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 June 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





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 September 21, 2009




2





LIVE CURRENT MEDIA INC.


REPORT ON FORM 10-Q


QUARTER ENDED JUNE 30, 2009


TABLE OF CONTENTS







PART I.
Financial Information
4Item 1.
Unaudited Financial Statements
4Consolidated Balance Sheets as of June 30, 2009 and December 31, 2008
5Consolidated Statements of Operations for the periods ended June 30, 2009 and June 30, 2008
6Consolidated Statement of Stockholders’ Equity for the periods ended June 30, 2009 and December 31, 2008
7Consolidated Statements of Cash Flows for the periods ended June 30, 2009 and June 30, 2008
8Notes to the Consolidated Financial Statements
9Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
39Item 3.
Quantitative and Qualitative Disclosures About Market Risk
61Item 4T.
Controls and Procedures
61PART II.
Other Information
63Item 1.
Legal Proceedings
63Item 1A.
Risk Factors
63Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
63Item 3.
Defaults Upon Senior Securities
63Item 4.
Submission of Matters to a Vote of Security Holders
63Item 5.
Other Information
63Item 6.
Exhibits
64Signatures

65Certifications




3




PART  I - FINANCIAL INFORMATION





Item 1: Financial Statements.





LIVE CURRENT MEDIA INC.
 (formerly COMMUNICATE.COM INC.)
   CONSOLIDATED FINANCIAL STATEMENTS
 
 JUNE 30, 2009
 
 (UNAUDITED)
 
  CONSOLIDATED BALANCE SHEETSCONSOLIDATED STATEMENTS OF OPERATIONSCONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITYCONSOLIDATED STATEMENTS OF CASH FLOWSNOTES 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)
   June 30,2009


December 31,2008(unaudited)


(audited)(As Restated -
See Note 2)ASSETSCurrentCash and cash equivalents

$
306,466


$
1,832,520Accounts receivable (net of allowance for doubtful accounts of nil)


62,225



93,582Prepaid expenses and deposits


147,044



109,543Inventory


42,592



74,082Current portion of receivable from sales-type lease (Note 12)


23,423



23,423Total current assets


581,750



2,133,150Long-term portion of receivable from sales-type lease (Note 12)


-



23,423Property & equipment (Note 8)


259,766



1,042,851Website development costs (Note 9)


292,551



355,391Intangible assets


1,491,449



1,587,463Goodwill (Notes 5 and 7)


2,606,040



2,606,040Total Assets

$
5,231,556


$
7,748,318LIABILITIES AND STOCKHOLDERS' EQUITYCurrentAccounts payable and accrued liabilities

$
2,133,506


$
3,047,993Amounts payable to the BCCI and IPL(Notes 6 and 19)


750,000



1,000,000Bonuses payable


138,391



354,695Due to shareholders of Auctomatic (Note 7)


804,528



789,799Deferred revenue


74,740



120,456Current portion of deferred lease inducements (Note 10)


20,138



20,138Total current liabilities


3,921,303



5,333,081Deferred income tax (Note 14)


193,888



206,370Deferred lease inducements (Note 10)


45,311



55,380Warrants (Note 11(e))


209,370



157,895Total Liabilities


4,369,872



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


15,955,383



14,757,932Accumulated deficit


(15,098,082
)


(12,777,195
)Total Live Current Media Inc. stockholders' equity


872,636



1,995,592Non-controlling interest


(10,952
)


-Total Stockholders' Equity


861,684



1,995,592Total Liabilities and Stockholders' Equity

$
5,231,556


$
7,748,318Commitments 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


Six Months
Ended


Six Months
EndedJune 30, 2009


June 30, 2008
(As Restated - See Note 2)


June 30, 2009


June 30, 2008
(As Restated - See Note 2)SALESHealth and beauty eCommerce

$
1,663,182


$
1,912,217


$
3,383,349


$
3,732,405Other eCommerce


-



-



-



455Domain name advertising


22,917



27,418



47,370



55,254Miscellaneous and other income


18,806



-



26,568



-Total Sales


1,704,905



1,939,635



3,457,287



3,788,114COSTS OF SALESHealth and Beauty eCommerce


1,315,747



1,583,067



2,702,366



3,068,577Other eCommerce


-



-



-



552Total Costs of Sales


1,315,747



1,583,067



2,702,366



3,069,129GROSS PROFIT


389,158



356,568



754,921



718,985EXPENSESAmortization and depreciation


98,246



43,888



196,412



59,154Amortization of website development costs(Note 9)


33,507



9,363



66,069



9,363Corporate general and administrative


215,472



591,170



501,658



1,117,710ECommerce general and administrative


73,668



100,495



153,888



270,308Management fees and employee salaries


836,968



1,595,083



1,844,689



2,738,808Corporate marketing


1,602



20,243



4,161



46,807ECommerce marketing


114,965



129,885



226,387



279,072Other expenses (Note 13)


-



33,691



264,904



663,547Total Expenses


1,374,428



2,523,818



3,258,168



5,184,769OTHER INCOME (EXPENSES)Global Cricket Venture expenses(Note 6)


(155,968
)


-



(383,223
)


-Gain on settlement of amounts due to Global Cricket Venture(Note 6 and 19)


-



-



250,000



-Gain from sales and sales-type lease of domain names (Note 12)


326,934



-



944,867



168,206Accretion interest expense(Note 7)


(23,300
)






(63,300
)


-Interest and investment income


665



16,680



1,555



59,178Impairment of Auction Software(Note 8)


(590,973
)


-



(590,973
)


-Total Other Income (Expenses)


(442,642
)


16,680



158,926



227,384NET LOSS BEFORE TAXES


(1,427,912
)


(2,150,570
)


(2,344,321
)


(4,238,400
)Deferred tax recovery (Note 14)


(12,482
)


-



(12,482
)


-CONSOLIDATED NET LOSS


(1,415,430
)


(2,150,570
)


(2,331,839
)


(4,238,400
)ADD: NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST


8,007



23,972



10,952



75,478NET LOSS AND COMPREHENSIVE LOSS FOR THE PERIODATTRIBUTABLE TO LIVE CURRENT MEDIA INC.

$
(1,407,423
)

$
(2,126,598
)

$
(2,320,887
)

$
(4,162,922
)LOSS PER SHARE - BASIC AND DILUTEDNet Loss attributable to Live Current Media Inc. common stockholders

$
(0.06
)

$
(0.10
)

$
(0.10
)

$
(0.20
)Weighted Average Number of Common Shares Outstanding - Basic and Diluted


23,109,035



20,832,026



23,109,035



20,832,026See 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











(9,987,270
)

(9,987,270
)

(75,478
)

(10,062,748
)Balance, December 31, 2008 (audited) (As Restated - See Note 2)


23,546,370


14,855


14,757,932


(12,777,195
)

1,995,592


-


1,995,592Stock-based compensation(Note 11d)








1,062,830





1,062,830


-


1,062,830Issuance 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











(2,320,887
)

(2,320,887
)

(10,952
)

(2,331,839
)Balance, June 30, 2009 (unaudited)


24,026,180

$
15,335

$
15,955,383

$
(15,098,082
)
$
872,636

$
(10,952
)
$
861,684See 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)


Six Months
Ended


Six Months
EndedJune 30, 2009


June 30, 2008(As Restated - See Note 2)OPERATING ACTIVITIESNet loss for the period

$
(2,320,887
)

$
(4,162,922
)Non-cash items included in net loss:Deferred tax recovery(Note 14)


(12,482
)


-Gain on settlement of amounts due to Global Cricket Venture(Notes 6 and 19)


(250,000
)


-Impairment of Auction Software(Note 8)


590,973



-Gain from sales and sales-type lease of domain names


(944,867
)


(168,206
)Accretion interest expense


63,300



-Interest expense


4,528



-Stock-based compensation


1,062,830



986,879Warrants issued


51,475



3,792Issuance of common stock for services (Note 11b)


5,700



85,350Amortization and depreciation


252,412



58,448Change in operating assets and liabilities:Accounts receivable


31,357



7,032Amounts due from Global Cricket Venture


-



(733,539
)Prepaid expenses and deposits


(37,501
)


(64,552
)Inventory


31,490



-Accounts payable and accrued liabilities


(785,086
)


211,613Bonuses payable


(216,304
)


341,005Deferred revenue


(45,716
)


(37,292
)Cash flows used in operating activities


(2,518,778
)


(3,472,392
)INVESTING ACTIVITIESNet proceeds from sale of domain names


718,130



-Net proceeds from sales-type lease of domain names


378,423



65,585Cash consideration for Auctomatic(Note 7)


(53,099
)


(1,533,493
)Purchases of property & equipment


(4,301
)


(176,134
)Website development costs (Note 9)


(35,477
)


(285,393
)Cash flows from (used in) investing activities


1,003,676



(1,929,435
)FINANCING ACTIVITIESNet loss attributable to non-controlling interest


(10,952
)


(75,478
)Cash flows from financing activities


(10,952
)


(75,478
)Net decrease in cash and cash equivalents


(1,526,054
)


(5,477,305
)Cash and cash equivalents, beginning of period


1,832,520



7,375,245Cash and cash equivalents, end of period

$
306,466


$
1,897,940See 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 six months ended June 30, 2009
(Unaudited)
  NOTE 1 – NATURE OF BUSINESS AND BASIS OF PRESENTATION
 
 Nature of business
 Live Current Media Inc. (the “Company”) 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 large 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.  During the period ended June 30, 2009, the Company was also
developing Cricket.com, a media-rich consumer sports experience.  Refer to Note 19.
 
 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 a consolidated net loss of $1,407,423 for the three months ended
and $2,320,887 for the six months ended June 30, 2009 and realized a negative cash flow from operating activities of $618,173 and $2,518,778 for the three months and six months ended June 30, 2009 respectively.  At June 30, 2009, there is an accumulated deficit of $15,098,082 (December 31, 2008 - $12,777,195) and a working capital deficiency of $3,339,553 ($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 Note 19.
  9
 Live Current Media Inc. (formerly Communicate.com Inc.)
 Notes to the Consolidated Financial Statements
 For the three and six months ended June 30, 2009
 (Unaudited)
 NOTE 1 – NATURE OF BUSINESS AND BASIS OF PRESENTATION (continued)
 
 Going Concern (continued)
 The accompanying 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.  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 has established a plan to continue its current business operations and overcome its financial difficulties.  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 six month periods ended June 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 June 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 $23,972 in the three month period and $75,748 in the six month period ended June 30, 2008.  There was no effect to the non-controlling interest on the consolidated balance sheets at December 31, 2008.
  10
 Live Current Media Inc. (formerly Communicate.com Inc.)
 Notes to the Consolidated Financial Statements
 For the three and six months ended June 30, 2009
 (Unaudited)
  NOTE 2 – RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS (continued)
 
 C. Management Compensation:
 
 (i)  The financial statements for the three and six month periods ended June 30, 2008 did not expense $89,466 and $177,752, 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 June 30, 2009 financial statements.
 
 (ii) The financial statements for the three and six month periods ended June 30, 2008 did not expense $35,786 and $71,101, 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.
 
 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 $45,913 and $84,336 to stock-based compensation expense in the three and six month periods, respectively, ended
June 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 six month periods, respectively, ended June 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 June 30, 2008.
  11
 Live Current Media Inc.
 (formerly Communicate.com Inc.)
 Notes to the Consolidated Financial Statements
 For the three and six months ended June 30, 2009
 (Unaudited)
  NOTE 2 – RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS (continued)
 
 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 quarter ended June 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 six months ended June 30, 2008 was $45,326.
 
 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 and $750,000 as at June 30, 2009 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.
 
 12
  Live Current Media Inc. (formerly Communicate.com Inc.)
 Notes to the Consolidated Financial Statements
 For the three and six months ended June 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 three months ended June 30, 2008.
  For the three months ended June 30, 2008

Reference


As previously reported


Restatement adjustment


As restatedGROSS PROFIT





356,568



-



356,568EXPENSESManagement fees and employee salaries

C(i), C(ii), D, G(ii)



1,470,418



124,665



1,595,083All other expenses





928,735



-



928,735Total Expenses





2,399,153



124,665



2,523,818OTHER INCOME (EXPENSES)Interest and investment income





16,680



-



16,680Non-controlling interest





-



-



-Total Other Income (Expenses)





16,680



-



16,680CONSOLIDATED NET LOSS





(2,025,905
)


(124,665
)


(2,150,570
)ADD: NET LOSS ATTRIBUTABLE TONON-CONTROLLING INTEREST

B



-



23,972



23,972NET LOSS AND COMPREHENSIVE LOSS FOR THE PERIOD


$
(2,025,905
)

$
(100,693
)

$
(2,126,598
)LOSS PER SHARE - BASIC AND DILUTEDNet Loss attributable to Live Current Media Inc. common stockholders


$
(0.10
)


(0.00
)

$
(0.10
)Weighted Average Number of Common SharesOutstanding - Basic and Diluted






20,832,026



-



20,832,026
  13
  Live Current Media Inc. (formerly Communicate.com Inc.)
 Notes to the Consolidated Financial Statements
 For the three and six months ended June 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 six months ended June 30, 2008.
  For the six months ended June 30, 2008

Reference


As previously reported


Restatement adjustment


As restatedGROSS PROFIT





718,985



-



718,985EXPENSESCorporate general and administrative

E(i)



1,053,960



63,750



1,117,710Management fees and employee salaries

C(i), C(ii), D, G(ii)



2,528,965



209,843



2,738,808All other expenses






1,328,251



-



1,328,251Total Expenses






4,911,176



273,593



5,184,769OTHER INCOME (EXPENSES)Gain from sales and sales-type lease of domain names



168,206



-



168,206Interest and investment income






59,178



-



59,178Total Other Income (Expenses)






227,384



-



227,384CONSOLIDATED NET LOSS






(3,964,807
)


(273,593
)


(4,238,400
)ADD: NET LOSS ATTRIBUTABLE TONON-CONTROLLING INTEREST

B



-



75,478



75,478NET LOSS AND COMPREHENSIVE LOSS FOR THE PERIOD


$
(3,964,807
)

$
(198,115
)

$
(4,162,922
)LOSS PER SHARE - BASIC AND DILUTEDNet Loss attributable to Live Current Media Inc. common stockholders


$
(0.19
)


(0.01
)

$
(0.20
)Weighted Average Number of Common SharesOutstanding - Basic and Diluted






20,832,026



-



20,832,026
  14
  Live Current Media Inc.
 (formerly Communicate.com Inc.)
 Notes to the Consolidated Financial Statements
 For the three and six months ended June 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 six months ended June 30, 2008.
  For the quarter ended June 30, 2008

Reference


As previously reported


Restatement adjustment


As restatedOPERATING ACTIVITIESNet loss for the period




$
(3,964,807
)

$
(198,115
)

$
(4,162,922
)Non-cash items included in net loss:Gain from sales and sales-type lease of domain names





(168,206
)


-



(168,206
)Stock-based compensation

D, G(ii)



1,025,889



(39,010
)


986,879Warrants issued





3,792



-



3,792Issuance of common stock for services





85,350



-



85,350Amortization and depreciation





58,448



-



58,448Change in operating assets and liabilities:Accounts receivable





7,032



-



7,032Amounts payable to the BCCI and IPL





(733,539
)


-



(733,539
)Prepaid expenses and deposits





(64,552
)


-



(64,552
)Accounts payable and accrued liabilities

E(i)



37,117



174,496



211,613Bonuses payable

C(i), C(ii)



92,152



248,853



341,005Deferred revenue






(37,292
)


-



(37,292
)Cash flows used in operating activities






(3,658,616
)

186,224


(3,472,392
)INVESTING ACTIVITIESNet proceeds from sales-type lease of domain name






65,585



-



65,585Cash consideration for Auctomatic

G(i)



(1,422,747
)


(110,746
)


(1,533,493
)Purchases of property & equipment






(176,134
)


-



(176,134
)Website development costs






(285,393
)


-



(285,393
)Cash flows used in (from) investing activities






(1,818,689
)


(110,746
)


(1,929,435
)FINANCING ACTIVITIESNet loss attributable to non-controlling interest

B



-



(75,478
)


(75,478
)Cash flows from financing activities






-



(75,478
)


(75,478
)Net increase (decrease) in cash and cash equivalents






(5,477,305
)


-



(5,477,305
)Cash and cash equivalents, beginning of period






7,375,245



-



7,375,245Cash and cash equivalents, end of period





$
1,897,940


$
-


$
1,897,940
  15
 Live Current Media Inc.
(formerly Communicate.com Inc.)
Notes to the Consolidated Financial Statements
For the three and six months ended June 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 first two quarters of 2009.
  As previously reported

Live Current Media StockholdersCommon stock

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 the merger 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 shares to investor relations firm




33,000


33


85,649





85,682


-


85,682





85,682Issuance of 120,000 common shares to 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 shares not distributed




(300,000
)

-


-





-


-


-





-Private Placement of 1,627,344 units at $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
)

19,186


(9,987,270
)

(75,478
)

(10,062,748
)Balance, December 31, 2008 (audited) (as restated)




23,546,370


14,855


14,772,880


(12,532,134
)

2,255,601


(260,009
)

1,995,592


-


1,995,592Stock-based compensation

D, G(ii)

-


-


386,513





386,513


223,830


610,343


-


610,343Issuance of 15,000 common shares to investor relations firm




15,000


15


5,685





5,700


-


5,700


-


5,700Extinguishment of accounts payable




345,075


346


120,430


(634,647
)

120,776


-


120,776


-


120,776Net loss and comprehensive loss

C(ii), D, E(i), E(ii), F, G(ii)













(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


(317,941
)

1,816,002


(8,007
)

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

$
(317,941
)
$
872,636

$
(10,952
)
$
861,684
  16
 Live Current Media Inc.
(formerly Communicate.com Inc.)
Notes to the Consolidated Financial Statements
For the three and six months ended June 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 Emerging Issues Task Force (“EITF”) 99-19, Reporting Revenue Gross as a Principal versus Net as an Agent, the Company records web advertising revenues on a gross basis.
 
 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 first half of 2009, there were two sales of domain names.  Collectibility of the amounts owing on these sales are reasonably assured and therefore accounted for as sales in the period the transaction 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 first half of 2009, there was one sales-type lease of a domain name.  In 2008, there was one sales-type lease of a domain name.  See also Note 12.
  17
 Live Current Media Inc.
 (formerly Communicate.com Inc.)
 Notes to the Consolidated Financial Statements
 For the three and six months ended June 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 FAS 52, Foreign Currency Translation, 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 loss.  There was no effect to comprehensive 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 loss
 Comprehensive loss includes all changes in equity of the Company during a period except those resulting from investments by shareholders and distributions to shareholders.  Comprehensive loss includes net loss and other comprehensive loss (“OCL”).  The major components included in OCL 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.
 
 Loss per share
 Basic loss per share is computed by dividing losses for the period by the weighted average number of common shares outstanding for the period.  Diluted 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 and advertising revenues receivable.  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 June 30, 2009 is recorded at cost of $42,592 (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
 
 Amortization for leasehold improvements is based on a straight-line method calculated over the term of the lease.  Auction software is amortized straight line over the life of the asset.  Other additions are amortized on a half-year basis in the year of acquisition.
  18
 
 Live Current Media Inc.
 (formerly Communicate.com Inc.)
 Notes to the Consolidated Financial Statements
 For the three and six months ended June 30, 2009
 (Unaudited)
 NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 
 Website development costs
 The Company has adopted the provisions of EITF No. 00-2, Accounting for Web Site 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 FAS No. 142, Goodwill and Intangible Assets, which revises the accounting for purchased goodwill and intangible assets. Under FAS 142, 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 June 30, 2009.
 
 Goodwill
 Goodwill represents the excess of acquisition cost over the fair value of the net assets of acquired entities. In accordance with FAS No. 142, Accounting for Goodwill and Other Intangible Assets, 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 June 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.
  19
 Live Current Media Inc.
 (formerly Communicate.com Inc.)
 Notes to the Consolidated Financial Statements
 For the three and six months ended June 30, 2009
 (Unaudited)   NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 
 Advertising Costs
 The Company recognizes advertising expenses in accordance with SOP 93-7, Reporting on 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 $116,567 for the three months
and $230,548 for the six months ended June 30, 2009 respectively ($150,128 for the three months and $325,879 for the six months ended June 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 Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment (FAS 123(R)), which requires the recognition of the fair value of stock-based
compensation. Under the fair value recognition provisions for FAS 123(R), 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 FAS 123(R) and the conclusions reached by the EITF in Issue No. 96-18.  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 EITF 96-18.
 
 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.
  20
 Live Current Media Inc.
 (formerly Communicate.com Inc.)
 Notes to the Consolidated Financial Statements
 For the three and six months ended June 30, 2009
 (Unaudited)
  NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 
 Income taxes
 On January 1, 2007, the Company adopted the following new critical accounting policy related to income tax.  The Company began accounting for income tax under the provisions of Financial Accounting Standards Board (“FASB”) Interpretation No. 48, Accounting
for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109 (“FIN 48”).  FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement 109, Accounting for Income Taxes, 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 June 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 Accounting Pronouncements
 
 FAS 168
 In June, 2009, the FASB issued FAS No. 168, The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles – A Replacement of FASB Statement No. 162.  The FASB Accounting Standards
CodificationTM (Codification) will become the source of authoritative U.S. generally accepted accounting principles (GAAP) recognized by the FASB to be applied by nongovernmental entities. 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 beginning after September 15, 2009, which, for the Company, would be the fiscal year beginning January 1, 2010. The Company is currently assessing the impact of FAS No. 168 on its financial position and results of
operations.
  FAS 166
 In June, 2009, the FASB issued FAS No. 166, Accounting for Transfer of Financial Assets – An Amendment of FASB Statement No. 140. The new standard is intended to improve the relevance, representational faithfulness, and comparability of the information that
a reporting entity provides in its financial statements about a transfer of financial assets: the effects of a transfer on its financial position, financial performance, and cash flows; and a transferor’s continuing involvement, if any, in transferred financial assets.  This statement is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2009, which, for the Company, would be the fiscal year beginning January 1, 2010. The Company is
currently assessing the impact of FAS No. 166 on its financial position and results of operations.
 
 FAS 162
 In May, 2008, the FASB issued FAS 162, The Hierarchy of Generally Accepted Accounting Principles. The new standard is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing
financial statements that are presented in conformity with U.S. generally accepted accounting principles (GAAP) for non-governmental entities. This Statement is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles.  The Company does not expect that this Statement will result in
a change in current practice.
  21
 Live Current Media Inc.
 (formerly Communicate.com Inc.)
 Notes to the Consolidated Financial Statements
 For the three and six months ended June 30, 2009
 (Unaudited)
  NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 
 Recently Adopted Accounting Pronouncements
 
 FAS 165
 In May, 2009, the FASB issued FAS No. 165, 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. Adoption of this statement did not have a material effect to the Company’s current practice.
 
 FAS 161
 In March 2008, the FASB issued FAS 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FAS 133.  FAS 161 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 FAS 133 and its related interpretations; and how derivative instruments and related hedged items affect an entity's financial
position, financial performance and cash flows. FAS 161 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 FAS 161 at January 1, 2009, however the adoption of this statement did not have a material effect on its financial results.
 
 FSP FAS 142-3
 In April 2008, the FASB issued FASB Staff Position (“FSP”) FAS 142-3, Determination of the Useful Life of Intangible Assets.  FSP FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to
determine the useful life of a recognized intangible asset under FAS 142, Goodwill and Other Intangible Assets.  The intent of FSP FAS 142-3 is to improve the consistency between the useful life of a recognized intangible asset under FAS 142 and the period of expected cash flows used to measure the fair value of the asset under FAS 141(R) and other applicable accounting literature.  FSP FAS 142-3 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 FAS 142-3 at January 1, 2009, however the adoption of this statement did not have a material effect on its financial results.
 
 FAS 141(R)
 In December 2007, the FASB issued FAS 141 (revised 2007), Business Combinations("FAS 141(R)"). FAS 141(R) significantly changes the accounting for business combinations in a number of areas including the treatment of contingent consideration, preacquisition
contingencies, transaction costs, in-process research and development and restructuring costs. In addition, under FAS 141(R), changes in an acquired entity's deferred tax assets and uncertain tax positions after the measurement period will impact income tax expense. This standard will change accounting treatment for business combinations on a prospective basis. FAS 141(R) was 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 FAS 141(R) at January 1, 2009, however the adoption of this statement did not have a material effect on its financial results.
 
 FAS 160
 In December 2007, the FASB issued FAS 160 Noncontrolling Interests in Consolidated Financial Statements, and simultaneously revised FAS 141 Business Combinations.  This Statement applies prospectively
to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008, which for the Company was the fiscal year beginning January 1, 2009. An entity may not adopt the policy before the transitional date.  The Company adopted FAS 160 at January 1, 2009, however the adoption of this statement did not have a material effect on its financial results.
  22
 Live Current Media Inc.
 (formerly Communicate.com Inc.)
 Notes to the Consolidated Financial Statements
 For the three and six months ended June 30, 2009
 (Unaudited)
  NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 
 Recently Adopted Accounting Pronouncements (continued)
 
 FAS 157
 In September 2006, the FASB issued FAS 157, Fair Value Measurements.  This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements.  This
standard does not require any new fair value measurements.
 
 In 2008, the Company adopted FAS 157 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 FAS 157 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 FSP FAS 157-2, which delays the effective date of FAS 157 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 FAS 157 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.
 
 In October 2008, the FASB issued FSP FAS 157-3, Determining the Fair Value of a Financial Asset When the Market for that Asset is Not Active, which clarifies the application of FAS 157 in determining the fair value of a financial asset when the market for that asset
is not active.  FSP FAS 157-3 is effective as of the issuance date and has not affected the valuation of the Company’s financial assets.
 
 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 FAS 157 as of January 1, 2009.  FAS 157 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. FAS 157 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, FAS 157 establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring
fair value as follows:
 23
 
 Live Current Media Inc.
(formerly Communicate.com Inc.)
Notes to the Consolidated Financial Statements
For the three and six months ended June 30, 2009
(Unaudited) NOTE 4 – FINANCIAL INSTRUMENTS (continued)





Fair values of Financial Instruments (continued)





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.





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 June 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)$209,370
-
$209,370
-




The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, receivable from sales-type lease, accounts payable, amounts payable to the BCCI and IPL, 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 Media Inc. 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 six months ended June 30, 2008.





The 2009 year-to-date losses of DHI have resulted in a debit balance of $10,952 in the NCI balance at June 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 them have significant assets or operations to date, nor have any material binding contracts been signed.





During the six months ended June 30, 2009, the Company incurred $383,223 (year ended December 31, 2008 - $1.47 million) in furtherance of this plan.  The Company also incurred $750,000 of liabilities to the IPL at June 30, 2009 in respect of exclusive online content rights agreements.  As the plan
to exploit cricket.com was in its early stages, all expenditures were charged to operations.




24


Live Current Media Inc. (formerly Communicate.com Inc.)
 Notes to the Consolidated Financial Statements
 For the three and six months ended June 30, 2009
 (Unaudited)
  NOTE 6 – GLOBAL CRICKET VENTURE (continued)





Memoranda of Understanding (continued)


In August 2009, the Company transferred and assigned all its interests in the project, including its ownership of the cricket.com domain name, for cash and assumption by a third party of all past and future liabilities due to the BCCI and IPL.  See also Note 19.





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 is subject to their continuing employment with the Company or a subsidiary on each Distribution Date.  As these shares are contingent on future
employment, they are considered contingent consideration and are required to be accounted for under FAS 123(R) as stock-based compensation.  Refer to Note 11d.  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 will no longer be payable.  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.  Subsequent to June 30, 2009, the remaining 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 and Note 19.





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 by $40,000 in Q1 of 2009 and by $23,300 in Q2 of 2009 (2008 - $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.  The payment of these funds to the Auctomatic shareholders was not made during the second quarter of 2009.  However, subsequent to quarter end, 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%, with such interest accruing as of May 22, 2009
and payable quarterly in arrears.  As a result, $4,528 of interest was accrued and expensed during the quarter ended June 30, 2009 to reflect the interest accrued between May 22, 2009 and June 30, 2009.  Refer to Note 19.





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


25
 
 Live Current Media Inc.
(formerly Communicate.com Inc.)
Notes to the Consolidated Financial Statements
For the three and six months ended June 30, 2009
(Unaudited) NOTE 7 – MERGER AGREEMENT (continued)





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.  See Notes 8 and 19.


NOTE 8 – PROPERTY & EQUIPMENT





June 30, 2009

Cost


Accumulated Amortization


Net Book ValueOffice Furniture and Equipment

$
167,464


$
44,367


$
123,097Computer Equipment


103,493



59,142



44,351Computer Software


27,276



20,457



6,819Auction Software


-



-



-Leasehold Improvements


142,498



56,999



85,499$
440,731


$
180,965


$
259,766





December 31, 2008

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 believes that the auction software is 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 six months ended June 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.




June 30,
2009


December 31,
2008Website Development Costs

$
394,040


$
405,001Less: Accumulated Amortization


(101,489
)


(49,610
)$
292,551


$
355,391





The Company capitalized website development costs of $25,231 in the first quarter of 2009 and $10,246 in the second quarter of 2009.  The Company expensed website development costs of $46,438 and corresponding accumulated amortization of $14,189 related to a domain name that was 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







June 30,
2009


December 31,
2008Deferred Lease Inducements

$
65,449


$
75,518Less: Current Portion


(20,138
)


(20,138
)$
45,311


$
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 June 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.




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.


27
 
 Live Current Media Inc.
 (formerly Communicate.com Inc.)
 Notes to the Consolidated Financial Statements
 For the three and six months ended June 30, 2009
 (Unaudited)
 
 NOTE 11 – COMMON STOCK (continued)





b)     Issued (continued)





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 are being held for future distribution in three equal installments on the next three anniversary
dates of 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 are reserved for future issuance to the Auctomatic founders and are being accounted for as stock-based compensation pursuant to FAS 123(R). See also Note 11(c), Note 11(d) and Note 19.





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 six months ended June 30, 2009


(Unaudited)





NOTE 11 – SHARE CAPITAL (continued)





c)     Reserved





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.  These shares were to be issued on the first anniversary date of the merger as stated above. Therefore at June 30, 2009, the balance of reserved shares of common stock for
future issuance and distribution was 183,824.  See also Note 7, Note 11(d) and Note 19.





Subsequent to June 30, 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, there will be no further reserved shares
for future issuance and distribution to the Auctomatic founders.





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.





d)     Stock Options





The Board of Directors and stockholders approved the 2007 Stock Incentive Plan and adopted it 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 FAS 123(R) for non-employees using the Black Scholes option pricing model.  The assumptions used in the pricing model include:




2009
2008Dividend yield
0%
0%Expected volatility
97.02%-107.34%
64.86%-75.68%Risk free interest rate
1.43%-1.69%
1.62% - 3.07%Expected lives
3.375 years
3.375 years




(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.




29
 Live Current Media Inc.
(formerly Communicate.com Inc.)
Notes to the Consolidated Financial Statements
For the three and six months ended June 30, 2009
(Unaudited)
 NOTE 11 – SHARE CAPITAL (continued)





d)      Stock Options (continued)


(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.  Subsequent to the second 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, and 25,000 options were forfeited in the second 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.  Subsequent to the second 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.
 
 The Company recognizes stock-based compensation expense over the requisite service period of the individual grants, which generally equals the vesting period. FAS 123(R) 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 June 30, 2009 of $5,169,943 (December 31, 2008 - $5,824,833) will be recognized on a straight-line basis over a vesting term of 3 years and an expense has been recognized in the six months ended June 30, 2009 of $925,411 (year ended December 31, 2008 of $1,992,461) and included in management
fees and employee salaries expense.




30




Live Current Media Inc.
 (formerly Communicate.com Inc.)
 Notes to the Consolidated Financial Statements
 For the three and six months ended June 30, 2009
 (Unaudited)


NOTE 11 – SHARE CAPITAL (continued)





d)     Stock Options (continued)





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 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.  As these shares are contingent on future employment, they are considered contingent consideration and are required to be accounted for under FAS 123(R) 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.  See also Note 7 and Note 11(c).  All such shares
have been valued using the Black Scholes option pricing model at the date of grant using a 3 year term and a 33% forfeiture rate.  The Company assesses forfeiture rates for these shares consistent to its analysis of granted options.  The Auctomatic founders are considered corporate directors, along with some other employees.  The forfeiture rate of 33% among Auctomatic founders alone is consistent with a 25% forfeiture rate for the whole class of corporate directors.





The fair value of these shares at June 30, 2009 of $1,089,365 (December 31, 2008 - $1,157,049) will be recognized on a straight-line basis over a vesting term of 3 years at date of grant and accordingly, an expense has been recognized in the six months ended June 30, 2009 of $137,419 (year ended December 31, 2008 - $170,065)
and included in management fees and employee salaries expense.





A summary of the option activity under the 2007 Plan during 2008 and 2009 is presented below:





Options

Shares


WeightedAverage
Exercise Price
$


WeightedAverage
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


125,000



0.30



0.19Exercised


-



-



-Forfeited or expired


1,717,500



1.96



1.46Options outstanding, June 30,2009


3,205,000



0.64



1.41Options vested at June 30, 2009


2,971,902



0.64



1.43Aggregate Intrinsic Value

$
0Weighted average remaining life

3.47 Years





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 options 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.





31


Live Current Media Inc.
 (formerly Communicate.com Inc.)
 Notes to the Consolidated Financial Statements
 For the three and six months ended June 30, 2009
 (Unaudited)
 NOTE 11 – SHARE CAPITAL (continued)





e)     Common Stock Purchase Warrants (continued)





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 June 30, 2009 was $209,370 (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 EITF 00-19, 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 six months ended June 30, 2009, the change to the fair value of the warrants was $51,475 which was charged to corporate general and administrative expenses during the period.





As of June 30, 2009, 3,304,688 warrants to purchase the Company’s common stock remain outstanding as follows:





WeightedAverage


Date ofWarrants

Outstanding


Exercise 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, 2011Cancelled or expired


1,000,000



1.25Warrants exercisable December 31, 2008and June 30, 2009


3,304,688



0.89Weighted average remaining life

1.86 Years





NOTE 12 – DOMAIN NAME LEASES AND SALES





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 is received at the end of the lease term.  If the purchaser defaults on any payments, the agreement terminates, funds received to date are forfeited by the purchaser, and rights to the domain name return to the Company.  Due to the uncertainty regarding the collectibility of the funds in the future, only the amounts received to date have been recorded as a gain on sale of a domain name at quarter end.  When collectibility is reasonably assured, the full gain
on sale will be reflected in the Company’s operations.  During the first quarter of 2009, a resulting gain of $290,000 was recorded based on the payments received.




32


Live Current Media Inc.
 (formerly Communicate.com Inc.)
 Notes to the Consolidated Financial Statements
 For the three and six months ended June 30, 2009
 (Unaudited)


NOTE 12 – DOMAIN NAME LEASES AND SALES (continued)





2009 (continued)





During the second quarter 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.  Under
the terms of the agreement, the Company retained the funds and the domain name.  See Note 19.





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.





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 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 Q1 of 2008
share issuance of DHI shares to its parent company and $2,000 in some final windup costs related to the FT disposition in late 2007.


33
 Live Current Media Inc.
 (formerly Communicate.com Inc.)
 Notes to the Consolidated Financial Statements
 For the three and six months ended June 30, 2009
 (Unaudited)


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 June 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 $193,888 at June 30, 2009 and $206,370 at December 31, 2008.  There was a deferred tax recovery during the three and six months ended June 30, 2009 of $12,482.





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 six months ended June 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 six months ended June 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 six months ended June 30, 2009


$



$



$Revenue


3,383,349



73,938



3,457,287Segment Loss From Operations


(1,765,366
)


(737,881
)


(2,503,247
)As at June 30, 2009


$



$



$Total Assets


3,649,849



1,581,707



5,231,556Intangible Assets


158,849



1,332,600



1,491,449eCommerce


Advertising


TotalProducts


and OtherFor the six months ended June 30, 2008 (as restated - see Note 2)


$



$



$Revenue


3,732,860



55,254



3,788,114Segment Loss From Operations


(3,236,549
)


(1,229,235
)


(4,465,784
)As at June 30, 2008 (as restated - see Note 2)


$



$



$Total Assets


7,355,981



1,562,008



8,917,989Intangible Assets


189,047



1,436,834



1,625,881




The reconciliation of the segment loss from operations to net loss as reported in the consolidated financial statements is as follows:




For the six months ended June 30, 2009


For the six months ended June 30, 2008(unaudited)


(unaudited)(As Restated -
See Note 2)Segment Loss

$
(2,503,247
)

$
(4,465,784
)Other Income and (Expenses)Global Cricket Venture expenses


(383,223
)


-Gain on settlement of amounts due to Global Cricket Venture


250,000



-Gain from sales and sales-type lease of domain names


944,867



168,206Accretion interest expense


(63,300
)


-Interest and investment income


1,555



59,178Impairment of Auction Software


(590,973
)


-Net loss before taxes for the period

$
(2,344,321
)

$
(4,238,400
)





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 six months ended June 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
58,7622010
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 is released from all accrued liabilities under the BCCI Memorandum, conditional on a $750,000 payment to be made by July 1, 2009 by GCV 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 all of the rights, title, and interest in and to the original MOU with the IPL, as amended by the Novation Agreement.  See Note 19.


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 six months ended June 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, September 18, 2009.





Global Cricket Venture





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.  The Company has also agreed to sell the domain name cricket.com to a company related to Mauritius, whereby the Company will sell the domain name, along with the website, content, copyrights, trademarks, etc., for consideration of four equal payments of $250,000.  The cricket.com domain name shall remain the property of the
Company until all payments have been made.  The Company cannot determine the financial impact of this transaction at this time.




37


Live Current Media Inc.
 (formerly Communicate.com Inc.)
 Notes to the Consolidated Financial Statements
 For the three and six months ended June 30, 2009
 (Unaudited)
  NOTE 19 – SUBSEQUENT EVENTS (continued)





Auctomatic





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





Also in August 2009, the Company reached an agreement with the remaining two founders of Auctomatic which terminates their employment.  Under their severance agreements, the Company will repay the amounts owed under the Merger Agreement at a 10% discount to face value and will record an additional $60,000 of
severance costs in Q3 of 2009 due to them under 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.





Sales of Domain Names





In July 2009, the Company sold three domain names for $725,000 less commission and the purchase prices were paid in full upon the execution of each agreement.





In August 2009, the Company sold the domain name www.cricket.com as disclosed above.





Also in August 2009, the Company sold a domain name for $1,100,000 less commission and the purchase price was paid in full upon the execution of the agreement. This domain name had been previously sold to an unrelated party in February 2009, however in May 2009 the purchaser breached the agreement and forfeited a total
of $355,000 that had been paid to the Company as of that date.  See Note 12.





NOTE 20 – COMPARATIVE FIGURES





Certain comparative figures have been reclassified to conform to the basis of presentation adopted in the current period.




38




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 website acceptance, 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 the amendment thereto.





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





(b) Business Overview





We build consumer internet experiences around our large 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 discount 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 half of 2009, advertising accounted for less than 2% of total revenues.  We presently employ eighteen full-time and one part-time employee, 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.




39




In 2008, we began shipping our Perfume.com products to selected international markets.  Until then, we shipped only to delivery addresses located in the United States.  However, through the first half of the 2009 fiscal year, 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.  As a result of our dependence on the U.S. marketplace for
sales, it is likely that the current recession will cause a negative impact to our results for at least the short-term.




During 2008 and through the first half of 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 August, 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 defer the
payment of his salary indefinitely.  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., a leading 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 the Karate.com domain name we own.  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.




40




Exit from Cricket.com




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 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 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 out of the Cricket business, pending any obligation we may have to pay to the BCCI and IPL if Mauritius fails to make the assumed payments, and with the exception of interim support services which we have agreed to provide for a period of six months.  The
Company cannot determine the financial impact of this transaction at this time.




Auctomatic




At June 30, 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 interest bearing notes with a one year term. 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 will pay the amounts owed under the Merger Agreement at a 10% discount to face value and will record an additional $60,000 of severance costs in
Q3 of 2009 due to them under 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.




41




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 June 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 the Original 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 period ended June 30, 2008 and December 31, 2008.  Please also see Note 2 to our
restated financial statements, as well as our related disclosure on our Amendment No.1 to Form 10-K as filed with the Securities and Exchange Commission on September 14, 2009.




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 to our 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 $23,972 in the three month period and $75,748 in the six month period ended June 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 six month periods ended June 30, 2008 did not expense $89,466 and $177,752, 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 June 30, 2009 financial statements.




(ii) The financial statements for the three and six month periods ended June 30, 2008 did not expense $35,786 and $71,101, 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.




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 $45,913 and $84,336 to stock-based compensation expense in the three and six month periods ended June 30,
2008.




42




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 six month periods, respectively, ended June 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 June 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 quarter ended June 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 six months ended June 30, 2008 was $45,326.




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 and $750,000 as at June 30, 2009 to the BCCI and IPL.




43




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 June 30, 2008.


For the three months ended June 30, 2008

Reference


As previously reported


Restatement adjustment


As restatedGROSS PROFIT





356,568



-



356,568EXPENSESManagement fees and employee salaries

C(i), C(ii), D, G(ii)



1,470,418



124,665



1,595,083All other expenses





928,735



-



928,735Total Expenses





2,399,153



124,665



2,523,818OTHER INCOME (EXPENSES)Interest and investment income





16,680



-



16,680Non-controlling interest





-



-



-Total Other Income (Expenses)





16,680



-



16,680CONSOLIDATED NET LOSS





(2,025,905
)


(124,665
)


(2,150,570
)ADD: NET LOSS ATTRIBUTABLE TONON-CONTROLLING INTEREST

B



-



23,972



23,972NET LOSS AND COMPREHENSIVE LOSS FOR THE PERIOD


$
(2,025,905
)

$
(100,693
)

$
(2,126,598
)LOSS PER SHARE - BASIC AND DILUTEDNet Loss attributable to Live Current Media Inc. common stockholders


$
(0.10
)


(0.00
)

$
(0.10
)Weighted Average Number of Common SharesOutstanding - Basic and Diluted






20,832,026



-



20,832,026
  44


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


For the six months ended June 30, 2008

Reference


As previously reported


Restatement adjustment


As restatedGROSS PROFIT





718,985



-



718,985EXPENSESCorporate general and administrative

E(i)



1,053,960



63,750



1,117,710Management fees and employee salaries

C(i), C(ii), D, G(ii)



2,528,965



209,843



2,738,808All other expenses






1,328,251



-



1,328,251Total Expenses






4,911,176



273,593



5,184,769OTHER INCOME (EXPENSES)Gain from sales and sales-type lease of domain names



168,206



-



168,206Interest and investment income






59,178



-



59,178Total Other Income (Expenses)






227,384



-



227,384CONSOLIDATED NET LOSS






(3,964,807
)


(273,593
)


(4,238,400
)ADD: NET LOSS ATTRIBUTABLE TONON-CONTROLLING INTEREST

B



-



75,478



75,478NET LOSS AND COMPREHENSIVE LOSS FOR THE PERIOD


$
(3,964,807
)

$
(198,115
)

$
(4,162,922
)LOSS PER SHARE - BASIC AND DILUTEDNet Loss attributable to Live Current Media Inc. common stockholders


$
(0.19
)


(0.01
)

$
(0.20
)Weighted Average Number of Common SharesOutstanding - Basic and Diluted






20,832,026



-



20,832,026


45




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


For the quarter ended June 30, 2008

Reference


As previously reported


Restatement adjustment


As restatedOPERATING ACTIVITIESNet loss for the period




$
(3,964,807
)

$
(198,115
)

$
(4,162,922
)Non-cash items included in net loss:Gain from sales and sales-type lease of domain names





(168,206
)


-



(168,206
)Stock-based compensation

D, G(ii)



1,025,889



(39,010
)


986,879Warrants issued





3,792



-



3,792Issuance of common stock for services





85,350



-



85,350Amortization and depreciation





58,448



-



58,448Change in operating assets and liabilities:Accounts receivable





7,032



-



7,032Amounts payable to the BCCI and IPL





(733,539
)


-



(733,539
)Prepaid expenses and deposits





(64,552
)


-



(64,552
)Accounts payable and accrued liabilities

E(i)



37,117



174,496



211,613Bonuses payable

C(i), C(ii)



92,152



248,853



341,005Deferred revenue






(37,292
)


-



(37,292
)Cash flows used in operating activities






(3,658,616
)

186,224


(3,472,392
)INVESTING ACTIVITIESNet proceeds from sales-type lease of domain name






65,585



-



65,585Cash consideration for Auctomatic

G(i)



(1,422,747
)


(110,746
)


(1,533,493
)Purchases of property & equipment






(176,134
)


-



(176,134
)Website development costs






(285,393
)


-



(285,393
)Cash flows used in (from) investing activities






(1,818,689
)


(110,746
)


(1,929,435
)FINANCING ACTIVITIESNet loss attributable to non-controlling interest

B



-



(75,478
)


(75,478
)Cash flows from financing activities






-



(75,478
)


(75,478
)Net increase (decrease) in cash and cash equivalents






(5,477,305
)


-



(5,477,305
)Cash and cash equivalents, beginning of period






7,375,245



-



7,375,245Cash and cash equivalents, end of period





$
1,897,940


$
-


$
1,897,940


46





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 first two quarters of 2009.


As previously reported

Live Current Media StockholdersCommon stock

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 the merger 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 shares to investor relations firm




33,000


33


85,649





85,682


-


85,682





85,682Issuance of 120,000 common shares to 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 shares not distributed




(300,000
)

-


-





-


-


-





-Private Placement of 1,627,344 units at $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
)

19,186


(9,987,270
)

(75,478
)

(10,062,748
)Balance, December 31, 2008 (audited) (as restated)




23,546,370


14,855


14,772,880


(12,532,134
)

2,255,601


(260,009
)

1,995,592


-


1,995,592Stock-based compensation

D, G(ii)

-


-


386,513





386,513


223,830


610,343


-


610,343Issuance of 15,000 common shares to investor relations firm




15,000


15


5,685





5,700


-


5,700


-


5,700Extinguishment of accounts payable




345,075


346


120,430


(634,647
)

120,776


-


120,776


-


120,776Net loss and comprehensive loss

C(ii), D, E(i), E(ii), F, G(ii)













(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


(317,941
)

1,816,002


(8,007
)

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

$
(317,941
)
$
872,636

$
(10,952
)
$
861,684


47





(c)Selected
Financial Data




The following selected financial data was derived from our unaudited interim consolidated financial statements for the quarter ended June 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 EndedJune 30, 2009


June 30, 2008(Unaudited)


(Unaudited)
(As Restated)SALESHealth and beauty eCommerce

$
1,663,182


$
1,912,217Domain name advertising


22,917



27,418Miscellaneous income


18,806



-Total Sales


1,704,905



1,939,635COSTS OF SALESHealth and Beauty eCommerce


1,315,747



1,583,067Total Costs of Sales


1,315,747



1,583,067GROSS PROFIT


389,158



356,568EXPENSESAmortization and depreciation


98,246



43,888Amortization of website development costs


33,507



9,363Corporate general and administrative


215,472



591,170ECommerce general and administrative


73,668



100,495Management fees and employee salaries


836,968



1,595,083Corporate marketing


1,602



20,243ECommerce marketing


114,965



129,885Other expenses


-



33,691Total Expenses


1,374,428



2,523,818OTHER INCOME (EXPENSES)Global Cricket Venture expenses


(155,968
)


-Gain from sales and sales-type lease of domain names


326,934



-Accretion interest expense


(23,300
)


-Interest and investment income


665



16,680Impairment of Auction Software


(590,973
)


-Non-controlling interest


-



-Total Other Income (Expenses)


(442,642
)


16,680NET LOSS BEFORE TAXES


(1,427,912
)


(2,150,570
)Deferred tax recovery


(12,482
)


-CONSOLIDATED NET LOSS


(1,415,430
)


(2,150,570
)ADD: NET LOSS ATTRIBUTABLE TONON-CONTROLLING INTEREST


8,007



23,972NET LOSS AND COMPREHENSIVE LOSS FOR THE PERIODATTRIBUTABLE TO LIVE CURRENT MEDIA INC.

$
(1,407,423
)

$
(2,126,598
)LOSS PER SHARE - BASIC AND DILUTEDNet Loss attributable to Live Current Media Inc. common stockholders


(0.06
)


(0.10
)Weighted Average Number of Common SharesOutstanding - Basic and Diluted


23,109,035



20,832,026




48




BALANCE SHEET DATA


June 30, 2009


December 31, 2008(Unaudited)


(Audited)
(As Restated)AssetsCurrent Assets


581,750



2,133,150Long-term portion of investment in sales-type lease


-



23,423Property & equipment


259,766



1,042,851Website development costs


292,551



355,391Intangible assets


1,491,449



1,587,463Goodwill


2,606,040



2,606,040Total Assets

$
5,231,556


$
7,748,318LiabilitiesCurrent Liabilities


3,921,303



5,333,081Deferred income tax


193,888



206,370Deferred lease inducements


45,311



55,380Warrants


209,370



157,895Total Liabilities


4,369,872



5,752,726Stockholders' EquityCommon Stock


15,335



14,855Additional paid-in capital


15,955,383



14,757,932Accumulated deficit


(15,098,082
)


(12,777,195
)Total Live Current Media Inc. stockholders' equity


872,636



1,995,592Non-controlling interest


(10,952
)


-Total Stockholders' Equity


861,684



1,995,592Total Liabilities and Stockholders' Equity

$
5,231,556



7,748,318





(d) Results of Operations




Sales and Costs of Sales




Quarter over Quarter Analysis




Overall, combined sales in Q2 of 2009 totaled $1,704,905 as compared to $1,939,635 in Q2 of 2008, a decrease of 12.1%.  Most of this decrease was driven by the decrease in sales on Perfume.com as noted below.  Overall, Health & Beauty eCommerce product sales, consisting of Perfume.com sales, represented 97.6% of total revenues
in Q2 of 2009, compared to approximately 98.6% of total revenues in Q2 of 2008.




Costs of sales were $1,315,747 in Q2 of 2008 compared to $1,583,067 during Q2 of 2008, a decrease of 16.9%.  This resulted in an overall gross margin in Q2 of 2009 of $389,158, or 22.8% compared to a gross margin of $356,568, or 18.4% in Q2 of 2008.  This significant increase in the overall gross margin in Q2 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.




Period over Period Analysis




Total sales in the first two quarters of 2009 have decreased by 8.8% due primarily to a decline in Perfume.com revenues as described below.  The decrease in costs of sales period over period of 12.0% is also consistent with the decline in our eCommerce business.  Overall gross margin in the six months ended June 30, 2009 is 21.8%
compared to 19.0% in the same period last year.




49




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 six months ended June 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

Health and Beauty


Average Daily SalesMarch 31, 2008

$
1,820,188


$
20,002June 30, 2008


1,912,217



21,013September 30, 2008


1,934,829



21,031December 31, 2008


3,604,003



39,174Fiscal Year 2008 Totals

$
9,271,237


$
25,331March 31, 2009

$
1,720,167


$
19,113June 30, 2009


1,663,182



18,277Fiscal Year 2009 Totals

$
3,383,349


$
18,693




The most recent quarters have presented great challenges for all retailers including eCommerce, due to the worldwide economic downturn.  The industry has seen a decrease in consumer spending on discretionary items.  Such a decrease will likely adversely affect the revenues from Perfume.com over the short-term.




Quarter over Quarter Analysis




Perfume.com revenues decreased 13.0% to $1,663,182 in Q2 of 2009 from $1,912,217 in Q2 of 2008.  Daily sales averaged $18,277 per day in Q2 of 2009 compared to $21,013 per day in Q2 of 2008.  This decrease was in part due to the decline in economic conditions; however it was primarily due to a shift in management’s strategy
whereby in 2008 we were focusing on increasing revenues at the detriment to low gross margin ratios.  However, in 2009 we are working towards increasing gross margins by limiting aggressive discounts and implementing slight increases to the sale prices of products on our website.




Perfume.com revenues decreased only 3.3% in Q2 of 2009 over Q1 of 2009.  As noted above, daily sales during Q2 of 2009 averaged $18,277 per day as compared to daily sales of $19,113 in Q1 of 2009.  Management believes that the relatively flat sales in Q2 of 2009 over Q1 of 2009 demonstrate continued strong potential of this business
segment, considering the decline in the global economy over the last year and management’s implementation of increased prices for products on our website.  However, there is no certainty that such results can be maintained throughout the rest of the year or continue into the foreseeable future.  Moreover, 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.  Such
a decrease may adversely affect our revenues from Perfume.com over the short-term.




Costs of shipping and purchases totaled $1,315,747 in Q2 of 2009 versus $1,583,067 in Q2 of 2008. This produced a gross margin of $347,435 or 20.9% in Q2 of 2009 compared to $329,150 or 17.2% in Q2 of 2008.  Gross profit margins in Q1 of 2009 of $333,548 or 19.4% demonstrate management’s continued effort in increasing gross margins both
in dollar value and in percentage point.  Gross profit margin in Q2 of 2009 increased by almost 4 percentage points over Q2 of 2008, and increased by 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.




50




Period over Period Analysis




Perfume.com revenues decreased 9.4% to $3,383,349 in the six months ended June 30, 2009 from $3,732,405 in the six months ended June 30, 2008.  Daily sales of $18,693 in the first half of 2009 are down from daily sales of $20,508 in the first half of 2008.  This decrease was in part due to the decline in economic conditions; however
as management has altered its focus to increasing gross margins from increasing gross revenues, we expect this trend to continue.




Costs of shipping and purchases decreased 11.9% to $2,702,366 in the six months ended June 30, 2009 from $3,068,577 in the same period of 2008.  This resulted in a gross margin during the first half of 2009 of 20.1% compared to 17.8% in the first half of 2008.  During and subsequent to the second 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.




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.




Advertising and Miscellaneous Income




Quarter over Quarter Analysis




In Q2 of 2009, we generated advertising revenues of $22,917 compared to $27,418 in Q2 of 2008, a decrease of 16.4%. 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 Q2 of 2008, advertising accounted for 1.4% of total revenues, consistent with 1.3% of total revenues in Q2 of 2009.  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 realigns 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 income on our consolidated statements of operations.




Period over Period Analysis




During the 6 months ended June 30, 2009, our advertising revenues were $47,370 compared to $55,254 in the same period of 2008, a decrease of 14.3%.  These revenues accounted for 1.4% of total revenues during the first half of 2009 and 1.5% 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 2008 and sales of two domain names in the first half of 2009. Management continues to evaluate expression of interest from domain name buyers, and continues to search for other domain names that would complement either the advertising or eCommerce businesses.




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General and Administrative




Quarter over Quarter Analysis




In Q2 of 2009, we recorded total general and administrative expense of $289,140 or 17.0% of total sales as compared to $691,665 or 35.7% of total sales in Q2 of 2008, a decrease of $402,525 or over 58%. This total includes corporate and eCommerce related general and administrative costs.  Total general and administrative expenses in Q2 of
2009 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 $215,472 have decreased over the amount of $591,170 in Q2 of 2008 by $375,698.  This was primarily due to payments made in Q2 of 2008 relating to investor relations paid both in cash and common stock valued at approximately $228,000.  Other significant
expense reductions include $25,000 in meals and entertainment, $33,000 in telephone, $37,000 in rent benefit and approximately $49,000 in legal expenses. In total, these expenses accounted for 12.6% of total revenues in Q2 of 2009, compared to 16.3% in Q1 of 2009 and 30.5% in Q2 of 2008.





Corporate general and administrative costs for Q2 of 2009 have decreased by $70,818, or 24.7%, over Q1 of 2009 due primarily to a decrease in rent benefits of $15,000 and accounting and audit fees of $64,000.  There were expenses related to warrants issued in Q2 of 2008 of $33,000 that did not exist in
Q2 of 2009, however there were offsetting increases of $19,000 in legal expenses and over $25,000 in foreign exchange due to higher volatility of foreign exchange rates in the second quarter of 2009.





We anticipate that we may incur 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.





ECommerce general and administrative costs, which totaled $73,668 in Q2 of 2009, decreased by $26,827 over Q2 of 2008 primarily due to $26,000 in decreased in travel and accommodations costs.  These expenses represented 4.4% of eCommerce sales in Q2 of 2009 compared to 4.7% in Q1 of 2009 and 5.3% in Q2
of 2008.





ECommerce general and administrative expenses in Q2 of 2009 decreased by $6,552, or 8.2%, compared to Q1 of 2009 primarily due to overall cost cutting measures.  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 first six months of 2009, we recorded total general and administrative expense of $655,546 or 19.0% of total sales as compared to $1,388,018 or 36.6% of total sales in the same period of 2008, a decrease of over $732,000, or 53%.  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 first half of 2009 of $501,658 have decreased by $616,052, or more than 55.1%, compared to $1,117,710 spent in the same period of 2008.  This was primarily due to payments made relating to investor relations paid both in cash and common stock valued at approximately
$228,000.  Other significant expenses reductions include $41,000 in meals and entertainment, $111,000 in travel, $24,000 in telephone and $6,000 in office supplies and miscellaneous 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 half of 2009 also decreased by $64,000 in rent benefit and approximately $135,000 in legal expenses due to our addition in 2009 of in-house legal counsel.  In
total, these expenses accounted for 14.5% of total revenues in the period ended June 30, 2009, compared to 29.5% in the same period of 2008.





ECommerce general and administrative costs, which totaled $153,888 in the six months ended June 30, 2009, decreased by $116,420, or 43.1%, over the $270,308 expensed in the same period of 2008.  This was primarily due to $105,000 incurred in the first half of 2008 for recruiting costs, and a reduction period
over period of $8,000 in travel and accommodations costs related to our Perfume.com business, and a $2,300 reduction in merchant fees as sales have decreased in 2009.  These expenses represented 4.6% of eCommerce sales in the first half of 2009 compared to 7.2% in the same period of 2008.




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Management Fees and Employee Salaries





Quarter over Quarter Analysis





In Q2 of 2009, we incurred total management fees and staff salaries of $836,968 compared to $1,007,721 in Q1 of 2009.  This amount includes stock based compensation of $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 $10,427 and $8,919 in Q2 of 2009 and Q1 of 2009 respectively.  Excluding the amounts for bonuses and stock based compensation, normalized management fees and employee salaries expense in Q2 of 2009 was $374,054 and in Q1 of 2009 was $388,460.  This produced a decrease of 3.7% in Q2 of 2009 over Q1 of 2009.  This decrease was primarily due to the fact that we terminated several staff in early 2009.





The normalized expense in Q2 of 2009 decreased by $335,199, or 47.3%, over Q2 of 2008.  The decrease was due to the fact we significantly decreased the number of 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, represented 21.9% of total revenues in Q2 of 2009 versus 22.2% in Q1 of 2009 and 36.6% in Q2 of 2008.  The decreasing trend is a result of lay-offs and other active measures to cut costs.  Given the number
and caliber of current staff, management believes that it is reasonable for the Company maintain salaries expense at approximately 20% of total revenues.





Period over Period Analysis





During the six months ended June 30, 2009, we incurred total management fees and staff salaries of $1,844,689 compared to $2,738,808 in the comparative period of 2008, a decrease of 32.7%.  This amount includes stock based compensation of $1,062,830 and $986,879 in the 2009 period and 2008 period respectively.  It
also includes accrued amounts for special and performance bonuses payable to management and employees of $19,346 in the first half of 2009 and $348,177 in the first half of 2008.  Excluding these amounts, normalized management fees and employee salaries expense was $762,513 in the first half of 2009 compared to $1,403,752, resulting in a decrease of 45.7% period over period.  This decrease was primarily due to the fact that we terminated several staff in early 2009.





Marketing





Quarter over Quarter Analysis





We acquire internet traffic by pay-per-click, email and affiliate marketing.  In Q2 of 2009, we incurred total marketing expenses of $116,567, or 6.8% of total revenues, compared to $113,876, or 6.5% of total revenues in Q1 of 2009, and $150,128, or 7.7% of total revenues, in Q2 of 2008.





Included in this total were corporate marketing expenses of $1,602 in Q2 of 2009, compared to $2,454 in Q1 of 2009, and $20,243 in Q2 of 2008 related to an increase in news releases and public relations last year around repositioning and rebranding our Company.





ECommerce marketing expenses in Q2 of 2009 were $114,965, or 6.9% of eCommerce sales, compared to $111,422, or 6.5% of eCommerce sales in Q1 of 2009 and $129,885 or 6.8% of eCommerce sales in Q2 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.




53


Period over Period Analysis





During the first half of 2009, we incurred $230,548 in marketing costs, or 6.7% of total revenues, compared to $325,879, or 8.6% of total revenues in the first half of 2008.





Included in this total was $4,161 in corporate marketing expenses in the 2009 period compared to $46,807 in the 2008 period, a decrease of over $42,600 or 91.1%.  This decrease was primarily due to a $38,000 reduction in public relations related to a decrease in news releases in 2009.  Corporate
marketing costs in both periods account for a small percentage of total revenues.





ECommerce marketing expenses during the period ended June 30, 2009 were $226,387 compared to $279,072 in the comparative period in 2008.  The decrease of $52,685 or 18.9% period over period was due to a decrease of approximately $30,000 in pay-per-click advertising campaigns and $21,000 in email advertising
campaigns during the first half 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 half of 2009 accounted for 6.6% of eCommerce sales compared to 7.8% in the first half 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.  Total other expenses for the first two quarters of 2008 were $663,547.





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 of 2009.





Global Cricket Venture





We incurred $227,255 in the first quarter of 2009 and $155,968 in the second quarter of 2009 relating to Global Cricket Venture.  We accounted for our economic obligations to the BCCI and IPL based on the schedule of payments defined by the 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.





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.  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 reflect a gain on settlement of GCV related payments of $250,000.





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.  We have 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.  The cricket.com domain name shall remain the property of the Company until all payments have been made.  These two
agreements will result in our full exit out of the Cricket business, pending any obligation we may have to pay to the BCCI and IPL if Mauritius fails to make the assumed payments, and with the exception of interim support services which we have agreed to provide for a period of six months.  The Company cannot determine the financial impact of this transaction at this time.




54


(e) Liquidity and Capital Resources





We generate revenues from the sale of third-party products over the internet, “pay-per-click” advertising, selling advertising on media rich websites with relevant content, and the sale or lease of domain name assets. 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 first half of 2009, and we continue to explore opportunities to continue to do so.





As at June 30, 2009, current liabilities were in excess of current assets resulting in a working capital deficiency of $3,339,553, compared to a working capital deficiency of $3,199,931 at the fiscal year ended December 31, 2008.  During the three months ended June 30, 2009, we incurred a net loss of $1,407,423
and a decrease in cash of $266,122 compared to a net loss of $2,126,598 and a decrease in cash of $3,007,805 over the three month period ended June 30, 2008.  During the six months ended June 30, 2009, we incurred a net loss of $2,320,887 and a decrease in cash of $1,526,054 compared to a net loss of $4,162,922 and a decrease in cash of $5,477,305 for the same six month period of last year.  From the beginning of the fiscal year to June 30, 2009, we increased our accumulated deficit to $15,098,082
from $12,777,195 and have stockholders’ equity of $861,684.





The net loss in the three and six months ended June 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 consolidated financial statements.





The decrease in cash for the six 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 six months ended June 30, 2009 resulted in cash outflows of $2,518,778 after adjustments for non-cash items, the most significant of which were the stock-based compensation expensed during the period of $1,062,830, offsetting the performance bonuses accrued in the amount of $216,304, the
decrease in accounts payable and accrued liabilities of $785,086, and the gain from the sales and sales-type lease of a domain names of $944,867.  In the six months ended June 30, 2008, cash outflows of $3,472,392 were primarily due to the loss of the period offset by the stock-based compensation expensed during the period of $986,879.




Investing Activities




Investing activities during the six months ended June 30, 2009 generated cash inflows of $1,003,676, primarily due to $1,096,553 in net proceeds received from the sale and sales-type lease of domain names.  During the six months ended June 30, 2008, we generated cash outflows of $1,929,435 primarily due
to the cash consideration of $1,533,493 paid in conjunction with the Auctomatic merger, the investment of approximately $176,100 of property and equipment, and $285,000 in website development.




Financing Activities




The effect to financing activities for the six months ended June 30, 2009 and 2008 was the attribution of losses to our non-controlling interest of $10,952 and $75,478, respectively.




55




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 $1.65 million.  In
the second quarter of 2009, we sold an additional domain name for proceeds of $400,000.  Subsequent to June 30, 2009, we sold an additional four domain names for over $1.8 million in addition to the agreements that were reached with Mauritius relating to cricket.com.  We believe that these strategic sales of domain names have provided us with the required cash to meet our working capital needs and to provide for general operating capital needs over the next 12 to 18 months.  We also
anticipate that we may decide to 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.





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 direct 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.





We have established a plan to continue our current business operations and overcome our financial difficulties.  We expect to achieve an improved financial position and enhanced liquidity by establishing and carrying out a plan of recovery as discussed in our Amendment No. 1 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 June 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.




56


Going Concern





Our 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.  We have generated a consolidated net loss of $1,407,423 for the three months ended
and $2,320,887 for the six months ended June 30, 2009 and realized a negative cash flow from operating activities of $618,173 and $2,518,778 for the three months and six months ended June 30, 2009 respectively.  At June 30, 2009, there is an accumulated deficit of $15,098,082 (December 31, 2008 - $12,777,195) and a working capital deficiency of $3,339,553 ($3,199,931 at December 31, 2008).





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 raise financing, including being able to issue shares of our common stock to meet our liabilities as they become payable, and the attainment of profitable operations.  The
outcome of these matters is dependant on factors outside of our control and cannot be predicted at this time.





Financial statements prepared on a going concern basis assume that we will be able to realize assets and discharge liabilities in the normal course of business for the foreseeable future.  Our 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.





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 Emerging Issues Task Force (“EITF”) 99-19, Reporting Revenue Gross as a Principal versus Net as an Agent, we record web advertising revenues on a gross basis.





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 half of 2009, there were two sales of domain names.  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.  There
was one sales-type lease in the first quarter of 2009 that was breached by the buyer during the second quarter of 2009.





Stock-Based Compensation





Beginning July 1, 2007, we began accounting for stock options under the provisions of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment (“FAS 123(R)”), which requires the recognition of the fair value of stock-based compensation.
Under the fair value recognition provisions for FAS 123(R), 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 FAS No. 123(R) and the conclusions reached by the EITF in Issue No. 96-18.  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 EITF 96-18.





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 June 30, 2009 is recorded at cost of $42,592 (December 31, 2008
- $74,082) and represents inventory in transit from the supplier to the customer.





Website Development Costs





We adopted the provisions of EITF No. 00-2, Accounting for Web Site 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.




58


Intangible Assets





We adopted the provision of FAS No. 142, Goodwill and Intangible Assets, which revises the accounting for purchased goodwill and intangible assets. Under FAS 142, 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 June 30, 2009.





Goodwill





Goodwill represents the excess of acquisition cost over the fair value of the net assets of acquired entities. In accordance with FAS No. 142, Accounting for Goodwill and Other Intangible Assets, 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 June 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





FAS 168


In June, 2009, the FASB issued FAS No. 168, The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles – A Replacement of FASB Statement No. 162.  The FASB Accounting Standards
CodificationTM (Codification) will become the source of authoritative U.S. generally accepted accounting principles (GAAP) recognized by the FASB to be applied by nongovernmental entities. 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 beginning after September 15, 2009, which, for us, would be the fiscal year beginning January 1, 2010. We are currently assessing the impact of FAS No. 168 on our financial position and results of operations.




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FAS 166


In June, 2009, the FASB issued FAS No. 166, Accounting for Transfer of Financial Assets – An Amendment of FASB Statement No. 140. The new standard is intended to improve the relevance, representational faithfulness, and comparability of the information
that a reporting entity provides in its financial statements about a transfer of financial assets, the effects of a transfer on its financial position, financial performance, and cash flows, and a transferor’s continuing involvement, if any, in transferred financial assets.  This statement is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2009, which, for us, would be the fiscal year beginning January 1, 2010. We are currently assessing
the impact of FAS No. 166 on our financial position and results of operations.





FAS 162


In May, 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles. The new standard is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be
used in preparing financial statements that are presented in conformity with U.S. generally accepted accounting principles (GAAP) for nongovernmental entities. This Statement is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning ofPresent Fairly in Conformity With Generally Accepted Accounting Principles.  We
do not expect that this Statement will result in a change in current practice.





Recently Adopted Accounting Pronouncements





FAS 165


In May, 2009, the FASB issued FAS No. 165, 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 us, would be the interim period ending June 30, 2009. We do not expect that this Statement will result in a change in current practice.





FAS 161


In March 2008, the FASB issued FAS 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FAS 133. FAS 161 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 FAS 133 and its related interpretations; and how derivative instruments and related hedged items affect an entity's financial position,
financial performance and cash flows.  FAS 161 was effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, which for us was the fiscal year beginning January 1, 2009.  We adopted FAS 161 at January 1, 2009, however the adoption of this statement did not have a material effect on our financial results.





FSP FAS 142-3


In April 2008, the FASB issued FASB Staff Position (“FSP”) FAS 142-3, Determination of the Useful Life of Intangible Assets.  FSP FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used
to determine the useful life of a recognized intangible asset under FAS 142, Goodwill and Other Intangible Assets.  The intent of FSP FAS 142-3 is to improve the consistency between the useful life of a recognized intangible asset under FAS 142 and the period of expected cash flows used to measure the fair value of the asset under FAS 141(R) and other applicable accounting literature.  FSP FAS 142-3 was effective for financial statements
issued for fiscal years beginning after December 15, 2008, which for us was the fiscal year beginning January 1, 2009.  We adopted FAS 142-3 at January 1, 2009, however the adoption of this statement did not have a material effect on our financial results.





FAS 141R


In December 2007, the FASB issued FAS 141 (revised 2007), Business Combinations("FAS 141(R)"). FAS 141(R) significantly changes the accounting for business combinations in a number of areas including the treatment of contingent consideration, preacquisition
contingencies, transaction costs, in-process research and development and restructuring costs. In addition, under FAS 141(R), changes in an acquired entity's deferred tax assets and uncertain tax positions after the measurement period will impact income tax expense. This standard will change accounting treatment for business combinations on a prospective basis. FAS 141(R) was effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2008, which for us was the
fiscal year beginning January 1, 2009.  We adopted FAS 141(R) at January 1, 2009, however the adoption of this statement did not have a material effect on our financial results.




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FAS 160


In December 2007, the FASB issued FAS 160 Noncontrolling Interests in Consolidated Financial Statements, and simultaneously revised FAS 141 Business Combinations.  This Statement applies prospectively
to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008, which for us was the fiscal year beginning January 1, 2009. An entity may not adopt the policy before the transitional date.  We adopted FAS 160 at January 1, 2009, however the adoption of this statement did not have a material effect on our financial results.





FAS 157


In September 2006, the FASB issued FAS 157, Fair Value Measurements.  This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value
measurements.  This standard does not require any new fair value measurements.





In 2008, we adopted FAS 157 for financial assets and liabilities recognized at fair value on a recurring basis. The adoption did not have a material effect on our financial results. The disclosures required by FAS 157 for financial assets and liabilities measured at fair value on a recurring basis as at December
31, 2008 are included in Note 4 of our consolidated financial statements.





In February 2008, the FASB issued FSP FAS 157-2, which delays the effective date of FAS 157 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 us was the fiscal year beginning January 1, 2009.





We applied the requirements of FAS 157 for fair value measurements of financial and nonfinancial assets and liabilities not valued on a recurring basis at January 1, 2009.  We adopted these requirements of FAS 157 at January 1, 2009, however the adoption of this statement did not have a material effect
on our financial results.





In October 2008, the FASB issued FSP FAS 157-3, Determining the Fair Value of a Financial Asset When the Market for that Asset is Not Active, which clarifies the application of FAS 157 in determining the fair value of a financial asset when the market for that
asset is not active.  FSP FAS 157-3 is effective as of the issuance date and has not affected the valuation of our financial assets.





Item 3:Quantitative and Qualitative Disclosures about Market Risk





Not required.





Item 4T: Controls and Procedures.





Evaluation of Disclosure Controls and Procedures





As of June 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.





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In connection with the restatement of our financial statements for the quarter ended March 31, 2009 and our fiscal years ended December 31, 2008 and 2007 (the “Restatement”), our management, with the participation of our Chief Executive Officer and Principal Financial Officer, has concluded that, as of June 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 as of December 31, 2008 resulted from our failure to maintain effective processes and controls over the accounting for and reporting of complex and non-routine transactions. Specifically, we did 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.  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.




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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 Q2 of 2009, we issued the following securities not registered under the Securities Act of 1933, as amended (the “Securities Act”):





On April 9, 2009, we issued 27,823 shares of common stock to a law firm, McCormick Legal Advisors LLC, in payment of services that had been rendered to us having a value of $8,625.  The offer and sale of the securities were exempt from the registration requirements of the Securities Act in accordance with
Section 4(2).  The offer and sale was not effected through any general solicitation or general advertising and the offeree was an accredited investor.





On June 19, 2009, we issued 45,956 shares of our common stock to each of the two remaining Auctomatic founders pursuant to the Merger Agreement.  The offer and sale of the securities were exempt from the registration requirements of the Securities Act in accordance with Section 4(2).  The offer
and sale was not effected through any general solicitation or general advertising and the offerees occupied an insider status relative to us that afforded them effective access to the information registration would otherwise provide.





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.




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Item 6: Exhibits.




(A)
Index to and Description of Exhibits.EXHIBIT
DESCRIPTION31.1
Section 302 Certification of Chief Executive Officer31.2
Section 302 Certification of Principal Financial Officer32.1
Section 906 Certificate of Chief Executive Officer and Chief Financial Officer





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SIGNATURES





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






LIVE CURRENT MEDIA INC.Dated:  September 21, 2009
By:
/s/ C. Geoffrey HampsonName:
C. Geoffrey HampsonTitle:
CEO and Chairman of the Board(Principal Executive Officer)




Dated:  September 21, 2009
By:
/s/ C. Geoffrey HampsonName:
C. Geoffrey HampsonTitle:
CEO and Chairman of the Board(Principal Financial Officer)