Nevada
(State
or other jurisdiction of incorporation or organization)
|
85-0206668
(IRS
Employer Identification No.)
|
2490
East Sunset Road, Suite 100
Las
Vegas, Nevada
(Address
of principal executive offices)
|
89120
(Zip
Code)
|
Large Accelerated Filer o
|
Accelerated Filer o
|
Non-Accelerated Filer o
(do not check if a smaller reporting company)
|
Smaller reporting company þ
|
Page
|
||
PART
I
|
||
FINANCIAL
INFORMATION
|
||
Item
1.
|
Financial
Statements
|
|
Condensed
Consolidated Balance Sheets as of June 30, 2009 (unaudited) and September
30, 2008 (as restated)
|
3
|
|
Unaudited
Condensed Consolidated Statements of Operations
|
||
for
the Three and Nine months Ended June 30, 2009 and 2008
|
4
|
|
Unaudited
Condensed Consolidated Statements of Cash Flows
|
||
for
the Nine months Ended June 30, 2009 and 2008
|
5
|
|
Notes
to Unaudited Condensed Consolidated Financial Statements
|
6
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
22
|
Item
4.
|
Controls
and Procedures
|
33
|
PART
II
|
||
OTHER
INFORMATION
|
||
Item
1.
|
Legal
Proceedings
|
34
|
Item
1A.
|
Risk
Factors
|
34
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
35
|
Item
6.
|
Exhibits
|
35
|
Signatures
|
36
|
|
June 30,
|
September 30,
|
||||||
|
2009
|
2008
|
||||||
|
(unaudited)
|
(as restated,
|
||||||
|
see Note 3)
|
|||||||
Assets
|
||||||||
Cash
and cash equivalents
|
$ | 9,205,343 | $ | 4,639,787 | ||||
Certificates
of deposit
|
100,000 | - | ||||||
Accounts
receivable, net
|
1,644,966 | 6,326,272 | ||||||
Prepaid
expenses and other current assets
|
437,141 | 792,309 | ||||||
Customer
acquisition costs, net
|
- | 642,220 | ||||||
Income
taxes receivable
|
595,713 | 487,532 | ||||||
Deferred
tax asset, net of valuation allowance
|
271,148 | 949,121 | ||||||
Total
current assets
|
12,254,311 | 13,837,241 | ||||||
Accounts
receivable, long term portion, net
|
2,701,813 | 2,011,143 | ||||||
Property
and equipment, net
|
667,659 | 959,854 | ||||||
Deposits
and other assets
|
81,712 | 83,547 | ||||||
Intangible
assets, net
|
2,375,170 | 6,736,078 | ||||||
Goodwill
|
- | 11,706,406 | ||||||
Deferred
tax asset, long term, net of valuation allowance
|
- | 3,863,502 | ||||||
Total
assets
|
$ | 18,080,665 | $ | 39,197,771 | ||||
|
||||||||
Liabilities
and Stockholders' Equity
|
||||||||
Liabilities:
|
||||||||
Accounts
payable
|
$ | 635,887 | $ | 1,078,712 | ||||
Accrued
liabilities
|
1,725,711 | 1,437,149 | ||||||
Current
portion of capital lease obligation
|
68,820 | 61,149 | ||||||
Total
current liabilities
|
2,430,418 | 2,577,010 | ||||||
Long
term portion of capital lease obligation
|
135,729 | 170,838 | ||||||
Total
liabilities
|
2,566,147 | 2,747,848 | ||||||
|
||||||||
Commitments
and contingencies
|
||||||||
|
||||||||
Stockholders'
equity:
|
||||||||
Series
E convertible preferred stock, $0.001 par value, 200,000 shares
authorized,
|
||||||||
127,840
issued and outstanding, liquidation preference $38,202
|
10,866 | 10,866 | ||||||
Common
stock, $0.001 par value, 100,000,000 shares authorized, 6,135,933
and
|
||||||||
6,513,687
issued and outstanding at June 30, 2009 and September 30, 2008,
respectively
|
6,136 | 6,514 | ||||||
Paid
in capital
|
20,259,099 | 20,884,112 | ||||||
Retained
earnings (accumulated deficit)
|
(4,761,583 | ) | 15,548,431 | |||||
Total
stockholders' equity
|
15,514,518 | 36,449,923 | ||||||
|
||||||||
Total
liabilities and stockholders' equity
|
$ | 18,080,665 | $ | 39,197,771 |
|
Three Months ended
|
Nine Months ended
|
||||||||||||||
|
June 30,
|
June 30,
|
||||||||||||||
|
2009
|
2008
|
2009
|
2008
|
||||||||||||
|
||||||||||||||||
Net
revenues
|
$ | 2,448,569 | $ | 5,427,012 | $ | 11,006,358 | $ | 17,872,608 | ||||||||
Cost
of services
|
812,321 | 1,115,293 | 3,879,853 | 3,190,324 | ||||||||||||
Gross
profit
|
1,636,248 | 4,311,719 | 7,126,505 | 14,682,284 | ||||||||||||
|
||||||||||||||||
Operating
expenses:
|
||||||||||||||||
General
and administrative expenses
|
3,812,983 | 4,807,460 | 12,126,364 | 12,047,495 | ||||||||||||
Impairment
of goodwill and intangible assets
|
- | - | 16,111,494 | - | ||||||||||||
Sales
and marketing expenses
|
130,627 | 1,242,050 | 2,416,012 | 3,915,945 | ||||||||||||
Total
operating expenses
|
3,943,610 | 6,049,510 | 30,653,870 | 15,963,440 | ||||||||||||
Operating
loss
|
(2,307,362 | ) | (1,737,791 | ) | (23,527,365 | ) | (1,281,156 | ) | ||||||||
Other
income (expense):
|
||||||||||||||||
Interest
income, net
|
7,487 | 14,837 | 27,406 | 78,588 | ||||||||||||
Other
income (expense)
|
77,786 | (18,269 | ) | 7,341,784 | (14,637 | ) | ||||||||||
Total
other income (expense)
|
85,273 | (3,432 | ) | 7,369,190 | 63,951 | |||||||||||
|
||||||||||||||||
Loss
from continuing operations before income taxes
|
(2,222,089 | ) | (1,741,223 | ) | (16,158,175 | ) | (1,217,205 | ) | ||||||||
Income
tax provision (benefit)
|
(105,117 | ) | (221,763 | ) | 4,057,695 | (2,486 | ) | |||||||||
Loss
from continuing operations
|
(2,116,972 | ) | (1,519,460 | ) | (20,215,870 | ) | (1,214,719 | ) | ||||||||
|
||||||||||||||||
Discontinued
operations:
|
||||||||||||||||
Income
(loss) from discontinued component, including disposal
costs
|
7,422 | (97,760 | ) | (147,999 | ) | (58,345 | ) | |||||||||
Income
tax provision (benefit)
|
2,773 | (36,523 | ) | (55,293 | ) | (21,798 | ) | |||||||||
Income
(loss) from discontinued operations
|
4,649 | (61,237 | ) | (92,706 | ) | (36,547 | ) | |||||||||
|
||||||||||||||||
Net
loss
|
$ | (2,112,323 | ) | $ | (1,580,697 | ) | $ | (20,308,576 | ) | $ | (1,251,266 | ) | ||||
|
||||||||||||||||
Earnings
per share - basic1:
|
||||||||||||||||
Loss
from continuing operations
|
$ | (0.35 | ) | $ | (0.24 | ) | $ | (3.37 | ) | $ | (0.20 | ) | ||||
Discontinued
operations
|
- | (0.01 | ) | (0.02 | ) | (0.01 | ) | |||||||||
Net
loss
|
$ | (0.35 | ) | $ | (0.25 | ) | $ | (3.38 | ) | $ | (0.20 | ) | ||||
|
||||||||||||||||
Earnings
per share - diluted1:
|
||||||||||||||||
Loss
from continuing operations
|
$ | (0.35 | ) | $ | (0.24 | ) | $ | (3.37 | ) | $ | (0.20 | ) | ||||
Discontinued
operations
|
- | (0.01 | ) | (0.02 | ) | (0.01 | ) | |||||||||
Net
loss
|
$ | (0.35 | ) | $ | (0.25 | ) | $ | (3.38 | ) | $ | (0.20 | ) | ||||
|
||||||||||||||||
Weighted
average common shares outstanding:
|
||||||||||||||||
Basic
|
5,999,268 | 6,222,351 | 6,006,770 | 6,214,099 | ||||||||||||
Diluted
|
5,999,268 | 6,222,351 | 6,006,770 | 6,214,099 |
Nine Months Ended June 30,
|
||||||||
2009
|
2008
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net
loss
|
$ | (20,308,576 | ) | $ | (1,251,267 | ) | ||
Adjustments
to reconcile net loss to net cash used
in operating activities:
|
||||||||
Depreciation
and amortization
|
2,088,425 | 1,525,972 | ||||||
Non-cash
stock compensation expense
|
69,186 | - | ||||||
Amortization
of deferred stock compensation
|
(207,098 | ) | 859,271 | |||||
Deferred
income taxes
|
4,541,475 | 458,930 | ||||||
Provision
for uncollectible accounts
|
1,023,211 | 430,880 | ||||||
Noncash
impairment of goodwill and other intangibles
|
16,111,494 | - | ||||||
Gain
on sale of customer list
|
(2,815,952 | ) | - | |||||
Gain
on sale of internet domain name
|
(3,805,778 | ) | - | |||||
Gain
on amendment of directory services contract
|
(642,268 | ) | - | |||||
Loss
on disposal of property and equipment
|
37,943 | 15,352 | ||||||
Changes
in assets and liabilities:
|
||||||||
Accounts
receivable
|
2,831,757 | (780,126 | ) | |||||
Customer
acquisition costs
|
- | (1,700,000 | ) | |||||
Prepaid
expenses and other current assets
|
104,057 | (151,313 | ) | |||||
Deposits
and other assets
|
1,835 | 8,169 | ||||||
Accounts
payable
|
(442,825 | ) | 53,341 | |||||
Accrued
liabilities
|
170,619 | 535,696 | ||||||
Income
taxes receivable and payable
|
(108,181 | ) | (453,035 | ) | ||||
Net
cash used in operating activities
|
(1,350,676 | ) | (448,130 | ) | ||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Proceeds
from sale of internet domain name
|
3,850,000 | - | ||||||
Proceeds
from sale of customer list
|
2,783,097 | - | ||||||
Proceeds
from amendment of directory services contract
|
642,268 | - | ||||||
Additional
closing costs related to acquisition of LiveDeal, Inc.
|
- | (7,000 | ) | |||||
Additional
closing costs related to acquisition of OnCall
|
||||||||
Subscriber
Management, Inc.
|
- | (16,243 | ) | |||||
Expenditures
for intangible assets
|
(626,119 | ) | (55,942 | ) | ||||
Investment
in certificates of deposit
|
(100,000 | ) | - | |||||
Purchases
of equipment
|
(91,838 | ) | (585,845 | ) | ||||
Net
cash provided by (used in) investing activities
|
6,457,408 | (665,030 | ) | |||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Series
E preferred stock dividends
|
(1,437 | ) | (1,438 | ) | ||||
Principal
repayments on capital lease obligations
|
(52,259 | ) | - | |||||
Purchase
of treasury stock
|
(487,480 | ) | (500,901 | ) | ||||
Net
cash used in financing activities
|
(541,176 | ) | (502,339 | ) | ||||
INCREASE
(DECREASE) IN CASH AND CASH EQUIVALENTS
|
4,565,556 | (1,615,499 | ) | |||||
CASH
AND CASH EQUIVALENTS, beginning of period
|
4,639,787 | 5,674,533 | ||||||
CASH
AND CASH EQUIVALENTS, end of period
|
$ | 9,205,343 | $ | 4,059,034 |
1.
|
The
current effects of the recession and general economic
downturn;
|
2.
|
Management’s
perception that the general economic downturn could lead the Company’s
business customers to seek lower-cost customer acquisition methods,
primarily through the
Internet;
|
3.
|
The
sale of the Company’s “www.yp.com” domain name in the first quarter of
2009, which domain name was associated with the Company’s traditional
business;
|
4.
|
The
reconstitution of the Company’s management team with additional capability
in Internet-based
technologies;
|
5.
|
The
termination of certain significant directory business contracts related to
the traditional business;
|
6.
|
The
sale of certain of the Company’s traditional business assets, including
certain of its customer lists;
and
|
7.
|
Continuing
losses in the Company’s classifieds
business.
|
|
1.
|
Impairment
charges of $16,111,494 were recorded related to the write-down of the
Company’s goodwill and other intangible assets as discussed in Note
6;
|
|
2.
|
The
Company commenced a plan to discontinue its classifieds business and
initiated shutdown activities, as discussed in Note 7, and has reflected
the operating results of this line of business as discontinued operations
in the accompanying unaudited condensed consolidated statements of
operations;
|
|
3.
|
The
Company sold a portion of its customer list associated with its directory
services business and recorded a gain of $2,815,952, as discussed in Note
8; and
|
|
4.
|
The
Company established a valuation allowance of $9,713,322 related to its
deferred tax assets, as described in Note
11.
|
September 30, 2008
|
||||||||||||
As Originally
Reported
|
As Restated
|
Net Change
|
||||||||||
Accounts
receivable, net (current)
|
$ | 6,880,492 | $ | 6,326,272 | $ | (554,220 | ) | |||||
Accrued
liabilities
|
$ | 1,991,369 | $ | 1,437,149 | $ | (554,220 | ) |
June 30,
|
September 30,
|
|||||||
2009
|
2008
|
|||||||
(as
restated,
|
||||||||
|
see
Note 3)
|
|||||||
Receivables,
current, net:
|
||||||||
Accounts
receivable, current
|
$ | 2,934,886 | $ | 8,369,095 | ||||
Less:
Allowance for doubtful accounts
|
(1,289,920 | ) | (2,042,823 | ) | ||||
$ | 1,644,966 | $ | 6,326,272 | |||||
Receivables,
long term, net:
|
||||||||
Accounts
receivable, long term
|
$ | 3,252,416 | $ | 2,171,865 | ||||
Less:
Allowance for doubtful accounts
|
(550,603 | ) | (160,722 | ) | ||||
$ | 2,701,813 | $ | 2,011,143 | |||||
Total
receivables, net:
|
||||||||
Gross
receivables
|
$ | 6,187,302 | $ | 10,540,960 | ||||
Allowance
for doubtful accounts
|
(1,840,523 | ) | (2,203,545 | ) | ||||
$ | 4,346,779 | $ | 8,337,415 | |||||
Components
of allowance for doubtful accounts are as follows:
|
||||||||
June
30,
|
September
30,
|
|||||||
2009
|
2008
|
|||||||
Allowance
for dilution and fees on amounts due from billing
aggregators
|
$ | 1,766,661 | $ | 1,775,276 | ||||
Allowance
for customer refunds
|
73,862 | 428,269 | ||||||
$ | 1,840,523 | $ | 2,203,545 |
June 30,
|
September 30,
|
|||||||
2009
|
2008
|
|||||||
Customer
acquisition costs, net:
|
||||||||
Customer
acquisition costs
|
$ | 1,700,000 | $ | 1,700,000 | ||||
Less: Accumulated
amortization
|
(1,700,000 | ) | (1,057,780 | ) | ||||
$ | - | $ | 642,220 |
June 30,
|
September 30,
|
|||||||
2009
|
2008
|
|||||||
Property
and equipment, net:
|
||||||||
Leasehold
improvements
|
$ | 235,056 | $ | 233,970 | ||||
Furnishings
and fixtures
|
336,068 | 311,319 | ||||||
Office,
computer equipment and other
|
679,949 | 961,931 | ||||||
1,251,073 | 1,507,220 | |||||||
Less:
Accumulated depreciation
|
(583,414 | ) | (547,366 | ) | ||||
$ | 667,659 | $ | 959,854 |
June 30,
|
September 30,
|
|||||||
2009
|
2008
|
|||||||
Intangible
assets, net:
|
||||||||
Domain
name and marketing related intangibles
|
$ | 6,699,600 | $ | 7,208,600 | ||||
Non-compete
agreements
|
3,465,000 | 3,465,000 | ||||||
Website
and technology related intangibles
|
4,676,660 | 4,147,459 | ||||||
14,841,260 | 14,821,059 | |||||||
Less: Accumulated
amortization
|
(12,466,090 | ) | (8,084,981 | ) | ||||
$ | 2,375,170 | $ | 6,736,078 |
June 30,
|
September 30,
|
|||||||
2009
|
2008
|
|||||||
(as
restated,
|
||||||||
|
see
Note 3)
|
|||||||
Accrued
liabilities:
|
||||||||
Deferred
revenue
|
$ | 110,210 | $ | 362,848 | ||||
Accrued
payroll and bonuses
|
358,501 | 306,984 | ||||||
Accruals
for service contracts
|
416,981 | - | ||||||
Accruals
under revenue sharing agreements
|
254,286 | 326,306 | ||||||
Accrued
expenses - other
|
585,733 | 441,011 | ||||||
$ | 1,725,711 | $ | 1,437,149 |
|
1.
|
The
goodwill acquired by the Company in its acquisition of LiveDeal, Inc., the
business focus of which was online classified advertising which was
originally intended to be merged with the Company’s existing directory
services business;
|
|
2.
|
The
goodwill acquired by the Company in its acquisition of a Philippines
call-center, 247 Marketing, Inc., the business focus of which was
providing telemarketing services to acquire customers for its
directory services business;
|
|
3.
|
Assets
related to the Company’s call-center operations and non-compete agreements
that were effectively made obsolete due to the sale of a portion of the
Company’s customer list associated with its directory services business,
as described in Note 8; and
|
|
4.
|
Intangible
assets related to the Company’s directory services business, including
URLs, internally developed software, and other miscellaneous intangible
assets.
|
Goodwill
|
$ | 11,706,406 | ||
Domain
name and marketing related intangibles
|
1,879,054 | |||
Assets
related to customer list
|
1,259,680 | |||
Website
and technology related intangibles
|
1,266,354 | |||
$ | 16,111,494 |
Quarter Ended
|
Nine Months Ended
|
Quarter Ended
|
Nine Months Ended
|
|||||||||||||
June 30, 2009
|
June 30, 2009
|
June 30, 2008
|
June 30, 2008
|
|||||||||||||
Volatility
|
N/A | 97 | % | N/A | N/A | |||||||||||
Risk-free
interest rate
|
N/A | 2.6 | % | N/A | N/A | |||||||||||
Expected
term
|
N/A |
6.0
years
|
N/A | N/A | ||||||||||||
Forfeiture
rate
|
N/A | 40 | % | N/A | N/A | |||||||||||
Dividend
yield rate
|
N/A | 0 | % | N/A | N/A |
Weighted
|
Weighted
|
Weighted
|
||||||||||||||||||
Average
|
Average
|
Average
|
Aggregate
|
|||||||||||||||||
Number of
|
Exercise
|
Fair
|
Remaining
|
Intrinsic
|
||||||||||||||||
Shares
|
Price
|
Value
|
Contractual Life
|
Value
|
||||||||||||||||
Outstanding
at September 30, 2008
|
5,000 | |||||||||||||||||||
Granted
at market price
|
550,000 | $ | 1.45 | $ | 1.13 | |||||||||||||||
Exercised
|
- | $ | - | |||||||||||||||||
Forfeited
|
(225,000 | ) | $ | 1.45 | ||||||||||||||||
Outstanding
at June 30, 2009
|
330,000 | 9.3 | $ | 48,750 | ||||||||||||||||
Exercisable
|
30,000 | $ | 1.67 | 9.2 | $ | 3,750 |
Exercisable
|
Unexercisable
|
Total
|
||||||||||||||||||||||
Weighted
|
Weighted
|
Weighted
|
||||||||||||||||||||||
Number
|
Average
|
Number
|
Average
|
Number
|
Average
|
|||||||||||||||||||
Range of Exercise Prices
|
Outstanding
|
Exercise Price
|
Outstanding
|
Exercise Price
|
Outstanding
|
Exercise Price
|
||||||||||||||||||
Less
than $3.00 per share
|
30,000 | $ | 1.67 | 300,000 | 1.45 | 330,000 | $ | 1.47 |
Outstanding
(unvested) at September 30, 2008
|
227,425 | |||
Granted
|
10,000 | |||
Forfeited
|
(70,750 | ) | ||
Vested
|
(41,500 | ) | ||
Outstanding
(unvested) at June 30, 2009
|
125,175 |
Three Months Ended June 30,
|
Nine Months Ended June 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Net
loss from continuing operations
|
$ | (2,116,972 | ) | $ | (1,519,460 | ) | $ | (20,215,870 | ) | $ | (1,214,719 | ) | ||||
Less:
preferred stock dividends
|
(479 | ) | (480 | ) | (1,437 | ) | (1,438 | ) | ||||||||
Loss
from continuing operations applicable to common stock
|
(2,117,451 | ) | (1,519,940 | ) | (20,217,307 | ) | (1,216,157 | ) | ||||||||
Income
(loss) from discontinued operations
|
4,649 | (61,237 | ) | (92,706 | ) | (36,547 | ) | |||||||||
Loss
applicable to common stock
|
$ | (2,112,802 | ) | $ | (1,581,177 | ) | $ | (20,310,013 | ) | $ | (1,252,704 | ) | ||||
Basic
and diluted weighted average common shares outstanding
|
5,999,268 | 6,222,351 | 6,006,770 | 6,214,099 | ||||||||||||
Earnings
per share - basic1:
|
||||||||||||||||
Loss
from continuing operations
|
$ | (0.35 | ) | $ | (0.24 | ) | $ | (3.37 | ) | $ | (0.20 | ) | ||||
Discontinued
operations
|
$ | 0.00 | $ | (0.01 | ) | $ | (0.02 | ) | $ | (0.01 | ) | |||||
Net
loss
|
$ | (0.35 | ) | $ | (0.25 | ) | $ | (3.38 | ) | $ | (0.20 | ) | ||||
Earnings
per share - diluted1:
|
||||||||||||||||
Loss
from continuing operations
|
$ | (0.35 | ) | $ | (0.24 | ) | $ | (3.37 | ) | $ | (0.20 | ) | ||||
Discontinued
operations
|
$ | 0.00 | $ | (0.01 | ) | $ | (0.02 | ) | $ | (0.01 | ) | |||||
Net
loss
|
$ | (0.35 | ) | $ | (0.25 | ) | $ | (3.38 | ) | $ | (0.20 | ) |
Three Months Ended June 30,
|
Nine Months Ended June 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Shares
of non-vested restricted stock
|
125,175 | 239,175 | 167,561 | 354,576 | ||||||||||||
Stock
options
|
330,000 | - | 427,141 | - | ||||||||||||
Shares
of Series E convertible preferred stock
|
127,840 | 127,840 | 127,840 | 127,840 |
Deferred
income tax asset, current:
|
||||
Book
to tax differences in accounts receivable
|
$ | 748,752 | ||
Book
to tax differences in prepaid expenses
|
(80,141 | ) | ||
Net
operating loss carryforwards, current
|
271,148 | |||
Total
deferred income tax asset, current
|
939,759 | |||
Less: valuation
allowance
|
(668,611 | ) | ||
Deferred
income tax asset, current, net
|
271,148 | |||
Deferred
income tax asset, long-term:
|
||||
Net
operating loss carryforwards, long-term
|
3,210,639 | |||
Book
to tax differences for stock based compensation
|
220,227 | |||
Book
to tax differences in intangible assets
|
7,155,336 | |||
Book
to tax differences in depreciation
|
(1,541,815 | ) | ||
Other
book tax differences
|
326 | |||
Total
deferred income tax asset, long-term
|
9,044,713 | |||
Less: valuation
allowance
|
(9,044,713 | ) | ||
Deferred
income tax asset, long-term, net
|
- | |||
Total
deferred income tax assets, net of valuation allowance
|
$ | 271,148 |
Nine Months Ended June 30,
|
||||||||||||||||
2009
|
2008
|
|||||||||||||||
Amount
|
Percent
|
Amount
|
Percent
|
|||||||||||||
Federal
statutory rates
|
$ | (5,493,779 | ) | 34 | % | $ | (413,850 | ) | 34 | % | ||||||
State
income taxes
|
(543,107 | ) | 3 | % | (40,912 | ) | 3 | % | ||||||||
Write
off of deferred tax asset related to vested restricted
stock
|
48,570 | (0 | )% | 445,022 | (37 | )% | ||||||||||
Valuation
allowance
|
9,713,324 | (60 | )% | - | 0 | % | ||||||||||
True
up to tax returns and other
|
332,687 | (2 | )% | 7,254 | (1 | )% | ||||||||||
Effective
rate
|
$ | 4,057,695 | (25 | )% | $ | (2,486 | ) | 0 | % |
Payments Due by Fiscal Year
|
||||||||||||||||||||||||||||
Total
|
2009
|
2010
|
2011
|
2012
|
2013
|
Thereafter
|
||||||||||||||||||||||
Operating
lease commitments
|
$ | 1,533,822 | $ | 158,680 | $ | 551,922 | $ | 427,621 | $ | 316,879 | $ | 78,720 | $ | - | ||||||||||||||
Noncanceleable
service contracts
|
1,388,853 | 524,853 | 605,000 | 259,000 | - | - | - | |||||||||||||||||||||
$ | 2,922,675 | $ | 683,533 | $ | 1,156,922 | $ | 686,621 | $ | 316,879 | $ | 78,720 | $ | - |
2009
|
$ | 19,219 | ||
2010
|
76,876 | |||
2011
|
76,876 | |||
2012
|
44,844 | |||
2013
|
- | |||
Thereafter
|
- | |||
Total minimum lease payments
|
217,815 | |||
Less imputed interest
|
(13,266 | ) | ||
Present value of minimum lease payments
|
204,549 | |||
Less: current maturities of capital lease
obligations
|
68,820 | |||
Noncurrent maturities of capital lease obligations
|
$ | 135,729 |
Nine Months Ended June 30, 2009
|
||||||||||||||||
Directory
Services
|
Direct Sales -
Customer
Acquisition
Services
|
Unallocated
|
Consolidated
|
|||||||||||||
Net
revenues
|
$ | 8,068,710 | $ | 2,937,648 | $ | - | $ | 11,006,358 | ||||||||
Cost
of services
|
2,518,160 | 1,361,693 | - | 3,879,853 | ||||||||||||
Gross
profit
|
5,550,550 | 1,575,955 | - | 7,126,505 | ||||||||||||
Operating
expenses
|
- | - | 30,653,870 | 30,653,870 | ||||||||||||
Operating
income (loss)
|
5,550,550 | 1,575,955 | (30,653,870 | ) | (23,527,365 | ) | ||||||||||
Other
income (expense)
|
- | - | 7,369,190 | 7,369,190 | ||||||||||||
Income
(loss) before income taxes and discontinued operations
|
$ | 5,550,550 | $ | 1,575,955 | $ | (23,284,680 | ) | $ | (16,158,175 | ) |
Nine Months Ended June 30, 2008
|
||||||||||||||||
Directory
Services
|
Direct Sales -
Customer
Acquisition
Services
|
Unallocated
|
Consolidated
|
|||||||||||||
Net
revenues
|
$ | 17,553,551 | $ | 319,057 | $ | - | $ | 17,872,608 | ||||||||
Cost
of services
|
2,935,546 | 254,778 | - | 3,190,324 | ||||||||||||
Gross
profit
|
14,618,005 | 64,279 | - | 14,682,284 | ||||||||||||
Operating
expenses
|
- | - | 15,963,440 | 15,963,440 | ||||||||||||
Operating
income
|
14,618,005 | 64,279 | (15,963,440 | ) | (1,281,156 | ) | ||||||||||
Other
income (expense)
|
- | - | 63,951 | 63,951 | ||||||||||||
Income
before income taxes and discontinued operations
|
$ | 14,618,005 | $ | 64,279 | $ | (15,899,489 | ) | $ | (1,217,205 | ) |
June 30, 2009
|
||||||||||||
Directory
Services
|
Direct Sales -
Customer
Acquisition
Services
|
Total
|
||||||||||
Accounts
receivable, net - short term
|
$ | 1,415,814 | $ | 229,152 | $ | 1,644,966 | ||||||
Accounts
receivable, net - long term
|
2,701,813 | - | 2,701,813 | |||||||||
Total
accounts receivable, net
|
$ | 4,117,627 | $ | 229,152 | $ | 4,346,779 |
September 30, 2008 (as restated, see Note 3)
|
||||||||||||
Directory
Services
|
Direct Sales -
Customer
Acquisition
Services
|
Total
|
||||||||||
Accounts
receivable, net - short term
|
$ | 6,326,272 | $ | - | $ | 6,326,272 | ||||||
Accounts
receivable, net - long term
|
2,011,143 | - | 2,011,143 | |||||||||
Total
accounts receivable, net
|
$ | 8,337,415 | $ | - | $ | 8,337,415 |
|
·
|
Website
acquisition whereby we obtain website address names on behalf of our small
business clients.
|
|
·
|
Website
development and deployment services where we create, house and manage
websites on behalf of our small business
clients.
|
|
·
|
Website
traffic and audience development whereby we provide sophisticated search
engine marketing techniques, access to our own websites, partnerships with
other websites and other techniques to generate traffic to our customers’
websites, whether created and housed by us or
not.
|
|
·
|
Website
analytics and performance reports which generate information for our
customers about activities on their websites and lead activities for their
businesses based on Internet
activities.
|
|
·
|
Directory
services that provide both basic and enhanced directory listings for our
customers on our own directory and on partner
directories.
|
1.
|
The
current effects of the recession and general economic
downturn;
|
|
2.
|
Our
perception that the general economic downturn could lead our business
customers to seek lower-cost customer acquisition methods, primarily
through the Internet;
|
3.
|
The
sale of our “www.yp.com” domain name in the first quarter of 2009, which
domain name was associated with our traditional
business;
|
4.
|
The
reconstitution of our management team with additional capability in
Internet-based technologies;
|
5.
|
The
termination of certain significant directory business contracts related to
the traditional business;
|
6.
|
The
sale of certain of our traditional business assets including certain of
our customer lists; and
|
7.
|
Continuing
losses in our classifieds
business.
|
|
1.
|
Impairment
charges of $16,111,494 were recorded related to the write-down of our
goodwill and other intangible
assets;
|
|
2.
|
We
commenced a plan to discontinue our classifieds business and initiated
shutdown activities;
|
|
3.
|
We
sold our customer list associated with its directory services business and
recorded a gain of $2,815,952;
and
|
|
4.
|
We
established a valuation allowance of $9,713,322 related to our deferred
tax assets.
|
|
·
|
Rajeev
Seshadri replaced Gary Perschbacher as Chief Financial Officer effective
January 20, 2009;
|
|
·
|
President
and Chief Operating Officer, John Raven submitted his resignation
effective February 15, 2009;
|
|
·
|
Yishay
Yovel was named Vice President of Product Management in October of
2008;
|
|
·
|
Pamela
Sziebert was appointed Vice President of Marketing in November of
2008;
|
|
·
|
Dean
Heistad was appointed the Company’s new Vice President of Technology
Strategy as of January 5, 2009; and
|
|
·
|
Ruben
Atchison joined the Company as Director of Search Engine Marketing in
December 2008.
|
|
1.
|
The
goodwill acquired in our acquisition of LiveDeal, Inc., the business focus
of which was online classified
advertising;
|
|
2.
|
The
goodwill acquired in our acquisition of a Philippines call-center, 247
Marketing, Inc., the business focus of which was providing
telemarketing services to acquire customers for our directory
services business;
|
|
3.
|
Assets
related to our call-center operations and non-compete agreements that were
effectively made obsolete by the sale of a portion of our customer list
associated with our directory services business;
and
|
|
4.
|
Intangible
assets related to our directory services business, including URLs,
internally developed software, and other miscellaneous intangible
assets.
|
Goodwill
|
$ | 11,706,406 | ||
Domain
name and marketing related intangibles
|
1,879,054 | |||
Assets
related to customer list
|
1,259,680 | |||
Website
and technology related intangibles
|
1,266,354 | |||
$ | 16,111,494 |
Net Revenues
|
||||||||||||||||
2009
|
2008
|
Change
|
Percent
|
|||||||||||||
Three
Months Ended June 30,
|
$ | 2,448,569 | $ | 5,427,012 | $ | (2,978,443 | ) | (55 | )% | |||||||
Nine
Months Ended June 30,
|
$ | 11,006,358 | $ | 17,872,608 | $ | (6,866,250 | ) | (38 | )% |
Cost of Services
|
||||||||||||||||
2009
|
2008
|
Change
|
Percent
|
|||||||||||||
Three
Months Ended June 30,
|
$ | 812,321 | $ | 1,115,293 | $ | (302,972 | ) | (27 | )% | |||||||
Nine
Months Ended June 30,
|
$ | 3,879,853 | $ | 3,190,324 | $ | 689,529 | 22 | % |
Gross Profit
|
||||||||||||||||
2009
|
2008
|
Change
|
Percent
|
|||||||||||||
Three
Months Ended June 30,
|
$ | 1,636,248 | $ |