Industrial/Commercial Multi-Tenant Lease for Mesa facility, dated March 23, 2006,2012, by and between the Registrant and J3 Harmon,Isaac Capital Group LLC successor in interest to The Estate of Arthur Grandlich		Exhibit 10.4.210.1 to the Registrant’s AnnualQuarterly Report on Form 10-K for the fiscal year ended September 30, 200610-Q filed on May 15, 2012		12/29/065/15/12
10.4.410.6.1		First Amendment No. 4 to Standard Industrial/Commercial Multi-Tenant Lease for Mesa facility, datedNote Purchase Agreement, made and entered into as of April 12, 2006,3, 2012, by and between the Registrant and J3 Harmon,Isaac Capital Group LLC successor in interest to The Estate of Arthur Grandlich		Exhibit 10.4.310.12.1 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended September 30, 2006filed on January 15, 2013		12/29/06 1/15/13
10.6.2		Senior Subordinated Convertible Note (under Note Purchase Agreement)		Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed on May 15, 2012		5/15/12
10.6.3		Subordinated Guaranty (under Note Purchase Agreement)		Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q filed on May 15, 2012		5/15/12
10.6.4		Form of Warrant (under Note Purchase Agreement)		Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q filed on May 15, 2012		5/15/12
10.7		Asset Purchase Agreement, dated July 30, 2012, by and between the Registrant and LiveOpenly, Inc.		Exhibit 2.1 to the Registrant’s Quarterly Report on Form 10-Q filed on August 14, 2012		8/14/1
10.8		Employment Agreement, dated January 1, 2013, by and between the Registrant and Jon Isaac*		Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed on May 14, 2013		5/14/13

65

56

---

10.5		Standard Industrial Lease for Nevada facility, dated September 3, 2003, between the Registrant and Tomorrow 33 Convention, LP		Exhibit 10.4 to the Registrant’s Annual Report on Form 10-KSB for the fiscal year ended September 30, 2003		12/31/03
10.6		Amendment No. 1 to Standard Industrial Lease for Nevada facility, dated October 4, 2006, between the Registrant and Tomorrow 33 Convention, LP		Exhibit 10.6 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended September 30, 2006		12/29/06
10.7		Master Services Agreement, dated August 1, 2002, between the Registrant and eBillit, Inc.		Exhibit 10.24 to Amendment No. 1 to the Registrant’s Quarterly Report on Form 10-QSB/A for the fiscal quarter ended March 31, 2003		7/8/03
10.8		Billings and Related Services Agreement, dated September 1, 2001, between the Registrant and ACI Communications, Inc.		Exhibit 10.33 to Amendment No. 2 to the Registrant’s Annual Report on Form 10-KSB/A for the fiscal year ended September 30, 2002		7/8/03
10.9		Domain Name Purchase and Transfer Agreement, dated November 5, 2008, between the Registrant and YellowPages.com LLC		Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2008		2/17/09
10.10		Asset Purchase Agreement, dated as of March 9, 2009, by and among the Registrant, Telco Billing, Inc., and Local.com Corporation		Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2009		5/15/09
10.11		Settlement Agreement and Mutual release, dated as of February 3, 2010 by and among Oncall Superior Management, SM Ventures, LiveDeal, Inc. and Telco Billing, Inc.		Exhbit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2010		5/14/10
10.12		Stock Purchase Agreement, dated as of November 29, 2010, by and between the Registrant and Joint Corporation FeelTech Investment Unit 1		Attached hereto		10.21
14		Code of Business Conduct and Ethics, Adopted December 31, 2003		Exhibit 14 to the Registrant’s Quarterly Report on Form 10-QSB for the period ended March 31, 2004		5/13/04
21		Company Subsidiaries		Attached hereto
23		Consent of Mayer Hoffman McCann P.C.		Attached hereto
31		Certifications pursuant to SEC Release No. 33-8238, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002		Attached hereto
32		Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002		Attached hereto

10.9		Asset Purchase Agreement, dated September 9, 2013, by and between the Registrant and Novalk Apps S.A.S.		Filed herewith
10.10		Note Purchase Agreement, dated as of January 7, 2014, by and between the Registrant and Kingston Diversified Holdings LLC		Filed herewith
10.11		Convertible Note (under 2014 Note Purchase Agreement)		Filed herewith
10.12		Form of Warrant (under 2014 Note Purchase Agreement)		Filed herewith
14		Code of Business Conduct and Ethics, Adopted December 31, 2003		Exhibit 14 to the Registrant’s Quarterly Report on Form 10-QSB for the period ended March 31, 2004		5/13/04
23		Consent of Kabani & Company, Inc.		Filed herewith
31.1		Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002		Filed herewith
31.2		Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200		Filed herewith
32		Certification pursuant to 18 U.S.C. Section 1350		Filed herewith
101†		The following materials from the Company’s Annual Report on Form 10-K, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets as of September 30, 2013 and 2012, (ii) the Consolidated Statements of Operations for the Years Ended September 30, 2013 and 2012, (iii) Consolidated Statements of Stockholders' Equity for the Years Ended September 30, 2013 and 2012, (iv) the Consolidated Statements of Cash Flows for the Years Ended September 30, 2013 and 2012, and (iv) the Notes to Consolidated Financial Statements		Filed herewith

* Management contract or compensatory plan or arrangement

† Pursuant to Rule 406T of Regulation S-T, the interactive data files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

66

57

---

SIGNATURES

In accordance with

Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated:  January 5, 201110, 2014	/s/Kevin A. Hall Jon Isaac
	Kevin A. HallJon Isaac
	President and Chief OperatingExecutive Officer
	(Principal Executive, Officerand Financial Officer))
Dated:  January 5, 2011	/s/ Larry Tomsic
	Larry Tomsic
	Chief Financial Officer (Principal Financial and Accounting Officer)

BOARD OF DIRECTORS

Signature		Title		Date
/s/ Richard D. Butler		Director		January 5, 201110, 2014
Richard D. Butler
/s/ Sheryle BoltonDennis Gao		Director		January 5, 201110, 2014
Sheryle BoltonDennis Gao
/s/ Thomas Clarke, Jr.Jon Isaac		Director		January 5, 201110, 2014
Thomas Clark, JrJon Isaac
/s/ Greg LeClaireTony Isaac		Director		January 5, 201110, 2014
Tony Isaac
/s/ Greg LeClaire		Director		January 10, 2014
Greg LeClaire

67

58

---