UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549


FORM
10-Q





(Mark
One)




S
            Quarterly
      Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934For
      the quarterly period ended December 31,
2007




£
            Transition
      Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934For
      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 St. Suite 105
              Mesa,
      Arizona
            85205(Address
      of principal executive offices)
            (Zip
      Code)





(480)
654-9646


(Registrant’s
telephone number, including area code)




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 þ  No  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  þ




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




APPLICABLE
ONLY TO CORPORATE ISSUERS




The
number of shares of the issuer’s common equity outstanding as of February 1,
2008 was 6,582,516 shares of common stock, par value $0.001.









INDEX
TO FORM 10-Q FILING


FOR
THE QUARTER ENDED DECEMBER 31, 2007





TABLE OF CONTENTS





PART
I


FINANCIAL
INFORMATION


PageItem
      1.
              Financial StatementsConsolidated Balance Sheets as of December 31, 2007 (Unaudited)
      and September 30, 2007
              3Unaudited Consolidated Statements of Operations for the Three
      Month Periods Ended December 31, 2007 and December 31,
      2006
              4Unaudited Consolidated Statements of Cash Flows for the Three
      Month Periods Ended December 31, 2007 and December 31,
      2006
              5Notes to Unaudited Consolidated Financial
      Statements
              6Item
      2.
              Management’s Discussion and Analysis of Financial Condition
      and Results of Operations
              13Item
      3.
              Quantitative and Qualitative Disclosures About Market
      Risk
              21Item
      4.
              Controls and Procedures
              21PART
      IIOTHER
      INFORMATIONItem
      1A.
              Risk Factors
              22Item
      2.
              Unregistered Sale of Equity Securities and Use of
      Proceeds
              22Item
      6.
              Exhibits
              22Signatures
              23





2
 Table of Contents





PART
I – FINANCIAL INFORMATION





ITEM
      1.
            FINANCIAL STATEMENTS








LIVEDEAL,
      INC. AND SUBSIDIARIESCONSOLIDATED
      BALANCE SHEETSDecember
      31,
            
            
            September
      30,2007
            
            
            2007(unaudited)AssetsCash
      and cash equivalents
            
            $
            5,851,012
            
            
            $
            5,674,533Accounts
      receivable, net
            
            
            7,564,132
            
            
            
            6,919,180Prepaid
      expenses and other current assets
            
            
            364,657
            
            
            
            510,609Income
      taxes receivable
            
            
            113,621
            
            
            
            316,429Deferred
      tax asset
            
            
            472,701
            
            
            
            546,145Total
      current assets
            
            
            14,366,123
            
            
            
            13,966,896Accounts
      receivable, long term portion, net
            
            
            1,714,580
            
            
            
            1,941,996Property
      and equipment, net
            
            
            417,496
            
            
            
            423,563Deposits
      and other assets
            
            
            102,367
            
            
            
            103,057Intangible
      assets, net
            
            
            7,089,486
            
            
            
            7,372,147Goodwill
            
            
            11,706,406
            
            
            
            11,683,163Deferred
      tax asset, long term
            
            
            4,620,206
            
            
            
            4,551,644Total
      assets
            
            $
            40,016,664
            
            
            $
            40,042,466Liabilities
      and Stockholders' EquityLiabilities:Accounts
      payable
            
            $
            1,032,853
            
            
            $
            1,138,265Accrued
      liabilities
            
            
            1,035,081
            
            
            
            1,196,330Total
      current liabilities
            
            
            2,067,934
            
            
            
            2,334,595Total
      liabilities
            
            
            2,067,934
            
            
            
            2,334,595Commitments
      and contingenciesStockholders'
      Equity:Series
      E convertible preferred stock, $0.001 par value, 200,000 shares
      authorized, 127,840 issued and outstanding, liquidation preference
      $38,202
            
            
            10,866
            
            
            
            10,866Common
      stock, $0.001 par value, 100,000,000 shares authorized, 6,619,815 and
      7,022,242 issued and 6,610,865 and 6,693,676 outstanding at December 31,
      2007 and September 30, 2007, respectively
            
            
            6,611
            
            
            
            6,694Treasury
      stock (8,950 and 328,566 shares carried at cost)
            
            
            (35,530
            )
            
            
            (2,714,698
            )Paid
      in capital
            
            
            20,562,050
            
            
            
            23,325,888Retained
      earnings
            
            
            17,404,733
            
            
            
            17,079,121Total
      stockholders' equity
            
            
            37,948,730
            
            
            
            37,707,871Total
      liabilities and stockholders' equity
            
            $
            40,016,664
            
            
            $
            40,042,466See
      accompanying notes to unaudited consolidated financial
      statements.


3
 Table of Contents




LIVEDEAL,
      INC. AND SUBSIDIARIESUNAUDITED
      CONSOLIDATED STATEMENTS OF OPERATIONSThree
      Months
              ended
              December
      31,2007
            
            
            2006Net
      revenues
            
            $
            7,068,888
            
            
            $
            7,123,683Cost
      of services
            
            
            1,005,549
            
            
            
            1,110,870Gross
      profit
            
            
            6,063,339
            
            
            
            6,012,813Operating
      expenses:General
      and administrative expenses
            
            
            3,394,971
            
            
            
            3,186,725Sales
      and marketing expenses
            
            
            2,185,886
            
            
            
            2,086,033Total
      operating expenses
            
            
            5,580,857
            
            
            
            5,272,758Operating
      income
            
            
            482,482
            
            
            
            740,055Other
      income (expense):Interest
      income
            
            
            36,032
            
            
            
            78,234Other
      income (expense)
            
            
            (1,121
            )
            
            
            15,065Total
      other income (expense)
            
            
            34,911
            
            
            
            93,299Income
      before income taxes
            
            
            517,393
            
            
            
            833,354Income
      tax provision
            
            
            (191,301
            )
            
            
            (348,156
            )Net
      income
            
            $
            326,092
            
            
            $
            485,198Net
      income per common share:Basic
            
            $
            0.05
            
            
            $
            0.11Diluted
            
            $
            0.05
            
            
            $
            0.10Weighted
      average common shares outstanding:Basic
            
            
            6,230,395
            
            
            
            4,552,826Diluted
            
            
            6,424,978
            
            
            
            4,676,120See
      accompanying notes to unaudited consolidated financial
      statements.


4
 Table of Contents




LIVEDEAL,
      INC. AND SUBSIDIARIESUNAUDITED
      CONSOLIDATED STATEMENTS OF CASH FLOWSThree
      Months
              Ended
              December
      31,2007
            
            
            2006CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      income
            
            $
            326,092
            
            
            $
            485,198Adjustments
      to reconcile net income to net cash provided by (used in) operating
      activities:Depreciation
      and amortization
            
            
            496,842
            
            
            
            336,887Amortization
      of deferred stock compensation
            
            
            209,079
            
            
            
            367,548Deferred
      income taxes
            
            
            4,882
            
            
            
            788,968Provision
      for uncollectible accounts
            
            
            67,693
            
            
            
            75,064Changes
      in assets and liabilities:Accounts
      receivable
            
            
            (485,229
            )
            
            
            716,833Prepaid
      and other current assets
            
            
            145,952
            
            
            
            (93,433
            )Deposits
      and other assets
            
            
            690
            
            
            
            (12,907
            )Accounts
      payable
            
            
            (105,412
            )
            
            
            (118,692
            )Accrued
      liabilities
            
            
            (161,249
            )
            
            
            (2,133,262
            )Income
      taxes receivable
            
            
            202,808
            
            
            
            (690,812
            )Net
      cash provided by (used for) operating activities
            
            
            702,148
            
            
            
            (278,608
            )CASH
      FLOWS FROM INVESTING ACTIVITIES:Maturities
      of certificates of deposits and other investments
            
            
            -
            
            
            
            175,516Additional
      closing costs related to acquisition of LiveDeal, Inc.
            
            
            (7,000
            )
            
            
            -Additional
      closing costs related to acquisition of OnCallSubscriber
      Management, Inc.
            
            
            (16,243
            )
            
            
            -Expenditures
      for intangible assets
            
            
            (163,384
            )
            
            
            (446,757
            )Purchases
      of equipment
            
            
            (44,730
            )
            
            
            (96,742
            )Net
      cash used for investing activities
            
            
            (231,357
            )
            
            
            (367,983
            )CASH
      FLOWS FROM FINANCING ACTIVITIES:Series
      E preferred stock dividends
            
            
            (480
            )
            
            
            -Purchase
      of treasury stock
            
            
            (293,832
            )
            
            
            -Net
      cash used for financing activities
            
            
            (294,312
            )
            
            
            -INCREASE
      (DECREASE) IN CASH AND CASH EQUIVALENTS
            
            
            176,479
            
            
            
            (646,591
            )CASH
      AND CASH EQUIVALENTS, beginning of period
            
            
            5,674,533
            
            
            
            7,210,560CASH
      AND CASH EQUIVALENTS, end of period
            
            $
            5,851,012
            
            
            $
            6,563,969





See
accompanying notes to unaudited consolidated financial statements





5
 Table of Contents




LIVEDEAL,
INC. AND SUBSIDIARIES
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS




1.
            ORGANIZATION
      AND BASIS OF PRESENTATION





The
accompanying unaudited consolidated financial statements include the accounts of
LiveDeal, Inc. (formerly YP Corp.), a Nevada Corporation, and its wholly owned
subsidiaries (collectively the “Company”).  The Company is an
Internet-based provider of yellow page directories and online local classified
ads on or through www.YP.com, www.YP.net, www.Yellow-Page.net, and
www.livedeal.com.  No material or information contained on these
websites is a part of these notes or this Quarterly Report on Form
10-Q.  All material intercompany accounts and transactions have been
eliminated.




The
accompanying unaudited consolidated financial statements as of December 31, 2007
and for the three months ended December 31, 2007 and 2006,respectively, have been
prepared in accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for audited
financial statements. In the opinion of the Company’s management, the interim
information includes all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results for the interim
periods. The footnote disclosures related to the interim financial information
included herein are also unaudited. Such financial information should be read in
conjunction with the consolidated financial statements and related notes thereto
as of September 30, 2007 and for the year then ended included in the Company’s
Annual Report on Form 10-K for the year ended September 30, 2007.




The
preparation of financial statements in accordance with U.S. generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amount of assets and liabilities at the date of the
financial statements and the reported amount of revenues and expenses during the
reporting period. Significant estimates and assumptions have been used by
management throughout the preparation of the consolidated financial statements
including in conjunction with establishing allowances for customer refunds,
non-paying customers, dilution and fees, analyzing the recoverability of the
carrying amount of intangible assets, estimating forfeitures of restricted stock
and evaluating the recoverability of deferred tax assets.  Actual
results could differ from these estimates.




During
fiscal 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. The following changes
were made to the Company’s statements 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.




These
changes had no impact on previously reported net income or stockholders’
equity.  The following tables set forth the impact of these
restatements on the Company’s statement of operations for the three months ended
December 31, 2006:




6
 Table of Contents


LIVEDEAL,
INC. AND SUBSIDIARIES
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(cont)


Three
      Months Ended December 31, 2006As Originally
      Reported
            
            
            As
      Adjusted
            
            
            Effect
      of changeNet
      revenues
            
            $
            7,795,405
            
            
            $
            7,123,683
            
            
            $
            (671,722
            )Cost
      of services
            
            $
            1,498,531
            
            
            $
            1,110,870
            
            
            $
            (387,661
            )Gross
      profit
            
            $
            6,296,874
            
            
            $
            6,012,813
            
            
            $
            (284,061
            )Gross
      profit (as a percentage of net revenues)
            
            
            81
            %
            
            
            84
            %
            
            
            3
            %Operating
      expenses
            
            $
            5,556,819
            
            
            $
            5,272,758
            
            
            $
            (284,061
            )Net
      income
            
            $
            485,198
            
            
            $
            485,198
            
            
            $
            -




2.
            BALANCE
      SHEET INFORMATION





Balance
sheet information is as follows:





December
      31, 2007Current
            
            
            Long-Term
            
            
            TotalGross
      accounts receivable
            
            $
            9,679,925
            
            
            $
            1,864,006
            
            
            $
            11,543,931Allowance
      for doubtful accounts
            
            
            (2,115,793
            )
            
            
            (149,426
            )
            
            
            (2,265,219
            )Net
            
            $
            7,564,132
            
            
            $
            1,714,580
            
            
            $
            9,278,712





September
      30, 2007Current
            
            
            Long-Term
            
            
            TotalGross
      accounts receivable
            
            $
            9,221,903
            
            
            $
            2,101,071
            
            
            $
            11,322,974Allowance
      for doubtful accounts
            
            
            (2,302,723
            )
            
            
            (159,075
            )
            
            
            (2,461,798
            )Net
            
            $
            6,919,180
            
            
            $
            1,941,996
            
            
            $
            8,861,176





December 31,
      2007
            
            
            September 30,
      2007Allowance
      for dilution and fees on amounts due from billing
    aggregators
            
            $
            1,753,535
            
            
            $
            1,888,730Allowance
      for customer refunds
            
            
            511,684
            
            
            
            573,068$
            2,265,219
            
            
            $
            2,461,798Property
      and equipment, net consists of the following:





December
      31, 2007
            
            
            September
      30, 2007Leasehold
      improvements
            
            $
            497,051
            
            
            $
            455,286Furnishings
      and fixtures
            
            
            310,499
            
            
            
            310,499Office
      and computer equipment
            
            
            1,419,599
            
            
            
            1,423,989Total
            
            
            2,227,149
            
            
            
            2,189,774Less:
      Accumulated depreciation
            
            
            (1,809,653
            )
            
            
            (1,766,211
            )Property
      and equipment, net
            
            $
            417,496
            
            
            $
            423,563Intangible
      assets, net consists of the following:


7
 Table of Contents


LIVEDEAL,
INC. AND SUBSIDIARIES
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(cont)
  Intangible
assets, net consists of the following:


December
      31, 2007
            
            
            September
      30, 2007Domain
      name
            
            $
            7,208,600
            
            
            $
            7,208,600Non-compete
      agreements
            
            
            3,465,000
            
            
            
            3,465,000Website
      development
            
            
            3,153,175
            
            
            
            3,006,093Software
      licenses
            
            
            -
            
            
            
            -Total
            
            
            13,826,775
            
            
            
            13,679,693Less:
      Accumulated amortization
            
            
            (6,737,289
            )
            
            
            (6,307,546
            )Intangible
      assets, net
            
            $
            7,089,486
            
            
            $
            7,372,147Accrued
      liabilties include the following:





December
      31, 2007
            
            
            September
      30, 2007Deferred
      revenue
            
            $
            232,969
            
            
            $
            323,596Accrued
      payroll & bonus
            
            
            330,653
            
            
            
            339,305Accrued
      expenses - other
            
            
            471,459
            
            
            
            533,429Accrued
      liabilities
            
            $
            1,035,081
            
            
            $
            1,196,330






3.
            PRO FORMA
      FINANCIAL INFORMATION





The
accompanying consolidated unaudited financial statements include the results of
LiveDeal, Inc. and OnCall Subscriber Management Inc. from June 6, 2007 and July
10, 2007, their respective dates of acquisition.  The following table
provides pro forma results of operations for the three months ended December 31,
2006 as if LiveDeal had been acquired as of the beginning of the period. 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 and the elimination of interest expense on borrowings that were
satisfied through the acquisition.  However, pro formal results do not
include any anticipated cost savings or other effects of the 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.





Three
      MonthsEnded
      December 31,2006(unaudited)Net
      revenues
            
            $
            7,783,792Net
      loss
            
            $
            (671,922
            )Diluted
      net loss per share
            
            $
            (0.11
            )








Pro forma
financial information is not provided 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 stand-alone
basis cannot be obtained.





8
 Table of Contents


LIVEDEAL,
INC. AND SUBSIDIARIES
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(cont)


4.
            TREASURY
      STOCK





On May
25, 2007, the Company’s Board of Directors terminated its pre-existing stock
repurchase plan and replaced it with a new plan authorizing repurchases of up to
$1,000,000 of common stock from time to time on the open market or in privately
negotiated transactions.  The Company acquired 76,725 shares of its
common stock during the three months ended December 31, 2007 at an aggregate
cost of $293,832.  Of the 76,725 shares acquired, 67,775 shares were
retired prior to December 31, 2007. The Company retired an aggregate of 396,341
shares of treasury stock during the three months ended December 31,
2007.





5.
            COMMITMENTS
      AND CONTINGENCIES





At
December 31, 2007, future minimum annual payments under operating lease
agreements and non-cancelable service contracts for fiscal years ending
September 30 are as follows:




Payments
      Due by Fiscal YearTotal
            
            
            2008
            
            
            2009
            
            
            2010
            
            
            2011
            
            
            2012
            
            
            ThereafterOperating
      lease commitments
            
            $
            3,002,419
            
            
            $
            693,917
            
            
            $
            858,310
            
            
            $
            567,594
            
            
            $
            465,194
            
            
            $
            338,819
            
            
            $
            78,585Noncanceleable
      service contracts
            
            
            1,419,750
            
            
            
            645,750
            
            
            
            674,000
            
            
            
            100,000
            
            
            
            -
            
            
            
            -
            
            
            
            -$
            4,422,169
            
            
            $
            1,339,667
            
            
            $
            1,532,310
            
            
            $
            667,594
            
            
            $
            465,194
            
            
            $
            338,819
            
            
            $
            78,585







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
the Company’s business, financial position, results of operations, cash flows or
liquidity.




6.
            INCOME
      TAXES




The
Company provides for income taxes based on the provisions of SFAS No. 109,Accounting for Income Taxes,which, among other things, requires that recognition of deferred income
taxes be measured by the provisions of enacted tax laws in effect at the date of
the financial statements. The Company records, among other items, deferred tax
assets related to book-tax differences in the recognition of restricted stock
awards to officers, directors, employees and consultants.  During the
three months ended December 31, 2007 and 2006, 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 our related deferred tax assets.  Accordingly, the
Company incurred an additional $2,000 and $23,000 of income tax expense for the
three months ended December 31, 2007 and 2006, respectively, related to the
write-off of these deferred tax assets.




9
 Table of Contents


LIVEDEAL,
INC. AND SUBSIDIARIES
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(cont)


7.
            NET
      INCOME PER SHARE




Net
income per share is calculated using the weighted average number of shares
of common stock outstanding during the period.  Basic weighted average
common shares outstanding do not include shares of restricted stock that have
not yet vested, although such shares are included as outstanding shares in the
Company’s unaudited consolidated balance sheet.  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 from restricted
shares and convertible preferred stock. The dilutive effect of outstanding
restricted shares is reflected in diluted earnings per share by application of
the treasury stock method. Convertible preferred stock is reflected on an
if-converted basis. 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 net income per
share:




Three
      Months Ended December 31,2007
            
            
            2006Net
      income
            
            $
            326,092
            
            
            $
            485,198Less:
      preferred stock dividends
            
            
            (480
            )
            
            
            -Income
      applicable to common stock
            
            $
            325,612
            
            
            $
            485,198Basic
      weighted average common shares outstanding
            
            
            6,230,395
            
            
            
            4,552,826Add
      incremental shares for:Unvested
      restricted stock
            
            
            193,612
            
            
            
            117,098Series
      E convertible preferred stock
            
            
            971
            
            
            
            6,196Diluted
      weighted average common shares outstanding
            
            
            6,424,978
            
            
            
            4,676,120Net
      income per share:Basic
            
            $
            0.05
            
            
            $
            0.11Diluted
            
            $
            0.05
            
            
            $
            0.10







The
following potentially dilutive securities were excluded from the calculation of
diluted net income per share because the effects were antidilutive based on the
application of the treasury stock method:





Three
      Months Ended December 31,2007
            
            
            2006Shares
      of non-vested restricted stock
            
            
            54,493
            
            
            
            82,90054,493
            
            
            
            82,900





8.
            CONCENTRATION
      OF CREDIT RISK





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




10
 Table of Contents


LIVEDEAL,
INC. AND SUBSIDIARIES
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(cont)


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
four third-party billing companies.  The net receivable due from three
of these billing service providers individually exceeded 10% and represented
33%, 20% and 13%, respectively, of the Company’s total net accounts receivable
(excluding non-specific reserves) at December 31, 2007. The net
receivable due from such billing service providers represented 31%, 23% and 16%,
respectively, of the Company’s total net accounts receivable at September 30,
2007.




9.
            RECENT
      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 adopted the provisions of FIN 48 in the first quarter of fiscal 2008.
Upon adoption, the Company did not identify any positions that required the
recognition of any additional tax liabilities.





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 (“SFAS No. 159”), 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 what impact, if any, that
adopting this standard might have on its financial position and results of
operations.





11
 Table of Contents


LIVEDEAL,
INC. AND SUBSIDIARIES
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(cont)


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 (October 1, 2009 for the Company). 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.








*                      *                      *





12
 Table of Contents





ITEM
2.  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 three months
ended December 31, 2007, this “Item 2.  Management’s Discussion and
Analysis of Financial Condition and Results of Operations” (hereafter referred
to as “MD&A”) should be read in conjunction with the Consolidated Financial
Statements, including the related notes, appearing in Item 1 of this Quarterly
Report on Form 10-Q, as well as our Annual Report on Form 10-K for the year
ended September 30, 2007.




Forward-Looking
Statements




This
portion of this Quarterly Report on Form 10-Q, 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 herein 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 and (iii) 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 our Annual Report on Form
10-K for the fiscal year ended September 30, 2007 under Item 1A “Risk Factors”,
as well as other factors that we are currently unable to identify or quantify,
but that may exist in the future.




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




Executive
Overview





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.





Listing
on NASDAQ Capital Market





On
February 1, 2008, we began trading on the NASDAQ Capital
Market.   Concurrent with this change, our ticker symbol was
changed from LVDL.OB to LIVE.





13
 Table of Contents




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.





We have
consolidated the results of LiveDeal in our financial statements beginning June
6, 2007, the date of acquisition. The following table provides pro forma
results of operations for the three months ended December 31, 2006 as if
LiveDeal had been acquired as of the beginning of the period. 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 and the elimination of interest expense on borrowings that were satisfied
through the acquisition.  However, pro formal results do not include
any anticipated cost savings or other effects of the 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.





Three
      MonthsEnded
      December 31,2006(unaudited)Net
      revenues
            
            $
            7,783,792Net
      loss
            
            $
            (671,922
            )Diluted
      net loss per share
            
            $
            (0.11
            )








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. This acquisition allowed us to bring our entire telemarketing
operations in-house through the addition of 170 Philippines-based employees to
our workforce.  We have consolidated the results of this entity in our
financial statements beginning July 10, 2007, the date of
acquisition.




Pro forma
financial information is not provided 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 stand-alone
basis cannot be obtained.




14
 Table of Contents




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. The
following changes were made to our statements 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.







All prior
periods have been restated to conform to the current period
presentation.  See Note 1 to our unaudited consolidated financial
statements for a summary of the impacts of these restatements.




Recent
Operating Results




The
following represents a summary of recent financial results (certain amounts have
been restated to conform to the current period presentation as described in Note
1 to our unaudited consolidated financial statements):




Q1
    2008
            
            
            
            Q4
    2007
            
            
            
            Q3
    2007
            
            
            
            Q2
    2007
            
            
            
            Q1
    2007Net
      Revenues
            
            $
            7,068,888
            
            
            $
            7,120,697
            
            
            $
            5,989,437
            
            
            $
            6,106,544
            
            
            $
            7,123,683Gross
      margin
            
            $
            6,063,339
            
            
            $
            5,860,893
            
            
            $
            5,113,544
            
            
            $
            5,148,835
            
            
            $
            6,012,813Operating
      expenses
            
            $
            5,580,857
            
            
            $
            4,956,356
            
            
            $
            4,537,182
            
            
            $
            4,043,109
            
            
            $
            5,272,758Operating
      income
            
            $
            482,482
            
            
            $
            904,537
            
            
            $
            576,362
            
            
            $
            1,105,726
            
            
            $
            740,055Net
      income
            
            $
            326,092
            
            
            $
            376,053
            
            
            $
            266,405
            
            
            $
            626,262
            
            
            $
            485,198




Net
revenues in the first quarter of fiscal 2008 were roughly flat when compared to
the first and fourth quarters of fiscal 2007.  While our revenues were
negatively impacted during 2007 as a result of the Attorneys’ General
settlement, we have since stabilized our revenue base and are seeking new growth
opportunities through our combined online and classified
marketplace.




We
experienced a decrease in our operating income in the first quarter of fiscal
2008 as compared to the fourth quarter of fiscal 2007 as a reduction in cost of
services expenses were more than offset by higher operating expenses as we
invest to grow the business:




·
            Cost
      of services decreased in the first quarter of fiscal 2008 as compared to
      the fourth quarter of 2007 primarily due to a non-recurring charge of
      approximately  $377,000 to bad debt
    expense.




·
            General
      and administrative expenses were approximately $400,000 higher in the
      first quarter of fiscal 2008 as compared to the fourth quarter of fiscal
      2007 largely as the result  of the reversal of approximately
      $431,000 of accrued bonuses in the fourth quarter of fiscal 2007 which
      were not paid as pre-determined financial goals were not met in fiscal
      2007; and  15
 Table of Contents




·
            Sales
      and marketing expenses increased by approximately $200,000 in the first
      quarter of fiscal 2008 as compared to the fourth quarter of fiscal 2007
      primarily due to increased telemarketing costs as we tested various
      marketing programs and increased telemarketing
  seats.




Results
of Operations




Net
Revenues


Three
      Months Ended December 31,2007
            
            
            2006
            
            
            Change
            
            
            Percent$
            7,068,888
            
            
            $
            7,123,683
            
            
            $
            (54,795
            )
            
            
            (1
            )%







Net
revenues slightly decreased in the first quarter of fiscal 2008 as compared to
the first quarter of 2007 as we were precluded from billing wholesale accounts
in certain LEC areas and adding additional accounts in other LEC areas as the
LEC’s tightened their thresholds.  While our net revenues were
negatively affected in fiscal 2007 by the Attorneys’ General Settlement,
increased telemarketing and online advertising efforts have returned our
revenues to stable levels over the last two quarters.




Although
we have concentrations of risk with our billing aggregators (as described in
Note 8 to our Unaudited Consolidated Financial Statements included elsewhere in
this 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 the first quarter of fiscal 2008 were $662,648 of revenues
stemming from our classified and online marketplace as a result of the
acquisition of LiveDeal.




Cost
of Services


Three
      Months Ended December 31,2007
            
            
            2006
            
            
            Change
            
            
            Percent$
            1,005,549
            
            
            $
            1,110,870
            
            
            $
            (105,321
            )
            
            
            (9
            )%







Cost of
services decreased in the first quarter of fiscal 2008 as compared to the first
quarter of fiscal 2007 due to cost reduction efforts and a reduction in LEC
monitoring and Internet service fees.  We have increased our LEC
billings as a percent of net revenues from 54% in the first quarter of fiscal
2007 to 68% in the first quarter of fiscal 2008.  While LEC billings
typically have higher costs than other billing channels, we have reduced our
costs per customer by renegotiating vendor service contracts and improving our
quality assurance procedures.




Gross
Profit


Three
      Months Ended December 31,2007
            
            
            2006
            
            
            Change
            
            
            Percent$
            6,063,339
            
            
            $
            6,012,813
            
            
            $
            50,526
            
            
            
            1
            %







Gross
profit slightly increased in the first quarter of fiscal 2008 as compared to the
first quarter of fiscal 2007.  Gross margins were 85.8% and 84.4% of
net revenues in the first quarter of fiscal 2008 and 2007,
respectively.







16
 Table of Contents




General
and Administrative Expenses


Three
      Months Ended December 31,2007
            
            
            2006
            
            
            Change
            
            
            Percent$
            3,394,971
            
            
            $
            3,186,725
            
            
            $
            208,246
            
            
            
            7
            %







General
and administrative expenses increased in the first quarter of fiscal 2008 as
compared to the first quarter of fiscal 2007 primarily due to the
following:




·
            An
      increase in depreciation and amortization expense of approximately
      $142,000 stemming from the effects of the LiveDeal acquisition which added
      $2.2 million of depreciable and amortizable long-lived and intangible
      assets;




·
            An
      increase in compensation expense of approximately $55,000 stemming from
      the results of the LiveDeal acquisition, which added 13 additional
      employees, partially offset by corporate headcount
    reductions;




·
            An
      increase in other general and administrative expenses of approximately
      $131,000 primarily due to increased facility, office and other corporate
      expenses associated with the LiveDeal acquisition; and partially offset
      by




·
            A
      decrease in professional and consulting fees of approximately $113,000 as
      we incurred significant expenses in the first quarter of 2007 to develop
      our strategic direction following the effects of the Attorneys’ General
      settlement.




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.




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




Q1
      2008
            
            
            
            Q4
      2007
            
            
            
            Q3
      2007
            
            
            
            Q2
      2007
            
            
            
            Q1
      2007Compensation
      for employees, leased employees, officers and directors
            
            $
            1,928,272
            
            
            $
            1,535,115
            
            
            $
            1,760,439
            
            
            $
            1,877,103
            
            
            $
            1,873,582Professional
      fees
            
            
            281,418
            
            
            
            184,507
            
            
            
            529,139
            
            
            
            319,948
            
            
            
            394,028Reconfirmation,
      mailing, billing and other customer-related costs
            
            
            17,601
            
            
            
            33,662
            
            
            
            24,269
            
            
            
            34,042
            
            
            
            23,715Depreciation
      and amortization
            
            
            478,433
            
            
            
            460,554
            
            
            
            396,759
            
            
            
            364,724
            
            
            
            336,887Other
      general and administrative costs
            
            
            689,247
            
            
            
            757,136
            
            
            
            522,583
            
            
            
            531,915
            
            
            
            558,513$
            3,394,971
            
            
            $
            2,970,974
            
            
            $
            3,233,189
            
            
            $
            3,127,732
            
            
            $
            3,186,725







Sales
and Marketing Expenses


Three
      Months Ended December 31,2007
            
            
            2006
            
            
            Change
            
            
            Percent$
            2,185,886
            
            
            $
            2,086,033
            
            
            $
            99,853
            
            
            
            5
            %







Sales and
marketing expenses increased in the first quarter of fiscal 2008 as compared to
the first quarter of fiscal 2007 due to expanded marketing efforts in
telemarketing and online advertising, partially offset by a reduction of
approximately $1 million in direct response advertising costs as we have
discontinued our direct mail campaigns.  Online advertising has
increased from zero in the first quarter of fiscal 2007 to approximately
$592,000 in the first quarter of fiscal 2008 as we seek to increase customers’
awareness and use of our online marketplace.




17
 Table of Contents




Included
in sales and marketing expenses for the three months ended December 31, 2007 is
depreciation expense of $18,408 related to our subsidiary in the Philippines
that exclusively provides telemarketing services.


Operating
Income




Three
      Months Ended December 31,2007
            
            
            2006
            
            
            Change
            
            
            Percent$
            482,482
            
            
            $
            740,055
            
            
            $
            (257,573
            )
            
            
            (35
            )%






The
decrease in operating income for the first quarter of fiscal 2008 as compared to
the first quarter of fiscal 2007 is primarily due to increased operating
expenses partially offset by increased gross margins, each of which is described
above.


Other
Income (Expense)




Three
      Months Ended December 31,2007
            
            
            2006
            
            
            Change
            
            
            Percent$
            34,911
            
            
            $
            93,299
            
            
            $
            (58,388
            )
            
            
            (63
            )%







Other
income (expense), consisting primarily of interest income, decreased in the
first quarter of fiscal 2008 as compared to the first quarter of fiscal 2007 due
primarily to a reduction of our cash and short-term investment balances, which
decreased as a result of investments in acquired businesses and the effects of
the Attorneys’ General settlement.




Income
Tax Provision


Three
      Months Ended December 31,2007
            
            
            2006
            
            
            Change
            
            
            Percent$
            (191,301
            )
            
            $
            (348,156
            )
            
            $
            156,855
            
            
            
            (45
            )%







The
change in our income tax provision in each of the above periods is due primarily
to changes in our pre-tax income.  However, in the first quarter of
fiscal 2008 and 2007, we incurred additional income tax expense of $2,000 and
$23,000 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.




Net
Income


Three
      Months Ended December 31,2007
            
            
            2006
            
            
            Change
            
            
            Percent$
            326,092
            
            
            $
            485,198
            
            
            $
            (159,106
            )
            
            
            (33
            )%







Changes
in net income are primarily attributable to changes in operating income and
changes in income tax expense.  As these respective quarters 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 increased $980,756, or 352%, to $702,148 for
the first quarter of fiscal 2008 as compared to net cash used of $278,608 for
the first quarter of fiscal 2007.  The increase in cash generated from
operations is primarily due to the payment of over $2 million related to the
attorney’s general settlement in the first quarter of fiscal 2007, partially
offset by increases in accounts receivable and other changes in working
capital.




18
 Table of Contents




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
December 31, 2007, approximately 66.6% 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 for investing activities totaled $231,357 during the first quarter of
fiscal 2008 and consisted of $7,000 of additional closing costs related to the
acquisition of LiveDeal, Inc, $16,243 of additional closing costs related to the
acquisition of OnCall Subscriber Management Inc., $163,384 of expenditures for
software and intangible assets and $44,730 of purchases of
equipment.  Net cash used in investing activities totaled $367,983
during the first quarter of fiscal 2007 and consisted of expenditures for
software and intangible assets and purchases of equipment, partially offset by
the liquidation of certificates of deposit and other investments.




Net cash
used for financing activities was $294,312 during the first quarter of fiscal
2008, consisting primarily of treasury stock repurchases as described
below.  There were no financing activities in the first quarter of
fiscal 2007.




We had
working capital of $12,298,189 as of December 31, 2007, compared to $11,632,301
as of September 30, 2007, with current assets increasing by approximately
$399,000 and current liabilities decreasing approximately $267,000 from
September 30, 2007 to December 31, 2007.  Our cash position increased
to $5,851,012 at December 31, 2007 compared to $5,674,533 at September 30, 2007
due to the effects of our results of operations, partially offset by purchases
of software, intangible assets, and equipment and purchases of treasury
stock.




On May
25, 2007, the Company’s Board of Directors terminated our pre-existing stock
repurchase plan and replaced it with a new plan authorizing repurchases of up to
$1,000,000 of common stock from time to time on the open market or in privately
negotiated transactions.  We acquired 76,725 shares of our common
stock during the first quarter of fiscal 2008 at an aggregate cost of
$293,832.  Of the 76,725 shares acquired, 67,775 shares were retired
prior to December 31, 2007. We retired an aggregate of 396,341 shares of
treasury stock during the three months ended December 31, 2007.




The
following table summarizes our contractual obligations at December 31, 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
            
            $
            3,002,419
            
            
            $
            693,917
            
            
            $
            858,310
            
            
            $
            567,594
            
            
            $
            465,194
            
            
            $
            338,819
            
            
            $
            78,585Noncanceleable
      service contracts
            
            
            1,419,750
            
            
            
            645,750
            
            
            
            674,000
            
            
            
            100,000
            
            
            
            -
            
            
            
            -
            
            
            
            -$
            4,422,169
            
            
            $
            1,339,667
            
            
            $
            1,532,310
            
            
            $
            667,594
            
            
            $
            465,194
            
            
            $
            338,819
            
            
            $
            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
December 31, 2007, we had no other off-balance sheet arrangements, commitments
or guarantees that require additional disclosure or measurement.





*                      *                      *





19
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ITEM 3.
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK




As of
December 31, 2007, 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 the
periods set forth in this report) or commodity price risk.




ITEM 4.
            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 Quarterly Report on Form 10-Q,
is recorded, processed, summarized and reported within the time periods
specified by the Securities and Exchange Commission.  Disclosure
controls are also 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 principal executive officer and
principal 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 Quarterly 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.




Based on
their review and evaluation as of the end of the period covered by this Form
10-Q, and subject to the inherent limitations as described above, our principal
executive officer and principal financial officer have 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) are effective as of the end of the
period covered by this report.  They 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-Q, there have
not been any changes in our internal control over financial reporting that have
materially affected, or that are reasonably likely to materially affect, our
internal control over financial reporting.




20
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PART
II – OTHER INFORMATION




ITEM 1A.
            RISK
      FACTORS




There
have been no material changes to the factors disclosed in Item 1A Risk Factors
in our Annual Report on Form 10-K for the year ended September 30,
2007.




ITEM 2.
            UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS




Issuer
Purchases of Equity Securities




Period
            
            (a)
      Total Number of Shares (or Units) Purchased
            
            
            (b)
      Average Price Paid per
              Share (or Unit)
            
            
            (c)
      Total Number of Shares (or Units) Purchased as Part of Publicly Announced
      Plans or Programs1
            
            
            (d)
      Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May
      Yet Be Purchased Under the Plans or
      ProgramsOctober
      2007
            
            
            -
            
            
            
            N/A
            
            
            
            -
            
            
            $
            1,000,000November
      2007
            
            
            48,450
            
            
            $
            3.85
            
            
            
            48,450
            
            
            $
            813,433December
      2007
            
            
            28,275
            
            
            $
            3.79
            
            
            
            28,275
            
            
            $
            706,168Total
            
            
            76,725
            
            
            $
            3.83
            
            
            
            -
            
            
            $
            706,168




1           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







ITEM
      6.
            EXHIBITS




The
following exhibits are either attached hereto or incorporated herein by
reference as indicated:







Exhibit
      Number
            
            Description3.1
            
            Amended
      and Restated Articles of Incorporation of LiveDeal, Inc. (incorporated by
      reference to Exhibit 3.1 to Form 8-K Current Report, SEC File No.
      000-24217, filed on August 15, 2007).3.2
            
            Amended
      and Restated Bylaws of LiveDeal, Inc. (incorporated by reference to
      Exhibit 3.2 to Form 10-K Annual Report, SEC File No. 000-24217, for the
      year ended September 30, 2007).31
            
            Certifications
      pursuant to Section 302 of the Sarbanes-Oxley Act of
  200232
            
            Certifications
      pursuant to 18 U.S.C. Section 1350


21
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SIGNATURES




Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.







LiveDeal,
      Inc.Dated:  February
      14, 2008
            /s/ Gary L. PerschbacherGary
      L. PerschbacherChief
      Financial Officer