Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
Dec. 31, 2013 | Feb. 06, 2014 | |
OptionsToPurchaseSharesOfCommonStockMember | ' | ' |
Entity Registrant Name | 'LIVEDEAL INC | ' |
Entity Central Index Key | '0001045742 | ' |
Document Type | '10-Q | ' |
Document Period End Date | 31-Dec-13 | ' |
Amendment Flag | 'false | ' |
Current Fiscal Year End Date | '--09-30 | ' |
Is Entity a Well-known Seasoned Issuer? | 'No | ' |
Is Entity a Voluntary Filer? | 'No | ' |
Is Entity's Reporting Status Current? | 'Yes | ' |
Entity Filer Category | 'Smaller Reporting Company | ' |
Entity Common Stock, Shares Outstanding | ' | 13,577,327 |
Document Fiscal Period Focus | 'Q1 | ' |
Document Fiscal Year Focus | '2014 | ' |
CONDENSED_CONSOLIDATED_BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) | Dec. 31, 2013 | Sep. 30, 2013 |
Assets | ' | ' |
Cash and cash equivalents | $511,565 | $761,458 |
Accounts receivable, net | 140,547 | 174,901 |
Prepaid expenses and other current assets | 81,167 | 67,126 |
Total current assets | 733,279 | 1,003,485 |
Accounts receivable, long term portion, net | 44,638 | 44,639 |
Property and equipment, net | 68,485 | 71,162 |
Deposits and other assets | 25,563 | 25,563 |
Intangible assets, net | 2,753,098 | 2,848,401 |
Total assets | 3,625,063 | 3,993,250 |
Liabilities and Stockholders' Equity | ' | ' |
Accounts payable | 515,113 | 524,053 |
Accrued liabilities | 260,480 | 299,464 |
Total liabilities | 775,593 | 823,517 |
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, 30,000,000 shares authorized, 11,356,451 and 11,335,674 shares issued and outstanding at December 31, 2013 and September 30, 2013, respectively | 11,356 | 11,335 |
Paid in capital | 30,569,533 | 30,481,179 |
Accumulated deficit | -27,742,285 | -27,333,647 |
Total stockholders' equity | 2,849,470 | 3,169,733 |
Total liabilities and stockholders' equity | $3,625,063 | $3,993,250 |
CONDENSED_CONSOLIDATED_BALANCE1
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | Dec. 31, 2013 | Sep. 30, 2013 |
Stockholders' equity: | ' | ' |
Series E convertible preferred stock, par value | $0.00 | $0.00 |
Series E convertible preferred stock, shares authorized | 200,000 | 200,000 |
Series E convertible preferred stock, issued | 127,840 | 127,840 |
Series E convertible preferred stock, outstanding | 127,840 | 127,840 |
Series E convertible preferred stock, liquidation preference | $38,202 | $38,202 |
Common stock, par value | $0.00 | $0.00 |
Common stock, shares authorized | 30,000,000 | 30,000,000 |
Common stock, shares issued | 11,356,461 | 11,335,674 |
Common stock, shares outstanding | 11,356,461 | 11,335,674 |
CONDENSED_CONSOLIDATED_STATEME
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | 3 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Condensed Consolidated Statements Of Operations | ' | ' |
Net revenues | $593,458 | $572,535 |
Cost of services | 121,329 | 102,636 |
Gross profit | 472,129 | 469,899 |
Operating expenses: | ' | ' |
General and administrative expenses | 870,699 | 762,376 |
Sales and marketing expenses | 27,072 | 19,441 |
Total operating expenses | 897,771 | 781,817 |
Operating loss | -425,642 | -311,918 |
Other expense: | ' | ' |
Interest expense, net | -516 | -750,554 |
Other income | 18,000 | 0 |
Total other expense, net | 17,484 | -750,554 |
Loss from continuing operations | -408,158 | -1,062,472 |
Discontinued operations | ' | ' |
Income from discontinued component, including disposal costs | 0 | 1,963 |
Income from discontinued operations | 0 | 1,963 |
Net loss | ($408,158) | ($1,060,509) |
Earnings per share - basic and diluted: | ' | ' |
Loss from continuing operations | ($0.04) | ($0.13) |
Discontinued operations | $0 | $0 |
Net loss | ($0.04) | ($0.13) |
Weighted average common shares outstanding: | ' | ' |
Basic & diluted | 10,735,676 | 7,961,811 |
CONSOLIDATED_STATEMENTS_OF_CAS
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 3 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ' | ' |
Net loss | ($408,158) | ($1,060,509) |
Depreciation and amortization | 104,710 | 63,567 |
Non-cash interest expense associated with convertible debt and warrants | 0 | 750,754 |
Stock based compensation expense | 65,875 | 0 |
Issuance of common stock for services | 22,506 | 30,000 |
Provision for uncollectible accounts | -24,072 | 4,016 |
Loss on disposal of property and equipment | 0 | 1,407 |
Changes in assets and liabilities: | ' | ' |
Accounts receivable | 58,426 | 56,478 |
Prepaid expenses and other current assets | -14,041 | -297,307 |
Deposits and other assets | 0 | 13,542 |
Accounts payable | -8,947 | 73,050 |
Accrued liabilities | -39,462 | 103,630 |
Net cash used in operating activities | -243,163 | -261,372 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ' | ' |
Expenditures for intangible assets | -563 | -109,500 |
Purchases of property and equipment | -6,167 | -15,813 |
Net cash used in investing activities | -6,730 | -125,313 |
CASH FLOWS FROM FINANCING ACTIVITIES: | ' | ' |
Proceeds from issuance of convertible debt and warrants | 0 | 250,000 |
Net cash provided by financing activities | 0 | 250,000 |
DECREASE IN CASH AND CASH EQUIVALENTS | -249,893 | -136,685 |
CASH AND CASH EQUIVALENTS, beginning of period | 761,458 | 1,305,785 |
CASH AND CASH EQUIVALENTS, end of period | 511,565 | 1,169,100 |
Noncash financing and investing activities: | ' | ' |
Conversion of notes payable and accrued interest into common stock | 0 | 250,333 |
Accrued and unpaid dividends | 480 | 479 |
Interest paid | $686 | $0 |
1_Organization_and_Basis_of_Pr
1. Organization and Basis of Presentation | 3 Months Ended |
Dec. 31, 2013 | |
Organization And Basis Of Presentation | ' |
Organization and Basis of Presentation | ' |
The accompanying unaudited Condensed 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 accompanying unaudited Condensed Consolidated Balance Sheet as of September 30, 2013, which has been derived from our audited Consolidated Financial Statements, and the accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles (“GAAP”) for audited financial statements. In the opinion of the Company’s management, this interim information includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods. The results of operations for the three months ended December 31, 2013 are not necessarily indicative of the results to be expected for the fiscal year ending September 30, 2014. The accompanying note disclosures related to the interim financial information included herein are also unaudited. This financial information should be read in conjunction with the consolidated financial statements and related notes thereto as of September 30, 2013 and for the fiscal year then ended included in the Company’s Annual Report on Form 10-K filed with the SEC on January 10, 2014. | |
The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Significant estimates and assumptions have been made by management throughout the preparation of the condensed consolidated financial statements, including in conjunction with establishing allowances for customer refunds, non-paying customers, dilution and fees, analyzing the recoverability of the carrying amount of intangible assets, evaluating the merits of pending litigation, estimating forfeitures of stock-based compensation, valuing beneficial conversion features in convertible debt, and evaluating the recoverability of deferred tax assets. Actual results could differ from these estimates. | |
While the Company believes that its existing cash on hand is sufficient to finance our operations for the next twelve months, there can be no assurance that we will generate profitability or positive operating cash flows in the near future. To the extent that we cannot achieve profitability or positive operating cash flows, our business will be materially and adversely affected. Further, our business is likely to experience significant volatility in its revenues, operating losses, personnel involved, products or services for sale, and other business parameters, as management implements and revises our strategies and responds to operating results and market conditions. | |
All data for common stock, options and warrants have been adjusted to reflect the 3-for-1 forward stock split for all periods presented. In addition, all common stock prices, and per share data for all periods presented have been adjusted to reflect the 3-for-1 forward stock split. The 3-for-1 forward stock split record date was February 3, 2014 and it was effective February 11, 2014, after the market closed. See Note 15 for details. |
2_Balance_Sheet_Information
2. Balance Sheet Information | 3 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' | ||||||||
Balance Sheet Information | ' | ||||||||
Balance sheet information is as follows: | |||||||||
December 31, | September 30, | ||||||||
2013 | 2013 | ||||||||
Receivables, current, net: | |||||||||
Accounts receivable, current | $ | 848,999 | $ | 904,197 | |||||
Less: Allowance for doubtful accounts | (708,452 | ) | (729,296 | ) | |||||
$ | 140,547 | $ | 174,901 | ||||||
Receivables, long term, net: | |||||||||
Accounts receivable, long term | $ | 363,540 | $ | 374,708 | |||||
Less: Allowance for doubtful accounts | (318,902 | ) | (330,069 | ) | |||||
$ | 44,638 | $ | 44,639 | ||||||
Total receivables, net: | |||||||||
Gross receivables | $ | 1,212,539 | $ | 1,278,905 | |||||
Less: Allowance for doubtful accounts | (1,027,354 | ) | (1,059,365 | ) | |||||
$ | 185,185 | $ | 219,540 | ||||||
Components of allowance for doubtful accounts are as follows: | |||||||||
December 31, | September 30, | ||||||||
2013 | 2013 | ||||||||
Allowance for dilution and fees on amounts due from billing aggregators | $ | 1,007,961 | $ | 730,777 | |||||
Allowance for customer refunds | 2,428 | 6,281 | |||||||
$ | 1,010,389 | $ | 737,058 | ||||||
December 31, | September 30, | ||||||||
2013 | 2013 | ||||||||
Property and equipment, net: | |||||||||
Furnishings and fixtures | $ | 101,611 | $ | 101,611 | |||||
Office, computer equipment and other | 410,747 | 404,580 | |||||||
512,358 | 506,191 | ||||||||
Less: Accumulated depreciation | (443,873 | ) | (435,029 | ) | |||||
$ | 68,485 | $ | 71,162 | ||||||
December 31, | September 30, | ||||||||
2013 | 2013 | ||||||||
Intangible assets, net: | |||||||||
Domain name and marketing related intangibles | $ | 1,513,708 | $ | 1,513,708 | |||||
Website and technology related intangibles | 2,336,291 | 2,335,728 | |||||||
3,849,999 | 3,849,436 | ||||||||
Less: Accumulated amortization | (1,096,901 | ) | (1,001,035 | ) | |||||
$ | 2,753,098 | $ | 2,848,401 | ||||||
December 31, | September 30, | ||||||||
2013 | 2013 | ||||||||
Accrued liabilities: | |||||||||
Deferred revenue | $ | 1,962 | $ | 2,829 | |||||
Accrued payroll and bonuses | 27,951 | 27,330 | |||||||
Accruals under revenue sharing agreements | 1,480 | 44,167 | |||||||
Accrued expenses - other | 229,087 | 225,138 | |||||||
$ | 260,480 | $ | 299,464 | ||||||
3_Going_Concern
3. Going Concern | 3 Months Ended |
Dec. 31, 2013 | |
Risks and Uncertainties [Abstract] | ' |
Going Concern | ' |
The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. For the three months ended December 31, 2013 and 2012, the Company had a net loss of $408,158 and $1,060,509, respectively. These circumstances result in substantial doubt as to the Company's ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon the Company’s ability to generate sufficient revenues to operate profitably or raise additional capital through debt financing and/or through sales of common stock. The failure to achieve the necessary levels of profitability and obtain the additional funding would be detrimental to the Company. The accompanying condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern. | |
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. | |
Management has taken the following steps to revise its operating and financial requirements, which it believes are sufficient to provide the Company with the ability to continue as a going concern. Management devoted considerable effort from inception through the period ended December 31, 2013, towards (i) establishment of sales distribution channels for its products, (ii) management of accrued expenses and accounts payable, and (iii) building and marketing its LiveDeal.com and Velocity Local™ offerings and developing other new products. In addition, the Company recently sold 2,214,612 shares of our common stock, resulting in gross proceeds of $10,000,000, in an at-the-market offering, in which Chardan Capital Markets LLC was our agent. The shares were sold under our Registration Statement on Form S-3 (Reg. No. 333-187397) , which was declared effective on May 3, 2013. | |
The Company will require additional capital to finance its planned business operations as it continues to build and market its LiveDeal.com and Velocity Local™ offerings and develop other new products. In addition, the Company may require additional capital to finance acquisitions or other strategic investments in its business. Other sources of financing may include stock issuances; additional loans (for example, through our sale and issuance of convertible notes pursuant to the $5 million line of credit that we entered into in January 2014); or other forms of financing. Any financing obtained may further dilute or otherwise impair the ownership interest of the Company’s existing stockholders. If the Company is unable to generate positive cash flows or raise additional capital in a timely manner or on acceptable terms, the Company may (i) not be able to make acquisitions or other strategic investments in its business, (ii) modify, delay or abandon some or all of its business plans, and/or (iii) be forced to cease operations. | |
Management believes that the above actions will allow the Company to continue operations for the next 12 months. |
4_Stockbased_Compensation
4. Stock-based Compensation | 3 Months Ended | ||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||
Share-based Compensation [Abstract] | ' | ||||||||||||||||
Stock-based Compensation | ' | ||||||||||||||||
From time to time, the Company grants stock options and restricted stock awards to officers, directors, employees and consultants. These 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 requisite service period. | |||||||||||||||||
Stock Options | |||||||||||||||||
The following table summarizes stock option activity for the three months ended December 31, 2013: | |||||||||||||||||
Weighted | Weighted | ||||||||||||||||
Average | Average | ||||||||||||||||
Number of | Exercise | Remaining | |||||||||||||||
Shares | Price | Contractual Life | Intrinsic Value | ||||||||||||||
Outstanding at September 30, 2013 | 675,000 | $ | 2.82 | ||||||||||||||
Granted | – | $ | – | ||||||||||||||
Exercised | – | ||||||||||||||||
Forfeited | – | ||||||||||||||||
Outstanding at December 31, 2013 | 675,000 | $ | 2.82 | 5.6 | – | ||||||||||||
Exercisable at December 31, 2013 | 75,000 | $ | 3.33 | 0.4 | – | ||||||||||||
The Company recognized compensation expense of $65,875 and $0 during the three months ended December 31, 2013 and 2012, respectively, related to stock option awards granted to certain employees and executives based on the grant date fair value of the awards, net of estimated forfeitures. The Company used the estimated forfeiture rate of awards of 10% based on actual forfeiture experience and other factors. | |||||||||||||||||
At December 31, 2013, the Company had $202,193 of unrecognized compensation expense (net of estimated forfeitures) associated with stock option awards which the Company expects will be recognized over a weighted-average period of 1.76 years. | |||||||||||||||||
The following table summarizes information about the Company’s s non-vested shares as of December 31, 2013: | |||||||||||||||||
Weighted-Average | |||||||||||||||||
Number of | Grant-Date | ||||||||||||||||
Non-vested Shares | Shares | Fair Value | |||||||||||||||
Nonvested at September 30, 2013 | 600,000 | $ | 0.73 | ||||||||||||||
Granted | – | $ | – | ||||||||||||||
Nonvested at December 31, 2013 | 600,000 | $ | 0.73 | ||||||||||||||
Stock Awards Granted to Directors | |||||||||||||||||
In September 2011, in an effort to preserve cash, our Board, after consultation with the Compensation Committee, determined to compensate 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 Company’s Amended and Restated 2003 Stock Plan (the “2003 Stock Plan”) in lieu of cash payments to directors. Under the terms of this arrangement, each non-employee director received a monthly award of a number of fully vested shares of the Company’s common stock equal to his or her monthly board of director cash fees divided by the closing market price of the Company’s common stock on the grant date. An aggregate of 250,485 shares have been issued to members of the Board of Directors pursuant to such arrangement. Other than as described immediately above, 20,787 shares of the Company’s common stock were recorded but not yet issued to members of the Board during the three months ended December 31, 2013. For the three months ended December 31, 2012, 25,107 shares of the Company’s common stock were issued to members of the Board. |
5_Debt
5. Debt | 3 Months Ended | ||
Dec. 31, 2013 | |||
Debt Disclosure [Abstract] | ' | ||
Debt | ' | ||
On April 3, 2012 (“Closing Date”), the Company entered into a Note Purchase Agreement (“Purchase Agreement”) with Isaac Capital Group, LLC (“ICG”), 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 1,209,675 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 were due and payable on April 3, 2013 (“Maturity Date”), provided that the Company had the 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) had occurred and was 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. The Company exercised such option prior to the Maturity Date. | |||
Effective as of April 3, 2012, the Company and ICG amended the Purchase Agreement to clarify ambiguities 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 $0.33 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, provided that: | |||
· | The Notes accrued interest at an annual interest rate equal to 8%. All interest was payable on the Maturity Date or upon the conversion of the applicable Note. | ||
· | The Company had the option to prepay each Note, in whole or in part, at any time without premium or penalty. | ||
· | If ICG elected 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 was subject to adjustment in the event of stock splits or combinations, stock dividends, certain pro rata distributions, and certain fundamental transactions. Each Contingent Warrant was 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 provided that they would be exercised in whole or in part and include a cashless exercise feature. | ||
· | The Notes provided that, upon the occurrence of any Event of Default, all amounts payable to ICG would become immediately due and payable without any demand or notice. | ||
· | The Company would 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) was 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 triggered 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 the principal amount of $250,000 to ICG (“Note No. 1”) on the Closing Date. Because the conversion price of $0.84 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 on the Closing Date. The discount to Note No. 1 is being amortized to interest expense until maturity or its earlier repayment or conversion | |||
As mentioned above, the Purchase Agreement, as amended, contained contingent provisions for the adjustment of the conversion ratio and conversion price, and the issuance of Contingent Warrants upon conversion. | |||
On September 10, 2012, ICG elected to convert the Note No. 1 with a conversion price of $0.79 per share, resulting in the issuance of 327,417 shares. In accordance with the terms of the agreement, warrants to acquire 327,417 shares were issued upon conversion with an exercise price of ($0.79 x 120%) $0.95 per share. Upon conversion of Note No. 1, 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 of Note No. 1 was $322,927 and was immediately recognized as interest expense. | |||
On December 11, 2012, the Company issued a second Note to ICG in the principal amount of $250,000 (“Note No. 2”), pursuant to the Purchase Agreement. Because the conversion price of $0.67 was less than the stock price, this gave rise to a beneficial conversion feature valued at $200,738. The Company recognized this beneficial conversion feature as a debt discount and additional paid in capital on December 11, 2012. On December 17, 2012, ICG elected to convert Note No. 2, resulting in the issuance of 371,487 shares of the Company’s common stock and a warrant to acquire 371,487 additional shares of the Company’s common stock at an exercise price of $0.81 per share. Upon conversion of the Note No. 2, the remaining debt discount of $196,556 was immediately recognized as interest expense. The fair value of the warrants issued in connection with the conversion of Note No. 2 was $550,016 and was immediately recognized as interest expense. | |||
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 (“Note No. 3”) and $250,000 (“Note No. 4”), respectively, pursuant to the Purchase Agreement. Because the conversion price of $0.46 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 Note Nos. 3 and 4, resulting in the issuance of 1,631,886 shares of the Company’s common stock and a warrant to acquire 1,631,886 additional shares of the Company’s common stock at an exercise price of $0.55 per share. Upon conversion of Note Nos. 3 and 4, 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 Note Nos. 3 and 4 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 (“Note No. 5”), pursuant to the Purchase Agreement. Because the conversion price of $0.47 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 Note No. 5, resulting in the issuance of 535,716 additional shares of the Company’s common stock and a warrant to acquire 535,716 shares at an exercise price of $0.56 per share. Upon conversion of Note No. 6, 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 Note No. 5 was $589,442 and was immediately recognized as interest expense. |
6_Equity
6. Equity | 3 Months Ended |
Dec. 31, 2013 | |
Equity [Abstract] | ' |
Equity | ' |
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 5. | |
For the three months ended December 31, 2013, 20,787 shares of the Company’s common stock were recorded but not yet issued to members of the Board of Directors in exchange for services. For the three months ended December 31, 2012, 25,107 shares of the Company’s common stock were issued to members of the Board of Directors in exchange for services. See Note 4. |
7_Warrants
7. Warrants | 3 Months Ended | ||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||
Warrants and Rights Note Disclosure [Abstract] | ' | ||||||||||||||||
Warrants | ' | ||||||||||||||||
As discussed in Note 5, the Company issued several Notes and converted them resulting in the issuance of warrants. The following table summarizes information about the Company’s warrants at December 31, 2013: | |||||||||||||||||
Number of Units | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (in years) | Intrinsic Value | ||||||||||||||
Outstanding at September 30, 2013 | 2,866,506 | $ | 0.63 | ||||||||||||||
Granted | – | ||||||||||||||||
Exercised | – | ||||||||||||||||
Outstanding at December 31, 2013 | 2,866,506 | 0.63 | 4.14 | 1,987,969 | |||||||||||||
Exerciseable at December 31, 2013 | 2,866,506 | 0.63 | 4.14 | 1,987,969 | |||||||||||||
8_Net_Loss_Per_Share
8. Net Loss Per Share | 3 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Earnings Per Share [Abstract] | ' | ||||||||
Net Loss Per Share | ' | ||||||||
Net loss per share is calculated using the weighted average number of shares of common stock outstanding during the applicable period. 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 unaudited Condensed Consolidated Balance Sheet. Diluted net 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 additional common shares issuable in respect of restricted share awards, stock options 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 net loss per share: | |||||||||
Three Months Ended December 31, | |||||||||
2013 | 2012 | ||||||||
Loss from continuing operations | $ | (408,158 | ) | $ | (1,062,472 | ) | |||
Less: preferred stock dividends | (480 | ) | (479 | ) | |||||
Loss from continuing operations | |||||||||
applicable to common stock | (408,638 | ) | (1,062,951 | ) | |||||
Income (loss) from discontinued operations | – | 1,963 | |||||||
Net loss applicable to common stock | $ | (408,638 | ) | $ | (1,060,988 | ) | |||
Weighted average common shares outstanding - | |||||||||
basic and diluted | 10,735,676 | 7,961,811 | |||||||
Earnings per share - basic and diluted: | |||||||||
Loss from continuing operations | $ | (0.04 | ) | $ | (0.13 | ) | |||
Discontinued operations | – | – | |||||||
Net loss | $ | (0.04 | ) | $ | (0.13 | ) | |||
The following potentially dilutive securities were excluded from the calculation of diluted net loss per share because the effects were anti-dilutive based on the application of the treasury stock method and because the Company incurred net losses during the period: | |||||||||
Three Months Ended December 31, | |||||||||
2013 | 2012 | ||||||||
Options to purchase shares of common stock | 675,000 | – | |||||||
Warrants to purchase shares of common stock | 2,866,506 | 698,904 | |||||||
Series E convertible preferred stock | 127,840 | 383,520 | |||||||
Shares of non-vested restricted stock | – | 789 | |||||||
Total potentially dilutive shares | 3,669,346 | 1,083,213 | |||||||
9_Income_Taxes
9. Income Taxes | 3 Months Ended |
Dec. 31, 2013 | |
Income Tax Disclosure [Abstract] | ' |
Income Taxes | ' |
At December 31, 2013, the Company maintained a valuation allowance against its deferred tax assets. The Company determined this valuation allowance was necessary given the current and expected near term losses and the uncertainty with respect to the Company’s ability to generate sufficient profits from its new business model. | |
During the three months ended December 31, 2013, the Company did not incur any income tax benefit associated with its net loss due to the establishment of a valuation allowance against deferred tax assets generated during the period. |
10_Related_Party_Transactions
10. Related Party Transactions | 3 Months Ended |
Dec. 31, 2013 | |
Related Party Transactions [Abstract] | ' |
Related Party Transactions | ' |
Convertible Notes with ICG | |
As described in Note 5, during 2012 and 2013 the Company entered into a Note Purchase Agreement with ICG, an entity owned by Jon Isaac, the Company’s President and Chief Executive Officer and a director of the Company, and subsequently issued a series of Subordinated Convertible Notes thereunder to ICG. In connection with these transactions, the Company received gross proceeds of $0 and $250,000 during the three months ended December 31, 2013 and 2012, respectively. | |
Under the terms of the Note Purchase Agreement and the Subordinated Convertible Notes, ICG executed its conversion option on all then-outstanding notes during the quarter ended December 31, 2012. In exchange for the conversion of $250,000 of convertible notes during the quarter ended December 31, 2012, ICG received an aggregate of 371,487 of shares of common stock and, upon conversion ICG also received warrants to acquire an additional 371,487 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 three months ended December 31, 2013 and 2012, the Company recognized total interest expense of $0 and $750,754 associated with the ICG notes. |
11_Commitments_and_Contingenci
11. Commitments and Contingencies | 3 Months Ended | ||||||
Dec. 31, 2013 | |||||||
Commitments and Contingencies Disclosure [Abstract] | ' | ||||||
Commitments and Contingencies | ' | ||||||
Litigation | |||||||
The Company is party to certain legal proceedings from time to time incidental to the conduct of its business. These proceedings could result in fines, penalties, compensatory or treble damages or non-monetary relief. The nature of legal proceedings is such that the Company cannot assure the outcome of any particular matter, and an unfavorable ruling or development could have a materially adverse effect on our consolidated financial position, results of operations and cash flows in the period in which a ruling or settlement occurs. However, based on information available to the Company’s management to date and other than as noted below, the Company’s management does not expect that the outcome of any matter pending against us is likely to have a materially adverse effect on our consolidated financial position as of December 31, 2013, our annual results of operations, cash flows or liquidity of the Company. | |||||||
Global Education Services, Inc. v. LiveDeal, Inc. | |||||||
On June 6, 2008, Global Education Services, Inc., which we refer to as GES, filed a consumer fraud lawsuit against us in the King County Superior Court in the State of Washington, alleging that our use of activator checks violated the Washington Consumer Protection Act and seeking class certification pursuant to Washington law. GES sought injunctive relief against our use of activator checks, damages in an amount equal to three times the damages allegedly sustained by the members of the putative class, exemplary damages for the alleged violation of law and its fees and costs. We denied the allegations and commenced defending the litigation. | |||||||
Early in 2010, the Court denied both parties’ dispositive motions, at 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 fully resolved and the matter closed. | |||||||
J3 Harmon LLC v. LiveDeal, Inc. | |||||||
On February 9, 2012, J3 Harmon LLC, which we refer to as J3, filed a lawsuit against us in the Superior Court for Maricopa County in the State of Arizona, alleging breach of a commercial lease agreement. J3 sought damages for alleged unpaid rents during the lease term as well as alleged damages for storage costs after the expiration of the lease term. We denied the allegations and asserted various affirmative defenses. In September 2012, the Maricopa County Superior Court entered a judgment in favor of J3 in the sum of $62,886. 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 December 31, 2013, we maintained an accrual of $52,261 related to this matter. | |||||||
Operating Leases and Service Contracts | |||||||
As of December 31, 2013, future minimum annual payments under operating lease agreements for fiscal years ending September 30 are as follows: | |||||||
2014 | 155,864 | ||||||
2015 | 175,525 | ||||||
2016 | 121,880 | ||||||
2017 | 53,946 | ||||||
2018 | – | ||||||
Thereafter | – | ||||||
$ | 507,215 | ||||||
12_Concentration_of_Credit_Ris
12. Concentration of Credit Risk | 3 Months Ended |
Dec. 31, 2013 | |
Risks and Uncertainties [Abstract] | ' |
Concentration of Credit Risk | ' |
The Company maintains cash balances at banks in California and Nevada. Accounts are insured by the Federal Deposit Insurance Corporation up to $250,000 per institution as of December 31, 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 (defined below) 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 LEC’s 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 December 31, 2013 and September 30, 2013 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 Local Exchange Carrier (“LEC”) service providers. Three such entities accounted for 46%, 26% and 19% of gross receivables at December 31, 2013 and 44%, 25%, and 18% of gross receivables at September 30, 2013, respectively. |
13_Segment_Reporting
13. Segment Reporting | 3 Months Ended |
Dec. 31, 2013 | |
Segment Reporting [Abstract] | ' |
Segment Reporting | ' |
As of December 31, 2013, the Company only operated one business segment. 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. |
14_Recent_Accounting_Pronounce
14. Recent Accounting Pronouncements | 3 Months Ended |
Dec. 31, 2013 | |
Accounting Changes and Error Corrections [Abstract] | ' |
Recent Accounting Pronouncements | ' |
The Company has reviewed all recently issued, but not effective, accounting pronouncements and does not believe the future adoption of any such pronouncements will cause a material impact on its financial condition or the result of its operation. |
15_Subsequent_Events
15. Subsequent Events | 3 Months Ended | ||
Dec. 31, 2013 | |||
Subsequent Events [Abstract] | ' | ||
Subsequent Events | ' | ||
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 1,980,000 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) (the “Registration Statement”) 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. | |||
Subsequent to the quarter ended December 31, 2013, we sold 2,214,612 shares of our common stock, resulting in gross proceeds of $10,000,000, in an at-the-market offering, in which Chardan Capital Markets LLC was our agent. We received net proceeds of $8,343,744. The shares were sold under the Registration Statement. | |||
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. | |||
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 1,800,000 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. | |||
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. | ||
— | 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., $3.12 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 $0.33. For example, if the Average Price is $0.17 per share, then for purposes of calculating the conversion price, the Average Price per share would be $0.33 per share instead of $0.17 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, 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 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. | ||
— | 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 $0.23 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 were filed with the Annual Report on Form 10-K on January 10, 2014. | |||
3-for-1 Forward Stock Split | |||
On January 16, 2014, our Board of Directors approved a 3-for-1 forward stock split with respect to the Company’s common stock. Stockholders received three shares of common stock for every one share of common stock owned on the record date of February 3, 2014. The forward stock split was effective as of the close of trading on February 11, 2014. The additional shares were distributed as of the close of business on February 11, 2014. In connection with the forward stock split, the Company’s authorized shares of common stock also increased from 10,000,000 shares to 30,000,000 shares. All data for common stock, options and warrants have been adjusted to reflect the 3-for-1 forward stock split for all periods presented. In addition, all common stock prices, and per share data for all periods presented have been adjusted to reflect the 3-for-1 forward stock split. | |||
Note Payable | |||
On January 23, 2014, the Company issued a Note to ICG in the principal amount of $500,000, relating to the debt agreement in Note 5. |
2_Balance_Sheet_Information_Ta
2. Balance Sheet Information (Tables) | 3 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' | ||||||||
Balance sheet information | ' | ||||||||
December 31, | September 30, | ||||||||
2013 | 2013 | ||||||||
Receivables, current, net: | |||||||||
Accounts receivable, current | $ | 848,999 | $ | 904,197 | |||||
Less: Allowance for doubtful accounts | (708,452 | ) | (729,296 | ) | |||||
$ | 140,547 | $ | 174,901 | ||||||
Receivables, long term, net: | |||||||||
Accounts receivable, long term | $ | 363,540 | $ | 374,708 | |||||
Less: Allowance for doubtful accounts | (318,902 | ) | (330,069 | ) | |||||
$ | 44,638 | $ | 44,639 | ||||||
Total receivables, net: | |||||||||
Gross receivables | $ | 1,212,539 | $ | 1,278,905 | |||||
Less: Allowance for doubtful accounts | (1,027,354 | ) | (1,059,365 | ) | |||||
$ | 185,185 | $ | 219,540 | ||||||
Components of allowance for doubtful accounts | ' | ||||||||
December 31, | September 30, | ||||||||
2013 | 2013 | ||||||||
Allowance for dilution and fees on amounts due from billing aggregators | $ | 1,007,961 | $ | 730,777 | |||||
Allowance for customer refunds | 2,428 | 6,281 | |||||||
$ | 1,010,389 | $ | 737,058 | ||||||
Property and equipment, net | ' | ||||||||
December 31, | September 30, | ||||||||
2013 | 2013 | ||||||||
Property and equipment, net: | |||||||||
Furnishings and fixtures | $ | 101,611 | $ | 101,611 | |||||
Office, computer equipment and other | 410,747 | 404,580 | |||||||
512,358 | 506,191 | ||||||||
Less: Accumulated depreciation | (443,873 | ) | (435,029 | ) | |||||
$ | 68,485 | $ | 71,162 | ||||||
Intangible assets, net | ' | ||||||||
December 31, | September 30, | ||||||||
2013 | 2013 | ||||||||
Intangible assets, net: | |||||||||
Domain name and marketing related intangibles | $ | 1,513,708 | $ | 1,513,708 | |||||
Website and technology related intangibles | 2,336,291 | 2,335,728 | |||||||
3,849,999 | 3,849,436 | ||||||||
Less: Accumulated amortization | (1,096,901 | ) | (1,001,035 | ) | |||||
$ | 2,753,098 | $ | 2,848,401 | ||||||
Accrued liabilities | ' | ||||||||
December 31, | September 30, | ||||||||
2013 | 2013 | ||||||||
Accrued liabilities: | |||||||||
Deferred revenue | $ | 1,962 | $ | 2,829 | |||||
Accrued payroll and bonuses | 27,951 | 27,330 | |||||||
Accruals under revenue sharing agreements | 1,480 | 44,167 | |||||||
Accrued expenses - other | 229,087 | 225,138 | |||||||
$ | 260,480 | $ | 299,464 |
4_Stockbased_Compensation_Tabl
4. Stock-based Compensation (Tables) | 3 Months Ended | ||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||
Share-based Compensation [Abstract] | ' | ||||||||||||||||
Stock option activity | ' | ||||||||||||||||
Weighted | Weighted | ||||||||||||||||
Average | Average | ||||||||||||||||
Number of | Exercise | Remaining | |||||||||||||||
Shares | Price | Contractual Life | Intrinsic Value | ||||||||||||||
Outstanding at September 30, 2013 | 675,000 | $ | 2.82 | ||||||||||||||
Granted | – | $ | – | ||||||||||||||
Exercised | – | ||||||||||||||||
Forfeited | – | ||||||||||||||||
Outstanding at December 31, 2013 | 675,000 | $ | 2.82 | 5.6 | – | ||||||||||||
Exercisable at December 31, 2013 | 75,000 | $ | 3.33 | 0.4 | – | ||||||||||||
Non-vested shares | ' | ||||||||||||||||
Weighted-Average | |||||||||||||||||
Number of | Grant-Date | ||||||||||||||||
Non-vested Shares | Shares | Fair Value | |||||||||||||||
Nonvested at September 30, 2013 | 600,000 | $ | 0.73 | ||||||||||||||
Granted | – | $ | – | ||||||||||||||
Nonvested at December 31, 2013 | 600,000 | $ | 0.73 |
7_Warrants_Tables
7. Warrants (Tables) | 3 Months Ended | ||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||
Warrants and Rights Note Disclosure [Abstract] | ' | ||||||||||||||||
Schedule of warrants issued | ' | ||||||||||||||||
Number of Units | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (in years) | Intrinsic Value | ||||||||||||||
Outstanding at September 30, 2013 | 2,866,506 | $ | 0.63 | ||||||||||||||
Granted | – | ||||||||||||||||
Exercised | – | ||||||||||||||||
Outstanding at December 31, 2013 | 2,866,506 | 0.63 | 4.14 | 1,987,969 | |||||||||||||
Exerciseable at December 31, 2013 | 2,866,506 | 0.63 | 4.14 | 1,987,969 |
8_Net_Loss_Per_Share_Tables
8. Net Loss Per Share (Tables) | 3 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Earnings Per Share [Abstract] | ' | ||||||||
Basic and diluted net loss per share | ' | ||||||||
Three Months Ended December 31, | |||||||||
2013 | 2012 | ||||||||
Loss from continuing operations | $ | (408,158 | ) | $ | (1,062,472 | ) | |||
Less: preferred stock dividends | (480 | ) | (479 | ) | |||||
Loss from continuing operations | |||||||||
applicable to common stock | (408,638 | ) | (1,062,951 | ) | |||||
Income (loss) from discontinued operations | – | 1,963 | |||||||
Net loss applicable to common stock | $ | (408,638 | ) | $ | (1,060,988 | ) | |||
Weighted average common shares outstanding - | |||||||||
basic and diluted | 10,735,676 | 7,961,811 | |||||||
Earnings per share - basic and diluted: | |||||||||
Loss from continuing operations | $ | (0.04 | ) | $ | (0.13 | ) | |||
Discontinued operations | – | – | |||||||
Net loss | $ | (0.04 | ) | $ | (0.13 | ) | |||
Potentially dilutive securities | ' | ||||||||
Three Months Ended December 31, | |||||||||
2013 | 2012 | ||||||||
Options to purchase shares of common stock | 675,000 | – | |||||||
Warrants to purchase shares of common stock | 2,866,506 | 698,904 | |||||||
Series E convertible preferred stock | 127,840 | 383,520 | |||||||
Shares of non-vested restricted stock | – | 789 | |||||||
Total potentially dilutive shares | 3,669,346 | 1,083,213 |
11_Commitments_and_Contingenci1
11. Commitments and Contingencies (Tables) | 3 Months Ended | ||||||
Dec. 31, 2013 | |||||||
Commitments and Contingencies Disclosure [Abstract] | ' | ||||||
Future minimum annual payments under operating lease agreements | ' | ||||||
2014 | 155,864 | ||||||
2015 | 175,525 | ||||||
2016 | 121,880 | ||||||
2017 | 53,946 | ||||||
2018 | – | ||||||
Thereafter | – | ||||||
$ | 507,215 |
2_Balance_Sheet_Information_De
2. Balance Sheet Information (Details) (USD $) | Dec. 31, 2013 | Sep. 30, 2013 |
Receivables, current, net: | ' | ' |
Accounts receivable, current | $848,999 | $904,197 |
Less: Allowance for doubtful accounts | -708,452 | -729,296 |
Receivables, current, net | 140,547 | 174,901 |
Receivables, long term, net: | ' | ' |
Accounts receivable, long term | 363,540 | 374,708 |
Less: Allowance for doubtful accounts | -318,902 | -330,069 |
Receivables, long term, net | 44,638 | 44,639 |
Total receivables, net: | ' | ' |
Gross receivables | 1,212,539 | 1,278,905 |
Less: Allowance for doubtful accounts | -1,027,354 | -1,059,365 |
Total receivables, net | 185,185 | 219,540 |
Allowance for dilution and fees on amounts due from billing aggregators | 1,007,961 | 730,777 |
Allowance for customer refunds | 2,428 | 6,281 |
Total allowances | 1,010,389 | 737,058 |
Property and equipment, net: | ' | ' |
Furnishings and fixtures | 101,611 | 101,611 |
Office, computer equipment and other | 410,747 | 404,580 |
Plant Property and Equipment,Gross | 512,358 | 506,191 |
Less: Accumulated depreciation | -443,873 | -435,029 |
Property and equipment, net | 68,485 | 71,162 |
Intangible assets, net: | ' | ' |
Domain name and marketing related intangibles | 1,513,708 | 1,513,708 |
Website and technology related intangibles | 2,336,291 | 2,335,728 |
Intangible assets, gross | 3,849,999 | 3,849,436 |
Less: Accumulated amortization | -1,096,901 | -1,001,035 |
Intangible assets, net | 2,753,098 | 2,848,401 |
Accrued liabilities: | ' | ' |
Deferred revenue | 1,962 | 2,829 |
Accrued payroll and bonuses | 27,951 | 27,330 |
Accruals under revenue sharing agreements | 1,480 | 44,167 |
Accrued expenses - other | 229,087 | 225,138 |
Total accrued liabilities | $260,480 | $299,464 |
3_Going_Concern_Narrative
3. Going Concern (Narrative) (USD $) | 3 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Risks and Uncertainties [Abstract] | ' | ' |
Net loss | ($408,158) | ($1,060,509) |
Common stock issued for cash, value | $10,000,000 | ' |
Common stock issued for cash, shares | 2,214,612 | ' |
4_Stockbased_Compensation_Deta
4. Stock-based Compensation (Details - Stock Option Activity) (Stock Options, USD $) | 3 Months Ended |
Dec. 31, 2013 | |
Stock Options | ' |
Number of Shares | ' |
Outstanding, beginning balance | 675,000 |
Granted | 0 |
Exercised | 0 |
Forfeited | 0 |
Outstanding, ending balance | 675,000 |
Exercisable | 75,000 |
Outstanding, ending balance | $2.82 |
Exercisable | $3.33 |
Weighted Average Remaining Contractual Life | ' |
Outstanding, end of period | '5 years 7 months 6 days |
Exercisable | '4 years 24 days |
4_Stockbased_Compensation_Deta1
4. Stock-based Compensation (Details - Non-Vested Shares) (Nonvested Shares) | 3 Months Ended |
Dec. 31, 2013 | |
Nonvested Shares | ' |
Number of Shares, Nonvested | ' |
Outstanding, beginning balance | 600,000 |
Granted | 0 |
Outstanding, ending balance | 600,000 |
Weighted-Average Grant Date Fair Value | ' |
Granted | '8 months 23 days |
Nonvested, ending balance | '8 months 23 days |
4_Stockbased_Compensation_Narr
4. Stock-based Compensation (Narrative) (USD $) | 3 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Stock based compensation expense | $65,875 | $0 |
Stock issued to board members | 250,485 | 25,107 |
Stock Options | ' | ' |
Unrecognized compensation expense | $202,193 | ' |
Unrecognized weighted-average period | '1 year 9 months 4 days | ' |
5_Debt_Narrative
5. Debt (Narrative) (USD $) | 3 Months Ended | 12 Months Ended | |||||
Dec. 31, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | |
ICG Note 1 | ICG Note 2 | ICG Note 3 | ICG Note 4 | ICG Note 5 | |||
Note issued | ' | ' | $250,000 | $250,000 | $500,000 | $250,000 | $250,000 |
Beneficial conversion feature | 0 | 750,754 | 166,667 | 200,738 | 401,386 | ' | 250,000 |
Shares issued upon conversion | ' | ' | 109,139 | 371,487 | 1,631,886 | ' | 535,716 |
Debt discount recognized as interest expense | ' | ' | 97,222 | 196,556 | 396,977 | ' | 250,000 |
Fair value of warrants recognized as interest expense | ' | ' | $322,927 | $550,016 | $1,299,884 | ' | $589,442 |
6_Equity_Narrative
6. Equity (Narrative) | 3 Months Ended |
Dec. 31, 2013 | |
Equity [Abstract] | ' |
Stock recorded but not issued | 20,787 |
Stock issued for services, shares | 25,107 |
7_Warrants_Details_Warrants_Ou
7. Warrants (Details - Warrants Outstanding) (Warrants, USD $) | 3 Months Ended |
Dec. 31, 2013 | |
Warrants | ' |
Number of units | ' |
Outstanding, beginning of period | 2,866,506 |
Granted | 0 |
Exercised | 0 |
Outstanding, end of period | 2,866,506 |
Exercisable, end of period | 2,866,506 |
Outstanding, beginning of period | $0.63 |
Granted | $0 |
Outstanding, end of period | $0.63 |
Exercisable, end of period | $0.63 |
Weighted Average Remaining Contractual Term (in years) | ' |
Outstanding, end of period | '4 years 1 month 20 days |
Exercisable, end of period | '4 years 1 month 20 days |
Outstanding, end of period | $1,987,969 |
Exercisable, end of period | 1,987,969 |
8_Net_Loss_Per_Share_Details_C
8. Net Loss Per Share (Details - Computation of loss per share) (USD $) | 3 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Net Loss Per Share | ' | ' |
Loss from continuing operations | ($408,158) | ($1,062,472) |
Less: preferred stock dividends | -480 | -479 |
Loss from continuing operations applicable to common stock | -408,638 | -1,062,951 |
Income (loss) from discontinued operations | 0 | 1,963 |
Net loss applicable to common stock | ($408,638) | ($1,060,988) |
Weighted average common shares outstanding - basic and diluted | 10,735,676 | 7,961,811 |
Earnings per share - basic and diluted: | ' | ' |
Loss from continuing operations | ($0.04) | ($0.13) |
Discontinued operations | $0 | $0 |
Net loss | ($0.04) | ($0.13) |
8_Net_Loss_Per_Share_Details_A
8. Net Loss Per Share (Details - Antidilutive securities) | 3 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ' | ' |
Antidilutive Securities Excluded From Computation Of Earnings Per Share Amount | 3,669,346 | 1,083,213 |
Options | ' | ' |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ' | ' |
Antidilutive Securities Excluded From Computation Of Earnings Per Share Amount | 675,000 | 0 |
Warrants | ' | ' |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ' | ' |
Antidilutive Securities Excluded From Computation Of Earnings Per Share Amount | 2,866,506 | 698,904 |
Series E Convertible Preferred Stock | ' | ' |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ' | ' |
Antidilutive Securities Excluded From Computation Of Earnings Per Share Amount | 127,840 | 383,520 |
Shares Of Nonvested Restricted Stock | ' | ' |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ' | ' |
Antidilutive Securities Excluded From Computation Of Earnings Per Share Amount | 0 | 789 |
10_Related_Party_Transactions_
10. Related Party Transactions (Narrative) (USD $) | 3 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Related Party Transactions [Abstract] | ' | ' |
Gross proceeds from related party debt | $0 | $250,000 |
Interest expense associated with ICG Notes | $0 | $750,754 |
10_Commitments_and_Contingenci
10. Commitments and Contingencies (Details) (USD $) | Dec. 31, 2013 |
Commitments and Contingencies Disclosure [Abstract] | ' |
2014 | $155,864 |
2015 | 175,525 |
2016 | 121,880 |
2017 | 53,946 |
2018 | 0 |
Thereafter | 0 |
Total | $507,215 |
12_Concentration_of_Credit_Ris1
12. Concentration of Credit Risk (Narrative) (Accounts Receivable [Member]) | 3 Months Ended | 12 Months Ended |
Dec. 31, 2013 | Sep. 30, 2013 | |
LEC 1 | ' | ' |
Concentration Risk [Line Items] | ' | ' |
Concentration of receivables | 46.00% | 44.00% |
LEC 2 | ' | ' |
Concentration Risk [Line Items] | ' | ' |
Concentration of receivables | 26.00% | 25.00% |
LEC 3 | ' | ' |
Concentration Risk [Line Items] | ' | ' |
Concentration of receivables | 19.00% | 18.00% |