UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





Amendment
No. 1





to





Form
10-Q /A





þ   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 of
              incorporation
      or organization)
            (IRS
      Employer
              Identification
      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 þ  No 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. o Yes  o No





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).


o Yes  þ  No




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













LIVE
CURRENT MEDIA INC.


AMENDMENT NO. 1 TO 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 4T.
              Controls and
      Procedures
              61PART II.
              Other
    Information
              63Item
      6.
              Exhibits
              63Signatures
              64Certifications











2





EXPLANATORY
NOTE





On
November 10, 2009 we received a letter from the Securities and Exchange
Commission relating to our Form 10-Q for the quarterly period ended June 30,
2009, originally filed September 21, 2009 (the “Original Report”. The
primary purpose of this amendment (“Amendment No. 1”) is to respond to the
comment letter.





In
Amendment No. 1, we have revised the presentation of our financial statements to
respond to the comments made by the Securities and Exchange Commission.We have separated
operating expenses from non-operating income (expenses), and we have indicated
that our costs of goods sold exclude depreciation and
amortization.  We have also reclassified expenses related to Global
Cricket Venture.  We have revised the discussion at Item 2,
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations”, to reflect the changes to our financial
statements.





Amendment
No. 1 includes information contained in the Original Report, and we have made no
attempt in Amendment No. 1 to modify or update the disclosures presented in the
Original Report, except as identified above.  The disclosures in
Amendment No. 1 continue to speak as of the date of the Original Report, and do
not reflect events occurring after the filing of the Original
Report.  Accordingly, Amendment No. 1 should be read in conjunction
with our other filings made with the Securities and Exchange Commission
subsequent to the filing of the Original Report.  The filing of
Amendment No. 1 shall not be deemed to be an admission that the Original Report,
when made, included any untrue statement of a material fact or omitted to state
a material fact necessary to make a statement not
misleading.







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 SHEETS
 
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 
 CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY
 
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
  4
 LIVE
      CURRENT MEDIA INC.(formerly
      COMMUNICATE.COM INC.)CONSOLIDATED
      BALANCE SHEETSExpressed
      In U.S. Dollars(Going
      Concern - See Note 1)December
      31,June
      30, 2009
                
                
                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 value

                    Issued
      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 OPERATIONSExpressed
      In U.S. Dollars(Unaudited)Three
      Months Ended
                
                
                Three
      Months Ended
                
                
                Six
      Months Ended
                
                
                Six
      Months EndedJune
      30, 2009
                
                
                June
      30, 2008
                
                
                June
      30, 2009
                
                
                June
      30, 2008(As
      Restated -
                  See
      Note 2)
                
                
                
                
                (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 (excluding depreciation and amortization as shown
      below)
                
                
                1,315,747
                
                
                
                1,583,067
                
                
                
                2,702,366
                
                
                
                3,069,129GROSS
      PROFIT
                
                
                389,158
                
                
                
                356,568
                
                
                
                754,921
                
                
                
                718,985OPERATING
      EXPENSESAmortization
      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
                
                
                207,128
                
                
                
                591,170
                
                
                
                533,482
                
                
                
                1,117,710ECommerce
      general and administrative
                
                
                73,668
                
                
                
                100,495
                
                
                
                153,888
                
                
                
                270,308Management
      fees and employee salaries
                
                
                996,661
                
                
                
                1,595,083
                
                
                
                2,190,256
                
                
                
                2,738,808Corporate
      marketing
                
                
                6,221
                
                
                
                20,243
                
                
                
                9,993
                
                
                
                46,807ECommerce
      marketing
                
                
                114,965
                
                
                
                129,885
                
                
                
                226,387
                
                
                
                279,072Other
      expenses (Note
      13)
                
                
                -
                
                
                
                33,691
                
                
                
                264,904
                
                
                
                663,547Total
      Operating Expenses
                
                
                1,530,396
                
                
                
                2,523,818
                
                
                
                3,641,391
                
                
                
                5,184,769NON-OPERATING
      INCOME (EXPENSES)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
      Non-Operating Income (Expenses)
                
                
                (286,674
                )
                
                
                16,680
                
                
                
                542,149
                
                
                
                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
                
                
                
                20,832,026
 
 See
accompanying notes to consolidated financial statements
   6
  LIVE
      CURRENT MEDIA INC.(formerly
      COMMUNICATE.COM INC)CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS' EQUITYExpressed
      In U.S. DollarsLive
      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
                )
                
                $
                861,684
 See
accompanying notes to consolidated financial statements
  7
  LIVE
      CURRENT MEDIA INC.(formerly
      COMMUNICATE.COM INC)CONSOLIDATED
      STATEMENTS OF CASH FLOWSExpressed
      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 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)
 These
financial statements do not include any adjustments relating to the
recoverability or classification of assets or the amounts or classification of
liabilities that might be necessary should the Company be unable to continue as
a going concern.
 
 The
Company expects to achieve an improved financial position and enhanced liquidity
by establishing and carrying out a plan of recovery as discussed in the
consolidated financial statements included in the Company’s Annual Report on
Form 10-K for the year ended December 31, 2008, as amended.
 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
      restatedSALES
                
                
                
                
                $
                1,939,635
                
                
                $
                -
                
                
                $
                1,939,635COSTS
      OF SALES (excluding depreciation and amortization as shown
      below)
                
                
                
                
                1,583,067
                
                
                
                -
                
                
                
                1,583,067GROSS
      PROFIT
                
                
                
                
                
                356,568
                
                
                
                -
                
                
                
                356,568OPERATING
      EXPENSESAmortization
      and depreciation
                
                
                
                
                
                43,888
                
                
                
                -
                
                
                
                43,888Amortization
      of website development costs
                
                
                
                
                
                9,363
                
                
                
                -
                
                
                
                9,363Corporate
      general and administrative
                
                
                
                
                
                591,170
                
                
                
                -
                
                
                
                591,170ECommerce
      general and administrative
                
                
                
                
                
                100,495
                
                
                
                -
                
                
                
                100,495Management
      fees and employee salaries
                
                C(i),
      C(ii), D, G(ii)
                
                
                
                1,470,418
                
                
                
                124,665
                
                
                
                1,595,083Corporate
      marketing
                
                
                
                
                
                20,243
                
                
                
                -
                
                
                
                20,243ECommerce
      marketing
                
                
                
                
                
                129,885
                
                
                
                -
                
                
                
                129,885Other
      expenses
                
                
                
                
                
                33,691
                
                
                
                -
                
                
                
                33,691Total
      Operating Expenses
                
                
                
                
                
                2,399,153
                
                
                
                124,665
                
                
                
                2,523,818NON-OPERATING
      INCOME (EXPENSES)Interest
      and investment income
                
                
                
                
                
                16,680
                
                
                
                -
                
                
                
                16,680Total
      Non-Operating 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 DILUTED
                
                
                
                
                
                $
                (0.10
                )
                
                $
                (0.00
                )
                
                $
                (0.10
                )Net
      Loss attributable to Live Current Media Inc. common
      stockholdersWeighted
      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
      restatedSALES
                  
                  
                  
                  
                  $
                  3,788,114
                  
                  
                  $
                  -
                  
                  
                  $
                  3,788,114COSTS
      OF SALES (excluding depreciation and amortization as shown
      below)
                  
                  
                  
                  
                  3,069,129
                  
                  
                  
                  -
                  
                  
                  
                  3,069,129GROSS
      PROFIT
                  
                  
                  
                  
                  
                  718,985
                  
                  
                  
                  -
                  
                  
                  
                  718,985OPERATING
      EXPENSESAmortization
      and depreciation
                  
                  
                  
                  
                  
                  59,154
                  
                  
                  
                  -
                  
                  
                  
                  59,154Amortization
      of website development costs
                  
                  
                  
                  
                  
                  9,363
                  
                  
                  
                  -
                  
                  
                  
                  9,363Corporate
      general and administrative
                  
                  
                  E(i)
                  
                  
                  
                  1,053,960
                  
                  
                  
                  63,750
                  
                  
                  
                  1,117,710ECommerce
      general and administrative
                  
                  
                  
                  
                  
                  
                  270,308
                  
                  
                  
                  -
                  
                  
                  
                  270,308Management
      fees and employee salaries
                  
                  C(i),
      C(ii), D, G(ii)
                  
                  
                  2,528,965
                  
                  
                  
                  209,843
                  
                  
                  
                  2,738,808Corporate
      marketing
                  
                  
                  
                  
                  
                  
                  46,807
                  
                  
                  
                  -
                  
                  
                  
                  46,807ECommerce
      marketing
                  
                  
                  
                  
                  
                  
                  279,072
                  
                  
                  
                  -
                  
                  
                  
                  279,072Other
      expenses
                  
                  
                  
                  
                  
                  
                  663,547
                  
                  
                  
                  -
                  
                  
                  
                  663,547Total
      Operating Expenses
                  
                  
                  
                  
                  
                  
                  4,911,176
                  
                  
                  
                  273,593
                  
                  
                  
                  5,184,769NON-OPERATING
      INCOME (EXPENSES)Gain
      from sales and sales-type lease of domain names
                  
                  
                  
                  
                  
                  
                  168,206
                  
                  
                  
                  -
                  
                  
                  
                  168,206Interest
      and investment income
                  
                  
                  
                  
                  
                  
                  59,178
                  
                  
                  
                  -
                  
                  
                  
                  59,178Total
      Non-Operating 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 DILUTED
                  
                  
                  
                  
                  
                  $
                  (0.19
                  )
                  
                  $
                  (0.01
                  )
                  
                  $
                  (0.20
                  )Net
      Loss attributable to Live Current Media Inc. common
      stockholdersWeighted
      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
                
                
                
                63,750
                
                
                
                100,867Bonuses
      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
                )
                
                
                75,478
                
                
                
                (3,583,138
                )INVESTING
      ACTIVITIESNet
      proceeds from sales-type lease of domain name
                
                
                
                
                
                
                65,585
                
                
                
                -
                
                
                
                65,585Cash
      consideration for Auctomatic
                
                
                
                
                
                
                (1,422,747
                )
                
                
                -
                
                
                
                (1,422,747
                )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
                )
                
                
                -
                
                
                
                (1,818,689
                )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 themerger agreement with
      Auctomatic
                  
                  G(i)
                  
                  
                  
                  586,403
                  
                  
                  
                  586
                  
                  
                  
                  1,137,533
                  
                  
                  
                  
                  
                  
                  
                  1,138,119
                  
                  
                  
                  110,746
                  
                  
                  
                  1,248,865
                  
                  
                  
                  
                  
                  
                  
                  1,248,865Issuance
      of 33,000 common sharesto investor relations firm
                  
                  
                  
                  
                  
                  33,000
                  
                  
                  
                  33
                  
                  
                  
                  85,649
                  
                  
                  
                  
                  
                  
                  
                  85,682
                  
                  
                  
                  -
                  
                  
                  
                  85,682
                  
                  
                  
                  
                  
                  
                  
                  85,682Issuance
      of 120,000 common sharesto investor relations firm
                  
                  
                  
                  
                  
                  120,000
                  
                  
                  
                  120
                  
                  
                  
                  218,057
                  
                  
                  
                  
                  
                  
                  
                  218,177
                  
                  
                  
                  -
                  
                  
                  
                  218,177
                  
                  
                  
                  
                  
                  
                  
                  218,177Issuance
      of 50,000 warrantsto investor relations firm
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  45,500
                  
                  
                  
                  
                  
                  
                  
                  45,500
                  
                  
                  
                  -
                  
                  
                  
                  45,500
                  
                  
                  
                  
                  
                  
                  
                  45,500Cancellation
      of 300,000 common sharesnot distributed
                  
                  
                  
                  
                  
                  (300,000
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  -Private
      Placement of 1,627,344 unitsat $0.65 per share
                  
                  F
                  
                  
                  
                  1,627,344
                  
                  
                  
                  1,627
                  
                  
                  
                  1,056,148
                  
                  
                  
                  
                  
                  
                  
                  1,057,775
                  
                  
                  
                  (157,895
                  )
                  
                  
                  899,880
                  
                  
                  
                  
                  
                  
                  
                  899,880Share
      issue costs
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (86,803
                  )
                  
                  
                  
                  
                  
                  
                  (86,803
                  )
                  
                  
                  -
                  
                  
                  
                  (86,803
                  )
                  
                  
                  
                  
                  
                  
                  (86,803
                  )Extinguishment
      of accounts payable
                  
                  
                  
                  
                  
                  33,000
                  
                  
                  
                  33
                  
                  
                  
                  16,467
                  
                  
                  
                  
                  
                  
                  
                  16,500
                  
                  
                  
                  -
                  
                  
                  
                  16,500
                  
                  
                  
                  
                  
                  
                  
                  16,500Net
      loss and comprehensive loss
                  
                  A,
      B, C(i), C(ii), D, E(i), E(ii), G(ii)
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (10,006,456
                  )
                  
                  
                  (10,006,456
                  )
                  
                  
                  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 sharesto investor relations firm
                  
                  
                  
                  
                  
                  15,000
                  
                  
                  
                  15
                  
                  
                  
                  5,685
                  
                  
                  
                  
                  
                  
                  
                  5,700
                  
                  
                  
                  -
                  
                  
                  
                  5,700
                  
                  
                  
                  -
                  
                  
                  
                  5,700Extinguishment
      of accounts payable
                  
                  
                  
                  
                  
                  345,075
                  
                  
                  
                  346
                  
                  
                  
                  120,430
                  
                  
                  
                  
                  
                  
                  
                  120,776
                  
                  
                  
                  -
                  
                  
                  
                  120,776
                  
                  
                  
                  -
                  
                  
                  
                  120,776Net
      loss and comprehensive loss
                  
                  C(ii),
      D, E(i), E(ii), F, G(ii)
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (634,647
                  )
                  
                  
                  (634,647
                  )
                  
                  
                  (281,762
                  )
                  
                  
                  (916,409
                  )
                  
                  
                  (8,007
                  )
                  
                  
                  (924,416
                  )Balance,
      March 31, 2009 (unaudited) (as restated)
                  
                  
                  
                  
                  
                  23,906,445
                  
                  
                  
                  15,216
                  
                  
                  
                  15,285,508
                  
                  
                  
                  (13,166,781
                  )
                  
                  
                  2,133,943
                  
                  
                  
                  (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 $121,186 for the three
months and $236,380 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 forfinancial 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 which have been
included in corporate marketing, management fees and employee salaries, and
corporate general and administrative expenses.  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 Note 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 – COMMON STOCK (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 Companygranted 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 Companygranted 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 – COMMON STOCK (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 Companygranted 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
      Companygranted 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
      Companygranted 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
      Companygranted 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 – COMMON STOCK (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
              
              
              Weighted
      Average
                Exercise
      Price
                $
              
              
              Weighted
      Average
                Fair
      Value
                $Options
      outstanding, December 31, 2007
              
              
              2,750,000
              
              
              
              1.41
              
              
              
              1.50Granted
              
              
              2,160,000
              
              
              
              0.81
              
              
              
              1.36Exercised
              
              
              -
              
              
              
              -
              
              
              
              -Forfeited
      or expired
              
              
              112,500
              
              
              
              2.29
              
              
              
              0.47Options
      outstanding, December 31, 2008
              
              
              4,797,500
              
              
              
              1.12
              
              
              
              1.46Granted
              
              
              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 – COMMON STOCK (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:
 
 Warrants
              
              Outstanding
              
              
              WeightedAverageExercise Price
              
              
              Date
      ofExpiry$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, 2008 and
      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
                )
                
                
                (1,121,104
                )
                
                
                (2,886,470
                )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
                
                $
                (2,886,470
                )
                
                $
                (4,465,784
                )Non-Operating
      Income (Expenses)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 Amendment
No. 1 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 Amendment No.
1 .





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 Amendment No. 1 .




Readers
of this report should not rely solely on the forward-looking statements and
should consider all risks and uncertainties throughout this Amendment No. 1 , 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 amendments 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





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
      restatedSALES
              
              
              
              
              $
              1,939,635
              
              
              $
              -
              
              
              $
              1,939,635COSTS
      OF SALES (excluding depreciation and amortization as shown
      below)
              
              
              
              1,583,067
              
              
              
              -
              
              
              
              1,583,067GROSS
      PROFIT
              
              
              
              
              
              356,568
              
              
              
              -
              
              
              
              356,568OPERATING
      EXPENSESAmortization
      and depreciation
              
              
              
              
              
              43,888
              
              
              
              -
              
              
              
              43,888Amortization
      of website development costs
              
              
              
              
              
              9,363
              
              
              
              -
              
              
              
              9,363Corporate
      general and administrative
              
              
              
              
              
              591,170
              
              
              
              -
              
              
              
              591,170ECommerce
      general and administrative
              
              
              
              
              
              100,495
              
              
              
              -
              
              
              
              100,495Management
      fees and employee salaries
              
              C(i),
      C(ii), D, G(ii)
              
              
              
              1,470,418
              
              
              
              124,665
              
              
              
              1,595,083Corporate
      marketing
              
              
              
              
              
              20,243
              
              
              
              -
              
              
              
              20,243ECommerce
      marketing
              
              
              
              
              
              129,885
              
              
              
              -
              
              
              
              129,885Other
      expenses
              
              
              
              
              
              33,691
              
              
              
              -
              
              
              
              33,691Total
      Operating Expenses
              
              
              
              
              
              2,399,153
              
              
              
              124,665
              
              
              
              2,523,818NON-OPERATING
      INCOME (EXPENSES)Interest
      and investment income
              
              
              
              
              
              16,680
              
              
              
              -
              
              
              
              16,680Total
      Non-Operating Income (Expenses)
              
              
              
              
              
              16,680
              
              
              
              -
              
              
              
              16,680CONSOLIDATED
      NET LOSS
              
              
              
              
              
              (2,025,905
              )
              
              
              (124,665
              )
              
              
              (2,150,570
              )ADD:
      NET LOSS ATTRIBUTABLE TO NON-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 DILUTED
              
              
              
              
              $
              (0.10
              )
              
              $
              (0.00
              )
              
              $
              (0.10
              )Net
      Loss attributable to Live Current Media Inc. common
      stockholdersWeighted
      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
      restatedSALES
              
              
              
              
              $
              3,788,114
              
              
              $
              -
              
              
              $
              3,788,114COSTS
      OF SALES (excluding depreciation and amortization as shown
      below)
              
              
              
              3,069,129
              
              
              
              -
              
              
              
              3,069,129GROSS
      PROFIT
              
              
              
              
              
              718,985
              
              
              
              -
              
              
              
              718,985OPERATING
      EXPENSESAmortization
      and depreciation
              
              
              
              
              
              59,154
              
              
              
              -
              
              
              
              59,154Amortization
      of website development costs
              
              
              
              
              
              9,363
              
              
              
              -
              
              
              
              9,363Corporate
      general and administrative
              
              E(i)
              
              
              
              1,053,960
              
              
              
              63,750
              
              
              
              1,117,710ECommerce
      general and administrative
              
              
              
              
              
              270,308
              
              
              
              -
              
              
              
              270,308Management
      fees and employee salaries
              
              C(i),
      C(ii), D, G(ii)
              
              
              
              2,528,965
              
              
              
              209,843
              
              
              
              2,738,808Corporate
      marketing
              
              
              
              
              
              46,807
              
              
              
              -
              
              
              
              46,807ECommerce
      marketing
              
              
              
              
              
              279,072
              
              
              
              -
              
              
              
              279,072Other
      expenses
              
              
              
              
              
              663,547
              
              
              
              -
              
              
              
              663,547Total
      Operating Expenses
              
              
              
              
              
              4,911,176
              
              
              
              273,593
              
              
              
              5,184,769NON-OPERATING
      INCOME (EXPENSES)Gain
      from sales and sales-type lease of domain names
              
              
              
              
              
              168,206
              
              
              
              -
              
              
              
              168,206Interest
      and investment income
              
              
              
              
              
              59,178
              
              
              
              -
              
              
              
              59,178Total
      Non-Operating Income (Expenses)
              
              
              
              
              
              227,384
              
              
              
              -
              
              
              
              227,384CONSOLIDATED
      NET LOSS
              
              
              
              
              
              (3,964,807
              )
              
              
              (273,593
              )
              
              
              (4,238,400
              )ADD:
      NET LOSS ATTRIBUTABLE TO NON-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 DILUTED
              
              
              
              
              $
              (0.19
              )
              
              $
              (0.01
              )
              
              $
              (0.20
              )Net
      Loss attributable to Live Current Media Inc. common
      stockholdersWeighted
      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
              
              
              
              63,750
              
              
              
              100,867Bonuses
      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
              )
              
              
              75,478
              
              
              
              (3,583,138
              )INVESTING
      ACTIVITIESNet
      proceeds from sales-type lease of domain name
              
              
              
              
              
              65,585
              
              
              
              -
              
              
              
              65,585Cash
      consideration for Auctomatic
              
              
              
              
              
              (1,422,747
              )
              
              
              -
              
              
              
              (1,422,747
              )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
              )
              
              
              -
              
              
              
              (1,818,689
              )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 themerger agreement with
      Auctomatic
              
              G(i)
              
              
              
              586,403
              
              
              
              586
              
              
              
              1,137,533
              
              
              
              
              
              
              
              1,138,119
              
              
              
              110,746
              
              
              
              1,248,865
              
              
              
              
              
              
              
              1,248,865Issuance
      of 33,000 common sharesto investor relations firm
              
              
              
              
              
              33,000
              
              
              
              33
              
              
              
              85,649
              
              
              
              
              
              
              
              85,682
              
              
              
              -
              
              
              
              85,682
              
              
              
              
              
              
              
              85,682Issuance
      of 120,000 common sharesto investor relations firm
              
              
              
              
              
              120,000
              
              
              
              120
              
              
              
              218,057
              
              
              
              
              
              
              
              218,177
              
              
              
              -
              
              
              
              218,177
              
              
              
              
              
              
              
              218,177Issuance
      of 50,000 warrantsto investor relations firm
              
              
              
              
              
              -
              
              
              
              -
              
              
              
              45,500
              
              
              
              
              
              
              
              45,500
              
              
              
              -
              
              
              
              45,500
              
              
              
              
              
              
              
              45,500Cancellation
      of 300,000 common sharesnot distributed
              
              
              
              
              
              (300,000
              )
              
              
              -
              
              
              
              -
              
              
              
              
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              
              
              
              
              -Private
      Placement of 1,627,344 unitsat $0.65 per share
              
              F
              
              
              
              1,627,344
              
              
              
              1,627
              
              
              
              1,056,148
              
              
              
              
              
              
              
              1,057,775
              
              
              
              (157,895
              )
              
              
              899,880
              
              
              
              
              
              
              
              899,880Share
      issue costs
              
              
              
              
              
              -
              
              
              
              -
              
              
              
              (86,803
              )
              
              
              
              
              
              
              (86,803
              )
              
              
              -
              
              
              
              (86,803
              )
              
              
              
              
              
              
              (86,803
              )Extinguishment
      of accounts payable
              
              
              
              
              
              33,000
              
              
              
              33
              
              
              
              16,467
              
              
              
              
              
              
              
              16,500
              
              
              
              -
              
              
              
              16,500
              
              
              
              
              
              
              
              16,500Net
      loss and comprehensive loss
              
              A,
      B, C(i), C(ii), D, E(i), E(ii), G(ii)
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (10,006,456
              )
              
              
              (10,006,456
              )
              
              
              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 sharesto investor relations firm
              
              
              
              
              
              15,000
              
              
              
              15
              
              
              
              5,685
              
              
              
              
              
              
              
              5,700
              
              
              
              -
              
              
              
              5,700
              
              
              
              -
              
              
              
              5,700Extinguishment
      of accounts payable
              
              
              
              
              
              345,075
              
              
              
              346
              
              
              
              120,430
              
              
              
              
              
              
              
              120,776
              
              
              
              -
              
              
              
              120,776
              
              
              
              -
              
              
              
              120,776Net
      loss and comprehensive loss
              
              C(ii),
      D, E(i), E(ii), F, G(ii)
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (634,647
              )
              
              
              (634,647
              )
              
              
              (281,762
              )
              
              
              (916,409
              )
              
              
              (8,007
              )
              
              
              (924,416
              )Balance,
      March 31, 2009 (unaudited) (as restated)
              
              
              
              
              
              23,906,445
              
              
              
              15,216
              
              
              
              15,285,508
              
              
              
              (13,166,781
              )
              
              
              2,133,943
              
              
              
              (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 (excluding depreciation and
      amortization as shown below)
              
              
              1,315,747
              
              
              
              1,583,067GROSS
      PROFIT
              
              
              389,158
              
              
              
              356,568OPERATING EXPENSESAmortization
      and depreciation
              
              
              98,246
              
              
              
              43,888Amortization
      of website development costs
              
              
              33,507
              
              
              
              9,363Corporate
      general and administrative
              
              
              207,128
              
              
              
              591,170ECommerce
      general and administrative
              
              
              73,668
              
              
              
              100,495Management
      fees and employee salaries
              
              
              996,661
              
              
              
              1,595,083Corporate
      marketing
              
              
              6,221
              
              
              
              20,243ECommerce
      marketing
              
              
              114,965
              
              
              
              129,885Other
      expenses
              
              
              -
              
              
              
              33,691Total
      Operating Expenses
              
              
              1,530,396
              
              
              
              2,523,818NON-OPERATING INCOME (EXPENSES)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
              )
              
              
              -Total
      Non-Operating Income
(Expenses)
              
              
              ( 286,674
              )
              
              
              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 DATAJune
      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.




49


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.





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
            
            
            
            18,277Year -to-date 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.




51


General
and Administrative





Quarter
over Quarter Analysis





In Q2 of
2009, we recorded total general and administrative expense of $280,796 or 16.5%
of total sales as compared to $691,665 or 35.7% of total sales in Q2 of 2008, a
decrease of $410,869 or over 59%. This total includes corporate and eCommerce
related general and administrative costs.  Total general and
administrative expenses in Q2 of 2009 were 30.9% lower than the $406,574 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 $207,128 have decreased over the amount of
$591,170 in Q2 of 2008 by $384,042.  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.
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. In total, these expenses
accounted for 12.1% of total revenues in Q2 of 2009, compared to 18.6% in Q1 of
2009 and 30.5% in Q2 of 2008.





Corporate general and administrative costs for Q2 of 2009 have
decreased by $119,226, or 36.5%, over Q1 of 2009 due primarily to a decrease in
rent benefits of $15,000 and accounting and audit fees of
$64,000.  Cricket related costs have decreased by approximately
$40,000 in Q2 of 2009 compared to Q1 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 $687,370 or 19.9% 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 $700,600, or
50.5%.  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 $533,482 have decreased by $584,228, or 52.3%, 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 Q2 of 2008, all
cricket related expenses had been capitalized and therefore corporate general
and administrative expenses in Q2 of 2009 included approximately $32,000 of
these costs.  In total, these expenses accounted for 15.4% of total
revenues in the period ended June 30, 2009, compared to 29.5% in the same period
of 2008 .




52


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.





Management
Fees and Employee Salaries





Quarter
over Quarter Analysis





In Q2 of
2009, we incurred total management fees and staff salaries of $996,661 compared
to $1,193,595 in Q1 of 2009.  This amount includes stock based
compensation of $452,487 in Q2 of 2009 and $610,343 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 $533,747 and in Q1 of 2009 was $574,333.  This produced a
decrease of 7.1% 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 $175,506, or 24.8%, over the
normalized expense of $708,666 in 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.  However, management fees and employee salaries expense in Q2 of
2009 included $159,693 in cricket related costs while no cricket related costs
had been expensed during Q2 of 2008.





Management
fees and staff salaries, excluding stock-based compensation and accrued bonuses,
represented 31.3% of total revenues in Q2 of 2009 versus 32.8% 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 $2,190,256 compared to $2,738,808 in the comparative period of 2008,
a decrease of 20.0%.  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 $1,108,080
in the first half of 2009 compared to $1,403,752, resulting in a decrease of
21.1% 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
$121,186, or 7.1% of total revenues, compared to $115,193, or 6.6% 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
$6,221 in Q2 of 2009, compared to $3,771 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 $236,380 in marketing costs, or 6.8% of
total revenues, compared to $325,879, or 8.6% of total revenues in the first
half of 2008.





Included in this total was $9,993 in corporate marketing expenses
in the 2009 period compared to $46,807 in the 2008 period, a decrease of over
$36,814 or 78.7%.  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.  During
these two quarters, these costs have been reported as $31,824 of corporate
general and administrative expenses, $345,567 of management fees and employee
salaries, and $5,832 in corporate marketing expenses.  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.




54




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.





(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.




55




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.




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.




56


(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.





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 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.




57




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.





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.


58
 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.





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.




59





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.




60





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.





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 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.




61




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.






62




PART
II - OTHER INFORMATION





Item 6:
Exhibits.





(A)       
Index to and
Description of Exhibits.





EXHIBIT
            DESCRIPTION31.1
            Rule 13a-14(a)/15d-14(a) Certification of Chief
      Executive Officer31.2
            Rule 13a-14(a)/15d-14(a) Certification of Principal
      Financial Officer32.1
            Section
      906 Certificate of Chief Executive Officer and Principal Financial
  Officer












63


SIGNATURES





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




LIVE CURRENT MEDIA
      INC.Dated: 
      November 20,
      2009
              By:
              /s/ C.
      Geoffrey HampsonName:
              C.
      Geoffrey HampsonTitle:
              CEO
      and Chairman of the Board

                (Principal
      Executive Officer)


Dated: 
      November 20,
      2009
                By:
                /s/ C.
      Geoffrey HampsonName:
                C.
      Geoffrey HampsonTitle:
                CEO
      and Chairman of the Board

                  (Principal
      Financial Officer)




64