UNITED
      STATES


SECURITIES
      AND EXCHANGE
      COMMISSION


WASHINGTON,
      D.C.
      20549


___________





FORM
      10-K


ANNUAL
      REPORT


PURSUANT
      TO SECTION 13 OR
      15(d)


OF
      THE SECURITIES EXCHANGE ACT OF
      1934





(Mark
      one)




x
            ANNUAL
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934




For
      the
      fiscal year ended September 30, 2007





o
            TRANSITION
                REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
                OF
                1934




For
      the
      Transition period from ________ to  ____________





Commission
      File Number: 0-24217





LiveDeal,
      Inc.


(Exact
      Name of Registrant as Specified in Its Charter)





Nevada
            
            85-0206668(State
                or Other Jurisdiction of Incorporation or Organization)
            
            (IRS
                Employer Identification No.)





4840
                East Jasmine Street, Suite
                105,
              Mesa,
                Arizona
            
            85205(Address
                of principal executive offices)
            
            (Zip
                Code)





Registrant’s
      telephone number, including area code: (480) 654-9646





Securities
      registered under Section 12(b) of the Exchange Act: None





Securities
      registered under Section 12(g) of the Exchange Act:





Common
      Stock, $.001 Par
      Value


(Title
      of
      Class)





Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act. Yes o No x





Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or Section 15(d) of the Act. Yes o No x





Indicate
      by check mark whether the registrant: (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90
      days.           Yes x No o














Indicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K is not contained herein, and will not be contained, to the best
      of registrant’s knowledge, in definitive proxy or information statements
      incorporated by reference in Part III of this Form 10-K or any amendment to
      this
      Form 10-K o





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer.  See definition of
“accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange
      Act.


Large
                accelerated filer o
            Accelerated
                filer o
            Non-accelerated
                filer x





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes o No x





The
      aggregate market value of the common stock held by non-affiliates computed
      based
      on the closing price of such stock on March 31, 2007 was approximately
      $33,700,000.





The
      number of shares outstanding of the registrant’s classes of common stock, as of
      December 3, 2007, was 6,640,541 shares.





DOCUMENTS
      INCORPORATED BY REFERENCE





Portions
      of the Proxy Statement relating to the Registrant’s 2008 Annual Meeting of
      Stockholders are incorporated by reference in Part III of this Form
      10-K.











LIVEDEAL,
      INC.





FORM
      10-K


For
      the year ended September 30,
      2007





TABLE
      OF CONTENTS





PagePart
                IItem
                1.
            Business
            
            2Item
                1A.
            Risk
                Factors
            
            9Item
                1B.
            Unresolved
                Staff Comments
            
            19Item
                2.
            Properties
            
            19Item
                3.
            Legal
                Proceedings
            
            19Item
                4.
            Submission
                of Matters to a Vote of Security
                Holders
            
            20Part
                IIItem
                5.
            Market
                for Registrant’s Common Equity, Related Stockholder
                Matters and Issuer Purchases
                of Equity Securities
            
            20Item
                6.
            Selected
                Financial Data
            
            22Item
                7.
            Management’s
                Discussion and Analysis of Financial Condition
                and Results of Operations
            
            23Item
                7A.
            Quantitative
                and Qualitative Disclosure About Market
                Risk
            
            36Item
                8.
            Financial
                Statements and Supplementary
                Data
            
            37Report
                of Independent Registered Public Accounting
                Firm
            
            38Consolidated
                Financial Statements:Consolidated
                Balance Sheets at September 30, 2007 and
                2006
            
            40Consolidated
                Statements of Operations for the Years Ended
                September 30, 2007, 2006, and 2005
            
            41Consolidated
                Statements of Stockholders' Equity for the Years
                Ended September 30, 2007, 2006, and 2005
            
            42Consolidated
                Statements of Cash Flows for the Years Ended
                September 30, 2007, 2006, and 2005
            
            43Notes
                to Consolidated Financial
                Statements
            
            44Item
                9.
            Changes
                in and Disagreements With Accountants on Accounting
                and Financial Disclosures
            
            62Item
                9A.
            Controls
                and Procedures
            
            62Item
                9B.
            Other
                Information
            
            63Part
                IIIItem
                10.
            Directors,
                Executive Officers and Corporate
                Governance
            
            63Item
                11.
            Executive
                Compensation
            
            63Item
                12.
            Security
                Ownership of Certain Beneficial Owners and Management
                and Related Stockholder Matters
            
            63Item
                13.
            Certain
                Relationships and Related Transactions, and Director
                Independence
            
            63Item
                14.
            Principal
                Accountant Fees and Services
            
            63Part
                IVItem
                15.
            Exhibits
                and Financial Statement
                Schedule
            
            63Signatures
            
            68




i
 Table
            of
            Contents





PART
      I





Forward-Looking
      Statements





Part
      I 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 Part I of this Annual Report include, but are not
      limited to, our company’s (i) belief that local exchange carrier, or LEC
      billing, will continue to be a significant billing channel in the future; (ii)
      the expectation of increasing our future telemarketing efforts to generate
      new
      business given our discontinuance of activation checks; (iii) expectation of
      increasing revenues through our national accounts programs, fulfillment
      contracts, web hosting and other arrangements; (iv) expectation that our
      technologies will increase recurrent use of our system by users of our directory
      services; (v) belief in the growth of Internet usage and the Internet Yellow
      Page market as described in recent press releases by The Kelsey
      Group;  (vi) belief that existing cash on hand will be sufficient to
      meet our needs for the next 12 months; (vii) belief that recent acquisitions
      to
      bring telemarketing services in-house will yield future cost savings 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.





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 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.





ITEM
      1.
      Business





Our
      Company





LiveDeal,
      Inc., a Nevada corporation (formerly known as YP Corp.) (the “Company,” “we,”
“us,” or “our”) is a combined local online classifieds and Yellow Pages
      marketplace, headquartered in Mesa, Arizona. Through our wholly-owned
      subsidiary, Telco Billing, Inc. (“Telco”), located in Las Vegas, Nevada, we
      publish our Yellow Pages online at or through the following URL’s:
      www.Yellow-Page.Net, www.YP.Net,www.YP.Com and www.livedeal.com.  Any
      information contained on the foregoing websites or any other websites referenced
      in this Annual Report are not a part of this Annual Report.





On
      June
      6, 2007, we completed our acquisition of LiveDeal, Inc, a California corporation
      (“LiveDeal”).  LiveDeal has developed and operates an online local
      classifieds marketplace, www.livedeal.com which has millions of goods and
      services listed for sale in almost every city and zip code across the U.S.
      LiveDeal offers 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. Additionally, the LiveDeal technology lets
      consumers search or browse for items in a particular city, state or zip
      code.





On
      July
      10, 2007, we acquired substantially all of the assets and assumed certain
      liabilities of OnCall Subscriber Management Inc. a Manila, Philippines-based
      company that provides telemarketing services.  This acquisition
      allowed us to bring certain marketing efforts in-house, which we expect to
      yield
      future cost savings.





Summary
      Business
      Description





We
      maintain a combined local online classifieds and Yellow Pages marketplace with
      millions of goods and services listed for sale, in every city and zip code
      across the U.S. By combining the benefits of classifieds, business listings,
      mobile services, advertising/distribution networks and e-commerce into a single
      online solution, we offer businesses and consumers an affordable and effective
      solution for creating a web presence and marketing their products and services
      locally. Through our online properties YP.com and LiveDeal.com, we enable buyers
      and sellers to find and list business services, merchandise, real estate,
      automobiles, pets and more in their local communities. Using LiveDeal’s
      marketplace, consumers can search or browse for items in a particular city,
      state or zip code, or reach out on a national or global scope if they so
      choose.





2
 Table
            of
            Contents





Online
      Classifieds





We
      operate an online classified marketplace at our website
      LiveDeal.com.  We offer our standard non-commercial classified
      advertisements to users at no charge.  However, we offer additional
      upgrades on a fee-for-service basis to promote these
      listings.  Additionally, commercial businesses utilize our online
      marketplace to promote their businesses.  We offer various online
      storefronts to commercial businesses which permit these businesses to establish
      a separate section within our site with their logos, enhanced listings and
      other
      features.





Advertisers
      can also display graphical advertisements on the pages that are viewed by our
      users across our website. For these advertising services, we earn revenue as
      “impressions” are delivered. An “impression” is delivered when an advertisement
      appears in pages viewed by users.





Yellow
      Page
      Marketplace





We
      use a
      business model similar to print Yellow Pages publishers for our Yellow Page
      marketplace.  We publish basic directory listings on the Internet free
      of charge.  Our basic listings contain the business name, address and
      telephone number for almost 17 million U.S. businesses. We strive to maintain
      a
      listing for almost every business in America in this format.





We
      generate revenues from advertisers that desire increased exposure for their
      businesses.  As described below, advertisers pay us monthly fees in
      the same manner that advertisers pay additional fees to traditional print Yellow
      Pages providers for enhanced advertisement font, location or
      display.  The users of our website are prospective customers for our
      advertisers, as well as the other businesses for which we publish basic
      listings.  We also have arrangements with third parties to distribute
      our advertisers’ information to other search engines, thereby enhancing our
      advertisers’ presence on the Internet.





Benefits
      to
      Advertisers.  RH Donnelley indicated in its 2004 report that
      the Internet is the future of the Yellow Pages.  For advertisers, we
      believe that online Yellow Pages provide significant competitive advantages
      over
      existing print directories. For example, the ability of online advertisers
      to
      access and modify their displays and advertisements often results in more
      current information.  Additionally, online advertisers can more
      readily advertise temporary or targeted specials or discounts.  We
      provide added value to advertisers that have purchased our Internet Advertising
      Package (“IAP”) through promotion and branding of our website to bring customers
      to our advertisers. We believe that the large number of IAPs, which include
      the
      Mini-WebPages, provide users of our website with more information about our
      advertisers and that this feature is more readily available on our website
      than
      that of our competitors. We believe that we provide users of our website with
      the information they are looking for, more quickly and more
      efficiently.  We believe our call center provides the highest level of
      customer service and therefore provides IAP advertisers with the necessary
      resources to fully utilize the benefits of the IAP.  We also believe
      the attraction of these users will, over the long-term, result in more sales
      for
      our IAP advertisers.





Moreover,
      we provide additional value through our relationships.  We provide the
      majority of our IAP advertisers additional exposure by circulating their
      listings to other search engines.   The circulated listing competes
      for appearance in search results across the Internet through a paid advertising
      agreement with Interchange Corp., which in turn circulates listings to
      destinations such as epilot.com and local.com.  Interchange Corp.
      has agreements with approximately 300 search partners with over 3
      billion searches per month to display advertising.  We also have an
      agreement with Yahoo! Search Services to improve our IAP advertisers’ appearance
      in search results at several high-profile sites including www.msn.com,
      www.altavista.com, www.cnn.com and www.infospace.com.  In addition to our
      paid advertising programs, our preferred listings are syndicated
      to community portals at www.mycity.com.   MyCity.com has a
      national network of online city guides, focused on delivering local search
      results.





3
 Table
            of
            Contents





Benefits
      to Users of our
      Website.  We are a national online Yellow Pages. Users of our
      website can access information nationally rather than relying exclusively on
      local listings such as those provided in print Yellow Pages
      directories.  In addition, our product offerings allow users to find
      and take advantage of our advertisers’ current special offerings and discounts.
      Users can access such information easily through their desktop or laptop
      computers, cellular telephones or hand-held devices, such as personal digital
      assistants. We believe our offering of a national online Yellow Pages service
      meets the growing demand for immediate access and the increasing need and trend
      of Internet users who are more frequently traveling to areas outside the areas
      serviced by their local print directories.  We also believe that our
      website meets or exceeds the local Yellow Page search capabilities of our major
      competitors.





Products
      and
      Services





Internet
      Advertising Package.Our primary product is our Internet Advertising Package, or IAP. Under
      this package, the advertiser pays for additional exposure by purchasing a
      Mini-WebPage.  This Mini-WebPage contains, among other useful
      information, a 40-word description of the business, hours of operation, and
      detailed contact information.  The advertiser can easily access and
      modify its Mini-WebPage.  This product is easily searched by users of
      our website on their personal computers, as well as cellular telephones and
      other hand-held devices.  In order to provide search traffic to an
      advertiser’s Mini-WebPage, we elevate the advertiser to a preferred listing
      status at no additional charge. As such, the preferred advertiser enjoys the
      benefit of having its advertisement displayed in a primary position before
      all
      of the basic listings in that particular category when users of our website
      perform searches on our website.  We also provide our IAP advertisers
      with enhanced presentation and additional unique products,
      including:




·
            Larger
                font.


·
            Bolded
                business name.


·
            A
                “tagline” whereby the advertiser can differentiate itself from its
                competitors.


·
            An
                audio advertisement.


·
            Map
                directions.


·
            A
                Click2CallTM feature, whereby a user of our website can place a telephone
                call to one of our advertising customers by clicking the icon that
                is
                displayed on the Mini-WebPage.  This initiates a telephone call
                by the advertiser to the user, in a conference call type format.
                Once both
                are connected, it functions as a regular telephone
                call.  Because we cover all charges for this telephone call, it
                is free of charge to both the user and the IAP advertiser.  We
                have an agreement with WebDialogs, Inc. to provide this
                service.


·
            A
                link to the advertiser’s own webpage and email
                address.


·
            Additional
                distribution network for preferred listings. This feature gives additional
                exposure to our IAP advertisers by placing their preferred listing
                on
                several online directory systems.  There currently is no charge
                to the IAP advertiser for these additional channels of
                distribution.





Our
      IAP
      advertisers generally pay between $27.50 and $39.95 per month. Our IAP and
      the
      Internet Dial-Up Package described below account for over 90% of our net
      revenues.





Classified
      Advertisements.For our classified business, we offer our
      standard non-commercial classified advertisement at no
      charge.  However, we offer additional upgrades on a fee-for-service
      basis to promote these listings.  Additionally, commercial businesses
      utilize our online marketplace to promote their businesses.  We offer
      various online storefronts to commercial businesses which permit these
      businesses to establish a separate section within our site with their logos,
      enhanced listings and other features.





Revenues
      from the classified marketplace are only included in our fiscal 2007 operating
      results from June 6, 2007, the date of our acquisition of
      LiveDeal.  Since the date of the LiveDeal acquisition, these products
      have accounted for approximately 2 percent of our net revenues.





Banner
      Advertisements.We offer banner advertisements and other
      graphical advertisements to businesses.We work with our
      advertisers to maximize the effectiveness of their campaigns by optimizing
      advertisement formats and placement on our sites.  We generate
      revenues from these advertisements on a “click-through” basis from the
      advertisements placed on the YP.com and LiveDeal.com sites.  Since the
      date of the LiveDeal acquisition, these products have accounted for
      approximately 2 percent of our net revenues.





4
 Table
            of
            Contents





Other
      Online
      Services.  We also offer our customers other products and
      services to enhance their use of the Internet, including a simple, effective,
      website development tool and a cost-effective Internet dial-up
      package.  These products accounted for less than 1% of our net
      revenues in fiscal 2007.





Fulfillment
      Services.Beginning in fiscal 2006, we began entering into
      contracts with several third parties whereby we provide hosting, customer
      service and certain administrative functions under a revenue sharing
      agreement.  We believe these agreements allow us to increase
      operational efficiencies and expand our customer base.





Billing





Our
      billing process allows us to deliver high levels of service to our customers
      through convenient and timely billing and payment options.  We
      currently bill our advertisers through (i) their LEC, (ii) ACH billing, (iii)
      their credit card or (iv) direct bill invoices.





Similar
      to the local Regional Bell Operating Companies, we are approved to bill our
      products and services directly on some of our advertisers’ local telephone bill
      through their local exchange carrier, or LEC, commonly referred to as their
      local telephone company.  We believe that this is an efficient and
      cost-effective billing method as compared to direct billing
      methods.  LEC billing accounted for approximately 63% of net billings
      in fiscal 2007.





In
      order
      to bill our advertisers through their LECs, we are required to use one or more
      billing service aggregators. These aggregators have been approved by various
      LECs to provide billing, collection, and related services through the LECs.
      Under these agreements, our service aggregators bill and collect our charges
      to
      our advertisers through LEC billing and remit to us the proceeds, net of fees,
      bad debt expense, customer returns, and unbillable accounts, typically within
      90
      days of submission.





We
      also
      use billing service providers to process billings via recurring direct bank
      account withdrawal options through an Automated Clearing House, or ACH
      billings.  These service providers process direct bank withdrawals
      through an Automated Clearing House and remit the proceeds, net of fees and
      refunds to advertisers that cancel their service, typically within 15 days
      of
      settlement.





Under
      our
      contractual agreements with our LEC billing service aggregators and our ACH
      service providers, these third parties are entitled to withhold certain amounts
      from our net proceeds to serve as a security deposit or “holdbacks” or
“reserves.”  In the case of LEC billing aggregators, such amounts are
      generally remitted to us over a 12-18 month period, depending on the terms
      of
      the respective agreements.  ACH processors maintain a rolling reserve
      based on average monthly volume.





Pricing





We
      generally price our IAP product between $27.50 and $39.95 per month, which
      includes all of the service benefits previously described. We believe that
      these
      prices are comparable to the prices of our competitors and we believe that
      our
      site provides superior value to our advertisers when considering the many
      benefits that they receive, including the Click2Call feature, the Mini-WebPage,
      mapping directions, links to the advertiser websites, and the speed and ease
      of
      use of our website.





Our
      pricing advantage is significant when compared with printed Yellow
      Pages.  For a Yellow Pages listing with comparable information
      content, an advertiser would typically pay over $200 per month.  This
      listing in the printed Yellow Pages would include a business description of
      comparable size to our IAP offering but would lack our Click2Call feature,
      mapping directions, and link to the advertiser’s website.  Our online
      Yellow Pages provide significant flexibility in terms of changing content and
      adding special informational items at any time throughout the
      year.  Advertisers in printed Yellow Pages are limited by the
      publishers’ infrequent re-publication schedule if they desire to change their
      advertisement.





Basic
      classified advertisements for non-commercial users are free, though we offer
      a
      variety of promotional options to improve selling success on a fee for service
      basis, with such pricing ranging from $0.50 to $29.95 per
      listing.    Pricing for storefronts and other commercial
      services are priced beginning at $9.95 per month for merchandise accounts and
      $76.00 per month for automobile accounts, with additional promotional options
      offered on a fee-for-service basis.  Our pricing also is competitive
      with print classified advertisements.





5
 Table
            of
            Contents





Marketing





As
      with
      leading online businesses such as Yahoo! and Google, we seek to develop a strong
      brand and content offerings which will attract and engage users and
      advertisers.  In June 2007, we combined existing businesses in the
      online classified advertising market (LiveDeal, Inc.) with the online Yellow
      Page market (the former core YP Corp. business) to provide users with an
      effective online venue for marketing their products and services
      locally.  We believe that the natural synergies associated with these
      two businesses will allow us to create a content-rich and efficient marketplace
      that will drive growth in users and advertisers.





We
      utilize various online marketing methods to drive users and advertisers to
      our
      site.  However, our primary marketing method is
      telemarketing.  In fiscal 2007, we acquired an existing telemarketing
      vendor in the Philippines which added 170 employees and enables us to conduct
      full-scale telemarketing efforts at a reduced cost.  We expect that
      this acquisition will provide us cost savings in the future.





We
      utilize our expertise and experience as an Internet company to identify other
      marketing opportunities.  Through our referral networks, we have
      generated revenue from national accounts programs (whereby revenues are
      generated on a “per click” basis), fulfillment contracts, web hosting and other
      arrangements.  We also have entered into various marketing
      arrangements with other businesses whereby we pay commissions based on sales
      leads and revenue generated from these businesses.  To date, such
      commissions have not been material. We evaluate such business opportunities
      on a
      case-by-case basis and expect to expand future revenues from such marketing
      efforts.




Technology
      and
      Infrastructure





We
      have
      developed technologies to support the timely delivery of information requested
      by a user of our online businesses.  A staff of senior engineers
      experienced in large-scale distributed web 2.0 applications and computer
      operation develops and maintains the technology.  We believe we are
      particularly adept at scalable databases, design, data modeling, operations
      and
      content management for a large-scale high volume website.





To
      focus
      on a quality and timely product, we have divided our technology staff and
      technology base into a business operations unit and an advanced technologies
      group dedicated to our directory services product.  Our business
      operations support a sophisticated call center, automated billing of our
      customers, customer relationship management, and automated mailing
      campaign.  Our advanced technologies group supports all research,
      design, development and systems enhancements to the LiveDeal.com and YP.com
      websites and internal systems.  These operations are described in the
      following paragraphs.





LiveDeal.com
      and YP.com combines the local online classifieds and Yellow Pages marketplace
      with millions of goods and services listed for sale, in every city and zip
      code
      across the U.S. By combining the benefits of classifieds, business listings
      and
      premium stores, feedback reviews, community chat boards, maps and directions,
      telephone numbers, advertising/distribution networks and e-commerce into a
      single online solution, LiveDeal offers businesses and consumers the most
      affordable and effective solution for creating a web presence and marketing
      their products and services locally. YP.com is LiveDeal's Yellow Pages website
      and URL. Through its online properties YP.com and LiveDeal.com, LiveDeal enables
      buyers and sellers to find and list business services, merchandise, real estate,
      automobiles, pets and more in their local communities. Using LiveDeal’s
      marketplace, consumers can search or browse for items in a particular city,
      state or zip code, or reach out on a national or global scope if they so
      choose.


LiveDeal
      also partners with online and offline media to quickly and cost effectively
      power their online classifieds and yellow pages via its dynamic
      platform.





Salient
      features of LiveDeal technology:





·
            Own
                source code that includes cutting edge technology (J2EE, Struts,
                XML,
                Spring, Hybernate, JBoss, Apache,
                etc):





6
 Table
            of
            Contents





·
            Linear
                scaling architecture using low cost commodity
                hardware:


·
            An
                architecture based on redundancy for scalable quick user
                responses:


·
            Proven
                search technology which scales for large
                volumes:


·
            Enhanced
                security using HTTPS, Encryption, data obfuscation:
                and


·
            Internationalized
                Architecture for quick
                localization.





Database
      Management
      Systems.  At the core of our infrastructure are several
      high-performance and proprietary database systems containing several giga-bytes
      of data representing millions of records with hundreds of attributes each,
      such
      as business name, telephone number, address, number of employees, description
      of
      the business, classifieds listings and  feed back
      reviews.  We maintain the data for internal operations on
      high-performance servers and with large-scale storage systems at our Santa
      Clara, California and Mesa, Arizona facility.  To meet the demand for
      our products and services and to provide the highest level of reliability,
      we
      employ technologies and techniques providing data redundancy and
      clustering.  Clustering is the use of several computers deployed in a
      manner that provides redundancy and additional computer processing
      power.





High-Performance
      Database and Search
      Engine.  We believe we provide one of the most complete and
      high-performing directory services in the market today.  Our
      proprietary database enables us to collect and merge data from multiple sources
      to provide extensive and accurate content for our users.  With our
      technologies, we provide keyword search, synonym matching, automated content
      delivery, and multiple source data merging in a simple to use
      paradigm.  We believe these technologies simplify the search process
      and provide the most relevant content to suit our customers’ and users’
needs.  Ultimately, we expect these technologies to increase recurrent
      use of our system by users of our directory services.





Content
      Syndication, Distribution,
      and Private Label Networks.  We add value by increasing our IAP
      advertisers’ visibility by providing automated conduits and content delivery to
      numerous search engines besides our own.  We can deliver content both
      on the Internet and on mobile devices such as cell phones and personal digital
      assistants.  Our market position and volume allows us to provide
      content to any of our strategic alliances, as discussed elsewhere in this Annual
      Report, at a cost below what would be accomplished if one were to attempt to
      duplicate our content and distribution network. We have further enhanced the
      capabilities of this global distribution network with our AdWiz technology,
      which provides high-volume automated record updates in real-time to our
      distribution partners and private-label customers.





The
      Internet Yellow Pages and
      Classified Advertising Market





According
      to The Kelsey Group and the Yellow Pages Integrated Media Association, or YPIMA,
      while there are approximately 200 major U.S. Yellow Pages print publishers,
      an
      increasingly mobile and computer-sophisticated population is accessing the
      Yellow Pages by way of the Internet at a sharply increasing rate.





According
      to a March 2007 press release from The Kelsey Group, advertising revenues from
      Internet Yellow Pages and Local Search are expected to grow from $4.1 billion
      in
      2006 to $11.1 billion globally in 2011, a 22.3% compound annual growth
      rate.  Recent studies have shown that while small and mid-size
      businesses continue to utilize traditional media, they are increasingly turning
      to targeted, vertical electronic media.





Internet
      Yellow Pages provide the following advantages over print Yellow
      Pages:





·
            More
                current and extensive listing
                information.


·
            Immediate
                access to business listings across the nation from any
                location.


·
            Broad
                accessibility via computers and hand-held devices, such as mobile
                phones
                and personal digital assistants.


·
            Features
                such as mapping, direct calling to the advertiser, and e-mail at
                the click
                of a button also may be available.





Internet
      Yellow Pages and online classifieds also offer lower costs for a given level
      of
      content and the ability to easily access and modify displays and advertisements,
      which allows for opportunistic or targeted specials or discounts.





Internet
      usage, in general, has increased dramatically in recent
      years.  According to Internet World Stats, 69.3% of the United States
      population uses the Internet, a growth of 117.3% from 2000 to
      2006.  Search engines are a common method by which these users
      navigate the Internet.  Our expanding distribution network seeks to
      allow our advertisers to benefit from this growth by receiving prominent
      placement in search engine results.





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Strategic
      Alliances





In
      order
      to service users of our website more effectively and to extend our brand to
      other Internet sources, we have entered into strategic relationships with
      business partners that offer content, technology, and distribution capabilities.
      The following are descriptions of our most significant strategic
      relationships:





·
            We
                have cross-marketing arrangements with reciprocal linking of websites
                without any compensation to either party. These arrangements increase
                the
                page views for our advertisers’ listings by being listed on the linked
                websites. These co-promotional arrangements typically are terminable
                with
                one month’s notice.





·
            We
                have a license agreement with Palm, Inc. whereby we pay a fee to
                be a
                provider of Yellow Pages content on hand-held devices using the Palm
                operating system.  We provide this content to Palm through a
                hypertext link from the Palm operating system to our
                website.





·
            We
                have an agreement with Yahoo! Search Services to provide visibility
                to our
                website so that we can provide traffic to our advertisers. In exchange
                for
                monthly fees, Yahoo! Search Services assists in helping us to be
                one of
                the highest placed sites when Yellow Pages searches are done on major
                search engines, such as MSN and
                Yahoo!.





·
            We
                utilize WebDialogs in a co-promotional effort to provide automatic
                dialing
                services to our website users. These services allow these users to
                place a
                call to one of our IAP advertisers by simply clicking a button. This
                function powers our Click2Call
                feature.





·
            We
                will begin featuring Yelp’s 1.8 million customer reviews on its online
                classifieds and Yellow Pages platforms, giving LiveDeal users an
                enormous
                wealth of user-generated content about local area
                businesses.





We
      are
      members of the Yellow Pages Association (formerly known as Yellow Pages
      Integrated Media Association) and the Association of Directory Publishers and
      have been since 1998.  These organizations are trade associations for
      Yellow Pages publishers or others that promote the quality of published content
      and advertising methods.





Competition





We
      operate in the highly competitive and rapidly expanding and evolving
      business-to-business Internet services market. Our largest competitors are
      LECs,
      which are generally known as local telephone companies, and national search
      engines such as Yahoo! and Google that have recently expanded their presence
      in
      the local search market. We compete with other online Yellow Pages services,
      website operators, advertising networks, and traditional offline media, such
      as
      traditional Yellow Pages directory publishers, television, radio, and print
      share advertising.  Our services also compete with many directory
      website production businesses and Internet information service
      providers.





The
      principal competitive factors of the markets in which we compete include
      personalization of service, ease of use of directories, quality and
      responsiveness of search results, availability of quality content, value-added
      products and services, and access to end-users.  We compete for
      advertising listings with the suppliers of Internet navigational and
      informational services, high-traffic websites, Internet access providers, and
      other media.  This competition could result in significantly lower
      prices for advertising and reductions in advertising
      revenues.  Increased competition could have a material adverse effect
      on our business.





Many
      of
      our competitors have greater capital resources than we have.  These
      capital resources could allow 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 have advantages
      in terms of brand name recognition.





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We
      believe that we are in a position to successfully compete in these markets
      due
      to the speed of our local search engine, the comprehensiveness of our database,
      and the effectiveness of our marketing programs and our distribution
      network.  We also believe that the combination of local classifieds
      and Internet Yellow Pages provides businesses and consumers a simple and
      affordable way of creating a web presence and marketing their products and
      services to local audiences. We further believe that we can compete effectively
      by continuing to provide quality services at competitive prices and by actively
      developing new products and services for customers.





We
      believe our listings and our Mini-WebPages provide users of our website with
      readily available information that is easy to understand and from which they
      can
      make their buying decisions.  We believe that our calling center is a
      competitive advantage.  Through our calling centers we continually
      receive and process requests to update customer information on our website
      and,
      accordingly, we believe our site contains more useful and timely information
      than that of our competitors.  We further believe that this, in turn,
      will translate into more page views and advertisers.





Employees





As
      of
      September 30, 2007, we had 85 full-time and 1 part-time employees in the United
      States and 159 full-time employees in the Philippines.  None of our
      employees are covered by any collective bargaining agreements.





ITEM
      1A. Risk
      Factors





An
      investment in our common stock involves a substantial degree of
      risk.  Before making an investment decision, you should give careful
      consideration to the following risk factors in addition to the other information
      contained in this report.  The following risk factors, however, may
      not reflect all of the risks associated with our business or an investment
      in
      our common stock.  Accordingly, you should only consider investing in
      our common stock if you can afford to lose your entire investment.





Risks
      Related to Our
      Business








We
      face intense competition,
      including from companies with greater resources, which could adversely affect
      our growth and could lead to decreased revenues.





Several
      companies, including Google, Microsoft, Verizon, and Yahoo!, currently market
      Internet Yellow Pages or local search services that directly compete with our
      services and products.  We may not compete effectively with existing
      and potential competitors for several reasons, including the
      following:





·
            some
                competitors have longer operating histories and greater financial
                and
                other resources than we have and are in better financial condition
                than we
                are;




·
            some
                competitors have better name recognition, as well as larger, more
                established, and more extensive marketing, customer service, and
                customer
                support capabilities than we have;




·
            some
                competitors may supply a broader range of services, enabling them
                to serve
                more or all of their customers’ needs. This could limit our sales and
                strengthen our competitors’ existing relationships with their customers,
                including our current and potential IAP
                advertisers;




·
            some
                competitors may be able to better adapt to changing market conditions
                and
                customer demand; and




·
            barriers
                to entry are not significant.  As a result, other companies that
                are not currently involved in the Internet-based Yellow Pages advertising
                business may enter the market or develop technology that reduces
                the need
                for our services.





Increased
      competitive pressure could lead to reduced market share, as well as lower prices
      and reduced margins for our services.  If we experience reductions in
      our revenue for any reason, our margins may continue to decline, which would
      adversely affect our results of operations.  We cannot assure you that
      we will be able to compete successfully in the future.





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Our
      success depends upon our ability
      to establish and maintain relationships with our
      advertisers.





Our
      ability to generate revenue depends upon our ability to maintain relationships
      with our existing advertisers, to attract new advertisers to sign up for
      revenue-generating services, and to generate traffic to our advertisers’
websites.  We primarily use telemarketing efforts to attract new
      advertisers.  These telemarketing efforts may not produce
      satisfactory results in the future.  We attempt to maintain
      relationships with our advertisers through customer service and delivery of
      traffic to their businesses.  An inability to either attract
      additional advertisers to use our service or to maintain relationships with
      our
      advertisers could have a material adverse effect on our business, prospects,
      financial condition, and results of operations.





If
      we do not introduce new or
      enhanced offerings to our advertisers and users, we may be unable to attract
      and
      retain those advertisers and users, which would significantly impede our ability
      to generate revenue.





We
      will
      need to introduce new or enhanced products and services in order to attract
      and
      retain advertisers and users and to remain competitive.  Our industry
      has been characterized by rapid technological change, changes in advertiser
      and
      user requirements and preferences, and frequent new product and service
      introductions embodying new technologies.  These changes could render
      our technology, systems, and website obsolete.  We may experience
      difficulties that could delay or prevent us from introducing new products and
      services.  If we do not periodically enhance our existing products and
      services, develop new technologies that address our advertisers’ and users’
needs and preferences, or respond to emerging technological advances and
      industry standards and practices on a timely and cost-effective basis, our
      products and services may not be attractive to advertisers and users, which
      would significantly impede our revenue growth. In addition, our reputation
      and
      our brand could be damaged if any new product or service introduction is not
      favorably received.





Our
      quarterly results of operations
      could fluctuate due to factors outside of our control.





Our
      operating results have historically fluctuated significantly and we have
      experienced recent declines in net revenues and operating profits.  We
      could continue to experience fluctuations or continued declining operating
      results due to factors that may or may not be within our
      control.  Such factors include the following:





·
            fluctuating
                demand for our services, which may depend on a number of factors
                including




o
            changes
                in economic conditions and our IAP advertisers’
                profitability,




o
            varying
                IAP advertiser response rates to our direct marketing
                efforts,




o
            our
                ability to complete direct mailing solicitations on a timely basis
                each
                month,




o
            changes
                in our direct marketing efforts,




o
            IAP
                advertiser refunds or cancellations,
                and




o
            our
                ability to continue to bill through LEC billing, ACH billing or credit
                card channels rather than through direct
                invoicing;




·
            market
                acceptance of new or enhanced versions of our services or
                products;




·
            price
                competition or pricing changes by us or our
                competitors;




·
            new
                product offerings or other actions by our
                competitors;




·
            the
                ability of our check processing service providers to continue to
                process
                and provide billing information regarding our solicitation
                checks;




·
            the
                amount and timing of expenditures for expansion of our operations,
                including the hiring of new employees, capital expenditures, and
                related
                costs;




·
            technical
                difficulties or failures affecting our systems or the Internet in
                general;




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·
            a
                decline in Internet traffic at our
                website;




·
            the
                cost of acquiring, and the availability of, information for our database
                of potential advertisers; and




·
            the
                fixed nature of a significant amount of our operating
                expenses.







The
      loss of our ability to bill IAP
      advertisers through our Local Exchange Carriers on the IAP advertisers’
telephone bills would adversely impact our results of
      operations.





We
      rely
      heavily on our ability to bill advertisers on their telephone bills through
      their respective Local Exchange Carriers, or “LECs.”  LEC billing has
      steadily increased in recent quarters and accounted for 63% of net billings
      in
      2007.





The
      existence of the LECs is the result of federal legislation.  In the
      same manner, Congress could pass future legislation that obviates the existence
      of or the need for the LECs.  Additionally, regulatory agencies could
      limit or prevent our ability to use the LECs to bill our
      advertisers.  The introduction of and advancement of new technologies,
      such as WiFi technology or other wireless-related technologies, could render
      unnecessary the existence of fixed telecommunication lines, which also could
      obviate the need for and access to the LECs. Finally, we have historically
      been
      affected by the LECs’ internal policies.  With respect to certain
      LECs, such policies are becoming more stringent. Our inability to use the LECs
      to bill our advertisers through their monthly telephone bills would result
      in
      increased dilution and decreased revenues and would have a material adverse
      impact on our financial condition and results of operations.





Our
      revenue may decline over time due
      to the involvement of the CLECs in the local telephone
      markets.





Due
      to
      competition in the telephony industry, many business customers are finding
      alternative telephone suppliers, such as Competitive Local Exchange Carriers,
      or
      CLECs, that offer less expensive alternatives to the LECs.  When the
      LECs effectuate a price increase, many business customers look for an
      alternative telephone company, which may be a CLEC.  When our
      advertising customers switch service providers from the LECs to a CLEC, we
      are
      precluded from billing these customers on their monthly telephone bill and
      must
      instead convert them to alternative billing methods such as ACH billing or
      direct invoicing.  This conversion process can be disruptive to our
      operations and result in lost revenue.  We cannot provide any
      assurances that our efforts will be successful. We may experience future
      increases in dilution of our customer base that we are able to bill on their
      monthly telephone bills, which, in turn, may result in decreases in our
      revenue.





The
      loss of our ability to bill IAP
      advertisers through our ACH billing channel would adversely impact our results
      of operations.





We
      bill a
      significant number of our IAP advertisers through our ACH billing
      channel.  ACH transactions are closely regulated by NACHA – The
      Electronic Payments Association, which develops operating rules and business
      practices for the Automated Clearing House (ACH) Network and for electronic
      payments in the areas of Internet commerce and other electronic payment
      means.  Changes in these rules and business practices could compromise
      our ability to bill a significant number of our advertisers through ACH billing,
      and we would have to transition these advertisers to other billing
      channels.  Such changes would be disruptive and result in lost
      revenue.





We
      depend upon our executive officers
      and key personnel.





Our
      performance depends substantially on the performance of our executive officers
      and other key personnel.  The success of our business in the future
      will depend on our ability to attract, train, retain, and motivate high quality
      personnel, especially highly qualified technical and managerial
      personnel.  The loss of services of any executive officers or key
      personnel could have a material adverse effect on our business, results of
      operations or financial condition.  Although we maintain key person
      life insurance on the lives of our executive officers, such coverage may not
      be
      adequate to protect us in the event of loss of such personnel.





Competition
      for talented personnel is intense, and there is no assurance that we will be
      able to continue to attract, train, retain or motivate other highly qualified
      technical and managerial personnel in the future.  In addition, market
      conditions may require us to pay higher compensation to qualified management
      and
      technical personnel than we currently anticipate.  Any inability to
      attract and retain qualified management and technical personnel in the future
      could have a material adverse effect on our business, prospects, financial
      condition, and results of operations.





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Our
      ability to efficiently process
      new advertiser sign-ups and to bill our advertisers monthly depends upon our
      third party service providers and billing aggregators and processors,
      respectively.





We
      currently use third party service providers to provide us with advertiser
      information at the point of sign-up for our Internet Advertising
      Package.  Our ability to gather information to bill our advertisers at
      the point of sign-up could be adversely affected if one or more of these
      providers experiences a disruption in its operations or ceases to do business
      with us.





We
      also
      depend upon our billing aggregators and service providers to efficiently bill
      and collect monies through our LEC billing and ACH billing
      channels.   We currently have agreements with three billing
      aggregators and two ACH service providers.  Any disruption in these
      third parties’ ability to perform these functions could adversely affect our
      financial condition and results of operations.





We
      depend upon third parties to
      provide certain services and software, and our business may suffer if the
      relationships upon which we depend fail to produce the expected benefits or
      are
      terminated.





We
      depend
      upon third-party software to operate certain of our services.  The
      failure of this software to perform as expected would 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 would have a material
      adverse effect on our business, prospects, financial condition, and results
      of
      operations.  We also depend upon third parties to provide services
      that allow us to connect to the Internet with sufficient capacity and bandwidth
      so that our business can function properly and our websites can handle current
      and anticipated traffic.  Any restrictions or interruption in our
      connection to the Internet would have a material adverse effect on our business,
      prospects, financial condition, and results of operations.





The
      market for our services is
      uncertain.





The
      demand and market acceptance for our services may be subject to a high level
      of
      uncertainty.   Advertisers and users may not adopt or continue to
      use Internet-base Yellow Pages services and other online services that we may
      offer in the future.  Advertisers may find Internet Yellow Pages
      advertising to be less effective for meeting their business needs than
      traditional methods of Yellow Pages or other advertising and
      marketing.  Our business, prospects, financial condition or results of
      operations will be materially and adversely affected if potential advertisers
      do
      not adopt Internet Yellow Pages as an important component of their advertising
      expenditures.





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, 2007, together
      with cash flows from operations, 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 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:





·
            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.





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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.  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 over our promotional
      activities, specifically the use of our check mailer for customer
      acquisition.  The main terms of this agreement were as
      follows:


·
              We
                  paid a settlement fee of $2,000,000 to the state consortium, which
                  was
                  distributed among themselves;
 ·
              We
                  discontinued the use of activation checks as a promotional
                  incentive;
 ·
              We
                  temporarily suspended billing of any active customer that was acquired
                  in
                  connection with the use of an activation check while notifying
                  the
                  customer of their legal rights to cancel the service and providing
                  them a
                  60-day opportunity to receive a refund equivalent to the customer’s last
                  two payments; and
 ·
              We
                  agreed not to employ any collection efforts with respect to past-due
                  accounts of customers that were secured through the use of an activation
                  check.




There
      can
      be no absolute assurance that the other states, 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 be unable to promote and
      maintain our brands.





We
      believe that establishing and maintaining the brand identities of our Internet
      Yellow Pages services is a critical aspect of attracting and expanding a base
      of
      advertisers and users.  Promotion and enhancement of our brands will
      depend largely on our success in continuing to provide high quality
      service.  If advertisers and users do not perceive our existing
      services to be of high quality, or if we introduce new services or enter into
      new business ventures that are not favorably received by advertisers and users,
      we will risk diluting our brand identities and decreasing their attractiveness
      to existing and potential IAP advertisers.





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





Our
      success depends both on our internally developed technology and our 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-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 protect our proprietary
      technology.





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Third
      parties 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.





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 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 that incorporate the challenged
                intellectual property, which would adversely affect our
                revenue;




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




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




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 may require us
      to expand our infrastructure and IAP advertiser support
      capabilities.





Our
      ability to provide high-quality Internet Yellow Pages services largely depends
      upon the efficient and uninterrupted operation of our computer and
      communications systems.  We may be required to expand our technology,
      infrastructure, and IAP advertiser support capabilities in order to accommodate
      any significant increases in the numbers of advertisers and users of our
      websites.  We 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
      systems and infrastructure to accommodate these increases in a timely
      manner.  If we do not expand and upgrade our infrastructure in a
      timely manner, we could experience temporary capacity constraints that may
      cause
      unanticipated system disruptions, slower response times, and lower levels of
      IAP
      advertiser service.  Our inability to upgrade and expand our
      infrastructure and IAP advertiser support capabilities as required could impair
      the reputation of our brand and our services, reduce the volume of users able
      to
      access our website, 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 IAP advertiser 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.




We
      may not be able to effectively
      integrate our newly acquired businesses.





During
      2007, we acquired LiveDeal, an online local classifieds marketplace and Oncall
      Subscriber Management, a call center in the Philippines that provides various
      business process outsourcing, telemarketing, subscriber and other customer
      services.  These businesses do not generate existing cash
      flows.  To the extent that we do not successfully integrate these
      businesses, we may experience a material adverse effect to our business,
      financial condition and results of operations.





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Our
      operation of a subsidiary in the
      Philippines poses risks and could impact our financial
      condition.




In
      fiscal
      2007, we acquired Oncall Subscriber Management Inc., which operated a call
      center in the Philippines, and created a Philippine subsidiary to carry on
      that
      business.  We entered into those transactions to generate cost savings
      in connection with our ongoing marketing efforts and do not presently anticipate
      relying on our foreign operations for a significant portion of our
      revenues.  Still, our operation of a foreign subsidiary poses certain
      risks to our business, including:




·
            changes
                that might result from regulatory requirements, exchange rates, tariffs
                and/or other economic barriers;




·
            difficulties
                in staffing and managing the operations of our Philippine
                subsidiary;




·
            differing
                technology and systems standards;




·
            conflicting
                laws and/or political conditions;
                and




·
            risks
                relating to accounting practices and/or tax laws enforced in foreign
                jurisdictions.




Failure
      to achieve and maintain
      effective internal controls in accordance with Section 404 of the Sarbanes-Oxley
      Act could have a material adverse effect on our business and stock
      price.




Pursuant
      to Section 404 of the Sarbanes-Oxley Act of 2002, beginning with our Annual
      Report on Form 10-K for the fiscal year ending September 30, 2008, we will
      be
      required to furnish a report by our management on our internal control over
      financial reporting. The internal control report must contain (i) a statement
      of
      management's responsibility for establishing and maintaining adequate internal
      control over financial reporting, (ii) a statement identifying the framework
      used by management to conduct the required evaluation of the effectiveness
      of
      our internal control over financial reporting, (iii) management's assessment
      of
      the effectiveness of our internal control over financial reporting as of the
      end
      of our most recent fiscal year, including a statement as to whether or not
      internal control over financial reporting is effective, and (iv) a statement
      that the Company's independent auditors have issued an attestation report on
      management's assessment of internal control over financial
      reporting.




In
      order
      to achieve compliance with Section 404 of the Act within the prescribed period,
      we will need to engage in a process to document and evaluate our internal
      control over financial reporting, which will be both costly and challenging.
      In
      this regard, management will need to dedicate internal resources, engage outside
      consultants and adopt a detailed work plan to (i) assess and document the
      adequacy of internal control over financial reporting, (ii) take steps to
      improve control processes where appropriate, (iii) validate through testing
      that
      controls are functioning as documented, and (iv) implement a continuous
      reporting and improvement process for internal control over financial
      reporting.  We can provide no assurance as to our, or our independent
      auditors’, conclusions at September 30, 2008 with respect to the effectiveness
      of our internal control over financial reporting under Section 404 of the Act.
      There is a risk that neither we nor our independent auditors will be able to
      conclude at September 30, 2008 that our internal controls over financial
      reporting are effective as required by Section 404 of the Act.




During
      the course of our testing we may identify deficiencies that we may not be able
      to remediate in time to meet the deadline imposed by the Sarbanes-Oxley Act
      for
      compliance with the requirements of Section 404. In addition, if we fail to
      achieve and maintain the adequacy of our internal controls, as such standards
      are modified, supplemented or amended from time to time, we may not be able
      to
      ensure that we can conclude on an ongoing basis that we have effective internal
      controls over financial reporting in accordance with Section 404 of the
      Sarbanes-Oxley Act. Moreover, effective internal controls, particularly those
      related to revenue recognition, are necessary for us to produce reliable
      financial reports and are important to helping prevent financial fraud. If
      we
      cannot provide reliable financial reports or prevent fraud, our business and
      operating results could be harmed, investors could lose confidence in our
      reported financial information, and the trading price of our stock could drop
      significantly.





Risks
      Related to the
      Internet





We
      may not be able to adapt as the
      Internet, Internet Yellow Pages services, and IAP advertiser demands continue
      to
      evolve.





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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, and
      the Internet Yellow Pages 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
      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 IAP advertisers;




·
            license,
                develop or acquire technologies useful in our business on a timely
                basis;
                and




·
            respond
                to technological advances and emerging industry standards and practices
                on
                a cost-effective and timely basis.




Our
      future success may depend on
      continued growth in the use of the Internet.





Because
      Internet Yellow Pages is a relatively new and rapidly evolving industry, the
      ultimate demand and market acceptance for our services will be subject to a
      high
      level of uncertainty.  Significant issues concerning the commercial
      use of the Internet and online service technologies, including security,
      reliability, cost, ease of use, and quality of service, remain unresolved and
      may inhibit the growth of Internet business solutions that use these
      technologies.  In addition, the Internet or other online services
      could lose their viability due to delays in the development or adoption of
      new
      standards and protocols required to handle increased levels of Internet
      activity, or due to increased governmental regulation.  Our business,
      prospects, financial condition, and results of operations would be materially
      and adversely affected if the use of Internet Yellow Pages and other online
      services does not continue to grow or grows more slowly than we
      expect.





We
      may be required to keep pace with
      rapid technological change in the Internet industry.





In
      order
      to remain competitive, we will be required continually to enhance and improve
      the functionality and features of our existing services, which could require
      us
      to invest significant capital.  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.  We may not have the funds or technical know-how to
      upgrade our services, technology, and systems.  If we face material
      delays in introducing new services, products, and enhancements, our advertisers
      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.





Regulation
      of the Internet may
      adversely affect our business.





Due
      to
      the increasing popularity and use of the Internet 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 Internet and other online
      services.  These laws and regulations may affect issues such as user
      privacy, pricing, content, taxation, copyrights, distribution, 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.  Any new legislation could hinder the growth in use of the
      Internet generally or in our industry and could impose additional burdens on
      companies conducting business online, which could, in turn, decrease the demand
      for our services, increase our cost of doing business, or otherwise have a
      material adverse effect on our business, prospects, financial condition, and
      results of operations.





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





We
      believe that our existing Internet 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.  Various Internet 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 advertisers 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 advertisers and users may have negative experiences with other
      companies that those advertisers 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
      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 IAP advertisers 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,
      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.  In addition, third-party websites are accessible through
      our website or those of our advertisers. As a result, we could be subject to
      legal claims for defamation, negligence, intellectual property infringement,
      and
      product or service liability.  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 based on links to
      sexually explicit 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 content to users.





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Risks
      Related to Our
      Securities





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 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 Internet services
                sector;




·
            variations
                in our operating results;




·
            announcements
                of technological innovations or new services by us or our
                competitors;




·
            changes
                in expectations of our future financial performance, including financial
                estimates by securities analysts and
                investors;




·
            our
                failure to meet analysts’
expectations;




·
            changes
                in operating and stock price performance of other technology companies
                similar to us;




·
            conditions
                or trends in the technology
                industry;




·
            additions
                or departures of key personnel; and




·
            future
                sales of our common stock.




Domestic
      and international stock markets often experience significant price and volume
      fluctuations that are unrelated 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.





Certain
      provisions of Nevada law and
      in our charter may prevent or delay a change of control of our
      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 board to issue up to 5,000,000 shares of serial
                preferred stock and to determine the price, rights, preferences,
                and
                privileges of these shares, without stockholder
                approval;




·
            all
                stockholder actions must be effected at a duly called meeting of
                stockholders and not by written consent unless such action or proposal
                is
                first approved by our board of
                directors;




·
            special
                meetings of the stockholders may be called only by the Chairman of
                the
                Board, the Chief Executive Officer, or the President of our company;
                and




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·
            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.




The
      reverse stock split that we
      effected in fiscal 2007 could have an adverse impact on our common
      stock.





Our
      1-for-10 reverse stock split could cause a reduction in the total market value
      of our common stock, increase the volatility of our stock price and has
      increased the number of shares of common stock we may issue.  Reduced
      liquidity may reduce the value of our common stock and our ability to use our
      equity as consideration for an acquisition or other corporate
      opportunity.  In addition, the reverse split has decreased the number
      of shares outstanding, giving individual orders the potential to create
      increased volatility in our stock price.  As a result of the reverse
      stock split, we are able to issue significantly more shares of our common stock
      which could have a material adverse affect on the market price of our common
      stock.  We are currently authorized to issue 100,000,000 shares of
      common stock and, as a result of the reverse stock split, have approximately
      6,640,541 shares outstanding as of December 3, 2007.





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





In
      the
      event that no exclusion from the definition of “penny stock” under the Exchange
      Act 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.





ITEM
      1B. Unresolved
      Staff Comments





Not
      applicable.





ITEM
      2.
      Properties





We
      have a
      long-term operating lease with Arthur Grandlich d/b/a McKellips Corporate Square
      for the 16,772 square foot corporate office that is located in Mesa,
      Arizona.  We pay rent of approximately $120,000 annually under this
      lease, which expires in June 2011.  This facility contains certain
      administrative resources.





We
      lease
      a 3,500 square foot facility in Las Vegas, Nevada that functions as the primary
      operating facility of Telco on a month-to-month basis.  We pay rent of
      approximately $8,000 per month.





We
      lease
      a 7,300 square foot facility in Santa Clara, California that functions as the
      primary operating facility of our Live Deal, Inc. subsidiary. We pay rent of
      approximately $8,200 per month under an operating lease that expires in June
      2008.





We
      lease
      space in the Philippines for our telemarketing activities under an operating
      lease that expires in February 2010.  Monthly rent payments fluctuate
      between $10,300 and $11,500 per month.





We
      believe that these facilities are adequate for our current and anticipated
      future needs and that both of these facilities and their contents are adequately
      covered by insurance.





ITEM
      3. Legal
      Proceedings





We
      are
      party to certain legal proceedings and other various claims and lawsuits in
      the
      normal course of our business, which, in the opinion of management, are not
      material to our business or financial condition.





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ITEM
      4. Submission
      of Matters to a Vote of Security Holders





The
      following matters were approved by the Company’s stockholders at a Special
      Meeting of Stockholders held on August 2, 2007:




·
            A
                proposal to give the Company’s Board of Directors discretion to effect a
                reverse stock split with respect to issued and outstanding shares
                of our
                common stock; and




·
            A
                proposal to amend and restate the Company’s Restated Articles of
                Incorporation to change the Company’s name from “YP Corp.” to “LiveDeal,
                Inc.”




Reverse
      Stock
      Split





The
      allocation of votes to give the Company’s Board of Directors discretion to
      effect a reverse stock split with respect to issued and outstanding shares
      of
      our common stock was as follows:





Votes
                For
            Votes
                Against
            Abstentions
                and Broker Non-VotesProposal
                to Give the Company’s Board of Directors Discretion to Effect a Reverse
                Stock Split with Respect to Issued and Outstanding Shares of our
                Common
                Stock
            52,886,335
            3,962,852
            371,700





Name
      Change





The
      allocation of votes to amend and restate the Company’s Restated Articles of
      Incorporation to change the Company’s name from “YP Corp.” to “LiveDeal, Inc.”
was as follows:








Votes
                For
            Votes
                Against
            Abstentions
                and Broker Non-VotesProposal
                to Amend and Restate the Company’s Restated Articles of Incorporation to
                Change the Company’s Name from “YP Corp.” to “LiveDeal,
                Inc.”
            56,443,009
            162,052
            625,826





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 trades publicly on the Over-The-Counter Bulletin Board (“OTCBB”)
      under the symbol “LVDL”. The OTCBB is a regulated quotation service that
      displays real-time quotes, last-sale prices and volume information in
      over-the-counter equity securities. The OTCBB securities are traded by a
      community of market makers that enter quotes and trade reports. This market
      is
      extremely limited and any prices quoted are not a reliable indication of the
      value of our common stock.





The
      following table sets forth the quarterly high and low bid prices per share
      of
      our common stock by the OTCBB during the last two fiscal years. The quotes
      represent inter-dealer quotations, without adjustment for retail mark-up,
      markdown or commission and may not represent actual transactions.





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Fiscal Year
            Quarter Ended
            
            High
            
            
            Low2006
            December
                31, 2005
            
            $
            9.40
            
            
            $
            4.00March
                31, 2006
            
            $
            10.30
            
            
            $
            5.10June
                30, 2006
            
            $
            13.00
            
            
            $
            9.50September
                30, 2006
            
            $
            10.80
            
            
            $
            7.902007
            December
                31, 2006
            
            $
            10.70
            
            
            $
            7.20March
                31, 2007
            
            $
            12.10
            
            
            $
            7.60June
                30, 2007
            
            $
            8.70
            
            
            $
            6.60September
                30, 2007
            
            $
            8.00
            
            
            $
            6.00




Holders
      of Record





On
      December 3, 2007, there were approximately 136 holders of record of our common
      stock according to our transfer agent. The Company has no record of the number
      of shareholders who hold their stock in “street” name with various
      brokers.





Dividend
      Policy





We
      have
      one class of outstanding 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, payable in quarterly installments of $0.00375.  At September 30,
      2007, we had accrued but unpaid dividends totaling approximately
      $4,300.




Presently,
      we do not pay dividends on our common stock.  The timing and amount of
      future dividend payments by our Company, 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




Period
            
            (a)
                Total Number ofShares
                (or Units)Purchased
            
            
            (b)
                Average PricePaid
                perShare
                (or Unit)
            
            
            (c)
                Total Number ofShares
                (or Units)
              Purchased
                as Part ofPublicly
                AnnouncedPlans
                or Programs2
            
            
            (d)
                Maximum Number(or
                Approximate DollarValue)
                of Shares (orUnits)
                that May Yet BePurchased
                Under thePlans
                or ProgramsJuly
                2007
            
            
            -
            
            
            N/A
            
            
            
            -
            
            
            $
            1,000,000August
                2007
            
            
            44,224
            1
            
            $
            6.95
            
            
            
            -
            
            
            $
            1,000,000September
                2007
            
            
            -
            
            
            N/A
            
            
            
            -
            
            
            $
            1,000,000Total
            
            
            44,224
            
            
            $
            6.95
            
            
            
            -
            
            
            $
            1,000,000




1           In
      August 2007, we acquired 44,224 shares of common stock at an aggregate price
      of
      $307,540 as part of arrangements with LiveDeal shareholders stemming from the
      acquisition of LiveDeal, Inc. in June 2007.




2           On
      May 18, 2005, we announced the adoption of a $3,000,000 stock repurchase plan,
      under which 85,385 shares were repurchased at an aggregate price of $686,793.
      On
      May 25, 2007, the Company’s Board of Directors terminated the May 18, 2005 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





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Performance
      Graph








ITEM
      6. Selected
      Financial Data





The
      selected financial data presented below are derived from our historical
      consolidated financial statements for the year ended September 30, 2007, which
      have been audited by Mayer Hoffman McCann, P.C., our independent registered
      public accounting firm and the years ended September 30, 2003 through 2006
      which
      were audited by Epstein, Weber & Conover, P.L.C., our former independent
      registered public accounting firm.  The selected financial data should
      be read in conjunction with Management’s Discussion and Analysis of Financial
      Condition and Results of Operations and our consolidated financial statements
      and the related notes thereto included elsewhere in this Annual
      Report.





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Year
                Ended September
                30,2007
            
            
            2006
            
            
            2005
                (1)
            
            
            2004
            
            
            2003Statement
                of Operations
                DataNet
                revenues
            
            $
            26,340,361
            
            
            $
            31,957,947
            
            
            $
            24,361,995
            
            
            
            38,954,823
            
            
            $
            26,396,093Cost
                of services
            
            
            4,204,276
            
            
            
            4,030,280
            
            
            
            3,137,756
            
            
            
            6,544,598
            
            
            
            4,102,395Gross
                profit
            
            
            22,136,085
            
            
            
            27,927,667
            
            
            
            21,224,239
            
            
            
            32,410,225
            
            
            
            22,293,698Operating
                income (loss)
            
            
            3,326,679
            
            
            
            (1,562,357
            )
            
            
            985,256
            
            
            
            11,465,946
            
            
            
            7,281,886Net
                income (loss)
            
            
            1,753,918
            
            
            
            (1,050,920
            )
            
            
            725,146
            
            
            
            8,184,930
            
            
            
            6,472,705Net
                income (loss) per common share:Basic
            
            $
            0.34
            
            
            $
            (0.23
            )
            
            $
            0.16
            
            
            $
            1.73
            
            
            $
            1.43Diluted
            
            $
            0.33
            
            
            $
            (0.23
            )
            
            $
            0.16
            
            
            $
            1.70
            
            
            $
            1.42Weighted
                average common shares outstanding:Basic
            
            
            5,108,551
            
            
            
            4,495,868
            
            
            
            4,639,036
            
            
            
            4,737,593
            
            
            
            4,532,672Diluted
            
            
            5,336,439
            
            
            
            4,495,868
            
            
            
            4,665,992
            
            
            
            4,807,570
            
            
            
            4,559,159Cash
                dividends declared per common share
            
            $
            -
            
            
            $
            -
            
            
            $
            0.30
            
            
            $
            0.30
            
            
            $
            -Statement
                of Cash Flows
                DataNet
                cash provided by operating activities
            
            $
            1,765,496
            
            
            $
            2,422,001
            
            
            $
            6,990,161
            
            
            $
            4,818,203
            
            
            $
            4,762,238Net
                cash used in investing activities
            
            
            (2,175,802
            )
            
            
            (1,904,201
            )
            
            
            (2,440,792
            )
            
            
            (2,192,500
            )
            
            
            (2,798,500
            )Net
                cash used in financing activities
            
            
            (309,936
            )
            
            
            (237,336
            )
            
            
            (2,011,587
            )
            
            
            (1,428,022
            )
            
            
            (351,998
            )Balance
                Sheet
                DataCash
                and cash equivalents
            
            $
            5,674,533
            
            
            $
            6,394,775
            
            
            $
            6,114,311
            
            
            $
            3,576,529
            
            
            $
            2,378,848Working
                capital
            
            
            11,315,872
            
            
            
            13,908,560
            
            
            
            13,374,171
            
            
            
            12,484,833
            
            
            
            6,615,537Property
                and equipment, net
            
            
            423,563
            
            
            
            178,883
            
            
            
            396,862
            
            
            
            725,936
            
            
            
            731,142Intangible
                assets, net
            
            
            7,372,147
            
            
            
            5,722,604
            
            
            
            6,108,823
            
            
            
            3,326,274
            
            
            
            3,512,952Total
                assets
            
            
            40,042,466
            
            
            
            27,977,227
            
            
            
            23,632,916
            
            
            
            26,289,604
            
            
            
            20,356,163Total
                long term liabilities
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            848,498
            
            
            
            -Total
                stockholders' equity
            
            
            37,707,871
            
            
            
            22,376,373
            
            
            
            22,065,266
            
            
            
            23,572,393
            
            
            
            15,709,315





(1)
            Includes
                an increase to income of approximately $100,000 (net of income taxes
                of
                approximately $54,000) resulting from the cumulative effect of an
                accounting change for forfeitures of restricted stock granted to
                employees, executives and
                consultants





All
      per
      share amounts have been retroactively restated for the effects of the 1-for-10
      reverse stock split that occurred in fiscal 2007





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, 2007, 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 will provide
      us
      with sufficient liquidity to meet our operating needs for the next twelve
      months.





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.





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Executive
      Overview





This
      section presents a discussion of recent developments and summary information
      regarding our industry and operating trends only. For further information
      regarding the events summarized herein, you should read this Management’s
      Discussion and Analysis of Financial Condition and Results of Operations in
      its
      entirety.




We
      maintain a combined local online classifieds and Yellow Pages marketplace with
      millions of goods and services listed for sale, in nearly every city and zip
      code across the U.S. By combining the benefits of classifieds, business
      listings, mobile services, advertising/distribution networks and e-commerce
      into
      a single online solution, we offer businesses and consumers an affordable and
      effective solution for creating a web presence and marketing their products
      and
      services locally. Through our online properties YP.com and LiveDeal.com, we
      enable buyers and sellers to find and list business services, merchandise,
      real
      estate, automobiles, pets and more in their local communities. Using LiveDeal’s
      marketplace, consumers can search or browse for items in a particular city,
      state or zip code, or reach out on a national or global scope if they so
      choose.





Acquisition
      of LiveDeal,
      Inc.




On
      June
      6, 2007, we completed the acquisition of LiveDeal, Inc.
      (“LiveDeal”).  LiveDeal developed and operates an online local
      classifieds marketplace, www.livedeal.com, which lists millions of goods and
      services for sale in almost every city and zip code across the
      U.S.   The technology acquired in the acquisition offers 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.





The
      acquisition represents a major strategic event in our history and is expected
      to
      result in significant efficiencies as well as future growth
      opportunities.  With the acquisition of LiveDeal, we are now able to
      supplement our telemarketing campaigns with online marketing
      efforts.  Our online traffic acquisition strategy includes activities
      in e-mail marketing, search engine marketing (SEM) search engine optimization
      (SEO) partnerships with major online marketing companies, and the generation
      of
      word of mouth advertising.  We anticipate continued investment in
      online advertising to bring increased traffic to our websites that should result
      in increased value to the local business advertising community thereby driving
      increased revenues.





The
      aggregate purchase price of LiveDeal was $12,700,695, consisting of
      approximately $12,328,045 of stock-based consideration and $372,650 of
      acquisition-related expenses.  The value of the combined 1,675,016
      shares of Common Stock granted in the transaction was determined based on the
      average closing market price of the Common Stock over the two day period before
      and after the effective date of the acquisition.





The
      following table presents the allocation of the acquisition cost, including
      acquisition-related expenses, to the assets acquired and liabilities assumed,
      based on their fair values:





Current
                assets
            
            $
            962,877Property,
                plant and equipment
            
            
            70,000Goodwill
            
            
            7,349,366Intangible
                assets
            
            
            2,130,000Deferred
                tax assets
            
            
            3,545,618Other
                non-current assets
            
            
            10,846Total
                assets acquired
            
            
            14,068,707Current
                liabilities
            
            
            1,368,012Total
                liabilities assumed
            
            
            1,368,012Net
                assets acquired
            
            $
            12,700,695




Further
      information with respect to this acquisition is set forth in Note 4 to our
      audited consolidated financial statements.





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Acquisition
      of OnCall Subscriber
      Management Inc.




On
      July
      10, 2007, we acquired substantially all of the assets and assumed certain
      liabilities of OnCall Subscriber Management Inc. (a Manila, Philippines-based
      company), which OnCall purchased recently under option from 24 by 7 Contact
      Solutions, Inc. The purchase price of the acquisition was approximately
      $4,552,600 (including acquisition expenses of $52,600) payable in cash. The
      acquisition added approximately 170 Philippines-based employees to our
      workforce.  We currently operate the acquired business through a
      wholly owned subsidiary in the Philippines.




Name
      Change and Reverse Stock
      Split




The
      following matters were approved by our stockholders at a Special Meeting of
      Stockholders held on August 2, 2007:




·
            A
                proposal to give our Board of Directors discretion to effect a reverse
                stock split with respect to issued and outstanding shares of our
                common
                stock; and




·
            A
                proposal to amend and restate our Restated Articles of Incorporation
                to
                change our name from “YP Corp.” to “LiveDeal,
                Inc.”




Our
      Board
      of Directors effected a 1 for 10 reverse stock split effective on August 15,
      2007.  All shares amounts have been retroactively restated in this
      Annual Report to reflect the effects of this reverse stock split.




Changes
      in Officers and
      Directors




On
      June
      6, 2007, the Company’s Board of Directors (the “Board”) increased the size of
      the Board to seven and appointed Rajesh Navar and John Clay Evans to fill the
      newly created vacancies.




Rajesh
      Navar also serves as president of LiveDeal, Inc.  Mr. Navar brings
      more than 16 years experience in building high technology and Internet
      companies. As an original member of the engineering and management team at
      eBay,
      Navar is one of the pioneers in e-commerce. Prior to founding LiveDeal, Navar
      joined eBay in 1998, a start-up at that time, as a senior member of the
      engineering team. Navar founded and built eBay's search technology, helping
      build eBay into one of the worlds most successful and profitable e-commerce
      companies. In September, 2005, Navar was honored among Silicon Valley Business
      Journal's chronicle of "40 under 40" people to watch.




Mr.
      Evans, a non-employee director, has been a business strategy consultant and
      investment analyst in the information services and media industry since 2002.
      He
      remains an adviser to various private funds analyzing investments in this
      industry. Previous to this he has been a fixed income and equity analyst and
      portfolio manager for various funds and family offices.  During this period
      he has performed many strategic consulting for many companies such as Bankrate,
      Inc. and many other companies.  He studied American and Ancient History at
      Columbia University in the City of New York.




Effective
      August 3, 2007, Elisabeth DeMarse resigned from the board of LiveDeal, Inc.
      due to her other business commitments.  Ms. DeMarse did not have
      any disagreement with the Company regarding its operations, policies or
      practices.




On
      November 20, 2007 the Board of Directors, of LiveDeal, Inc., elected Mr. Thomas
      J. Clarke, Jr. as a director of the company effective
      immediately.  Mr. Clarke is currently the Chairman and Chief Executive
      Officer of TheStreet.com (NASQ-TSCM). Prior to joining that company in 1999,
      Mr.
      Clarke was Chief Executive Officer of Thomson Financial Investor Relations.
      At
      that company, Mr. Clarke oversaw the sale of what was then Technimetrics Inc.
      from Knight-Ridder to Thomson Corporation in 1998. Mr. Clarke has also held
      management positions at companies such as McAuto Systems Corp. and Media
      Records.  Additionally, Mr. Clarke serves as a business information
      advisor for Plum Holdings L.P., an institutional venture capital firm
      specializing in early stage investments in media companies. He serves on the
      University of Albany's executive advisory board of the Center for Comparative
      Functional Genomics, and on the board of Standing Stone, Inc., developers of
      disease state management solutions.





We
      believe that the addition of these directors, two of whom are independent,
      will
      strengthen our corporate governance and the effectiveness of our
      organization.





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Restatements




During fiscal
      2007, we revisited our consolidated financial statement
      presentation.  As such, we have determined that it is preferable
      to make changes to certain classifications within our financial
      statements. These changes are summarized as follows:




Balance
      Sheet





·
            Certain
                investment accounts totaling $815,785 have been reclassified from
                cash and
                cash equivalents to
                certificates of deposit and other investments based on the maturity
                dates
                of the underlying investments


·
            Accrued
                refunds and fees of $1,250,000 relating to the Attorneys’ General
                settlement described in Note 10 have been reclassified from accounts
                receivable, net to accrued liabilities in the accompanying consolidated
                balance sheet as of September 30,
                2006.


·
            Certain
                miscellaneous receivables totaling $23,819 at September 30, 2006
                were
                reclassified from prepaid expenses and other current assets to accounts
                receivable, net in the accompanying consolidated balance
                sheet.




Statement
      of Operations




·
              Dilution
                  and charge backs have
                  been reclassified from cost of services to a reduction in net revenues
                  in
                  the consolidated statement of
                  operations.


·
              Monitoring
                  fees related to our
                  LEC billing channel have been reclassified from general and administrative
                  expenses to cost of
                  services.


·
              Depreciation
                  and amortization
                  expenses that were previously separately stated are now included
                  in
                  general and administrative expenses in the consolidated statement of
                  operations.


·
              Litigation
                  and related expenses
                  that were previously included in other income and expense are now
                  separately stated as a component of operating expenses in the consolidated
                  statement of
                  operations.




Our
      auditors have reviewed these changes and concur with our current
      presentation.  All prior periods have been restated to conform to the
      current period presentation.  See Note 19 to our audited consolidated
      financial statements.




Attorneys’
General
      Settlement




On
      December 14, 2006, we voluntarily entered into a settlement with thirty-four
      states’ attorneys general to address their concerns over our promotional
      activities, specifically the use of our check mailer for customer
      acquisition.  The main terms of this agreement were as
      follows:





·
            We
                paid a settlement fee of $2,000,000 to the state consortium, which
                was
                distributed among themselves;


·
            We
                discontinued the use of activation checks as a promotional
                incentive;


·
            We
                temporarily suspended billing of any active customer that was acquired
                in
                connection with the use of an activation check while notifying the
                customer of their legal rights to cancel the service and providing
                them a
                60-day opportunity to receive a refund equivalent to the customer’s last
                two payments; and


·
            We
                agreed not to employ any collection efforts with respect to past-due
                accounts of customers that were secured through the use of an activation
                check.





This
      settlement limited our exposure to significant legal fees and costs that may
      have been otherwise incurred had we decided to dispute these
      inquiries.  Further, we had been transitioning a significant amount of
      our marketing efforts away from the use of activation checks toward the use
      of
      telemarketing and other marketing channels during 2005 and 2006.  With
      this settlement, we were able to accelerate this transition away from the use
      of
      activation checks and focus our marketing efforts toward improving the
      effectiveness and efficiency of our telemarketing campaigns and other marketing
      efforts.




Recent
      Financial
      Results




The
      following represents a summary of recent financial results:




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Q4
                2007
            
            
            Q3
                2007
            
            
            Q2
                2007
            
            
            Q1
                2007
            
            
            Q4
                2006
            
            
            Q3
                2006
            
            
            Q2
                2006
            
            
            Q1
                2006Net
                Revenues
            
            $
            7,120,697
            
            
            $
            5,989,437
            
            
            $
            6,106,544
            
            
            $
            7,123,683
            
            
            $
            8,335,284
            
            
            $
            8,577,639
            
            
            $
            7,997,623
            
            
            $
            7,047,401Gross
                margin
            
            $
            5,860,893
            
            
            $
            5,113,544
            
            
            $
            5,148,835
            
            
            $
            6,012,813
            
            
            $
            6,697,106
            
            
            $
            7,506,947
            
            
            $
            7,213,184
            
            
            $
            6,510,430Operating
                expenses
            
            $
            4,956,356
            
            
            $
            4,537,182
            
            
            $
            4,043,109
            
            
            $
            5,272,759
            
            
            $
            9,053,783
            
            
            $
            6,276,713
            
            
            $
            7,081,323
            
            
            $
            7,078,205Operating
                income (loss)
            
            $
            904,537
            
            
            $
            576,362
            
            
            $
            1,105,726
            
            
            $
            740,054
            
            
            $
            (2,356,677
            )
            
            $
            1,230,234
            
            
            $
            131,861
            
            
            $
            (567,775
            )Net
                income (loss)
            
            $
            376,053
            
            
            $
            266,405
            
            
            $
            626,262
            
            
            $
            485,198
            
            
            $
            (1,680,673
            )
            
            $
            826,847
            
            
            $
            129,998
            
            
            $
            (327,092
            )





Net
      revenues in fiscal 2007 decreased by approximately $5,618,000 when compared
      to
      fiscal 2006.  This decrease was primarily attributable to the
      Attorneys’ General Settlement, which caused approximately 15,000 customer
      cancellations in our ACH billing channel and prevented us from signing new
      customers from our direct mail campaign in the first quarter of fiscal
      2007.  Revenues declined during the first three quarters of fiscal
      2007, but have since increased in the fourth quarter of 2007.  We do
      not anticipate any further impacts to our results of operations as a result
      of
      this settlement.




Despite
      lower revenues of $26.3 million in 2007 compared to $32 million in 2006, we
      generated net income of approximately $1,754,000, or $0.33 per share on a
      diluted basis, during fiscal 2007.  Net income was negatively impacted
      by approximately $1 million of direct response advertising costs incurred in
      October 2006 for which we derived no benefit, $500,000 of additional tax expense
      associated with the write-off of deferred tax assets related to our restricted
      stock awards, and $377,000 of increased bad debt reserves resulting from the
      bankruptcy filing of one of our billing aggregators, each of which is further
      described below.




During
      fiscal 2006, we generated net loss of approximately $1,051,000, or ($0.23)
      per
      share on a diluted basis. The net loss for 2006 includes non-recurring expenses
      totaling approximately $4,144,000 or $0.92 per share consisting of approximately
      $3,687,000 of settlement related matters with attorneys general and with a
      former vendor and approximately $457,000 of severance costs, further described
      below.




The
      following non-recurring items are relevant to our fiscal 2007 and 2006 quarterly
      operating results:




§
            Fourth
                quarter of fiscal 2007 – includes an increased bad debt reserve of
                approximately $377,000 resulting from the Chapter 11 Bankruptcy filing
                of
                one of our LEC aggregators, representing our entire pre-petition
                outstanding receivable balance.  The aggregator continues to
                operate as debtor-in-possession.  We have since transitioned
                this portion of our business to another
                aggregator.




§
            Second
                quarter of fiscal 2007 – includes the reversal of approximately $200,000
                of accrued expenses related to the Attorneys’ General
                settlement.




§
            First
                quarter of fiscal 2007 – includes approximately $1,000,000 of direct
                response advertising costs incurred in October 2006 for which we
                derived
                no benefit based on the Attorneys’ General settlement that was agreed to
                in December 2006.




§
            Fourth
                quarter of fiscal 2006 – includes the following charges associated with
                the Attorneys’ General settlement:





o
            $2,000,000
                payment to cover regulatory and related
                expenses


o
            $1,250,000
                of accrued refunds and processing fees for existing customers that
                wish to
                cancel their service in response to the correspondence to be sent
                per the
                terms of the agreement


o
            $275,000
                of legal and professional fees





§
            Second
                quarter of fiscal 2006 – includes an increase of general and
                administrative expenses of approximately $80,000 related to separation
                costs with our former Chief Financial Officer and $39,000 related
                to
                separation costs with other
                employees.





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§
            First
                quarter of fiscal 2006 – includes an increase of general and
                administrative expenses totaling approximately $338,000 related to
                separation costs with our former Chief Executive Officer and an increase
                in other expenses associated with an additional expense of $162,000
                relating to an outstanding legal
                matter.







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 certain 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.  As
      such, in accordance with the use of accounting principles generally accepted
      in
      the United States of America, our actual realized results may differ 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
      following summarizes critical estimates made by management in the preparation
      of
      the consolidated financial statements.





Revenue
      Recognition.We
      generate
      revenue from customer subscriptions for directory and advertising
      services.  Our billing and collection procedures include significant
      involvement of outside parties, referred to as aggregators for LEC billing
      and
      service providers for ACH billing.  Such processes are described
      below.




ACH
      Billing– For ACH
      billing, we submit electronic billing information to our service providers,
      who
      in turn use this information as a basis for processing direct bank withdrawals
      through an Automated Clearing House.  We receive information regarding
      records that are rejected or cannot otherwise be processed on a timely basis,
      and we recognize revenue only for those items that are processed.




LEC
      Billing– When a
      customer subscribes to our service we create an electronic customer file, which
      is the basis for the billing.  We submit gross billings electronically
      to third party billing aggregators. These billing aggregators compile and format
      our electronic customer files and forward the billing records to the appropriate
      LECs.  The billing for our service flows through to monthly bills of
      the individual LEC customers.  The LECs collect our billing and remit
      amounts to the billing aggregators, which in turn remit funds to
      us.  The following are significant accounting estimates and
      assumptions used in the revenue recognition process with respect to these
      billings.




·
            Customer
                refunds.  We have a customer refund policy that allows
                the customer to request a refund if they are not satisfied with the
                service within the first 120 days of the subscription.  We
                accrue for refunds based on historical experience of refunds as a
                percentage of new billings in that 120-day period.  Customer
                refunds are reserved and charged against gross
                revenue.




·
            Non-paying
                customers.  There are customers who may not pay the fee
                for our services even though we believe they are valid
                subscribers.  Included in cost of services is an accrual for
                estimated non-paying customers that are recorded at the time of
                billing.




·
            Dilution.  We
                recognize revenue during the month for which the service is provided
                based
                on net billings accepted by the billing aggregators.  We
                recognize revenue only for accepted records.  However,
                subsequent to this acceptance, there are instances in the LEC billing
                process where a customer cannot be billed due to changes in telephone
                numbers, telephone carriers, data synchronization issues,
                etc.  These amounts that ultimately cannot be billed, as well as
                certain minor billing adjustments by the LECs are commonly referred
                to as
                “dilution.”  Dilution is estimated at the time of billing and
                charged to cost of services.




·
            Fees.  Both
                the aggregator and the LEC charge processing
                fees.  Additionally, the LEC charges fees for responding to
                billing inquiries by its customers, processing refunds, and other
                customer-related services.  Such fees are estimated at the time
                of billing and charged to cost of
                services.




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Direct
      bill
      customers– If we are unable to bill via any other means, we bill
      subscribers directly via paper invoices.  Our collection rate on these
      billings is significantly lower than those processed through the
      LECs.  We track collections on direct-billed customers and recognize
      revenue from those customers based on the historical collection
      rates.




Fulfillment
      contracts–Beginning
      in fiscal
      2006, we began entering into contracts with several third parties whereby we
      provide hosting, customer service and certain administrative functions under
      revenue sharing agreements.  We recognize revenues only for those
      revenues for which we are entitled to when the related services are
      performed.




Allowance
      for Doubtful Accounts.We
      receive cash
      through the processes discussed above.  Under our contractual
      arrangements with our third party aggregators and service providers, the LECs
      and aggregators/service providers deduct from our gross billings amounts for
      returns, nonpaying customers, dilution and fees to arrive at net proceeds
      remitted to us.  We estimate an allowance for doubtful accounts on the
      basis of information provided by the billing aggregators and service
      providers.  This information is an indicator of timely payments made
      by our subscribers.  At September 30, 2007 and 2006, the allowance for
      doubtful accounts was approximately 22% and 26% of gross accounts receivable,
      respectively.  The allowance at September 30, 2007 includes a reserve
      of approximately $377,000 resulting from the Chapter 11 Bankruptcy filing of
      one
      of our LEC aggregators, representing our entire pre-petition outstanding
      receivable balance.  Notwithstanding this additional reserve, our
      allowance decreased from September 30, 2006 to September 30, 2007 as we have
      increased our quality control procedures over the submission of our billings
      to
      reduce the risk of dilution and noncollectibility.




Carrying
      Value of Intangible
      Assets.Our intangible assets consist of licenses for the use
      of Internet domain names or 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 (or at
      fair value for assets acquired through business combinations) and amortized
      over
      their estimated useful lives.




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.  We most recently completed an impairment test in the fourth
      quarter of fiscal 2007.  No long-lived assets were impaired during the
      years ended September 30, 2007, 2006, and 2005.




Change
      in Accounting Principle -
      Capitalization of Customer Acquisition Costs and Amortization of those
      Costs.We purchase mailing lists and send advertising
      materials to prospective subscribers from those mailing lists as well as
      outbound call campaigns.  Customers subscribe to the services by
      affirmatively responding to those advertising materials and calling campaigns,
      which serve as the contract for the subscription.  Previously, we
      capitalized these customer acquisition costs and amortized them on a
      straight-line basis over the average expected life of our customers based on
      historical IAP advertiser attrition rates and other factors.




Prior
      to
      fiscal 2006, the majority of our capitalized customer acquisition costs related
      to our mailing campaigns for which we amortized the costs based on historical
      IAP advertiser attrition rates attributable to our entire customer
      base.  During fiscal 2006, we began increasing our expenditures for
      telemarketing campaigns.  The capitalization of such costs required
      that we amortize the costs over the average expected life of acquired customers,
      as determined on a cost-pool-by-cost-pool basis.  Our systems do not
      allow us to efficiently and accurately monitor customer lives by method of
      acquisition.  Therefore, we are unable to determine the average
      expected life of those customers acquired via telemarketing versus those
      acquired via mailing campaigns.  As we cannot effectively evaluate
      such costs on a cost-pool-by-cost-pool basis, we determined in fiscal 2006
      that
      the more preferable method of accounting for these costs is to expense them
      when
      incurred.  We enacted this change in accounting principle during the
      fourth quarter of fiscal 2006 and we have restated all periods presented to
      reflect this new method of accounting for such costs.




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.




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We
      have
      estimated net deferred income tax assets of $5,097,789 and $3,116,523 at
      September 30, 2007 and 2006, respectively, which relate to various timing
      differences between book and tax expense recognition.




In
      anticipation of the adoption of FASB Interpretation No. 48, Accounting for Uncertainty
      in Income
      Taxes (FIN 48) – an interpretation ofFASB Statement No.
      109, Accounting
      for Income Taxes (SFAS No. 109)in fiscal
      2008, we
      engaged an independent accounting firm to perform a preliminary analysis of
      our
      tax positions.  Such investigation did not reveal any significant
      uncertainties that would affect the carrying value of our deferred tax assets
      and liabilities at September 30, 2007.




Stock-Based
      Compensation.From time-to-time, we grant restricted stock
      awards 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.Prior to October 1,
      2004,
      we recognized forfeitures as they occurred.  Upon occurrence, we
      reversed the previously recognized expense associated with such
      grant.  Effective October 1, 2004, we changed to an expense
      recognition method that is based on an estimate of the number of shares that
      are
      ultimately expected to vest (see discussion below in “Results of Operations – Cumulative
      Effect of Accounting Change”).  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 Year2007
            
            $
            26,340,361
            
            
            $
            (5,617,586
            )
            
            
            (17.6
            )%2006
            
            $
            31,957,947
            
            
            $
            7,595,952
            
            
            
            31.2
            %2005
            
            $
            24,361,995




Net
      revenues decreased in fiscal 2007 as compared to 2006 primarily attributable
      to
      the Attorneys’ General Settlement, which caused approximately 15,000 customer
      cancellations in our ACH billing channel and prevented us from signing new
      customers from our direct mail campaign in the first quarter of fiscal 2007.
      As
      a result of this settlement, we experienced an increase in customer
      cancellations and a temporary disruption in our marketing
      efforts.  Revenues declined during the first three quarters of fiscal
      2007, but have since increased in the fourth quarter of fiscal
      2007.  We do not anticipate any further impacts to our results of
      operations as a result of this settlement.




The
      increase in revenues for fiscal 2006, as compared to 2005, was largely due
      to an
      increased customer count attributable to expanded marketing efforts, the
      reintroduction of certain LEC billing channels for new customers, and new
      fulfillment contracts.




Although
      we have concentrations of risk with our billing aggregators (as described in
      the
      Notes to Consolidated Financial Statements included elsewhere in this Annual
      Report) these aggregators bill via many underlying LECs, thereby reducing our
      risk associated with credit concentrations.  However, there are a few
      LECs that service a significant number of our customers.  To the
      extent that future changes in their billing practices cause a disruption in
      our
      ability to bill through these channels, our revenues could be adversely
      affected.




The
      majority of our IAP customers pay between $27.50 and $39.95 per
      month.




Included
      in net revenues for fiscal 2007 were $673,643 of revenues stemming from our
      classified and online marketplace as a result of the acquisition of
      LiveDeal





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Cost
      of Services




Year Ended
              September 30,
            
            Cost of
              Services
            
            
            Change from
              Prior Year
            
            
            Percent Change
              from Prior Year2007
            
            $
            4,204,276
            
            
            $
            173,996
            
            
            
            4.3
            %2006
            
            $
            4,030,280
            
            
            $
            892,524
            
            
            
            28.4
            %2005
            
            $
            3,137,756




Cost
      of
      services increased in fiscal 2007 as compared to fiscal 2006 due to an increase
      in LEC billings, which have higher costs than other billing
      channels.  Also included in fiscal 2007 is a bad debt reserve of
      approximately $377,000 resulting from the Chapter 11 Bankruptcy filing of one
      of
      our LEC aggregators, representing our entire pre-petition outstanding receivable
      balance from this LEC. The increase in cost of services for the year ended
      September 30, 2006, as compared to September 30, 2005, is also attributable
      to
      an increase in LEC billings.  The following table sets forth billings
      by channel for each of the following fiscal years:




2007
            
            
            2006
            
            
            2005LEC
                billing
            
            
            63
            %
            
            
            48
            %
            
            
            30
            %ACH
                billing
            
            
            30
            %
            
            
            46
            %
            
            
            56
            %Direct
                billing
            
            
            4
            %
            
            
            6
            %
            
            
            14
            %Classified
            
            
            3
            %
            
            
            0
            %
            
            
            0
            %




We
      expect
      cost of services to continue to be directly correlated to our usage of LEC
      billing channels.




Gross
      Profit





Year Ended
              September 30,
            
            Gross
              Profit
            
            
            Change from
              Prior Year
            
            
            Percent Change
              from Prior Year2007
            
            $
            22,136,085
            
            
            $
            (5,791,582
            )
            
            
            (20.7
            )%2006
            
            $
            27,927,667
            
            
            $
            6,703,428
            
            
            
            31.6
            %2005
            
            $
            21,224,239




The
      changes in our gross profits were due primarily to changes in revenues and
      increased cost of sales associated with higher utilization of LEC billing
      channels. Gross margins were 84%, 87% and 87% of net revenues in fiscal 2007,
      2006, and 2005, respectively.




General
      and Administrative
      Expenses




Year Ended
              September 30,
            
            General &
              Administrative
              Expenses
            
            
            Change from
              Prior Year
            
            
            Percent Change
              from Prior Year2007
            
            $
            12,518,620
            
            
            $
            (1,832,133
            )
            
            
            (12.8
            )%2006
            
            $
            14,350,753
            
            
            $
            (249,861
            )
            
            
            (1.7
            )%2005
            
            $
            14,600,614




General
      and administrative expenses decreased in fiscal 2007 as compared to fiscal
      2006
      due to the following:





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·
            A
                decrease in compensation expense of approximately $1,887,000 resulting
                from (i) a fiscal 2007 reduction in workforce stemming from the
                discontinuance of our check mailer program and other business changes
                which reduced our need for administrative support and (ii) a decrease
                of
                severance costs of $352,000 that were incurred in fiscal
                2006;




·
            A
                reduction in customer related expenses of approximately $1,093,000
                resulting from charges of approximately $924,000 in fiscal 2006 associated
                with reconfirming customers acquired through our check activator
                program
                and $169,000 of other decreased customer related and collection expenses
                as we reduced our usage of direct billing methods in fiscal
                2007;




·
            An
                increase in our software and data license expenses of approximately
                $360,000 primarily attributable to license fees associated with a
                new
                customer relationship management system acquired during fiscal
                2007;




·
            An
                increase in travel costs of approximately $313,000 related to increased
                investor relations activities, acquisitions in California and the
                Philippines, and increased travel between our offices in Nevada and
                Arizona;




·
            An
                increase in amortization expense of approximately $124,000 resulting
                from
                increased capitalized intangible assets, the most significant of
                which
                were marketing and technology-related intangible assets that were
                acquired
                through our acquisition of LiveDeal,
                Inc.;




·
            An
                increase in investor relations expenses of $124,000 as we seek to
                expand
                and attract new investors; and




·
            Other
                cost increases of approximately
                $227,000.




General
      and administrative expenses decreased from fiscal 2006 to 2005 based on the
      following:


·
              A
                  decrease in mailing and other customer costs of approximately $662,000
                  associated with the reduction of paper invoices and other methods
                  of
                  correspondence with customers for which payment is unlikely to
                  be
                  received;
  ·
              A
                  decrease in depreciation and amortization expense of approximately
                  $135,000 as a significant amount of our fixed assets and intangible
                  assets
                  recently became fully depreciated;
                  and


·
            An
                increase in consulting and professional fees of approximately $233,000,
                primarily driven by $162,000 of executive search and placement services
                and other miscellaneous activities;




·
            An
                increase in compensation expense of approximately $476,000 associated
                with
                the general increase in revenues and business activity in fiscal
                2006.  This increase was comprised of increases of approximately
                (i) $352,000 of severance costs associated with the termination of
                former
                officers and other personnel, (ii) non-cash compensation costs of
                $179,000
                associated with restricted stock awards, (iii) $307,000 for Directors’
                compensation and Executive bonuses, and (iv) increases in leased
                and
                contract employees and other miscellaneous compensation expenses
                of
                $131,000.  These costs were partially offset by a decrease in
                executive consulting fees of approximately
                $493,000;




·
            General
                cost reductions of approximately
                $162,000.




Our
      general and administrative expenses consist largely of fixed and semi-fixed
      expenses such as compensation, rent, and utilities.  Therefore, we do
      not consider short-term trends of general and administrative expenses as a
      percentage of revenues to be meaningful indicators for evaluating operational
      performance.




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


Q4
                2007
            
            
            Q3
                2007
            
            
            Q2
                2007
            
            
            Q1
                2007
            
            
            Q4
                2006
            
            
            Q3
                2006
            
            
            Q2
                2006
            
            
            Q1
                2006Compensation
                for employees, leased employees, officers and directors
            
            $
            1,535,115
            
            
            $
            1,760,439
            
            
            $
            1,877,103
            
            
            $
            1,873,582
            
            
            $
            2,073,646
            
            
            $
            1,908,099
            
            
            $
            2,475,244
            
            
            $
            2,476,713Professional
                fees
            
            
            184,507
            
            
            
            529,139
            
            
            
            319,948
            
            
            
            394,028
            
            
            
            347,247
            
            
            
            313,533
            
            
            
            282,148
            
            
            
            416,088Reconfirmation,
                mailing, billing and other customer-related costs
            
            
            33,662
            
            
            
            24,269
            
            
            
            34,042
            
            
            
            23,715
            
            
            
            39,180
            
            
            
            245,597
            
            
            
            396,883
            
            
            
            491,947Depreciation
                and amortization
            
            
            460,554
            
            
            
            396,759
            
            
            
            364,724
            
            
            
            336,887
            
            
            
            316,688
            
            
            
            351,342
            
            
            
            369,519
            
            
            
            397,005Other
                general and administrative costs
            
            
            757,136
            
            
            
            522,583
            
            
            
            531,915
            
            
            
            558,513
            
            
            
            390,093
            
            
            
            325,405
            
            
            
            360,276
            
            
            
            374,100




Sales
      and Marketing
      Expenses





Year Ended
              September 30,
            
            Sales &
              Marketing
              Expenses
            
            
            Change from
              Prior Year
            
            
            Percent Change
              from Prior Year2007
            
            $
            6,491,504
            
            
            $
            (4,960,961
            )
            
            
            (43.3
            )%2006
            
            $
            11,452,465
            
            
            $
            6,142,229
            
            
            
            115.7
            %2005
            
            $
            5,310,236




Sales
      and
      marketing expenses decreased in fiscal 2007 as compared to fiscal 2006 primarily
      due to the discontinuance of our direct mail campaigns and increased
      efficiencies on our telemarketing campaigns, partially offset by an expansion
      of
      our telemarketing activities.  We incurred approximately $5.3 million
      of direct mail expenses in fiscal 2006.  Such costs were reduced to
      approximately $1 million in fiscal 2007 as we transitioned from direct mail
      campaigns to telemarketing.  While our telemarketing efforts have
      increased significantly, we renegotiated contracts with our service providers
      and, during the fourth quarter of fiscal 2007, brought a portion of these
      activities in-house through the acquisition of OnCall Subscriber Management
      Inc.




Sales
      and
      marketing expense increased in fiscal 2006 as compared to fiscal 2005 primarily
      due to an increase in telemarketing expenditures from $153,000 in fiscal 2005
      to
      $5,245,000 in fiscal 2006.  The remaining increase is due to increased
      mailing campaigns partially offset by a decrease in branding
      activities.




Litigation
      and Related
      Expenses




Year Ended
              September 30,
            
            Litigation and
              Related Expenses
            
            
            Change from
              Prior Year
            
            
            Percent Change
              from Prior Year2007
            
            $
            (200,718
            )
            
            $
            (3,887,524
            )
            
            
            (105.4
            )%2006
            
            $
            3,686,806
            
            
            $
            3,358,673
            
            
            
            1023.6
            %2005
            
            $
            328,133




In
      fiscal
      2007, we had no significant outstanding, pending or threatened
      litigation.  We also concluded the Attorneys’ General settlement
      (described in “Executive
      Overview – Recent Developments and Outlook” above) and reversed our
      remaining accruals of approximately $201,000.





The
      impact of the Attorneys’ General settlement in fiscal 2006 consisted of a
      settlement fee of $2,000,000, $1,250,000 of accrued refunds and related expenses
      and $275,000 of legal fees.  Also included in litigation and related
      expenses for fiscal 2006 was a $162,000 expense related to the settlement of
      an
      outstanding matter with a vendor.





The
      litigation and related expenses in fiscal 2005 consisted of an accrual of
      $328,133 related to this vendor dispute.





Operating
      Income
      (Loss)





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Year Ended
              September 30,
            
            Operating
              Income (Loss)
            
            
            Change from
              Prior Year
            
            
            Percent Change
              from Prior Year2007
            
            $
            3,326,679
            
            
            $
            4,889,036
            
            
            
            312.9
            %2006
            
            $
            (1,562,357
            )
            
            $
            (2,547,613
            )
            
            
            (258.6
            )%2005
            
            $
            985,256




The
      increase in operating income for fiscal 2007 as compared to fiscal 2006 is
      primarily due to decreased operating and litigation related expenses, partially
      offset by lower net revenues, each of which is described above.  The
      decrease in operating income for fiscal 2006 as compared to fiscal 2005 is
      primarily due to the effects of the attorneys general settlement and changes
      in
      revenues and sales and marketing expenses as described above.




Other
      Income
      (Expense)




Year Ended
              September 30,
            
            Other Income
              (Expense)
            
            
            Change from
              Prior Year
            
            
            Percent Change
              from Prior Year2007
            
            $
            10,945
            
            
            $
            35,463
            
            
            
            144.6
            %2006
            
            $
            (24,518
            )
            
            $
            197,758
            
            
            
            (89.0
            )%2005
            
            $
            (222,276
            )







Other
      income (expense) in fiscal 2007 consists primarily of interest income on cash
      and short term investment balances.  In fiscal 2006, this account
      included expenses associated with the settlement of minor outstanding claims,
      partially offset by interest income.  Other income (expense) for
      fiscal 2005 included losses $282,000 associated with our agreement to settle
      outstanding amounts due from two of our largest stockholders, partially offset
      by interest income.




Income
      Tax Provision
      (Benefit)





Year Ended
              September 30,
            
            Income Tax
              Provision (Benefit)
            
            
            Change from
              Prior Year
            
            
            Percent Change
              from Prior Year2007
            
            $
            1,855,675
            
            
            $
            2,167,454
            
            
            
            695.2
            %2006
            
            $
            (311,779
            )
            
            $
            (683,816
            )
            
            
            (183.8
            )%2005
            
            $
            372,037




The
      change in our income tax provision (benefit) in each of the above years is
      due
      primarily to changes in our pre-tax income.  However, in fiscal 2007
      and 2006, we incurred additional income tax expense of $499,885 and $217,131
      due
      to book-tax differences in the recognition of restricted stock
      awards.  During these periods, a portion of our restricted stock
      awards had vested and, due to declines in our stock price from grant date to
      vest date, the tax effects of the vesting of these awards were less than the
      carrying value of the related deferred tax assets.





Cumulative
      Effect of Accounting
      Change





During
      the first fiscal quarter of 2005, we changed our method of accounting for
      forfeitures of restricted stock awards to employees, officers, and
      directors.  Prior to October 1, 2004, we recognized forfeitures as
      they occurred.  Upon occurrence, we reversed the previously recognized
      expense associated with such grant.  Effective October 1, 2004, we
      changed to an expense recognition method that is based on an estimate of the
      number of shares that are ultimately expected to vest.  We believe
      that this is a preferable method as it provides less volatility in expense
      recognition.  Additionally, while both methods of accounting for
      forfeitures are acceptable under current guidance, the implementation of SFAS
      No. 123R (effective during the first quarter of fiscal 2006) no longer permits
      us to recognize forfeitures as they occur.  This change resulted in an
      increase to net income of $99,848, net of income taxes of $53,764, during the
      first quarter of fiscal 2005.  Note that this change in accounting
      principle was enacted prior to the adoption of SFAS No. 154, which requires
      the
      retroactive application of changes in accounting principles to all periods
      presented.





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Net
      Income
      (Loss)




Year Ended
              September 30,
            
            Net Income
              (Loss)
            
            
            Change from
              Prior Year
            
            
            Percent Change
              from Prior Year2007
            
            $
            1,753,918
            
            
            $
            2,804,838
            
            
            
            266.9
            %2006
            
            $
            (1,050,920
            )
            
            $
            (1,776,066
            )
            
            
            (244.9
            )%2005
            
            $
            725,146







Changes
      in net income (loss) are primarily attributable to changes in operating income
      and changes in income tax expense.  As the three years yielded
      different operating results stemming from the impacts of the Attorneys’ General
      settlement, changes in the use of billing channels, changes in marketing
      strategies and other operating changes, see the respective financial statement
      line item narratives included herein for a detailed analysis of changes in
      our
      results of operations.




Liquidity
      and Capital
      Resources




Net
      cash
      provided by operating activities decreased approximately $657,000, or 27.1%,
      to
      $1,765,000 for fiscal 2007 as compared to $2,422,000 for fiscal
      2006.  The decrease in cash generated from operations is primarily due
      to the payment of over $3 million related to the attorney’s general settlement,
      partially offset by increases in net income and other changes in working
      capital.   Net cash provided by operating activities decreased
      approximately $4,568,000, or 65.4%, to $2,422,000 for the year ended September
      30, 2006, compared to $6,990,000 for the year ended September 30,
      2005.  The decrease in cash generated from operations in fiscal 2006
      is primarily due to an increase in accounts receivable and the related
      provisions resulting from an increased reliance on the LEC billing
      channel.




Our
      primary source of cash inflows is net remittances from our billing channels,
      including ACH billings and LEC billings.  For ACH billings, we
      generally receive the net proceeds through our billing service processors within
      15 days of submission.  For LEC billings, we receive collections on
      accounts receivable through the billing service aggregators under contracts
      to
      administer this billing and collection process.  The billing service
      aggregators generally do not remit funds until they are
      collected.  Generally, cash is collected and remitted to us (net of
      dilution and other fees and expenses) over a 60- to 120-day period subsequent
      to
      the billing dates.  Additionally, for each monthly billing cycle, the
      billing aggregators and LECs withhold certain amounts, or “holdback reserves,”
to cover potential future dilution and bad debt expense.  These
      holdback reserves lengthen our cash conversion cycle as they are remitted to
      us
      over a 12- to 18-month period of time.  We classify these holdback
      reserves as current or long-term receivables on our consolidated balance sheet,
      depending on when they are scheduled to be remitted to us.  As of
      September 30, 2007, approximately 70% of our gross accounts receivable are
      due
      from three aggregators.




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




Net
      cash
      used in investing activities totaled $2,176,000 during fiscal 2007 and consisted
      of $4,114,000 of net cash outflows for the acquisitions of LiveDeal, Inc. and
      OnCall Subscriber Management Inc., $939,000 of expenditures for software and
      intangible assets and $205,000 of purchases of equipment, partially offset
      by
      the liquidation of $3,082,000 of certificates of deposit and other
      investments.  During fiscal 2006, net cash used in investing
      activities was $1,904,000 and consisted of investments of excess cash in
      certificates of deposit and other investments, expenditures for intangible
      assets and minor purchases of equipment.  During fiscal 2005, cash
      used for investing activities was $2,441,000, and also consisted of investments
      of excess cash in certificates of deposit and other investments, expenditures
      for intangible assets and minor purchases of equipment.




Net
      cash
      used for financing activities was $310,000 during fiscal 2007 and consisted
      primarily of repurchases of stock owned by dissenting shareholders in connection
      with the acquisition of LiveDeal, Inc.  Net cash used for financing
      activities was $237,000 during fiscal 2006 and consisted primarily of the
      repurchase of our treasury stock.  Cash used for financing activities
      during fiscal 2005 was $2,012,000 and consisted predominantly of payments of
      common stock dividends of $1,445,000 and purchases of treasury stock totaling
      $566,000.





35
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We
      had
      working capital of $11,316,000 as of September 30, 2007, compared to $13,909,000
      as of September 30, 2006.  Our cash position decreased to $5,675,000
      at September 30, 2007 compared to $6,395,000 at September 30, 2006, as investing
      and financing outflows exceeded cash flows from operations, each of which is
      described above.




During
      2005, our Board of Directors authorized the repurchase of up to $3,000,000
      of
      our common stock from time to time on the open market or in privately negotiated
      transactions.  We purchased a total of 85,385 shares at an aggregate
      cost of $686,793 under the plan. On May 25, 2007, the Company’s Board of
      Directors terminated the 2005 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





During
      fiscal 2006, we entered into a contractual arrangement with an attorney to
      settle previous claims and to engage the future services of this attorney.
      Under
      the terms of the arrangement, we made cash payments during the year totaling
      $145,000 and granted 10,000 shares of restricted stock. We are obligated to
      make
      future payments over the next year totaling $63,000 in exchange for future
      services. Such amounts have not been accrued in the accompanying financial
      statements as such payments are for future services.





During
      fiscal 2006, we entered into a contractual arrangement with a consulting firm
      to
      provide strategic and operational related consulting services.  Under
      the terms of the agreement, we are obligated to make future payments through
      July 2009 that vary based on the Company’s billed customer count subject to a
      minimum of $20,000 per month.  Current payments are approximately
      $100,000 per month.  The future payments have not been accrued in the
      accompanying financial statements as such payments are for future
      services.





The
      following table summarizes our contractual obligations at September 30, 2007
      and
      the effect such obligations are expected to have on our future liquidity and
      cash flows:





Payments
                Due by Fiscal
                YearTotal
            
            
            2008
            
            
            2009
            
            
            2010
            
            
            2011
            
            
            2012
            
            
            ThereafterOperating
                lease commitments
            
            $
            2,942,292
            
            
            $
            830,833
            
            
            $
            800,639
            
            
            $
            509,923
            
            
            $
            407,523
            
            
            $
            314,789
            
            
            $
            78,585Noncanceleable
                service contracts
            
            
            1,551,000
            
            
            
            777,000
            
            
            
            674,000
            
            
            
            100,000
            
            
            
            -
            
            
            
            -
            
            
            
            -$
            4,493,292
            
            
            $
            1,607,833
            
            
            $
            1,474,639
            
            
            $
            609,923
            
            
            $
            407,523
            
            
            $
            314,789
            
            
            $
            78,585








We
      believe that our existing cash on hand and additional cash generated from
      operations will provide us with sufficient liquidity to meet our operating
      needs
      for the next 12 months.





At
      September 30, 2007, we had no other off-balance sheet arrangements, commitments
      or guarantees that require additional disclosure or measurement.





ITEM
      7A.
      Quantitative and Qualitative Disclosure about Market Risk





As
      of
      September 30, 2006, we did not participate in any market risk-sensitive
      commodity instruments for which fair value disclosure would be required under
      Statement of Financial Accounting Standards No. 107. 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 2007 or 2006) or commodity price risk.





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 Table
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ITEM
      8. Financial
      Statements and Supplementary Data





LIVEDEAL,
      INC.





INDEX
      TO CONSOLIDATED FINANCIAL
      STATEMENTS




PageReport
                of Independent Registered Public Accounting Firm
            38Consolidated
                Financial Statements:Consolidated
                Balance Sheets at September 30, 2007 and 2006
            40Consolidated
                Statements of Operations for the years ended September 30, 2007,
                2006, and
                2005
            41Consolidated
                Statements of Stockholders’ Equity for the years ended September 30, 2007,
                2006, and 2005
            42Consolidated
                Statements of Cash Flows for the years ended September 30, 2007,
                2006, and
                2005
            43Notes
                to Consolidated Financial Statements
            44




37
 Table
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REPORT
      OF
      INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM








To
      the
      Stockholders and Board of Directors





LiveDeal,
      Inc. and
      Subsidiaries





We
      have
      audited the accompanying consolidated balance sheet of LiveDeal, Inc. and
      Subsidiaries as of September 30, 2007 and the related statements of operations,
      stockholders’ equity and cash flows for the year then ended.  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 audit.





We
      conducted our audit in accordance with the standards of the Public Company
      Accounting Oversight Board (United States).  Those standards require
      that we plan and perform the audit to obtain reasonable assurance about whether
      the financial statements are free of material misstatement.  An audit
      includes examining, on a test basis, evidence supporting the amounts and
      disclosures in the 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 our audit provides 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 LiveDeal, Inc. and
      Subsidiaries as of September 30, 2007, and the results of their operations
      and
      their cash flows for the year then ended, in conformity with accounting
      principles generally accepted in the United States of America.








/s/
      Mayer
      Hoffman McCann P.C.





MAYER
      HOFFMAN MCCANN P.C.


Phoenix,
      Arizona


December
      18, 2007





38
 Table
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REPORT
        OF INDEPENDENT REGISTERED
        PUBLIC ACCOUNTING FIRM
 
 
 
 To
        the
        Stockholders and Board
 of
        Directors of LiveDeal, Inc.:
 
 We
        have
        audited the accompanying consolidated balance sheet of LiveDeal, Inc. (formerly
        YP Corp.) and Subsidiaries as of September 30, 2006, and the related statements
        of operations, stockholders’ equity and cash flows for each of the two years in
        the period ended September 30, 2006.  These financial statements are
        the responsibility of the Company’s management.  Our responsibility is
        to express an opinion on these 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 financial statements are free of material misstatement.  An audit
        includes examining, on a test basis, evidence supporting the amounts and
        disclosures in the 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 our audits provide a reasonable basis for
        our opinion.
 
 In
        our
        opinion, the financial statements referred to above present fairly, in all
        material respects, the consolidated financial position of LiveDeal, Inc.
        (formerly YP Corp.) and Subsidiaries as of September 30, 2006, and the
        consolidated results of its operations and cash flows for each of the two
        years
        in the period ended September 30, 2006, in conformity with accounting principles
        generally accepted in the United States of America.
 
 As
        discussed in Note 19, to the consolidated financial statements, LiveDeal,
        Inc.
        has restated its financial statements as of September 30, 2006 and for each
        of
        the two years in the period ended September 30, 2006.
 
 /s/
        Epstein, Weber & Conover, PLC
 Scottsdale,
        Arizona
 December
        18, 2006, except as to Note 19
 which is as of December 18, 2007


39
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LIVEDEAL,
      INC. AND
      SUBSIDIARIES


CONSOLIDATED
      BALANCE
      SHEETS





September
                30,Assets
            
            2007
            
            
            2006(as
                restated)Cash
                and equivalents
            
            $
            5,674,533
            
            
            $
            6,394,775Certificates
                of deposit and other investments
            
            
            -
            
            
            
            3,082,053Accounts
                receivable, net
            
            
            6,919,180
            
            
            
            8,015,600Prepaid
                expenses and other current assets
            
            
            510,609
            
            
            
            235,250Deferred
                tax asset
            
            
            546,145
            
            
            
            1,781,736Total
                current assets
            
            
            13,650,467
            
            
            
            19,509,414Accounts
                receivable, long term portion, net
            
            
            1,941,996
            
            
            
            1,140,179Property
                and equipment, net
            
            
            423,563
            
            
            
            178,883Deposits
                and other assets
            
            
            103,057
            
            
            
            91,360Intangible
                assets, net
            
            
            7,372,147
            
            
            
            5,722,604Goodwill
            
            
            11,683,163
            
            
            
            -Deferred
                tax asset, long term
            
            
            4,551,644
            
            
            
            1,334,787Income
                taxes receivable
            
            
            316,429
            
            
            
            -Total
                assets
            
            $
            40,042,466
            
            
            $
            27,977,227Liabilities
                and Stockholders'
                EquityLiabilities:Accounts
                payable
            
            $
            1,138,265
            
            
            $
            773,653Accrued
                liabilities
            
            
            1,196,330
            
            
            
            4,565,439Income
                taxes payable
            
            
            -
            
            
            
            261,762Total
                current liabilities
            
            
            2,334,595
            
            
            
            5,600,854Total
                liabilities
            
            
            2,334,595
            
            
            
            5,600,854Commitments
                and contingenciesStockholders'
                Equity:Series
                E convertible preferred stock, $.001 par value, 200,000 shares authorized,
                127,840 issued and outstanding, liquidation preference
                $38,202
            
            
            10,866
            
            
            
            10,866Common
                stock, $.001 par value, 100,000,000 shares authorized, 6,693,676
                and
                5,002,159 issued and outstanding
            
            
            6,694
            
            
            
            5,002Treasury
                stock (328,566 and 284,342 shares carried at cost)
            
            
            (2,714,698
            )
            
            
            (2,407,158
            )Paid
                in capital
            
            
            23,325,888
            
            
            
            12,294,186Deferred
                stock compensation
            
            
            -
            
            
            
            (2,854,122
            )Retained
                earnings
            
            
            17,079,121
            
            
            
            15,327,599Total
                stockholders' equity
            
            
            37,707,871
            
            
            
            22,376,373Total
                liabilities and stockholders' equity
            
            $
            40,042,466
            
            
            $
            27,977,227





See
      accompanying notes to consolidated financial statements.





40
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            of
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LIVEDEAL,
      INC. AND
      SUBSIDIARIES


CONSOLIDATED
      STATEMENTS OF
      OPERATIONS





Year
                ended September
                30,2007
            
            
            2006
            
            
            2005(as
                restated)
            
            
            (as
                restated)Net
                revenues
            
            $
            26,340,361
            
            
            $
            31,957,947
            
            
            $
            24,361,995Cost
                of services
            
            
            4,204,276
            
            
            
            4,030,280
            
            
            
            3,137,756Gross
                profit
            
            
            22,136,085
            
            
            
            27,927,667
            
            
            
            21,224,239Operating
                expenses:General
                and administrative expenses
            
            
            12,518,620
            
            
            
            14,350,753
            
            
            
            14,600,614Sales
                and marketing expenses
            
            
            6,491,504
            
            
            
            11,452,465
            
            
            
            5,310,236Litigation
                and related expenses
            
            
            (200,718
            )
            
            
            3,686,806
            
            
            
            328,133Total
                operating expenses
            
            
            18,809,406
            
            
            
            29,490,024
            
            
            
            20,238,983Operating
                income (loss)
            
            
            3,326,679
            
            
            
            (1,562,357
            )
            
            
            985,256Other
                income (expense):Interest
                expense and other financing costs
            
            
            -
            
            
            
            -
            
            
            
            (8,610
            )Interest
                income
            
            
            271,969
            
            
            
            224,176
            
            
            
            242,965Other
                income (expense)
            
            
            10,945
            
            
            
            (24,518
            )
            
            
            (222,276
            )Total
                other income (expense)
            
            
            282,914
            
            
            
            199,658
            
            
            
            12,079Income
              (loss) before income taxes andcumulative effect of accounting
              change
            
            
            3,609,593
            
            
            
            (1,362,699
            )
            
            
            997,335Income
                tax provision (benefit)
            
            
            1,855,675
            
            
            
            (311,779
            )
            
            
            372,037Cumulative
                  effect of accounting change (net of income taxes of $53,764 in
                  2005)
            
            
            -
            
            
            
            -
            
            
            
            (99,848
            )Net
                income (loss)
            
            $
            1,753,918
            
            
            $
            (1,050,920
            )
            
            $
            725,146Net
                income (loss) per common share:Basic:Income
                (loss) applicable to common stock before cumulative effect of accounting
                change
            
            $
            0.34
            
            
            $
            (0.23
            )
            
            $
            0.14Cumulative
                effect of accounting change
            
            $
            -
            
            
            $
            -
            
            
            $
            0.02Net
                income applicable to common stock
            
            $
            0.34
            
            
            $
            (0.23
            )
            
            $
            0.16Diluted:Income
                (loss) applicable to common stock before cumulative effect of accounting
                change
            
            $
            0.33
            
            
            $
            (0.23
            )
            
            $
            0.14Cumulative
                effect of accounting change
            
            $
            -
            
            
            $
            -
            
            
            $
            0.02Net
                income (loss) applicable to common stock
            
            $
            0.33
            
            
            $
            (0.23
            )
            
            $
            0.16Weighted
                average common shares outstanding:Basic
            
            
            5,108,551
            
            
            
            4,495,868
            
            
            
            4,639,036Diluted
            
            
            5,336,439
            
            
            
            4,495,868
            
            
            
            4,665,992




See
      accompanying notes to consolidated financial statements.





41
 Table
            of
            Contents





LIVEDEAL,
      INC. AND
      SUBSIDIARIES


CONSOLIDATED
      STATEMENTS OF
      STOCKHOLDERS' EQUITY





Common
                Stock
            
            
            Preferred
                Stock
            
            
            Treasury
            
            
            Paid-In
            
            
            Deferred
            
            
            RetainedShares
            
            
            Amount
            
            
            Shares
            
            
            Amount
            
            
            Stock
            
            
            Capital
            
            
            Compensation
            
            
            Earnings
            
            
            TotalBalance,
                October 1, 2004
            
            
            5,085,879
            
            
            $
            5,086
            
            
            
            128,340
            
            
            $
            10,909
            
            
            $
            -
            
            
            $
            12,197,719
            
            
            $
            (5,742,814
            )
            
            $
            17,101,493
            
            
            $
            23,572,393Common
                stock issued for services
            
            
            10,000
            
            
            
            10
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            119,490
            
            
            
            -
            
            
            
            -
            
            
            
            119,500Treasury
                stock received as partial settlement of amounts due from
                affiliates
            
            
            (188,957
            )
            
            
            (189
            )
            
            
            -
            
            
            
            -
            
            
            
            (1,606,131
            )
            
            
            189
            
            
            
            -
            
            
            
            -
            
            
            
            (1,606,131
            )Treasury
                stock acquired as part of stock repurchase program
            
            
            (60,125
            )
            
            
            (60
            )
            
            
            -
            
            
            
            -
            
            
            
            (565,609
            )
            
            
            60
            
            
            
            -
            
            
            
            -
            
            
            
            (565,609
            )Series
                E preferred stock dividends
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (1,439
            )
            
            
            (1,439
            )Conversion
                of Series E preferred stock
            
            
            50
            
            
            
            -
            
            
            
            (500
            )
            
            
            (43
            )
            
            
            -
            
            
            
            267
            
            
            
            -
            
            
            
            -
            
            
            
            224Common
                stock issued in restricted stock plan
            
            
            88,572
            
            
            
            89
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            530,287
            
            
            
            (530,376
            )
            
            
            -
            
            
            
            -Amortization
                of deferred stock compensation
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            1,419,557
            
            
            
            -
            
            
            
            1,419,557Net
                income
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            725,146
            
            
            
            725,146Common
                stock dividends
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (1,444,763
            )
            
            
            (1,444,763
            )Cumulative
                effect of accounting change
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (1,166,426
            )
            
            
            1,012,814
            
            
            
            -
            
            
            
            (153,612
            )Effect
                of change in estimated forfeiture ratefor
                restricted stock plan
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (593,284
            )
            
            
            593,284
            
            
            
            -
            
            
            
            -Canceled
                stock
            
            
            (51,650
            )
            
            
            (52
            )
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            52
            
            
            
            -
            
            
            
            -
            
            
            
            -Balance,
                September 30, 2005
            
            
            4,883,769
            
            
            
            4,884
            
            
            
            127,840
            
            
            
            10,866
            
            
            
            (2,171,740
            )
            
            
            11,088,354
            
            
            
            (3,247,535
            )
            
            
            16,380,437
            
            
            
            22,065,266Treasury
                stock acquired as part of stock repurchase program
            
            
            (25,260
            )
            
            
            (26
            )
            
            
            -
            
            
            
            -
            
            
            
            (134,418
            )
            
            
            26
            
            
            
            -
            
            
            
            -
            
            
            
            (134,418
            )Treasury
                stock acquired in connection   with URL
                purchase
            
            
            (10,000
            )
            
            
            (10
            )
            
            
            -
            
            
            
            -
            
            
            
            (101,000
            )
            
            
            10
            
            
            
            -
            
            
            
            -
            
            
            
            (101,000
            )Series
                E preferred stock dividends
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (1,918
            )
            
            
            (1,918
            )Common
                stock issued in restricted stock plan
            
            
            239,650
            
            
            
            240
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            1,290,178
            
            
            
            (1,290,418
            )
            
            
            -
            
            
            
            -Amortization
                of deferred stock compensation
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            1,599,363
            
            
            
            -
            
            
            
            1,599,363Net
                income
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (1,050,920
            )
            
            
            (1,050,920
            )Effect
                of change in estimated forfeiture ratefor
                restricted stock plan
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (84,468
            )
            
            
            84,468
            
            
            
            -
            
            
            
            -Canceled
                stock
            
            
            (86,000
            )
            
            
            (86
            )
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            86
            
            
            
            -
            
            
            
            -
            
            
            
            -Balance,
                September 30, 2006
            
            
            5,002,159
            
            
            
            5,002
            
            
            
            127,840
            
            
            
            10,866
            
            
            
            (2,407,158
            )
            
            
            12,294,186
            
            
            
            (2,854,122
            )
            
            
            15,327,599
            
            
            
            22,376,373Reclass
                of deferred compensation
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (2,854,122
            )
            
            
            2,854,122
            
            
            
            -
            
            
            
            -Series
                E preferred stock dividends
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (2,396
            )
            
            
            (2,396
            )Common
                stock issued in restricted stock plan
            
            
            78,500
            
            
            
            79
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (79
            )
            
            
            
            
            
            
            -
            
            
            
            -Common
                stock issued in acquisition
            
            
            1,675,016
            
            
            
            1,675
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            12,326,370
            
            
            
            -
            
            
            
            -
            
            
            
            12,328,045Shares
                acquired from LiveDeal shareholders
            
            
            (44,224
            )
            
            
            (44
            )
            
            
            
            
            
            
            
            
            
            
            (307,540
            )
            
            
            44
            
            
            
            
            
            
            
            
            
            
            
            (307,540
            )Issuance
                of restricted stock in exchange for services
            
            
            10,800
            
            
            
            11
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            78,828
            
            
            
            -
            
            
            
            -
            
            
            
            78,839Restricted
                stock cancellations
            
            
            (28,575
            )
            
            
            (29
            )
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            29
            
            
            
            -
            
            
            
            -
            
            
            
            -Amortization
                of deferred stock compensation
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            1,480,632
            
            
            
            -
            
            
            
            -
            
            
            
            1,480,632Net
                income
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            1,753,918
            
            
            
            1,753,918Balance,
                September 30, 2007
            
            
            6,693,676
            
            
            $
            6,694
            
            
            
            127,840
            
            
            $
            10,866
            
            
            $
            (2,714,698
            )
            
            $
            23,325,888
            
            
            $
            -
            
            
            $
            17,079,121
            
            
            $
            37,707,871





See
      accompanying notes to consolidated financial statements.





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LIVEDEAL,
      INC. AND
      SUBSIDIARIES


CONSOLIDATED
      STATEMENTS OF CASH
      FLOWS





Year
                ended September
                30,2007
            
            
            2006
            
            
            2005(as
                restated)
            
            
            (as
                restated)CASH
                FLOWS FROM OPERATING ACTIVITIES:Net
                income (loss)
            
            $
            1,753,918
            
            
            $
            (1,050,920
            )
            
            $
            725,146Adjustments
                to reconcile net income (loss) to net cash provided by operating
                activities:Depreciation
                and amortization
            
            
            1,575,488
            
            
            
            1,434,554
            
            
            
            1,569,999Amortization
                of deferred stock compensation
            
            
            1,480,632
            
            
            
            1,599,363
            
            
            
            1,419,557Issuance
                of common stock as compensation for services
            
            
            78,839
            
            
            
            -
            
            
            
            119,500Non-cash
                interest income on advances to affiliates
            
            
            -
            
            
            
            -
            
            
            
            (110,019
            )Non-cash
                loss on transaction with affiliates
            
            
            -
            
            
            
            -
            
            
            
            281,884Cumulative
                effect of accounting change
            
            
            -
            
            
            
            -
            
            
            
            (99,848
            )Non-cash
                compensation expense to Chief Executive Officer
            
            
            88,680
            
            
            
            -
            
            
            
            -Deferred
                income taxes
            
            
            1,564,352
            
            
            
            (1,484,554
            )
            
            
            (507,259
            )(Gain)
                loss on disposal of equipment
            
            
            4,128
            
            
            
            (3,221
            )
            
            
            -Provision
                for uncollectible accounts
            
            
            660,963
            
            
            
            429,614
            
            
            
            631,277Changes
                in assets and liabilities:Restricted
                cash
            
            
            -
            
            
            
            500,000
            
            
            
            (500,000
            )Accounts
                receivable
            
            
            (237,771
            )
            
            
            (3,300,144
            )
            
            
            3,594,508Prepaid
                and other current assets
            
            
            (252,182
            )
            
            
            293,437
            
            
            
            (1,365,853
            )Deposits
                and other assets
            
            
            (851
            )
            
            
            (29,331
            )
            
            
            177,031Accounts
                payable
            
            
            (718,151
            )
            
            
            118,127
            
            
            
            (554,838
            )Accrued
                liabilities
            
            
            (3,654,358
            )
            
            
            3,762,169
            
            
            
            260,786Income
                taxes payable
            
            
            (578,191
            )
            
            
            152,907
            
            
            
            1,348,290Net
                cash  provided by operating activities
            
            
            1,765,496
            
            
            
            2,422,001
            
            
            
            6,990,161CASH
                FLOWS FROM INVESTING ACTIVITIES:Acquisition
                of businesses, net of cash acquired
            
            
            (4,114,139
            )
            
            
            -
            
            
            
            -Expenditures
                for intangible assets
            
            
            (939,102
            )
            
            
            (801,416
            )
            
            
            (391,077
            )Net
                purchases/redemptions of certificates ofdeposits
                and other investments
            
            
            3,082,053
            
            
            
            (1,077,066
            )
            
            
            (2,004,987
            )Purchases
                of  equipment
            
            
            (204,614
            )
            
            
            (25,719
            )
            
            
            (44,728
            )Net
                cash used in investing activities
            
            
            (2,175,802
            )
            
            
            (1,904,201
            )
            
            
            (2,440,792
            )CASH
                FLOWS FROM FINANCING ACTIVITIES:Series
                E preferred stock dividends
            
            
            (2,396
            )
            
            
            (1,918
            )
            
            
            (1,439
            )Common
                stock dividends
            
            
            -
            
            
            
            -
            
            
            
            (1,444,763
            )Proceeds
                from conversion of preferred stock
            
            
            -
            
            
            
            -
            
            
            
            224Purchase
                of treasury stock
            
            
            (307,540
            )
            
            
            (235,418
            )
            
            
            (565,609
            )Net
                cash used in financing activities
            
            
            (309,936
            )
            
            
            (237,336
            )
            
            
            (2,011,587
            )(DECREASE)
                INCREASE IN CASH AND CASH EQUIVALENTS
            
            
            (720,242
            )
            
            
            280,464
            
            
            
            2,537,782CASH
                AND CASH EQUIVALENTS, beginning of year
            
            
            6,394,775
            
            
            
            6,114,311
            
            
            
            3,576,529CASH
                AND CASH EQUIVALENTS, end of year
            
            $
            5,674,533
            
            
            $
            6,394,775
            
            
            $
            6,114,311





See
      accompanying notes to consolidated financial statements.





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1.
            ORGANIZATION
                AND BASIS OF PRESENTATION





LiveDeal,
      Inc. (the “Company”), formerly YP Corp., YP.Net, Inc. and RIGL Corporation, had
      previously attempted to develop software solutions for medical practice billing
      and administration.  The Company was not successful in implementing
      its medical practice billing and administration software products and looked
      to
      other business opportunities.  The Company acquired Telco Billing,
      Inc. (“Telco”) in June 1999, through the issuance of 1,700,000 shares of the
      Company’s common stock (on a post-split adjusted basis).  Prior to its
      acquisition of Telco, the Company had not generated significant or sufficient
      revenue from planned operations.





Telco
      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 YP Corp. 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 developed and operates an online
      local classifieds marketplace, www.livedeal.com, which listed millions of goods
      and services for sale in almost every city and zip code across the United
      States.   The technology acquired in the acquisition offers 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.





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 provides telemarketing services.  The
      acquisition took place through the Company’s wholly-owned subsidiary, “247
      Marketing”, a Nevada corporation.





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.





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, 247 Marketing,
      Telco and Telco of Canada, Inc, the Company’s wholly owned subsidiaries, for the
      years ended September 30, 2007, 2006, and 2005.  The results of
      LiveDeal and 247 Marketing are included from their respective acquisition dates
      of June 6, 2007 and July 10, 2007, respectively.





2.
            SUMMARY
                OF SIGNIFICANT ACCOUNTING POLICIES





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-insured limits.





Principles
      of
      Consolidation: The consolidated financial statements include the accounts
      of the Company and its wholly owned subsidiaries, LiveDeal, 247 Marketing,
      Telco
      Billing, Inc. and Telco of Canada, Inc.  The results of LiveDeal and
      247 Marketing are included from their respective acquisition dates of June
      6,
      2007 and July 10, 2007, respectively.  All significant intercompany
      accounts and transactions have been eliminated.





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Customer
      Acquisition
      Costs:  In the fourth quarter of fiscal 2006, the Company
      enacted a change in accounting principle to expense customer acquisition costs
      when incurred.  A preferability letter was obtained by the Company’s
      predecessor auditors and filed with the SEC in connection with the Company’s
      Form 10-K for the year ended September 30, 2006.  Prior periods have
      been restated to reflect the retroactive application of this
      change.  See Note 3.





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 $155,929, $246,919, and $373,803 for the years ended
      September 30, 2007, 2006, and 2005, respectively.





Revenue
      Recognition:
      The Company’s revenue is generated by customer subscriptions of directory and
      advertising services.  Revenue is billed and recognized monthly for
      services subscribed in that specific month.  The Company utilizes
      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.





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.





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.





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.





Net
      Income (Loss) Per
      Share: Net income (loss) per share is calculated in accordance with
      Statement of Financial Accounting Standards (SFAS) No. 128, Earnings Per Share.Under
      the provisions of
      SFAS No. 128, basic net income 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
      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.





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. The carrying amount of the advances to affiliates
      approximates fair value because the Company charges what it believes are market
      rate interest rates for comparable credit risk instruments. The Company has
      applied certain assumptions in estimating these fair values. The use of
      different assumptions or methodologies may have a material effect on the
      estimates of fair values.





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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, and estimated
      useful lives for intangible assets and property and equipment.





Stock-Based
      Compensation:  The Company from time-to-time grants restricted
      stock awards 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 SFAS No. 123R and Emerging Issues Task Force (“EITF”) Issue No.
      96-18, Accounting for Equity
      Instruments that are Issued to Other Than Employees for Acquiring, or in
      Conjunction with Selling Goods or Services.  Under SFAS No.
      123R and EITF No. 96-18, stock awards to non-employees are accounted for at
      fair
      value at their respective measurement date.





Impairment
      of Long-lived
      Assets: The Company assesses long-lived assets for impairment in
      accordance with the provisions of SFAS No. 144, Accounting for the Impairment
      or
      Disposal of Long-Lived Assets.SFAS No. 144 requires that the Company
      assess the issue of impairment of a long-lived asset annually or whenever there
      is an indication 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 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.   The Company
      most recently completed an impairment evaluation in the fourth quarter of fiscal
      2007.  No long-lived assets were determined to be impaired during the
      years ended September 30, 2007, 2006, and 2005.





Effects
      of Reverse Stock
      Split: Effective on August 15, 2007, the Company implemented a 1-for-10
      reverse stock split with respect to issued and outstanding shares of its common
      stock.  The reverse stock split 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.  All per share amounts have been
      retroactively restated for the effects of this reverse stock split.





Restatements: See
      Note 19.





Recently
      Issued Accounting
      Pronouncements:





In
      July 2006, the Financial Accounting Standards Board (FASB) issued FASB
      Interpretation No. 48, Accounting for Uncertainty
      in Income
      Taxes (FIN 48) – an interpretation of FASB Statement No. 109, Accounting for
      Income Taxes (SFAS No. 109) (FIN 48). FIN 48 clarifies the accounting for
      uncertainty in income taxes recognized in accordance with SFAS No. 109 and
      prescribes a recognition threshold and measurement attribute for the financial
      statement recognition and measurement of a tax position taken or expected to
      be
      taken in a return. Guidance is also provided on de-recognition, classification,
      interest and penalties, accounting in interim periods, disclosure and
      transition. FIN 48 is effective for fiscal years beginning after December 15,
      2006.  The Company does not expect the impact of FIN 48 to have a
      material effect on its financial position and results of
      operations.





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In
      September 2006, the SEC issued Staff Accounting Bulletin No. 108, Considering the Effects
      of Prior
      Year Misstatements when Quantifying Misstatements in Current Year Financial
      Statements(SAB 108).  SAB 108 provides guidance on how prior
      year misstatements should be considered when quantifying misstatements in the
      current year financial statements.  The SAB requires registrants to
      quantify misstatements using both a balance sheet and an income statement
      approach and evaluate whether either approach results in quantifying a
      misstatement that, when all relevant quantitative and qualitative factors are
      considered, is material.  SAB 108 does not change the guidance in SAB
      99, “Materiality”, when evaluating the materiality of
      misstatements.  SAB 108 is effective for fiscal years ending after
      November 15, 2006.  The adoption of this pronouncement did not have a
      material effect of the Company’s consolidated financial statements.





In
      September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS
      No. 157). SFAS No. 157 establishes a framework for measuring fair
      value under generally accepted accounting procedures and expands disclosures
      on
      fair value measurements. This statement applies under previously established
      valuation pronouncements and does not require the changing of any fair value
      measurements, though it may cause some valuation procedures to change. Under
      SFAS No. 157, fair value is established by the price that would be received
      to sell the item or the amount to be paid to transfer the liability of the
      asset
      as opposed to the price to be paid for the asset or received to transfer the
      liability. Further, it defines fair value as a market specific valuation as
      opposed to an entity specific valuation, though the statement does recognize
      that there may be instances when the low amount of market activity for a
      particular item or liability may challenge an entity’s ability to establish a
      market amount. In the instances that the item is restricted, this pronouncement
      states that the owner of the asset or liability should take into consideration
      what affects the restriction would have if viewed from the perspective of the
      buyer or assumer of the liability. This statement is effective for all assets
      valued in financial statements for fiscal years beginning after
      November 15, 2007. The Company is currently evaluating the impact of SFAS
      No. 157 on its financial position and result of operations.





In
      February 2007, the FASB issued SFAS No. 159, The Fair Value Option for
      Financial
      Assets and Financial Liabilities, which provides companies with an option
      to report selected financial assets and liabilities at fair
      value.  SFAS No. 159 also establishes presentation and disclosure
      requirements designed to facilitate comparisons between companies that choose
      different measurement attributes for similar types of assets and
      liabilities.  SFAS No. 159 is effective as of the beginning of an
      entity’s first fiscal year beginning after November 15, 2007 with early adoption
      allowed.  The Company has not yet determined the impact, if any, that
      adopting this standard might have on its financial statements.





In
      December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (SFAS
      No. 141(R)) and No. 160, Noncontrolling Interests
      in
      Consolidated Financial Statements, an amendment of ARB No. 51 (SFAS No.
      160). SFAS No. 141(R) and SFAS No. 160 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. SFAS No. 141(R) 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
      as of the acquisition date if it is more likely than not to be
      incurred.  SFAS No. 160 will change the accounting and reporting for
      minority interests, which will be recharacterized as noncontrolling interests
      and classified as a component of equity.  SFAS No. 141(R) and SFAS No.
      160 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). SFAS No. 141(R) will be applied prospectively. SFAS No.
      160
      requires retroactive adoption of the presentation and disclosure requirements
      for existing minority interests. All other requirements of SFAS No. 160 shall
      be
      applied prospectively. Early adoption is prohibited for both
      standards.  The Company is currently evaluating the effects of these
      pronouncements on its financial position and results of operations.




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3.
              ACCOUNTING
                  CHANGES


Change
      in Accounting
      Principle Subsequent to Adoption of SFAS No. 154 – Accounting for Customer
      Acquisition Costs





Historically,
      the Company had capitalized customer acquisition costs, consisting of mailing
      lists and check mailers, and amortized them on a straight-line basis over the
      average expected life of the related customers based on historical IAP
      advertiser attrition rates and other factors.




Prior
      to
      fiscal 2006, the majority of the capitalized customer acquisition costs related
      to the Company’s mailing campaigns, for which the Company amortized the costs
      based on historical IAP advertiser attrition rates attributable to its entire
      customer base.  During fiscal 2006, the Company began increasing its
      expenditures for telemarketing campaigns.  The capitalization of such
      costs requires that the Company amortize them over the average expected life
      of
      acquired customers, as determined on a cost-pool by cost-pool
      basis.  The Company’s systems do not allow us to efficiently and
      accurately monitor customer lives by method of
      acquisition.  Therefore, the Company is unable to determine the
      average expected life of those customers acquired via telemarketing versus
      those
      acquired via mailing campaigns and cannot assess the value of the future
      benefits.  As it cannot effectively evaluate such costs on a cost-pool
      by cost-pool basis, the Company determined in fiscal 2006 that the more
      preferable method of accounting for these costs is to expense them when
      incurred.  The Company enacted this change in accounting principle
      during the fourth quarter of fiscal 2006 and, in accordance with SFAS No. 154,
      has restated all periods presented to reflect this new method of accounting
      for
      such costs.





4.
            ACQUISITIONS





LiveDeal,
      Inc.





On
      June
      6, 2007, the Company acquired all of the outstanding common and preferred
      stock of LiveDeal, Inc. ("LiveDeal") in exchange for 1,505,490 shares of Common
      Stock. In addition, the Company issued an aggregate of 23,155 shares of
      restricted Common Stock in exchange for the cancellation of all outstanding
      LiveDeal options and warrants. Finally, the Company agreed to issue an
      additional 146,371 shares of Company Stock in exchange for the cancellation
      of
      $1,021,666 of LiveDeal debt. Immediately following the transaction, LiveDeal
      became be a wholly-owned subsidiary of the Company.





LiveDeal
      has developed and operates an online local classifieds marketplace,
      www.livedeal.com which has millions of goods and services listed for sale,
      in
      almost every city and zip code across the U.S. LiveDeal offers 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.
      Additionally, the LiveDeal technology lets consumers search or browse for items
      in a particular city, state or zip code.





At
      the
      site, users can search classifieds in any region and can look up businesses
      in a
      yellow pages database. As with most such classified ad sites, users are offered
      a search window and a listing of subcategories.  Sales are made
      directly between the user (buyer) and seller, and an "email the seller" link
      is
      provided to assist in this process.





Among
      the
      interesting features of LiveDeal’s site is "Local AdWiz", which is a classifieds
      and yellow pages distribution network, turning any web site or blog into a
      unique and localized classifieds and Yellow Pages site in seconds. AdWiz gives
      website publishers fresh local content and an instant revenue stream. Local
      AdWiz pulls from millions of classified and yellow page listings across multiple
      categories from people in cities and towns all over the U.S. AdWiz enables
      the
      listings to be republished dynamically on any website within
      seconds.





The
      aggregate purchase price of LiveDeal was $12,700,695, consisting of
      approximately $12,328,045 of stock-based consideration and $372,650 of
      acquisition-related expenses.  The value of the combined 1,675,016
      shares of common stock granted in the transaction was determined based on the
      average closing market price of the common stock over the two day period before
      and after the effective date of the acquisition.  The purchase price
      was determined based on an average of valuation estimates utilizing comparable
      companies, precedent transactions and discounted cash flow
      techniques.  There are no contingent payments or commitments specified
      in the agreement, except with respect to the employment agreement described
      in
      Note 10.





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The
      following table sets forth the allocation of the acquisition cost, including
      acquisition-related expenses, to the assets acquired and liabilities assumed,
      based on their estimated fair values:





Current
                assets
            
            $
            962,877Property,
                plant and equipment
            
            
            70,000Goodwill
            
            
            7,349,366Intangible
                assets
            
            
            2,130,000Deferred
                tax assets
            
            
            3,545,618Other
                non-current assets
            
            
            10,846Total
                assets acquired
            
            
            14,068,707Current
                liabilities
            
            
            1,368,012Total
                liabilities assumed
            
            
            1,368,012Net
                assets acquired
            
            $
            12,700,695








The
      Company does not expect the goodwill to be tax-deductible.  As the
      Company only operates in one reportable segment, the entire goodwill balance
      has
      been allocated to that segment.





The
      Company has estimated the fair value of LiveDeal’s identifiable intangible
      assets at $2,130,000, allocated as follows:





Estimated
              Fair
                Value
            
            Average
              Remaining
              Useful
                LifeAsset
                class:Marketing-based
                intangible assets
            
            $
            1,500,000
            
            20
                yearsTechnology-based
                intangible assets
            
            
            630,000
            
            5
                years$
            2,130,000





Marketing-based
      intangible assets include trademarks, tradenames and internet domain names,
      whereas technology-based intangible assets include computer software,
      technology, databases, and trade secrets.





In
      connection with its acquisition of LiveDeal, the Company repurchased an
      aggregate of 44,224 shares of common stock from dissenting shareholders of
      LiveDeal.  The aggregate purchase price was $307,540.





OnCall
      Subscriber
      Management, Inc.





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), which
      OnCall purchased recently under option from 24 by 7 Contact Solutions,
      Inc.  The Company completed the acquisition through 247 Marketing,
      LLC, a wholly owned subsidiary, which established a subsidiary in the
      Philippines (247 Marketing, Inc.) to operate the business.  The
      acquisition added 170 Philippines-based employees to the Company’s
      workforce.





The
      aggregate purchase price of the acquisition was approximately $4,552,600
      (including acquisition-related expenses of $52,600), which was paid in cash
      during fiscal 2007.  The Company allocated $218,803 of the purchase
      price to the estimated fair value of the equipment that was acquired and
      $4,333,797 to goodwill.  The Company does not expect the goodwill to
      be tax-deductible.  As the Company only operates in one reportable
      segment, the entire goodwill balance has been allocated to that
      segment.





Pro
      Forma Financial
      Information





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The
      following table provides pro forma results of operations for the three and
      nine
      months ended June 30, 2007 and 2006 as if LiveDeal had been acquired as of
      the
      beginning of each period presented.  The pro forma results include
      certain purchase accounting adjustments such as the estimated changes in
      amortization expense on acquired intangible assets, increased compensation
      expense resulting from the contractual obligation for Mr. Navar’s salary
      (described in Note 10) and the elimination of interest expense on borrowings
      that were satisfied through the acquisition.  However, pro forma
      results do not include any anticipated cost savings or other effects of the
      planned integration of LiveDeal.  Accordingly, such amounts are not
      necessarily indicative of the results that would have occurred if the
      acquisition had occurred on the dates indicated or that may result in the
      future.





Year
                ended September
                30,2007
            
            
            2006(unaudited)
            
            
            (unaudited)Net
                revenues
            
            $
            28,057,074
            
            
            $
            34,159,380Net
                loss
            
            $
            (1,834,830
            )
            
            $
            (4,089,392
            )Diluted
                net loss per share
            
            $
            (0.28
            )
            
            $
            (0.66
            )





The
      Company did not provide pro forma information for the acquisition of OnCall
      Subscriber Management Inc. as this entity was a carve-out of a larger
      entity.  As such, historical financial information of the acquired
      entity on a standalone basis is unattainable.





5.
            BALANCE
                SHEET INFORMATION





Balance
      sheet information is as follows:





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September
                30,2007
            
            
            2006Receivables,
                current, netAccounts
                receivable, current
            
            $
            9,221,903
            
            
            $
            11,050,104Less:
                Allowance for doubtful accounts
            
            
            (2,302,723
            )
            
            
            (3,034,504
            )$
            6,919,180
            
            
            $
            8,015,600Receivables,
                long term, netAccounts
                receivable, long term
            
            $
            2,101,071
            
            
            $
            1,374,624Less:
                Allowance for doubtful accounts
            
            
            (159,075
            )
            
            
            (234,445
            )$
            1,941,996
            
            
            $
            1,140,179Total
                receivables, netGross
                receivables
            
            $
            11,322,974
            
            
            $
            12,424,728Gross
                allowance for doubtful accounts
            
            
            (2,461,798
            )
            
            
            (3,268,949
            )$
            8,861,176
            
            
            $
            9,155,779Components
                of allowance for doubtful accounts are as follows:Allowance
                for dilution and fees on amounts due from billing
                aggregators
            
            $
            1,888,730
            
            
            $
            2,465,423Allowance
                for customer refunds
            
            
            573,068
            
            
            
            803,526$
            2,461,798
            
            
            $
            3,268,949Property
                and equipment, netLeasehold
                improvements
            
            $
            455,286
            
            
            $
            447,681Furnishings
                and fixtures
            
            
            310,499
            
            
            
            296,074Office,
                computer equipment and other
            
            
            1,423,989
            
            
            
            1,055,5452,189,774
            
            
            
            1,799,300Less:
                Accumulated depreciation
            
            
            (1,766,211
            )
            
            
            (1,620,417
            )$
            423,563
            
            
            $
            178,883Intangible
                assets, netDomain
                name and marketing related intangibles
            
            $
            7,208,600
            
            
            $
            5,708,600Non-compete
                agreement
            
            
            3,465,000
            
            
            
            3,465,000Website
                and technology related intangibles
            
            
            3,006,093
            
            
            
            1,436,99113,679,693
            
            
            
            10,610,591Less:  Accumulated
                amortization of intangible
            
            
            (6,307,546
            )
            
            
            (4,887,987
            )$
            7,372,147
            
            
            $
            5,722,604Accrued
                liabilitiesLitigation
                accrual
            
            $
            -
            
            
            $
            3,525,000Deferred
                revenue
            
            
            323,596
            
            
            
            188,399Accrued
                payroll and bonuses
            
            
            339,305
            
            
            
            187,973Accrued
                expenses - other
            
            
            533,428
            
            
            
            664,067$
            1,196,330
            
            
            $
            4,565,439








6.
            ACCOUNTS
                RECEIVABLE





The
      Company provides billing information to third party billing companies for the
      majority of its monthly billings.  Two billing channels account for
      the majority of the Company’s accounts receivable. Billings submitted are
“filtered” by these billing companies and the LECs.  Net accepted
      billings are recognized as revenue and accounts receivable.  The
      billing companies remit payments to the Company on the basis of cash ultimately
      received from the LECs by those billing companies.  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.  These balances have been classified as
      long-term assets in the accompanying consolidated balance sheet.





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The
      Company experiences significant dilution of its gross billings by the billing
      companies.  The Company negotiates collections with the billing
      companies on the basis of the contracted terms and historical
      experience.  The Company’s cash flow may be affected by holdbacks,
      fees, and other matters, which are determined by the LECs and the billing
      companies.





The
      handling and processing of cash receipts pertaining to trade accounts receivable
      is maintained primarily by three third-party billing companies.  The
      net receivable due from such billing services providers represented 31%, 23%,
      and 16%, respectively, of the Company’s total net accounts receivable at
      September 30, 2007.





Subscription
      receivables that are directly billed by the Company are valued and reported
      at
      the estimated future collection amount. Determining the expected collections
      requires an estimation of both uncollectible accounts and
      refunds.  The net direct-billed subscriptions receivable at September
      30, 2007 and 2006, respectively, were $150,323 and $261,880.





Certain
      receivables have been classified as long-term because issues arise whereby
      the
      billing companies withhold certain amounts that are repaid over a 12 to 18
      month
      period of time. .  The breakdown of current and long-term receivables
      and their respective allowances is in Note 5 above.





7.
            INTANGIBLE
                ASSETS





The
      Company’s intangible assets consist of licenses for the use of Internet domain
      names or 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.





In
      connection with the Company’s acquisition of Telco, the Company was required to
      provide an accelerated payment of license fees for the use of the URL
      Yellow-page.net.  The URL is recorded at its cost of $5,000,000, net
      of accumulated amortization.  The URL is amortized over the
      twenty-year term of the licensing agreement.





In
      July
      2003, the Company entered into a licensing agreement with a vendor to license
      the use of the URL www.yp.com in exchange for cash and restricted shares of
      the
      Company’s common stock. Under the terms of this agreement, the licensor had the
      option of transferring the rights to the URL and the restricted shares to the
      Company in exchange for $300,000. In July 2006, the licensor exercised this
      option, and transferred ownership of the URL and the restricted shares to the
      Company. As this option was deemed to be a purchase commitment, no liability
      was
      reflected in the Company’s financial statements prior to the exercise of the
      option. The Company capitalized the URL at its net acquisition price, computed
      as the $300,000 cash payment less the fair market value of the shares acquired
      (determined based on the stock price on the date of reacquisition) and will
      amortize this asset on a straight-line basis over its estimated useful
      life.





The
      following summarizes the estimated future amortization expense related to
      intangible assets:





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Years ended September 30,2008
            
            $
            1,698,7212009
            
            
            1,587,5652010
            
            
            1,012,9022011
            
            
            391,2892012
            
            
            345,387Thereafter
            
            
            2,336,283Total
            
            $
            7,372,147





Total
      amortization expense related to intangible assets was $1,419,559, $1,187,635
      and
      $1,196,198 for the years ended September 30, 2007, 2006 and 2005.





The
      Company most recently completed an impairment test in the fourth quarter of
      fiscal 2007.  No long-lived assets were impaired during the years
      ended September 30, 2007, 2006, and 2005.





8.
            STOCKHOLDERS’
                EQUITY





Common
      Stock Issued for
      Services





The
      Company historically has granted shares of its common stock to officers,
      directors and consultants as payment for services rendered. The value of those
      shares was determined based on the trading value of the stock at the date at
      which the counterparties’ performance is complete.  During the year
      ended September 30, 2007, the Company issued 10,800 shares to a consulting
      firm
      valued at $78,840 as payment for amounts previously accrued. During the year
      ended September 30, 2006, there were no shares granted to officers, directors
      and consultants other than grants of restricted stock as described in Note
      14.  During the year ended September 30, 2005, the Company issued
      10,000 shares to a consulting firm valued at $119,500 for services
      rendered.





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 ten-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.  During fiscal 2004, all then-outstanding treasury shares,
      valued at $216,000 were retired.  On April 1, 2005, the Company
      acquired 188,957 shares valued at $1,606,000 as partial settlement of amounts
      due from affiliates.  On May 18, 2005, the Company’s Board of
      Directors authorized a plan to repurchase up to $3,000,000 of common stock
      from
      time to time on the open market or in privately negotiated
      transactions.  In fiscal 2006, the Company acquired 25,260 shares for
      $134,000 and in fiscal 2005, the Company acquired 60,125 shares for $566,000
      under this plan.  In July 2006, the Company acquired 10,000 shares
      valued at $101,000 in connection with the exercise of its option to acquire
      the
      URL www.yp.com as described in Note 7.





On
      May
      25, 2007, the Company’s Board of Directors terminated the May 18, 2005 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.





Dividends





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During
      the years ended September 30, 2007, 2006 and 2005, the Company accrued dividends
      of $2,396, $1,918, and $1,439, respectively, to holders of Series E preferred
      stock.





9.
            NET
                (LOSS)/INCOME PER SHARE





Net
      (loss)/income per share is calculated using the weighted average number of
      shares of common stock outstanding during the year.  Preferred stock
      dividends are subtracted from net income to determine the amount available
      to
      common stockholders.





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





Year Ended
              September 30, 2007
            
            
            Year Ended
              September 30, 2006
            
            
            Year Ended
              September 30, 2005Income
                (loss) before cumulative effect of accounting change
            
            $
            1,753,918
            
            
            $
            (1,050,920
            )
            
            $
            625,298Less:
                preferred stock dividends
            
            
            (2,396
            )
            
            
            (1,918
            )
            
            
            (1,439
            )Income
                (loss) applicable to common stock before cumulative effect of accounting
                change
            
            
            1,751,522
            
            
            
            (1,052,838
            )
            
            
            623,859Cumulative
                effect of accounting change
            
            
            -
            
            
            
            -
            
            
            
            99,848Net
                income (loss) applicable to common stock
            
            $
            1,751,522
            
            
            $
            (1,052,838
            )
            
            $
            723,707Basic
                weighted average common shares outstanding:
            
            
            5,108,551
            
            
            
            4,495,868
            
            
            
            4,639,036Add
                incremental shares for:Unvested
                restricted stock
            
            
            222,359
            
            
            
            -
            
            
            
            18,647Series
                E convertible preferred stock
            
            
            5,529
            
            
            
            -
            
            
            
            7,358Outstanding
                warrants
            
            
            -
            
            
            
            -
            
            
            
            952Diluted
                weighted average common shares outstanding:
            
            
            5,336,439
            
            
            
            4,495,868
            
            
            
            4,665,992Net
                income (loss) per share:Basic:Income
                (loss) applicable to common stock before cumulative effect of accounting
                change
            
            $
            0.34
            
            
            $
            (0.23
            )
            
            $
            0.14Cumulative
                effect of accounting change
            
            $
            -
            
            
            $
            -
            
            
            $
            0.02Net
                income (loss) applicable to common stock
            
            $
            0.34
            
            
            $
            (0.23
            )
            
            $
            0.16Diluted:Income
                (loss) applicable to common stock before cumulative effect of accounting
                change
            
            $
            0.33
            
            
            $
            (0.23
            )
            
            $
            0.14Cumulative
                effect of accounting change
            
            $
            -
            
            
            $
            -
            
            
            $
            0.02Net
                income (loss) applicable to common stock
            
            $
            0.33
            
            
            $
            (0.23
            )
            
            $
            0.16








The
      following potentially dilutive securities were excluded from the calculation
      of
      net income (loss) per share because the effects are antidilutive:





September
                  30,2007
              
              
              2006
              
              
              2005Warrants
                  to purchase shares of common stock
              
              
              -
              
              
              
              -
              
              
              
              43,750Series
                  E convertible preferred stock
              
              
              -
              
              
              
              12,784
              
              
              
              -Shares
                  of non-vested restricted stock
              
              
              63,406
              
              
              
              371,858
              
              
              
              161,40463,406
              
              
              
              384,642
              
              
              
              205,154


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10.
              COMMITMENTS
                  AND CONTINGENCIES
  The
        Company leases its office space and certain equipment under long-term operating
        leases expiring through fiscal year 2013.  Rent expense under these
        leases was $526,617, $340,827, and $365,121 for the years ended September
        30,
        2007, 2006 and 2005, respectively.





At
      September 30, 2007, future minimum annual lease payments under operating lease
      agreements for fiscal years ended September 30 are as follows:





2008
            
            $
            830,8332009
            
            
            800,6392010
            
            
            509,9232011
            
            
            407,5232012
            
            
            314,789Thereafter
            
            
            78,585$
            2,942,292




Change
      in Officers and
      Employment Agreement





Effective
      June 6, 2007, the Company appointed Rajesh Navar, 39, President of the Company.
      In connection with this appointment and the LiveDeal acquisition described
      in
      Note 4 above, the Company entered into a three-year employment agreement with
      Mr. Navar. The agreement provides for a base salary of $300,000 per year plus
      participation in the Company's health, disability and dental benefits, insurance
      programs, pension and retirement plans, and all other employee benefit and
      compensation arrangements available to other senior officers of the Company.
      Commencing in the second year, Mr. Navar's annual salary will be increased
      on an
      annual basis at a rate of at least 10% of the preceding year's annual salary.
      The Company will also reimburse Mr. Navar for all business expenses incurred
      by
      him in connection with his employment with the Company.





The
      agreement also provides that, if Mr. Navar's employment is terminated as a
      result of his death, disability, for Cause (as defined in the agreement), the
      agreement otherwise expires, or for any reason other than Good Reason (as
      defined in the agreement), Mr. Navar or his estate, conservator or designated
      beneficiary, as the case may be, will be entitled to payment of any earned
      but
      unpaid annual salary for the year in which Mr. Navar's employment is terminated
      through the date of termination, as well as any accrued but unused vacation,
      reimbursement of expenses, and vested benefits to which Mr. Navar is entitled
      in
      accordance with the terms of each applicable benefit plan. In the event Mr.
      Navar's employment is terminated for any other reason or if Mr. Navar terminates
      his own employment for Good Reason on or before the expiration of the Agreement,
      and provided that Mr. Navar executes a valid release of any and all claims
      that
      Mr. Navar may have relating to his employment against the Company, Mr. Navar
      will be entitled to receive any earned but unpaid annual salary for the year,
      any accrued but unused vacation, reimbursement of expenses and vested benefits
      to which Mr. Navar is entitled in accordance with the terms of each applicable
      benefit plan, plus a lump sum amount equal to three months of annual salary
      that
      Mr. Navar would receive under the agreement if his employment with the Company
      had not been terminated.





In
      addition, in the event Mr. Navar's employment is terminated as a result of
      his
      death, Mr. Navar's estate, conservator or designated beneficiary, as the case
      may be, will be entitled to receive, in addition to Mr. Navar's accrued salary
      and benefits through the date of death, a lump sum payment equivalent to three
      months of Mr. Navar's annual salary in effect at the time of death.





On
      June
      6, 2007, the Company also entered into a Noncompetition, Nondisclosure, and
      Nonsolicitation Agreement with Mr. Navar, which provides that Mr. Navar will
      not: (i) disclose the Company's confidential information; (ii) compete with
      the
      Company until the third anniversary of the agreement or for one year after
      his
      employment or service to the Company is terminated (unless he is terminated
      for
      Cause or Good Reason), whichever is longer; (iii) solicit employees of the
      Company until the second anniversary of the agreement or for one year after
      his
      employment or service to the Company is terminated, whichever is longer; and
      (iv) solicit clients of the Company until the third anniversary of the agreement
      or for one year after his employment or service to the Company is terminated
      (unless he is terminated for Cause or Good Reason), whichever is
      longer.





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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.





During
      the second quarter of fiscal 2006, the Company settled outstanding litigation
      with a former vendor, resulting in a cash payment of $490,000. As $328,000
      of
      the settlement was previously accrued, there was $162,000 of expense incurred
      in
      the year ended September 30, 2006 associated with this settlement. In connection
      with this payment, the Company is no longer required to maintain our bond that
      was previously reflected as restricted cash in the accompanying consolidated
      balance sheet. Accordingly, the bond has been released and this amount has
      been
      reclassified from restricted cash to cash in the consolidated balance sheet
      as
      of September 30, 2006.





On
      December 14, 2006, the Company voluntarily entered into a settlement with
      thirty-four states’ Attorneys General to address their concerns over our
      promotional activities, specifically the use of its check mailer for customer
      acquisition.  The main terms of this agreement were as
      follows:





·
            The
                Company paid a settlement fee of $2,000,000 to the state consortium,
                which
                they distributed among themselves;


·
            The
                Company discontinued the use of activation checks as a promotional
                incentive;


·
            The
                Company temporarily suspended billing of any active customer that
                was
                acquired in connection with the use of an activation check while
                notifying
                the customer of their legal rights to cancel the service and providing
                them a 60-day opportunity to receive a refund equivalent to the customer’s
                last two payments; and


·
            The
                Company agreed not to employ any collection efforts with respect
                to
                past-due accounts of customers that were secured through the use
                of an
                activation check.





The
      Company has recorded a charge of $3,525,000 in other income and expense in
      the
      accompanying consolidated statement of operations for fiscal 2006, consisting
      of
      a settlement accrual of $2,000,000, a reserve for refunds to existing customers
      covered by the 60 day opportunity mentioned above and other related costs of
      $1,250,000 and legal fees of $275,000.  Management analyzed the number
      of customers eligible and applied probabilities to estimate the additional
      $1,250,000 in refunds and costs.  Customers had through February 2007
      to apply for these refunds.  In fiscal 2007, the Company reversed
      excess accruals for legal fees and refunds totaling $200,718.





Other
      Contractual
      Commitments





During
      the second quarter of fiscal 2006, the Company entered into a contractual
      arrangement with an attorney to settle previous claims and to engage the future
      services of this attorney.  Under the terms of the arrangement, the
      Company made cash payments during the year totaling $145,000 and granted 10,000
      shares of restricted stock.  Under the terms of the agreement, the
      Company is obligated to make future payments over the next year totaling $63,000
      in exchange for future services.  Future amounts payable under this
      agreement have not been accrued in the accompanying financial statements as
      such
      payments are for future services.





During
      the third quarter of fiscal 2006, we entered into a contractual arrangement
      with
      a consulting firm to provide strategic and operational related consulting
      services.  Under the terms of the agreement, we are obligated to make
      future payments through July 2009 that vary based on the Company’s billed
      customer count subject to a minimum of $20,000 per month.  Current
      payments are approximately $100,000 per month.  Future amounts payable
      under this agreement have not been accrued in the accompanying financial
      statements as such payments are for future services.





11.
            PROVISION
                FOR INCOME TAXES





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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.





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





2007
            
            
            2006
            
            
            2005Current
                provision
            
            $
            291,273
            
            
            $
            1,172,823
            
            
            $
            879,805Deferred
                (benefit) provision
            
            
            1,564,402
            
            
            
            (1,484,602
            )
            
            
            (507,768
            )Net
                income tax (benefit) provision
            
            $
            1,855,675
            
            
            $
            (311,779
            )
            
            $
            372,037




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





2007
            
            
            2006
            
            
            2005Amount
            
            
            Percent
            
            
            Amount
            
            
            Percent
            
            
            Amount
            
            
            PercentFederal
                statutory rates
            
            $
            1,227,262
            
            
            
            34
            %
            
            $
            (463,318
            )
            
            
            34
            %
            
            $
            339,094
            
            
            
            34
            %State
                income taxes
            
            
            121,282
            
            
            
            3
            %
            
            
            (45,787
            )
            
            
            3
            %
            
            
            33,510
            
            
            
            3
            %Write
                off of deferred tax asset related to vested restricted
                stock
            
            
            499,885
            
            
            
            14
            %
            
            
            217,131
            
            
            
            (16
            )%
            
            
            -
            
            
            
            0
            %Other
            
            
            7,246
            
            
            
            0
            %
            
            
            (19,805
            )
            
            
            1
            %
            
            
            (567
            )
            
            
            (0
            )%Effective
                rate
            
            $
            1,855,675
            
            
            
            51
            %
            
            $
            (311,779
            )
            
            
            22
            %
            
            $
            372,037
            
            
            
            37
            %




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





2007
            
            
            2006Deferred
                income tax assets:Book
                to tax differences in accounts receivable
            
            $
            546,145
            
            
            $
            1,314,721Net
                operating loss carryforwards
            
            
            3,545,618Book
                to tax differences in accrued expenses
            
            
            -
            
            
            
            467,065Book
                to tax differences for stock based compensation
            
            
            951,246
            
            
            
            1,280,007Book
                to tax differences in intangible assets
            
            
            121,613
            
            
            
            121,613Total
                deferred income tax asset
            
            
            5,164,622
            
            
            
            3,183,406Deferred
                income tax liabilities:Book
                to tax differences in depreciation
            
            
            66,833
            
            
            
            66,883Total
                deferred income tax liability
            
            
            66,833
            
            
            
            66,883Net
                deferred income tax asset (liability)
            
            $
            5,097,789
            
            
            $
            3,116,523




12.
            RELATED
                PARTY TRANSACTIONS





Changes
      in Officers and
      Directors





On
      November 3, 2005, the Company entered into a Separation Agreement with its
      former Chief Executive Officer.  Under the terms of the agreement, the
      Company made a cash payment of $337,500 in the second quarter of fiscal 2006.
      The agreement also provided for the continued vesting of 70,000 shares of the
      Chief Executive Officer’s restricted stock awards that were granted in fiscal
      2004 and 2005.





On
      January 19, 2006, the Company entered into a Separation Agreement & General
      Release with its former Chief Financial Officer.  Under the terms of
      the agreement, the Company made a cash payment of approximately $95,000 in
      the
      second quarter of fiscal 2006.  The agreement also provided for the
      continued vesting of the Chief Financial Officers’ restricted stock awards
      (totaling 15,000 shares) that were granted in fiscal 2004 and 2005.





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On
      September 19, 2006, the Company entered into an employment agreement with Daniel
      L. Coury, Sr., which calls for Mr. Coury to serve as the Chief Executive Officer
      and President of the Company. Mr. Coury had acted as interim Chief Executive
      Officer since January 25, 2006. As permanent Chief Executive Officer and
      President, Mr. Coury receives a salary of $420,000, plus 10% annual salary
      increases, beginning with the Company’s fiscal year ending September 30, 2008;
      an annual bonus of $150,000, provided the Company obtains certain performance
      measures as established by the Company’s Board of Directors; a one-time bonus of
      $150,000 if and when the common stock of the Company is listed on a national
      exchange; and a grant of 100,000 shares of restricted stock of the Company
      (“Restricted Shares”), which vest upon the earlier to occur of three years or a
“change of control” (as defined in the Company’s 2003 Stock Plan); provided,
      however, that Mr. Coury is obligated to return one-third of the Restricted
      Shares at the end of each fiscal year unless certain performance targets are
      reached for that fiscal year.





Additionally,
      in the event that Mr. Coury terminates his employment for “good reason” or the
      Company terminates his employment other than for “Cause” or on account of his
      death or “disability,” as each of those terms is defined in the employment
      agreement, Mr. Coury will receive 12 months of continuing salary, and all
      restricted stock granted to the employee prior to the employment agreement
      and
      the portion of the Restricted Shares that remain unvested and for which the
      annual risk of forfeiture has lapsed due to annual performance targets being
      achieved will be immediately accelerated.





On
      September 19, 2006, the Company also amended the employment agreements of Gary
      Perschbacher, the Company’s Chief Financial Officer, and John Raven, the
      Company’s Chief Operating Officer. Mr. Perschbacher’s amended employment
      agreement provides for an extension of the term until September 20, 2009; 10%
      annual salary increases, beginning with the Company’s fiscal year ending
      September 30, 2008; and a grant of 10,000 shares of restricted stock of the
      Company pursuant to the Company’s 2003 Stock Plan. Mr. Raven’s amended
      employment agreement provides for an extension of the term until September
      20,
      2009; an annual salary of $220,000, plus 10% annual salary increases, beginning
      with the Company’s fiscal year ending September 30, 2008; a $25,000 cash bonus
      upon execution of the employment agreement; and a grant of 2,500 shares of
      restricted stock of the Company pursuant to the Company’s 2003 Stock
      Plan.





On
      September 19, 2006, the Company also granted to Joseph Cunningham, a member
      of
      the Company’s Board of Directors, 10,000 shares of restricted stock of the
      Company in connection with his appointment to serve as Chairman of the Board
      of
      Directors and Chairman of the Company’s Audit Committee. Mr. Cunningham will
      receive an aggregate of $6,000 per month in lieu of all other director
      compensation for his service as Chairman of the Board and Chairman of the Audit
      Committee.





13.
            CONCENTRATION
                OF CREDIT RISK





The
      Company maintains cash balances at banks in Arizona and
      Nevada.  Accounts are insured by the Federal Deposit Insurance
      Corporation up to $100,000





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 net receivable due from such billing services
      providers represented 31%, 23% and 16%, respectively, of the Company’s total net
      accounts receivable at September 30, 2007.




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14.
              STOCK-BASED
                  COMPENSATION


During
      the year ended September 30, 2003, 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 300,000 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 200,000 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
      participate in the plan.





As
      of
      September 30, 2007, 586,757 shares authorized under the 2003 Plan were granted
      and remain outstanding, of which 144,850 have vested and 441,907 are in the
      form
      of restricted stock.  These shares of restricted stock were granted to
      the Company’s service providers, executives and directors.  Of the
      441,907, 35,541 shares vest on a cliff basis 1 year from the date of grant,
      344,791 shares vest on a cliff basis 3 years from the date of grant, 33,750
      vest
      on a cliff basis 5 years from the date of grant, and 27,825 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, 2007, total
      unrecognized compensation cost related to nonvested awards was
      $1,708,057.  The weighted average period over which such compensation
      cost is to be recognized is 2.16 years.





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





Outstanding
                (unvested) at September 30, 2004
            
            
            446,260Granted
            
            
            88,572Forfeited
            
            
            (51,650
            )Vested
            
            
            -Outstanding
                (unvested) at September 30, 2005
            
            
            483,182Granted
            
            
            239,650Forfeited
            
            
            (86,000
            )Vested
            
            
            (101,225
            )Outstanding
                (unvested) at September 30, 2006
            
            
            535,607Granted
            
            
            78,500Forfeited
            
            
            (28,575
            )Vested
            
            
            (143,625
            )Outstanding
                (unvested) at September 30, 2007
            
            
            441,907





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 the shares outstanding
      is
      $1.34 per share.





During
      the years ended September 30, 2007, 2006, and 2005, the Company recognized
      compensation expense of $1,480,632, $1,599,363, and $2,012,841, respectively,
      under the 2003 Plan and other restricted stock issuances.





At
      September 30, 2007, there were no options exercisable or
      outstanding.  No options were granted in the years ended September 30,
      2007, 2006 and 2005.





The
      Company has issued warrants in connection with certain debt and equity
      transactions.  Warrants outstanding are summarized as
      follows:





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2007
            
            
            2006
            
            
            2005Number of
            
            
            Weighted Average
            
            
            Number of
            
            
            Weighted Average
            
            
            Number of
            
            
            Weighted AverageWarrants
            
            
            Exercise Price
            
            
            Warrants
            
            
            Exercise Price
            
            
            Warrants
            
            
            Exercise PriceWarrants
                outstanding at beginning of year
            
            
            -
            
            
            $
            -
            
            
            
            500,000
            
            
            $
            2.12
            
            
            
            500,000
            
            
            $
            2.12Granted
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Expired
            
            
            -
            
            
            
            -
            
            
            
            (500,000
            )
            
            
            2.12
            
            
            
            -
            
            
            
            -Exercised
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Warrants
                outstanding at September 30,
            
            
            -
            
            
            $
            -
            
            
            
            -
            
            
            $
            -
            
            
            
            500,000
            
            
            $
            2.12




The
      warrants were granted in the year ended September 30, 2001 in connection with
      the settlement with the former URL holder (See Note 7).  The exercise
      prices of the warrants range from $1.00 to $3.00.  The fair value of
      these options at the date of grant was negligible, estimated using the
      Black-Scholes option-pricing model. All warrants had expired by September
      2006.





15.
            EMPLOYEE
                BENEFIT PLAN





The
      Company maintains a 401(k) profit sharing plan for its employees and service
      providers who are eligible to participate in the plan upon reaching age 21
      and
      completion of three months of service.   The Company made
      contributions of $34,159, $8,105 and $7,000 to the plan for the years ended
      September 30, 2007, 2006, and 2005, respectively.





16.
            OTHER
                INCOME (EXPENSE)





There
      were no significant items in other income (expense) in the year ended September
      30, 2007. In addition to interest income and interest expense, other income
      (expense) includes the following items:




Year
      ended September 30,
      2006




a.
            A
                loss of $3,525,000 consisting of a settlement accrual of $2,000,000,
                a
                reserve for refunds of $1,250,000 and legal fees of $275,000 related
                to
                the attorneys general settlement described in Note 10;
                and




b.
            A
                loss of $162,000 consisting of an additional accrual for the settlement
                of
                a matter with a former public relations
                vendor;




Year
      ended September 30,
      2005




·
            A
                loss of $282,000 from a Transfer and Repayment Agreement with two
                of the
                Company’s shareholders, equal to the difference between the carrying value
                of Advances to Affiliates and the value of the consideration
                received;




17.
            SEGMENT
                REPORTING





The
      Company operates one reportable segment – online marketplace and Yellow Page
      services.





At
      September 30, 2007, the Company’s long-lived assets included property and
      equipment with a net book value of $205,743 that reside in the
      Philippines.  All other long-lived assets reside in the United
      States.





18.
            SELECTED
                QUARTERLY FINANCIAL DATA
                (UNAUDITED)




Quarterly
      financial information for 2007 and 2006 follows:





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Quarter
                EndedDecember
                31,
            
            
            March
                31,
            
            
            June
                30,
            
            
            September
                30,2006
            
            
            2007
            
            
            2007
            
            
            2007Net
                revenues
            
            $
            7,123,683
            
            
            $
            6,106,544
            
            
            $
            5,989,437
            
            
            $
            7,120,697Gross
                profit
            
            
            6,012,813
            
            
            
            5,148,835
            
            
            
            5,113,544
            
            
            
            5,860,893Net
                income
            
            
            485,198
            
            
            
            626,262
            
            
            
            266,405
            
            
            
            376,053Earnings
                per share information:Basic
                income per share
            
            $
            0.11
            
            
            $
            0.14
            
            
            $
            0.05
            
            
            $
            0.06Diluted
                income per share
            
            $
            0.11
            
            
            $
            0.13
            
            
            $
            0.05
            
            
            $
            0.06





Quarter EndedDecember 31,
            
            
            March 31,
            
            
            June 30,
            
            
            September 30,2005
            
            
            2006
            
            
            2006
            
            
            2006Net
                revenues
            
            $
            7,047,401
            
            
            $
            7,997,623
            
            
            $
            8,577,639
            
            
            $
            8,335,284Gross
                profit
            
            
            6,510,430
            
            
            
            7,213,184
            
            
            
            7,506,947
            
            
            
            6,697,106Net
                income (loss)
            
            
            (327,092
            )
            
            
            129,998
            
            
            
            826,847
            
            
            
            (1,680,673
            )Earnings
                (loss) per share information:Basic
                income (loss) per share
            
            $
            (0.07
            )
            
            $
            0.03
            
            
            $
            0.19
            
            
            $
            (0.37
            )Diluted
                income (loss) per share
            
            $
            (0.07
            )
            
            $
            0.03
            
            
            $
            0.18
            
            
            $
            (0.37
            )








19.
            RESTATEMENTS





During
      2007, the company revisited its consolidated financial statement presentation.
      As such, it has determined it is preferable to make changes to certain
      classifications within its financial statements. These changes are summarized
      as
      follows:




Balance
      Sheet





·
            Certain
                investment accounts totaling $815,785 have been reclassified from
                cash and
                cash equivalent to
                certificates of deposit and other investments based on the maturity
                dates
                of the underlying investments


·
            Accrued
                refunds and fees of $1,250,000 relating to the Attorneys’ General
                settlement described in Note 10 have been reclassified from accounts
                receivable, net to accrued liabilities in the accompanying consolidated
                balance sheet as of September 30,
                2006.


·
            Certain
                miscellaneous receivables totaling $23,819 at September 30, 2006
                were
                reclassified from prepaid expenses and other current assets to accounts
                receivable, net in the accompanying consolidated balance
                sheet.




Statement
      of Operations




·
              Dilution
                  and charge backs have
                  been reclassified from cost of services to a reduction in net revenues
                  in
                  the consolidated statement of
                  operations.


·
              Monitoring
                  fees related to our
                  LEC billing channel have been reclassified from general and administrative
                  expenses to cost of
                  services.


·
              Depreciation
                  and amortization
                  expenses that were previously separately stated are now included
                  in
                  general and administrative expenses in the consolidated statement of
                  operations.


·
              Litigation
                  and related expenses
                  that were previously included in other income and expense are now
                  separately stated as a component of operating expenses in the consolidated
                  statement of
                  operations.




The
      following tables set forth the impact of these restatements on the Company’s
      statements of operations and balance sheet:





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Balance
                  Sheet
              
              September
                  30,
                  2006As
                  Originally
                Reported
              
              
              As
                  Adjusted
              
              
              Effect
                  of changeCash
                  and cash equivalents
              
              $
              7,210,560
              
              
              $
              6,394,775
              
              
              $
              (815,785
              )Certificates
                  of deposit and other investments
              
              $
              2,266,268
              
              
              $
              3,082,053
              
              
              $
              815,785Accounts
                  receivable, net (current)
              
              $
              6,741,781
              
              
              $
              8,015,600
              
              
              $
              1,273,819Prepaid
                  expenses and other current assets
              
              $
              259,069
              
              
              $
              235,250
              
              
              $
              (23,819
              )Accrued
                  expenses
              
              $
              3,315,439
              
              
              $
              4,565,439
              
              
              $
              1,250,000


Income
                Statement
            
            Year
                Ended September 30,
                2006As
                Originally
              Reported
            
            
            As
                Adjusted
            
            
            Effect
                of changeNet
                revenues
            
            $
            36,881,164
            
            
            $
            31,957,947
            
            
            $
            (4,923,217
            )Cost
                of services
            
            $
            8,069,239
            
            
            $
            4,030,280
            
            
            $
            (4,038,959
            )Gross
                profit
            
            $
            28,811,925
            
            
            $
            27,927,667
            
            
            $
            (884,258
            )Gross
                profit (as a percentage of net revenues)
            
            
            78
            %
            
            
            87
            %
            
            
            9
            %Operating
                expenses
            
            $
            26,687,475
            
            
            $
            29,490,024
            
            
            $
            2,802,549Other
                income (expense)
            
            $
            (3,487,149
            )
            
            $
            199,658
            
            
            $
            3,686,807Net
                income (loss)
            
            $
            (1,050,920
            )
            
            $
            (1,050,920
            )
            
            $
            -





Year
                Ended September 30,
                2005As
                Originally
              Reported
            
            
            As
                Adjusted
            
            
            Effect
                of changeNet
                revenues
            
            $
            25,204,858
            
            
            $
            24,361,995
            
            
            $
            (842,863
            )Cost
                of services
            
            $
            3,980,619
            
            
            $
            3,137,756
            
            
            $
            (842,863
            )Gross
                profit
            
            $
            21,224,239
            
            
            $
            21,224,239
            
            
            $
            -Gross
                profit (as a percentage of net revenues)
            
            
            84
            %
            
            
            87
            %
            
            
            3
            %Operating
                expenses
            
            $
            19,910,850
            
            
            $
            20,238,983
            
            
            $
            328,133Other
                income (expense)
            
            $
            (316,054
            )
            
            $
            12,079
            
            
            $
            328,133Net
                income (loss)
            
            $
            725,146
            
            
            $
            725,146
            
            
            $
            -





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
 
 Disclosure
          controls and procedures are designed with an objective of ensuring that
          information required to be disclosed in our periodic reports filed with
          the
          Securities and Exchange Commission, such as this Annual Report on Form
          10-K, is
          recorded, processed, summarized, and reported within the time periods specified
          by the Securities and Exchange Commission.  Disclosure controls also
          are designed with an objective of ensuring that such information is accumulated
          and communicated to our management, including our chief executive officer
          and
          chief financial officer, in order to allow timely consideration regarding
          required disclosures.
 
 The
          evaluation of our disclosure controls by our chief executive officer and
          chief
          financial officer included a review of the controls’ objectives and design, the
          operation of the controls, and the effect of the controls on the information
          presented in this Annual Report.  Our management, including our chief
          executive officer and chief financial officer, does not expect that disclosure
          controls can or will prevent or detect all errors and all fraud, if any.
          A
          control system, no matter how well designed and operated, can provide only
          reasonable, not absolute, assurance that the objectives of the control
          system
          are met.  Also, projections of any evaluation of the disclosure
          controls and procedures to future periods are subject to the risk that
          the
          disclosure controls and procedures may become inadequate because of changes
          in
          conditions, or that the degree of compliance with the policies or procedures
          may
          deteriorate.


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Based
          on
          their initial review and evaluation as of September 30, 2007 (the “Evaluation
          Date”), and subject to the inherent limitations described above, our principal
          executive officer and principal financial officer concluded that our disclosure
          controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under
          the
          Securities Exchange Act of 1934) were effective as of the Evaluation
          Date.  Subsequent to the Evaluation Date, however, Mayer Hoffman
          McCann P.C. advised our principal executive officer and principal financial
          officer that it had identified a material weakness in our internal control
          over
          financial reporting as of the Evaluation Date, related to our computation
          of the
          weighted average number of shares of our common stock that were outstanding
          for
          the period covered by this Form 10-K.  Because of the existence of
          this weakness, our principal executive officer and principal financial
          officer
          have concluded that our disclosure controls and procedures were not effective
          as
          of the Evaluation Date.
 
 Changes
          in Internal
          Controls
 
 As
          of
          December 19, 2007, we believe we have addressed the material weakness in
          our
          internal controls over financial reporting described above.  Because
          the material weakness was a result of a formula linkage and other errors
          in the
          spreadsheet that we used to calculate the weighted average number of common
          shares outstanding, an additional financial professional has been assigned
          to
          review the spreadsheet to ensure all formulae in the spreadsheets are properly
          linked and that the shares listed in the spreadsheet tie to our stock
          databases.  Additionally, the finance department will provide a table
          to the principal financial officer providing  weighted average number
          of shares sequentially by quarter as a reasonableness test.  The
          Company plans to further enhance these controls by acquiring automated
          equity
          management and administrative software to manage the complexities of equity
          management and reporting.
  Other
          than the change described in the foregoing paragraph, our principal executive
          officer and principal financial officer are not aware of any significant
          changes
          in our disclosure controls or in other factors that could significantly
          affect
          these controls subsequent to the date of their evaluation, including any
          corrective actions with regard to significant deficiencies and material
          weaknesses.  During the period covered by this Form 10-K, there have
          not been any other changes in our internal controls over financial reporting
          that have materially affected, or that are reasonably likely to materially
          affect, our internal control over financial
          reporting.


ITEM
      9B. Other
      Information





None.





PART
      III





Certain
      information required by Part III is omitted from this Annual Report on Form
      10-K
      because we will file our definitive Proxy Statement for our 2008 Annual Meeting
      of Stockholders to be filed pursuant to Regulation 14A of the Exchange Act
      (the
“2008 Proxy Statement”) not later than 120 days after the end of the fiscal year
      covered by this Annual Report. Certain information included in the 2008 Proxy
      Statement is incorporated herein by reference.





ITEM
                10.
            Directors,
                Executive Officers
                and Corporate Governance





The
      information required by this Item will be disclosed in our 2008 Proxy Statement
      and is incorporated herein by reference.





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





ITEM
                11.
            Executive
                Compensation





Information
      regarding director and executive compensation will be set forth in our 2008
      Proxy Statement and is incorporated herein by reference.





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





Information
      regarding security ownership of certain beneficial owners and management will
      be
      set forth in our 2008 Proxy Statement and is incorporated herein by
      reference.





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





The
      information required by this Item will be disclosed in our 2008 Proxy Statement
      and is incorporated herein by reference.





ITEM
                14.
            Principal
                Accountant Fees and
                Services





The
      information required by this Item will be disclosed in our 2008 Proxy Statement
      and is incorporated herein by reference.





PART
      IV





ITEM
                15.
            Exhibits
                and Financial
                Statement Schedule




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(1)
            Financial
                Statements are listed on the Index to Consolidated Financial Statements
                on
                page 40 of this Annual Report.


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







SCHEDULE
      II – VALUATION AND
      QUALIFYING ACCOUNTS AND RESERVES





REPORT
      OF INDEPENDENT REGISTERED
      PUBLIC ACCOUNTING FIRM ON SCHEDULE








To
      the
      Stockholders and Board of Directors





LIVEDEAL,
      INC. AND
      SUBSIDIARIES





We
      have
      audited the consolidated financial statements of LiveDeal,
      Inc.
      and Subsidiariesas of September 30, 2007 and for the year
      then ended and have issued our report thereon dated December 18,
      2007.  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 year ended September
      30, 2007 has been subjected to the auditing procedures applied in the audit
      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/
      Mayer Hoffman McCann
      P.C.





Phoenix,
      Arizona


December
      18, 2007








Description
            
            Balance at
              Beginning
              of
                Period
            
            
            Charged to
              Costs
                and
              Expenses
            
            
            Charged to
              Other
              Accounts
            
            
            Deductions/
              Writeoffs
            
            
            Balance at
              End
                of
              PeriodAllowance
                for dilution and
                fees on amounts due from billing aggregatorsYear
                ended September 30, 2005
            
            $
            3,400,575
            
            
            $
            4,405,481
            
            
            $
            
            
            
            $
            (6,883,056
            )
            
            $
            923,000Year
                ended September 30, 2006
            
            $
            923,000
            
            
            $
            5,274,762
            
            
            $
            
            
            
            $
            (3,732,339
            )
            
            $
            2,465,423Year
                ended September 30, 2007
            
            $
            2,465,423
            
            
            $
            5,183,515
            
            
            $
            
            
            
            $
            (5,760,208
            )
            
            $
            1,888,730Allowance
                for customer
                refundsYear
                ended September 30, 2005
            
            $
            269,662
            
            
            $
            4,177,741
            
            
            $
            
            
            
            $
            (4,149,403
            )
            
            $
            298,000Year
                ended September 30, 2006
            
            $
            298,000
            
            
            $
            2,307,141
            
            
            $
            
            
            
            $
            (1,801,615
            )
            
            $
            803,526Year
                ended September 30, 2007
            
            $
            803,526
            
            
            $
            2,281,995
            
            
            $
            
            
            
            $
            (2,512,453
            )
            
            $
            573,068




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





Exhibit
                        Number
                    Description
                    
                    Previously
                        Filed as Exhibit
                    
                    File
                        Number
                    
                    Date
                        Previously Filed2.1
                    Agreement
                        and Plan of Merger dated June 6, 2007, relating to the Registrant’s merger
                        with LiveDeal, Inc.
                    
                    Exhibit
                        2.1 to the Registrant’s Current Report on Form 8-K filed on June 6,
                        2007
                    
                    000-24217
                    
                    6/6/073.1
                    Amended
                        and Restated Articles of Incorporation
                    
                    Exhibit
                        3.1 to the Registrant’s Current Report on Form 8-K filed on August 15,
                        2007
                    
                    000-24217
                    
                    8/15/073.2
                    Amended
                        and Restated Bylaws
                    
                    Attached
                        hereto10.1
                    LiveDeal,
                        Inc. Amended and Restated 2003 Stock Plan*
                    
                    Attached
                        hereto10.2
                    Form
                        of 2003 Stock Plan Restricted Stock Agreement*
                    
                    Exhibit
                        10 to the Registrant’s Quarterly Report on Form 10-QSB for the fiscal
                        quarter ending March 31, 2005
                    
                    000-24217
                    
                    5/16/0510.3
                    Standard
                        Industrial/Commercial Multi-Tenant Lease for Mesa facility,
                        dated June 1,
                        1998, between the Registrant and Art Grandlich, d/b/a McKellips
                        Corporate
                        Square
                    
                    Exhibit
                        10.5 to the Registrant’s Annual Report on Form 10-KSB for the fiscal year
                        ended September 30, 1999
                    
                    000-24217
                    
                    9/19/0010.4
                    Amendment
                        No. 1 to Standard Industrial/Commercial Multi-Tenant Lease
                        for Mesa
                         facility, dated August 17, 1998, between the Registrant
                        and Arthur
                        Grandlich, d/b/a McKellips Corporate Square
                    
                    Exhibit
                        10.4 to the Registrant’s Annual Report on Form 10-K for the fiscal year
                        ended September 30, 2006
                    
                    000-24217
                    
                    12/29/0610.4.1
                    Amendment
                        No. 2 to Standard Industrial/Commercial Multi-Tenant Lease
                        for Mesa
                        facility, dated January 7, 2003, between the Registrant and
                        Arthur
                        Grandlich, d/b/a McKellips Corporate Square
                    
                    Exhibit
                        10.14 to Amendment No. 2 to the Registrant’s Annual Report on Form
                        10-KSB/A for the fiscal year ended September 30, 2002
                    
                    000-24217
                    
                    7/8/0310.4.2
                    Amendment
                        No. 3 to Standard Industrial/Commercial Multi-Tenant Lease
                        for Mesa
                        facility, dated March 23, 2006, between the Registrant and J3 Harmon,
                        LLC, successor in interest to The Estate of Arthur
                        Grandlich
                    
                    Exhibit
                        10.4.2 to the Registrant’s Annual Report on Form 10-K for the fiscal year
                        ended September 30, 2006
                    
                    000-24217
                    
                    12/29/0610.4.3
                    Amendment
                        No. 4 to Standard Industrial/Commercial Multi-Tenant Lease
                        for Mesa
                        facility, dated April 12, 2006, between the Registrant and J3 Harmon,
                        LLC, successor in interest to The Estate of Arthur
                        Grandlich
                    
                    Exhibit
                        10.4.3 to the Registrant’s Annual Report on Form 10-K for the fiscal year
                        ended September 30, 2006
                    
                    000-24217
                    
                    12/29/06
  65
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  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
                    
                    000-24217
                    
                    12/31/0310.6
                    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
                    
                    000-24217
                    
                    12/29/0610.7
                    Loan
                        and Security Agreement, dated April 13, 2004, between the
                        Registrant and
                        Merrill Lynch Business Financial Services, Inc.
                    
                    Exhibit
                        10.1 to Amendment No. 1 to the Registrant’s Quarterly Report on Form
                        10-QSB for the fiscal quarter ended June 30, 2004
                    
                    000-24217
                    
                    12/29/0410.9
                    Employment
                        Agreement, dated September 19, 2006, between the Registrant
                        and Daniel L.
                        Coury, Sr.*
                    
                    Exhibit
                        10.9 to the Registrant’s Annual Report on Form 10-K for the fiscal year
                        ended September 30, 2006
                    
                    000-24217
                    
                    12/29/0610.10
                    Employment
                        Agreement, dated September 19, 2006, between the Registrant
                        and Gary L.
                        Perschbacher*
                    
                    Exhibit
                        10.10 to the Registrant’s Annual Report on Form 10-K for the fiscal year
                        ended September 30, 2006
                    
                    000-24217
                    
                    12/29/0610.11
                    Wholesale
                        Fulfillment Agreement, dated March 1, 2005, between Registrant
                        and
                        Fulfillment House and Company
                    
                    Exhibit
                        10.1 to the Registrant’s Current Report on Form 8-K filed on May 4,
                        2006
                    
                    000-2417
                    
                    5/4/0610.12
                    Separation
                        Agreement, dated November 3, 2005, between the Registrant
                        and Peter J.
                        Bergmann*
                    
                    Exhibit
                        10.1 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal
                        quarter ending December 31, 2005
                    
                    000-24217
                    
                    2/14/0610.13
                    Employment
                        Agreement, dated February 6, 2006, between the Registrant
                        and John
                        Raven*
                    
                    Exhibit
                        10.1 to the Registrant’s Current Report on Form 8-K
                    
                    000-24217
                    
                    2/21/0610.13.1
                    First
                        Amendment to Employment Agreement, dated September 19, 2006,
                        between the
                        Registrant and John Raven*
                    
                    Exhibit
                        10.13.1 to the Registrant’s Annual Report on Form 10-K for the fiscal year
                        ended September 30, 2006
                    
                    000-24217
                    
                    12/29/0610.14
                    Exclusive
                        Domain Name Licensing Agreement, dated July 8, 2003, between
                        the
                        Registrant and Onramp Access, Inc.
                    
                    Exhibit
                        10.1 to the Registrant’s Current Report on Form 8-K filed on July 22,
                        2003
                    
                    000-24217
                    
                    7/22/0310.15
                    Stock
                        Repurchase and Domain Name Transfer Agreement, dated July
                        21, 2006,
                        between Registrant and Onramp Access, Inc.
                    
                    Exhibit
                        10.15 to the Registrant’s Annual Report on Form 10-K for the fiscal year
                        ended September 30, 2006
                    
                    000-24217
                    
                    12/29/0610.16
                    Processing
                        Agreement, dated August 26, 2003, between the Registrant
                        and Integrated
                        Payment Systems Inc., d/b/a First Data
                    
                    Exhibit
                        10.2 to the Registrant’s Current Report on Form 8-K filed on October 24,
                        2003
                    
                    000-24217
                    
                    10/24/03
  66
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                  Contents
  10.17
                    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
                    
                    000-24217
                    
                    7/8/0310.18
                    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
                    
                    000-24217
                    
                    7/8/0310.19
                    Escrow
                        Agreement dated June 6, 2007, relating to the Registrant’s merger with
                        LiveDeal, Inc.
                    
                    Exhibit
                        10.1 to the Registrant’s Current Report on Form 8-K filed on June 6,
                        2007
                    
                    000-24217
                    
                    6/6/0710.20
                    Employment
                        Agreement dated June 6, 2007, by and between the Registrant
                        and Rajesh
                        Navar*
                    
                    Exhibit
                        10.2 to the Registrant’s Current Report on Form 8-K filed on June 6,
                        2007
                    
                    000-24217
                    
                    6/6/0710.21
                    Noncompetition,
                        Nondisclosure and Nonsolicitation Agreement dated June 6,
                        2007, by and
                        between the Registrant and Rajesh Navar*
                    
                    Exhibit
                        10.3 to the Registrant’s Current Report on Form 8-K filed on June 6,
                        2007
                    
                    000-24217
                    
                    6/6/0710.22
                    Asset
                        Purchase Agreement dated as of July 10, 2007, relating to
                        the Registrant’s
                        acquisition of the assets of Oncall Subscriber Management
                        Inc.
                    
                    Exhibit
                        10.1 to the Registrant’s Current Report on Form 8-K filed on July 16,
                        2007
                    
                    000-24217
                    
                    7/16/0710.23
                    Escrow
                        Agreement dated as of July 10, 2007, relating to the Registrant’s
                        acquisition of the assets of Oncall Subscriber Management
                        Inc.
                    
                    Exhibit
                        10.2 to the Registrant’s Current Report on Form 8-K filed on July 16,
                        2007
                    
                    000-24217
                    
                    7/16/0714
                    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
                    
                    000-24217
                    
                    5/13/0421
                    Company
                        Subsidiaries
                    
                    Attached
                        hereto23.1
                    Consent
                        of Mayer Hoffman McCann P.C.
                    
                    Attached
                        hereto23.2
                    Consent
                      of Epstein Weber and Conover
                    
                    Attached
                      hereto31
                    Certifications
                        pursuant to SEC Release No. 33-8238, as adopted pursuant
                        to Section 302 of
                        the Sarbanes-Oxley Act of 2002
                    
                    Attached
                        hereto32
                    Certifications
                        pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
                        Section 906 of
                        the Sarbanes-Oxley Act of 2002
                    
                    Attached
                        hereto





*
      Management contract or compensatory plan or arrangement





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 Table
            of
            Contents





SIGNATURES





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





Dated:  December
                20, 2007
            /s/Daniel
                L. Coury,
                Sr.Daniel
                L. Coury, Sr.Chief
                Executive Officer








BOARD
      OF
      DIRECTORS





Signature
            
            Title
            
            Date/s/
                Daniel L. Coury,
                Sr.
            
            Chief
                Executive Officer (Principal Executive
            
            December
                20, 2007Daniel
                L. Coury, Sr.
            
            Officer)/s/
                Gary L.
                Perschbacher
            
            Chief
                Financial Officer (Principal Financial
            
            December
                20, 2007Gary
                L. Perschbacher
            
            Officer
              and Principal
              Accounting Officer)/s/
                Richard D.
                Butler.
            
            Director
            
            December
                20, 2007Richard
                D. Butler/s/
                Thomas Clarke,
                Jr.
            
            Director
            
            December
                20, 2007Thomas
                Clark, Jr/s/
                Joseph F. Cunningham,
                Jr.
            
            Chairman
                of the Board
            
            December
                20, 2007Joseph
                F. Cunningham, Jr./s/
                John
                Evans.
            
            Director
            
            December
                20, 2007John
                Evans/s/
                Benjamin
                Milk.
            
            Director
            
            December
                20, 2007Benjamin
              Milk/s/
                Rajesh
                Navar
            
            President
                and Director
            
            December
                20, 2007Rajesh
                Navar







68