UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549




Form
10-Q





x QUARTERLY REPORT
UNDER SECTION 13 OR 15(d) OF THE


SECURITIES
EXCHANGE ACT OF 1934




For the
quarterly period ended September 30, 2009 or




o TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE


SECURITIES
EXCHANGE ACT OF 1934




For the
transition period from ______ to ______




Commission
File Number 000-29929




LIVE
CURRENT MEDIA INC.


(Exact
name of registrant as specified in its charter)





Nevada
            88-0346310(State
      or other jurisdiction ofincorporation
      or organization)
            (IRS
      EmployerIdentification
      Number)





375 Water Street, Suite 645,
Vancouver, British Columbia, V6B 5C6




(604)
453-4870





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 þNo o




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files. Yes oNo o The
registrant is not yet subject to this requirement.




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





Large
      accelerated filer o
            Accelerated
      filer oNon-accelerated
      filer o  (Do
      not check if a smaller reporting company)
            Smaller
      reporting company þ





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes oNo þ









APPLICABLE
ONLY TO CORPORATE ISSUERS





Indicate
the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date.




Common
      Stock
              $.001 Par
      Value
            24,026,180 shares
      outstanding as of November 16, 2009




2





LIVE
CURRENT MEDIA INC.


REPORT
ON FORM 10-Q


QUARTER
ENDED SEPTEMBER 30, 2009


TABLE
OF CONTENTS






PART I.
            Financial
      InformationItem 1.
            Unaudited Financial
      Statements
            4Consolidated Balance
      Sheets as of September 30, 2009 and December 31, 2008
            5Consolidated
      Statements of Operations for the periods ended September 30, 2009 and
      September 30, 2008
            6Consolidated
      Statement of Stockholders’ Equity for the periods ended September 30, 2009
      and December 31, 2008
            7Consolidated
      Statements of Cash Flows for the periods ended September 30, 2009 and
      September 30, 2008
            8Notes to the
      Consolidated Financial Statements
            9Item 2.
            Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations
            38Item 3.
            Quantitative and
      Qualitative Disclosures About Market Risk
            60Item 4T.
            Controls and
      Procedures
            60PART II.
            Other
    InformationItem 1.
            Legal
      Proceedings
            62Item 1A.
            Risk
    Factors
            62Item 2.
            Unregistered Sales
      of Equity Securities and Use of Proceeds
            62Item 3.
            Defaults Upon Senior
      Securities
            62Item 4.
            Submission of
      Matters to a Vote of Security Holders
            62Item 5.
            Other
      Information
            62Item 6.
            Exhibits
            63Signatures
            
            64Certifications




3





PART  I
– FINANCIAL INFORMATION





Item 1: Financial
Statements.





LIVE
CURRENT MEDIA INC.


(formerly
COMMUNICATE.COM INC.)











CONSOLIDATED
FINANCIAL STATEMENTS


SEPTEMBER
30, 2009


(UNAUDITED)


CONSOLIDATED
BALANCE SHEETS
 
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 
 CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY
 
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
  4
 LIVE
CURRENT MEDIA INC.
 (formerly
COMMUNICATE.COM INC.)
 CONSOLIDATED
BALANCE SHEETS
 Expressed
In U.S. Dollars
 (Going
Concern - See Note 1)
 September
      30, 2009
                
                
                December
      31, 2008(unaudited)
                
                
                (audited)(As
      Restated -
                  See
      Note 2)ASSETSCurrentCash
      and cash equivalents
                
                $
                1,236,405
                
                
                $
                1,832,520Accounts
      receivable (net of allowance for doubtful accounts of nil)
                
                
                221,856
                
                
                
                93,582Prepaid
      expenses and deposits
                
                
                163,115
                
                
                
                109,543Inventory
                
                
                50,146
                
                
                
                74,082Current
      portion of receivable from sales-type lease (Note
    12)
                
                
                23,423
                
                
                
                23,423Total
      current assets
                
                
                1,694,945
                
                
                
                2,133,150Long-term
      portion of receivable from sales-type lease (Note
    12)
                
                
                -
                
                
                
                23,423Property
      & equipment (Note
      8)
                
                
                240,147
                
                
                
                1,042,851Website
      development costs (Note
      9)
                
                
                242,101
                
                
                
                355,391Intangible
      assets
                
                
                993,505
                
                
                
                1,587,463Goodwill
      (Notes 5 and
      7)
                
                
                2,606,040
                
                
                
                2,606,040Total
      Assets
                
                $
                5,776,738
                
                
                $
                7,748,318LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrentAccounts
      payable and accrued liabilities
                
                $
                1,749,318
                
                
                $
                3,047,993Amounts
      payable to the BCCI and IPL(Note
    6)
                
                
                -
                
                
                
                1,000,000Deferred
      gains of amounts regarding Global Cricket Venture (Note
6)
                
                
                833,333
                
                
                
                -Bonuses
      payable
                
                
                150,568
                
                
                
                354,695Due
      to shareholders of Auctomatic (Note
7)
                
                
                270,664
                
                
                
                789,799Convertible
      notes to shareholders of Auctomatic(Note
    7)
                
                
                429,475
                
                
                
                -Deferred
      revenue
                
                
                72,712
                
                
                
                120,456Current
      portion of deferred lease inducements (Note
    10)
                
                
                20,138
                
                
                
                20,138Total
      current liabilities
                
                
                3,526,208
                
                
                
                5,333,081Deferred
      income tax (Note
      14)
                
                
                129,156
                
                
                
                206,370Deferred
      lease inducements (Note
      10)
                
                
                40,276
                
                
                
                55,380Warrants
      (Note
      11(e))
                
                
                139,620
                
                
                
                157,895Total
      Liabilities
                
                
                3,835,260
                
                
                
                5,752,726STOCKHOLDERS'
      EQUITYCommon
      Stock (Note
      11)Authorized:
      50,000,000 common shares, $0.001 par valueIssued
      and outstanding:24,026,180
      common shares (December 31, 2008 - 23,546,370)
                
                
                15,335
                
                
                
                14,855Additional
      paid-in capital
                
                
                16,308,713
                
                
                
                14,757,932Accumulated
      deficit
                
                
                (14,373,893
                )
                
                
                (12,756,133
                )Total
      Live Current Media Inc. stockholders' equity
                
                
                1,950,155
                
                
                
                2,016,654Non-controlling
      interest
                
                
                (8,677
                )
                
                
                (21,062
                )Total
      Stockholders' Equity
                
                
                1,941,478
                
                
                
                1,995,592Total
      Liabilities and Stockholders' Equity
                
                $
                5,776,738
                
                
                $
                7,748,318
 
 Commitments
and Contingency(Notes 16 and
17)
 Subsequent
Events(Note
19)
 
 See
accompanying notes to consolidated financial statements


5
 LIVE
CURRENT MEDIA INC.
 (formerly
COMMUNICATE.COM INC)
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 Expressed
In U.S. Dollars
 (Unaudited)
 Three
      Months Ended
                
                
                Three
      Months Ended
                
                
                Nine
      Months Ended
                
                
                Nine
      Months EndedSeptember
      30, 2009
                
                
                September
      30, 2008
                
                
                September
      30, 2009
                
                
                September
      30, 2008(As
      Restated - See Note 2)
                
                
                
                
                
                (As
      Restated - See Note 2)SALESHealth
      and beauty eCommerce
                
                $
                1,498,265
                
                
                $
                1,934,829
                
                
                $
                4,881,614
                
                
                $
                5,663,053Other
      eCommerce
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                455Sponsorship
      revenues
                
                
                218,672
                
                
                
                -
                
                
                
                218,672
                
                
                
                -Domain
      name advertising
                
                
                19,345
                
                
                
                19,855
                
                
                
                66,715
                
                
                
                75,108Miscellaneous
      and other income
                
                
                21,454
                
                
                
                -
                
                
                
                48,022
                
                
                
                -Total
      Sales
                
                
                1,757,736
                
                
                
                1,954,684
                
                
                
                5,215,023
                
                
                
                5,738,616COSTS
      OF SALESHealth
      and Beauty eCommerce
                
                
                1,183,479
                
                
                
                1,602,249
                
                
                
                3,885,845
                
                
                
                4,666,645Other
      eCommerce
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                552Total
      Costs of Sales (excluding depreciation and amortization as shown
      below)
                
                
                1,183,479
                
                
                
                1,602,249
                
                
                
                3,885,845
                
                
                
                4,667,197GROSS
      PROFIT
                
                
                574,257
                
                
                
                352,435
                
                
                
                1,329,178
                
                
                
                1,071,419OPERATING
      EXPENSESAmortization
      and depreciation
                
                
                21,314
                
                
                
                96,707
                
                
                
                217,726
                
                
                
                155,861Amortization
      of website development costs(Note
    9)
                
                
                28,967
                
                
                
                29,143
                
                
                
                95,036
                
                
                
                29,143Corporate
      general and administrative
                
                
                226,570
                
                
                
                1,014,145
                
                
                
                755,421
                
                
                
                2,116,960ECommerce
      general and administrative
                
                
                63,461
                
                
                
                114,973
                
                
                
                217,348
                
                
                
                385,281Management
      fees and employee salaries
                
                
                760,631
                
                
                
                2,171,036
                
                
                
                2,950,887
                
                
                
                4,934,207Corporate
      marketing
                
                
                3,939
                
                
                
                14,449
                
                
                
                14,036
                
                
                
                61,151ECommerce
      marketing
                
                
                107,678
                
                
                
                99,412
                
                
                
                334,065
                
                
                
                378,484Other
      expenses (Note
      13)
                
                
                -
                
                
                
                20,000
                
                
                
                264,904
                
                
                
                683,547Total
      Operating Expenses
                
                
                1,212,560
                
                
                
                3,559,865
                
                
                
                4,849,423
                
                
                
                8,744,634NON-OPERATING
      INCOME (EXPENSES)Gain
      on settlement of amounts due regarding Global Cricket Venture(Note
    6)
                
                
                125,000
                
                
                
                -
                
                
                
                375,000
                
                
                
                -Gain
      from sales and sales-type lease of domain names (Note
    12)
                
                
                1,156,554
                
                
                
                -
                
                
                
                2,101,421
                
                
                
                168,206Accretion
      interest expense(Note
      7)
                
                
                -
                
                
                
                (56,600
                )
                
                
                (63,300
                )
                
                
                (56,600
                )Interest
      expense
                
                
                (10,723
                )
                
                
                
                
                
                
                (15,251
                )Interest
      and investment income
                
                
                3
                
                
                
                7,266
                
                
                
                1,558
                
                
                
                66,444Gain
      on restructure of Auctomatic payable
                
                
                29,201
                
                
                
                -
                
                
                
                29,201
                
                
                
                -Impairment
      of Auction Software(Note 8)
                
                
                -
                
                
                
                -
                
                
                
                (590,973
                )
                
                
                -Total
      Non-Operating Income (Expenses)
                
                
                1,300,035
                
                
                
                (49,334
                )
                
                
                1,837,656
                
                
                
                178,050NET
      INCOME (LOSS) BEFORE TAXES
                
                
                661,732
                
                
                
                (3,256,764
                )
                
                
                (1,682,589
                )
                
                
                (7,495,165
                )Deferred
      tax recovery (Note
      14)
                
                
                (64,732
                )
                
                
                -
                
                
                
                (77,214
                )
                
                
                -CONSOLIDATED
      NET INCOME (LOSS)
                
                
                726,464
                
                
                
                (3,256,764
                )
                
                
                (1,605,375
                )
                
                
                (7,495,165
                )ADD:
      NET (INCOME) LOSS ATTRIBUTABLE TONON-CONTROLLING
      INTEREST
                
                
                (23,337
                )
                
                
                -
                
                
                
                (12,385
                )
                
                
                75,478NET
      INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) FOR THEPERIOD
      ATTRIBUTABLE TO LIVE CURRENT MEDIA INC.
                
                $
                703,127
                
                
                $
                (3,256,764
                )
                
                $
                (1,617,760
                )
                
                $
                (7,419,687
                )INCOME
      (LOSS) PER SHARE - BASIC AND DILUTEDNet
      Income (Loss) attributable to Live Current Media Inc. common
      stockholders
                
                $
                0.03
                
                
                $
                (0.15
                )
                
                $
                (0.07
                )
                
                $
                (0.34
                )Weighted
      Average Number of Common Shares Outstanding - Basic
                
                
                23,593,205
                
                
                
                21,625,005
                
                
                
                23,593,205
                
                
                
                21,625,005Net
      Income (Loss) attributable to Live Current Media Inc. common
      stockholders
                
                $
                0.03
                
                
                $
                (0.15
                )
                
                $
                (0.07
                )
                
                $
                (0.34
                )Weighted
      Average Number of Common Shares Outstanding - Diluted
                
                
                26,011,464
                
                
                
                21,625,005
                
                
                
                23,593,205
                
                
                
                21,625,005
 See
accompanying notes to consolidated financial statements
  6
  LIVE
CURRENT MEDIA INC.
 (formerly
COMMUNICATE.COM INC)
 CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY
 Expressed
In U.S. Dollars
 Live
      Current Media Inc. StockholdersCommon
      stock
                
                
                Additional
      Paid-in Capital
                
                
                Accumulated
      Deficit
                
                
                Total
      Stockholders' Equity
                
                
                Non-Controlling
      Interest
                
                
                Total
      EquityNumber
      of Shares
                
                
                AmountBalance,
      December 31, 2007 (audited) (As Restated - See Note 2)
                
                
                21,446,623
                
                
                $
                12,456
                
                
                $
                10,170,004
                
                
                $
                (2,789,925
                )
                
                $
                7,392,535
                
                
                $
                8,786
                
                
                $
                7,401,321Stock-based
      compensation(Note
      11d)
                
                
                
                
                
                
                
                
                
                
                2,162,526
                
                
                
                
                
                
                
                2,162,526
                
                
                
                -
                
                
                
                2,162,526Issuance
      of Common Stock
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                
                
                
                
                -
                
                
                
                66,692
                
                
                
                66,692Issuance
      of 586,403 common shares per the mergeragreement with
      Auctomatic(Note
      7)
                
                
                586,403
                
                
                
                586
                
                
                
                1,248,279
                
                
                
                
                
                
                
                1,248,865
                
                
                
                -
                
                
                
                1,248,865Issuance
      of 33,000 common shares to investor relations firm (Note
    11b)
                
                
                33,000
                
                
                
                33
                
                
                
                85,649
                
                
                
                
                
                
                
                85,682
                
                
                
                -
                
                
                
                85,682Issuance
      of 120,000 common shares to investor relations firm (Note
    11b)
                
                
                120,000
                
                
                
                120
                
                
                
                218,057
                
                
                
                
                
                
                
                218,177
                
                
                
                -
                
                
                
                218,177Issuance
      of 50,000 warrants to investor relations firm (Note
    11e)
                
                
                
                
                
                
                
                
                
                
                45,500
                
                
                
                
                
                
                
                45,500
                
                
                
                -
                
                
                
                45,500Cancellation
      of 300,000 common shares not distributed(Note
    11b)
                
                
                (300,000
                )
                
                
                -
                
                
                
                -
                
                
                
                
                
                
                
                -
                
                
                
                -
                
                
                
                -Private
      Placement of 1,627,344 units at $0.65 per share (Note
    11b)
                
                
                1,627,344
                
                
                
                1,627
                
                
                
                898,253
                
                
                
                
                
                
                
                899,880
                
                
                
                -
                
                
                
                899,880Share
      issue costs(Note
      11b)
                
                
                
                
                
                
                
                
                
                
                (86,803
                )
                
                
                
                
                
                
                (86,803
                )
                
                
                -
                
                
                
                (86,803
                )Extinguishment
      of accounts payable(Note 11b)
                
                
                33,000
                
                
                
                33
                
                
                
                16,467
                
                
                
                
                
                
                
                16,500
                
                
                
                -
                
                
                
                16,500Net
      loss and comprehensive loss
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (9,966,208
                )
                
                
                (9,966,208
                )
                
                
                (96,540
                )
                
                
                (10,062,748
                )Balance,
      December 31, 2008 (audited) (As Restated - See Note 2)
                
                
                23,546,370
                
                
                
                14,855
                
                
                
                14,757,932
                
                
                
                (12,756,133
                )
                
                
                2,016,654
                
                
                
                (21,062
                )
                
                
                1,995,592Stock-based
      compensation(Note
      11d)
                
                
                
                
                
                
                
                
                
                
                1,416,160
                
                
                
                
                
                
                
                1,416,160
                
                
                
                -
                
                
                
                1,416,160Issuance
      of 15,000 common shares to investor relations firm (Note
    11b)
                
                
                15,000
                
                
                
                15
                
                
                
                5,685
                
                
                
                
                
                
                
                5,700
                
                
                
                -
                
                
                
                5,700Extinguishment
      of accounts payable(Note 11b)
                
                
                372,898
                
                
                
                373
                
                
                
                129,028
                
                
                
                
                
                
                
                129,401
                
                
                
                -
                
                
                
                129,401Issuance
      of 91,912 common shares per the mergeragreement with
      Auctomatic(Note
      7)
                
                
                91,912
                
                
                
                92
                
                
                
                (92
                )
                
                
                
                
                
                
                -
                
                
                
                -
                
                
                
                -Net
      loss and comprehensive loss
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (1,617,760
                )
                
                
                (1,617,760
                )
                
                
                12,385
                
                
                
                (1,605,375
                )Balance,
      September 30, 2009 (unaudited)
                
                
                24,026,180
                
                
                $
                15,335
                
                
                $
                16,308,713
                
                
                $
                (14,373,893
                )
                
                $
                1,950,155
                
                
                $
                (8,677
                )
                
                $
                1,941,478
 See
accompanying notes to consolidated financial statements
  7
 LIVE
CURRENT MEDIA INC.
 (formerly
COMMUNICATE.COM INC)
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 Expressed
In U.S. Dollars
 (Unaudited)
 Nine
      Months Ended
                  
                  
                  Nine
      Months EndedSeptember
      30, 2009
                  
                  
                  September
      30, 2008(As
      Restated - See Note 2)OPERATING
      ACTIVITIESNet
      loss for the period
                  
                  $
                  (1,617,760
                  )
                  
                  $
                  (7,419,687
                  )Non-cash
      items included in net loss:Deferred
      tax recovery(Note
      14)
                  
                  
                  (77,214
                  )
                  
                  
                  -Gain
      on settlement of amounts due to Global Cricket Venture(Notes
    6)
                  
                  
                  (375,000
                  )
                  
                  
                  -Gain
      on restructure of Auctomatic payable
                  
                  
                  (29,201
                  )
                  
                  
                  -Impairment
      of Auction Software(Note 8)
                  
                  
                  590,973
                  
                  
                  
                  -Gain
      from sales and sales-type lease of domain names
                  
                  
                  (2,101,421
                  )
                  
                  
                  (168,206
                  )Accretion
      interest expense
                  
                  
                  63,300
                  
                  
                  
                  56,600Interest
      expense
                  
                  
                  15,251
                  
                  
                  
                  -Stock-based
      compensation
                  
                  
                  1,416,160
                  
                  
                  
                  1,633,873Warrants
                  
                  
                  (18,275
                  )
                  
                  
                  9,480Issuance
      of common stock for services (Note
    11b)
                  
                  
                  5,700
                  
                  
                  
                  264,859Amortization
      and depreciation
                  
                  
                  297,658
                  
                  
                  
                  169,900Change
      in operating assets and liabilities:Accounts
      receivable
                  
                  
                  (128,274
                  )
                  
                  
                  71,353Prepaid
      expenses and deposits
                  
                  
                  (50,432
                  )
                  
                  
                  145,132Inventory
                  
                  
                  23,936
                  
                  
                  
                  -Accounts
      payable and accrued liabilities
                  
                  
                  (1,169,274
                  )
                  
                  
                  422,193Bonuses
      payable
                  
                  
                  (204,127
                  )
                  
                  
                  847,633Deferred
      revenue
                  
                  
                  (47,744
                  )
                  
                  
                  (40,708
                  )Cash
      flows from (used in) operating activities
                  
                  
                  (3,405,744
                  )
                  
                  
                  (4,007,578
                  )INVESTING
      ACTIVITIESDeferred
      acquisition costs
                  
                  
                  -
                  
                  
                  
                  (320,264
                  )Net
      proceeds from sale of domain names
                  
                  
                  2,360,628
                  
                  
                  
                  -Net
      proceeds from sales-type lease of domain names
                  
                  
                  628,423
                  
                  
                  
                  140,540Cash
      consideration for Auctomatic(Note
    7)
                  
                  
                  (139,010
                  )
                  
                  
                  (1,640,793
                  )Purchases
      of property & equipment
                  
                  
                  (5,995
                  )
                  
                  
                  (182,531
                  )Trademarks
                  
                  
                  (3,140
                  )
                  
                  
                  -Website
      development costs (Note
      9)
                  
                  
                  (43,662
                  )
                  
                  
                  (380,342
                  )Cash
      flows from (used in) investing activities
                  
                  
                  2,797,244
                  
                  
                  
                  (2,383,390
                  )FINANCING
      ACTIVITIESDeferred
      financing costs
                  
                  
                  -
                  
                  
                  
                  (106,055
                  )Net
      loss attributable to non-controlling interest
                  
                  
                  12,385
                  
                  
                  
                  (75,478
                  )Cash
      flows from (used in) financing activities
                  
                  
                  12,385
                  
                  
                  
                  (181,533
                  )Net
      decrease in cash and cash equivalents
                  
                  
                  (596,115
                  )
                  
                  
                  (6,572,501
                  )Cash
      and cash equivalents, beginning of period
                  
                  
                  1,832,520
                  
                  
                  
                  7,375,245Cash
      and cash equivalents, end of period
                  
                  $
                  1,236,405
                  
                  
                  $
                  802,744
 See
accompanying notes to consolidated financial statements
  8
  Live
Current Media Inc.
 (formerly
Communicate.com Inc.)
 Notes
to the Consolidated Financial Statements
 For
the three and nine months ended September 30, 2009
 (Unaudited)
  NOTE
1 – NATURE OF BUSINESS AND BASIS OF PRESENTATION
 
 Nature
of business
 Live
Current Media Inc. (the “Company” or “Live Current”) was incorporated under the
laws of the State of Nevada on October 10, 1995 under the name “Troyden
Corporation” and changed its name on August 21, 2000 from Troyden Corporation to
“Communicate.com Inc.”.  On May 30, 2008, the Company changed its name
from Communicate.com Inc. to Live Current Media Inc. after obtaining formal
shareholder approval to do so at the Annual General Meeting in May
2008.
 
 The
Company’s principal operating subsidiary, Domain Holdings Inc. (“DHI”), was
incorporated under the laws of British Columbia on July 4, 1994 under the name
“IMEDIAT Digital Creations Inc.”.  On April 14, 1999, IMEDIAT Digital
Creations, Inc. changed its name to “Communicate.com Inc.” and was redomiciled
from British Columbia to the jurisdiction of Alberta.  On April 5,
2002, Communicate.com Inc. changed its name to Domain Holdings
Inc.  DHI has 62,635,383 shares of common stock currently issued and
outstanding.  61,478,225 shares, or approximately 98.2% of the
outstanding shares, are held by Live Current.
 
 Through
DHI, the Company builds consumer Internet experiences around its portfolio of
domain names.  DHI’s current business strategy is to develop or to
seek partners to develop its domain names to include content, commerce and
community applications.  DHI is currently actively developing the
Perfume.com website, providing eCommerce for fragranceand
other health and beauty products.  DHIdevelops
content and sells advertising services on other domains held forfuture
development.  Before August 2009, the Company was also developing
Cricket.com, a media-rich consumer sports experience.  On August 25,
2009, the Company sold the domain name and assigned all of the rights, title,
and interest in and to the original Memorandum of Understanding (“MOU”) with the
Indian Premier League (“IPL”).  Refer to Note 6.
 
 DHI owns
100% of 0778229 B.C. Ltd. (“Importers”), Acadia Management Corp. (“Acadia”), and
a dormant company 612793 B.C. Ltd. (“612793”).  Acadia’s assets and
liabilities were assigned to DHI in October 2008, and that company was dissolved
and removed from the registrar of companies of British Columbia on January 21,
2009.
 
 On March
13, 2008, the Company incorporated a wholly owned subsidiary in the state of
Delaware, Communicate.com Delaware, Inc. (“Delaware”).  This
subsidiary was incorporated in relation to the Auctomatic transaction. Refer to
Note 7.
 
 On August
8, 2008, the Company also formed a wholly-owned subsidiary in Singapore, LCM
Cricket Ventures Pte. Ltd. (“LCM Cricket Ventures”).  This company
holds 50.05% of Global Cricket Venture Pte. Ltd. (“Global Cricket Venture” or
“GCV”).
 
 Basis
of presentation
 The
consolidated financial statements are presented in United States dollars and are
prepared in accordance with accounting principles generally accepted in the
United States.
 
 Going
Concern
 The
consolidated financial statements have been prepared on a going concern basis
which assumes that the Company will be able to realize assets and discharge
liabilities in the normal course of business for the foreseeable future. The
Company has generated consolidated net income of $703,127 and realized a
negative cash flow from operating activities of $886,966 for the three months
ended September 30, 2009.  It has generated a consolidated net loss of
$1,617,760 and realized a negative cash flow from operating activities of
$3,405,744 for the nine months ended September 30, 2009.  At September
30, 2009, there is an accumulated deficit of $14,373,893 (December 31, 2008 -
$12,756,133) and a working capital deficiency of $1,831,263 ($3,199,931 at
December 31, 2008).
 
 The
Company's ability to continue as a going-concern is in substantial doubt as it
is dependent on the continued financial support from its investors, the ability
of the Company to raise equity financing and the attainment of profitable
operations and further share issuances to meet the Company's liabilities as they
become payable.   The outcome of these matters is dependant on
factors outside of the Company’s control and cannot be predicted at this
time.  See also Notes 6 and 7.
  9
  Live
Current Media Inc.
 (formerly
Communicate.com Inc.)
 Notes
to the Consolidated Financial Statements
 For
the three and nine months ended September 30, 2009
 (Unaudited)
 NOTE
1 – NATURE OF BUSINESS AND BASIS OF PRESENTATION (continued)
 
 Going
Concern (continued)
 These
financial statements do not include any adjustments relating to the
recoverability or classification of assets or the amounts or classification of
liabilities that might be necessary should the Company be unable to continue as
a going concern.
 
 The
Company expects to achieve an improved financial position and enhanced liquidity
by establishing and carrying out a plan of recovery as discussed in the
consolidated financial statements included in the Company’s Amendment No. 1 to
its Annual Report on Form 10-K for the year ended December 31,
2008.
 NOTE
2 – RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS
 
 Correction of an error in
comparative periods:
 
 The
Company determined that its original consolidated financial statements as at and
for the three month period ended March 31, 2009, as at and for the three and
nine month periods ended September 30, 2008, and as at and for the years ended
December 31, 2008 and 2007 (the “Original Financial Statements”) contained
errors.  These errors, which are described below, affected opening
balances as at December 31, 2007 and the financial position, results of
operations and cash flows for the comparative periods ended December 31, 2008
and September 30, 2008.
 
 A.
Deferred income tax liability related to indefinite life intangible
assets:
 
 The
Company’s intangible assets, comprised of its domain names, have book values in
excess of their tax values.  The Original Financial Statements
considered the taxable temporary differences associated with these indefinite
life intangible assets in reducing the valuation allowance associated with its
loss carryforwards.  This was an incorrect application of
GAAP.  A deferred tax liability should have been recognized for these
taxable temporary differences.  Correction of this error resulted in
the recognition of a deferred tax liability of $206,370 as at December 31,
2008.
 
 B.
Non-Controlling Interest:
 
 The
Company determined that it should have recorded $66,692 of goodwill and an
increase to non-controlling interest liability associated with the exchange of
$3,000,000 of amounts due from a subsidiary for additional common stock in
2008.  See Note 5.
 
 Prior to
recognizing the non-controlling interest liabilities, the non-controlling
interest’s share of subsidiary losses in 2008 and 2007 was limited to the
non-controlling interest liability.  As a consequence of the above
increases to non-controlling interest liabilities, the non-controlling
interest’s share in subsidiary losses was increased by $0 in the three month
period and $75,748 in the nine month period ended September 30,
2008.  There was no effect to the non-controlling interest on the
consolidated balance sheets at December 31, 2008.
 
 C.
Management Compensation:
 
 (i)  The
financial statements for the three and nine month periods ended September 30,
2008 did not expense $77,729 and $255,481, respectively, for two CDN$250,000
special bonuses to be paid on October 1, 2008 and October 1, 2009 to the
Company’s former President and Chief Operating Officer pursuant to his
employment agreement.  These special bonuses were not discretionary,
but would only be paid if he remained employed as an officer of the Company on
the dates payable.  On February 4, 2009, he resigned as the Company’s
President and Chief Operating Officer and employee, effective January 31,
2009.  There was no effect to the December 31, 2008 or September 30,
2009 financial statements.
 
 (ii) The
financial statements for the three and nine month periods ended September 30,
2008 did not expense $31,091 and $102,192, respectively, for two CDN$100,000
special bonuses to be paid on January 1, 2009 and January 1, 2010 to the
Company’s current President and Chief Corporate Development Officer pursuant to
his employment agreement. These special bonuses are not discretionary, but will
only be paid if he remains employed as an officer of the Company on the dates
payable.  The effect to the consolidated balance sheets at December
31, 2008 was an underaccrual of bonuses payable of $119,045.
  10
 
 Live
Current Media Inc.
 (formerly
Communicate.com Inc.)
 Notes
to the Consolidated Financial Statements
 For
the three and nine months ended September 30, 2009
 (Unaudited)
 NOTE
2 – RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS (continued)
 
 D.
Estimated life of stock options:
 
 The
Company originally estimated the life of its stock options as equal to the
vesting period for these options, 3 years.  The estimated life should
have been 3.375 years, resulting in decreases of $6,514 and $90,850 to
stock-based compensation expense in the three and nine month periods,
respectively, ended September 30, 2008.
 
 E.
Other
 
 (i) Expense
accruals
 
 The
Company discovered an accrual and cutoff error in its recorded accounting fees,
resulting in an underaccrual of accounting expense (included in Corporate
General and Administrative expenses) of $0 and $63,750 in the three and nine
month periods, respectively, ended September 30, 2008.  The error
resulted in an overaccrual of accounts payable and accounting expense (included
in Corporate General and Administrative expenses) of $19,521 in the year ended
December 31, 2008.
 (ii) Gain on
sale of domain name
 
 The
Company failed to record website development costs attributable to a domain name
sold in 2008, reducing website development costs and gain on sale of domain
names by $37,408 in the year ended December 31, 2008.
 
 F.
Classification of warrants issued in November 2008 private
placement:
 
 In
November 2008, the Company raised $1,057,775 of cash by selling 1,627,344
units consisting of one share of the Company’s common stock and two warrants,
each for the purchase of a half share of common stock.  The offering
price was $0.65 per unit.  The estimated fair value of the warrants
was $157,895 and was presented as equity in the Original Financial
Statements.  The warrants contained provisions which could require
their redemption in cash in certain circumstances which may not all be within
the Company’s control.  The fair value of the warrants therefore
should have been recorded as a liability, with future changes to fair value
reported as either income or expense in the period in which the change in fair
value occurs.  There were no changes to the fair value of the warrants
between the November 2008 issue date and December 31, 2008.  There was
no effect to the comparative reported amounts at September 30,
2008.
 
 G.
Shares issued in connection with the merger with Auctomatic:
 
 (i) Valuation
of shares issued as purchase consideration
 
 The
Auctomatic merger closed on May 22, 2008.  The original estimate of
the fair value of the share purchase consideration attributable to the
acquisition was based on the trading value of the shares around March 25,
2008.  However, the Merger Agreement had an adjustment provision
regarding the number of shares to be issued, such that the shares should have
been valued with reference to the May 22, 2008 closing date as opposed to the
announcement date on March 25, 2008.  Using the average share price
around the closing date, an additional $110,746 should have been recorded as
additional paid-in capital and goodwill during the nine months ended September
30, 2008 and year ended December 31, 2008.
 
 (ii) Shares
issued to Auctomatic founders
 
 As part
of the merger, the Company agreed to distribute 413,604 shares of its common
stock payable on the first, second, and third anniversaries of the Closing Date
(the “Distribution Date”) to the Auctomatic founders subject to their continuing
employment with the Company or a subsidiary on each Distribution
Date.  These shares, which were not accounted for in the Auctomatic
purchase, also were not properly accounted for as compensation to the Auctomatic
founders for their continued employment with the Company.  The related
stock-based compensation expense that should have been recorded in the three and
nine months ended September 30, 2008 was $104,251 and $149,577,
respectively.
 11
 
 Live
Current Media Inc.
 (formerly
Communicate.com Inc.)
 Notes
to the Consolidated Financial Statements
 For
the three and nine months ended September 30, 2009
 (Unaudited)
 NOTE
2 – RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS
(continued)
 
 H.
Financial Statement Classification of Amounts Payable to the BCCI and
IPL:
 
 In order
to provide clarity, the Company also classified separately on its consolidated
balance sheets and consolidated statements of operations the $1,000,000 of
amounts payable as at December 31, 2008 to the BCCI and IPL.
 
 I.
Tax Impact:
 
 Exclusive
of Item A, none of the above adjustments gave rise to an increase or decrease in
the Company’s tax position.
 
 The
following is a summary of the significant effects of the restatements on the
Company’s comparative consolidated statements of operations for the three months
ended September 30, 2008.
 For
      the three months ended September 30, 2008
                  
                  Reference
                  
                  
                  As
      previously reported
                  
                  
                  Restatement
      adjustment
                  
                  
                  As
      restatedSALES
                  
                  
                  
                  
                  $
                  1,954,684
                  
                  
                  $
                  -
                  
                  
                  $
                  1,954,684COSTS
      OF SALES (excluding depreciation and amortization as shown
      below)
                  
                  
                  
                  1,602,249
                  
                  
                  
                  -
                  
                  
                  
                  1,602,249GROSS
      PROFIT
                  
                  
                  
                  
                  
                  352,435
                  
                  
                  
                  -
                  
                  
                  
                  352,435OPERATING
      EXPENSESAmortization
      and depreciation
                  
                  
                  
                  
                  
                  96,707
                  
                  
                  
                  -
                  
                  
                  
                  96,707Amortization
      of website development costs
                  
                  
                  
                  
                  
                  29,143
                  
                  
                  
                  -
                  
                  
                  
                  29,143Corporate
      general and administrative
                  
                  
                  
                  
                  
                  1,014,145
                  
                  
                  
                  -
                  
                  
                  
                  1,014,145ECommerce
      general and administrative
                  
                  
                  
                  
                  
                  114,973
                  
                  
                  
                  -
                  
                  
                  
                  114,973Management
      fees and employee salaries
                  
                  C(i),
      C(ii), D, G(ii)
                  
                  
                  
                  1,964,479
                  
                  
                  
                  206,557
                  
                  
                  
                  2,171,036Corporate
      marketing
                  
                  
                  
                  
                  
                  14,449
                  
                  
                  
                  -
                  
                  
                  
                  14,449ECommerce
      marketing
                  
                  
                  
                  
                  
                  99,412
                  
                  
                  
                  -
                  
                  
                  
                  99,412Other
      expenses
                  
                  
                  
                  
                  
                  20,000
                  
                  
                  
                  -
                  
                  
                  
                  20,000Total
      Operating Expenses
                  
                  
                  
                  
                  
                  3,353,308
                  
                  
                  
                  206,557
                  
                  
                  
                  3,559,865NON-OPERATING
      INCOME (EXPENSES)Accretion
      interest expense
                  
                  
                  
                  
                  
                  (56,600
                  )
                  
                  
                  -
                  
                  
                  
                  (56,600
                  )Interest
      and investment income
                  
                  
                  
                  
                  
                  7,266
                  
                  
                  
                  -
                  
                  
                  
                  7,266Total
      Non-Operating Income (Expenses)
                  
                  
                  
                  
                  
                  (49,334
                  )
                  
                  
                  -
                  
                  
                  
                  (49,334
                  )CONSOLIDATED
      NET LOSS
                  
                  
                  
                  
                  
                  (3,050,207
                  )
                  
                  
                  (206,557
                  )
                  
                  
                  (3,256,764
                  )ADD:
      NET LOSS ATTRIBUTABLE TONON-CONTROLLING
      INTEREST
                  
                  B
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -NET
      LOSS AND COMPREHENSIVE LOSS FOR THE PERIOD
                  
                  
                  $
                  (3,050,207
                  )
                  
                  $
                  (206,557
                  )
                  
                  $
                  (3,256,764
                  )LOSS
      PER SHARE - BASIC AND DILUTEDNet
      Loss attributable to Live Current Media Inc. common
      stockholders
                  
                  
                  $
                  (0.14
                  )
                  
                  
                  (0.01
                  )
                  
                  $
                  (0.15
                  )Weighted
      Average Number of Common SharesOutstanding
      - Basic and Diluted
                  
                  
                  
                  
                  
                  
                  21,625,005
                  
                  
                  
                  -
                  
                  
                  
                  21,625,005
  12
 
 Live
Current Media Inc.
 (formerly
Communicate.com Inc.)
 Notes
to the Consolidated Financial Statements
 For
the three and nine months ended September 30, 2009
 (Unaudited)
  NOTE
2 – RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS
(continued)
 
 The
following is a summary of the significant effects of the restatements on the
Company’s comparative consolidated statements of operations for the nine months
ended September 30, 2008.
  For
      the nine months ended September 30, 2008
                
                Reference
                
                
                As
      previously reported
                
                
                Restatement
      adjustment
                
                
                As
      restatedSALES
                
                
                
                
                $
                5,738,616
                
                
                $
                -
                
                
                $
                5,738,616COSTS
      OF SALES (excluding depreciation and amortization as shown
      below)
                
                
                
                4,667,197
                
                
                
                -
                
                
                
                4,667,197GROSS
      PROFIT
                
                
                
                
                
                1,071,419
                
                
                
                -
                
                
                
                1,071,419OPERATING
      EXPENSESAmortization
      and depreciation
                
                
                
                
                
                155,861
                
                
                
                -
                
                
                
                155,861Amortization
      of website development costs
                
                
                
                
                
                29,143
                
                
                
                -
                
                
                
                29,143Corporate
      general and administrative
                
                E(i)
                
                
                
                2,053,210
                
                
                
                63,750
                
                
                
                2,116,960ECommerce
      general and administrative
                
                
                
                
                
                
                385,281
                
                
                
                -
                
                
                
                385,281Management
      fees and employee salaries
                
                C(i),
      C(ii), D, G(ii)
                
                
                
                4,517,807
                
                
                
                416,400
                
                
                
                4,934,207Corporate
      marketing
                
                
                
                
                
                
                61,151
                
                
                
                -
                
                
                
                61,151ECommerce
      marketing
                
                
                
                
                
                
                378,484
                
                
                
                -
                
                
                
                378,484Other
      expenses
                
                
                
                
                
                
                683,547
                
                
                
                -
                
                
                
                683,547Total
      Operating Expenses
                
                
                
                
                
                
                8,264,484
                
                
                
                480,150
                
                
                
                8,744,634NON-OPERATING
      INCOME (EXPENSES)Gain
      from sales and sales-type lease of domain names
                
                
                
                168,206
                
                
                
                -
                
                
                
                168,206Accretion
      interest expense
                
                
                
                
                
                
                (56,600
                )
                
                
                -
                
                
                
                (56,600
                )Interest
      and investment income
                
                
                
                
                
                
                66,444
                
                
                
                -
                
                
                
                66,444Total
      Non-Operating Income (Expenses)
                
                
                
                
                
                
                178,050
                
                
                
                -
                
                
                
                178,050CONSOLIDATED
      NET LOSS
                
                
                
                
                
                
                (7,015,015
                )
                
                
                (480,150
                )
                
                
                (7,495,165
                )ADD:
      NET LOSS ATTRIBUTABLE TONON-CONTROLLING
      INTEREST
                
                B
                
                
                
                -
                
                
                
                75,478
                
                
                
                75,478NET
      LOSS AND COMPREHENSIVE LOSS FOR THE PERIOD
                
                
                $
                (7,015,015
                )
                
                $
                (404,672
                )
                
                $
                (7,419,687
                )LOSS
      PER SHARE - BASIC AND DILUTEDNet
      Loss attributable to Live Current Media Inc. common
      stockholders
                
                
                $
                (0.32
                )
                
                
                (0.02
                )
                
                $
                (0.34
                )Weighted
      Average Number of Common SharesOutstanding
      - Basic and Diluted
                
                
                
                
                
                
                21,625,005
                
                
                
                -
                
                
                
                21,625,005
  13
  Live
Current Media Inc.
 (formerly
Communicate.com Inc.)
 Notes
to the Consolidated Financial Statements
 For
the three and nine months ended September 30, 2009
 (Unaudited)
  NOTE
2 – RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS (continued)
 
 The
following is a summary of the significant effects of the restatements on the
Company’s comparative consolidated statements of cash flows for the nine months
ended September 30, 2008.
 For
      the nine months ended September 30, 2008
                  
                  Reference
                  
                  
                  As
      previously reported
                  
                  
                  Restatement
      adjustment
                  
                  
                  As
      restatedOPERATING
      ACTIVITIESNet
      loss for the period
                  
                  
                  
                  
                  $
                  (7,015,015
                  )
                  
                  $
                  (404,672
                  )
                  
                  $
                  (7,419,687
                  )Non-cash
      items included in net loss:Gain
      from sales and sales-type lease of domain names
                  
                  
                  
                  (168,206
                  )
                  
                  
                  -
                  
                  
                  
                  (168,206
                  )Accretion
      expense
                  
                  
                  
                  
                  
                  56,600
                  
                  
                  
                  
                  
                  
                  
                  56,600Stock-based
      compensation
                  
                  D,
      G(ii)
                  
                  
                  
                  1,575,146
                  
                  
                  
                  58,727
                  
                  
                  
                  1,633,873Warrants
      issued
                  
                  
                  
                  
                  
                  
                  9,480
                  
                  
                  
                  -
                  
                  
                  
                  9,480Issuance
      of common stock for services
                  
                  
                  
                  
                  
                  
                  264,859
                  
                  
                  
                  -
                  
                  
                  
                  264,859Amortization
      and depreciation
                  
                  
                  
                  
                  
                  
                  169,900
                  
                  
                  
                  -
                  
                  
                  
                  169,900Change
      in operating assets and liabilities:Accounts
      receivable
                  
                  
                  
                  
                  
                  
                  71,353
                  
                  
                  
                  -
                  
                  
                  
                  71,353Prepaid
      expenses and deposits
                  
                  
                  
                  
                  
                  
                  145,132
                  
                  
                  
                  -
                  
                  
                  
                  145,132Accounts
      payable and accrued liabilities
                  
                  E(i)
                  
                  
                  
                  247,697
                  
                  
                  
                  63,750
                  
                  
                  
                  311,447Bonuses
      payable
                  
                  C(i),
      C(ii)
                  
                  
                  
                  489,960
                  
                  
                  
                  357,673
                  
                  
                  
                  847,633Deferred
      revenue
                  
                  
                  
                  
                  
                  
                  (40,708
                  )
                  
                  
                  -
                  
                  
                  
                  (40,708
                  )Cash
      flows from (used in) operating activities
                  
                  
                  
                  
                  
                  
                  (4,193,802
                  )
                  
                  
                  75,478
                  
                  
                  
                  (4,118,324
                  )INVESTING
      ACTIVITIESDeferred
      acquisition costs
                  
                  
                  
                  
                  
                  
                  (320,264
                  )
                  
                  
                  -
                  
                  
                  
                  (320,264
                  )Net
      proceeds from sales-type lease of domain name
                  
                  
                  
                  
                  
                  
                  140,540
                  
                  
                  
                  -
                  
                  
                  
                  140,540Cash
      consideration for Auctomatic
                  
                  
                  
                  
                  
                  
                  (1,530,047
                  )
                  
                  
                  -
                  
                  
                  
                  (1,530,047
                  )Purchases
      of property & equipment
                  
                  
                  
                  
                  
                  
                  (182,531
                  )
                  
                  
                  -
                  
                  
                  
                  (182,531
                  )Website
      development costs
                  
                  
                  
                  
                  
                  
                  (380,342
                  )
                  
                  
                  -
                  
                  
                  
                  (380,342
                  )Cash
      flows used in investing activities
                  
                  
                  
                  
                  
                  
                  (2,272,644
                  )
                  
                  
                  -
                  
                  
                  
                  (2,272,644
                  )FINANCING
      ACTIVITIESDeferred
      financing costs
                  
                  
                  
                  
                  
                  
                  (106,055
                  )
                  
                  
                  -
                  
                  
                  
                  (106,055
                  )Net
      loss attributable to non-controlling interest
                  
                  B
                  
                  
                  
                  -
                  
                  
                  
                  (75,478
                  )
                  
                  
                  (75,478
                  )Cash
      flows used in financing activities
                  
                  
                  
                  
                  
                  
                  (106,055
                  )
                  
                  
                  (75,478
                  )
                  
                  
                  (181,533
                  )Net
      increase (decrease) in cash and cash equivalents
                  
                  
                  
                  
                  
                  
                  (6,572,501
                  )
                  
                  
                  -
                  
                  
                  
                  (6,572,501
                  )Cash
      and cash equivalents, beginning of period
                  
                  
                  
                  
                  
                  
                  7,375,245
                  
                  
                  
                  -
                  
                  
                  
                  7,375,245Cash
      and cash equivalents, end of period
                  
                  
                  
                  
                  
                  $
                  802,744
                  
                  
                  $
                  -
                  
                  
                  $
                  802,744
  14
  Live
Current Media Inc.
 (formerly
Communicate.com Inc.)
 Notes
to the Consolidated Financial Statements
 For
the three and nine months ended September 30, 2009
 (Unaudited)
  NOTE
2 – RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS (continued)
 
 The
following is a summary of the significant effects of the restatements on the
Company’s comparative consolidated statements of equity for the year ended
December 31, 2008 and the nine months ended September 30, 2009.
 As
      previously reported
                  
                  Live
      Current Media StockholdersCommonstock
                  
                  Additional
      Paid-in Capital
                  
                  Accumulated
      Deficit
                  
                  Total
                  
                  Restatement
      Adjustment
                  
                  As
      Restated
                    Total
                  
                  Non-Controlling
      Interest
                  
                  Total
                    EquityReference
                  
                  Number
      of Shares
                  
                  AmountBalance,
      December 31, 2007 (audited) (as restated)
                  
                  
                  
                  21,446,623
                  
                  $
                  12,456
                  
                  $
                  10,188,975
                  
                  $
                  (2,525,678
                  )
                  $
                  7,675,753
                  
                  $
                  (283,218
                  )
                  $
                  7,392,535
                  
                  $
                  8,786
                  
                  $
                  7,401,321Stock-based
      compensation
                  
                  D,
      G(ii)
                  
                  -
                  
                  
                  -
                  
                  
                  2,111,354
                  
                  
                  
                  
                  
                  2,111,354
                  
                  
                  51,172
                  
                  
                  2,162,526
                  
                  
                  
                  
                  
                  2,162,526Issuance
      of Common Stock
                  
                  B
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  66,692
                  
                  
                  66,692Issuance
      of 586,403 common shares per themerger agreement with
      Auctomatic
                  
                  G(i)
                  
                  586,403
                  
                  
                  586
                  
                  
                  1,137,533
                  
                  
                  
                  
                  
                  1,138,119
                  
                  
                  110,746
                  
                  
                  1,248,865
                  
                  
                  
                  
                  
                  1,248,865Issuance
      of 33,000 common sharesto investor relations firm
                  
                  
                  
                  33,000
                  
                  
                  33
                  
                  
                  85,649
                  
                  
                  
                  
                  
                  85,682
                  
                  
                  -
                  
                  
                  85,682
                  
                  
                  
                  
                  
                  85,682Issuance
      of 120,000 common sharesto investor relations firm
                  
                  
                  
                  120,000
                  
                  
                  120
                  
                  
                  218,057
                  
                  
                  
                  
                  
                  218,177
                  
                  
                  -
                  
                  
                  218,177
                  
                  
                  
                  
                  
                  218,177Issuance
      of 50,000 warrantsto investor relations firm
                  
                  
                  
                  -
                  
                  
                  -
                  
                  
                  45,500
                  
                  
                  
                  
                  
                  45,500
                  
                  
                  -
                  
                  
                  45,500
                  
                  
                  
                  
                  
                  45,500Cancellation
      of 300,000 common sharesnot distributed
                  
                  
                  
                  (300,000
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  
                  
                  
                  -Private
      Placement of 1,627,344 unitsat $0.65 per share
                  
                  F
                  
                  1,627,344
                  
                  
                  1,627
                  
                  
                  1,056,148
                  
                  
                  
                  
                  
                  1,057,775
                  
                  
                  (157,895
                  )
                  
                  899,880
                  
                  
                  
                  
                  
                  899,880Share
      issue costs
                  
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (86,803
                  )
                  
                  
                  
                  
                  (86,803
                  )
                  
                  -
                  
                  
                  (86,803
                  )
                  
                  
                  
                  
                  (86,803
                  )Extinguishment
      of accounts payable
                  
                  
                  
                  33,000
                  
                  
                  33
                  
                  
                  16,467
                  
                  
                  
                  
                  
                  16,500
                  
                  
                  -
                  
                  
                  16,500
                  
                  
                  
                  
                  
                  16,500Net
      loss and comprehensive loss
                  
                  A,
      B, C(i), C(ii), D, E(i), E(ii), G(ii)
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (10,006,456
                  )
                  
                  (10,006,456
                  )
                  
                  40,248
                  
                  
                  (9,966,208
                  )
                  
                  (96,540
                  )
                  
                  (10,062,748
                  )Balance,
      December 31, 2008 (audited) (as restated)
                  
                  
                  
                  23,546,370
                  
                  
                  14,855
                  
                  
                  14,772,880
                  
                  
                  (12,532,134
                  )
                  
                  2,255,601
                  
                  
                  (238,947
                  )
                  
                  2,016,654
                  
                  
                  (21,062
                  )
                  
                  1,995,592Stock-based
      compensation
                  
                  D,
      G(ii)
                  
                  -
                  
                  
                  -
                  
                  
                  386,513
                  
                  
                  
                  
                  
                  386,513
                  
                  
                  223,830
                  
                  
                  610,343
                  
                  
                  -
                  
                  
                  610,343Issuance
      of 15,000 common sharesto investor relations firm
                  
                  
                  
                  15,000
                  
                  
                  15
                  
                  
                  5,685
                  
                  
                  
                  
                  
                  5,700
                  
                  
                  -
                  
                  
                  5,700
                  
                  
                  -
                  
                  
                  5,700Extinguishment
      of accounts payable
                  
                  
                  
                  345,075
                  
                  
                  346
                  
                  
                  120,430
                  
                  
                  
                  
                  
                  120,776
                  
                  
                  -
                  
                  
                  120,776
                  
                  
                  -
                  
                  
                  120,776Net
      loss and comprehensive loss
                  
                  C(ii),
      D, E(i), E(ii), F, G(ii)
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (634,647
                  )
                  
                  (634,647
                  )
                  
                  (281,762
                  )
                  
                  (916,409
                  )
                  
                  (8,007
                  )
                  
                  (924,416
                  )Balance,
      March 31, 2009 (unaudited) (as restated)
                  
                  
                  
                  23,906,445
                  
                  
                  15,216
                  
                  
                  15,285,508
                  
                  
                  (13,166,781
                  )
                  
                  2,133,943
                  
                  
                  (296,879
                  )
                  
                  1,837,064
                  
                  
                  (29,069
                  )
                  
                  1,807,995Stock-based
      compensation
                  
                  
                  
                  -
                  
                  
                  -
                  
                  
                  452,487
                  
                  
                  
                  
                  
                  452,487
                  
                  
                  -
                  
                  
                  452,487
                  
                  
                  -
                  
                  
                  452,487Extinguishment
      of accounts payable
                  
                  
                  
                  27,823
                  
                  
                  27
                  
                  
                  8,598
                  
                  
                  
                  
                  
                  8,625
                  
                  
                  -
                  
                  
                  8,625
                  
                  
                  -
                  
                  
                  8,625Issuance
      of 91,912 common shares perthe merger agreement with
      Auctomatic
                  
                  
                  
                  91,912
                  
                  
                  92
                  
                  
                  (92
                  )
                  
                  
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -Net
      loss and comprehensive loss
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (1,404,478
                  )
                  
                  (1,404,478
                  )
                  
                  -
                  
                  
                  (1,404,478
                  )
                  
                  (2,945
                  )
                  
                  (1,407,423
                  )Balance,
      June 30, 2009 (unaudited)
                  
                  
                  
                  24,026,180
                  
                  
                  15,335
                  
                  
                  15,746,501
                  
                  
                  (14,571,259
                  )
                  
                  1,190,577
                  
                  
                  (296,879
                  )
                  
                  893,698
                  
                  
                  (32,014
                  )
                  
                  861,684Stock-based
      compensation
                  
                  
                  
                  -
                  
                  
                  -
                  
                  
                  353,330
                  
                  
                  
                  
                  
                  353,330
                  
                  
                  -
                  
                  
                  353,330
                  
                  
                  -
                  
                  
                  353,330Net
      income (loss) and comprehensive income (loss)
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  703,127
                  
                  
                  703,127
                  
                  
                  -
                  
                  
                  703,127
                  
                  
                  23,337
                  
                  
                  726,464Balance,
      September 30, 2009 (unaudited)
                  
                  
                  
                  24,026,180
                  
                  $
                  15,335
                  
                  $
                  16,099,831
                  
                  $
                  (13,868,132
                  )
                  $
                  2,247,034
                  
                  $
                  (296,879
                  )
                  $
                  1,950,155
                  
                  $
                  (8,677
                  )
                  $
                  1,941,478
  15
  Live
Current Media Inc.
 (formerly
Communicate.com Inc.)
 Notes
to the Consolidated Financial Statements
 For
the three and nine months ended September 30, 2009
 (Unaudited)
  NOTE
3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 The
following is a summary of significant accounting policies used in preparation of
these consolidated financial statements:
 
 Principles
of consolidation
 The
consolidated financial statements include the accounts of the Company, its
wholly owned subsidiary Delaware, its wholly-owned subsidiary LCM Cricket
Ventures, its 98.2% interest in its subsidiary DHI, DHI’s wholly owned
subsidiaries Importers and 612793, and LCM Cricket Ventures’ 50.05% interest in
Global Cricket Venture.  All significant intercompany balances and
transactions are eliminated on consolidation.
 
 Use
of estimates
 The
preparation of consolidated financial statements in conformity with U.S.
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of intangible assets, fair
value measurement, related party transactions, stock based compensation,
determination and disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and for the periods that the consolidated
financial statements are prepared. Actual results could differ from these
estimates.
 
 Business
Combinations
 On the
acquisition of a subsidiary, the purchase method of accounting is used whereby
the purchase consideration is allocated to the identifiable assets and
liabilities on the basis of fair value at the date of
acquisition.  The Company considers critical estimates involved in
determining any amount of goodwill, and tests for impairment of such goodwill as
disclosed in its Goodwill accounting policy below.
 
 Revenue
recognition
 Revenues
and associated costs of goods sold from the on-line sales of products, currently
consisting primarily of fragrances and other beauty products, are recorded upon
delivery of products and determination that collection is reasonably
assured.  The Company records inventory as an asset for items in
transit as title does not pass until received by the customer.  All
associated shipping and handling costs are recorded as cost of goods sold upon
delivery of products.
 
 Web
advertising revenue consists primarily of commissions earned from the referral
of visitors from the Company’s websites to other parties.  The amount
and collectibility of these referral commissions is subject to uncertainty;
accordingly, revenues are recognized when the amount can be determined and
collectibility can be reasonably assured.  In accordance with FASB
Accounting Standards Codification (“ASC”) 605-45-45, Revenue Recognition - Principal
Agent Considerations, the Company records web advertising revenues on a
gross basis.
 
 Sponsorship
revenues consist of sponsorships related to past cricket tournaments that are
receivable based on the Company’s prior agreements relating to the Cricket.com
website.  Revenues are recognized once collectibility is reasonably
assured.
 
 Gains
from the sale of domain names, whose carrying values are recorded as intangible
assets, consist primarily of funds earned for the transfer of rights to domain
names that are currently in the Company’s control.  Revenues have been
recognized when the sale agreement is signed, the price is fixed and agreed upon
by all parties, and the collectibility of the proceeds is reasonably
assured.  In the nine months ended September 30, 2009, there were six
sales of domain names.  Collectibility of the amounts owing on these
sales is reasonably assured and therefore accounted for as sales in the period
the transactions occurred.  In 2008, there was one sale of a domain
name.  Collectibility of the amounts owing on this sale is reasonably
assured and therefore accounted for as a sale in the period the transaction
occurred.
 
 Gains
from the sales-type leases of domain names, whose carrying values are recorded
as intangible assets, consist primarily of funds earned over a period of time
for the transfer of rights to domain names that are currently in the Company’s
control.  When collectibility of the proceeds on these transactions is
reasonably assured, the gain on sale is accounted for as a sales-type lease in
the period the transaction occurs.  In the nine months ended September
30, 2009, there was a sales-type lease of a domain name where collectibility of
future payments owing on this sale were not reasonably
assured.  Therefore, the gains were recorded based only on the amounts
that were reasonably assured.  The contract for the sales-type lease
was breached, however there was no effect to the financial
statements.  In 2008, there was one sales-type lease of a domain
name.  See also Note 12.
  16
 Live
Current Media Inc.
 (formerly
Communicate.com Inc.)
 Notes
to the Consolidated Financial Statements
 For
the three and nine months ended September 30, 2009
 (Unaudited)
 NOTE
3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 
 Foreign
currency transactions
 The
consolidated financial statements are presented in United States
dollars.  The functional currency of the Company is United States
dollars.  In accordance with ASC 830, Foreign Currency Matters, the
foreign currency financial statements of the Company’s subsidiaries are
translated into U.S. dollars.  Monetary assets and liabilities are
translated using the foreign exchange rate that prevailed at the balance sheet
date.  Revenue and expenses are translated at weighted average rates
of exchange during the year and stockholders’ equity accounts and certain other
historical cost balances are translated by using historical exchange
rates.  Any resulting exchange gains and losses are presented as
cumulative foreign currency translation gains (losses) within other accumulated
comprehensive income (loss).  There was no effect to comprehensive
income (loss) related to the share conversion with DHI.
 
 Transactions
denominated in foreign currencies are remeasured at the exchange rate in effect
on the respective transaction dates and gains and losses are reflected in the
consolidated statements of operations.
 
 Comprehensive income
(loss)
 Comprehensive
income (loss) includes all changes in equity of the Company during a period
except those resulting from investments by shareholders and distributions to
shareholders.  Comprehensive income (loss) includes net income (loss)
and other comprehensive income (loss) (“OCI”).  The major components
included in OCI are cumulative translation adjustments arising on the
translation of the financial statements of self-sustaining foreign operations
and unrealized gains and losses on financial assets classified as
available-for-sale. The Company has no self-sustaining foreign operations or
unrealized gains or losses on financial assets classified as
available-for-sale.
 
 Earnings
(Loss) per share
 Basic
earnings (loss) per share is computed by dividing earnings (losses) for the
period by the weighted average number of common shares outstanding for the
period.  Diluted earnings (loss) per share reflects the potential
dilution of securities by including other potential common stock in the weighted
average number of common shares outstanding for a period and is not presented
where the effect is anti-dilutive.
 
 Cash
and cash equivalents
 The
Company considers all highly liquid instruments, with original maturity dates of
three months or less at the time of issuance, to be cash
equivalents.
 
 Accounts
receivable and allowance for doubtful accounts
 The
Company’s accounts receivable balance consists primarily of goods and services
taxes (GST) receivable, advertising revenues receivable and sponsorship
revenues.  Per the Company’s review of open accounts and collection
history, the accounts receivable balances are reasonably considered to be
collectible and therefore no allowance for doubtful accounts has been reflected
at quarter end.
 
 Inventory
 Inventory
is recorded at the lower of cost or market using the first-in first-out (FIFO)
method.  The Company maintains little or no inventory of perfume which
is shipped from the supplier directly to the customer.  The inventory
on hand as at September 30, 2009 is recorded at cost of $50,146 (December 31,
2008 - $74,082) and represents inventory in transit from the supplier to the
customer.
 
 Property & Equipment
 These
assets are stated at cost. Minor additions and improvements are charged to
operations, and major additions are capitalized. Upon retirement, sale or other
disposition, the cost and accumulated depreciation are eliminated from the
accounts, and a gain or loss is included in operations.
 
 Amortization
for equipment is computed using declining balance method at the following annual
rates:
   Office Furniture and
      Equipment
              20%Computer
      Equipment
              30%Computer
      Software
              100%Auction
      Software
              3 years
      straight-line
  17
  Live
Current Media Inc.
 (formerly
Communicate.com Inc.)
 Notes
to the Consolidated Financial Statements
 For
the three and nine months ended September 30, 2009
 (Unaudited)
 NOTE
3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 
 Property & Equipment
(continued)
 Amortization
for leasehold improvements is based on a straight-line method calculated over
the term of the lease.  Auction software was amortized straight line
over the life of the asset and was written off at June 30,
2009.  Other additions are amortized on a half-year basis in the year
of acquisition.
 
 Website
development costs
 The
Company has adopted the provisions of ASC 350-50-25, Website Development Costs,
whereby costs incurred in the preliminary project phase are expensed as
incurred; costs incurred in the application development phase are capitalized;
and costs incurred in the post-implementation operating phase are expensed as
incurred.  Website development costs are stated at cost less
accumulated amortization and are amortized using the straight-line method over
its estimated useful life.  Upgrades and enhancements are capitalized
if they result in added functionality which enables the software to perform
tasks it was previously incapable of performing.  See also Note
9.
 
 Intangible
assets
 The
Company has adopted the provisions of ASC 350, Intangibles – Goodwill and
Other, which revises the accounting for purchased goodwill and intangible
assets. Under ASC 350, intangible assets with indefinite lives are no longer
amortized and are tested for impairment annually.  The determination
of any impairment would include a comparison of estimated future operating cash
flows anticipated during the remaining life with the net carrying value of the
asset as well as a comparison of the fair value to book value of the
Company.
 
 The
Company’s intangible assets, which consist of its portfolio of generic domain
names, have been determined to have an indefinite life and as a result are not
amortized.  Management has determined that there is no impairment of
the carrying value of intangible assets at September 30, 2009.
 
 Goodwill
 Goodwill
represents the excess of acquisition cost over the fair value of the net assets
of acquired entities. In accordance with ASC
350-20, Goodwill, the
Company is required to assess the carrying value of goodwill annually or
whenever circumstances indicate that a decline in value may have occurred,
utilizing a fair value approach at the reporting unit level. A reporting unit is the
operating segment, or a business unit one level below that operating segment,
for which discrete financial information is prepared and regularly reviewed by
segment management.
 
 The
goodwill impairment test is a two-step impairment test. In the first step, the
Company compares the fair value of each reporting unit to its carrying value.
The Company
determines the fair value of its reporting units using a discounted cash flow
approach. If the
fair value of the reporting unit exceeds the carrying value of the net assets
assigned to that reporting unit, goodwill is not impaired and the Company is not
required to perform further testing. If the carrying value of
the net assets assigned to the reporting unit exceeds the fair value of the
reporting unit, then the Company must perform the second step in order to
determine the implied fair value of the reporting unit’s goodwill and compare it
to the carrying value of the reporting unit’s goodwill. The activities in the
second step include valuing the tangible and intangible assets and liabilities
of the impaired reporting unit based on their fair value and determining the
fair value of the impaired reporting unit’s goodwill based upon the residual of
the summed identified tangible and intangible assets and
liabilities.
 
 The
Company assessed the carrying value of goodwill at the December 31, 2008 fiscal
year end, and there are no indications that a decline in value may have occurred
to September 30, 2009.  At that date, the fair value of the
Perfume.com reporting unit exceeded the carrying value of the assigned net
assets, therefore no further testing was required and an impairment charge was
not required.
 
 Deferred
Revenue
 Revenue
that has been received but does not yet qualify for recognition under the
Company's policies is reflected as either deferred revenue or long-term deferred
revenue.
 
 Deferred
Lease Inducements
 Lease
inducements, including rent free periods, are deferred and accounted for as a
reduction of rent expense over the term of the related lease on a straight-line
basis.
  18
 Live
Current Media Inc.
 (formerly
Communicate.com Inc.)
 Notes
to the Consolidated Financial Statements
 For
the three and nine months ended September 30, 2009
 (Unaudited)
  NOTE
3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 
 Advertising Costs
 The
Company recognizes advertising expenses in accordance with ASC 720-35, Advertising Costs. As such,
the Company expenses the costs of producing advertisements at the time
production occurs or the first time the advertising takes place and expenses the
cost of communicating advertising in the period during which the advertising
space or airtime is used.  Internet advertising expenses are
recognized as incurred based on the terms of the individual agreements, which
are generally: 1) a commission for traffic driven to the Website that
generates a sale or 2) a referral fee based on the number of clicks on
keywords or links to its Website generated during a given
period.  Total advertising expense of $111,617 for the three months
and $348,101 for the nine months ended September 30, 2009 respectively ($113,861
for the three months and $439,635 for the nine months ended September 30, 2008
respectively) is included in the “Corporate Marketing” and “eCommerce Marketing”
categories on the Company’s consolidated statements of operations.
 
 Stock-based
compensation
 Beginning
on July 1, 2007, the Company began accounting for stock options under the
provisions of ASC 718, Stock
Compensation, which requires the recognition of the fair value of
stock-based compensation. Under the fair value recognition provisions for ASC
718, stock-based compensation cost is estimated at the grant date based on the
fair value of the awards expected to vest and recognized as expense ratably over
the requisite service period of the award. The Company has used the
Black-Scholes valuation model to estimate fair value of its stock-based awards
which requires various judgmental assumptions including estimating stock price
volatility and expected life. The Company’s computation of expected volatility
is based on a combination of historical and market-based volatility. In
addition, the Company considers many factors when estimating expected life,
including types of awards and historical experience. If any of the assumptions
used in the Black-Scholes valuation model change significantly, stock-based
compensation expense may differ materially in the future from that recorded in
the current period.
 
 In August
2007, the Company’s Board of Directors approved an Incentive Stock Option Plan
to make available 5,000,000 shares of common stock for the grant of stock
options, including incentive stock options.  Incentive stock options
may be granted to employees of the Company, while non-qualified stock options
may be granted to employees, officers, directors, consultants, independent
contractors and advisors of the Company, provided such consultants, independent
contractors and advisors render bona-fide services not in connection with the
offer and sale of securities in a capital-raising transaction or promotion of
the Company’s securities.  See also Note 11.
 
 The
Company accounts for equity instruments issued in exchange for the receipt of
goods or services from other than employees in accordance with ASC 718 and the
conclusions reached by ASC 505-50.  Costs are measured at the estimated
fair market value of the consideration received or the estimated fair value of
the equity instruments issued, whichever is more reliably measurable.  The
value of equity instruments issued for consideration other than employee
services is determined on the earliest of a performance commitment or completion
of performance by the provider of goods or services as defined by ASC
505-50.
 
 On March
25, 2009, the Board of Directors approved a reduction in the exercise price of
Stock Option grants previously made under the 2007 Incentive Stock Option
Plan.  No other terms of the plan or the grants were
modified.  See also Note 11(d).
 Non-Controlling
Interest
 The
consolidated financial statements include the accounts of DHI (and its
subsidiaries).  All intercompany accounts and transactions have been
eliminated upon consolidation.  The Company records non-controlling
interest which reflects the 1.8% portion of the earnings of DHI and its
subsidiaries allocable to the holders of the minority
interest.
  19
 Live
Current Media Inc.
 (formerly
Communicate.com Inc.)
 Notes
to the Consolidated Financial Statements
 For
the three and nine months ended September 30, 2009
 (Unaudited)
 NOTE
3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 
 Income
taxes
 On
January 1, 2007, the Company adopted the following new accounting policy related
to income tax.  The Company began accounting for income tax under the
provisions of Financial Accounting Standards Board (“FASB”) ASC 740-10, (“FIN
48”).  FIN 48 clarifies the accounting for uncertainty in income taxes
recognized in an enterprise’s financial statements in accordance with ASC 740-10
and prescribes a recognition threshold and measurement process for financial
statement recognition and measurement of a tax position taken or expected to be
taken in a tax return.  FIN 48 also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition. The Company and its subsidiaries are
subject to U.S. federal income tax and Canadian income tax, as well as
income tax of multiple state and local jurisdictions. Based on the Company’s
evaluation, the Company has concluded that there are no significant uncertain
tax positions requiring recognition in the Company’s financial statements. The
Company’s evaluation was performed for the tax years ended December 31, 2002,
2003, 2004, 2005, 2006, 2007 and 2008, the tax years which remain subject to
examination by major tax jurisdictions as of December 31, 2008.  The
Company also evaluated the period ended September 30, 2009.  The
Company may from time to time be assessed interest or penalties by major tax
jurisdictions, although any such assessments historically have been minimal and
immaterial to the Company’s financial results.  In the event the
Company has received an assessment for interest and/or penalties, it has been
classified in the financial statements as selling, general and administrative
expense.
 
 Recent
Adopted Accounting Pronouncements
  ASC
105
 In June,
2009, the FASB issued Update No. 2009-01, The FASB Accounting Standards
CodificationTM
(“ASC”) as the source of authoritative U.S. generally accepted accounting
principles (GAAP) recognized by the FASB to be applied by nongovernmental
entities.  This guidance is set forth in Topic 105 (“ASC
105”).  Rules and interpretive releases of the Securities and Exchange
Commission (SEC) under authority of federal securities laws are also sources of
authoritative GAAP for SEC registrants. On the effective date of this Statement,
the Codification will supersede all then-existing non-SEC accounting and
reporting standards. All other nongrandfathered non-SEC accounting literature
not included in the Codification will become nonauthoritative.  This
statement is effective for financial statements issued for fiscal years and
interim periods ending after September 15, 2009, which, for the Company, is
the interim period ending September 30, 2009.  The Company adopted ASC
105 at September 30, 2009, however the adoption of this statement did not have a
material effect on its financial results.  Further to the adoption of
ASC 105, the Company has updated its references to GAAP.
  ASC
855
 In May,
2009, the FASB issued ASC 855, Subsequent Events. The new
standard is intended to establish general standards of accounting for and
disclosure of events that occur after the balance sheet date but before
financial statements are issued or are available to be issued.  This
statement is effective for financial statements issued for interim or annual
financial periods ending after June 15, 2009, which, for the Company, was the
interim period ending June 30, 2009.  The Company adopted ASC 855 in
the second quarter of 2009, however it did not have a material effect to the
Company’s current practice.
  ASC
815-10-65
 In
March 2008, the FASB issued ASC 815, Derivatives and
Hedging.  ASC 815 is intended to improve financial standards
for derivative instruments and hedging activities by requiring enhanced
disclosures to enable investors to better understand their effects on an
entity's financial position, financial performance and cash flows. Entities are
required to provide enhanced disclosures about: how and why an entity uses
derivative instruments; how derivative instruments and related hedged items are
accounted for under ASC 815; and how derivative instruments and related hedged
items affect an entity's financial position, financial performance and cash
flows.  ASC 815 was effective for financial statements issued for
fiscal years and interim periods beginning after November 15, 2008, which for
the Company was the fiscal year beginning January 1, 2009.  The
Company adopted ASC 815-10-65 at January 1, 2009, however the adoption of this
statement did not have a material effect on its financial results.
 20
 
 Live
Current Media Inc.
 (formerly
Communicate.com Inc.)
 Notes
to the Consolidated Financial Statements
 For
the three and nine months ended September 30, 2009
 (Unaudited)
 NOTE
3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 
 Recently
Adopted Accounting Pronouncements
 
 ASC
260-10-45
 The FASB
issued ASC 260-10-45, Earnings
Per Share,which clarifies that all outstanding unvested share-based
payment awards that contain rights to nonforfeitable dividends participate in
undistributed earnings with common shareholders.  Awards of this
nature are considered participating securities and the two-class method of
computing basic and diluted earnings per share must be applied.  The
restricted stock awards the Company has granted to employees and directors are
considered participating securities as they receive nonforfeitable
dividends.  The Company adopted AC 260-10-45 effective January 1,
2009, however, there has been no material effect on its financial
results.
 
 ASC
350-30
 In April
2008, the FASB issued ASC 350-30, General Intangibles Other Than
Goodwill.  ASC 350-30 amends the factors that should be
considered in developing renewal or extension assumptions used to determine the
useful life of a recognized intangible asset.  The intent of ASC
350-30 is to improve the consistency between the useful life of a recognized
intangible asset and the period of expected cash flows used to measure the fair
value of the asset.  ASC 350-30 was effective for financial statements
issued for fiscal years beginning after December 15, 2008, which for the Company
was the fiscal year beginning January 1, 2009.  The Company adopted
ASC 350-30 at January 1, 2009, however the adoption of this statement did not
have a material effect on its financial results.
 
 ASC
805
 In
December 2007, the FASB issued revised authoritative guidance in ASC 805,
Business
Combinations.  ASC 805 establishes principles and requirements
for how the acquirer in a business combination: (i) recognizes and measures in
its financial statements the identifiable assets acquired, the liabilities
assumed, and any noncontrolling interest in the acquiree, (ii) recognizes and
measures the goodwill acquired in the business combination or a gain from a
bargain purchase, and (iii) determines what information to disclose to enable
users of the financial statements to evaluate the nature and financial effects
of the business combination.  ASC 805 is effective for financial
statements issued for fiscal years and interim periods beginning after December
15, 2008, which for the Company was the fiscal year beginning January 1,
2009.  The Company adopted ASC 805 at January 1, 2009, however the
adoption of this statement did not have a material effect on its financial
results.  ASC 805 will be applied to any future business
combinations.
 
 ASC
810
 In
December 2007, the FASB issued authoritative guidance related to noncontrolling
interests in consolidated financial statements, which was an amendment of ARB
No. 51.  This guidance is set forth in ASC 810, Consolidation.  ASC
810 establishes accounting and reporting standards for the noncontrolling
interest in a subsidiary and for the deconsolidation of a
subsidiary.  This accounting standard is effective for fiscal years
beginning on or after December 15, 2008, which for the Company was the fiscal
year beginning January 1, 2009. The Company adopted ASC 810 at January 1, 2009,
however the adoption of this statement did not have a material effect on its
financial results.
 
 ASC
820
 In
September 2006, the FASB issued ASC 820, Fair Value Measurements and
Disclosures.  This Statement defines fair value, establishes a
framework for measuring fair value in GAAP, and expands disclosures about fair
value measurements.  This standard does not require any new fair value
measurements.
 
 In 2008,
the Company adopted ASC 820 for financial assets and liabilities recognized at
fair value on a recurring basis. The adoption did not have a material effect on
its financial results. The disclosures required by ASC 820 for financial assets
and liabilities measured at fair value on a recurring basis as at December 31,
2008 are included in Note 4.
 
 In
February 2008, the FASB issued authoritative guidance which deferred the
effective date of ASC 820 to fiscal years beginning after November 15, 2008 for
nonfinancial assets and nonfinancial liabilities, except for those items that
are recognized or disclosed at fair value in the financial statements on a
recurring basis, which for the Company was the fiscal year beginning January 1,
2009.  The Company applied the requirements of ASC 820 for fair value
measurements of financial and nonfinancial assets and liabilities not valued on
a recurring basis at January 1, 2009.  The adoption of this statement
did not have a material effect on its financial reporting and
disclosures.
  21
  Live
Current Media Inc.
 (formerly
Communicate.com Inc.)
 Notes
to the Consolidated Financial Statements
 For
the three and nine months ended September 30, 2009
 (Unaudited)
  NOTE
3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 
 Recently
Accounting Pronouncements
 
 Accounting
Standards Update (“ASU”) 2009 -13
 In
October 2009, the FASB issued ASU 2009-13, Revenue Recognition (Topic 605),
Multiple-Deliverable Revenue Arrangementsamending ASC 605. ASU 2009-13
requires entities to allocate revenue in an arrangement using estimated selling
prices of the delivered goods and services based on a selling price hierarchy.
ASU 2009-13 eliminates the residual method of revenue allocation and requires
revenue to be allocated using the relative selling price method. ASU 2009-13 is
effective prospectively for revenue arrangements entered into or materially
modified in fiscal years beginning on or after June 15, 2010. The Company
is currently evaluating the impact of ASU 2009-13, but does not expect its
adoption to have a material impact on the Company’s financial position or
results of operations.
 
 NOTE
4 – FINANCIAL INSTRUMENTS
 
 Interest
rate risk exposure
 The
Company currently has limited exposure to any fluctuation in interest
rates.
 
 Foreign
exchange risk
 The
Company is subject to foreign exchange risk for sales and purchases denominated
in foreign currencies. Foreign currency risk arises from the fluctuation of
foreign exchange rates and the degree of volatility of these rates relative to
the United States dollar. The Company does not actively manage this
risk.
 
 Concentration
of credit risk
 Financial
instruments, which potentially subject the Company to concentrations of credit
risk, consist primarily of cash and cash equivalents, trade accounts receivable
and receivable from sales-type lease.  The Company limits its exposure
to credit loss by placing its cash and cash equivalents on deposit with high
credit quality financial institutions. Receivables arising from sales to
customers are generally immaterial and are not collateralized. Management
regularly monitors the financial condition of its customers to reduce the risk
of loss.
 
 Fair
values of Financial Instruments
 As
described in Note 3, the Company adopted all provisions of ASC 820 as of January
1, 2009.  ASC 820 defines fair value, establishes a consistent
framework for measuring fair value, and expands disclosures for each major asset
and liability category measured at fair value on either a recurring or
nonrecurring basis. ASC 820 clarifies that fair value is an exit price,
representing the amount that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants. As
such, fair value is a market-based measurement that should be determined based
on assumptions that market participants would use in pricing an asset or
liability. As a basis for considering such assumptions, ASC 820 establishes a
three-tier fair value hierarchy which prioritizes the inputs used in measuring
fair value as follows:
 
 Level 1 -
observable inputs such as quoted prices in active markets for identical assets
and liabilities;
  Level 2 -
observable inputs such as quoted prices for similar assets or liabilities in
active markets, quoted prices for identical or similar assets or liabilities in
markets that are not active, other inputs that are observable, or can be
corroborated by observable market data; and
  Level 3 -
unobservable inputs for which there are little or no market data, which require
the reporting entity to develop its own assumptions.
  22
  Live
Current Media Inc.
 (formerly
Communicate.com Inc.)
 Notes
to the Consolidated Financial Statements
 For
the three and nine months ended September 30, 2009
 (Unaudited)
  NOTE
4 – FINANCIAL INSTRUMENTS (continued)
 
 Fair
values of Financial Instruments (continued)
 
 This
hierarchy requires the Company to minimize the use of unobservable inputs and to
use observable market data, if available, when estimating fair value. The fair
value of warrants using the following inputs at September 30, 2009
is:
 
 Fair
Value Measurements at Reporting Date Using
  Total
              Quoted Prices in
      Active
                Markets
      for Identical Assets
                (Level 1)
              Significant
      Other
                Observable Inputs
                (Level 2)
              Significant
                Unobservable Inputs
                (Level 3)$ 139,620
              -
              $ 139,620
              -
 
 The
Company’s financial instruments consist of cash and cash equivalents, accounts
receivable, receivable from sales-type lease, accounts payable, bonuses payable,
amounts due to shareholders of Auctomatic, and warrants.  The Company
believes that the recorded values of all of its financial instruments
approximate their fair values because of their nature and respective
durations.
 NOTE
5 – NON-CONTROLLING INTEREST
 
 The
Company currently holds 98.2% of the issued and outstanding shares of its
principal operating subsidiary, DHI.  During Q1 2008, DHI issued
40,086,645 shares to Live Current at fair value in exchange for a conversion of
intercompany debt of $3,000,000, therefore diluting the non-controlling interest
by 3.3%. This conversion was accounted for using the purchase method resulting
in an increase to goodwill of $66,692, and a credit against the non-controlling
interest of $75,478 charged to income during the nine months ended September 30,
2008.
 
 The 2009
year-to-date losses of DHI have resulted in a debit balance of $8,677 in the NCI
balance at September 30, 2009.
 
 NOTE
6 – GLOBAL CRICKET VENTURE
 
 Memoranda
of Understanding
 On April
17, 2008, the Company signed a Memorandum of Understanding (“MOU” or “Original
MOU”) with each of the Board of Control for Cricket in India (“BCCI”) and the
DLF Indian Premier League (“IPL”).  The MOU, which would be
preliminary to a final agreement, starts the Company’s planned exploitation of
its cricket.com domain name.
 
 Certain
other subsidiaries and ventures have been incorporated or formed to further this
business opportunity.  However, none of these companies have been used
for that purpose, have significant assets or operations to date, nor have any
material binding contracts been signed.
 
 During
the nine months ended September 30, 2009, the Company incurred $452,307 (year
ended December 31, 2008 - $1.47 million) in furtherance of this plan which have
been included in corporate marketing, management fees and employee salaries, and
corporate general and administrative expenses.  As the plan to exploit
cricket.com was in its early stages, all expenditures were charged to
operations.
 
 On August
20, 2009, GCV transferred and assigned to an unrelated third party (“Mauritius”)
all of the rights, title, and interest in and to the original MOU with the IPL,
as the original MOU was amended by the Novation Agreement that was signed on
March 31, 2009.  Pursuant to this agreement, Mauritius also agreed to
assume and be liable for all past and future obligations and liabilities of GCV
arising from the original MOU, as it was amended by the
Novation.  Mauritius made the $750,000 payment as required under the
Novation Agreement during Q3 of 2009, therefore Live Current was released from
all accrued liabilities under the BCCI Memorandum.
 
 23
  Live
Current Media Inc.
 (formerly
Communicate.com Inc.)
 Notes
to the Consolidated Financial Statements
 For
the three and nine months ended September 30, 2009
 (Unaudited)
  NOTE
6 – GLOBAL CRICKET VENTURE (continued)
 
 The
Company has also agreed to sell the domain name cricket.com, along with the
website, content, copyrights, trademarks, etc, to a company related to
Mauritius, for consideration of four equal payments of $250,000.  The
first instalment of the $250,000 was received in September 2009.  The
cricket.com domain name shall remain the property of the Company until all
payments have been made.  In order to facilitate the transfer of the
Cricket.com website, the Company has agreed to provide Mauritius with support
services for a period of no more than 6 months (the “Transition
Period”).  In exchange for the support services, Mauritius has agreed
to the payment of certain expenses related to the support services
 
 The
Company has accounted for this transaction under ASC 605-25, Multiple Element
Arrangements.As a result, the gain on the sales type lease of
cricket.com, the gain on settlement upon assignment and assumption of amounts
due under the Novation Agreement, as well as the support services to be provided
by the Company to Mauritius during the Transition Period, are to be recognized
over the six month Transition Period, or from September 2009 to February
2010.  Since the collectibility of the three future payments relating
to the sales-type lease of cricket.com are not reasonably assured, the Company
has only recorded the first $250,000 instalment in its analysis under ASC
605-25.  As a result, the Company recognized one month’s gain on
settlement of the amounts owing under the Novation Agreement and one month’s
gain on sales-type lease of cricket.com during the third quarter of
2009.
    Settlement of
      amounts due regarding Global Cricket Venture
              
              $
              750,000Less: Recognized
      gain on settlement during Q3 2009
              
              
              (125,000
              )$
              625,000Gain on sales-type
      lease of cricket.com
              
              $
              250,000Less: Recognized
      gain on sales-type lease of cricket.com
              
              
              (41,667
              )208,333Deferred gains of
      amounts regarding Global Cricket Venture
              
              
              
              
              
              $
              833,333
  NOTE
7 – MERGER AGREEMENT
 
 On March
25, 2008, the Company and its wholly owned subsidiary, Communicate.com Delaware,
Inc. (“Delaware”) entered into an Agreement and Plan of Merger (the “Merger
Agreement”) with Entity, Inc., a Delaware corporation,
(“Auctomatic”).  The merger agreement was consummated on May 22, 2008
(the “Closing Date”).  In connection with the Merger Agreement, the
stockholders of Auctomatic received in total (i) $2,000,000 cash minus $152,939
in certain assumed liabilities and (ii) 1,000,007 shares of common stock of the
Company (equal to $3,000,000 divided by $3.00 per share, the closing price of
the Company’s common stock on the business day immediately preceding the Closing
Date) in exchange for all the issued and outstanding shares of
Auctomatic.
 
 The
consideration was payable as follows: (i) 340,001 shares, or 34%, of the common
stock and (ii) $1,200,000 less $152,939 in assumed liabilities.  An
additional 246,402 shares of common stock were issued and were to be distributed
in equal amounts to the Auctomatic shareholders on each of the first, second and
third anniversaries of the Closing Date. The remaining $800,000 of the total
Cash Consideration was to be distributed on the first anniversary of the Closing
Date.  All amounts of cash and common stock are to be distributed pro
rata among the Auctomatic Stockholders.
 
 The
distribution of the remaining 413,604 shares of the common stock payable on the
first, second and third anniversary of the Closing Date to the Auctomatic
founders was subject to their continuing employment with the Company or a
subsidiary on each Distribution Date.  As these shares were contingent
on future employment, they were considered contingent consideration and were
required to be accounted for under ASC 718 as stock-based
compensation.  During the first quarter of 2009, one of the founders
resigned from Live Current, and therefore the distribution of 137,868 shares of
the common stock on the first, second and third anniversaries is no longer
payable.  At that date, the remaining 275,736 shares of the common
stock owing to the other founders remained payable on the anniversary dates as
noted above.  During the second quarter of 2009, 91,912 of these
shares were issued to the two founders who remained with the
Company.  In August 2009, these two founders were
terminated.  The remaining 183,824 shares of common stock payable
under the Merger Agreement on the second and third anniversaries to these two
Auctomatic founders contingent on employment were forgone pursuant to the
separation agreements with these two individuals.  See also Note
11.
  24
  Live
Current Media Inc.
 (formerly
Communicate.com Inc.)
 Notes
to the Consolidated Financial Statements
 For
the three and nine months ended September 30, 2009
 (Unaudited)
  NOTE
7 – MERGER AGREEMENT (continued)
 
 The
purchase price to affect the merger was allocated as following on the Closing
Date:
 
 Purchase
      Price PaidCash
      (net of assumed liabilities)
              
              $
              1,046,695Transaction
      Costs
              
              
              387,358Cash
      consideration for Auctomatic
              
              
              1,434,053Present
      value of shares of common stock paid and payable to shareholders of
      Auctomatic
              
              
              1,248,865Present
      value of amounts payable to shareholders of Auctomatic
              
              
              640,000Total
              
              $
              3,322,918
  Net
      Assets AcquiredAssetsCash
              
              $
              3,066Share
      subscriptions receivable
              
              
              780Computer
      hardware
              
              
              7,663Auction
      software(Note
      8)
              
              
              925,000Goodwill
              
              
              2,539,348Less
      LiabilitiesAccounts
      payable and accrued liabilities
              
              
              (85,622
              )Loan
      payable
              
              
              (67,317
              )Net
      Assets Acquired
              
              $
              3,322,918
 
 To show
effect to the merger of Auctomatic and Delaware as if the merger had occurred on
January 1, 2008, the pro forma information for the year ended December 31, 2008
would have resulted in revenues that remain unchanged from those reported in the
consolidated financial statements, no cumulative effect of accounting changes,
and income before extraordinary items and net income which both would have
decreased by $106,035.
 
 At May
22, 2008, the fair value of the amounts payable in cash to shareholders of
Auctomatic on the first anniversary of the closing date was
$640,000.  The fair value discount was accreted in full by $63,300 by
the first anniversary date, May 22, 2009 (2008 accretion -
$96,700).  As a result, the full $800,000 of the amounts payable in
cash to the shareholders of Auctomatic due on the first anniversary of the
closing date had been accrued by the Company.  The funds due to the
Auctomatic shareholders at the first anniversary date were not paid by the
Company as required.
 
 In August
2009, the Company issued convertible notes to twelve of the eighteen
shareholders covering $424,934 of the total $800,000.  These
convertible notes are interest bearing at 10% per annum, with such interest
accruing as of May 22, 2009 and payable quarterly in arrears.  The
convertible notes mature on May 22, 2010.
 
  Convertible
      Notes to Shareholders of AuctomaticConvertible
      notes issued August 21, 2009
              
              $
              424,934Interest
      accrued May 22, 2009 – September 30, 2009
              
              
              15,251Interest
      paid August 22, 2009
              
              
              (10,710
              )Balance,
      September 30, 2009
              
              $
              429,475
  25
 Live
Current Media Inc.
 (formerly
Communicate.com Inc.)
 Notes
to the Consolidated Financial Statements
 For
the three and nine months ended September 30, 2009
 (Unaudited)
 NOTE
7 – MERGER AGREEMENT (continued)
 
 Also in
August 2009, the Company reached an agreement with the remaining two founders of
Auctomatic to terminate their employment.  Under their separation
agreements, the Company will repay the amounts owed to them under the Merger
Agreement at a 10% discount to face value as discussed below.  The
Company also recorded $60,000 of severance costs in Q3 of 2009 due to them under
their employment agreements.  The severance costs were reimbursed
pursuant to the Cricket agreements as discussed in Note 6.  In
consideration of these payments, these individuals have each agreed to forfeit
their rights to 91,912 shares of Live Current common stock that were due to be
issued to each of them in May 2010 and May 2011 under the Merger
Agreement.
 
 The
amounts owing to the two founders of Auctomatic pursuant to the Merger Agreement
totalled $334,224 prior to their separation agreement.  These amounts
were discounted at 10% to face value in August 2009 and a gain on restructure of
the Auctomatic payable of $29,201 was recorded to the statements of operations
during the third quarter of 2009.  Payments of $75,200 were made
against the amounts owing to the founders upon execution of the separation
agreements.  The agreements provided for the balance of the payments
to be made on October 1, 2009,  with simple interest accruing on
unpaid amounts after October 1, 2009 at 10% per annum.  Amounts owing
to the other four of the eighteen shareholders of Auctomatic who did not take
part in the convertible note offering totalled $40,841.
  Due
      to Shareholders of AuctomaticAmounts
      payable to Auctomatic founders
              
              $
              334,224Amounts
      paid to Auctomatic founders
              
              
              (75,200
              )Amounts
      payable to other Auctomatic shareholders
              
              
              40,841Gain
      on restructure of Auctomatic payable
              
              
              (29,201
              )Balance,
      September 30, 2009
              
              $
              270,664
 
 NOTE
8 – PROPERTY & EQUIPMENT
 
 September
      30, 2009
              
              Cost
              
              
              Accumulated
      Amortization
              
              
              Net
      Book ValueOffice
      Furniture and Equipment
              
              $
              167,464
              
              
              $
              51,161
              
              
              $
              116,303Computer
      Equipment
              
              
              105,188
              
              
              
              63,127
              
              
              
              42,061Computer
      Software
              
              
              27,276
              
              
              
              23,867
              
              
              
              3,409Auction
      Software
              
              
              -
              
              
              
              -
              
              
              
              -Leasehold
      Improvements
              
              
              142,498
              
              
              
              64,124
              
              
              
              78,374$
              442,426
              
              
              $
              202,279
              
              
              $
              240,147
 
 December
      31, 2008 (as restated)
              
              Cost
              
              
              Accumulated
      Amortization
              
              
              Net
      Book ValueOffice
      Furniture and Equipment
              
              $
              165,868
              
              
              $
              30,778
              
              
              $
              135,090Computer
      Equipment
              
              
              100,789
              
              
              
              51,554
              
              
              
              49,235Computer
      Software
              
              
              27,276
              
              
              
              13,638
              
              
              
              13,638Auction
      Software
              
              
              925,000
              
              
              
              179,861
              
              
              
              745,139Leasehold
      Improvements
              
              
              142,498
              
              
              
              42,749
              
              
              
              99,749$
              1,361,431
              
              
              $
              318,580
              
              
              $
              1,042,851
 
 At June
30, 2009, the Company analyzed the potential for impairment of the auction
software that was acquired pursuant to the Merger Agreement.  At this
date, the Company considered the significant changes that were made to the
direction and to staffing within the Company.  The lack of a strategy,
plans, or use of the Auction software a year subsequent to the acquisition of
the software indicated impairment of the asset at the end of the second quarter
of 2009.  Therefore, the Company believed that the auction software
was impaired and has written off the net book value of the asset of $590,973 at
that date.
 26
 Live
Current Media Inc.
 (formerly
Communicate.com Inc.)
 Notes
to the Consolidated Financial Statements
 For
the three and nine months ended September 30, 2009
 (Unaudited)
  NOTE
9 – WEBSITE DEVELOPMENT COSTS
 
 Website
development costs are related to infrastructure development of various websites
that the Company operates.  In previous years, costs qualifying for
capitalization were immaterial and therefore were expensed as
incurred.  Website maintenance, training, data conversion and business
process reengineering costs are expensed in the period in which they are
incurred.  Costs incurred in the application development phase are
capitalized, and when the related websites reach the post-implementation
operating phase, the Company begins amortizing these costs on a straight-line
basis over 36 months beginning in the month following the implementation of the
related websites.
  September
      30,2009
              
              
              December
      31, 2008
                (as
      restated)Website
      Development Costs
              
              $
              355,787
              
              
              $
              405,001Less:
      Accumulated Amortization
              
              
              (113,686
              )
              
              
              (49,610
              )$
              242,101
              
              
              $
              355,391
 
 The
Company capitalized website development costs of $43,662 during the nine month
period ended September 30, 2009 and recorded $95,036 in accumulated
amortization.  The Company expensed website development costs of
$92,876 and corresponding accumulated amortization of $30,960 related to domain
names that were sold during the period.  The net effect of these
amounts was offset against the gain from sales of domain names.
 NOTE
10 – DEFERRED LEASE INDUCEMENTS
 
  September
      30,2009
              
              
              December
      31, 2008
                (as
      restated)Deferred
      Lease Inducements
              
              $
              60,414
              
              
              $
              75,518Less:
      Current Portion
              
              
              (20,138
              )
              
              
              (20,138
              )$
              40,276
              
              
              $
              55,380
 NOTE
11 – COMMON STOCK
 
 a)    
Authorized
 
 The
authorized capital of the Company consists of 50,000,000 common shares with a
par value of $0.001 per share. No other shares have been
authorized.
 
 b)    
Issued
 
 At
September 30, 2009, there were 24,026,180 (December 31, 2008 – 23,546,370)
shares issued and outstanding.
 
 2009
 
 On
January 2, 2009, the Company issued 15,000 shares with a value of $5,700 to the
investor relations firm that was engaged to provide investor relations services
to the Company.  This was the Company’s final share issuance to this
investor relations firm.  The agreement has since been
terminated.
 
 On
January 8, 2009, the Company entered into an agreement whereby $120,776 of its
accounts payable were extinguished in exchange for the issuance of 345,075
shares of its common stock.  As a result of this agreement, 172,538
shares were issued on January 22, 2009 and 172,537 shares were issued on
February 20, 2009.
 
 On April
9, 2009, the Company entered into an agreement whereby $8,625 of its accounts
payable were extinguished in exchange for the issuance of 27,823 shares of its
common stock.  These shares were issued on April 14,
2009.
  27
 Live
Current Media Inc.
 (formerly
Communicate.com Inc.)
 Notes
to the Consolidated Financial Statements
 For
the three and nine months ended September 30, 2009
 (Unaudited)
 NOTE
11 – COMMON STOCK
 
 2009
(continued)
 
 On June
19, 2009, the Company issued 45,956 shares of its common stock to each of the
two remaining Auctomatic founders for a total of 91,912 shares pursuant to the
Merger Agreement as discussed in Note 7.
 
 2008
 
 The
Company issued 50,000 warrants to an investor relations firm in May 2008, and
expensed $45,500 in relation to the value of the warrants.  See also
Note 11(e).
 
 In June
2008, the Company issued 586,403 shares of common stock in relation to the May
22, 2008 merger with Auctomatic.  Of those total issued shares,
340,001 shares were distributed to the shareholders and an additional 246,402
shares were being held for future distribution in three equal installments on
the three anniversary dates following the merger pursuant to the terms of the
Merger Agreement.  The value of the stock consideration was added to
the cash consideration in the Company’s determination of the purchase
price.  See also Note 7.  The remaining 413,604 shares of
common stock were reserved for future issuance to the Auctomatic founders and
are accounted for as stock-based compensation pursuant to ASC 718. See also Note
11(c) and Note 11(d).
 
 In May
and June 2008, the Company issued 45,000 shares to an investor relations firm
that had been engaged to provide investor relations services to the
Company.  Of the 45,000 shares, 30,000 shares with a value of $85,350
were issued as partial consideration for services rendered, while the remaining
15,000 shares with an estimated value of $42,300 were recorded as a prepaid
expense in June 2008 for services to be rendered in July 2008.  In
July 2008, this amount was revalued to $36,573 based on the July average stock
price and expensed with the difference between the estimated and actual values
adjusted to Additional Paid-In Capital.
 
 In August
2008, the Company issued 33,000 shares to an investor relations firm that had
previously been engaged to provide investor relations services to the
Company.  The contract with this former investor relations firm
terminated August 1, 2008.  The 33,000 shares owing to the firm had a
value of $85,682 and were issued as full consideration for services
rendered.
 
 In August
and September 2008, the Company issued 30,000 shares to an investor relations
firm that had been engaged to provide investor relations services to the
Company.  These shares, which were valued at $57,254, were issued as
partial consideration for services rendered during the year.
 
 In
October 2008, the Company cancelled 300,000 shares of common stock that had been
pre-maturely issued in a prior year in anticipation of a transaction that was
never consummated.
 
 During
November 2008, the Company accepted subscriptions from 11 accredited investors
pursuant to which the Company issued and sold 1,627,344 units consisting of one
share of the Company’s common stock and two warrants, each for the purchase of
one-half a share of common stock.  The price per unit was
$0.65.  The Company raised gross proceeds of $1,057,775 (the
“Offering”). The private placement closed on November 19, 2008.  One
warrant is exercisable at $0.78 (a 20% premium) and expires November 19,
2010.  The other warrant is exercisable at $0.91 (a 40% premium) and
expires November 19, 2011.  The Company incurred $86,803 in share
issuance costs related to the private placement.  The Company filed an
S-1 Registration Statement with the SEC on May 1, 2009 to register for resale
the common stock and the common stock underlying the warrants.  The
securities were offered and sold by the Company to accredited investors in
reliance on Section 506 of Regulation D of the Securities Act of 1933, as
amended.  Refer to Note 11(e).
 
 In
December 2008, the Company extinguished $16,500 of accounts payable by issuing
33,000 shares to the investor relations firm that had previously been engaged to
provide investor relations services to the Company.
 
 In
October, November and December 2008, the Company issued 45,000 shares to an
investor relations firm that had been engaged to provide investor relations
services to the Company.  These shares, which were valued at $39,000,
were issued as partial consideration for services rendered.
 28
 
 Live
Current Media Inc.
 (formerly
Communicate.com Inc.)
 Notes
to the Consolidated Financial Statements
 For
the three and nine months ended September 30, 2009
 (Unaudited)
 
 NOTE
11 – COMMON STOCK (continued)
 
 c)    
Reserved
 
 Auctomatic
 
 At
December 31, 2008, the Company had reserved 413,604 shares of common stock for
future issuance and distribution in relation to the May 22, 2008 merger with
Auctomatic. These shares were to be issued to the Auctomatic founders in three
equal instalments on the next three anniversary dates of the merger contingent
on their continued employment with the Company pursuant to the terms of the
Merger Agreement. In the first quarter of 2009, one of the Auctomatic founders
resigned from the Company. As a result, 137,868 shares reserved for distribution
to this individual were released and are no longer payable.  Therefore
at March 31, 2009, pursuant to this release, the balance of reserved shares of
common stock for future issuance and distribution was 275,736.
 
 In the
second quarter of 2009, the Company issued 91,912 shares to the remaining two
Auctomatic founders pursuant to the Merger Agreement as noted
above.  These shares were issued on the first anniversary date of the
merger and therefore at June 30, 2009, the balance of reserved shares of common
stock for future issuance and distribution was 183,824.
 
 In August
2009, the remaining two Auctomatic founders were terminated.  The
shares of common stock contingent on their continued employment with the Company
were forgone pursuant to separation agreements signed with the two
individuals.  Therefore, at September 30, 2009, there are no further
reserved shares for future issuance and distribution to the Auctomatic founders.
See also Note 7 and Note 11(d).
 
 Former
President
 
 Effective
January 31, 2009, the Company’s former President and Chief Operating Officer
resigned.  Pursuant to his separation agreement, the Company is
required to pay an accrued special bonus in the amount of CDN$250,000 less any
statutory deductions.  The net payment of this bonus will be converted
to equity and paid as restricted shares of the Company’s common
stock.  As the number of shares of common stock is not fixed on any
specific share price, it is not possible to quantify the number of shares that
will have to be issued to pay the net amount of this bonus.  The
CDN$250,000 has been included in accounts payable and accrued
liabilities.
 
 d)    
Stock Options
 
 The Board
of Directors and stockholders approved the 2007 Stock Incentive Plan and adopted
it on August 21, 2007 (the “Plan”).  The Company has reserved
5,000,000 shares of its common stock for issuance to directors, employees and
consultants under the Plan.  The Plan is administered by the Board of
Directors.  Vesting terms of the options range from immediately to
five years and no options will be exercisable for a period of more than ten
years.
 
 All stock
options noted herein vest over three years and are exercisable for a period of
five years based on the date of grant.  The Company historically
valued the options granted to employees and directors using the Black Scholes
option pricing model at the date of grant.  The Company values the
options to consultants at each reporting period under ASC 718 for non-employees
using the Black Scholes option pricing model.  The assumptions used in
the pricing model include:
  2009
              2008
                (as
      restated)Dividend
      yield
              0%
              0%Expected
      volatility
              97.02%-116.50%
              64.86%-75.68%Risk
      free interest rate
              1.43%-1.70%
              1.62%
      - 3.07%Expected
      lives
              3.375
      years
              3.375
      years
  29
 Live
Current Media Inc.
 (formerly
Communicate.com Inc.)
 Notes
to the Consolidated Financial Statements
 For
the three and nine months ended September 30, 2009
 (Unaudited)
  NOTE
11 – COMMON STOCK (continued)
 
 d)           
Stock Options (continued)
 
 (i)
              On
      January 1, 2008, the Company granted to its Chief Corporate Development
      Officer (“CCDO”) 1,000,000 options at an exercise price of $2.06 per
      share.  These options have a fair value of $1.26 per option
      granted.
 
 (ii)
              On
      January 7, 2008, the Company granted to its Vice President, Finance (“VP
      Finance”) 150,000 options at an exercise price of $1.98 per
      share.  These options have a fair value of $1.20 per option
      granted.
 
 (iii)
              On
      March 14, 2008, the Company granted to a director 100,000 options at an
      exercise price of $2.49 per share.  These options have a fair
      value of $1.40 per option granted.
 
 (iv)
              On
      May 27, 2008, the Company granted to its Vice President, General Counsel
      (“VP GC”) 125,000 options at an exercise price of $3.10 per
      share.  These options have a fair value of $1.71 per option
      granted.
 
 (v)
              Between
      January 1, 2008 and December 31, 2008, the Company granted to its
      full-time corporate directors a total of 425,000 options at a range of
      exercise prices between $2.06 and $3.30 per share.  These
      options have a fair value of between $1.26 and $1.92 per option
      granted.  25,000 of these options were forfeited during 2008,
      and an additional 100,000 options were forfeited in the first quarter of
      2009.  In the third quarter of 2009, the remaining 300,000
      options were forfeited.
 
 (vi)
              Between
      January 1, 2008 and December 31, 2008, the Company granted to its
      full-time employees a total of 290,000 options at a range of exercise
      prices between $0.65 and $3.10 per share.  These options have a
      fair value of between $0.30 and $1.71 per option
      granted.  17,500 of these options have been forfeited during
      2008, 92,500 options were forfeited in the first quarter of 2009, 25,000
      options were forfeited in the second quarter of 2009, and 50,000 options
      were forfeited in the third quarter of
2009.
 
 (vii)
              Between
      January 1, 2008 and December 31, 2008, the Company granted to consultants
      a total of 70,000 options at exercise prices ranging from $2.06 to $2.49
      per share.  All of these options were forfeited during
      2008.
 
 (viii)
              On
      March 25, 2009, the Board of Directors approved a reduction of the
      exercise price of stock option grants made prior to this
      date.  As a result, all grants issued prior to March 25, 2009
      currently have an exercise price of $0.65.  The stock option
      grants included in the repricing initially had exercise prices between
      $0.65 and $3.30.  The incremental value of $213,895 relating to
      the fair values at the date of the reduction in price has been included in
      the period expense.
 
 (ix)
              On
      March 25, 2009, the Company granted to its full-time employees a total of
      115,000 options at an exercise price of $0.30 per share.  These
      options have a fair value of $0.19 per option granted.  In the
      third quarter of 2009, 100,000 options were
  forfeited.
 
 (x)
              On
      April 8, 2009, the Company granted to one of its full-time employees a
      total of 5,000 options at an exercise price of $0.35 per
      share.  These options have a fair value of $0.23 per option
      granted.
 
 (xi)
              On
      May 28, 2009, the Company granted to one of its full-time employees a
      total of 5,000 options at an exercise price of $0.30 per
      share.  These options have a fair value of $0.21 per option
      granted.
 
 (xii)
              On
      September 1, 2009, the Company granted to two of its full-time corporate
      directors a total of 75,000 stock options at an exercise price of $0.22
      per share.  These options have a fair value of $0.16 per option
      granted.
  30
 Live
Current Media Inc.
 (formerly
Communicate.com Inc.)
 Notes
to the Consolidated Financial Statements
 For
the three and nine months ended September 30, 2009
 (Unaudited)
 NOTE
11 – COMMON STOCK (continued)
 
 d) Stock
Options (continued)
 
 The
Company recognizes stock-based compensation expense over the requisite service
period of the individual grants.  ASC 718 requires forfeitures to be
estimated at the time of grant and revised, if necessary, in subsequent periods
if actual forfeitures differ from those estimates. Due to recent economic
developments, the Company has experienced a high level of forfeitures during
late 2008 and early 2009. The Company assesses forfeiture rates for each class
of grantees; executive management and directors, corporate directors, and
general staff members.  Executive management and directors are
relatively few in number and turnover is considered remote, therefore the
Company estimates forfeitures for this class of grantees to be 10%. Corporate
directors are high level senior staff members with a forfeiture rate of 25% and
general staff members have a higher forfeiture rate due to higher average
turnover rates at 35%. Estimate of forfeitures is reviewed on an annual basis.
Stock-based compensation is expensed on a straight-line basis over the requisite
service period.
 
 The fair
value of these options at September 30, 2009 of $4,948,244 (December 31, 2008 -
$5,824,833) will be recognized on a straight-line basis over a vesting term of
3.375 years and an expense has been recognized in the nine months ended
September 30, 2009 of $1,255,205 (year ended December 31, 2008 - $1,992,461) and
included in management fees and employee salaries expense.
  On May
22, 2008, the Company reserved 413,604 shares of common stock for future
issuance and distribution in relation to the merger with
Auctomatic.  These shares were to be issued to the Auctomatic founders
in equal instalments on the three subsequent anniversary dates of the merger
contingent on their continued employment with the Company pursuant to the terms
of the Merger Agreement.  As these shares were contingent on future
employment, they were considered contingent consideration and are required to be
accounted for under ASC 718 as stock-based compensation.  During the
first quarter of 2009, 137,868 of these shares were forfeited.  During
the second quarter of 2009, 91,912 of these shares were issued out of
treasury.  During the third quarter of 2009, the remaining 183,824
shares were forfeited.  See also Note 7 and Note
11(c).  Before August 2009, the shares were valued using the Black
Scholes option pricing model at the date of grant using a 3 year term and a 33%
forfeiture rate.  Beginning in August 2009, the shares were valued
using a 100% forfeiture rate as all of the founders had forfeited their
shares.
 
 The fair
value of these shares at July 31, 2009 of $1,077,773 (December 31, 2008 -
$1,157,049) was recognized on a straight-line basis over a vesting term of 3
years at date of grant and accordingly, an expense had been recognized in the
nine months ended September 30, 2009 of $160,955 (year ended December 31, 2008 -
$170,065) and included in management fees and employee salaries
expense.  In August 2009, the forfeiture rate changed to 100% and at
September 30, 2009, the fair value was $0.
 
 A summary
of the option activity under the 2007 Plan during 2008 and 2009 is presented
below:
 
 Options
              
              Shares
              
              
              Weighted
      Average
                Exercise
      Price
                $
              
              
              Weighted
      Average Fair Value
                $Options
      outstanding, December 31, 2007
              
              
              2,750,000
              
              
              
              1.41
              
              
              
              1.50Granted
              
              
              2,160,000
              
              
              
              0.81
              
              
              
              1.36Exercised
              
              
              -
              
              
              
              -
              
              
              
              -Forfeited
      or expired
              
              
              112,500
              
              
              
              2.29
              
              
              
              0.47Options
      outstanding, December 31, 2008
              
              
              4,797,500
              
              
              
              1.12
              
              
              
              1.46Granted
              
              
              200,000
              
              
              
              0.27
              
              
              
              0.18Exercised
              
              
              -
              
              
              
              -
              
              
              
              -Forfeited
      or expired
              
              
              2,167,500
              
              
              
              1.67
              
              
              
              1.44Options
      outstanding, September 30,2009
              
              
              2,830,000
              
              
              
              0.64
              
              
              
              1.38Options
      vested at September 30, 2009
              
              
              2,705,585
              
              
              
              0.64
              
              
              
              1.40Aggregate
      Intrinsic Value
              
              $
              0Weighted
      average remaining life
              
              3.21
      Years
 31
 
 Live
Current Media Inc.
 (formerly
Communicate.com Inc.)
 Notes
to the Consolidated Financial Statements
 For
the three and nine months ended September 30, 2009
 (Unaudited)
 NOTE
11 – COMMON STOCK (continued)
 
 e)    
Common Stock Purchase Warrants
 
 On June
11, 2007, the Company issued 1,000,000 shares of common stock and 1,000,000
common stock share purchase warrants to a company owned and controlled by the
Company’s Chief Executive Officer in exchange for $1,000,000
cash.  The warrants expired June 10, 2009.
 
 On May 1,
2008, the Company issued 50,000 common stock share purchase warrants with an
exercise price of $2.33 to its investor relations firm in connection with a
services agreement.  The warrants expire May 1, 2010.  The
Company valued these warrants using the Black Scholes option pricing model using
the following assumptions: no dividend yield; expected volatility rate of
69.27%; risk free interest rate of 2.37% and an expected life of 2 years
resulting in a fair value of $0.91 per warrant granted, and a total fair value
of $45,500.
  In
connection with the private placement in November 2008, the Company issued
1,627,344 warrants, each for the purchase of one-half share of the Company’s
common stock, with an exercise price of $0.78 expiring November 19, 2010 and
1,627,344 warrants, each for the purchase of one-half share of the Company’s
common stock, with an exercise price of $0.91 expiring November 19,
2011.  The Company valued the warrants expiring November 19, 2010
using the Black Scholes option pricing model using the following assumptions: no
dividend yield; expected volatility rate of 75.24%; risk free interest rate of
1.09% and an expected life of 1 year.  This resulted in a fair value
of $0.09 per warrant.  The Company valued the warrants expiring
November 19, 2011 also using the Black Scholes option pricing model using the
following assumptions: no dividend yield; expected volatility rate of 70.53%,
risk free interest rate of 1.36% and an expected life of 2
years.  This resulted in a fair value of $0.10 per
warrant.  The total fair value of both warrants at September 30, 2009
was $139,620 (December 31, 2008 - $157,895).  The warrants issued are
contingently redeemable in cash in certain circumstances which may not all be
within the Company’s control.  As a result, the accounting treatment
for the warrants falls under ASC 815-40-25, and their fair value of $157,895 at
December 31, 2008 was recorded as a liability.  Any future changes to
the fair value of the warrants will be adjusted to the statement of operations
in the period in which the change in fair value occurs.  During the
nine months ended September 30, 2009, the decrease to the fair value of the
warrants was $18,275 which was charged against corporate general and
administrative expenses during the period.
 
 As of
September 30, 2009, 3,304,688 warrants to purchase the Company’s common stock
remain outstanding as follows:
 
 WeightedWarrants
              
              Outstanding
              
              
              Average
              
              
              Date
      ofExercise
      Price
              
              
              Expiry$Warrants
      outstanding, December 31, 2007
              
              
              1,000,000
              
              
              
              1.25
              
              
              June
      10, 2009Granted
      May 1, 2008
              
              
              50,000
              
              
              
              2.33
              
              
              May
      1, 2010Granted
      November 19, 2008
              
              
              1,627,344
              
              
              
              0.78
              
              
              November
      19, 2010Granted
      November 19, 2008
              
              
              1,627,344
              
              
              
              0.91
              
              
              November
      19, 2011Warrants
      exercisable December 31, 2008
              
              
              4,304,688
              
              
              
              0.96Granted
              
              
              -
              
              
              
              -Cancelled
      or expired
              
              
              1,000,000
              
              
              
              1.25Warrants
      exercisable September 30, 2009
              
              
              3,304,688
              
              
              
              0.89Weighted
      average remaining life
              
              1.60
      Years
  32
 Live
Current Media Inc.
 (formerly
Communicate.com Inc.)
 Notes
to the Consolidated Financial Statements
 For
the three and nine months ended September 30, 2009
 (Unaudited)
 NOTE 12 – DOMAIN NAME LEASES AND SALES
 
 2009
 
 In August
2009, the Company sold the domain name www.cricket.com.  Due
to the uncertainty regarding the collectibility of the funds receivable under
the sale agreement in the future, the Company only recognized the first
instalment of $250,000 received during the third quarter of
2009.  This amount was included in the Company’s analysis under ASC
605-25 as disclosed in Note 6, and therefore one/sixth of $250,000, or $41,667
was recorded as a gain on sales-type lease of a domain name during the
period.
 
 In July
2009, the Company sold three domain names for $725,000 less 10% commission and
the purchase prices were paid in full upon the execution of each
agreement.  The resulting $374,887 in net gain was reported in the
third quarter of 2009.
 
 On April
15, 2009, the Company sold one domain name to an unrelated third party for
$400,000, resulting in a $261,934 net gain in the second quarter of
2009.
 
 On
February 27, 2009 (the “Effective Date”), the Company entered into an agreement
to lease one domain name to an unrelated third party for
$1,250,000.  The terms of the agreement provided for the receipt of
this amount in irregular lease payments over a one-year term.  The
first payment of $225,000 was due within 7 days of the Effective Date, $65,000
was due on each of the first to the fifth monthly anniversaries of the Effective
Date, $100,000 was due on each of the sixth to the ninth monthly anniversaries
of the Effective Date, and $300,000 was due on the first year anniversary of the
Effective Date.  The Company was to lease the domain name to the
purchaser exclusively during the term of the agreement.  Title and
rights to the domain name would be transferred to the purchaser only when full
payment was received at the end of the lease term.  If the purchaser
defaulted on any payments, the agreement would terminate, funds received to date
would be forfeited by the purchaser, and rights to the domain name would return
to the Company.  Due to the uncertainty regarding the collectibility
of the funds in the future, only the amounts received were recorded as a gain on
sale of a domain name.  During Q1 of 2009, a resulting gain of
$290,000 was recorded based on the payments received.  During Q2 of
2009, a resulting gain of $65,000 was recorded based on the payment received in
April 2009.  In May 2009, the purchaser breached the
agreement.  As a result, the purchaser forfeited the total of $355,000
that had already been paid to the Company as of that date and that was recorded
as a gain on sales-type lease of domain name.  Under the terms of the
agreement, the Company retained the funds and the domain name.  In
August 2009, the Company subsequently sold this domain name to an unrelated
third party for $1,100,000 less $110,000 in commission and the purchase price
was paid in full upon the execution of the agreement. The resulting gain of
$740,000 was reported as a gain on sale of domain name in the third quarter of
2009.
 
 On
February 24, 2009, the Company sold one domain name to an unrelated third party
for $400,000, resulting in a gain of $327,933 in the first quarter of
2009.
 
 2008
 
 On
December 31, 2008, the Company entered into an agreement to sell one domain name
to an unrelated third party for CDN$500,000.  The terms of the
agreement provided for the receipt of CDN$476,190 on December 31, 2008 and the
balance of CDN$23,810 by March 31, 2009.  The title of the domain name
transferred to the buyer at December 31, 2008 as collection of the balance was
reasonably assured, therefore the disposal and resulting gain of $293,215 was
recorded on December 31, 2008.  Both payments were received in
accordance with the terms of the agreement.
 
 On
January 17, 2008, the Company entered into an agreement to lease one domain name
to an unrelated third party for CDN$200,000.  The terms of the
agreement provide for the receipt of this amount in five irregular lease
payments over a two-year term.  The first payment of CDN$25,000 was
due on January 17, 2008 (the “Effective Date”), CDN$45,000 was due 3 months
after the Effective Date, CDN$80,000 was due 6 months after the Effective Date,
CDN$25,000 is due 1 year after the Effective Date, and CDN$25,000 is due 2 years
after the Effective Date.  The Company will lease the domain name to
the third party exclusively during the term of the agreement.  Title
and rights to the domain name will be transferred to the purchaser only when
full payment is received at the end of the lease term.  If the third
party defaults on any payments, the agreement terminates, funds received to date
are forfeited by the lessee, and rights to the domain name return to the
Company.  This transaction was recorded as a sales-type lease in
2008.  The investment in a sales-type lease of $163,963 was recorded
on the balance sheet on a net basis after the lease payments received to
date.  The gain of $168,206 was recorded at the present value of the
lease payments over the term, net of the cost of the domain name, at an implicit
rate of 6%.  Payments have been collected to date in accordance with
the terms of the agreement.
 33
 
 Live
Current Media Inc.
 (formerly
Communicate.com Inc.)
 Notes
to the Consolidated Financial Statements
 For
the three and nine months ended September 30, 2009
 (Unaudited)
 
 NOTE
13 – OTHER EXPENSES
 
 During Q1
of 2009, the Company incurred various restructuring costs of $264,904 consisting
of severance payments to the former President and Chief Operating Officer and to
other staff terminated in the first quarter as a result of restructuring the
Company’s staffing requirements.  There were no such expenses in Q2 or
Q3 of 2009.
 
 During Q1
of 2008, the Company incurred various restructuring costs totaling $629,856
relating to establishing the new management team.  During the period,
such costs included severance payments to the Company’s former Chief Financial
Officer of $168,429, $25,657 in consulting fees to the  former Chief
Financial Officer, $317,109 in signing bonuses to the Company’s new Chief
Corporate Development Officer and new Vice President Finance, a severance
payment of $53,582 to one full time employee, $39,778 in costs related to
changing the Company name and rebranding, and $25,301 in some final windup costs
related to the FrequentTraveller disposition in late 2007.  During Q2
of 2008, the Company incurred similar restructuring costs including $31,691 in
valuation costs relating to the issuance of DHI shares to its parent company,
which occurred in Q1 of 2008, and $2,000 in some final windup costs related to
the FT disposition in late 2007.   During Q3 of 2008, the Company
incurred $20,000 in costs related to engaging a firm to pursue capital financing
opportunities that were terminated subsequent to the 2008 year end.
 
 NOTE
14 – INCOME TAXES
 
 The
Company’s subsidiaries, DHI, Importers, and 612793 are subject to federal and
provincial taxes in Canada.  The Company and its subsidiary, Delaware,
are subject to United States federal and state taxes.
 
 As at
September 30 2009, the Company and its US subsidiaries have net operating loss
carryforwards from previous tax years of approximately $4,138,000 and capital
loss carryforwards of $120,000 that result in deferred tax
assets.  The Company’s Canadian subsidiaries have non capital loss
carryforwards of approximately $6,187,000 that result in deferred tax
assets.  These loss carryforwards will expire, if not utilized,
through 2028.  The Company’s subsidiary DHI also has approximately
$896,300 in undepreciated capital costs relating to property and equipment that
have not been amortized for tax purposes.  The costs may be amortized
in future years as necessary to reduce taxable income.  Management
believes that the realization of the benefits from these deferred tax assets is
uncertain and accordingly, a full deferred tax asset valuation allowance has
been provided and no deferred tax asset benefit has been recorded.
 
 The
Company has a deferred tax liability related to potential taxes owing on
potential gains on disposal of our domain name intangible
assets.  GAAP does not permit taxable temporary differences associated
with indefinite life intangible assets to be considered as evidence to otherwise
reduce a valuation allowance associated with deductible timing differences in
the same entity.  The Company has recorded a related deferred tax
liability in its consolidated financial statements of $129,156 at September 30,
2009 and $206,370 at December 31, 2008.  There was a deferred tax
recovery during the three months ended September 30, 2009 of $64,732 and during
the nine months ended September 30, 2009 of $77,214.
 
 There has
been no substantial change in the effective tax rate since December 31,
2008.
  34
 Live
Current Media Inc.
 (formerly
Communicate.com Inc.)
 Notes
to the Consolidated Financial Statements
 For
the three and nine months ended September 30, 2009
 (Unaudited)
 NOTE
15 – SEGMENTED INFORMATION
 
 In 2008
and 2009, the Company’s operations were conducted in two business segments;
eCommerce Products, and Advertising and Other.
 
 During
2008, the Company began offering international shipping on its Perfume.com
website.  The operations of Perfume.com are included as the eCommerce
Products business segment.  The sales generated from regions other
than North America have been immaterial during the nine months ended September
30, 2009 as well as the year ended December 31, 2008, and therefore no
geographic segment reporting is required.
 
 Revenues,
operating profits and net identifiable assets by business segments are as
follows:
  eCommerce
                
                
                Advertising
                
                
                TotalProducts
                
                
                and
      OtherFor
      the nine months ended September 30, 2009
                
                
                $
                
                
                
                $
                
                
                
                $Revenue
                
                
                4,881,614
                
                
                
                333,409
                
                
                
                5,215,023Segment
      Loss From Operations
                
                
                (2,163,156
                )
                
                
                (1,357,089
                )
                
                
                (3,520,245
                )As
      at September 30, 2009
                
                
                $
                
                
                
                $
                
                
                
                $Total
      Assets
                
                
                4,524,899
                
                
                
                1,251,839
                
                
                
                5,776,738Intangible
      Assets
                
                
                158,849
                
                
                
                834,656
                
                
                
                993,505eCommerce
                
                
                Advertising
                
                
                TotalProducts
                
                
                and
      OtherFor
      the nine months ended September 30, 2008 (as restated - see Note
      2)
                
                
                $
                
                
                
                $
                
                
                
                $Revenue
                
                
                5,663,508
                
                
                
                75,108
                
                
                
                5,738,616Segment
      Loss From Operations
                
                
                (4,608,567
                )
                
                
                (3,064,649
                )
                
                
                (7,673,215
                )As
      at December 31, 2008 (as restated - see Note 2)
                
                
                $
                
                
                
                $
                
                
                
                $Total
      Assets
                
                
                6,082,595
                
                
                
                1,665,723
                
                
                
                7,748,318Intangible
      Assets
                
                
                189,046
                
                
                
                1,398,417
                
                
                
                1,587,463
 
 The
reconciliation of the segment loss from operations to net loss as reported in
the consolidated financial statements is as follows:
  For
      the nine months ended September 30, 2009
                
                
                For
      the nine months ended September 30, 2008(unaudited)
                
                
                (unaudited)(As
      Restated - See Note 2)Segment
      Loss
                
                $
                (3,520,245
                )
                
                $
                (7,673,215
                )Non-Operating
      Income (Expenses)Gain
      on settlement of amounts due to Global Cricket Venture
                
                
                375,000
                
                
                
                -Gain
      from sales and sales-type lease of domain names
                
                
                2,101,421
                
                
                
                168,206Accretion
      interest expense
                
                
                (63,300
                )
                
                
                (56,600
                )Interest
      expense
                
                
                (15,251
                )
                
                
                -Interest
      and investment income
                
                
                1,558
                
                
                
                66,444Gain
      on restructure of Auctomatic payable
                
                
                29,201
                
                
                
                -Impairment
      of Auction Software
                
                
                (590,973
                )
                
                
                -Net
      loss before taxes for the period
                
                $
                (1,682,589
                )
                
                $
                (7,495,165
                )
 
 Substantially
all property and equipment and intangible assets are located in
Canada.
 35
 
 Live
Current Media Inc.
 (formerly
Communicate.com Inc.)
 Notes
to the Consolidated Financial Statements
 For
the three and nine months ended September 30, 2009
 (Unaudited)
 
 NOTE
16 – COMMITMENTS
 
 Premise
Lease
 
 Effective
October 1, 2007 the Company leased its office in Vancouver, Canada from an
unrelated party for a 5-year period from October 1, 2007 to September 30,
2012.  Pursuant to the terms of the lease agreement, the Company is
committed to basic rent payments expiring September 30, 2012 as
follows.
  CDN
      $2009
              30,0492010
              121,5312011
              126,8732012
              98,159
 
 The
Company will also be responsible for common costs currently estimated to be
equal to approximately 74% of basic rent.
 
 Global Cricket
Venture
 
 On March
31, 2009, the Company, its subsidiary GCV, the BCCI and the IPL amended the
MOUs.  The Company and the BCCI jointly entered into a Termination
Agreement, pursuant to which the BCCI Memorandum was terminated.  The
agreement constitutes full and final settlement of any and all historic and
future outstanding obligations due from Live Current under the BCCI
Memorandum.  Per the Termination Agreement, Live Current would be
released from all accrued liabilities under the BCCI Memorandum after the
$750,000 payment was made under the Novation Agreement described
below.
 
 The
Company, GCV and the BCCI, on behalf of the IPL, entered into a Novation
Agreement with respect to the IPL Memorandum.  The responsibility for
this payment was assumed by, and the benefits associated with the MOU formerly
held by the Company were transferred to, GCV.  The IPL Memorandum’s
payment schedule was amended as well.
 
 These
terms were further renegotiated in August 2009 whereby GCV transferred and
assigned to an unrelated third party (“Mauritius”) all of the rights, title, and
interest in and to the original MOU with the IPL, as amended by the Novation
Agreement.  Mauritius made the $750,000 payment as required under the
Novation Agreement during Q3 of 2009, therefore Live Current was released from
all accrued liabilities under the BCCI Memorandum.  In order to
facilitate the transfer of the Cricket.com website, the Company has agreed to
provide Mauritius with support services for a period of no more than 6 months
(the “Transition Period”).  In exchange for the support services,
Mauritius has agreed to the payment of certain expenses related to the support
services.  Refer to Note 6.
 NOTE
17 – CONTINGENCY
 
 A former
Chief Executive Officer of DHI commenced a legal action against DHI on March 9,
2000 for wrongful dismissal and breach of contract.  He is seeking, at
a minimum, 18.39% of the outstanding shares of DHI, specific performance of his
contract, special damages in an approximate amount of $30,000, aggravated and
punitive damages, interest and costs. On June 1, 2000, DHI filed a Defense and
Counterclaim against this individual claiming damages and special damages for
breach of fiduciary duty and breach of his employment contract. The outcome of
these legal actions is currently not determinable and as such the amount of
loss, if any, resulting from this litigation is presently not
determinable.  To date, there has been no further action taken by the
plaintiff since the filing of the initial legal action on March 9,
2000.
 36
 
 Live
Current Media Inc.
 (formerly
Communicate.com Inc.)
 Notes
to the Consolidated Financial Statements
 For
the three and nine months ended September 30, 2009
 (Unaudited)
 NOTE
18 – RELATED PARTY TRANSACTIONS
 
 2009
 
 On March
1, 2009, the Company began charging $6,000 per month to a company controlled by
its Chief Executive Officer.  Live Current is providing this company
with IT, administrative, and marketing support.  This arrangement
allows Live Current to share its resources while earning revenues for support
services.
 
 2008
  The
Company issued shares of common stock to related parties pursuant to private
placements 2008 as follows:
  On
November 19, 2008, the Company closed a private placement financing in which C.
Geoffrey Hampson, the Company’s Chief Executive Officer, invested
$126,750.  Mr. Hampson received 195,000 restricted shares of common
stock, two-year warrants to purchase 97,500 common shares at an exercise price
of $0.78, and three-year warrants to purchase 97,500 common shares at an
exercise price of $0.91.
  On
November 19, 2008, the Company closed a private placement financing in which
Jonathan Ehrlich, the Company’s then President and Chief Operating Officer,
invested $25,000.  Mr. Ehrlich received 38,461 restricted shares of
common stock, two-year warrants to purchase 19,230 common shares at an exercise
price of $0.78, and three-year warrants to purchase 19,230 common shares at an
exercise price of $0.91.
  On
November 19, 2008, the Company closed a private placement financing in which
Mark Melville, the Company’s Chief Corporate Development Officer, invested
$35,000.  Mr. Melville received 53,846 restricted shares of common
stock, two-year warrants to purchase 26,923 common shares at an exercise price
of $0.78, and three-year warrants to purchase 26,923 common shares at an
exercise price of $0.91.
  NOTE
19 – SUBSEQUENT EVENTS
 
 Subsequent
events have been evaluated up to the date the financial statements were
available to be issued, November 13, 2009.
 
 On
November 10, 2009, the Company’s Board of Directors approved an Amendment to the
Employment Agreement (the “Amendment”) of the Company’s Chief Executive Officer
(“CEO”).  The Amendment modifies the CEO’s base salary in that
effective February 1, 2009, his base salary is $120,000.  The
Amendment recognizes that the salary related to $80,000 owing for his services
from February 1, 2009 to September 30, 2009 has remained unpaid, and this amount
is to be converted to shares of the Company’s common stock.  The
effect of the decrease in salary for the period of February 1 to September 30,
2009 has been reflected in the Company’s interim financial statements ended
September 30, 2009.  The stock price for such conversion shall be the
closing price of the common stock on December 1, 2009.
 
 On
November 13, 2009 the Company also entered into a second amendment to the
Employment Severance Agreement dated February 4, 2009 with Jonathan Ehrlich, the
Company’s former President and Chief Operating Officer.
 
 Pursuant
to the second amendment, the severance allowance remaining to be paid and all
additional benefits owed to Mr. Ehrlich as of November 16, 2009 in the gross
amount of $109,375 will be paid in a lump sum payment less all applicable
withholdings rather than over a period of 10 months.  Furthermore, Mr.
Ehrlich agrees to waive all of the net monthly equity payments that we are
obligated to pay him under the Employment Severance Agreement and will accept
$20,000 cash, less all applicable withholdings, in lieu thereof.
 
 NOTE
20 – COMPARATIVE FIGURES
 
 Certain
comparative figures have been reclassified to conform to the basis of
presentation adopted in the current period.


37





Item 2: Management’s
discussion and analysis of financial condition and results of
operations





(a) Forward
Looking Statements





The
Company makes forward-looking statements in this report and may make such
statements in future filings with the Securities and Exchange Commission. The
Company may also make forward-looking statements in its press releases or other
public shareholder communications. Its forward-looking statements are subject to
risks and uncertainties and include information about its expectations and
possible or assumed future results of operations. When management uses any of
the words “believes”, “expects”, “anticipates”, “estimates” or similar
expressions, it is making forward-looking statements.





While
management believes that our forward-looking statements are reasonable, you
should not place undue reliance on any such forward-looking statements, which
speak only as of the date made.  Because these forward-looking
statements are based on estimates and assumptions that are subject to
significant business, economic and competitive uncertainties, many of which are
beyond management’s control or are subject to change, actual results could be
materially different. Factors that might cause such a difference include,
without limitation, the following: the Company’s inability to generate
sufficient cash flows to meet its current liabilities, its potential inability
to retain qualified management, sales and customer service personnel, the
potential for an extended decline in sales as a result of the recession in the
U.S., the possible failure of revenues to offset additional costs associated
with any changes in our business model, the potential lack of acceptance by
consumers of business websites we create in the future, the Company’s potential
inability to create new businesses around domain names, the potential loss of
customer or supplier relationships, the potential failure to receive or maintain
necessary regulatory approvals, the extent to which competition may negatively
affect prices and sales volumes or necessitate increased sales or marketing
expenses, and the other risks and uncertainties set forth in this
report.




Other
factors not currently anticipated by management may also materially and
adversely affect our results of operations.  Except as required by
applicable law, management does not undertake any obligation to publicly release
any revisions which may be made to any forward-looking statements to reflect
events or circumstances occurring after the date of this report.




Readers
of this report should not rely solely on the forward-looking statements and
should consider all risks and uncertainties throughout this report, as well as
those discussed under “Item 1 Risk Factors” in our Annual Report on Form 10-K
for the year ended December 31, 2008 and Amendments No.1 and No. 2
thereto.




The
following discussion should be read in conjunction with our interim consolidated
financial statements and their explanatory notes, which are included in Item
1.





(b) Business
Overview





We build
consumer internet experiences around our portfolio of domain
names.  In addition, we own hundreds of non-core domain names that we
may choose to develop, lease or sell in the future to raise funds in a
non-dilutive manner.  We generate revenues from consumer internet
experiences in two different ways; through the online sales of products
(eCommerce) and through the sale of advertising.  Currently, almost
all of the revenues we earn are generated from our main health and beauty
website, Perfume.com.  Through this website, we sell brand name
fragrances, skin care and hair care products directly to
consumers.  We also generate revenues by selling online advertising
space to advertisers or in partnership with third party advertising
networks.  However, in 2008 and during the first three quarters of
2009, advertising accounted for less than 2% of total revenues.  We
presently employ eighteen full-time and seven part-time employees, as well as
one consultant.  Our principal office is located at #645-375 Water
Street, Vancouver, British Columbia.  We also lease an office at 12201
Tukwila Intl. Blvd, Suite 200, Tukwila, Washington.




38




In 2008,
we began shipping our Perfume.com products to select international
markets.  Until then, we shipped only to delivery addresses located in
the United States.  However, during the period ending September 30,
2009, sales of products shipped to non-U.S. locations are immaterial and
therefore are not disclosed separately.




The
recent downturn in the global economy has significantly impacted the U.S.
economy and consumer confidence.  It remains a challenge for all
retailers, including online retailers, to achieve sales growth with adequate
gross margins.  The current recession has caused a negative impact to
some of our results as discussed below, and we expect this to continue for at
least the short-term.




During
2008 and through the period ended September 30, 2009, our revenues were not
sufficient to support our operations and we do not expect this to change in the
short-term.  Therefore, we have needed to find ways to raise funds for
working capital.  Toward the end of the 2008 fiscal year, we began to
experience significant challenges in raising capital through the sale of our
securities and these challenges are on-going.  Financing opportunities
have become more expensive and difficult to find.  Furthermore, if we
attempted to raise funds through the sale of our securities, the steep decline
in the price of our common stock would result in significant dilution to our
current stockholders.  As a result, management sold some of our
non-core domain names to raise funds.  From December 31, 2008 through
September 30, 2009, we sold seven domain names, not including our cricket.com
domain name, for a total of nearly $3.4 million.  We believe these
sales are a testament to the inherent value of our domain name assets, and
together with other cost-cutting measures, the proceeds will help meet our
working capital needs and management’s strategy to achieve the goal of cash flow
positive operations by the end of 2010.




In 2008,
we had a significant net loss and significant cash outflows.  In late
2008 and early 2009 we instituted cost-cutting measures, including layoffs of
staff and the termination of consulting and investor relations
contracts.  In addition, our Chief Executive Officer has agreed to
amend his employment agreement to reduce the annual base salary from $300,000
CAD to $120,000 CAD effective February 1, 2009.  Furthermore, he has
agreed that the eight months of salary payable between February 1 and September
30, 2009, which totalled $80,000 CAD, would be deferred and converted to shares
of our common stock at a conversion price equal to the closing price of one
share of our common stock on December 1, 2009.  As a result of these
efforts, our net cash outflows have begun to decrease.




For the
immediate future, we do not anticipate independently developing technologies,
processes, products or otherwise engaging in research, development or similar
activities.  Instead, if we find these activities to be necessary to our
business, we intend to enter into relationships with strategic partners who
conduct such activities.




RECENT
DEVELOPMENTS




Karate.com




On May
15, 2009 (the “Effective Date”), we signed an agreement (“LLC Agreement”) with
Domain Strategies, Inc., an internet development and management company, and
Develep, a partnership, to jointly establish a limited liability company
(“Karate, LLC”) for the purpose of developing, managing and monetizing our
Karate.com domain name.  This partnership will provide management
focus and resources to efficiently monetize the domain name.  Pursuant
to the LLC Agreement, we will contribute the domain name, Karate.com, to Karate,
LLC and will receive a 55% interest of Karate, LLC, plus a liquidation and
withdrawal preference.  The Board of Directors of Karate, LLC will
have equal representation from all parties with Domain Strategies and Develep
having primary responsibility for the management of day-to-day operations
including site design, employment relationships, vendors, customer acquisition
and maintenance and relationships with potential strategic
partners.  On the second anniversary of the Effective Date, we have
the right to withdraw from Karate, LLC for any reason.  We also have
the right to withdraw from Karate, LLC at any time on or before the third
anniversary of the Effective Date if we are required at any time to make a
capital contribution, or if our equity interest in Karate, LLC has been or will
be diluted in any way.  In the event we are the terminating party,
ownership of the domain name www.karate.com will
revert back to us, however Domain Strategies will have the right but not the
obligation to purchase the domain name www.karate.com for $1
million within 60 days of termination.  The website went live during
Q3 of 2009, however no capital contributions have been made to
date.




39




Exit
from Cricket




On March
31, 2009 the Company, Global Cricket Ventures Pte. Ltd. (sometimes referred to
in this Report as “GCV”), a subsidiary of the Company, and the Board of Control
for Cricket in India (“BCCI”) entered into a Novation Agreement (the “Novation”)
pursuant to which GCV was granted all of the Company’s rights, and assumed all
of the Company’s obligations, under the Memorandum of Understanding (the
“Original Agreement”) dated April 16, 2008 that had been executed by the Company
and the BCCI, acting for and on behalf of its separate subcommittee unit known
as the Indian Premier League.




On August
25, 2009 GCV entered into an Assignment and Assumption Agreement (the
“Assignment”) with Global Cricket Ventures Limited (Mauritius) (“Mauritius”), an
entity unrelated to the Company or its affiliates.  The Assignment is
dated August 20, 2009.  Pursuant to the Assignment, GCV transferred
and assigned to Mauritius all of GCV’s right, title and interest in and to the
Original Agreement, as amended by the Novation, and Mauritius accepted the
assignment and assumed and agreed to be liable for all past and future
obligations and liabilities of GCV arising under, pursuant to or in connection
with the Original Agreement, as amended by the Novation.




In
conjunction with the Assignment, on August 25, 2009 DHI entered into the
Cricket.com Lease and Transfer Agreement (the “Lease”) with a company related to
Mauritius.  The Lease is dated August 20, 2009.  Pursuant to
the Lease, DHI leased to Mauritius the cricket.com domain name, the cricket.com
website (the “Website”), and certain support services in exchange for the
payment of $1 million (the “Purchase Price”) plus the expenses described
below.  The Purchase Price is to be paid in 4 equal installments, each
of $250,000.  The first installment was received subsequent to the
execution of the Lease and the remaining 3 installments are to be paid on a
quarterly basis.  Upon the payment of the final installment and the
expenses described below, DHI will assign to Mauritius all rights, title and
interest in the Website, the cricket.com domain name and the registration
thereof, all trademarks, services marks and logos that incorporate the term
cricket.com and the goodwill (if any) associated with the
foregoing.




In order
to facilitate the transfer of the Website, DHI has agreed to provide Mauritius
with support services for a period of no more than 6 months (the “Transition
Period”).  In exchange for the support services, Mauritius has agreed
to the payment of certain expenses related to the support services including (i)
direct costs incurred by DHI for maintaining the Website, (ii) rent and overhead
costs in the amount of $2,500 per month, (iii) employee related costs, and (iv)
severance costs (not to exceed $60,000) related to the termination of employees
whose employment will be terminated as a result of the transfer of the
Website.  The $60,000 payment has been received.  In
addition, Mauritius has agreed that, prior to the expiration of the Transition
Period, it will either enter into an employment agreement with Mark Melville,
the Company’s President and Chief Corporate Development Officer, or pay any
severance costs related to his termination without cause (with the exception of
special bonus payments), in accordance with the terms of his employment
agreement with the Company.  These two agreements will result in our
full exit from the Cricket business with the exception of interim support
services which we have agreed to provide for a period of six
months.




Auctomatic




At the
end of the second quarter of 2009, we determined that the auction software
acquired through the merger with Auctomatic was impaired.  As a
result, we recorded an impairment loss of $590,973 at that date.




In August
2009, we reached an agreement with twelve of the eighteen Auctomatic
shareholders to convert $424,934 of the $800,000 payable to them into
convertible notes bearing interest at 10%. The payment due date is May 22,
2010.




Also in
August 2009, we reached an agreement with the remaining two founders of
Auctomatic to terminate their employment.  Under their severance
agreements, we agreed to pay the amounts owed under the Merger Agreement at a
10% discount to face value.  We are paying these amounts in
instalments.  During Q3 of 2009, we also paid them a total of $60,000
of severance costs due pursuant to the terms of their employment
agreements.  In consideration of these payments, these individuals
have each agreed to forfeit their rights to 91,912 shares of Live Current common
stock that were due to be issued to each of them in May 2010 and May 2011 under
the Merger Agreement.




40




RESTATEMENT
OF FINANCIAL STATEMENTS




Correction of an error in
comparative periods:




On June
18, 2009, we were advised by Ernst & Young, LLP, our independent registered
public accounting firm, that our consolidated financial statements for the
quarter ended March 31, 2009, as well as the consolidated financial statements
for the quarter ended September 30, 2008 and the years ended December 31, 2008
and 2007 contained errors.  Based on the foregoing, C. Geoffrey
Hampson, the Company’s Chief Executive Officer and Chief Financial Officer,
concluded that these financial statements should no longer be relied
upon.  These errors, which are described below, affected opening
balances as at December 31, 2007 and the financial position, results of
operations and cash flows for the comparative periods ended September 30, 2008
and December 31, 2008.  Please also see Note 2 to our restated
financial statements, as well as our related disclosure in Amendments No.1 and
No. 2 to  our Form 10-K, as filed with the Securities and Exchange
Commission on September 14, 2009 and October 26, 2009,
respectively.




A.
Deferred income tax liability related to indefinite life intangible
assets:




The
Company’s intangible assets, comprised of its domain names, have book values in
excess of their tax values.  The December 31, 2008 financial
statements considered the taxable temporary differences associated with these
indefinite life intangible assets in reducing the valuation allowance associated
with its loss carryforwards.  This was an incorrect application of
GAAP.  A deferred tax liability should have been recognized for these
taxable temporary differences.  Correction of this error resulted in
the recognition of a deferred tax liability of $206,370 as at December 31,
2008.




B.
Non-Controlling Interest:




The
Company determined that it should have recorded $66,692 of goodwill and an
increase to non-controlling interest liability associated with the exchange of
$3,000,000 of amounts due from a subsidiary for additional common stock in
2008.  See Note 5 to our interim consolidated financial
statements.




Prior to
recognizing the non-controlling interest liabilities, the non-controlling
interest’s share of subsidiary losses in 2008 and 2007 was limited to the
non-controlling interest liability.  As a consequence of the above
increases to non-controlling interest liabilities, the non-controlling
interest’s share in subsidiary losses was increased by $0 in the three month
period and $75,748 in the nine month period ended September 30,
2008.  There was no effect to the non-controlling interest on the
consolidated balance sheets at December 31, 2008.




C.
Management Compensation:




(i)  The
financial statements for the three and nine month periods ended September 30,
2008 did not expense $77,729 and $255,481, respectively, for two CDN$250,000
special bonuses to be paid on October 1, 2008 and October 1, 2009 to our former
President and Chief Operating Officer pursuant to his employment
agreement.  These special bonuses were not discretionary, but would
only be paid if he remained employed as an officer of the Company on the dates
payable.  On February 4, 2009, he resigned as our President and Chief
Operating Officer and employee, effective January 31, 2009.  There was
no effect to the December 31, 2008 or September 30, 2009 financial
statements.




(ii) The
financial statements for the three and nine month periods ended September 30,
2008 did not expense $31,091 and $102,192, respectively, for two CDN$100,000
special bonuses to be paid on January 1, 2009 and January 1, 2010 to our current
President and Chief Corporate Development Officer pursuant to his employment
agreement. These special bonuses are not discretionary, but will only be paid if
he remains employed as an officer of the Company on the dates
payable.  The effect to the consolidated balance sheets at December
31, 2008 was an underaccrual of bonuses payable of $119,045.




41




D.
Estimated life of stock options:




The
Company originally estimated the life of its stock options as equal to the
vesting period for these options, 3 years.  The estimated life should
have been 3.375 years, resulting in decreases of $6,514 and $90,850 to
stock-based compensation expense in the three and nine month periods ended
September 30, 2008.




E.
Other




(i) Expense
accruals




The
Company discovered an accrual and cutoff error in its recorded accounting fees,
resulting in an underaccrual of accounting expense (included in Corporate
General and Administrative expenses) of $0 and $63,750 in the three and nine
month periods, respectively, ended September 30, 2008.  The error
resulted in an overaccrual of accounts payable and accounting expense (included
in Corporate General and Administrative expenses) of $19,521 in the year ended
December 31, 2008.




(ii) Gain on
sale of domain name




The
Company failed to record website development costs attributable to a domain name
sold in 2008, reducing website development costs and gain on sale of domain
names by $37,408 in the year ended December 31, 2008.




F.
Classification of warrants issued in November 2008 private
placement:




In
November 2008, the Company raised $1,057,775 of cash by selling 1,627,344
units consisting of one share of the Company’s common stock and two warrants,
each for the purchase of a half share of common stock.  The offering
price was $0.65 per unit.  The estimated fair value of the warrants
was $157,895 and was presented as equity in the financial statements for the
fiscal year ended December 31, 2008.  The warrants contained
provisions which could require their redemption in cash in certain circumstances
which may not all be within the Company’s control.  The fair value of
the warrants therefore should have been recorded as a liability, with future
changes to fair value reported as either income or expense in the period in
which the change in fair value occurs.  There were no changes to the
fair value of the warrants between the November 2008 issue date and December 31,
2008.  There was no effect to the comparative reported amounts at
September 30, 2008.




G.
Shares issued in connection with the merger with Auctomatic:




(i) Valuation
of shares issued as purchase consideration




The
Auctomatic merger closed on May 22, 2008.  The original estimate of
the fair value of the share purchase consideration attributable to the
acquisition was based on the trading value of the shares around March 25,
2008.  However, the Merger Agreement had an adjustment provision
regarding the number of shares to be issued, such that the shares should have
been valued with reference to the May 22, 2008 closing date as opposed to the
announcement date on March 25, 2008.  Using the average share price
around the closing date, an additional $110,746 should have been recorded as
additional paid-in capital and goodwill during the nine months ended September
30, 2008 and year ended December 31, 2008.




(ii) Shares
issued to Auctomatic founders




As part
of the merger, the Company agreed to distribute 413,604 shares of its common
stock payable on the first, second, and third anniversaries of the Closing Date
(the “Distribution Date”) to the Auctomatic founders subject to their continuing
employment with the Company or a subsidiary on each Distribution
Date.  These shares, which were not accounted for in the Auctomatic
purchase, also were not properly accounted for as compensation to the Auctomatic
founders for their continued employment with the Company.  The related
stock-based compensation expense that should have been recorded in the three and
nine months ended September 30, 2008 was $104,251 and $149,577,
respectively.




42




H.
Financial Statement Classification of Amounts Payable to the BCCI and
IPL:




In order
to provide clarity, the Company also classified separately on its consolidated
balance sheets and consolidated statements of operations the $1,000,000 of
amounts payable as at December 31, 2008 to the BCCI and IPL.




I.
Tax Impact:




Exclusive
of Item A, none of the above adjustments gave rise to an increase or decrease in
the Company’s tax position.




The
following is a summary of the significant effects of the restatements on the
Company’s comparative consolidated statements of operations for the three months
ended September 30, 2008.




For
      the three months ended September 30, 2008
              
              Reference
              
              
              As
      previously reported
              
              
              Restatement
      adjustment
              
              
              As
      restatedSALES
              
              
              
              
              $
              1,954,684
              
              
              $
              -
              
              
              $
              1,954,684COSTS
      OF SALES (excluding depreciation and amortization as shown
      below)
              
              
              
              1,602,249
              
              
              
              -
              
              
              
              1,602,249GROSS
      PROFIT
              
              
              
              
              
              352,435
              
              
              
              -
              
              
              
              352,435OPERATING
      EXPENSESAmortization
      and depreciation
              
              
              
              
              
              96,707
              
              
              
              -
              
              
              
              96,707Amortization
      of website development costs
              
              
              
              
              
              29,143
              
              
              
              -
              
              
              
              29,143Corporate
      general and administrative
              
              
              
              
              
              1,014,145
              
              
              
              -
              
              
              
              1,014,145ECommerce
      general and administrative
              
              
              
              
              
              114,973
              
              
              
              -
              
              
              
              114,973Management
      fees and employee salaries
              
              C(i),
      C(ii), D, G(ii)
              
              
              
              1,964,479
              
              
              
              206,557
              
              
              
              2,171,036Corporate
      marketing
              
              
              
              
              
              14,449
              
              
              
              -
              
              
              
              14,449ECommerce
      marketing
              
              
              
              
              
              99,412
              
              
              
              -
              
              
              
              99,412Other
      expenses
              
              
              
              
              
              20,000
              
              
              
              -
              
              
              
              20,000Total
      Operating Expenses
              
              
              
              
              
              3,353,308
              
              
              
              206,557
              
              
              
              3,559,865NON-OPERATING
      INCOME (EXPENSES)Accretion
      interest expense
              
              
              
              
              
              (56,600
              )
              
              
              -
              
              
              
              (56,600
              )Interest
      and investment income
              
              
              
              
              
              7,266
              
              
              
              -
              
              
              
              7,266Total
      Non-Operating Income (Expenses)
              
              
              
              
              
              (49,334
              )
              
              
              -
              
              
              
              (49,334
              )CONSOLIDATED
      NET LOSS
              
              
              
              
              
              (3,050,207
              )
              
              
              (206,557
              )
              
              
              (3,256,764
              )ADD:
      NET LOSS ATTRIBUTABLE TONON-CONTROLLING
      INTEREST
              
              B
              
              
              
              -
              
              
              
              -
              
              
              
              -NET
      LOSS AND COMPREHENSIVE LOSS FOR THE PERIOD
              
              
              $
              (3,050,207
              )
              
              $
              (206,557
              )
              
              $
              (3,256,764
              )LOSS
      PER SHARE - BASIC AND DILUTEDNet
      Loss attributable to Live Current Media Inc. common
      stockholders
              
              
              $
              (0.14
              )
              
              
              (0.01
              )
              
              $
              (0.15
              )Weighted
      Average Number of Common SharesOutstanding
      - Basic and Diluted
              
              
              
              
              
              
              21,625,005
              
              
              
              -
              
              
              
              21,625,005




43




The
following is a summary of the significant effects of the restatements on the
Company’s comparative consolidated statements of operations for the nine months
ended September 30, 2008.




For
      the nine months ended September 30, 2008
              
              Reference
              
              
              As
      previously reported
              
              
              Restatement
      adjustment
              
              
              As
      restatedSALES
              
              
              
              
              $
              5,738,616
              
              
              $
              -
              
              
              $
              5,738,616COSTS
      OF SALES (excluding depreciation and amortization as shown
      below)
              
              
              
              4,667,197
              
              
              
              -
              
              
              
              4,667,197GROSS
      PROFIT
              
              
              
              
              
              1,071,419
              
              
              
              -
              
              
              
              1,071,419OPERATING
      EXPENSESAmortization
      and depreciation
              
              
              
              
              
              155,861
              
              
              
              -
              
              
              
              155,861Amortization
      of website development costs
              
              
              
              
              
              29,143
              
              
              
              -
              
              
              
              29,143Corporate
      general and administrative
              
              E(i)
              
              
              
              2,053,210
              
              
              
              63,750
              
              
              
              2,116,960ECommerce
      general and administrative
              
              
              
              
              
              
              385,281
              
              
              
              -
              
              
              
              385,281Management
      fees and employee salaries
              
              C(i),
      C(ii), D, G(ii)
              
              
              
              4,517,807
              
              
              
              416,400
              
              
              
              4,934,207Corporate
      marketing
              
              
              
              
              
              
              61,151
              
              
              
              -
              
              
              
              61,151ECommerce
      marketing
              
              
              
              
              
              
              378,484
              
              
              
              -
              
              
              
              378,484Other
      expenses
              
              
              
              
              
              
              683,547
              
              
              
              -
              
              
              
              683,547Total
      Operating Expenses
              
              
              
              
              
              
              8,264,484
              
              
              
              480,150
              
              
              
              8,744,634NON-OPERATING
      INCOME (EXPENSES)Gain
      from sales and sales-type lease of domain names
              
              
              
              168,206
              
              
              
              -
              
              
              
              168,206Accretion
      interest expense
              
              
              
              
              
              
              (56,600
              )
              
              
              -
              
              
              
              (56,600
              )Interest
      and investment income
              
              
              
              
              
              
              66,444
              
              
              
              -
              
              
              
              66,444Total
      Non-Operating Income (Expenses)
              
              
              
              
              
              
              178,050
              
              
              
              -
              
              
              
              178,050CONSOLIDATED
      NET LOSS
              
              
              
              
              
              
              (7,015,015
              )
              
              
              (480,150
              )
              
              
              (7,495,165
              )ADD:
      NET LOSS ATTRIBUTABLE TONON-CONTROLLING
      INTEREST
              
              B
              
              
              
              -
              
              
              
              75,478
              
              
              
              75,478NET
      LOSS AND COMPREHENSIVE LOSS FOR THE PERIOD
              
              
              $
              (7,015,015
              )
              
              $
              (404,672
              )
              
              $
              (7,419,687
              )LOSS
      PER SHARE - BASIC AND DILUTEDNet
      Loss attributable to Live Current Media Inc. common
      stockholders
              
              
              $
              (0.32
              )
              
              
              (0.02
              )
              
              $
              (0.34
              )Weighted
      Average Number of Common SharesOutstanding
      - Basic and Diluted
              
              
              
              
              
              
              21,625,005
              
              
              
              -
              
              
              
              21,625,005


44





The
following is a summary of the significant effects of the restatements on the
Company’s comparative consolidated statements of cash flows for the nine months
ended September 30, 2008.




For
      the nine months ended September 30, 2008
              
              Reference
              
              
              As
      previously reported
              
              
              Restatement
      adjustment
              
              
              As
      restatedOPERATING
      ACTIVITIESNet
      loss for the period
              
              
              
              
              $
              (7,015,015
              )
              
              $
              (404,672
              )
              
              $
              (7,419,687
              )Non-cash
      items included in net loss:Gain
      from sales and sales-type lease of domain names
              
              
              
              (168,206
              )
              
              
              -
              
              
              
              (168,206
              )Accretion
      expense
              
              
              
              
              
              56,600
              
              
              
              
              
              
              
              56,600Stock-based
      compensation
              
              D,
      G(ii)
              
              
              
              1,575,146
              
              
              
              58,727
              
              
              
              1,633,873Warrants
      issued
              
              
              
              
              
              
              9,480
              
              
              
              -
              
              
              
              9,480Issuance
      of common stock for services
              
              
              
              
              
              
              264,859
              
              
              
              -
              
              
              
              264,859Amortization
      and depreciation
              
              
              
              
              
              
              169,900
              
              
              
              -
              
              
              
              169,900Change
      in operating assets and liabilities:Accounts
      receivable
              
              
              
              
              
              
              71,353
              
              
              
              -
              
              
              
              71,353Prepaid
      expenses and deposits
              
              
              
              
              
              
              145,132
              
              
              
              -
              
              
              
              145,132Accounts
      payable and accrued liabilities
              
              E(i)
              
              
              
              247,697
              
              
              
              63,750
              
              
              
              311,447Bonuses
      payable
              
              C(i),
      C(ii)
              
              
              
              489,960
              
              
              
              357,673
              
              
              
              847,633Deferred
      revenue
              
              
              
              
              
              
              (40,708
              )
              
              
              -
              
              
              
              (40,708
              )Cash
      flows from (used in) operating activities
              
              
              
              
              
              
              (4,193,802
              )
              
              
              75,478
              
              
              
              (4,118,324
              )INVESTING
      ACTIVITIESDeferred
      acquisition costs
              
              
              
              
              
              
              (320,264
              )
              
              
              -
              
              
              
              (320,264
              )Net
      proceeds from sales-type lease of domain name
              
              
              
              
              
              
              140,540
              
              
              
              -
              
              
              
              140,540Cash
      consideration for Auctomatic
              
              
              
              
              
              
              (1,530,047
              )
              
              
              -
              
              
              
              (1,530,047
              )Purchases
      of property & equipment
              
              
              
              
              
              
              (182,531
              )
              
              
              -
              
              
              
              (182,531
              )Website
      development costs
              
              
              
              
              
              
              (380,342
              )
              
              
              -
              
              
              
              (380,342
              )Cash
      flows used in investing activities
              
              
              
              
              
              
              (2,272,644
              )
              
              
              -
              
              
              
              (2,272,644
              )FINANCING
      ACTIVITIESDeferred
      financing costs
              
              
              
              
              
              
              (106,055
              )
              
              
              -
              
              
              
              (106,055
              )Net
      loss attributable to non-controlling interest
              
              B
              
              
              
              -
              
              
              
              (75,478
              )
              
              
              (75,478
              )Cash
      flows used in financing activities
              
              
              
              
              
              
              (106,055
              )
              
              
              (75,478
              )
              
              
              (181,533
              )Net
      increase (decrease) in cash and cash equivalents
              
              
              
              
              
              
              (6,572,501
              )
              
              
              -
              
              
              
              (6,572,501
              )Cash
      and cash equivalents, beginning of period
              
              
              
              
              
              
              7,375,245
              
              
              
              -
              
              
              
              7,375,245Cash
      and cash equivalents, end of period
              
              
              
              
              
              $
              802,744
              
              
              $
              -
              
              
              $
              802,744


45





The
following is a summary of the significant effects of the restatements on the
Company’s comparative consolidated statements of equity for the year ended
December 31, 2008 and the nine months ended September 30, 2009.




As
      previously reported
              
              Live
      Current Media StockholdersCommonstock
              
              Additional
      Paid-in Capital
              
              Accumulated
      Deficit
              
              Total
              
              Restatement
      Adjustment
              
              As
      Restated
                Total
              
              Non-Controlling
      Interest
              
              Total
                EquityReference
              
              Number
      of Shares
              
              AmountBalance,
      December 31, 2007 (audited) (as restated)
              
              
              
              21,446,623
              
              $
              12,456
              
              $
              10,188,975
              
              $
              (2,525,678
              )
              $
              7,675,753
              
              $
              (283,218
              )
              $
              7,392,535
              
              $
              8,786
              
              $
              7,401,321Stock-based
      compensation
              
              D,
      G(ii)
              
              -
              
              
              -
              
              
              2,111,354
              
              
              
              
              
              2,111,354
              
              
              51,172
              
              
              2,162,526
              
              
              
              
              
              2,162,526Issuance
      of Common Stock
              
              B
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              -
              
              
              -
              
              
              -
              
              
              66,692
              
              
              66,692Issuance
      of 586,403 common shares per themerger agreement with
      Auctomatic
              
              G(i)
              
              586,403
              
              
              586
              
              
              1,137,533
              
              
              
              
              
              1,138,119
              
              
              110,746
              
              
              1,248,865
              
              
              
              
              
              1,248,865Issuance
      of 33,000 common sharesto investor relations firm
              
              
              
              33,000
              
              
              33
              
              
              85,649
              
              
              
              
              
              85,682
              
              
              -
              
              
              85,682
              
              
              
              
              
              85,682Issuance
      of 120,000 common sharesto investor relations firm
              
              
              
              120,000
              
              
              120
              
              
              218,057
              
              
              
              
              
              218,177
              
              
              -
              
              
              218,177
              
              
              
              
              
              218,177Issuance
      of 50,000 warrantsto investor relations firm
              
              
              
              -
              
              
              -
              
              
              45,500
              
              
              
              
              
              45,500
              
              
              -
              
              
              45,500
              
              
              
              
              
              45,500Cancellation
      of 300,000 common sharesnot distributed
              
              
              
              (300,000
              )
              
              -
              
              
              -
              
              
              
              
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              -Private
      Placement of 1,627,344 unitsat $0.65 per share
              
              F
              
              1,627,344
              
              
              1,627
              
              
              1,056,148
              
              
              
              
              
              1,057,775
              
              
              (157,895
              )
              
              899,880
              
              
              
              
              
              899,880Share
      issue costs
              
              
              
              -
              
              
              -
              
              
              (86,803
              )
              
              
              
              
              (86,803
              )
              
              -
              
              
              (86,803
              )
              
              
              
              
              (86,803
              )Extinguishment
      of accounts payable
              
              
              
              33,000
              
              
              33
              
              
              16,467
              
              
              
              
              
              16,500
              
              
              -
              
              
              16,500
              
              
              
              
              
              16,500Net
      loss and comprehensive loss
              
              A,
      B, C(i), C(ii), D, E(i), E(ii), G(ii)
              
              
              
              
              
              
              
              
              
              
              (10,006,456
              )
              
              (10,006,456
              )
              
              40,248
              
              
              (9,966,208
              )
              
              (96,540
              )
              
              (10,062,748
              )Balance,
      December 31, 2008 (audited) (as restated)
              
              
              
              23,546,370
              
              
              14,855
              
              
              14,772,880
              
              
              (12,532,134
              )
              
              2,255,601
              
              
              (238,947
              )
              
              2,016,654
              
              
              (21,062
              )
              
              1,995,592Stock-based
      compensation
              
              D,
      G(ii)
              
              -
              
              
              -
              
              
              386,513
              
              
              
              
              
              386,513
              
              
              223,830
              
              
              610,343
              
              
              -
              
              
              610,343Issuance
      of 15,000 common sharesto investor relations firm
              
              
              
              15,000
              
              
              15
              
              
              5,685
              
              
              
              
              
              5,700
              
              
              -
              
              
              5,700
              
              
              -
              
              
              5,700Extinguishment
      of accounts payable
              
              
              
              345,075
              
              
              346
              
              
              120,430
              
              
              
              
              
              120,776
              
              
              -
              
              
              120,776
              
              
              -
              
              
              120,776Net
      loss and comprehensive loss
              
              C(ii),
      D, E(i), E(ii), F, G(ii)
              
              
              
              
              
              
              
              
              
              
              (634,647
              )
              
              (634,647
              )
              
              (281,762
              )
              
              (916,409
              )
              
              (8,007
              )
              
              (924,416
              )Balance,
      March 31, 2009 (unaudited) (as restated)
              
              
              
              23,906,445
              
              
              15,216
              
              
              15,285,508
              
              
              (13,166,781
              )
              
              2,133,943
              
              
              (296,879
              )
              
              1,837,064
              
              
              (29,069
              )
              
              1,807,995Stock-based
      compensation
              
              
              
              -
              
              
              -
              
              
              452,487
              
              
              
              
              
              452,487
              
              
              -
              
              
              452,487
              
              
              -
              
              
              452,487Extinguishment
      of accounts payable
              
              
              
              27,823
              
              
              27
              
              
              8,598
              
              
              
              
              
              8,625
              
              
              -
              
              
              8,625
              
              
              -
              
              
              8,625Issuance
      of 91,912 common shares perthe merger agreement with
      Auctomatic
              
              
              
              91,912
              
              
              92
              
              
              (92
              )
              
              
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Net
      loss and comprehensive loss
              
              
              
              
              
              
              
              
              
              
              
              
              (1,404,478
              )
              
              (1,404,478
              )
              
              -
              
              
              (1,404,478
              )
              
              (2,945
              )
              
              (1,407,423
              )Balance,
      June 30, 2009 (unaudited)
              
              
              
              24,026,180
              
              
              15,335
              
              
              15,746,501
              
              
              (14,571,259
              )
              
              1,190,577
              
              
              (296,879
              )
              
              893,698
              
              
              (32,014
              )
              
              861,684Stock-based
      compensation
              
              
              
              -
              
              
              -
              
              
              353,330
              
              
              
              
              
              353,330
              
              
              -
              
              
              353,330
              
              
              -
              
              
              353,330Net
      income (loss) and comprehensive income (loss)
              
              
              
              
              
              
              
              
              
              
              
              
              703,127
              
              
              703,127
              
              
              -
              
              
              703,127
              
              
              23,337
              
              
              726,464Balance,
      September 30, 2009 (unaudited)
              
              
              
              24,026,180
              
              $
              15,335
              
              $
              16,099,831
              
              $
              (13,868,132
              )
              $
              2,247,034
              
              $
              (296,879
              )
              $
              1,950,155
              
              $
              (8,677
              )
              $
              1,941,478




46




(c) Selected
Financial Data





The
following selected financial data was derived from our unaudited interim
consolidated financial statements for the quarter ended September 30,
2009.  The information set forth below should be read in conjunction
with our financial statements and related notes included elsewhere in this
report.




Three
      Months EndedSeptember
      30, 2009
              
              
              September
      30, 2008(Unaudited)
              
              
              (Unaudited)
                (As
      Restated)SALESHealth
      and beauty eCommerce
              
              $
              1,498,265
              
              
              $
              1,934,829Sponsorship
      revenues
              
              
              218,672
              
              
              
              -Domain
      name advertising
              
              
              19,345
              
              
              
              19,855Miscellaneous
      income
              
              
              21,454
              
              
              
              -Total
      Sales
              
              
              1,757,736
              
              
              
              1,954,684COSTS
      OF SALESHealth
      and Beauty eCommerce
              
              
              1,183,479
              
              
              
              1,602,249Total
      Costs of Sales (excluding depreciation and amortization as shown
      below)
              
              
              1,183,479
              
              
              
              1,602,249GROSS
      PROFIT
              
              
              574,257
              
              
              
              352,435OPERATING
      EXPENSESAmortization
      and depreciation
              
              
              21,314
              
              
              
              96,707Amortization
      of website development costs
              
              
              28,967
              
              
              
              29,143Corporate
      general and administrative
              
              
              226,570
              
              
              
              1,014,145ECommerce
      general and administrative
              
              
              63,461
              
              
              
              114,973Management
      fees and employee salaries
              
              
              760,631
              
              
              
              2,171,036Corporate
      marketing
              
              
              3,939
              
              
              
              14,449ECommerce
      marketing
              
              
              107,678
              
              
              
              99,412Other
      expenses
              
              
              -
              
              
              
              20,000Total
      Operating Expenses
              
              
              1,212,560
              
              
              
              3,559,865NON-OPERATING
      INCOME (EXPENSES)Global
      Cricket Venture payments
              
              
              125,000
              
              
              
              -Gain
      from sales and sales-type lease of domain names
              
              
              1,156,554
              
              
              
              -Accretion
      interest expense
              
              
              -
              
              
              
              (56,600
              )Interest
      expense
              
              
              (10,723
              )
              
              
              -Interest
      and investment income
              
              
              3
              
              
              
              7,266Gain
      on restructure of Auctomatic payable
              
              
              29,201
              
              
              
              -Total
      Other Income (Expenses)
              
              
              1,300,035
              
              
              
              (49,334
              )NET
      INCOME (LOSS) BEFORE TAXES
              
              
              661,732
              
              
              
              (3,256,764
              )Deferred
      tax recovery
              
              
              (64,732
              )
              
              
              -CONSOLIDATED
      NET INCOME (LOSS)
              
              
              726,464
              
              
              
              (3,256,764
              )ADD:
      NET INCOME ATTRIBUTABLE TO NON-CONTROLLING INTEREST
              
              
              (23,337
              )
              
              
              -NET
      INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) FORTHE
      PERIOD ATTRIBUTABLE TO LIVE CURRENT MEDIA INC.
              
              $
              703,127
              
              
              $
              (3,256,764
              )INCOME
      (LOSS PER SHARE - BASIC AND DILUTEDNet
      Income (Loss) attributable to Live Current Media Inc. common
      stockholders
              
              $
              0.03
              
              
              $
              (0.15
              )Weighted
      Average Number of Common Shares Outstanding - Basic
              
              
              23,593,205
              
              
              
              21,625,005Net
      Income (Loss) attributable to Live Current Media Inc. common
      stockholders
              
              $
              0.03
              
              
              $
              (0.15
              )Weighted
      Average Number of Common Shares Outstanding - Diluted
              
              
              26,011,464
              
              
              
              21,625,005




47




BALANCE SHEET DATA


September
      30, 2009
              
              
              December
      31, 2008(Unaudited)
              
              
              (Audited)
                (As
      Restated)AssetsCurrent
      Assets
              
              $
              1,694,945
              
              
              $
              2,133,150Long-term
      portion of investment in sales-type lease
              
              
              -
              
              
              
              23,423Property
      & equipment
              
              
              240,147
              
              
              
              1,042,851Website
      development costs
              
              
              242,101
              
              
              
              355,391Intangible
      assets
              
              
              993,505
              
              
              
              1,587,463Goodwill
              
              
              2,606,040
              
              
              
              2,606,040Total
      Assets
              
              $
              5,776,738
              
              
              $
              7,748,318LiabilitiesCurrent
      Liabilities
              
              $
              3,526,208
              
              
              $
              5,333,081Deferred
      income tax
              
              
              129,156
              
              
              
              206,370Deferred
      lease inducements
              
              
              40,276
              
              
              
              55,380Warrants
              
              
              139,620
              
              
              
              157,895Total
      Liabilities
              
              
              3,835,260
              
              
              
              5,752,726Stockholders'
      EquityCommon
      Stock
              
              
              15,335
              
              
              
              14,855Additional
      paid-in capital
              
              
              16,308,713
              
              
              
              14,757,932Accumulated
      deficit
              
              
              (14,373,893
              )
              
              
              (12,756,133
              )Total
      Live Current Media Inc. stockholders' equity
              
              
              1,950,155
              
              
              
              2,016,654Non-controlling
      interest
              
              
              (8,677
              )
              
              
              (21,062
              )Total
      Stockholders' Equity
              
              
              1,941,478
              
              
              
              1,995,592Total
      Liabilities and Stockholders' Equity
              
              $
              5,776,738
              
              
              $
              7,748,318





(d) Results of
Operations





Sales
and Costs of Sales




Quarter
over Quarter Analysis





Overall,
combined sales in Q3 of 2009 totaled $1,757,736 as compared to $1,954,684 in Q3
of 2008, a decrease of 10.1%.  This decrease was driven by the
decrease in sales at Perfume.com as noted below, however it was offset by
sponsorship revenues earned on Cricket.com before its
disposal.  Overall, Health & Beauty eCommerce product sales,
consisting of Perfume.com sales, represented 85.2% of total revenues including
these sponsorship revenues in Q3 of 2009, or 97.3% of total revenues excluding
these sponsorship revenues in Q3 of 2009, compared to approximately 99.0% of
total revenues in Q3 of 2008.  A discussion of the decline in our
revenues is included below.





Costs of
sales were $1,183,479 in Q3 of 2008 compared to $1,602,249 during Q3 of 2008, a
decrease of 26.1%.  This resulted in an overall gross margin in Q3 of
2009 of $574,257, or 32.7%, including sponsorship revenues and $355,585, or
23.1% excluding sponsorship revenues.  This is compared to a gross
margin of $352,435, or 18.0% in Q3 of 2008.  This significant increase
in the overall gross margin in Q3 of 2009 is due to a change in management’s
focus regarding product sale prices and discounts on our Perfume.com website as
discussed below, as well as the implementation of other income opportunities
that require few costs to manage and have a 100% gross margin.




48


Period
over Period Analysis





Total
sales reported year-to-date at September 30, 2009 decreased by $523,593, or
9.1%, over the same period of 2008.  The decrease without
consideration of Cricket.com sponsorship revenues of $218,672 was $742,265, or
12.9%, due primarily to a decline in Perfume.com revenues as described
below.  The decrease in costs of sales period over period of $781,352,
or 16.7% is also consistent with the decline in our eCommerce
business.  Overall gross margin in the nine months ended September 30,
2009 was 22.2% excluding sponsorship revenues, compared to 18.7% in the same
period last year.





Health
and Beauty eCommerce Sales





Our
Perfume.com sales result from the sale of fragrances, designer skin care and
hair care products.  Our results from the nine months ended September
30, 2008 include eCommerce monetization of Body.com which ended in early
2008.  Perfume.com accounted for nearly all of our eCommerce sales in
2008 and 2009 and we expect that this will continue in the short
term.





The
following table summarizes our revenues earned on the sale of Health and Beauty
products during each quarter since January 1, 2008.






Quarter
    Ended
            
            Total Quarterly
      Sales
            
            
            Average Daily
      SalesMarch 31,
    2008
            
            $
            1,816,007
            
            
            $
            19,956June 30,
    2008
            
            
            1,912,217
            
            
            
            21,013September 30,
      2008
            
            
            1,934,829
            
            
            
            21,031December 31,
      2008
            
            
            3,604,003
            
            
            
            39,174Fiscal Year 2008
      Totals
            
            $
            9,267,056
            
            
            $
            25,320March 31,
    2009
            
            $
            1,720,167
            
            
            $
            19,113June 30,
    2009
            
            
            1,663,182
            
            
            
            18,277September 30,
      2009
            
            
            1,498,265
            
            
            
            16,285Year-To-Date 2009
      Totals
            
            $
            4,881,614
            
            
            $
            17,881


The most
recent quarters have presented great challenges for all retailers, including
eCommerce, due to the worldwide economic downturn.  As noted above,
the majority of our revenues come from consumers in the United States, which is
still experiencing a severe recession that has adversely affected consumer
spending on discretionary items.  This decline in discretionary
consumer spending has contributed to the decrease in revenues from
Perfume.com.




Quarter
over Quarter Analysis




Perfume.com
revenues decreased 22.6% to $1,498,265 in Q3 of 2009 from $1,934,829 in Q3 of
2008.  Daily sales averaged $16,285 in Q3 of 2009 compared to $21,031
per day in Q3 of 2008.  This decrease was due both to the decline in
economic conditions and a shift in management’s strategy.  Whereas in
2008 we were focusing on increasing revenues to the detriment of our gross
margin ratios, in 2009 the strategy is to increase gross margins by limiting
aggressive and unprofitable SEO practices and discounts, to increase the value
of the content on the site, and to increase the sales prices of products on our
website.




Perfume.com
revenues decreased 9.9% in Q3 of 2009 over Q2 of 2009, which in turn had
decreased 3.3% over Q1 of 2009.  As noted above, daily sales during Q3
of 2009 averaged $16,285 as compared to daily sales of $18,277 in Q2 of 2009 and
$19,113 in Q1 of 2009.  Management believes that this business
segment, especially with the new strategy of higher engagement and higher
prices, continues to demonstrate strong potential.  This view is
reinforced by the fact that despite the economic decline in the United States
over the last four quarters and management’s implementation of increased prices
for products on our website, the site has continued to perform as
anticipated.  However, it is possible that consumer spending on
discretionary items will continue to decline as the recession in the U.S., from
which we earn the majority of our eCommerce revenues, continues.




49




The
following table summarizes our gross margins and gross margin percentages earned
on the sale of Health and Beauty products during each quarter since January 1,
2008.


Quarter
    Ended
              
              Quarterly Gross
      Margins $
              
              
              Quarterly Gross
      Margin %March 31,
    2008
              
              $
              334,678
              
              
              
              18.4%June 30,
    2008
              
              
              329,150
              
              
              
              17.2%September 30,
      2008
              
              
              332,580
              
              
              
              17.2%December 31,
      2008
              
              
              591,397
              
              
              
              16.4%Fiscal Year 2008
      Totals
              
              $
              1,587,805
              
              
              
              17.1%March 31,
    2009
              
              $
              333,548
              
              
              
              19.4%June 30,
    2009
              
              
              347,435
              
              
              
              20.9%September 30,
      2009
              
              
              314,786
              
              
              
              21.0%Year-To-Date 2009
      Totals
              
              $
              995,769
              
              
              
              20.4%
 Costs of
shipping and purchases totaled $1,183,479 in Q3 of 2009 as compared to
$1,602,249 in Q3 of 2008. This produced a gross margin in Perfume.com of
$314,786 or 21.0% in Q3 of 2009 compared to $332,580 or 17.2% in Q3 of
2008.  Gross profit margins in Q2 of 2009 of $347,435 or 20.9% and Q1
of 2009 of $333,548 or 19.4% demonstrate management’s continued effort to
increase gross margins even at the risk of decreased revenues.  Gross
profit margin in Q3 of 2009 increased by almost 4 percentage points to 21.0%
compared to gross margins of 17.2% in Q3 of 2008, and increased by 0.1
percentage points over Q2 of 2009, which had in turn increased 1.5 percentage
points over Q1 of 2009.  Management continues to research and pursue
opportunities that may contribute to higher gross margin percentages in the
future.  Management anticipates that it will maintain a profit margin
of approximately 20% through 2009.  Over the next several quarters,
management intends to explore opportunities to introduce and implement more
robust supply chain capability which, if realized, should also increase gross
margins by the end of 2010.
  Period
over Period Analysis
  Perfume.com
revenues decreased 13.8% to $4,881,614 in the nine months ended September 30,
2009 from $5,663,053 in the nine months ended September 30,
2008.  Daily sales of $17,881 in the first three quarters of 2009 are
down from daily sales of $20,668 in the first three quarters of
2008.  This decrease was in part due to the decline in economic
conditions; however as management has shifted its focus to increasing gross
margins from increasing gross revenues, we expect this trend to
continue.
  Costs of
shipping and purchases decreased 16.7% to $3,885,845 in the nine months ended
September 30, 2009 from $4,666,645 in the same period of 2008.  This
resulted in a gross margin during the first three quarters of 2009 of $995,769
or 20.4% compared to $996,408 or 17.6% in the first three quarters of
2008.  During and subsequent to the third quarter of 2009, management
has revised our business plan for Perfume.com and is now focused on increasing
gross margins and cutting costs.  As a result, although there has been
decline in revenues period over period, these changes have provided the Company
with healthier gross margins quarter over quarter in 2009.
  Other
eCommerce Sales
  In Q1 of
2008, we ceased offering goods or services for sale on any of our websites other
than Perfume.com and undertook to re-evaluate the business models around which
these websites were built.  As a result, these websites generated no
revenue after the first quarter of the 2008 fiscal year.  For the
remainder of 2009, we will continue to allocate our resources to the
development of Perfume.com.
  50
  Advertising
and Miscellaneous Income
  Quarter
over Quarter Analysis
  In Q3 of
2009, we generated advertising revenues of $19,345 compared to $19,855 in Q3 of
2008, a decrease of 2.6%.  Management terminated its primary
advertising contract in early 2008 because its restrictive conditions limited
monetization in the medium and long term.  Advertising revenues have
decreased every quarter in 2008 and 2009 as a result.  In Q3 of 2009,
advertising accounted for 1.1% of total revenues including sponsorship revenues
and 1.3% excluding these revenues, consistent with 1.0% of total revenues in Q3
of 2008.  Advertising revenues are expected to continue to account for
a small percentage of total revenues in the next few quarters as management
investigates new monetization opportunities with vendors, and seeks to increase
advertising options available on our properties.
  In early
2009, we implemented a new cost sharing arrangement with a related party whereby
we would earn $6,000 per month for providing administrative, technical, and
other services.  This income is classified as miscellaneous and other
income on our consolidated statements of operations.
  Period
over Period Analysis
  During
the nine months ended September 30, 2009, our advertising revenues were $66,715
compared to $75,108 in the same period of 2008, a decrease of
11.2%.  These revenues accounted for 1.3% of total revenues during the
first three quarters of 2009 both including and excluding sponsorship revenues,
consistent with 1.3% during the same period in 2008. As noted above, management
continues to pursue new opportunities to increase advertising revenues, however
we do not expect them to account for a significant portion of our revenue
stream.
  Domain
Name Leases and Sales
  There was
one outright sale of a domain name in the 2008 fiscal year and sales of six
domain names in the first three quarters of 2009, not including
Cricket.com.  Management has successfully raised significant funds in
order to aid in the Company’s liquidity, continues to evaluate expressions of
interest from domain name buyers, and continues to search for other domain names
that would complement either the advertising or eCommerce
businesses.
  General
and Administrative
  Quarter
over Quarter Analysis
  In Q3 of
2009, we recorded total general and administrative expense of $290,031 or 16.5%
of total sales as compared to $1,129,118 or 57.8% of total sales in Q3 of 2008,
a decrease of $839,087 or over 74.3%. This total includes corporate and
eCommerce related general and administrative costs.  Total general and
administrative expenses in Q3 of 2009 have increased by 3.3% compared to Q2 of
2009, which in turn were 20.9% lower than the $366,510 in Q1 of
2009.  Management expects general and administrative expenses to
decrease as a percentage of revenue as the eCommerce business grows and as
continued efforts are made to cut costs, and expects to maintain general and
administrative costs well below 20% of total sales.
  Corporate
general and administrative costs of $226,570 have decreased from the amount of
$1,014,145 in Q3 of 2008 by $787,575, or 77.7%.  One of the
significant costs we incurred during Q3 of 2008 which was not incurred in Q3 of
2009 was approximately $310,000 in payments made both in cash and common stock
for investor relations services.  We also significantly reduced
expenses during Q3 of 2009, including reductions of $34,000 in travel, $19,000
in rent benefits and approximately $49,000 in legal
expenses.  Expenses related to our cricket activities decreased by
approximately $370,000 over Q3 of 2008.  In total, corporate general
and administrative expenses accounted for 12.9% of total revenues in Q3 of 2009,
compared to 12.1% in Q2 of 2009, 18.6% in Q1 of 2009 and 51.9% in Q3 of
2008.
  Corporate
general and administrative costs for Q3 of 2009 have increased by $19,442, or
9.4%, over the $207,128 in Q2 of 2009, which had decreased by $119,226, or
36.5%, over Q1 of 2009.  The slight increase in Q3 of 2009 is due
primarily to an increase in audit and accounting costs during the quarter
related to our recent restatements.
  We have
incurred additional legal expenses to comply with new disclosure and reporting
requirements mandated by the British Columbia Securities Commission (“BCSC”) for
companies listed on the OTCBB with a presence in British
Columbia.  These regulations were effective as of September 15,
2008.
  51
  ECommerce
general and administrative costs, which totaled $63,461 in Q3 of 2009, decreased
by $51,512, or 44.8%, over Q3 of 2008 primarily due to an $8,000 decrease in
merchant fees, $10,400 in decreased internet traffic expenses, and $20,000 in
decreased in travel and accommodations costs, as well as significant foreign
exchange effects due to higher volatility of foreign exchange rates in Q3 of
2009 compared to Q3 of 2008.  These expenses represented 4.2% of
eCommerce sales in Q3 of 2009 compared to 4.4% in Q2 of 2009, 4.7% in Q1 of 2009
and 5.9% in Q3 of 2008.
  ECommerce
general and administrative expenses in Q3 of 2009 decreased by $10,207, or
13.9%, over Q2 of 2009, which in turn had decreased by $6,552, or 8.2%, compared
to Q1 of 2009 primarily due to overall cost cutting measures.  This
downward trend is the culmination of our active efforts to curtail
spending.  Management believes these expense ratios are reasonable
given the increasingly competitive environment for eCommerce sales in the United
States and management’s continued focus on growing the eCommerce business
throughout 2009.
  Period
over Period Analysis
  In the
nine months ended September 30. 2009, we recorded total general and
administrative expense of $972,769 or 18.7% of total sales as compared to
$2,502,241 or 43.6% of total sales in the same period of 2008, a decrease of
over $1,529,472, or 61.1%.  Management has actively curtailed its
spending since early 2009, and expects this trend to continue throughout the
remainder of the year.
  Corporate
general and administrative costs in the nine months ended September 30, 2009 of
$755,420 have decreased by $1,361,540, or more than 64%, compared to $2,116,960
spent in the same period of 2008.  One of the significant costs we
incurred during the nine months ended September 30, 2008 which was not incurred
during the nine months ended September 30, 2009 was approximately $528,000 in
payments made in cash and common stock for investor relations
services.  We also significantly reduced expenses during the nine
months ended September 30, 2009, including reductions of $39,100 in meals and
entertainment, $139,500 in travel, $36,800 in telephone, $16,000 in automobile
allowance and parking costs, and $10,500 in office related
supplies.  The decrease in these expenses was due to management’s
focus in 2009 on cutting costs as well as the decrease in the number of
employees in 2009.  The expenses in the first three quarters of 2009
also decreased by $78,000 in rent benefits and approximately $169,000 in legal
expenses due to our addition in mid-2008 of in-house legal
counsel.  Cricket related expenses included in corporate general and
administrative costs in the first three quarters of 2009 were $21,095, which
represented a decrease of approximately $350,000 over the $370,471 expensed in
first three quarters of 2008.  In total, these expenses accounted for
14.5% of total revenues in the period ended September 30, 2009, compared to
36.9% in the same period of 2008.
  ECommerce
general and administrative costs, which totaled $217,348 in the nine months
ended September 30, 2009, decreased by $167,933, or 43.6%, over the $385,281
expensed in the same period of 2008.  During the first three quarters
of 2008, we spent $105,300 for recruiting costs, which was not repeated during
the same period of 2009.  We also reduced, period over period, $8,100
in domain renewal fees, $6,100 in internet traffic, $27,300 in travel and
accommodation costs related to our Perfume.com business, and $10,000 in merchant
fees due to decreased sales in 2009, as well as significant effects to our
accounts relating to higher volatility of foreign exchange rates in the first
three quarters of 2009 compared to the first three quarters of
2008.  These expenses represented 4.5% of eCommerce sales in the first
three quarters of 2009 compared to 6.8% in the same period of 2008.
  Management
Fees and Employee Salaries
  Quarter
over Quarter Analysis
  In Q3 of
2009, we incurred total management fees and staff salaries of $760,631 compared
to $996,661 in Q2 of 2009 and $1,193,595 in Q1 of 2009.  This amount
includes stock based compensation of $353,331 in Q3 of 2009, $452,487 in Q2 of
2009 and $610,342 in Q1 of 2009.  The management fees and staff
salaries expense in these periods also include accrued amounts for special
bonuses payable to one member on the management team of $12,177 in Q3 of 2009,
$10,427 in Q2 of 2009 and $8,919 in Q1 of 2009.  Excluding the amounts
for bonuses and stock based compensation, normalized management fees and
employee salaries expense in Q3 of 2009 was $395,123, Q2 of 2009 was $533,747
and Q1 of 2009 was $574,334.  This produced a decrease in Q3 of 2009
of 26.0% over Q2 of 2009, which in turn had decreased by 7.1% over Q1 of
2009.  This decrease was primarily due to staff terminations in
2009.
  52
  The
normalized expense in Q3 of 2009 of $395,123 decreased by $863,581, or 68.6%,
over Q3 of 2008.  The decrease was due to the fact that we terminated
several employees in late 2008 and early 2009 and ended various consulting
agreements that existed in 2008.
  Management
fees and staff salaries, excluding stock-based compensation and accrued bonuses,
has been consistent quarter over quarter for the current fiscal year and
represented 22.5% of total revenues in Q3 of 2009 versus 31.3% in Q2 of 2009 and
32.8% in Q1 of 2009.  The comparable amount in Q3 of 2008 represented
64.4% of total revenues during that period.  The decreasing trend is a
result of lay-offs and other active measures to cut costs.  Management
believes that it is reasonable for the Company to maintain salaries expense at
approximately 20% of total revenues.
  Period
over Period Analysis
  During
the nine months ended September 30, 2009, we incurred total management fees and
staff salaries of $2,950,887 compared to $4,934,207 in the comparative period of
2008, a decrease of over 40%.  This amount includes stock based
compensation of $1,416,160 and $1,633,873 in the 2009 period and 2008 period
respectively.  It also includes accrued amounts for special and
performance bonuses payable to management and employees of $31,523 in the first
three quarters of 2009 and $606,343 in the first three quarters of
2008.  Excluding these amounts, normalized management fees and
employee salaries expense was $1,503,204 in the nine months ended September 30,
2009 compared to $2,693,991 in the same period of 2008, resulting in a decrease
of 44.2% period over period.  This decrease was primarily due to the
fact that we terminated several employees in early 2009, as well as decreased
costs related to our activities in Cricket.  Cricket related expenses
included in management fees and salaries in the three quarters ended September
30, 2009 were $424,425, while during the same period of 2008 these expenses
totaled $630,065.  In August 2009, we terminated our activities
related to the cricket venture.
  Marketing
  Quarter
over Quarter Analysis
  We
acquire internet traffic by pay-per-click, email and affiliate
marketing.  In Q3 of 2009, we incurred total marketing expenses of
$111,617, or 6.4% of total revenues, compared to $121,186, or 7.1% of total
revenues, in Q2 of 2009 and $115,298, or 6.6% of total revenues in Q1 of 2009,
and $113,861, or 5.8% of total revenues, in Q3 of 2008.
  Included
in this total were corporate marketing expenses of $3,939 in Q3 of 2009 compared
to $6,221 in Q2 of 2009, $3,876 in Q1 of 2009, and $14,449 in Q3 of
2008.  These amounts have remained consistently low throughout
2009.  The larger expenses we incurred during Q3 of 2008 related to an
increase in news releases and public relations last year arising from our
decision to reposition and rebrand the Company.
  ECommerce
marketing expenses in Q3 of 2009 were $107,678, or 7.2% of eCommerce sales,
compared to $114,965, or 6.9%, in Q2 of 2009, $111,422, or 6.5%, in Q1 of 2009
and $99,412, or 5.1% of eCommerce sales, in Q3 of 2008.  These
expenses have been consistent since mid-2008 due to increased effective email
marketing campaigns for Perfume.com.  Management believes that
customer acquisition is the key to accelerated growth, and direct, measurable
marketing vehicles like search, email, and affiliates account for the largest
part of these marketing expenditures.
  Period
over Period Analysis
  During
the first three quarters of 2009, we incurred $348,101 in marketing costs, or
6.7% of total revenues, compared to $439,635, or 7.7% of total revenues in the
same period of 2008.
  Included
in this total was $14,036 in corporate marketing expenses in the 2009 period
compared to $61,151 in the 2008 period, a decrease of over $47,115 or
77.1%.  This decrease was primarily due to a $47,000 reduction in
public relations services in 2009. Corporate marketing expenses included
costs related to our cricket activities totaling $6,787 in the first three
quarters of 2009 compared to $9,487 in the first three quarters of
2008.  Corporate marketing costs in both periods account for a small
percentage of total revenues.
  53
  ECommerce
marketing expenses during the period ended September 30, 2009 were $334,065
compared to $378,484 in the comparative period in 2008.  The decrease
of $44,419 or 11.7% period over period was due to a decrease of approximately
$32,000 in pay-per-click advertising campaigns and email advertising campaigns
combined, and a reduction of $10,000 in general advertising costs during the
first three quarters of 2009 compared to the same period in 2008 as management
continues to explore cost-effective ways to drive revenues and
traffic.  ECommerce marketing costs in the first three quarters of
2009 accounted for 6.8% of eCommerce sales and were consistent with 6.6% in the
first three quarters of 2008.  Management believes it is reasonable to
expect eCommerce marketing costs to remain under 10% of eCommerce
sales.
  Our
websites’ search rankings currently perform adequately however management
believes targeted keywords advertising at opportune times will bring additional
traffic to Perfume.com.
  Other
Expenses
  During
the first quarter of 2008, we incurred various unusual and one-time costs
totaling $629,856.  During Q2 of 2008, we incurred similar
restructuring costs including $31,691 in valuation costs relating to the payment
of amounts owed to the Company by its subsidiary, DHI, with shares of DHI common
stock which were issued in Q1 2008, and $2,000 in some final windup costs
related to the FT disposition in late 2007.  During Q3 of 2008, we
incurred $20,000 in costs related to engaging a firm to pursue capital financing
opportunities that were terminated subsequent to the 2008 year
end.  Total other expenses for the nine months ended September 30,
2008 were $683,547.
  During Q1
of 2009, we incurred various restructuring costs of $264,904 consisting of
severance payments to our former President and Chief Operating Officer and to
other staff terminated in the first quarter as a result of restructuring our
staffing requirements.  There were no such expenses in Q2 or Q3 of
2009.
  Global
Cricket Venture
  We
incurred $227,255 in the first quarter of 2009, $155,968 in the second quarter
of 2009, and $69,084 in the third quarter of 2009 relating to Global Cricket
Venture, sometimes referred to in this report as “GCV”.  These costs
relate to, but are not limited to, expenditures for business development,
travel, marketing consulting, and salaries.  As such, the costs have
been reported as $6,787 of corporate marketing, $424,425 of management fees and
employee salaries, and $21,095 of corporate general and administrative
expenses.  On March 31, 2009, the Company, GCV, the BCCI and the IPL
amended the MOUs.  The Company and the BCCI jointly entered into a
Termination Agreement, pursuant to which the BCCI Memorandum was
terminated.  On the same date, the Company, GCV and the BCCI, on
behalf of the IPL, entered into a Novation Agreement with respect to the IPL
Memorandum.  Under the Novation Agreement, the combined $1 million
owed to the BCCI and the IPL at December 31, 2008 was reduced to $500,000,
consisting of $125,000 owed to the BCCI and $375,000 owed to the
IPL.  We accounted for our economic obligations to the BCCI and IPL
based on the schedule of payments included in the Memoranda of Understanding
(“MOUs”) by accruing individual payments as liabilities based on the payment
schedule, and expensed such payments in the related period as a current expense
as the minimum guaranteed payments owing to the BCCI and IPL had no future
benefit to the Company.  The responsibility for this payment was
assumed by, and the benefits associated with the MOU formerly held by the
Company were transferred to, GCV through the Novation
Agreement.  During the first quarter of 2009, the Company also accrued
the payment of $625,000 that was due to be paid to the BCCI on January 1,
2009.  As a result of the Novation Agreement, the consolidated
financial statements for the six months ended June 30, 2009 reflected a gain on
settlement of GCV related payments of $250,000.
  Subsequently,
in August 2009, GCV transferred and assigned to an unrelated third party
(“Mauritius”) all of its rights, title, and interest in and to the original MOU
with the IPL, as the original MOU was amended by the Novation Agreement that was
signed on March 31, 2009.  Pursuant to this agreement, Mauritius also
agreed to assume and be liable for all past and future obligations and
liabilities of GCV arising from the original MOU, as it was amended by the
Novation.  As a result, the $750,000 that was payable to the BCCI and
IPL was assumed and paid by Mauritius during the third quarter of
2009.
  54
  We also
agreed to sell the cricket.com domain name, along with the website, content,
copyrights, trademarks, etc., to a company related to Mauritius for
consideration of four equal payments of $250,000.  In order to
facilitate the transfer of the Cricket.com website, we agreed to provide
Mauritius with support services for a period of no more than 6 months (the
“Transition Period”).  In exchange for the support services, Mauritius
has agreed to the payment of certain expenses related to the support
services.  The cricket.com domain name shall remain the property of
the Company until all payments have been made.    The first
instalment of $250,000 was received in September 2009.  Collectibility
of the remaining three instalments is not reasonably assured, therefore we have
only recognized the first $250,000 in our calculation of the gain on sales-type
lease of cricket.com as discussed below.
  We
accounted for these transactions under ASC 605-25, Multiple Element
Arrangements.As a result, the gain on the sales type lease of
cricket.com, the gain on settlement upon assignment and assumption of amounts
due under the Novation Agreement, as well as the support services we are to
provide to Mauritius during the transition period, are to be recognized over the
six month transition period, or from September 2009 to February
2010.  As a result, the Company recognized one/sixth of the gain on
settlement of the amounts owing under the Novation Agreement and one/sixth of
the gain on sales-type lease of cricket.com during the third quarter of
2009.  Refer to Note 6 in our interim consolidated financial
statements attached as Item 1.
  These two
agreements will result in our full exit from the Cricket business with the
exception of interim support services which we have agreed to provide for a
period of six months.
  (e) Liquidity and
Capital Resources
  We
generate revenues from the sale of third-party products over the internet,
“pay-per-click” advertising, and by selling advertising on media rich websites
with relevant content. However, during the 2008 fiscal year our revenues were
not adequate to support our operations. In order to conserve cash, we paid
certain service providers with shares of our common stock during the first three
quarters of 2009 and sold or leased some of our domain name assets, in order to
better manage our liquidity and cash resources.
  As at
September 30, 2009, current liabilities were in excess of current assets
resulting in a working capital deficiency of $1,831,263, compared to a working
capital deficiency of $3,199,931 at the fiscal year ended December 31,
2008.  During the three months ended September 30, 2009, we incurred
net income of $703,127 and an increase in cash of $929,939 compared to a net
loss of $3,256,764 and a decrease in cash of $1,095,196 over the three month
period ended September 30, 2008.  During the nine months ended
September 30, 2009, we incurred a net loss of $1,617,760 and a decrease in cash
of $596,115 compared to a net loss of $7,419,687 and a decrease in cash of
$6,572,501 for the same nine month period of last year.  From the
beginning of the fiscal year to September 30, 2009, we increased our accumulated
deficit to $14,373,893 from $12,756,133 and have stockholders’ equity of
$1,941,478.
  The net
loss in the nine months ended September 30, 2009 included a $590,973 impairment
loss related to the auction software acquired pursuant to the merger with
Auctomatic in May 2008.  Refer to Note 8 of our interim consolidated
financial statements.
  The
decrease in cash for the nine month period primarily included cash outlays to
pay off some large accounts payable that had been accrued at the December 31,
2008 fiscal year end.  Other payments that were either unusual or
non-operational in nature included expenses that were paid during the period
related to Global Cricket Venture.
  Operating
Activities
  Operating
activities in the nine months ended September 30, 2009 resulted in cash outflows
of $3,405,744 after adjustments for non-cash items, the most significant of
which were the stock-based compensation expensed during the period of
$1,416,160, offsetting the special bonuses accrued in the amount of $204,127,
the decrease in accounts payable and accrued liabilities of $1,169,274, and the
gain from the sales and sales-type lease of domain names of
$2,101,421.  In the nine months ended September 30, 2008, cash
outflows of $4,007,578 were primarily due to the loss of the period offset by
stock-based compensation expensed during the period of $1,633,873 and bonuses
accrued of $847,633.
  55
  Investing
Activities
  Investing
activities during the nine months ended September 30, 2009 generated cash
inflows of $2,797,244, primarily due to $2,989,051 in net proceeds received from
the sale and sales-type lease of domain names.  During the nine months
ended September 30, 2008, we generated cash outflows of $2,383,390 primarily due
to the cash consideration of $1,640,793 paid in conjunction with the Auctomatic
merger, deferred acquisition costs of $320,264, the investment of approximately
$182,531 in property and equipment, and $380,342 in website
development.
  Financing
Activities
  The
effect to financing activities for the nine months ended September 30, 2009 and
2008 was the attribution of income to our non-controlling interest of
$12,385.  The nine months ended September 30, 2008 included the
attribution of losses to our non-controlling interest of $75,478 as well as
deferred financing costs of $106,055.
  Future
Operations
  At
quarter end, we had a working capital deficiency, and for over the past two
fiscal years we have experienced substantial losses.  We expect to
continue to incur losses in the coming quarters even though costs have been
reduced through lay-offs and restructuring.  We may also seek to
explore new business opportunities, including the partnering, building or
acquiring of a distribution center or warehouse in the United States to enhance
our fragrance fulfillment capability and improve gross margins.  These
acquisitions may require additional cash beyond what is currently available and
such funds may be raised by future equity and/or debt financings, and through
the sale of non-core domain name assets.
  We are
pursuing opportunities to increase cash flows, however there is no certainty
that these opportunities will generate sufficient cash flows to support our
activities in the future in view of changing market
conditions.  During the 2009 fiscal year, we expect to expend
significant funds toward additional marketing costs, which we believe will
translate into higher revenue growth.  There is no certainty that the
profit margins we may generate going forward, as well as any successful raising
of working capital, will be sufficient to offset the anticipated marketing costs
and other expenditures and may result in net cash outflow for the 2009 fiscal
year.
  We have
actively curtailed some operations and growth activities in an effort to reduce
costs and preserve cash on hand.  We have sold selected domain names
in order to address short term liquidity needs.  Two domain names were
sold or leased during the first quarter of 2009 for $755,000.  In the
second quarter of 2009, we sold an additional domain name for proceeds of
$400,000.  In the third quarter of 2009, we sold an additional four
domain names for $1.825 million in addition to the agreements that were reached
with Mauritius relating to cricket.com.  We believe that these
strategic sales of domain names will provide us with the required cash to meet
our working capital needs and provide for general operating capital needs over
the next 12 to 18 months.  We also anticipate that we may enter into
future sales of domain names if we require further additions to our working
capital.  There can be no assurances that any future sales of domain
names on terms acceptable to us will occur or that such sales, if they do occur,
will provide us with enough money to meet our operating expenses.
  The
interim consolidated financial statements have been prepared on a going concern
basis which assumes that we will be able to realize assets and discharge
liabilities in the normal course of business for the foreseeable
future.  Our ability to continue as a going-concern is in substantial
doubt as it is dependent on continued financial support from our investors, our
ability to sell additional non-core domain names, our ability to raise future
debt or equity financings, and the attainment of profitable operations to meet
our liabilities as they become payable.  The outcome of our operations
and fundraising efforts is dependent in part on factors and sources beyond our
control that cannot be predicted with certainty.  Access to future
debt or equity financing is not assured and we may not be able to enter into
arrangements with financing sources on acceptable terms, if at
all.  The financial statements do not include any adjustments relating
to the recoverability or classification of assets or the amounts or
classification of liabilities that might be necessary should we be unable to
continue as a going concern.
  56
  We expect
to achieve an improved financial position and enhanced liquidity by establishing
and carrying out a plan of recovery as discussed in Amendments No. 1 and No. 2
to our Annual Report on Form 10-K.





We have
no current plans to purchase any significant property and
equipment.





Off-Balance
Sheet Arrangements




As of
September 30, 2009, we did not have any off-balance sheet arrangements,
including any outstanding derivative financial instruments, off-balance sheet
guarantees, interest rate swap transactions or foreign currency
contracts.   We do have off-balance sheet commitments as
disclosed in the notes to the interim consolidated financial statements,
included in Item 1 to this Report.  We do not engage in trading
activities involving non-exchange traded contracts.




(f) Application
of Critical Accounting Policies




Our
interim consolidated financial statements and accompanying notes are prepared in
accordance with United States generally accepted accounting
principles.  Preparing financial statements requires management to
make estimates and assumptions that affect the reported amounts of assets,
liabilities, revenue, and expenses. These estimates and assumptions are affected
by management's application of accounting policies.  We believe that
understanding the basis and nature of the estimates and assumptions is critical
to an understanding of our operating results and financial
position.




Principles
of consolidation




The
consolidated financial statements include our accounts, our wholly owned
subsidiary Delaware, our wholly-owned subsidiary LCM Cricket Ventures, our 98.2%
(December 31, 2008 – 98.2%) interest in our subsidiary DHI, DHI’s wholly owned
subsidiaries Importers and 612793, and LCM Cricket Ventures’ 50.05% interest in
Global Cricket Venture.  All significant intercompany balances and
transactions are eliminated on consolidation.




Business
Combinations




On the
acquisition of a subsidiary, the purchase method of accounting is used whereby
the purchase consideration is allocated to the identifiable assets and
liabilities on the basis of fair value at the date of acquisition.  We
consider critical estimates involved in determining any amount of goodwill, and
test for impairment of such goodwill as disclosed in our Goodwill accounting
policy below.




Revenue
Recognition




Revenues,
and associated costs of goods sold, from the on-line sales of products,
currently consisting primarily of fragrances and other beauty products, are
recorded upon delivery of products and determination that collection is
reasonably assured.  We record inventory as an asset for items in
transit as title does not pass until received by the customer.  All
associated shipping and handling costs are recorded as cost of goods sold upon
delivery of products.




Web
advertising revenue consists primarily of commissions earned from the referral
of visitors from our websites to other parties.  The amount and
collectibility of these referral commissions is subject to uncertainty;
accordingly, revenues are recognized when the amount can be determined and
collectibility can be reasonably assured.  In accordance with FASB
Accounting Standards Codification (“ASC”) 605-45-45, Revenue Recognition - Principal
Agent Considerations, we record web advertising revenues on a gross
basis.




Sponsorship
revenues consist of sponsorships related to past cricket tournaments that are
receivable based on our prior agreements relating to the Cricket.com website.
Revenues are recognized once collectibility is reasonably assured.




Gains
from the sale of domain names, whose carrying values are recorded as intangible
assets, consist primarily of funds earned for the transfer of rights to domain
names that are currently in our control.  Revenues have been
recognized when the sale agreement is signed and the collectibility of the
proceeds is reasonably assured.  In the first three quarters of 2009,
there were six sales of domain names, not including
Cricket.com.  Collectibility of the amounts owing on these sales are
reasonably assured and therefore accounted for as a sale in the period the
transaction occurred.  In 2008, there was a sale of one domain
name.  Collectibility of the amounts owing on this sale is reasonably
assured and therefore accounted for as a sale in the period the transaction
occurred.




57




Gains
from the sales-type leases of domain names, whose carrying values are recorded
as intangible assets, consist primarily of funds earned over a period of time
for the transfer of rights to domain names that are currently in our
control.  When collectibility of the proceeds on these transactions is
reasonably assured, the gain on sale is accounted for as a sales-type lease in
the period the transaction occurs.  In the nine months ended September
30, 2009, there was a sales-type lease of a domain name where collectibility of
future payments owing on this sale were not reasonably
assured.  Therefore, the gains were recorded based only on the amounts
that were reasonably assured.  The contract for the sales-type lease
was breached in Q2 of 2009, however there was no effect to the financial
statements.  In 2008, there was one sales-type lease of a domain
name.  See also Note 12 to our interim consolidated financial
statements.




Stock-Based
Compensation




Beginning
July 1, 2007, we began accounting for stock options under the provisions of ASC
718, Stock
Compensation, which requires the recognition of the fair value of
stock-based compensation. Under the fair value recognition provisions for ASC
718, stock-based compensation cost is estimated at the grant date based on the
fair value of the awards expected to vest and is recognized as expense ratably
over the requisite service period of the award. We have used the Black-Scholes
valuation model to estimate fair value of our stock-based awards which require
various judgmental assumptions including estimating price volatility and
expected life. Our computation of expected volatility is based on a combination
of historic and market-based implied volatility. In addition, we consider many
factors when estimating expected life, including types of awards and historical
experience. If any of these assumptions used in the Black-Scholes valuation
model change significantly, stock-based compensation expense may differ
materially in the future from what is recorded in the current
period.




In August
2007, our board of directors approved a Stock Incentive Plan to make available
5,000,000 shares of common stock to be awarded as restricted stock awards or
stock options, in the form of incentive stock options (“ISO”) to be granted to
our employees, and non-qualified stock options to be granted to our employees,
officers, directors, consultants, independent contractors and advisors, provided
such consultants, independent contractors and advisors render bona-fide services
not in connection with the offer and sale of securities in a capital-raising
transaction or promotion of our securities.  Our shareholders approved
the Stock Incentive Plan at the 2008 Annual General Meeting.




We
account for equity instruments issued in exchange for the receipt of goods or
services from other than employees in accordance with ASC 718 and the
conclusions reached by ASC 505-50.  Costs are measured at the estimated
fair market value of the consideration received or the estimated fair value of
the equity instruments issued, whichever is more reliably measurable.  The
value of equity instruments issued for consideration other than employee
services is determined on the earliest of a performance commitment or completion
of performance by the provider of goods or services as defined by ASC
505-50.




On March
25, 2009, our Board of Directors approved a reduction in the exercise price of
stock option grants previously made under the 2007 Incentive Stock Option
Plan.  No other terms of the plan or the grants were
modified.




Inventory




Inventory
is recorded at the lower of cost or market using the first-in first-out (FIFO)
method.  We maintain little or no inventory of perfume which is
shipped from the supplier directly to the customer.  The inventory on
hand as at September 30, 2009 is recorded at cost of $50,146 (December 31, 2008
- $74,082) and represents inventory in transit from the supplier to the
customer.




58




Website
Development Costs




We
adopted the provisions of ASC 350-50-25,, Website Development Costs,
whereby costs incurred in the preliminary project phase are expensed as
incurred; costs incurred in the application development phase are capitalized;
and costs incurred in the post-implementation operating phase are expensed as
incurred.  Website development costs are stated at cost less
accumulated amortization and are amortized using the straight-line method over
its estimated useful life.  Upgrades and enhancements are capitalized
if they result in added functionality which enables the software to perform
tasks it was previously incapable of performing.




Intangible
Assets




We
adopted the provision of ASC 350, Intangibles - Goodwill and
Other, which revises the accounting for purchased goodwill and intangible
assets. Under ASC 350, goodwill and intangible assets with indefinite lives are
no longer amortized and are tested for impairment annually. The determination of
any impairment would include a comparison of estimated future operating cash
flows anticipated during the remaining life with the net carrying value of the
asset as well as a comparison of our fair value to book value.




Our
intangible assets, which consist of its portfolio of generic domain names, have
been determined to have an indefinite life and as a result are not
amortized.  Management has determined that there is no impairment of
the carrying value of intangible assets at September 30, 2009.




Goodwill




Goodwill
represents the excess of acquisition cost over the fair value of the net assets
of acquired entities. In accordance with ASC
350-20, Goodwill, we
are required to assess the carrying value of goodwill annually or whenever
circumstances indicate that a decline in value may have occurred, utilizing a
fair value approach at the reporting unit level. A reporting unit is the
operating segment, or a business unit one level below that operating segment,
for which discrete financial information is prepared and regularly reviewed by
segment management.




The
goodwill impairment test is a two-step impairment test. In the first step, we
compare the fair value of each reporting unit to its carrying value. We determine the fair
value of our reporting units using a discounted cash flow approach. If the fair value of the
reporting unit exceeds the carrying value of the net assets assigned to that
reporting unit, goodwill is not impaired and we are not required to perform
further testing. If the carrying value of
the net assets assigned to the reporting unit exceeds the fair value of the
reporting unit, then we must perform the second step in order to determine the
implied fair value of the reporting unit’s goodwill and compare it to the
carrying value of the reporting unit’s goodwill. The activities in the
second step include valuing the tangible and intangible assets and liabilities
of the impaired reporting unit based on their fair value and determining the
fair value of the impaired reporting unit’s goodwill based upon the residual of
the summed identified tangible and intangible assets and
liabilities.




We
assessed the carrying value of goodwill at the December 31, 2008 fiscal year
end, and there are no indications that a decline in value may have occurred to
September 30, 2009.  At that date, the fair value of the Perfume.com
reporting unit exceeded the carrying value of the assigned net assets, therefore
no further testing was required and an impairment charge was not
required.




(g) Recent
Accounting Pronouncements




See Item
1 of Part 1, “Financial Statements – Note 3 – Summary of Significant Accounting
Policies – Recent Accounting Pronouncements” and “Financial Statements – Note 3
– Summary of Significant Accounting Policies – Recently Adopted Accounting
Pronouncements”.




(h) Subsequent
Events




On
November 10, 2009 we entered into an amendment (the “Amendment”) to the
employment agreement dated May 31, 2007 with Mr. C. Geoffrey Hampson, our Chief
Executive Officer.  The Amendment has an effective date of October 1,
2009.




59




Pursuant
to the Amendment, Mr. Hampson’s annual salary has been reduced from $300,000 to
$120,000 as of February 1, 2009.  The effect of the decrease in salary
for the period of February 1, 2009 to September 30, 2009 has been reflected in
the Company’s interim financial statements ended September 30,
2009.  The portion of Mr. Hampson’s salary that was deferred during
the period beginning on February 1, 2009 and ending on September 30, 2009 in the
amount of $80,000, less any amounts as are required by law to be withheld, is to
be converted to equity and paid in restricted shares of our common
stock.  The number of shares of common stock to be issued will be
computed using the closing price of the common stock on December 1,
2009.  All amounts are expressed in Canadian dollars.




The
Amendment adds the following language to the definition of “change of control of
the company”: (a)  if the incumbent Board of Directors (the “Incumbent
Board”) ceases to constitute a majority of the Company’s Board of Directors for
any reason(s) other than (i) the voluntary resignation of one or more Board
members; (ii) the refusal by one or more Board members to stand for election to
the Board; and/or (iii) the removal of one or more Board members for good cause;
provided, however, (1)that if the nomination
or election of any new director of the Company was approved by a vote of at
least a majority of the Incumbent Board, such new director shall be deemed a
member of the Incumbent Board; and (2) that no individual shall be considered a
member of the Incumbent Board if such individual initially assumed office (A) as
a result of either an actual or threatened director election contest wherein a
person or group of persons opposed a solicitation made by the Company with
respect to the election or removal of directors at any annual or special meeting
of the Company’s shareholders, or (B) as a result of a solicitation of proxies
or consents by or on behalf of any person other than the Company or its
designated representatives (a “Proxy Contest”), or (C) as a
result of any agreement intended to avoid or settle any director election
contest or Proxy Contest; (b) any cancellation or nonrenewal of the Company’s
directors and officers insurance coverage without the approval of the Executive
or the majority of the Incumbent Board; or (c) as a result of a successful
tender offer.




The
Amendment also includes a provision that allows any bonus paid to Mr. Hampson to
be paid in common stock, in cash or in a combination of cash and common
stock.  The entitlement to, amount and form of bonus remuneration must
be determined and approved by the Board of Directors in its sole
discretion.




On
November 13, 2009 we also entered into a second amendment to the Employment
Severance Agreement dated February 4, 2009 with Jonathan Ehrlich, our former
President and Chief Operating Officer.




Pursuant
to the second amendment, the severance allowance remaining to be paid and all
additional benefits owed to Mr. Ehrlich as of November 16, 2009 in the gross
amount of $109,375 will be paid in a lump sum payment less all applicable
withholdings rather than over a period of 10 months.  Furthermore, Mr.
Ehrlich agrees to waive all of the net monthly equity payments that we are
obligated to pay him under the Employment Severance Agreement and will accept
$20,000 cash, less all applicable withholdings, in lieu thereof. All amounts are
expressed in Canadian dollars.




Item 3:Quantitative and Qualitative
Disclosures about Market Risk




Not
required.




Item 4T: Controls and
Procedures.




Evaluation
of Disclosure Controls and Procedures




As of
September 30, 2009, we carried out an evaluation, under the supervision of and
with the participation of our Chief Executive Officer and Principal Financial
Officer, of the effectiveness of the design and operation of our disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Our
disclosure controls and procedures are designed to ensure that information
required to be disclosed in the reports we file or submit under the Exchange Act
is recorded, processed, summarized and reported within the time periods
specified in the SEC’s rules and forms, and that such information is accumulated
and communicated to our management, including our Chief Executive Officer and
Principal Financial Officer, to allow timely decisions regarding required
disclosures.




60




Our
management, with the participation of our Chief Executive Officer and Principal
Financial Officer, has concluded that, as of September 30, 2009, our disclosure
controls and procedures were not effective because of the material weakness in
our internal control over financial reporting described below.




A
material weakness is a deficiency, or a combination of deficiencies, in internal
control over financial reporting, such that there is a reasonable possibility
that a material misstatement of the Company’s annual or interim financial
statements will not be prevented or detected on a timely basis. The material
weakness in our internal control over financial reporting resulted from our
failure to maintain effective processes and controls over the accounting for and
reporting of complex and non-routine transactions. Specifically, we do not have
an appropriate level of technical knowledge, experience and training in the
accounting for business combinations, stock-based compensation, deferred income
taxes and financial statement disclosure.  These control deficiencies
resulted in the restatement of our financial statements for the quarter ended
March 31, 2009 and the fiscal years ended December 31, 2008 and
2007.  The Company is actively working with outside consultants to
attempt to remediate these deficiencies.




Changes
in Internal Controls




During
the quarter covered by this report, there was no change in our internal control
over financial reporting that has materially affected, or is reasonably likely
to materially affect, our internal control over financial
reporting.




61




PART
II - OTHER INFORMATION





Item 1: Legal
Proceedings.




We are
not aware of any pending or threatened material legal proceedings that arose
during the quarter.




Item 1A: Risk
Factors.




Not
required.




Item 2: Unregistered Sales
of Equity Securities and Use of Proceeds.




During
the quarter of the fiscal year covered by this report, (i) we did not modify the
instruments defining the rights of our shareholders, and (ii) no rights of any
shareholders were limited or qualified by any other class of
securities.




During Q3
of 2009, we did not issue any unregistered equity securities.




Item 3: Defaults Upon Senior
Securities.




During
the quarter of the fiscal year covered by this report, no material default has
occurred with respect to any indebtedness of ours.  Also, during this
quarter, no material arrearage in the payment of dividends has
occurred.




Item 4: Submission of
Matters to a Vote of Security Holders.




No matter
was submitted to a vote of security holders, through the solicitation of proxies
or otherwise, during the three months of the fiscal year covered by this
report.




Item 5: Other
Information.




During
the quarter of the fiscal year covered by this report, we reported all
information that was required to be disclosed in a report on Form
8-K.




62




Item 6:
Exhibits.





(A)Index to and Description of
Exhibits.





EXHIBIT
            DESCRIPTION10.1
            Form
      of Convertible Promissory Note dated August 17, 2009 issued to certain
      shareholders of Entity, Inc. (1)10.2
            Assignment
      and Assumption Agreement dated August 20, 2009 between Global Cricket
      Venture Pte., Ltd. and Global Cricket Ventures Limited (Mauritius)
      (2)10.3
            Cricket.com
      Lease and Transfer Agreement dated August 20, 2009 between Domain Holdings
      Inc. and Global Cricket Ventures Limited (2)10.4
            Settlement
      Agreement and Release dated August 27, 2009 between Harjeet Taggar and
      Live Current Media Inc. (2)10.5
            Settlement
      Agreement and Release dated August 27, 2009 between Kulveer Taggar and
      Live Current Media Inc. (2)31.1
            Rule
      13a-14(a)/15d-14(a) Certification of Chief Executive
    Officer*31.2
            Rule
      13a-14(a)/15d-14(a) Certification of Principal Financial
      Officer*32.1
            Section
      906 Certificate of Chief Executive Officer and Principal Financial
      Officer*


* Filed
herewith.


(1)
Incorporated by reference from the Current Report on Form 8-K filed by the
registrant with the Securities and Exchange Commission on August 21,
2009.


(2)
Incorporated by reference from the Current Report on Form 8-K filed by the
registrant with the Securities and Exchange Commission on August 31,
2009.





63





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.






LIVE CURRENT MEDIA
      INC.Dated:November 16,
      2009
              By:
              /s/ C.
      Geoffrey HampsonName:
              C.
      Geoffrey HampsonTitle:
              CEO
      and Chairman of the Board
                (Principal
      Executive Officer)Dated:November 16,
      2009
              By:
              /s/ C. Geoffrey
      HampsonName:
              C.
      Geoffrey HampsonTitle:
              Principal
      Financial Officer
  64