UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


WASHINGTON,
      D.C. 20549





FORM
      20-F








[
]  REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934





OR





[X] ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934





For
the fiscal year ended June 30, 2008




OR





[ ]TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934


For the transition
period from ______________ to __________________




OR





[
] SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15D OF THE SECURITIES EXCHANGE
ACT OF 1934





Date of event
requiring this shell company report





Commission
      file number: 000-50492





LiveReel Media
      Corporation


(Exact
      name of Registrant as specified in its
charter)








Canada


(Jurisdiction of
incorporation or organization)





3400 One First Canadian
Place, C/O Bennett Jones LLP, PO Box 130,


Toronto, Ontario M5X 1A4,
Canada


(Address of
principal executive offices)





J. Stephen Wilson,
416-607-6793, 416-863-1716, 3400 One First Canadian Place, C/O Bennett Jones
LLP, PO Box 130,


Toronto, Ontario M5X 1A4,
Canada


(Name, Telephone,
Facsimile number and Address of Company Contact Person)

















Securities
registered or to be registered pursuant to Section 12(b) of the Act.: None





Securities registered
or to be registered pursuant to Section 12(g) of the Act.





Common shares without par
value


(Title of
Class)





Securities for
which there is a reporting obligation pursuant to Section 15(d) of the Act :
None





Indicate the number
of outstanding shares of each of the Issuer’s classes of capital or common stock
as of the close of the period covered by the annual report





Common
shares without par value – 13,721,744 as at June 30, 2008





Indicate by check
mark if the registrant is a well-known seasoned issuer, as defined in Rule 405
of the Securities Act.


[
] Yes [X]
No





If
this report is an annual or transition report, indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934.


[X] Yes  []
No





Note - Checking the
box above will not relieve any registrant required to file reports pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 from their
obligations under those Sections.





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 report) and (2) has been subject to such filing requirements for the past
90 days.


[X]Yes [ ]No





Indicate by check
mark whether the registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer. See definition of "accelerated filer and large
accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one):





Large
      accelerated filer [ ]
            Accelerated
      filer [ ]
            Non-accelerated
      filer [X]














Indicate by check
mark which basis of accounting the registrant has used to prepare the financial
statements included in this filing:





US
      GAAP  [ ]
            International
      Financial Reporting Standards as issued by the International Accounting
      Standards Board[ ]
            Other [X]








If
“Other” has been checked in response to the previous question, Indicate by check
mark which financial statement item the registrant has elected to
follow


Item 17: XItem 18





If
this is an annual report, indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Exchange Act).


[
] Yes [X] No











TABLE
OF CONTENTS








Page
      No.Forward-Looking
      Statements
            1Foreign
      Private Issuer Status and Currencies and Exchange Rates
            2Part IItem 1.
      Identity of Directors, Senior Management and Advisors
            2Item 2. Offer
      Statistics and Expected Timetable
            2Item 3. Key
      Information
            3Item 4.
      Information on the Company
            9Item 5.
      Operating and Financial Review and Prospects
            13Item 6.
      Directors, Senior Management and Employees
            24Item 7. Major
      Shareholders and Related Party Transactions
            29Item 8.
      Financial Information
            31Item 9. The
      Offer and Listing
            32Item 10.
      Additional Information
            34Item 11.
      Quantitative and Qualitative Disclosures About Market Risk
            51Item 12.
      Description of Securities Other Than Equity Securities
            52Part
      IIItem 13.
      Defaults, Dividend Arrearages and Delinquencies
            52Item 14.
      Material Modifications to the Rights of Security Holders
            52and Use of ProceedsItem 15.
      Controls and Procedures
            52Item 16.
      Audit Committee, Code of Ethics, and Principal Accountant's Fees, and
      Services
            53Part
      IIIItem 17.
      Financial Statements
            54Item 18.
      Financial Statements
            54Item 19.
      Exhibits
            55Signature
            58














FORWARD-LOOKING
STATEMENTS








This annual report
includes "forward-looking statements." All statements, other than statements of
historical facts, included in this annual report that address activities, events
or developments, which we expect or anticipate, will or may occur in the future
are forward-looking statements.





The words
"believe", "intend", "expect", "anticipate", "project", "estimate", "predict"
and similar expressions are also intended to identify forward-looking
statements.





These
forward-looking statements address, among others, such issues as:





-
            Future
      earnings and cash flow,-
            Expansion and
      growth of our business and operations, and-
            Our
      prospective operational and financial
  information.





These statements
are based on assumptions and analyses made by us in light of our experience and
our perception of historical trends, current conditions and expected future
developments, as well as other factors we believe are appropriate in particular
circumstances. However, whether actual results and developments will meet our
expectations and predictions depends on a number of risks and uncertainties,
which could cause actual results to differ materially from our expectations,
including the risks set forth in "Item 3-Key Information-Risk Factors" and the
following:





-
            Fluctuations
      in prices of our products and services,-
            Potential
      acquisitions and other business
opportunities,





-
            General
      economic, market and business conditions, and-
            Other risks
      and factors beyond our control.





Consequently, all
of the forward-looking statements made in this annual report are qualified by
these cautionary statements. We cannot assure you that the actual results or
developments anticipated by us will be realized or, even if substantially
realized, that they will have the expected effect on us or our business or
operations.




Unless the context
indicates otherwise, the terms "LiveReel Media Corporation", “the "Company”,
"LiveReel", “we”, “us”, “our” and “registrant” are used interchangeably in this
Annual Report and mean LiveReel Media Corporation and its
subsidiary.





-
1 -





FOREIGN PRIVATE ISSUER
STATUS AND CURRENCIES AND EXCHANGE RATES








Foreign
Private Issuer Status





LiveReel Media
Corporation is a Canadian corporation incorporated under the Federal Business
Laws of Canada. Approximately 63% of its common stock is held by non-United
States citizens and residents and our business is administered principally
outside the United States; As a result, we believe that we qualify as a "foreign
private issuer" for continuing to report regarding the registration of our
common stock using this Form 20-F annual report format.





Currency





The financial
information presented in this Annual Report is expressed in Canadian dollars
("CDN $") and the financial data in this Annual Report is presented in
accordance with accounting principles generally accepted in Canada ("Can.
GAAP"). Such financial data conforms in all material respects with accounting
principles generally accepted in the United States ("U.S. GAAP") except as
disclosed in Note 15 of the Notes to Consolidated Financial Statements contained
herein.





All dollar amounts
set forth in this report are in Canadian dollars, except where otherwise
indicated.





PART I








ITEM 1 - IDENTITY OF
DIRECTORS, SENIOR MANAGEMENT AND ADVISORS





Not
applicable.





ITEM 2 - OFFER STATISTICS
AND EXPECTED TIMETABLE





Not
applicable.








-
2 -





ITEM 3 - KEY
INFORMATION





(A)
SELECTED FINANCIAL DATA





This Report
includes consolidated financial statements of the Company for the years ended
June 30, 2008, 2007 and 2006.  These financial statements were
prepared in accordance with accounting principles generally accepted in Canada.
Reference is made to Financial Statement Notes for a discussion of the material
differences between Canadian GAAP and U.S. GAAP, and their effect on the
Company's financial statements.





The following is a
selected financial data for the Company for each of the last five fiscal years
2004 through 2008 on a consolidated basis. The data is extracted from the
audited financial statements of the Company for each of the said
years.





Financial
data in accordance with Canadian GAAP (CDN $) - Fiscal year ended June
30





2008
            
            
            2007
            
            
            2006
            
            
            2005
            
            
            2004Revenue
            
            $
            40,012
            
            
            $
            72,697
            
            
            $
            7,052
            
            
            $
            5,031
            
            
            $
            -Net
      Loss
            
            $
            (788,811
            )
            
            $
            (624,965
            )
            
            $
            (682,097
            )
            
            $
            (259,333
            )
            
            $
            (214,601
            )Net loss per
      share  (1)
            
            $
            (0.06
            )
            
            $
            (0.04
            )
            
            $
            (0.07
            )
            
            $
            (0.04
            )
            
            $
            (0.06
            )Working
      capital (Deficit)
            
            $
            1,201,854
            
            
            $
            1,965,665
            
            
            $
            2,499,781
            
            
            $
            (194,696
            )
            
            $
            (57,478
            )Total
      assets
            
            $
            1,386,399
            
            
            $
            2,105,100
            
            
            $
            2,641,600
            
            
            $
            240,112
            
            
            $
            2,867Capital stock
      (2)
            
            $
            6,656,265
            
            
            $
            1,586,599
            
            
            $
            2,255,394
            
            
            $
            4,815,672
            
            
            $
            4,460,857Warrants
            
            $
            4,146,081
            
            
            $
            6,215,747
            
            
            $
            5,729,352
            
            
            $
            -
            
            
            $
            -Shareholders'
      equity(Deficit)
            
            $
            1,201,854
            
            
            $
            1,990,655
            
            
            $
            2,524,781
            
            
            $
            37,804
            
            
            $
            (57,478
            )Weighted
      average number of shares outstanding (3)
            
            
            13,721,744
            
            
            
            14,089,963
            
            
            
            9,494,677
            
            
            
            6,629,968
            
            
            
            3,680,536





(1) The
      effect of potential share issuances pursuant to the exercise
      of  warrants would be anti-dilutive and, therefore, basic and
      diluted losses per share are the same.(2) During
      the fiscal years 2004 and 2006, 6,193,600 warrants were issued in
      connection with various private placements and the acquisition of certain
      theatrical film properties.  The valuation of these warrants in
      2006 and 2007 was applied to the capital stock and resulted in a negative
      amount which is not permitted under Canadian GAAP.  These items
      were restated in the 2008 audited financial statements with no impact on
      shareholders’ equity, the consolidated statements of operations,
      consolidated statement of cash flows and the basic and diluted loss per
      share.  For further information, see Note 16 to the audited
      financial statement.(3) Weighted
      average number of shares for a year was calculated by dividing the total
      of the number of shares outstanding at the end of each of the months by
      twelve.








-
3 -





Financial
data in accordance with U.S. GAAP  (CDN $) – Fiscal year ended June
30





2008
            
            
            2007
            
            
            2006
            
            
            2005
            
            
            2004Revenue
            
            $
            40,012
            
            
            $
            72,697
            
            
            $
            7,052
            
            
            $
            5,031
            
            
            $
            -Net
      Loss
            
            $
            (788,811
            )
            
            $
            (624,695
            )
            
            $
            (648,139
            )
            
            $
            (259,736
            )
            
            $
            (104,601
            )Comprehensive
      Loss
            
            $
            (788,811
            )
            
            $
            (624,695
            )
            
            $
            (648,139
            )
            
            $
            (259,533
            )
            
            $
            (104,601
            )Loss per
      share
            
            $
            (0.06
            )
            
            $
            (0.04
            )
            
            $
            (0.07
            )
            
            $
            (0.04
            )
            
            $
            (0.03
            )Total
      assets
            
            $
            1,386,399
            
            
            $
            2,105,100
            
            
            $
            2,641,600
            
            
            $
            240,112
            
            
            $
            2,876Shareholders'
      equity(Deficit)
            
            $
            1,201,854
            
            
            $
            1,990,655
            
            
            $
            2,524,781
            
            
            $
            37,804
            
            
            $
            (57,478
            )





The Company has not
declared or paid any dividends in any of its last five financial
years.





Exchange
Rates





In
this Annual Report on Form 20-F, unless otherwise specified, all monetary
amounts are expressed in Canadian dollars.  The exchange rates used herein
were obtained from Bank of Canada; however, they cannot be
guaranteed.





On
November 30, 2008, the exchange rate, based on the noon buying rates, for the
conversion of Canadian dollars into United States dollars (the “Noon Rate of
Exchange”) was $1.24.





The following table
sets out the high and low exchange rates for each of the last six
months.








2008
            
            November
            
            
            October
            
            
            September
            
            
            August
            
            
            July
            
            
            JuneHigh for
      period
            
            $
            1.29
            
            
            $
            1.29
            
            
            $
            1.08
            
            
            $
            1.07
            
            
            $
            1.03
            
            
            $
            1.03Low for
      period
            
            $
            1.15
            
            
            $
            1.06
            
            
            $
            1.03
            
            
            $
            1.03
            
            
            $
            1.00
            
            
            $
            0.99








The following table
sets out the average exchange rates for the five most recent financial years
calculated by using the average of the Noon Rate of Exchange on the last day of
each month during the period.


Year Ended June 30,2008
            
            
            2007
            
            
            2006
            
            
            2005
            
            
            2004Average for
      the year
            
            
            1.01
            
            
            
            1.13
            
            
            
            1.16
            
            
            
            1.25
            
            
            
            1.34








(B)
CAPITALIZATION AND INDEBTEDNESS





Not
applicable





(C)
REASONS FOR THE OFFER AND USE OF PROCEEDS





Not
applicable








-
4 -





(D)
RISK FACTORS





The following is a
brief discussion of those distinctive or special characteristics of the
Company’s operations and industry that may have a material impact on, or
constitute risk factors in respect of, the Company’s future financial
performance.





THE
COMPANY HAS AN UNSUCCESSFUL OPERATING HISTORY





The Company is not
profitable and has had no significant revenues since its incorporation in March
1997. While one of the film properties acquired by the Company in fiscal 2005
and the film that was financed in fiscal 2007havenow been developed into
feature films for which the Company holds certain distribution rights, it is not
clear whether this will generate any revenue for the Company. The Company has
operated at a loss to date and in all likelihood will continue to sustain
operating expenses in the foreseeable future. As of June 30, 2008, the Company
had incurred cumulative losses of approximately $6.9 million. There is no
assurance that the Company will ever be profitable.





The Company’s
audited financials until fiscal 2005 included comments regarding the Company’s
ability to continue as a going concern. During fiscal 2006, the Company was able
to raise significant equity funds and restructure its operations, and as a
result, going concern ability comments were not considered relevant by our
auditors. However, there is a risk that the Company will need additional capital
to fund its business plan and operations.





INVESTMENT
STRATEGY




We
have received Board of Director approval to utilize excess cash in our business
to pursue additional investment opportunities outside the film industry in order
to potentially increase our return to shareholders.   We are not
limited to any particular industry or type of business, and we may choose to
stay within the film industry.  We have not yet identified or selected
any specific investment opportunity.   Accordingly, there is no
current basis for you to evaluate the possible merits or risks of the investment
opportunity which we may ultimately decide to pursue.




UNCERTAINTY
REGARDING AUDIENCE ACCEPTANCES OF PROGRAMS





The television and
motion picture industries have always involved a substantial degree of risk.
There can be no assurance of the economic success of any motion picture or
television program as revenue derived depends on audience acceptance, which
cannot be accurately predicted. Audience acceptance is a factor not only of the
response to the television program's or motion picture's artistic components but
also to the reviews of critics, promotions, the quality and acceptance of other
competing programs released into, or channels existing in, the marketplace at or
near the same time, the availability of alternative forms of entertainment and
leisure time activities, general economic conditions, public tastes generally
and other intangible factors, all of which could change rapidly and many of
which are beyond the Company’s control. A lack of audience acceptance for any of
the films licensed, co-produced or distributed by the Company could have an
adverse effect on its businesses, results of operations, prospects and financial
condition.





-
5 -








UNAUTHORIZED
OR PIRATED USE MAY ADVERSELY AFFECT REVENUE





Technological
advances and the conversion of motion pictures into digital formats have made it
easier to create, transmit and "share" high quality unauthorized copies of
motion pictures in theatrical release, on videotapes and DVDs, from pay-per-view
through unauthorized set-top boxes and other devices and through unlicensed
broadcasts on free TV. As a result, users may be able to download and distribute
unauthorized or "pirated" copies of copyrighted motion pictures over the
Internet. As long as pirated content is available to download digitally, some
consumers may choose to digitally download pirated motion pictures rather than
pay for legitimate motion pictures or to purchase pirated DVD’s of motion
pictures or of boxed sets of television series from unauthorized
vendors.








CHANGES
IN REGULATIONS AND INCENTIVES MAY ADVERSELY AFFECT THE BUSINESS OF THE
COMPANY





The Company plans
to co-produce with or license its scripts and other intellectual properties to
other entities which are expected to rely heavily on grants and labor rebates
available for Canadian contents under the current regulations of Federal and
Provincial governments of Canada.





Any significant
changes in these regulations that result in reduced grants and rebates or
elimination thereof may significantly affect the Company’s ability to produce
and or license its scripts and in turn its ability to generate
revenue.





THE
COMPANY MAY NOT BE ABLE TO ACHIEVE AND MAINTAIN ITS COMPETITIVE
POSITION





The entertainment
industry is highly capital intensive and is characterized by intense and
substantial competition. A number of the Company's competitors are well
established, substantially larger and have substantially greater market
recognition, greater resources and broader distribution capabilities than the
Company. New competitors are continually emerging. Increased competition by
existing and future competitors could materially and adversely affect the
Company's ability to implement its business plan profitably. The lack of
availability of unique quality content could adversely affect its
business.





FOREIGN
EXCHANGE RISK





The Company has
foreign exchange risk because its functional currency is the Canadian dollar and
a significant part of its revenue may be generated from overseas countries. An
adverse move in foreign exchange rates between the Canadian dollar and the
currencies of these countries could have an adverse effect on its operating
results. The Company does not hedge against this risk.





-
6 -





THE
COMPANY'S COMMON SHARES ARE CONSIDERED TO BE PENNY STOCK, WHICH MAY ADVERSELY
AFFECT THE LIQUIDITY OF ITS COMMON SHARES





The common shares
of the Company are classified as “penny stock” as defined in Reg. § 240.3a51-1
promulgated under the Securities Exchange Act of 1934 (the “1934 Act”). In
connection with effecting any transaction in a penny stock, a broker or dealer
must give the customer a written risk disclosure document that (a) describes the
nature and level of risk in the market for penny stocks in both public offerings
and secondary trading, (b) describes the broker’s or dealer’s duties to the
customer and the rights and remedies available to such customer with respect to
violations of such duties, (c) describes the dealer market, including “bid” and
“ask” prices for penny stock and the significance of the spread between the bid
and ask prices, (d) contains a toll-free telephone number for inquiries on
disciplinary histories of brokers and dealers, and (e) define significant terms
used in the disclosure document or the conduct of trading in penny stocks.
 In addition, the broker-dealer must provide to a penny stock customer a
written monthly account statement that discloses the identity and number of
shares of each penny stock held in the customer’s account, and the estimated
market value of such shares.  The extensive disclosure and other
broker-dealer compliance related to penny stocks may result in reducing the
level of trading activity in the secondary market for such stocks, thus limiting
the ability of the holder to sell such stock.





MARKET
PRICE FOR THE COMPANY'S COMMON SHARES HAS BEEN VOLATILE IN THE PAST AND MAY
DECLINE IN THE FUTURE





In
recent years, the securities markets in Canada and the United States have
experienced a high level of price and volume volatility, and the market prices
of securities of many companies, particularly small-cap companies like ours,
have experienced wide fluctuations which have not necessarily been related to
the operating performance, underlying asset values or prospects of such
companies. Our shares may continue to experience significant market price and
volume fluctuations in the future in response to factors, which are beyond our
control.




THE COMPANY MAY NEED TO RAISE
ADDITIONAL FINANCING TO MEET FUTURE OPERATING NEEDS.




The Company is in
the business of film production, financing and distribution, which requires a
level of liquidity. The Company hopes to earn sufficient revenue from
distribution and scripts licensing to meet its operating needs and to raise
additional equity funds through private placements of its securities with
sophisticated investors.  The Company has avoided obtaining debt
financing but may have to pursue this option if it is unable to obtain equity
financing on acceptable terms.




If the
Company is unable to achieve the expected revenue and or to obtain financing and
cannot pay its debts as they become due, it may be forced to solicit a buyer or
be forced into bankruptcy by its creditors.




-
7 -





DIVIDENDS





All of the
Company's available funds will be invested to finance the growth of the
Company's business and therefore investors should not anticipate receiving a
dividend on the Company's common shares in the foreseeable future.




DILUTION




The Company may in
the future grant to some or all of its own and its subsidiaries' directors,
officers, insiders and key consultants options to purchase the Company's Common
Shares as non-cash incentives to those people. Such options may be granted at
exercise prices equal to market prices at time when the public market is
depressed or at exercise prices which may be substantially lower than the market
prices. To the extent that significant numbers of such options may be granted
and exercised, the interests of the then existing shareholders of the Company
may be subject to additional dilution.




The Company is
currently without proven sources of revenue except interest income which does
not cover operating costs and may be required to issue additional securities to
finance its operation and may also issue additional securities to finance the
development of any or all of its projects. These actions could cause further
dilution of the interests of the existing shareholders.




SHARES
ELIGIBLE FOR FUTURE SALE MAY DEPRESS OUR STOCK PRICE




At
June 30, 2008, we had approximately 13.7 million shares of common stock
outstanding of which approximately 9 million are restricted securities under
Rule 144 promulgated under the Securities Act. We also have approximately
6.2 million shares of common stock issuable under presently exercisable warrants
which have not yet been registered under the US Securities Act.




Sales of shares of
common stock pursuant to an effective registration statement or under
Rule 144 or another exemption under the US Securities Act could have a
material adverse effect on the price of our common stock and could impair our
ability to raise additional capital through the sale of equity
securities.





OUR
OFFICERS AND DIRECTORS RESIDE OUTSIDE OF UNITED STATES AND THERE IS A RISK THAT
CIVIL LIABILITIES AND JUDGEMENTS MAY BE UNENFORCEABLE




Half of the
Company’s directors and officers are residents of countries other than the
United States, and most of the Company's assets are located outside the United
States.  As a result, it may not be possible for investors to effect
service of process within the United States upon such persons or enforce in the
United States against such persons judgments obtained in United States courts,
including judgments predicated upon the civil liability provisions of United
States federal securities laws or state securities laws.




-
8 -








YOUR
RIGHTS AND RESPONSIBILITIES AS A SHAREHOLDER WILL BE GOVERNED BY CANADIAN LAW
AND DIFFER IN SOME RESPECTS FROM THE RIGHTS AND RESPONSIBILITIES UNDER U.S.
LAW





We
are incorporated under Canadian law. The rights and responsibilities of holders
of our shares are governed by our Articles and By-Laws and by Canadian law.
These rights and responsibilities may differ in some respects from the rights
and responsibilities of shareholders in typical U.S. corporations.





CHANGING
REGULATIONS OF CORPORATE GOVERNANCE AND PUBLIC DISCLOSURE CAN CAUSE ADDITIONAL
EXPENSES AND FAILURE TO COMPLY MAY ADVERSELY AFFECT OUR REPUTATION AND THE VALUE
OF OUR SECURITIES





Changing laws,
regulations and standards relating to corporate governance and public
disclosure, including the Sarbanes-Oxley Act of 2002, new SEC regulations and
new and changing provisions of Canadian securities laws, are creating
uncertainty because of the lack of specificity and varying interpretations of
the rules. As a result, the application of the rules may evolve over time as new
guidance is provided by regulatory and governing bodies, which could result in
continuing uncertainty regarding compliance matters and higher costs
necessitated by ongoing revisions to disclosure and governance practices. We are
committed to maintaining high standards of corporate governance and public
disclosure. As a result, our efforts to comply with evolving laws, regulations
and standards have resulted in, and are likely to continue to result in,
increased general and administrative expenses and a diversion of management time
and attention from revenue-generating activities to compliance activities. Any
failure to comply with applicable laws may materially adversely affect our
reputation and the value of our securities.








ITEM 4 - INFORMATION ON THE
COMPANY





(A)
HISTORY AND DEVELOPMENT OF THE COMPANY





The Company changed
its name from Noble House Entertainment Inc. to LiveReel Media Corporation
effective October 12, 2006. The Company’s wholly owned subsidiary changed its
name from Noble House Film & Television Inc. to LiveReel Productions
Corporation (LRPC) effective August 10, 2006.





The Company is a
reporting issuer with Ontario Securities Commission. Its common shares are
currently listed and traded on Over The Counter Bulletin Board of the NASD
(OTCBB) under the trading symbol “NHSEF”. The Company received a new CUSIP
number and changed its trading and listing symbol to LVRLF effective December 1,
2006.





On
October 26, 2006, LiveReel completed its continuance under the jurisdiction of
the Canada Business Corporation Act from being governed by the Ontario Business
Corporation Act (Ontario).





-
9 -








The Company was
originally incorporated under the Business Corporation Act (Ontario) on March
18, 1997 as a result of an amalgamation under the name "Biolink Corp." The
Company went through several name changes and changes in its business
activities.





The Company has had
no significant revenue since its incorporation. While it tried some new business
initiatives including acquisition of scripts and related intellectual properties
of a musical, “The Count of Monte Cristo” in 2001 and acquisition of an artist
management contract and related developed properties like a demo 5-song CD, in
fiscal 2003, the Company was unable to raise the required funds to develop and
market these projects. Hence, by fiscal 2004, the Company abandoned these
projects and wrote off all the related costs.





The Company
continued its focus on entertainment sector. However, it changed its business
strategy to focus primarily on films and television program development,
licensing and distribution as a core business due to availability of various
government incentives, local talents and a wider commercial market compared to
the one for musicals, plays and song albums.





In
November 2004, the Company acquired certain film scripts and distribution rights
from an independent production house for $350,000, which was settled by issuance
of 3.5 million restricted shares and 3.5 million restricted warrants. These film
assets were rolled into the subsidiary, which is an operating arm of the
Company.





In
December 2004, the principals of the vendor production house joined the Company
as consultants and began managing the subsidiary with a mandate to explore and
exploit the existing properties commercially.





One of the scripts,
King of Sorrow, was sold by the Company and produced into a feature film by
another production company. In exchange for the rights to the screenplay, the
company holds certain distribution rights to the film. Sales and distribution
efforts have begun for this film.





The Company was a
co-producer in a feature film, “Due Process”. This film has been produced and is
ready for commercial exploitation. The Company has distribution rights to this
film.





The Company
completed two private placements in April and June 2006 with independent
accredited investors and raised approximately $3 million.





LRPC, the Company’s
subsidiary, opened a representative office in London, UK on June 26, 2006 to
facilitate European distribution networking.








-
10 -





During the last
quarter of fiscal 2006 and the first quarter of fiscal 2007, there was a change
in the management of the Company. Both the chief executive officer and chief
financial officer resigned and their consulting contracts were cancelled without
any penalty or further financial commitments. One of the significant
participants in the private placement became the chief executive officer and a
new chief financial offer was appointed. Further, the entire in-house production
team at the subsidiary also resigned and their contracts were
terminated.





The new management
concluded that the film properties held by the Company could not be profitably
developed and exploited and therefore wrote off all properties at June 30, 2006,
except for the script of King of Sorrow, which was already developed into a
commercial film. This script was left at its carrying value.





The new management,
while maintaining the overall business focus on feature film production and
distribution, began adopting a new approach in the final quarter of fiscal
2006.




The Company plans
to focus on financing feature film productions as a producer or co-producer with
others. These feature films will be produced by independent production
companies, to be selected by management from time to time.  The
Company anticipates continuing to utilize consultants with expertise in the
industry to assist in selecting content and assisting in production and
distribution efforts on projects the Company chooses to be associated
with.




During the three
month period ended September 30, 2006, the Company began to explore the
financing aspect of the entertainment industry more extensively than in the
past.  The Company entered into a bridging loan agreement which called
for advances of up to $1.8 million to an independent production company involved
in the production of a feature film, The Poet.  All amounts drawn
under the bridging facility plus interest were repaid in the three months ended
December 31, 2006.  The production company is owned by a former
director and officer of the Company and a former officer of its wholly owned
subsidiary.





In
the three month period ended December 31, 2006, the Company entered into
additional financing agreements to provide up to $625,000 in financing in
exchange for financing fees and/or interest payments and the right to share in
future net revenues of The Poet.  After a series of advances and
repayments under this second facility, as at June 30, 2007, the amount advanced
was approximately $226,000.  The Company was obligated for further
advances of an additional $114,000 under the financing agreement.  The
Company expected to be repaid upon successful completion and distribution of The
Poet.





-
11 -





Subsequent to the
end of the first quarter of fiscal 2008, the production company entered into a
distribution agreement with a distributor for the certain worldwide rights to
The Poet, and the first commitments were received at a major film industry trade
show in November 2007.   However, based on the commitments
received at that time, management has re-evaluated its expected future proceeds
to be received from the film and reduced the expected value of the advance down
to nil.  This resulted in the expensing of $283,667 during the quarter
ended September 30, 2007.  Further advances made during the quarter
totaling $57,060 were also expensed in the three months ended December 31,
2007.





The Company’s
wholly owned subsidiary, LiveReel Productions Corporation (“LRPC”) formalized
distribution arrangements for one of its films, King of Sorrow, in the first
half of fiscal 2007.  The first successful international sales of the
film were entered into in February, 2007 at the Berlin Film Festival, and
further sales are continuing to be pursued.  However, as the
international distribution agent has been selling the film for over a year and
has recently had limited success at two major fall trade shows, management
re-evaluated its expected future proceeds to be received from the film and
reduced the expected value of the advance to $100,000 and the value of the film
script down to nil.  This resulted in the expensing of $118,243 during
the quarter ended September 30, 2007 both as a write down of advances to
production companies and a write off of the script.





During the fourth
quarter of fiscal 2008, the Company received payment of $29,840 from
distributing King of Sorrow which was applied to reduce this
receivable.  While the Company has entered into a new agreement with
another party to attempt to sell the film internationally, the Company wrote off
the balance of the advance to $20,179 effective June 30, 2008, which was
received subsequent to year end.





The Company’s
principal business office is located at 3400 One First Canadian Place, C/O
Bennett Jones LLP, PO Box 130, Toronto, Ontario, Canada M5X 1A4 and its
telephone number is 416-607-6793.





(B)
BUSINESS OVERVIEW





The Company’s
business plan continues to become an integrated entertainment company focused on
films and television properties. During most of fiscal 2006, management focused
on three major activities: development and licensing of film properties,
providing production consulting including pre and postproduction and sales
exploitation of films. However, following successful completion of two private
placements in April 2006 and June 2006, in which the Company raised
approximately $3 million, there was a change in management and composition of
the board of directors.





The new management,
while maintaining the overall business focus on feature film production and
distribution, began adopting a new approach.





-
12 -





The Company plans
to focus on financing feature film productions as a producer or co-producer with
others. These feature films will be produced by independent production
companies, to be selected by management from time to time. The Company
anticipates continuing to utilize consultants with expertise in the industry to
assist in selecting content and assisting in production and distribution efforts
on projects the Company chooses to be associated with.





(C)
ORGANIZATIONAL STRUCTURE





As
at June 30, 2008, the Company had only one wholly-owned subsidiary, LiveReel
Productions Corporation, as explained above in (A).





(D)
PROPERTY PLANTS AND EQUIPMENT





During fiscal 2006
and through July 31, 2006, the Corporate and head office of the Company was
located in subleased premises at 47 Avenue Road, Suite 200, Toronto, Ontario,
Canada. There was no long-term lease commitment.





Total area of the
premises was approximately 950 sq. ft., and approximately 10% of these premises
were subleased to the Company at an approximate rent and utilities cost of $200
per month.





During fiscal 2006
and through July 31, 2006, the Company’s subsidiary, LRPC was located in another
subleased premise at 181 Queen Street East, Toronto, Ontario, Canada. The
premises were owned by the Company’s former CEO and a director, Mr. Damian Lee.
There was no long-term lease commitment. Rent paid was $1,300 per
month.





Effective August 1,
2006, the Company and its subsidiary both were relocated to 429 Spadina Road,
Toronto, Ontario M5P 2W3, Canada. The Company and its subsidiary subleased the
space on a month to month basis at a cost of approximately $4,700 per
month.  Effective October 1, 2006, the month to month rent arrangement
was terminated and the Company moved its registered office to its lawyers’
location, at 3400 One First Canadian Place, C/O Bennett Jones LLP, PO Box 130,
Toronto, Ontario, Canada M5X 1A4.  It is not charged monthly rent
under this arrangement.





The Company’s
subsidiary opened a representative office in London, UK on June 26, 2006. The
office is at 105 Park Street, London, W1k 7JD, UK. The Company subleases the
space on a month to month basis at no charge.








ITEM 5 - OPERATING AND
FINANCIAL REVIEW AND PROSPECTS





(A)
OPERATING RESULTS





The following
discussion should be read in conjunction with the Audited Financial Statements
of the Company and notes thereto contained elsewhere in this report.




-
13 -





Results
of operations





Year ended
      June 30
            
            2008
            
            
            2007
            
            
            2006in 000' CDN
      $
            
            
            in 000' CDN
      $
            
            
            in 000' CDN
      $Income
            
            
            40
            
            
            
            73
            
            
            
            7Expenses
            
            
            (829
            )
            
            
            (697
            )
            
            
            (689
            )Net loss for
      year
            
            
            (789
            )
            
            
            (624
            )
            
            
            (682
            )Deficit at
      end of year
            
            
            (6,894
            )
            
            
            (6,105
            )
            
            
            (5,480
            )





Overview





The following were
the key events in the year ended June 30, 2008 -





1.
            The Company’s
      and its subsidiary whave been involved in the financing of two feature
      films, King of Sorrow and The Poet.  Advances totaling
      approximately $476,000 were made through September 30,
      2007.  Such advances were expected to be recovered through the
      sales of these films in various territories throughout the
      world.





During fiscal 2007,
King of Sorrow was sold in various territories, but had not been sold
successfully into its largest potential market, the United
States.  This was due to a number of factors, and management had
anticipated that it would be successful at two major trade shows in the United
States in October and November 2007 that it was unable to attend in
2006.  However, sales at those shows were much less than what had
previously forecast, and as a result, a write down of the scripts for $25,000
and other advances of $93,243 was made in the first quarter of the 2008 fiscal
year to approximate management’s estimate of the net realizable value of the
assets.





In addition, the
production company in charge of The Poet entered into an agreement for
international distribution in October 2007.  Going to the same trade
shows as discussed above, The Poet did have some commercial success in terms of
obtaining advances from certain territories at the trade
show.  However, estimated revenues were such that management revised
its projected future inflows from The Poet downward and resulted in taking a
write down of all previous advances and advances in the first quarter of fiscal
2008 totaling $283,667.





2.
            The Company’s
      continued to pay further advances totaling $57,000 to fulfill its
      commitment to fund The Poet through December 31,
  2007.





3.
            During the
      fourth quarter of fiscal 2008, the Company received payment of $29,840
      from distributing King of Sorrow which was applied to reduce this
      receivable.  While the Company has entered into a new agreement
      with another party to attempt to sell the film internationally, the
      Company wrote off $49,974 of the advance to $20,179 effective June 30,
      2008, which was received subsequent to year
end.





-
14 -








4.
            Subsequent to
      the end of the year, on July 22, 2008, the board of directors agreed to
      increase the size of the option pool under the 2006 stock option plan to
      4,000,000 options.  In addition, the 900,000 options previously
      issued to Gregg Goldstein, CEO, were cancelled.   Finally,
      a new grant of 3,900,000 options to Gregg Goldstein, CEO, at a strike
      price of $0.01 per option, expiring July 22, 2013, and fully vested was
      approved.  In addition, the conversion price of all previously
      issued warrants was reduced to US $0.01 per warrant and the expiry date
      was extended to November 30, 2010 by the board of directors of the
      Company.





The following were
the key events in the year ended June 30, 2007 -





1.
            The Company’s
      subsidiary, LRPC was restructured to reduce the number of full time
      consultants effective September 1, 2006.  The Company entered
      into an international distribution agreement for its film, King of
      Sorrow.  The first sales of King of Sorrow occurred at the
      Berlin Film Festival in February,
2007.





The Company’s
wholly owned subsidiary, LiveReel Productions Corporation (“LRPC”) formalized
distribution arrangements for one of its films, King of Sorrow, in the first
half of fiscal 2007.  The first successful international sales of the
film were entered into in February, 2007 at the Berlin Film Festival, and
further sales are continuing to be pursued.  However, as the
international distribution agent had been selling the film for over a year and
had limited success at two major fall trade shows, management re-evaluated its
expected future proceeds to be received from the film and reduced the expected
value of the advance to $100,000 and the value of the film script down to
nil.  This resulted in the expensing of $118,243 during the period
ended September 30, 2007 both as a write down of advances to production
companies and a write off of the script.





2.
            The Company
      entered into an agreement with a production company, The Poet Inc., to
      provide bridge financing of up to $1.8 million for production expenses of
      the film that The Poet Inc. is in the process of developing in the three
      months ended September 30, 2006.  These were repaid in the three
      months ended December 31, 2006.





3.
            In the three
      months ended December 31, 2006, the Company entered into additional
      agreements to provide up to $625,000 in additional financing to The Poet
      Inc.  After a number series of advances and repayments under
      this second facility, as at June 30, 2007, the amount advanced was
      approximately $226,000.  The Company was obligated for further
      advances of an additional $114,000 under the financing
      agreement.  The Company was to be repaid upon successful
      completion and distribution of The
Poet.





-
15 -








Subsequent to the
end of the first quarter of fiscal 2008, the production company entered into a
distribution agreement with a distributor for the certain worldwide rights to
The Poet, and the first commitments were received at a major film industry trade
show in November.   However, based on the commitments received at
that time, management re-evaluated its expected future proceeds to be received
from the film and reduced the expected value of the advance down to
nil.  This resulted in the expensing of $283,667 during the period
ended September 30, 2007.





4.
            A case was
      filed on August 10, 2005 in the Court in Florida against the Company and
      some of its past directors by a person alleging a liability of US$ 200,000
      plus triple damages for failing to issue him common shares of the Company
      against the funds that he alleged to have paid in 1997.  The
      Company’s lawyer filed a motion to dismiss the case on October 12, 2005
      for lack of jurisdiction.  The case was dismissed in April
      2007.




5.
            On February
      9, 2007, 1,000,000 options were granted to management by the board of
      directors.  The options granted were issued at a strike price of
      US$0.15 per share, expire on February 9, 2012 and were fully
      vested.  On the same date, the board of directors increased the
      number of options available to be granted under the stock option plan to
      3,000,000.  The board of directors of the Company has full
      discretion to decide the option price and vesting periods. The options are
      convertible into an equal number of common shares of the
      Company.  As a result of the granting of the options described
      above, the fair value of these options was estimated, on February 9, 2007,
      the date of the grant, using a Black-Scholes option price
      model.




6.
            The amount of
      $136,179 was accounted for as a stock compensation expense in the three
      months ended March 31, 2007.





7.
            On February
      27, 2007, the conversion price of all previously issued warrants (total of
      6,193,600) was reduced to US $0.10 per warrant and the expiry date was
      extended to November 30, 2009 by the board of directors of the
      Company.  The fair value of these warrants of February 27, 2007,
      the date of these changes, was estimated using a Black-Scholes option
      price model.





8.
            The Company
      changed its name from Noble House Entertainment Inc. to LiveReel Media
      Corporation effective October 12, 2006.  On October 20, 2006,
      the Company received regulatory approval for continuance under the
      jurisdiction of the Canada Business Corporations
  Act.





The following were
the key events in fiscal 2006 -





1.
            One of the
      scripts, King of Sorrow, was sold by the Company and produced into a
      feature film by another production company. In exchange for the rights to
      the screenplay, the Company holds certain distribution rights to the film.
      Sales and distribution efforts have begun for this
  film.





2.
            The company
      was a co-producer in a feature film, “Due Process”. This film has been
      produced and is ready for commercial exploitation. The company has
      distribution rights to this film.





-
16 -





3.
            The
      Company successfully completed two private placements with independent
      accredited investors and raised approximately $3
  million.





4.
            LRPC, the
      Company’s subsidiary, opened a representative office in London, UK on June
      26, 2006 to facilitate European distribution
  networking.





Income





The Company’s
primary source of income in the year ended June 30, 2008 was from interest
earned on excess cash balances.





The Company’s
primary source of income in the year ended June 30, 2007 was from interest
earned on the bridge financing facility provided to a production company
described earlier and by earning interest income on excess cash
balances.





Income in fiscal
2006 was comprised of distribution commission of $7,052 (fiscal 2005: $5,031)
received during the second quarter of the fiscal 2006 from one of the
distribution rights owned by the Company.





Expenses





The overall
analysis of the expenses is as follows:





Year
      ended June 30
            
            2008
            
            
            2007
            
            
            2006Writedown of
      production advances
            
            $
            426,884
            
            
            $
            -
            
            
            $
            -Operating
      expenses
            
            
            319,879
            
            
            
            492,814
            
            
            
            367,648Production
      advances
            
            
            57,060Amortization
      of investments in film and television programs
            
            
            25,000
            
            
            
            -
            
            
            
            207,500Stock based
      compensation
            
            
            -
            
            
            
            204,578
            
            
            
            114,001$
            828,823
            
            
            $
            697,392
            
            
            $
            689,149





Operating
Expenses





The overall
analysis of operating expenses is as follows:





Year
      ended June 30
            
            2008
            
            
            2007
            
            
            2006Office and
      general
            
            $
            115,599
            
            
            $
            90,871
            
            
            $
            78,410Foreign
      exchange loss
            
            
            70,290
            
            
            
            117,336
            
            
            
            33,958Professional
      fees
            
            
            60,645
            
            
            
            114,311
            
            
            
            37,849Consulting
            
            
            60,000
            
            
            
            138,678
            
            
            
            199,488Shareholders
      information
            
            
            10,292
            
            
            
            26,312
            
            
            
            8,935Promotion
            
            
            2,377
            
            
            
            3,746
            
            
            
            7,999Bank
      charges
            
            
            676
            
            
            
            1,560
            
            
            
            1,009$
            319,879
            
            
            $
            492,814
            
            
            $
            367,648








-
17 -








Write
Down of Production Advances and Production Advances





The Company and its
subsidiary have been involved in the financing of two feature films, King of
Sorrow and The Poet.  Advances totaling approximately $476,000 were
made through September 30, 2007.  Such advances were expected to be
recovered through the sales of these films in various territories throughout the
world.





During fiscal 2007,
King of Sorrow was sold in various territories, but had not been sold
successfully into its largest potential market, the United
States.  This was due to a number of factors, and management had
anticipated that it would be successful at two major trade shows in the United
States in October and November 2007 that it was unable to attend last
year.  However, sales at those shows were much less than what had
previously forecast, and as a result, a write down of the scripts for $25,000
and other advances of $93,243 was made in the first quarter to approximate
management’s estimate of net realizable value of the assets.





In addition, the
production company in charge of The Poet entered into an agreement for
international distribution in October 2007.  Going to the same trade
shows as discussed above, The Poet did have some commercial success in terms of
obtaining advances from certain territories at the trade
show.  However, estimated revenues were such that management revised
its projected future inflows from The Poet downward and resulted in taking a
write down of all previous advances and advances in the first quarter of fiscal
2008 totaling $283,667.





During the quarter
ended December 31, 2007, the Company expensed an additional $57,060 in advances
made to The Poet to fulfill its advance commitments for that film.





During the fourth
quarter of fiscal 2008, the Company received payment of $29,840 from
distributing King of Sorrow which was applied to reduce this
receivable.  While the Company has entered into a new agreement with
another party to attempt to sell the film internationally, the Company wrote off
$49,974 of the advance to $20,186 effective June 30, 2008, which was received
subsequent to year end.





Office
and general




These costs
      include insurance, rent, telephone, travel, and other general and
      administration costs.




Insurance
      costs for the twelve months ended June 30, 2008 of $51,370 (2007 -
      $43,200) relate to a directors and officers insurance policy entered into
      during the first quarter of fiscal 2007 for a twelve month period of
      time.  It was renewed in fiscal 2008.  There was no
      such policy in place in fiscal
2006.




The Company
      also reimbursed the CEO for various general and office expenses totalling
      approximately $58,000 including costs for his rent, communications costs,
      health benefits and professional fees (2007 – nil; 2006 -
      nil).





-
18 -







Rent for the
      twelve months ended June 30, 2007 was $9,450 as the company shared its
      premises with a production company during the year.  There was
      no such rent incurred in 2008.




In the twelve
      months ended June 30, 2006, rent was $18,505 and was incurred for the
      office space of the subsidiary, LRPC, which was rented at $1,300 per month
      under a month-to month lease as well as a small charge for corporate space
      from Current Capital Corporation, a
shareholder.




Miscellaneous
      office and general costs include the costs of various administrative
      travel, courier, web site development, etc. not categorized elsewhere in
      the financial statements.  These costs totalled $5,143 in the
      twelve months ended June 30, 2008 (2007 - $38,221; 2006 - $59,905) because
      of there being fewer employees and consultants in fiscal 2008 versus 2007
      compared to 2006, and associated administration costs declined
      accordingly.   The Company also spent approximately $5,000
      developing a corporate website in the twelve months ended June 30, 2006,
      and no such cost was incurred in fiscal
2007.





Foreign
exchange loss




Exchange loss
      for the twelve months ended June 30, 2008, 2007 and 2006 related entirely
      to the translation of US dollar balances and transactions into Canadian
      dollars at the relevant measurement date compared to the prior year’s
      measurement date as the Canadian dollar strengthened against the US
      dollar.   Most of the Company’s excess cash is held in a US
      dollar account, and translated at the balance sheet
  date.





Professional
fees





Professional fees
in the twelve months ended June 30, 2008 were comprised of legal fees of $28,795
and accounting fees of $31,850.  Legal fees relate primarily to the
review of the Company’s various public filings and general corporate
matters.   Accounting fees were comprised of audit fees of
$22,500 and the balance of $9,350 for various tax advice received during the
year.





Professional fees
in the twelve months ended June 30, 2007 were comprised of legal fees of $84,461
and audit fees of $29,850.  Legal fees relate primarily to the review
of the Company’s various public filings, assistance in review of materials for
the annual general meeting of shareholders held March 12, 2007, assistance with
the special shareholder meeting held October 4, 2006 and general corporate
matters.





Professional fees
in fiscal 2006 comprised legal fees of $18,003 and audit fees of
$19,846.  Legal fees of approximately $3,800 were incurred on a legal
case which is discussed further under the key contractual obligation sections of
this report. The remaining legal fees were mainly incurred in connection with
registration of stock compensation and stock option plans with the US Securities
and Exchange Commission (SEC) and with review of our annual filings by the SEC
for fiscal 2004 and 2005.








-
19 -





Consulting
Expenses





Consulting expenses
for the twelve months ended June 30, 2008 include $60,000 of fees paid to the
Chief Financial Officer for consulting services provided during the
period.





Consulting expenses
for the twelve months ended June 30, 2007 include $65,000 of fees paid to the
Chief Financial Officer for consulting services provided during the period,
$40,000 of fess paid to a former director and officer, and the balance related
to consulting fees paid to 6 individuals who worked for the Company’s
subsidiary.  Two of the former executives of the subsidiary, Mr.
Damian Lee, the former President, and Mr. Lowell Conn, the former vice
president, were paid a total of approximately $23,000 in the twelve month
period.  All long term consulting contracts with the Company’s former
senior management were cancelled without any penalty or further obligation in
the three month period ended September 30, 2006.





Consulting fees for
fiscal 2006 mainly included fees paid to approximately nine consultants by LRPC.
Two of the former executives of the subsidiary, Mr. Damian Lee, the former
president and Mr. Lowell Conn, the vice president were paid a total of
approximately $131,000 or 66% of the fees as per the terms of five-year
consulting contracts in place at the time.





Shareholder
Information





Shareholder
information costs in the twelve months ended June 30, 2008 comprised transfer
agent fees of $3,843 and regulatory and related filing fees of
$6,449.





Shareholder
information costs in the twelve months ended June 30, 2007 consist of the cost
of holding a special shareholders’ meetings in October 2006, an annual general
meeting of March 12, 2007 totaling approximately $8,800, regulatory and related
filing fees of approximately $8,700 and transfer agent fees of approximately
$9,500.   These costs increased from the prior year as third
parties were used to facilitate filings rather than being done by the management
of the Company and an extra meeting was held by the Company.





For fiscal 2006,
transfer agent fees were approximately $6,400 and the balance of approximately
$2,500 related to holding of annual and special meeting and filing
fees.




Promotion





During the twelve
months ended June 30, 2008, these costs related to various meals and
entertainment costs incurred by management.  During the twelve months
ended June 30, 2007, these costs related to the promotion of King of
Sorrow.  During the twelve months ended June 30, 2006, these costs
related to sales, marketing, travel and related costs for visits to the UK and
US for promotional efforts for certain films and discussions with the group of
investors who participated in the private placement.





-
20 -







Amortization
      of Investments in Film and Television
Programs





During fiscal 2006,
LRPC was holding nine scripts at a carrying value of $172,500 and four
distribution contracts at a carrying value of $60,000. At the year end of June
30, 2006, management decided to fully amortize all but one script and all
distribution contracts because it has decided not to pursue development of these
properties any further. The only script not amortized and kept at its carrying
value of $25,000 was that of King of Sorrow. The script has been developed into
a feature film for which the Company held the certain distribution
rights.  As at June 30, 2007, management concluded that based on the
estimates of the potential revenue that would be realized by the film, the
carrying value of the script was fully recoverable.  This was written
off in fiscal 2008 as discussed under write down of production advances
above.





Stock
based Compensation





Stock based
compensation is made up of the Company’s common shares and options to acquire
the Company’s common shares being issued to various consultants and directors of
the Company for services provided. The Company used this method of payment
mainly to conserve its cash flow for business investments purposes. This method
also allows the Company to avail the services of consultants with specialized
skills and knowledge in the business activities of the Company without having to
deplete its limited cash flow.





During fiscal 2006,
the board of directors of the Company approved and created two new Plans, which
were all registered with Securities and Exchange Commission of the United States
of America as required under the Securities Act of 1933:





1.
            2006
      Consultant Stock Compensation Plan covering one million common shares,
      which were issued to three consultants including a former director for his
      services as chief financial officer and two other consultants of the
      company for their services.  The shares were valued at $228,000
      based on the market price on the date of issuance. $114,001 was expensed
      in fiscal 2006 and the balance of $113,999 was
  deferred.





On
December 15, 2006, the Company cancelled 800,000 shares issued to a consultant
due to lack of performance of duties.  The Company recorded a
reduction in share capital related to the cancellation of shares of $182,400 and
an increase in contributed surplus of previously amortized charges of
$136,800.





2.
            2006 Stock
      Option Plan covering one million options. None of the options were granted
      as at December 31, 2006.  On February 9, 2007, 1,000,000 options
      were granted to management by the Board of Directors.  On the
      same date the Board of Directors increased the number of options available
      to be granted under the plan to 3,000,000.  As a result of this
      grant, an expense of $136,179 was incurred in the three months ended March
      31, 2007.





-
21 -








Warrants





During the fiscal
years 2004 and 2006, 6,193,600 warrants were issued in connection with various
private placements and the acquisition of certain theatrical film
properties.  These warrants together with common shares formed a Unit
subscribed and paid for under the private placements and were combined with
shares in the acquisition of the theatrical film properties.  These
warrants were originally valued at $5,729,352 using the Black-Scholes valuation
model.





On
February 27, 2007, the conversion price of all previously issued warrants was
reduced to US$0.10 per warrant and the expiry date was extended to November 30,
2009 by the board of directors of the Company.  The warrants were
valued at $486,395 using the Black-Scholes valuation model.





The valuation in
2006 and 2007 were applied to the capital stock and resulted in a negative
amount, which is not permitted under CICA handbook section 3861.22.





Management has
therefore revised the valuation of these warrants using the relative fair value
method allowed under both the Canadian and US accounting
standards.  Based on the valuation method, the revised value of the
warrants issued came to $1,146,081.  The excess value of $4,583,271
was credited to capital stock.  The valuation in 2007 was reversed
from the financial statements previously issued.





These changes have
no effect on the shareholder’s equity, the consolidated statement of operations,
consolidated statements of cash flows, and the basic and diluted loss per
share.




On July 22, 2008,
the conversion price of all previously issued warrants was reduced to US$0.01
per warrant and the expiry date was extended to November 30, 2010 by the board
of directors of the Company.  There is no financial impact related to
this transaction.





(B)
LIQUIDITY AND CAPITAL RESOURCES





Working
      Capital





As
at June 30, 2008, the Company had a net working capital position of $1,201,854
compared to a working capital position of $1,965,665 as of June 30,
2007.   Cash on hand as at June 30, 2008 was $1,330,037 compared
to $1,644,350 in cash as at June 30, 2007.





The working capital
position has declined by approximately $764,000 on a year over year basis due to
the financing of the operating loss of the business in the twelve months ended
June 30, 2008.





The Company
believes it has adequate cash on hand to meet its cash requirements in the
upcoming fiscal year.





-
22 -











Operating cash
      flow





During fiscal 2008,
operating activities required a net cash flow of $315,000. Approximately
$320,000 was spent on corporate operations.  An additional $57,000 was
advanced to The Poet Inc., a production company involved in making a feature
film, offsetting a repayment of advances of approximately $30,000 received from
King of Sorrow Inc.





The operating cash
requirement was met through cash on hand in the Company.


Investment cash flows


The company had no
investing activities during the year.





Financing cash
      flows





The Company had no
financing activities during the year.





(C)RESEARCH AND DEVELOPMENT, PATENTS AND
LICENSES




The Company has not
spent any funds on research and development during the fiscal years 2008, 2007,
and 2006.




(D)TREND INFORMATION




There are no
trends, commitments, events or uncertainties presently known to management that
are reasonably expected to have a material effect on the Company’s business,
financial condition or results of operation other than the nature of the
business (Refer to the heading entitled “Risk Factors”).





(E)OFF-BALANCE SHEET
ARRANGEMENTS




At
June 30, 2008, 2007, and 2006, the Company did not have any off balance sheet
arrangements, including any relationships with unconsolidated entities or
financial partnerships to enhance perceived liquidity.





LiveReel and its
wholly owned subsidiary, LRPC, have made arrangements with various production
companies to provide scripts/screenplay, production consulting and distribution
services for which it will be compensated by way of a percentage of the net
proceeds from the sale/distribution of feature films. Certain of the production
companies are owned by persons who were previously director/executives in
LiveReel or its subsidiary.





In
all such cases, LiveReel does not record any production costs nor will it record
any losses that may be sustained by such production companies on the feature
films made with the help of LiveReel on the ground that LiveReel has not given
any guarantee or is otherwise not responsible for any production costs or any
other liabilities of the production companies.





-
23 -





(F)CONTRACTUAL
OBLIGATIONS




The Company has no
contractual commitments that can not be cancelled with 30 days
notice.




(G)SAFE HARBOUR




Not
applicable.






ITEM 6 - DIRECTORS, SENIOR
MANAGEMENT AND EMPLOYEES








(A)
DIRECTORS AND SENIOR MANAGEMENT





Mr. Gregg Goldstein, joined
the board as chairman on June 13, 2006 . He also assumed the role of chief
executive officer effective the same date. Mr. Goldstein has over twenty years
experience in Investment Banking, Finance and Accounting. He is a graduate of
the MIT Sloan School of Management and began his career at Coopers &
Lybrand, Public Accountants. For the last six years, Mr. Goldstein has been a
private investor. Prior to that, Mr. Goldstein was a managing director in the
Investment Banking Division - Capital Markets of UBS (AG), where he headed and
managed sales and structuring in the Interest Rate Derivative and Structured
Products areas. In this capacity, Mr. Goldstein and histeams advised and traded
with Hedge Funds, Mutual Funds, Pension Funds, and Governments around the
world.


Mr.
Stephen Wilsonbecame a director and chief financial officer and
corporate secretary on September 14, 2006. Mr. Wilson has held various senior
financial and operating positions in a number of private and public companies
over the last 13 years in both Canada and the United States. He has extensive
experience in mergers and acquisitions and raising capital for high growth
companies. He is a graduate of the University of Michigan and a chartered
accountant.





Ms. Joanne Butterfield Douglasjoined the board as independent director on June 13, 2006. Ms. Douglas is
the Managing Director of SAM Investment Services Limited, a Bermuda based
management company. Prior to that, she was with the Bank of Bermuda working in
Directed Investments.





Mr. Steve Dabbah joined the
board as an independent director on October 26, 2006. He has been the Chairman
and Chief Executive Officer of Dabbah Securities Corp., a New York based NASD
broker / dealer firm and investment banking boutique since 1989.. Dabbah
Securities specializes in equity, fixed income and derivatives execution and
implementation. Mr. Dabbah is also the principal of Bedrock Capital Management,
LLC, an asset management firm and Bedrock Advisors, LLC a commodity pool
operator and commodity trading adviser registered with the CFTC.





-
24 -





(B)
COMPENSATION





The compensation
payable to directors and officers of the Company and its subsidiary is
summarized below:





1.General





The Company does
not compensate directors for acting solely as directors. Except as described
below, the Company does not have any arrangements pursuant to which directors
are remunerated by the Company or its subsidiary for their services in their
capacity as directors, other than options to purchase shares of the Company
which may be granted to the Company’s directors from time to time and the
reimbursement of direct expenses.





The Company does
not have any pension plans.





2. 
Statement of Executive Compensation





Mr. Gregg Goldstein receives no cash
remuneration nor has he signed any consulting contract with the Company. During
the year ended June 30, 2008, Mr. Goldstein was reimbursed for various general
and office expenses totalling approximately $58,000 including costs for his
rent, communications costs, health benefits and professional
fees.  During the year ended June 30, 2007, Mr. Goldstein was granted
900,000 options.





Subsequent to the
end of the year, on July 22, 2008, the board of directors agreed to increase the
size of the option pool to 4,000,000 options.  In addition, the
900,000 options previously issued to Gregg Goldstein, CEO, were
cancelled.   A new grant of 3,900,000 options to Gregg Goldstein,
CEO, at a strike price of $0.01 per option, expiring July 22, 2013, and fully
vested was approved.





Mr. Stephen Wilson
has a consulting contract calling for the payment of monthly fees of $5,000 and
can be terminated with one month’s notice.  During the year ended June
30, 2007, Mr. Wilson was granted 100,000 options.





The following table
and accompanying notes set forth all compensation paid by the Company to all
persons who served as Company directors and senior management during the fiscal
year ended June 30, 2008.  The information is provided for the fiscal
years ended 2008, 2007 and 2006.





-
25 -











ANNUAL
      COMPENSATION
            
            LONG-TERM
      COMPENSATIONAwards
            
            PayoutsName
      and principal position
            Year
            Fee
            Bonus
            Other
      annual compensation
            
            Securities
      under options/SARs Granted (1)
            Shares
      or units subject to resale restrictions
            LTIP
      (2) payouts
            All
      other
              compensation($)
            ($)
            ($)
            
            (#)
            ($)
            ($)Gregg
      Goldstein, Chairman and CEO
            2008
            -
            -
            -
            
            -
            -
            -
            -2007
            -
            -
            -
            
            900,000
            -
            -
            -2006
            Not
      applicableStephen
      Wilson, CFO
            2008
            60,000
            -
            -
            
            -
            -
            -
            -2007
            65,000
            -
            -
            
            100,000
            -
            -
            -2006
            Not
      applicable





Notes:





1.
            “SAR”
      means stock appreciation rights2.
            “LTIP”
      means long term incentive plan







Long Term Incentive Plan (LTIP)
Awards




The Company does
not have a LTIP, pursuant to which cash or non-cash compensation intended to
serve as an incentive for performance (whereby performance is measured by
reference to financial performance or the price of the Company’s securities) was
paid or distributed to the Named Executive Officers during the most recently
completed financial year.




Defined
Benefit or Actuarial Plan Disclosure




There is no pension
plan or retirement benefit plan that has been instituted by the Company and none
are proposed at this time.




(C)
BOARD PRACTICES





Directors may be
appointed at any time in accordance with the by-laws of the Company and then
re-elected annually by the shareholders of the Company. Directors receive no
compensation for serving as such, other than stock option and reimbursement of
direct expenses. Officers are elected annually by the Board of Directors of the
Company and serve at the discretion of the Board of Directors.





The Company has not
set aside or accrued any amount for retirement or similar benefits to the
directors.





-
26 -




Mandate
of the Board




The Board has
adopted a mandate, in which it has explicitly assumed responsibility for the
stewardship of LiveReel. In carrying out its mandate the Board holds at least
four meetings annually.  The frequency of meetings, as well as the nature
of the matters dealt with, will vary from year to year depending on the state of
our business and the opportunities or risks, which we face from time to time.
The Board held a total of 4 meetings during our fiscal year ended June 30,
2008.  To assist in the discharge of its responsibilities, the Board has
designated two standing committee: a Corporate governance Committee and an Audit
Committee, as more particularly discussed below.




Corporate
Governance Committee





The Corporate
Governance Committee is comprised of Gregg Goldstein (Chair), Steve Dabbah and
Joanne Butterfield-Douglas. The responsibilities, powers and operation of the
Corporate Governance Committee are set out in the Corporate Governance Committee
Charter.  As described in its charter, the Corporate Governance
Committee is responsible for, among other things, assisting the Board of
Directors in fulfilling its corporate governance oversight
responsibilities.





Audit
Committee





The members of the
audit committee consist of Mr. Steve Dabbah and Ms. Joanne Butterfield Douglas,
both independent directors. The audit committee is charged with overseeing the
Company's accounting and financial reporting policies, practices and internal
controls. The committee reviews significant financial and accounting issues and
the services performed by and the reports of our independent auditors and makes
recommendations to our Board of Directors with respect to these and related
matters.





The Company’s Audit
Committee’s charter was detailed in the annual report for fiscal 2005 and became
effective on August 2, 2005.




Audit Committee
charter assists the Board in fulfilling its responsibilities for our accounting
and financial reporting practices by:




·
            ·reviewing
      the quarterly and annual consolidated financial statements and management
      discussion and analyses;




·
            meeting at
      least annually with our external
auditor;




·
            reviewing the
      adequacy of the system of internal controls in consultation with the chief
      executive and financial officer;




·
            reviewing any
      relevant accounting and financial matters including reviewing our public
      disclosure of information extracted or derived from our financial
      statements;







-
27 -








·
            establishing
      procedures for the receipt, retention and treatment of complaints received
      by us regarding accounting, internal controls or auditing matters and the
      confidential, anonymous submission by employees of concerns regarding
      questionable accounting or auditing
matters;




·
            pre-approving
      all non-audit services and recommending the appointment of external
      auditors; and




·
            reviewing and
      approving our hiring policies regarding personnel of our present and
      former external auditor





Compensation
Committee





The Company does
not currently have a Compensation Committee. The directors determined that, in
light of the Company’s size and resources, setting up such a committee would be
too expensive for the Company at this time. The Company has, however, set up an
Independent Review Committee of the Board to review and approve all non-arms'
length contracts. This Committee has the same composition as the Audit
Committee, and is currently comprised of the two independent directors - Mr.
Steve Dabbah and Ms. Joanne Butterfield Douglas.





(D)
EMPLOYEES





The Company
presently has no permanent employees. It uses the services of consultants from
time to time.





(E)
SHARE OWNERSHIP





The Corporation had
the following plans as at June 30, 2008:





1.
            2006 Stock
      Option Plan covering three million
options.





2.
            2006
      Consultant Stock Compensation Plan covering one million
      shares.





1,000,000 options
were granted under the 2006 Stock Option Plan on February 9, 2007 at a strike
price of $0.15 per share.  On the same date, the board of directors
increased the number of options available to be granted under the plan to
3,000,000.
Subsequent to the end of the year, on July 22, 2008, the board of directors
agreed to increase the size of the option pool under the 2006 Stock Option Plan
to 4,000,000 options.







-
28 -








The objective of
these Plans is to provide for and encourage ownership of common shares of the
Company by its directors, officers, consultants and employees and those of any
subsidiary companies so that such persons may increase their stake in the
Company and benefit from increases in the value of the common shares. The Plans
are designed to be competitive with the benefit programs of other companies in
the industry. It is the view of management that the Plans are a significant
incentive for the directors, officers, consultants and employees to continue and
to increase their efforts in promoting the Company’s operations to the mutual
benefit of both the Company and such individuals and also allow the Company to
avail of the services of experienced persons with minimum cash
outlay.




The following table
sets forth the share ownership of those persons listed in subsection 6.B above
and includes details of all warrants held by such persons at December 15,
2008:







Name
            # of Common
      shares held
              at December
      15, 2008
            # of
      Warrants
            Exercise
      price - in US$
            Expiry
      date(s)
            # of options
      held at
              December 15,
      2008
            Expiry
      dateGregg
      Goldstein
            2,800,000
            1,400,000
            $0.01
            Nov 30,
      2010
            3,900,000
            July 22,
      2013J. Stephen
      Wilson
            nil
            nil
            N/A
            N/A
            100,000
            Feb 9,
      2012





As
of June 30, 2008, the Company had 13,721,744 shares of common stock outstanding,
1,000,000 options to buy common stock, and 6,193,600 warrants to purchase common
stock.








ITEM
7 - MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS





(A)MAJOR
SHAREHOLDERS





The Company's
securities are recorded on the books of its transfer agent in registered form.
The majority of such shares are, however, registered in the name of
intermediaries such as brokerage houses and clearing-houses on behalf of their
respective clients. The Company does not have knowledge of the beneficial owners
thereof.








-
29 -





As
at December 15, 2008, Intermediaries like CDS & Co, Toronto, Canada and Cede
& Co of New York, USA held approximately 20% of the issued and outstanding
common shares of the company on behalf of several beneficial shareholders whose
individual holdings details were not available. The following are the other
registered shareholders holding more than 5% of the common shares of the company
as at December 15, 2008.





Name
      of shareholder
            No.
      of shares held
            %
      of issued sharesCrystal Star
      Productions Limited
            6,563,250
            48%Gregg
      Goldstein
            2,800,000
            20%Snapper
      Inc.
            795,000
            6%





All of the
Company’s shareholders have the same voting rights.





At
December 15, 2008, the Company had 13,721,744 shares of common stock
outstanding, which, as per the details provided by the Transfer Agents, were
held by 355 record holders excluding the beneficial shareholders held through
the intermediaries, 9 of which, holding an aggregate of 5,044,718 shares 37% of
common stock, were in the United States.





The Registrant is a
publicly owned Canadian corporation, the shares of which are owned by Canadian
residents, US residents, and residents of other countries. The Registrant is not
owned or controlled directly or indirectly by another corporation or any foreign
government. There are no arrangements, known to the Company, the operation of
which may at a subsequent date result in a change of control of the
Company.




(B)
RELATED PARTY TRANSACTIONS




Transactions with
related parties are incurred in the normal course of business and are measured
at the exchange amount. Related party transactions during the year ended June
30, 2008 are as follows:





1.
            Consulting
      fees include $60,000 paid to the existing Chief Financial Officer for
      services rendered during the period (2007 –
      $65,000).  Consulting fees in 2007 also include $40,000 of fees
      paid to a former director and officer for various
      services.  (2006 - $75,000 – fees to other
      officers).





2.
            Office and
      general expenses include approximately $58,000 of reimbursable expenses to
      the Chief Executive Officer for various costs including rent,
      communications, health benefits, and professional fees.  (2007 –
      nil; 2006 – nil).




-
30 -





Indebtedness
to Company of Directors, Executive Officers and Senior Officers




None of the
directors, consultants, executive officers and senior officers of the Company or
any of its subsidiaries, proposed nominees for election or associates of such
persons is or has been indebted to the Company at any time for any reason
whatsoever, including the purchase of securities of the Company or any of its
subsidiaries.




(C)
INTERESTS OF EXPERTS AND COUNSEL





Not
applicable







ITEM 8 - FINANCIAL
INFORMATION





(A)
CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION




Information
regarding our financial statements is contained under the caption "Item 17.
Financial Statements" below.




Legal
Proceedings





A
case was filed on August 10, 2005 in the Court in Florida against the Company
and some of its past directors by a person alleging a liability of US$ 200,000
plus triple damages for failing to issue him common shares of the Company
against the funds that he alleged to have paid in 1997.





The Company’s
lawyer filed a motion to dismiss the case on October 12, 2005 for lack of
jurisdiction.  The case was dismissed in April 2007.





Dividend
Policy




Since its
incorporation, the Company has not declared or paid, and has no present
intention to declare or to pay in the foreseeable future, any cash dividends
with respect to its Common Shares. Earnings will be retained to finance further
growth and development of the business of the Company. However, if the Board of
Directors declares dividends, all Common Shares will participate equally in the
dividends, and, in the event of liquidation, in the net assets, of the
Company.




-
31 -







(B)
SIGNIFICANT CHANGES




There was a
significant event subsequent to June 30, 2008, which will have effect on the
capital structure of the Company.  The key event is described
below:





1.
            Subsequent to
      the end of the year, on July 22, 2008, the board of directors agreed to
      increase the size of the option pool to 4,000,000 options.  In
      addition, the 900,000 options previously issued to Gregg Goldstein, CEO,
      were cancelled.   Finally, a new grant of 3,900,000 options
      to Gregg Goldstein, CEO, at a strike price of $0.01 per option, expiring
      July 22, 2013, and fully vested was approved.  In addition, the
      conversion price of all previously issued warrants was reduced to US $0.01
      per warrant and the expiry date was extended to November 30, 2010 by the
      board of directors of the Company.







ITEM 9 - THE OFFER AND
LISTING






(A)
OFFER AND LISTING DETAILS




The Company’s
common shares began trading on OTCBB on April 27 2005. Prior to that date, the
Company’s shares were traded “Over -the Counter” on the Canadian Unlisted Board
(“CUB”) for a brief while in 2000. No real-time quotes or trades were available
to the public. There is no record of quotations under the CUB.





The following
tables set forth the reported high and low sale prices for the common shares of
the Company as quoted on OTCBB.




The following table
outlines the annual high and low market prices for each of the fiscal years
since the trading date of April 27, 2005:




Fiscal year ended June
      30
            
            High
              In US
      $
            
            Low
              In
      US$2008
            
            
            .06
            
            .022007
            
            
            1.70
            
            .062006
            
            
            2.15
            
            .612005 (April
      28, 2005 to June 30, 2005)
            
            
            .65
            
            .54







-
32 -





The following table
outlines the high and low market prices for each fiscal financial quarter for
each of the quarters since April 27, 2005 and any subsequent
period:




Fiscal Quarter
      ended
            
            High
            
            
            LowIn
      US$
            
            
            In
      US$September 30,
      2008
            
            
            .02
            
            
            
            .01June 30,
      2008
            
            
            .03
            
            
            
            .02March 31,
      2008
            
            
            .04
            
            
            
            .03December 31,
      2007
            
            
            .06
            
            
            
            .04September 30,
      2007
            
            
            .06
            
            
            
            .06June 30,
      2007
            
            
            .11
            
            
            
            .10March 31,
      2007
            
            
            .15
            
            
            
            .10December 31,
      2006
            
            
            .50
            
            
            
            .12September 30,
      2006
            
            
            1.70
            
            
            
            .30June 30,
      2006
            
            
            0.85
            
            
            
            2.15March 31,
      2006
            
            
            1.20
            
            
            
            .20December 31,
      2005
            
            
            .65
            
            
            
            .35September 30,
      2005
            
            
            .61
            
            
            
            .56




The following table
outlines the high and low market prices for each of the most recent six
months:




Month
            
            High
            
            
            LowIn
      US$
            
            
            In
      US$November,
      2008
            
            
            .03
            
            
            
            .03October,
      2008
            
            
            .03
            
            
            
            .03September,
      2008
            
            
            .01
            
            
            
            .01August ,
      2008
            
            
            .01
            
            
            
            .01July,
      2008
            
            
            .02
            
            
            
            .01June,
      2008
            
            
            .02
            
            
            
            .02







(B)  
PLAN OF DISTRIBUTION




Not
applicable





(C)  
MARKETS




The company's
common shares were traded briefly during the fiscal 2000 "over-the-counter" on
the Canadian Unlisted Board ("CUB") with the trading symbol "FEPR" and CUSIP
#32008X 10 2. The CUB system was implemented in November 2000 but has currently
been discontinued. It was only available to traders and brokers for reporting
trades that they had arranged in unlisted and unquoted equity securities in
Ontario. No real-time quotes or trades were available to the public. There is no
record of quotations under the CUB.




-
33 -





Since April 27,
2005, the Company’s common shares began trading on OTCBB of the NASD under a
trading symbol “NHSEF”.




The Company
received a new CUSIP number and changed its trading and listing symbol to LVRLF
effective December 1, 2006.




(D)
SELLING SHAREHOLDERS




Not
applicable.




(E)
DILUTION




Not
applicable




(F)
EXPENSES OF THE ISSUE




Not
applicable






ITEM 10 - ADDITIONAL
INFORMATION




(A) SHARE CAPITAL




This Form 20F is
being filed as an Annual Report under the Exchange Act and, as such, there is no
requirement to provide any information under this section.




(B)
MEMORANDUM AND ARTICLES OF ASSOCIATION




Following approval
by the shareholders in a special meeting held on October 4, 2006 as explained in
item 8(B) above, the Company applied for authorization to continue from being
governed by the Business Corporations Act (Ontario) and was granted approval on
October 26, 2006 to continue under the jurisdiction of the Canada Business
Corporation Act.  An application for authorization to continue is
included in Exhibits 1.1 and 1.2 hereof, which exhibits have been incorporated
by reference into this report.




New by-laws were
adopted in the special meeting of shareholders on October 4, 2006 in compliance
with the requirements of the Canada Business Corporation Act. The new by-laws
included in Exhibit  1.3 hereof, which exhibit has been incorporated
by reference into this report.





(C)
MATERIAL CONTRACTS




All material
contracts have been entered into in the ordinary course of its
business.





-
34 -





(D)
EXCHANGE CONTROLS




Limitations on the
ability to acquire and hold shares of the Company may be imposed by the
Competition Act (Canada) (the “Competition Act”).  This legislation permits
the Commissioner of Competition to review any acquisition of a significant
interest in us.  This legislation grants the Commissioner jurisdiction, for
up to three years, to challenge this type of acquisition before the Competition
Tribunal if the Commissioner believes that it would, or would be likely to,
result in a substantial lessening or prevention of competition in any market in
Canada.




The Competition Act
requires that any person proposing to acquire any of the assets in Canada of an
operating business file a notification with the Competition Bureau where (a) the
parties to the transaction, together with their respective affiliates, have (i)
assets in Canada the value of which exceeds $400,000,000 in the aggregate, or
(ii) annual gross revenues from sales in, from or into Canada that exceed
$400,000,000 in the aggregate; and (b) the aggregate
value of those assets, or the gross revenues from sales in or from Canada
generated from those assets, would exceed $50,000,000.  For the purposes of
the Competition Act, asset values and gross revenues are to be determined as of
the last day of the period covered by the most recent audited financial
statements in which the assets or gross revenues are accounted for.




This legislation
also requires any person who intends to acquire shares to file a notification
with the Competition Bureau if certain financial thresholds are exceeded, and
that person would hold more than 20% of our voting shares as a result of the
acquisition.  If a person already owns 20% or more of our voting shares, a
notification must be filed when the acquisition would bring that person’s
holdings over 50%.  Where a notification is required, the legislation
prohibits completion of the acquisition until the expiration of a statutory
waiting period, unless the Commissioner provides written notice that he does not
intend to challenge the acquisition.





There are no
governmental laws, decrees or regulations in Canada that restrict the export or
import of capital or that affect the remittance of dividends, interest or other
payments to non-resident holders of our securities.  However, any such
remittance to a resident of the United States may be subject to a withholding
tax pursuant to the Income Tax Act (Canada).  For further information
concerning such withholding tax, see “Taxation" below.




Except as may be
provided under the Investment Canada Act (the "ICA"), there are no specific
limitations under the laws of Canada, the Province of British Columbia, or in
the Notice of Articles and Articles of the Company with respect to the rights of
non-residents of Canada to hold and/or vote securities of the
Company.





-
35 -





The ICA requires
each individual, government or agency thereof, corporation, partnership, trust
or joint venture that is not a “Canadian” as defined in the ICA (a
“non-Canadian”) making an investment to acquire control of a Canadian business,
the gross assets of which exceed certain defined threshold levels, to file an
application for review with the Investment Review Division of Industry Canada.
 The current threshold level for non-Canadians who are World Trade
Organization investors (as defined in the ICA) is $265,000,000 (in 2006).
 This amount is subject to an annual adjustment on the basis of a
prescribed formula in the ICA to reflect inflation and real growth within
Canada.




In
the context of the Company, in essence, three methods of acquiring control of a
Canadian business are regulated by the ICA: (i) the acquisition of all or
substantially all of the assets used in carrying on business in Canada; (ii) the
acquisition, directly or indirectly, of voting shares of a Canadian corporation
carrying on business in Canada; (iii) the acquisition of voting shares of an
entity which controls, directly or indirectly, another entity carrying on
business in Canada.  An acquisition of a majority of the voting interests
of an entity, including a corporation, is deemed to be an acquisition of control
under the ICA.  However, under the ICA, there is a rebuttable presumption
that control is acquired if one-third of the voting shares of a Canadian
corporation or an equivalent undivided interest in the voting shares of such
corporation are held by a non-Canadian person or entity.  An acquisition of
less than one-third of the voting shares of a Canadian corporation is deemed not
to be an acquisition of control.  An acquisition of less than a majority,
but one-third or more, of the voting shares of a Canadian corporation is
presumed to be an acquisition of control unless it can be established that on
the acquisition the Canadian corporation is not, in fact, controlled by the
acquirer through the ownership of voting shares.  Certain transactions
relating to the acquisition of common shares would be exempt from review from
the ICA, including:




(a) acquisition of
common shares by a person in the ordinary course of a person’s business as a
trader or dealer in securities;




(b) acquisition of
control of a Canadian corporation in connection with the realization of security
granted for a loan or other financial assistance and not for any purpose related
to the provisions of the ICA; and




(c) acquisition of
control of a Canadian corporation by reason of an amalgamation, merger,
consolidation or corporate reorganization following which the ultimate direct or
indirect control in fact of the corporation, through the ownership of voting
interests, remains unchanged.




In
addition, if less than a majority of voting interests of a Canadian corporation
are owned by Canadians, the acquisition of control of any other Canadian
corporation by such corporation may be subject to review unless it can be
established that the corporation is not in fact controlled through the ownership
of voting interests and that two-thirds of the members of the board of directors
of the corporation are Canadians.




-
36 -





Where an investment
is reviewable under the ICA, it may not be implemented unless it is likely to be
of net benefit to Canada.  If an applicant is unable to satisfy the
Minister responsible for Industry Canada that the investment is likely to be of
net benefit to Canada, the applicant may not proceed with the investment.
 Alternatively, an acquiror may be required to divest control of the
Canadian business that is the subject of the investment.




In
addition to the foregoing, the ICA requires formal notification to the Canadian
government of all other acquisitions of control of Canadian businesses by
non-Canadians.  These provisions require a foreign investor to give notice
in the required form, which notices are for information, as opposed to review
purposes.




(E)
TAXATION




Canadian Federal Income Tax
Consequences




We
consider that the following general summary fairly describes the principal
Canadian federal income tax considerations applicable to holders of our common
shares who, for purposes of the Income Tax Act (Canada) (the “ITA”), deal at
arm’s length with the Company, hold such shares as capital property, do not
carry on business in Canada, have not been at any time residents of Canada for
purposes of the ITA and are residents of the United States (“US Residents”)
under the Canada-United States Income Tax Convention (1980) (the
“Convention”).




This summary is
based upon the current provisions of the ITA, the Income Tax Regulations (the
“Regulations”), the current publicly announced administrative and assessing
policies of the Canada Revenue Agency (formerly Canada Customs and Revenue
Agency), and all specific proposals (the “Tax Proposals”) to amend the ITA and
Regulations publicly announced prior to the date hereof by the Minister of
Finance (Canada).  This description is not exhaustive of all possible
Canadian federal income tax consequences and, except for the Tax Proposals, does
not take into account or anticipate any changes in law, whether by legislative,
governmental or judicial action, nor does it take into account provincial or
foreign tax considerations which may differ significantly from those discussed
herein.





The following
discussion is for general information only and it is not intended to be, nor
should it be construed to be, legal or tax advice to any holder or prospective
holder of our common shares and no opinion or representation with respect to any
Canadian federal, provincial or foreign tax consequences to any such holder or
prospective holder is made.  Accordingly, holders and prospective holders
of our common shares should consult with their own tax advisors about the
Canadian federal, provincial and foreign tax consequences of purchasing, owning
and disposing of our common shares.





-
37 -




Dividends




Dividends,
including stock dividends, paid or credited or deemed to be paid or credited on
our common shares to a US Resident will be subject to withholding tax at a rate
of 25%.  The Convention provides that the normal 25% withholding tax rate
will generally be reduced to 15% on dividends paid on shares of a corporation
resident in Canada for federal income tax purposes (such as the Company) to US
Residents, and also provides for a further reduction of this rate to 5% where
the beneficial owner of the dividends is a corporation which is a resident of
the United States and owns at least 10% of the voting shares of the corporation
paying the dividend.  These Convention reductions are not available to
beneficial owners who are a US LLC corporation.




Capital
Gains




The Convention
provides that a US Resident will not be subject to tax under the ITA in respect
of any capital gain on the disposition of our common shares unless such shares
constitute taxable Canadian property of the US Resident and the US Resident is
not entitled to the benefits of the Convention with regards to capital gains.
 Our common shares will constitute taxable Canadian property if at any time
during the five year period immediately preceding the disposition of our common
shares, the US Resident, or persons with whom the US Resident did not deal at
arm’s length, or the US Resident together with persons with whom the US resident
did not deal at arm’s length owned 25% or more of the issued shares of any class
of our capital stock.




Where a US resident
realizes a capital gain on a disposition of shares that constitute “taxable
Canadian property”, the Convention relieves the US resident from liability for
Canadian tax on such capital gains unless:





(a)the value of the shares
is derived principally from “real property” in Canada, including the right to
explore for or exploit natural resources and rights to amounts computed by
reference to production,





(b)the shareholder was
resident in Canada for 120 months during any period of 20 consecutive years
preceding the disposition, was resident in Canada at any time during the 10
years immediately preceding the disposition and the shares were owned by him
when he ceased to be resident in Canada, or




(c)the shares formed part
of the business property of a “permanent establishment” or pertained to a fixed
base used for the purpose of performing independent personal services that the
shareholder has or had in Canada within the 12 months preceding the
disposition.




These Convention
benefits are generally not available to beneficial owners who are a US LLC
corporation.





-
38 -





U.S. Federal Income Tax
Consequences




The following is a
summary of the anticipated material U.S. federal income tax consequences to a
U.S. Holder (as defined below) arising from and relating to the acquisition,
ownership, and disposition of our common shares (“Common Shares”).





This summary is for
general information purposes only and does not purport to be a complete analysis
or listing of all potential U.S. federal income tax consequences that may apply
to a U.S. Holder as a result of the acquisition, ownership, and disposition of
Common Shares.  In addition, this summary does not take into account the
individual facts and circumstances of any particular U.S. Holder that may affect
the U.S. federal income tax consequences of the acquisition, ownership, and
disposition of Common Shares.  Accordingly, this summary is not intended to
be, and should not be construed as, legal or U.S. federal income tax advice with
respect to any U.S. Holder.  Each U.S. Holder should consult its own
financial advisor, legal counsel, or accountant regarding the U.S. federal, U.S.
state and local, and foreign tax consequences of the acquisition, ownership, and
disposition of Common Shares.





Scope
of this Disclosure





Authorities





This summary is
based on the Internal Revenue Code of 1986, as amended (the “Code”), Treasury
Regulations (whether final, temporary, or proposed), published rulings of the
Internal Revenue Service (“IRS”), published administrative positions of the IRS,
the Convention Between Canada and the United States of America with Respect to
Taxes on Income and on Capital, signed September 26, 1980, as amended (the
“Canada-U.S. Tax Convention”), and U.S. court decisions that are applicable and,
in each case, as in effect and available, as of the date of this Annual Report.
 Any of the authorities on which this summary is based could be changed in
a material and adverse manner at any time, and any such change could be applied
on a retroactive basis.  This summary does not discuss the potential
effects, whether adverse or beneficial, of any proposed legislation that, if
enacted, could be applied on a retroactive basis.





U.S.
Holders





For purposes of
this summary, a “U.S. Holder” is a beneficial owner of Common Shares that, for
U.S. federal income tax purposes, is (a) an individual who is a citizen or
resident of the U.S., (b) a corporation, or any other entity classified as
a corporation for U.S. federal income tax purposes, that is created or organized
in or under the laws of the U.S. or any state in the U.S., including the
District of Columbia, (c) an estate if the income of such estate is subject
to U.S. federal income tax regardless of the source of such income, or
(d) a trust if (i) such trust has validly elected to be treated as a
U.S. person for U.S. federal income tax purposes or (ii) a U.S. court is
able to exercise primary supervision over the administration of such trust and
one or more U.S. persons have the authority to control all substantial decisions
of such trust.





-
39 -





Non




U.S.
Holders





For purposes of
this summary, a “non-U.S. Holder” is a beneficial owner of Common Shares other
than a U.S. Holder.  This summary does not address the U.S. federal income
tax consequences of the acquisition, ownership, and disposition of Common Shares
to non-U.S. Holders.  Accordingly, a non-U.S. Holder should consult its own
financial advisor, legal counsel, or accountant regarding the U.S. federal, U.S.
state and local, and foreign tax consequences (including the potential
application of and operation of any tax treaties) of the acquisition, ownership,
and disposition of Common Shares.





U.S. Holders Subject to
Special U.S. Federal Income Tax Rules Not Addressed





This summary does
not address the U.S. federal income tax consequences of the acquisition,
ownership, and disposition of Common Shares to U.S. Holders that are subject to
special provisions under the Code, including the following U.S. Holders:
 (a) U.S. Holders that are tax-exempt organizations, qualified
retirement plans, individual retirement accounts, or other tax-deferred
accounts; (b) U.S. Holders that are financial institutions, insurance
companies, real estate investment trusts, or regulated investment companies;
(c) U.S. Holders that are dealers in securities or currencies or U.S.
Holders that are traders in securities that elect to apply a mark-to-market
accounting method; (d) U.S. Holders that have a “functional currency” other
than the U.S. dollar; (e) U.S. Holders that are liable for the alternative
minimum tax under the Code; (f) U.S. Holders that own Common Shares as part
of a straddle, hedging transaction, conversion transaction, constructive sale,
or other arrangement involving more than one position; (g) U.S. Holders
that acquired Common Shares in connection with the exercise of employee stock
options or otherwise as compensation for services; (h) U.S. Holders that
hold Common Shares other than as a capital asset within the meaning of
Section 1221 of the Code; or (i) U.S. Holders that own, directly or
indirectly, 10% or more, by voting power or value, of our outstanding shares.
 U.S. Holders that are subject to special provisions under the Code,
including U.S. Holders described immediately above, should consult their own
financial advisor, legal counsel or accountant regarding the U.S. federal, U.S.
state and local, and foreign tax consequences of the acquisition, ownership, and
disposition of Common Shares.





If
an entity that is classified as partnership (or “pass-through” entity) for U.S.
federal income tax purposes holds Common Shares, the U.S. federal income tax
consequences to such partnership (or “pass-through” entity) and the partners of
such partnership (or owners of such “pass-through” entity) generally will depend
on the activities of the partnership (or “pass-through” entity) and the status
of such partners (or owners).  Partners of entities that are classified as
partnerships (or owners of “pass-through” entities) for U.S. federal income tax
purposes should consult their own financial advisor, legal counsel or accountant
regarding the U.S. federal income tax consequences of the acquisition,
ownership, and disposition of Common Shares.





-
40 -





Tax Consequences Other than
U.S. Federal Income Tax Consequences Not Addressed





This summary does
not address the U.S. state and local, U.S. federal estate and gift, or foreign
tax consequences to U.S. Holders of the acquisition, ownership, and disposition
of Common Shares.  Each U.S. Holder should consult its own financial
advisor, legal counsel, or accountant regarding the U.S. state and local, U.S.
federal estate and gift, and foreign tax consequences of the acquisition,
ownership, and disposition of Common Shares.  (See “Taxation—Canadian
Federal Income Tax Consequences” above).





U.S.
Federal Income Tax Consequences of the Acquisition, Ownership, and Disposition
of Common Shares




Distributions on Common
Shares





General
Taxation of Distributions





A
U.S. Holder that receives a distribution, including a constructive distribution,
with respect to the Common Shares will be required to include the amount of such
distribution in gross income as a dividend (without reduction for any Canadian
income tax withheld from such distribution) to the extent of our current or
accumulated “earnings and profits”.  To the extent that a distribution
exceeds our current and accumulated “earnings and profits”, such distribution
will be treated (a) first, as a tax-free return of capital to the extent of
a U.S. Holder’s tax basis in the Common Shares and, (b) thereafter, as gain
from the sale or exchange of such Common Shares.  (See more detailed
discussion at “Disposition of Common Shares” below).





Reduced
Tax Rates for Certain Dividends





For taxable years
beginning after December 31, 2002 and before January 1, 2011, a dividend paid by
us generally will be taxed at the preferential tax rates applicable to long-term
capital gains if (a) we are a “qualified foreign corporation” (as defined
below), (b) the U.S. Holder receiving such dividend is an individual,
estate, or trust, and (c) such dividend is paid on Common Shares that have
been held by such U.S. Holder for at least 61 days during the 121-day period
beginning 60 days before the “ex-dividend date” (i.e., the first date that a
purchaser of such Common Shares will not be entitled to receive such
dividend).





-
41 -





We
generally will be a “qualified foreign corporation” under Section 1(h)(11)
of the Code (a “QFC”) if (a) we are incorporated in a possession of the
U.S., (b) we are eligible for the benefits of the Canada-U.S. Tax
Convention, or (c) the Common Shares are readily tradable on an established
securities market in the U.S.  However, even if we satisfy one or more of
such requirements, we will not be treated as a QFC if we are a “passive foreign
investment company” (as defined below) for the taxable year during which we pay
a dividend or for the preceding taxable year.  In 2003, the U.S. Department
of the Treasury (the “Treasury”) and the IRS announced that they intended to
issue Treasury Regulations providing procedures for a foreign corporation to
certify that it is a QFC.  Although these Treasury Regulations were not
issued in 2004, the Treasury and the IRS have confirmed their intention to issue
these Treasury Regulations.  It is expected that these Treasury Regulations
will obligate persons required to file information returns to report a
distribution with respect to a foreign security issued by a foreign corporation
as a dividend from a QFC if the foreign corporation has, among other things,
certified under penalties of perjury that the foreign corporation was not a
“passive foreign investment company” for the taxable year during which the
foreign corporation paid the dividend or for the preceding taxable year.





We
do not believe that we were a “passive foreign investment company” for the
taxable year ended June 30, 2008.   (See more detailed discussion at
“Additional Rules that May Apply to U.S. Holders” below).  There can be no
assurance that the IRS will not challenge the determination made by us
concerning our “passive foreign investment company” status or that we will not
be a “passive foreign investment company” for the current or any future taxable
year.  Accordingly, there can be no assurances that we will be a QFC for
the current or any future taxable year, or that we will be able to certify that
it is a QFC in accordance with the certification procedures issued by the
Treasury and the IRS.





If
we are not a QFC, a dividend paid by us to a U.S. Holder, including a U.S.
Holder that is an individual, estate, or trust, generally will be taxed at
ordinary income tax rates (and not at the preferential tax rates applicable to
long-term capital gains).  The dividend rules are complex, and each U.S.
Holder should consult its own financial advisor, legal counsel, or accountant
regarding the dividend rules.





Distributions
Paid in Foreign Currency





The amount of a
distribution paid to a U.S. Holder in foreign currency generally will be equal
to the U.S. dollar value of such distribution based on the exchange rate
applicable on the date of receipt.  A U.S. Holder that does not convert
foreign currency received as a distribution into U.S. dollars on the date of
receipt generally will have a tax basis in such foreign currency equal to the
U.S. dollar value of such foreign currency on the date of receipt.  Such a
U.S. Holder generally will recognize ordinary income or loss on the subsequent
sale or other taxable disposition of such foreign currency (including an
exchange for U.S. dollars).





-
42 -





Dividends
Received Deduction





Dividends paid on
the Common Shares generally will not be eligible for the “dividends received
deduction.”  The availability of the dividends received deduction is
subject to complex limitations that are beyond the scope of this discussion, and
a U.S. Holder that is a corporation should consult its own financial advisor,
legal counsel, or accountant regarding the dividends received
deduction.





Disposition of Common
Shares





A
U.S. Holder will recognize gain or loss on the sale or other taxable disposition
of Common Shares in an amount equal to the difference, if any, between
(a) the amount of cash plus the fair market value of any property received
and (b) such U.S. Holder’s tax basis in the Common Shares sold or otherwise
disposed of.  Any such gain or loss generally will be capital gain or loss,
which will be long-term capital gain or loss if the Common Shares are held for
more than one year.  Gain or loss recognized by a U.S. Holder on the sale
or other taxable disposition of Common Shares generally will be treated as “U.S.
source” for purposes of applying the U.S. foreign tax credit rules.
  (See more detailed discussion at “Foreign Tax Credit” below).





Preferential tax
rates apply to long-term capital gains of a U.S. Holder that is an individual,
estate, or trust.  There are currently no preferential tax rates for
long-term capital gains of a U.S. Holder that is a corporation.  Deductions
for capital losses and net capital losses are subject to complex limitations.
 For a U.S. Holder that is an individual, estate, or trust, capital losses
may be used to offset capital gains and up to US$3,000 of ordinary income.
 An unused capital loss of a U.S. Holder that is an individual, estate, or
trust generally may be carried forward to subsequent taxable years, until such
net capital loss is exhausted.  For a U.S. Holder that is a corporation,
capital losses may be used to offset capital gains, and an unused capital loss
generally may be carried back three years and carried forward five years from
the year in which such net capital loss is recognized.





Foreign Tax
Credit





A
U.S. Holder who pays (whether directly or through withholding) Canadian income
tax with respect to dividends paid on the Common Shares generally will be
entitled, at the election of such U.S. Holder, to receive either a deduction or
a credit for such Canadian income tax paid.  Generally, a credit will
reduce a U.S. Holder’s U.S. federal income tax liability on a dollar-for-dollar
basis, whereas a deduction will reduce a U.S. Holder’s income subject to U.S.
federal income tax.  This election is made on a year-by-year basis and
applies to all foreign taxes paid (whether directly or through withholding) by a
U.S. Holder during a year.





-
43 -





Complex limitations
apply to the foreign tax credit, including the general limitation that the
credit cannot exceed the proportionate share of a U.S. Holder’s U.S. federal
income tax liability that such U.S. Holder’s “foreign source” taxable income
bears to such U.S. Holder’s worldwide taxable income.  In applying this
limitation, a U.S. Holder’s various items of income and deduction must be
classified, under complex rules, as either “foreign source” or “U.S. source.”
 In addition, this limitation is calculated separately with respect to
specific categories of income (including “passive income,” “high withholding tax
interest,” “financial services income,” “general income,” and certain other
categories of income).  Dividends paid by us generally will constitute
“foreign source” income and generally will be categorized as “passive income”
or, in the case of certain U.S. Holders, “financial services income.”
 However, for taxable years beginning after December 31, 2006, the foreign
tax credit limitation categories are reduced to “passive income” and “general
income” (and the other categories of income, including “financial services
income,” are eliminated).  The foreign tax credit rules are complex, and
each U.S. Holder should consult its own financial advisor, legal counsel, or
accountant regarding the foreign tax credit rules.





Information Reporting;
Backup Withholding Tax





Payments made
within the U.S., or by a U.S. payor or U.S. middleman, of dividends on, and
proceeds arising from certain sales or other taxable dispositions of, Common
Shares generally will be subject to information reporting and backup withholding
tax, at the rate of 28%, if a U.S. Holder (a) fails to furnish such U.S.
Holder’s correct U.S. taxpayer identification number (generally on Form W-9),
(b) furnishes an incorrect U.S. taxpayer identification number, (c) is
notified by the IRS that such U.S. Holder has previously failed to properly
report items subject to backup withholding tax, or (d) fails to certify,
under penalty of perjury, that such U.S. Holder has furnished its correct U.S.
taxpayer identification number and that the IRS has not notified such U.S.
Holder that it is subject to backup withholding tax.  However, U.S. Holders
that are corporations generally are excluded from these information reporting
and backup withholding tax rules.  Any amounts withheld under the U.S.
backup withholding tax rules will be allowed as a credit against a U.S. Holder’s
U.S. federal income tax liability, if any, or will be refunded, if such U.S.
Holder furnishes required information to the IRS.  Each U.S. Holder should
consult its own financial advisor, legal counsel, or accountant regarding the
information reporting and backup withholding tax rules.





Additional
Rules that May Apply to U.S. Holders





If
we are a “controlled foreign corporation,” or a “passive foreign investment
company” (each as defined below), the preceding sections of this summary may not
describe the U.S. federal income tax consequences to U.S. Holders of the
acquisition, ownership, and disposition of Common Shares.








-
44 -





Controlled Foreign
Corporation





We
generally will be a “controlled foreign corporation” under Section 957 of
the Code (a “CFC”) if more than 50% of the total voting power or the total value
of our outstanding shares are owned, directly or indirectly, by citizens or
residents of the U.S., domestic partnerships, domestic corporations, domestic
estates, or domestic trusts (each as defined in Section 7701(a)(30) of the
Code), each of which own, directly or indirectly, 10% or more of the total
voting power of our outstanding shares (a “10% Shareholder”).





If
we are a CFC, a 10% Shareholder generally will be subject to current U.S.
federal income tax with respect to (a) such 10% Shareholder’s pro rata
share of the “subpart F income” (as defined in Section 952 of the Code) of
the Company and (b) such 10% Shareholder’s pro rata share of our
earnings invested in “United States property” (as defined in Section 956 of
the Code).  In addition, under Section 1248 of the Code, any gain
recognized on the sale or other taxable disposition of Common Shares by a U.S.
Holder that was a 10% Shareholder at any time during the five-year period
ending with such sale or other taxable disposition generally will be treated as
a dividend to the extent of the “earnings and profits” of the Company that are
attributable to such Common Shares.  If we are both a CFC and a “passive
foreign investment company” (as defined below), we generally will be treated as
a CFC (and not as a “passive foreign investment company”) with respect to any
10% Shareholder.





We do not
believe that LiveReel has previously been, or currently is a CFC.  However,
there can be no assurance that we will not be a CFC for the current or any
future taxable year.





Passive Foreign Investment
Company





We
generally will be a “passive foreign investment company” under Section 1297
of the Code (a “PFIC”) if, for a taxable year, (a) 75% or more of our gross
income for such taxable year is passive income or (b) 50% or more of the
assets held by us either produce passive income or are held for the production
of passive income, based on the fair market value of such assets (or on the
adjusted tax basis of such assets, if we are not publicly traded and either is a
“controlled foreign corporation” or makes an election).  “Passive income”
includes, for example, dividends, interest, certain rents and royalties, certain
gains from the sale of stock and securities, and certain gains from commodities
transactions.





For purposes of the
PFIC income test and asset test described above, if we own, directly or
indirectly, 25% or more of the total value of the outstanding shares of another
foreign corporation, we will be treated as if it (a) held a proportionate
share of the assets of such other foreign corporation and (b) received
directly a proportionate share of the income of such other foreign corporation.
 In addition, for purposes of the PFIC income test and asset test described
above, “passive income” does not include any interest, dividends, rents, or
royalties that are received or accrued by us from a “related person” (as defined
in Section 954(d)(3) of the Code), to the extent such items are properly
allocable to the income of such related person that is not passive income.





-
45 -




We
do not believe that LiveReel has previously been, or currently are a PFIC
 However, there can be no assurance that the IRS will not challenge our
determination concerning our PFIC status or that we will not be a PFIC for the
current or any future taxable year.





Default
PFIC Rules Under Section 1291 of the Code





If
we are a PFIC, the U.S. federal income tax consequences to a U.S. Holder of the
acquisition, ownership, and disposition of Common Shares will depend on whether
such U.S. Holder makes an election to treat the Company as a “qualified electing
fund” or “QEF” under Section 1295 of the Code (a “QEF Election”) or a
mark-to-market election under Section 1296 of the Code (a “Mark-to-Market
Election”).  A U.S. Holder that does not make either a QEF Election or a
Mark-to-Market Election will be referred to in this summary as a “Non-Electing
U.S. Holder.”





A
Non-Electing U.S. Holder will be subject to the rules of Section 1291 of
the Code with respect to (a) any gain recognized on the sale or other
taxable disposition of Common Shares and (b) any excess distribution paid
on the Common Shares.  A distribution generally will be an “excess
distribution” to the extent that such distribution (together with all other
distributions received in the current taxable year) exceeds 125% of the average
distributions received during the three preceding taxable years (or during a
U.S. Holder’s holding period for the Common Shares, if shorter).





Under
Section 1291 of the Code, any gain recognized on the sale or other taxable
disposition of Common Shares, and any excess distribution paid on the Common
Shares, must be ratably allocated to each day in a Non-Electing U.S. Holder’s
holding period for the Common Shares.  The amount of any such gain or
excess distribution allocated to prior years of such Non-Electing U.S. Holder’s
holding period for the Class Common Shares (other than years prior to the
first taxable year of the Company during such Non-Electing U.S. Holder’s holding
period and beginning after December 31, 1986 for which we was not a PFIC) will
be subject to U.S. federal income tax at the highest tax applicable to ordinary
income in each such prior year.  A Non-Electing U.S. Holder will be
required to pay interest on the resulting tax liability for each such prior
year, calculated as if such tax liability had been due in each such prior year.
 Such a Non-Electing U.S. Holder that is not a corporation must treat any
such interest paid as “personal interest,” which is not deductible.  The
amount of any such gain or excess distribution allocated to the current year of
such Non-Electing U.S. Holder’s holding period for the Common Shares will be
treated as ordinary income in the current year, and no interest charge will be
incurred with respect to the resulting tax liability for the current
year.





-
46 -





If
we are a PFIC for any taxable year during which a Non-Electing U.S. Holder holds
Common Shares, we will continue to be treated as a PFIC with respect to such
Non-Electing U.S. Holder, regardless of whether we cease to be a PFIC in one or
more subsequent years.  A Non-Electing U.S. Holder may terminate this
deemed PFIC status by electing to recognize gain (which will be taxed under the
rules of Section 1291 of the Code discussed above) as if such Common Shares
were sold on the last day of the last taxable year for which the Company was a
PFIC.


QEF
Election





A
U.S. Holder that makes a QEF Election generally will not be subject to the rules
of Section 1291 of the Code discussed above.  However, a U.S. Holder
that makes a QEF Election will be subject to U.S. federal income tax on such
U.S. Holder’s pro rata share of (a) the net capital gain of the Company,
which will be taxed as long-term capital gain to such U.S. Holder, and
(b) and the ordinary earnings of the Company, which will be taxed as
ordinary income to such U.S. Holder.  Generally, “net capital gain” is the
excess of (a) net long-term capital gain over (b) net short-term
capital loss, and “ordinary earnings” are the excess of (a) “earnings and
profits” over (b) net capital gain.  A U.S. Holder that makes a QEF
Election will be subject to U.S. federal income tax on such amounts for each
taxable year in which we are a PFIC, regardless of whether such amounts are
actually distributed to such U.S. Holder by us.  However, a U.S. Holder
that makes a QEF Election may, subject to certain limitations, elect to defer
payment of current U.S. federal income tax on such amounts, subject to an
interest charge.  If such U.S. Holder is not a corporation, any such
interest paid will be treated as “personal interest,” which is not deductible.





A
U.S. Holder that makes a QEF Election generally also (a) may receive a
tax-free distribution from us to the extent that such distribution represents
“earnings and profits” of the Company that were previously included in income by
the U.S. Holder because of such QEF Election and (b) will adjust such U.S.
Holder’s tax basis in the Common Shares to reflect the amount included in income
or allowed as a tax-free distribution because of such QEF Election.  In
addition, a U.S. Holder that makes a QEF Election generally will recognize
capital gain or loss on the sale or other taxable disposition of Common
Shares.





-
47 -





The procedure for
making a QEF Election, and the U.S. federal income tax consequences of making a
QEF Election, will depend on whether such QEF Election is timely.  A QEF
Election will be treated as “timely” if such QEF Election is made for the first
year in the U.S. Holder’s holding period for the Common Shares in which we were
a PFIC.  A U.S. Holder may make a timely QEF Election by filing the
appropriate QEF Election documents at the time such U.S. Holder files a U.S.
federal income tax return for such first year.  However, if we were a PFIC
in a prior year, then in addition to filing the QEF Election documents, a U.S.
Holder must elect to recognize (a) a gain (which will be taxed under the
rules of Section 1291 of the Code discussed above) as if the Common Shares
were sold on the qualification date or (b) if we were also a CFC, such U.S.
Holder’s pro rata share of the post-1986 “earnings and profits” of the Company
as of the qualification date.  The “qualification date” is the first day of
the first taxable year in which we were a QEF with respect to such U.S. Holder.
 The election to recognize such gain or “earnings and profits” can only be
made if such U.S. Holder’s holding period for the Common Shares includes the
qualification date.  By electing to recognize such gain or “earnings and
profits,” such U.S. Holder will be deemed to have made a timely QEF Election.
 In addition, under very limited circumstances, a U.S. Holder may make a
retroactive QEF Election if such U.S. Holder failed to file the QEF Election
documents in a timely manner.





A
QEF Election will apply to the taxable year for which such QEF Election is made
and to all subsequent taxable years, unless such QEF Election is invalidated or
terminated or the IRS consents to revocation of such QEF Election.  If a
U.S. Holder makes a QEF Election and, in a subsequent taxable year, we cease to
be a PFIC, the QEF Election will remain in effect (although it will not be
applicable) during those taxable years in which we are not a PFIC.
 Accordingly, if we become a PFIC in another subsequent taxable year, the
QEF Election will be effective and the U.S. Holder will be subject to the QEF
rules described above during any such subsequent taxable year in which we
qualify as a PFIC.  In addition, the QEF Election will remain in effect
(although it will not be applicable) with respect to a U.S. Holder even after
such U.S. Holder disposes of all of such U.S. Holder’s direct and indirect
interest in the Common Shares.  Accordingly, if such U.S. Holder reacquires
an interest in the Company, such U.S. Holder will be subject to the QEF rules
described above for each taxable year in which we are a PFIC.





Each U.S. Holder
should consult its own financial advisor, legal counsel, or accountant regarding
the availability of, and procedure for making, a QEF Election.  U.S.
Holders should be aware that there can be no assurance that we will satisfy
record keeping requirements that apply to a QEF, or that we will supply U.S.
Holders with information that such U.S. Holders require to report under the QEF
rules, in event that we are a PFIC and a U.S. Holder wishes to make a QEF
Election.





-
48 -





Mark-to-Market
Election





A
U.S. Holder may make a Mark-to-Market Election only if the Common Shares are
marketable stock.  The Common Shares generally will be “marketable stock”
if the Common Shares are regularly traded on (a) a national securities
exchange that is registered with the Securities and Exchange Commission,
(b) the national market system established pursuant to section 11A of the
Securities and Exchange Act of 1934, or (c) a foreign securities exchange
that is regulated or supervised by a governmental authority of the country in
which the market is located, provided that (i) such foreign exchange has
trading volume, listing, financial disclosure, and other requirements and the
laws of the country in which such foreign exchange is located, together with the
rules of such foreign exchange, ensure that such requirements are actually
enforced and (ii) the rules of such foreign exchange ensure active trading
of listed stocks.





A
U.S. Holder that makes a Mark-to-Market Election generally will not be subject
to the rules of Section 1291 of the Code discussed above.  However, if
a U.S. Holder makes a Mark-to-Market Election after the beginning of such U.S.
Holder’s holding period for the Common Shares and such U.S. Holder has not made
a timely QEF Election, the rules of Section 1291 of the Code discussed
above will apply to certain dispositions of, and distributions on, the Common
Shares.





A
U.S. Holder that makes a Mark-to-Market Election will include in ordinary
income, for each taxable year in which we are a PFIC, an amount equal to the
excess, if any, of (a) the fair market value of the Common Shares as of the
close of such taxable year over (b) such U.S. Holder’s tax basis in such
Common Shares.  A U.S. Holder that makes a Mark-to-Market Election will be
allowed a deduction in an amount equal to the lesser of (a) the excess, if
any, of (i) such U.S. Holder’s adjusted tax basis in the Common Shares over
(ii) the fair market value of such Common Shares as of the close of such
taxable year or (b) the excess, if any, of (i) the amount included in
ordinary income because of such Mark-to-Market Election for prior taxable years
over (ii) the amount allowed as a deduction because of such Mark-to-Market
Election for prior taxable years.





A
U.S. Holder that makes a Mark-to-Market Election generally also will adjust such
U.S. Holder’s tax basis in the Common Shares to reflect the amount included in
gross income or allowed as a deduction because of such Mark-to-Market Election.
 In addition, upon a sale or other taxable disposition of Common Shares, a
U.S. Holder that makes a Mark-to-Market Election will recognize ordinary income
or loss (not to exceed the excess, if any, of (a) the amount included in
ordinary income because of such Mark-to-Market Election for prior taxable years
over (b) the amount allowed as a deduction because of such Mark-to-Market
Election for prior taxable years).





A
Mark-to-Market Election applies to the taxable year in which such Mark-to-Market
Election is made and to each subsequent taxable year, unless the Common Shares
cease to be “marketable stock” or the IRS consents to revocation of such
election.  Each U.S. Holder should consult its own financial advisor, legal
counsel, or accountant regarding the availability of, and procedure for making,
a Mark-to-Market Election.





-
49 -





Other
PFIC Rules





Under
Section 1291(f) of the Code, the IRS has issued proposed Treasury
Regulations that, subject to certain exceptions, would cause a U.S. Holder that
had not made a timely QEF Election to recognize gain (but not loss) upon certain
transfers of Common Shares that would otherwise be tax-deferred (e.g., gifts and
exchanges pursuant to corporate reorganizations).  However, the specific
U.S. federal income tax consequences to a U.S. Holder may vary based on the
manner in which Common Shares are transferred.





Certain additional
adverse rules will apply with respect to a U.S. Holder if we are a PFIC,
regardless of whether such U.S. Holder makes a QEF Election.  For example
under Section 1298(b)(6) of the Code, a U.S. Holder that uses Common Shares
as security for a loan will, except as may be provided in Treasury Regulations,
be treated as having made a taxable disposition of such Common Shares.





The PFIC rules are
complex, and each U.S. Holder should consult its own financial advisor, legal
counsel, or accountant regarding the PFIC rules and how the PFIC rules may
affect the U.S. federal income tax consequences of the acquisition, ownership,
and disposition of Common Shares.







This
summary is of a general nature only and is not intended to be relied on as legal
or tax advice or representations to any particular investor.  Consequently,
potential investors are urged to seek independent tax advice in respect of the
consequences to them of the acquisition of common stock having regard to their
particular circumstances.




(F)
DIVIDEND AND PAYING AGENTS




Not
applicable





-
50 -





(G)
STATEMENT BY EXPERTS




Not
applicable




(H)
DOCUMENTS ON DISPLAY




The documents
concerning the Company referred to in this Annual Report may be inspected at the
Company's office at 3400 One First Canadian Place, C/O Bennett Jones LLP, PO Box
130, Toronto, Ontario, Canada, M5X 1A4.  The Company may be reached at
(416) 607-6793. Documents filed with the Securities and Exchange Commission
("SEC") may also be read and copied at the SEC's public reference room at 100 F
Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms.




The Company is
subject to reporting requirements as a “reporting issuer” under applicable
securities legislation in Canada and as a “foreign private issuer” under the
Securities Exchange Act of 1934 (the “Exchange Act”). As a result, we must file
periodic reports and other information with the Canadian securities regulatory
authorities and the Securities and Exchange Commission.





A
copy of this Form 20-F Annual Report and certain other documents referred to in
this Annual Report and other documents filed by us may be retrieved from the
system for electronic document analysis and retrieval (“SEDAR”) system
maintained by the Canadian securities regulatory authorities at www.sedar.ca or
from the Securities and Exchange Commission electronic data gathering, analysis
and retrieval system(“EDGAR”) at www.sec.gov/edgar.




(I)
SUBSIDIARY INFORMATION




The documents
concerning the Company’s subsidiaries referred to in this Annual Report may be
inspected at the Company's office at 3400 One First Canadian Place, C/O Bennett
Jones LLP, PO Box 130, Toronto, Ontario, Canada, M5X 1A4.






ITEM 11 - QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK






We
are exposed to foreign currency exchange rates.  We do not use derivative
financial instruments.




The Company‘s
surplus funds are held with Canadian banks in US and Canadian currencies in
interest earning accounts.




The Company has no
debt instruments subject to interest payments, sales contracts, swaps,
derivatives, or forward agreements or contracts, or inventory.




The Company has no
currency or commodity contracts, and the Company does not trade in such
instruments.




-
51 -








The Company
periodically accesses the capital markets with the issuance of new shares to
fund operating expenses and new projects,






ITEM 12 - DESCRIPTION OF
SECURITIES OTHER THAN EQUITY SECURITIES





Not required since
this is an annual report.





PART II






ITEM 13 - DEFAULTS, DIVIDEND
ARREARAGES AND DELINQUENCIES




None.






ITEM 14 - MATERIAL
MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
PROCEEDS




No
modifications or qualifications have been made to the instruments defining the
rights of the holders of our Common Shares and no material amount of assets
securing our securities has been withdrawn or substituted by us or anyone else
(other than in the ordinary course of business).





As
explained earlier, we have moved the jurisdiction of our company from Ontario
Business Corporation Act to Canada Business Corporation act and have revised the
by-laws which govern rights of the security holders. We do not believe that
these changes have materially affected or modified the said rights.







ITEM 15 CONTROLS AND
PROCEDURES




A.    Evaluation
of Our Disclosure Controls and Internal Controls




Under the
supervision and with the participation of our senior management, including our
Chief Executive Officer and Chief Financial Officer, we conducted an evaluation
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) under the Securities
Exchange Act of 1934, as amended, (the “Exchange Act”) as of the end of the
period covered by this annual report (the “Evaluation Date”).  Based
upon this evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that, as of the Evaluation Date, the Company's disclosure controls and
procedures were effective such that the information relating to the Company,
including our consolidated subsidiary, required to be disclosed in our SEC
reports (i) is recorded, processed, summarized and reported within the time
periods specified in SEC rules and forms, and (ii) is accumulated and
communicated to our management, including our Chief Executive Officer and Chief
Financial Officer, as appropriate to allow timely decisions regarding required
disclosure.





-
52 -





B.  
Management’s Annual Report on Internal Control over Financial
Reporting





Our internal
control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes of accounting principles generally
accepted in Canada.  Because of its inherent limitations, internal
control over financial reporting may not prevent or detect
misstatements.  Therefore, even those systems determined to be
effective can provide only reasonable assurance of achieving their control
objectives.  In evaluating the effectiveness of our internal control
over financial reporting, our management used the criteria set for the by the
Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in
Internal Control – Integrated Framework.





This annual report
does not include and attestation report of our registered public accounting firm
regarding internal control over financial reporting.  Management’s
report was not subject to attestation by our registered public accounting firm
pursuant to temporary rules of the SEC that permit us to provide only
management’s report in this report.





C.  
Changes in Internal Controls




There have been no
changes in the Company's internal controls over financial reporting that
occurred during the year ended June 30, 2008 that have materially affected or
are reasonably likely to materially affect the Company’s internal control over
financial reporting.







ITEM 16[RESERVED]







ITEM 16 (A) AUDIT COMMITTEE
FINANCIAL EXPERTS




As
at the Company’s financial year ended June 30, 2008, the audit committee
consisted of two directors, one of whom, Ms. Joanne Butterfield Douglas would be
determined as a financial expert, as that term is defined under Section 407 of
the Sarbanes-Oxley Act of 2002. Ms. Douglas’s background is described under Item
6(A) Directors and senior management.  She is an independent
director.




The other member of
the audit committee is Mr. Steve Dabbah.








ITEM 16 (B) CODE OF
ETHICS





On
February 9, 2007, we adopted a Code of Ethics that applies to our principal
executive officer and  principal financial officer, or persons
performing similar functions.  A copy of our Code of Ethics will be
provided to any person requesting same without charge.  To request a
copy of our Code of Ethics, please make a written request to our chief financial
officer, C/O Live Reel Media Corporation, 3400 One First Canadian Place, C/O
Bennett Jones, PO Box 130, Toronto, Ontario, Canada, M5X
1A4.





-
53 -





ITEM 16 (C) PRINCIPAL
ACCOUNTANT’S FEES AND SERVICES




The following
outlines the expenditures for accounting fees for the last two fiscal years
ended:




June 30
      2008
            
            
            June 30
      2007Audit
      Fees
            
            
            22,500
            
            
            
            29,850Audit Related
      Fees
            
            
            -
            
            
            
            -Tax
      Fees
            
            
            9,350
            
            
            
            -All Other
      Fees
            
            
            -
            
            
            
            -





Under our existing
policies, the audit committee must approve all audit and non-audit related
services provided by the auditors.








ITEM 16
(D)  EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT
COMMITTEES





Not
applicable








ITEM 16
(E)   PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
PURCHASERS





Not
applicable




PART III






ITEM 17 - FINANCIAL
STATEMENTS




See the Financial
Statements and Exhibits listed in Item 19 hereof and filed as part of this
Annual Report.  These financial statements were prepared in accordance with
Canadian GAAP and are expressed in Canadian dollars.  Such financial
statements have been reconciled to U.S. GAAP (see Note 16 therein).  For a
history of exchange rates in effect for Canadian dollars as against U.S.
dollars, see Item 3(A) Exchange Rates of this Annual Report.






ITEM 18 - FINANCIAL
STATEMENTS




Not
applicable.





-
54 -





ITEM 19 --
EXHIBITS





(a)Financial
Statements





Description of
      Document
            Page
      No.Cover
      Sheet
            F-1Index
            F-2Independent
      Auditor’s Report dated October 9, 2008
            F-3Consolidated
      Balance Sheets as at June30, 2008 and 2007
            F-4Consolidated
      Statements of Operations and Comprehensive Loss for the Fiscal Years Ended
      June 30, 2008, 2007 and 2006
            F-5Consolidated
      Statements of Cash Flows for the Fiscal Years Ended June 30, 2008, 2007,
      and 2006
            F-6Consolidated
      Statements of Shareholders’ Equity for the Fiscal Years Ended June 30,
      2008, 2007, and 2006
            F-7Notes to
      Consolidated Financial Statements
            F-8








-
55 -





b)Exhibits




The following
documents are filed as part of this Annual Report on Form 20-F




1.1
            Application
      for Authorization to continue in another jurisdiction dated October 20,
      2006.- Incorporated
      herein by reference to Exhibit 1.1 to the Company’s Registration
      Statement on Form 20-F filed on December 26, 20061.2
            Articles of
      Incorporation of the Company - Incorporated herein by
      reference to Exhibit 1.1 to the Company’s Registration Statement on
      Form 20-F filed on March 12, 20041.3
            By-Laws of
      the Company -Incorporated herein by reference to Exhibit 1.3 to the Company’s
      Registration Statement on Form 20-F filed on December 26,
    20061.4
            Certificate
      of name change from Minedel Mining & Development Company Limited to
      Minedel Mines Limited - Incorporated herein by
      reference to Exhibit 1.3 to the Company’s Registration Statement on
      Form 20-F filed on March 12, 20041.5
            Certificate
      of name change from Minedel Mines Limited to Havelock Energy &
      Resources Inc.. - Incorporated herein by
      reference to Exhibit 1.4 to the Company’s Registration Statement on
      Form 20-F filed on March 12, 20041.6
            Certificate
      of name change from Havelock energy & Resources Inc. to Municipal
      Ticket Corporation - Incorporated herein by
      reference to Exhibit 1.5 to the Company’s Registration Statement on
      Form 20-F filed on March 12, 20041.7
            Certificate
      of name change from Municipal Ticket Corporation to I.D.Investment Inc. -
      Incorporated herein by
      reference to Exhibit 1.6 to the Company’s Registration Statement on
      Form 20-F filed on March 12, 20041.8
            Certificate
      of amalgmation. to Biolink Corporation - Incorporated herein by
      reference to Exhibit 1.7 to the Company’s Registration Statement on
      Form 20-F filed on March 12, 20041.9
            Certificate
      of name change from Biolink Corp. to First Empire Entertainment.com Inc. -
      Incorporated herein by
      reference to Exhibit 1.8 to the Company’s Registration Statement on
      Form 20-F filed on March 12, 20041.10
            Certificate
      of name change from First Empire Entertainment.com Inc. to First Empire
      Corporation Inc. -Incorporated herein by reference to Exhibit 19 to the Company’s
      Annual Report on Form 20-F filed on March 12, 20041.11
            Certificate
      of name change from First Empire Corporation Inc. to Noble House
      Entertainment Inc. dated November 4, 2004 -Incorporated herein by
      reference to Exhibit 1.10 to the Company’s Annual Report on Form
      20-F filed on December 1, 20051.12
            Articles of
      Amendment dated November 19, 2004 consolidating the common shares of the
      Company on the basis of one new common share in exchange for every two old
      common shares - Incorporated herein by
      reference to Exhibit 1.11 to the Company’s Annual Report on Form
      20-F filed on December 1, 20051.13
            Certificate
      of name change from First Empire Music Corp. to Noble house Film &
      Television Inc. dated January 21, 2005 - Incorporated herein by
      reference to Exhibit 1.12 to the Company’s Annual Report on Form
      20-F filed on December 1, 2005.1.14
            Certificate
      of name change from Noble House Film & Television Inc. to LiveReel
      Productions Corporation dated August 10, 2006 - Incorporated herein by
      reference to Exhibit 1.14 to the Company’s Registration Statement
      on Form 20-F filed on December 26,
2006,





-
56 -








1.15
            Certificate
      of name change from Noble House Entertainment Inc. to LiveReel Media
      Corporation dated October 12, 2006 - Incorporated herein by
      reference to Exhibit 1.15 to the Company’s Registration Statement
      on Form 20-F filed on December 26, 2006,2.(a).
            Specimen
      Common Share certificate - Incorporated herein by
      reference to Exhibit 2.(a) to the Company’s Annual Report on Form
      20-F filed on December 1, 2005.4.(b)
            Offer to
      Purchase dated November 30, 2004 regarding acquisition of film properties
      from Noble House Production Inc. - Incorporated herein by
      reference to Exhibit 1.12 to the Company’s Annual Report on Form
      20-F filed on December 1, 2005.4.(c)
            2006
      Consultant Stock Compensation Plan and 2006 Stock Option Plan - Incorporated
      herein by
      reference to Form S-8 filed on March 9, 2006.11.
            Code of
      Ethics12
            The
      certifications required by Rule 13a-14(a) (17 CFR 240.13a-14(a)) or Rule
      15d-14(a) (17 CFR 240.15d-14(a)).13.a
            The
      Certifications Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
      Section 906 of the Sarbanes-Oxley Act of 2002.14(a)(i)Corporate
      Governance Charter - Incorporated herein by
      reference to Exhibit 14 (a)(i) to the Company’s Registration
      Statement on Form 20-F filed on December 26, 2006,14(a)(ii)Audit
      Committee Charter - Incorporated herein by
      reference to Exhibit 14 (a)(ii) to the Company’s Registration
      Statement on Form 20-F filed on December 26, 2006,








-
57 -





SIGNATURES





The Company hereby
certifies that it meets all of the requirements for filing on Form 20-F and has
duly caused and authorized the undersigned to sign this Annual Report on its
behalf.





Dated at Toronto,
Ontario, Canada, this November 30, 2008








LIVEREEL
MEDIA CORPORATION





Per:  (signed) Gregg
Goldstein


Title:
 Chairman and CEO





-
58 -














LIVEREEL
MEDIA CORPORATION





Consolidated
Financial Statements







For
the Years Ended June 30, 2008 and 2007







(Canadian
Dollars)





F
- 1













INDEX








PageAuditors’
      Report
            F-3Consolidated
      Balance Sheets
            F-4Consolidated
      Statements of Operations and Comprehensive Loss
            F-5Consolidated
      Statements of Cash Flows
            F-6Consolidated
      Statements of Shareholders’ Equity
            F-7Notes to
      Consolidated Financial Statements
            F-8 -
      F-26





F
- 2










Schwartz
Levitsky Feldman llp


CHARTERED
ACCOUNTANTS




TORONTO, MONTREAL,
OTTAWA





AUDITORS’
REPORT








To the Shareholders
of


LiveReel Media
Corporation







We have audited the
consolidated balance sheets of LiveReel Media Corporation as at June 30, 2008
and 2007 and the related consolidated statements of operations and comprehensive
loss, shareholders' equity and cash flows for the years then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.




We conducted our
audits in accordance with Canadian generally accepted auditing standards and
with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.




In our opinion,
these consolidated financial statements present fairly, in all material
respects, the financial position of the Company as at June 30, 2008 and 2007 and
the results of its operations and its cash flows for the years then ended, in
accordance with Canadian generally accepted accounting principles which differ
in certain respects from generally accepted accounting principles in the United
States (refer to note 15).




The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion.





/s/
SCHWARTZ LEVITSKY FELDMAN LLP


“SCHWARTZ
LEVITSKY FELDMAN LLP”









Toronto, Ontario,
Canada Chartered Accountants




October 9,
2008 Licensed Public Accountants









1167 Caledonia Road


Toronto, Ontario M6A 2X1


Tel:  416 785 5353


Fax:  416 785 5663





F
- 3







LiveReel
Media Corporation


Consolidated
Balance Sheets


(Canadian
Dollars)


As
      at June 30
              
              Note
              
              
              2008
              
              
              2007(Restated
      -See Note
      16)AssetsCurrentCash
              
              
              
              
              $
              1,330,037
              
              
              $
              1,644,350Accounts
      receivable and prepayments
              
              
              3
              
              
              
              56,362
              
              
              
              435,7501,386,399
              
              
              
              2,080,100Investment
      in film and television programs
              
              
              5
              
              
              
              -
              
              
              
              25,000$
              1,386,399
              
              
              $
              2,105,100LiabilitiesCurrentAccounts
      payable and accrued liabilities
              
              
              6
              
              
              $
              184,545
              
              
              $
              114,435184,545
              
              
              
              114,435Shareholders'
      EquityCapital
      stock
              
              
              7
              
              
              
              6,656,265
              
              
              
              6,656,265Contributed
      surplus
              
              
              
              
              
              
              293,370
              
              
              
              293,370Warrants
              
              
              8
              
              
              
              1,146,081
              
              
              
              1,146,081Deficit
      and comprehensive loss
              
              
              
              
              
              
              (6,893,862
              )
              
              
              (6,105,051
              )1,201,854
              
              
              
              1,990,665$
              1,386,399
              
              
              $
              2,105,100Related
      Party Transactions (Note 11)Commitments
      and contingencies (Note 12)Subsequent
      Events (Note 17)





Approved by the
Board  ”Gregg
Goldstein”  Director    ”J. Stephen Wilson”
Director


(signed)                                      (signed)











The
accompanying notes form an integral part of these consolidated financial
statements.





F
- 4





LiveReel
Media Corporation


Consolidated
Statements of Operations and Comprehensive Loss


(Canadian
Dollars)




For
      the Years Ended June 30
              
              Note
              
              
              2008
              
              
              2007
              
              
              2006RevenueInterest
      income
              
              
              
              
              $
              40,012
              
              
              $
              72,697
              
              
              $
              -Distribution
      income
              
              
              
              
              
              -
              
              
              
              -
              
              
              
              7,052Total
      Revenue
              
              
              
              
              $
              40,012
              
              
              $
              72,697
              
              
              $
              7,052ExpensesWritedown
      of production advances
              
              
              3
              
              
              $
              426,884
              
              
              $
              -
              
              
              $
              -Office
      and general
              
              
              11
              
              
              
              115,599
              
              
              
              90,871
              
              
              
              78,410Foreign
      exchange loss
              
              
              
              
              
              
              70,290
              
              
              
              117,336
              
              
              
              33,958Professional
      fees
              
              
              
              
              
              
              60,645
              
              
              
              114,311
              
              
              
              37,849Consulting
      expense
              
              4
      & 11
              
              
              
              60,000
              
              
              
              343,256
              
              
              
              313,489Production
      advances
              
              
              
              
              
              
              57,060
              
              
              
              -
              
              
              
              -Amortization
      of investment in film
              
              
              5
              
              
              
              25,000
              
              
              
              -
              
              
              
              207,500and
      television programsShareholders
      information
              
              
              
              
              
              
              10,292
              
              
              
              26,312
              
              
              
              8,935Promotion
              
              
              
              
              
              
              2,377
              
              
              
              3,746
              
              
              
              7,999Bank
      charges and interest
              
              
              
              
              
              
              676
              
              
              
              1,560
              
              
              
              1,009828,823
              
              
              
              697,392
              
              
              
              689,149Net
      loss and comprehensive loss for the year
              
              
              
              
              
              $
              (788,811
              )
              
              $
              (624,695
              )
              
              $
              (682,097
              )Net
      loss per share - basic and diluted
              
              
              9
              
              
              $
              (0.06
              )
              
              $
              (0.04
              )
              
              $
              (0.07
              )


The
accompanying notes form an integral part of these consolidated financial
statements.





F
- 5





LiveReel
Media Corporation


Consolidated
Statements of Cash Flows


(Canadian
Dollars)







For
      the Years Ended June 30
              
              2008
              
              
              2007
              
              
              2006Cash
      flows from operating activitiesNet
      loss for year
              
              $
              (788,811
              )
              
              $
              (624,695
              )
              
              $
              (682,097
              )Items
      not affecting cashWritedown
      of production advances
              
              
              426,884Amortization
      of investment in film and television programs
              
              
              25,000
              
              
              
              -
              
              
              
              207,500Stock
      based compensation
              
              
              -
              
              
              
              204,578
              
              
              
              114,001Effect
      of changes in:Advances
      and prepaids
              
              
              (47,496
              )
              
              
              (73,819
              )
              
              
              (355,948
              )Accounts
      payable and accrued liabilities
              
              
              70,110
              
              
              
              (2,384
              )
              
              
              65,596(314,313
              )
              
              
              (496,320
              )
              
              
              (650,948
              )Cash
      flows from investing activitiesRedemption
      of (investment in) treasury bills
              
              
              -
              
              
              
              279,125
              
              
              
              (279,125
              )-
              
              
              
              279,125
              
              
              
              (279,125
              )Cash
      flows from financing activitiesCommon shares issued
              
              
              -
              
              
              
              -
              
              
              
              2,941,074Net
      advances from (repayments to) shareholders
              
              
              -
              
              
              
              -
              
              
              
              (139,591
              )Note
      payable
              
              
              -
              
              
              
              -
              
              
              
              (11,494
              )-
              
              
              
              -
              
              
              
              2,789,989Increase
      (decrease) in cash
              
              
              (314,313
              )
              
              
              (217,195
              )
              
              
              1,859,916Cash,
      beginning of year
              
              
              1,644,350
              
              
              
              1,861,545
              
              
              
              1,629Cash,
      end of year
              
              $
              1,330,037
              
              
              $
              1,644,350
              
              
              $
              1,861,545






The
accompanying notes form an integral part of these consolidated financial
statements.





F
- 6





LiveReel
Media Corporation


Consolidated
Statement of Shareholders’ Equity


(Canadian
Dollars)








For
the Years Ended June 30, 2008, 2007 and 2006





Number of
      Shares
            
            
            Share
              Capital
            
            
            Warrants
            
            
            Contributed
      surplus
            
            
            Deficit and
      Comprehensive Loss
            
            
            Shareholders'
      EquityBalance
      June 30, 2006 *
            
            
            14,521,744
            
            
            $
            6,838,665
            
            
            $
            1,146,081
            
            
            $
            20,391
            
            
            $
            (5,480,356
            )
            
            $
            2,524,781Cancellation
      of shares
            
            
            (800,000
            )
            
            $
            (182,400
            )
            
            
            
            
            
            $
            182,400
            
            
            
            
            
            
            
            -Write off of
      unamortized deferred stock based compensation
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (45,600
            )
            
            
            -
            
            
            
            (45,600
            )Fair value of
      stock options granted for consulting services
            
            
            
            
            
            
            
            136,179
            
            
            
            
            
            
            
            136,179Net
      loss
            
            
            -
            
            
            
            -
            
            
            
            
            
            
            
            -
            
            
            
            (624,695
            )
            
            
            (624,695
            )Balance
      June 30, 2007*
            
            
            13,721,744
            
            
            $
            6,656,265
            
            
            $
            1,146,081
            
            
            $
            293,370
            
            
            $
            (6,105,051
            )
            
            $
            1,990,665Net
      loss
            
            
            -
            
            
            
            -
            
            
            
            
            
            
            
            -
            
            
            
            (788,811
            )
            
            
            (788,811
            )Balance
      June 30, 2008
            
            
            13,721,744
            
            
            $
            6,656,265
            
            
            $
            1,146,081
            
            
            $
            293,370
            
            
            $
            (6,893,862
            )
            
            $
            1,201,854* Restated -
      See Note 16




The
accompanying notes form an integral part of these consolidated financial
statements.





F
- 7





LiveReel
Media Corporation


Notes
to Consolidated Financial Statements


(Canadian
Dollars)


June
30, 2008 and 2007





1. NATURE
OF OPERATIONS





LiveReel Media
Corporation. (the “Company") is a fully integrated entertainment company engaged
in the financing, development, licensing, production and distribution of feature
films, television series, television movies and non-fiction
programming.





The Company was
incorporated in Ontario on March 18, 1997 as a result of an
amalgamation.





The Company changed
its name from Noble House Entertainment Inc. to LiveReel Media Corporation
effective October 12, 2006.  On October 20, 2006, the Company received
regulatory approval for continuance under the jurisdiction of the Canada
Business Corporations Act.








2.  SIGNIFICANT
ACCOUNTING POLICIES





Basis
of Presentation





These consolidated
financial statements are prepared in Canadian dollars in accordance with
accounting principles generally accepted in Canada, which conform, in all
material respects, with accounting principles generally accepted in the United
States, except as disclosed in Note 15.





Principles
of Consolidation





The consolidated
financial statements include the accounts of the Company and its wholly owned
subsidiary – LiveReel Productions Corporation (“LRPC”). The subsidiary changed
its name from Noble House Film & Television Inc. effective August 10,
2006.





LRPC holds titles
to the film properties and distribution rights acquired and is in the business
of licensing, developing, producing and distributing films and television
programs.





All intercompany
balances and transactions have been eliminated on consolidation.





Revenue
Recognition





Revenue from the
licensing of film and television programs is recognized when:




i.
            the Company
      has persuasive evidence of a contractual
  arrangement;


ii.
            the
      production has been completed;


iii.
            the
      contractual delivery arrangements have been
  satisfied;


iv.
            the licensing
      period has commenced and the customer can begin its exploitation,
      exhibition or sale;


v.
            the fee is
      fixed or determinable; and


vi.
            collectibility
      of proceeds is reasonably assured.





Revenue from the
theatrical release of feature films is recognized at the time of exhibition
based on the Company’s participation in box office receipts, provided that all
of the foregoing conditions are met.





F
- 8





LiveReel
Media Corporation


Notes
to Consolidated Financial Statements


(Canadian
Dollars)


June
30, 2008 and 2007








2.SIGNIFICANT ACCOUNTING POLICIES(continued)





Cash payments
received are recorded as deferred revenue until all the foregoing conditions of
revenue recognition have been met.





Investment
in Film and Television Programs





Investment in film
and television programs includes the unamortized costs of film and television
programs which have been produced by the Company or for which the Company has
acquired distribution rights, libraries acquired as part of acquisitions of
companies, and film and television programs in progress and in
development.





For film and
television programs produced by the Company, capitalized costs include all
direct production and financing costs, capitalized interest and production
overhead. For acquired film and television programs, these capitalized costs
consist of minimum guarantee payments to acquire the distribution
rights.





Costs of acquiring
and producing film and television programs and of acquired libraries are
amortized using the individual-film-forecast method, whereby these costs are
amortized. Participation and residual costs are accrued in the proportion that
the current year’s revenue bears to management’s estimate of ultimate revenue at
the beginning of the current year expected to be recognized from the
exploitation, exhibition or sale of the film or television programs. Ultimate
revenue includes estimates over a period not to exceed ten years following the
date of initial release or from the date of delivery of the first episode for
episodic television series. For titles included in acquired libraries, ultimate
revenue includes estimates over a period not to exceed twenty years following
the date of acquisition.





The valuation of
investment in film and television programs is reviewed on a title-by-title
basis, when an event or change in circumstances indicates that the recoverable
value of a film or television program is less than its unamortized cost.
Additional amortization is recorded in the amount by which the unamortized costs
exceed the estimated fair value of the film or television program. The fair
value of the film or television program is determined using management’s future
revenue and cost estimates and a discounted cash flow approach. Estimates of
future revenue involve measurement uncertainty and it is therefore possible that
reductions in the carrying value of investment in film and television programs
may be required as a consequence of changes in management’s future revenue
estimates.




F
- 9








LiveReel
Media Corporation


Notes
to Consolidated Financial Statements


(Canadian
Dollars)


June
30, 2008 and 2007








2. SIGNIFICANT ACCOUNTING POLICIES(continued)





Foreign
Currency Translation





The functional
currency of the Company is the Canadian dollar.  Monetary assets and
liabilities are translated at exchange rates in effect at the balance sheet
date.  Non-monetary assets are translated at the historical exchange
rates which were in effect when they were acquired.  Revenue and
expenses are translated at the approximate average rate of exchange for the
year, except that amortization is translated at the rates used to translate
related assets. The resulting gains or losses on translation are included in the
consolidated statement of operations.





Accumulated
Other Comprehensive Income (AOCI)





Effective July 1,
2007, AOCI is included on the consolidated balance sheet as a separate component
of shareholders’ equity and includes net unrealised gains and losses on short
term investments net of applicable taxes, held as available for
sale.  The Company does not have any such investments.





Future
Income Taxes





The Company follows
the asset and liability method of accounting for income taxes.  Under
this method, future income tax assets and liabilities are determined based on
temporary differences between financial reporting and tax bases of assets and
liabilities, as well as for the benefit of losses available to be carried
forward to future years for tax purposes.  Future income tax assets
and liabilities are measured using substantively enacted tax rates and laws that
will be in effect when the differences are expected to
reverse.  Future income tax assets are recognized in the financial
statements if realization is considered more likely than not.  A
valuation allowance against future tax assets is provided to the extent that the
realization of these future tax assets is not more likely than not.





Stock-Based
Compensation Plan





The Company follows
a fair value based method of accounting for all Stock-based Compensation and
Other Stock-based Payments to employees and non-employees.  The fair
value of all share purchase options is expensed over their vesting period with a
corresponding increase to contributed surplus. Upon exercise of share purchase
options, the consideration paid by the option holder, together with the amount
previously recognized in contributed surplus, is recorded as an increase to
share capital. The Company uses the Black-Scholes option valuation model to
calculate the fair value of share purchase options at the date of
grant.





The market value of
the Company’s share on the date of issuance of shares under any stock
compensation plan is considered as fair value of the shares issued.




F
- 10





LiveReel
Media Corporation


Notes
to Consolidated Financial Statements


(Canadian
Dollars)


June
30, 2008 and 2007








2. SIGNIFICANT ACCOUNTING POLICIES(continued)





Loss
Per Share





Basic loss per
share is calculated by dividing net loss (the numerator) by the weighted average
number of common shares outstanding (the denominator) during the
period.  Diluted loss per share reflects the dilution that would occur
if outstanding stock options and share purchase warrants were exercised or
converted into common shares using the treasury stock method and are calculated
by dividing net loss applicable to common shares by the sum of the weighted
average number of common shares outstanding and all additional common shares
that would have been outstanding if potentially dilutive common shares had been
issued.





The inclusion of
the Company’s stock options and share purchase warrants in the computation of
diluted loss per share would have an anti-dilutive effect on loss per share and
are therefore excluded from the computation.  Consequently, there is
no difference between basic loss per share and diluted loss per
share.





Use
of estimates





The preparation of
financial statements in conformity with Canadian generally accepted accounting
principles requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the period.  Significant estimates
include recoverability of assets and fair value of stock based
compensation.  Actual results could differ from those
estimates.





Accounting
Changes





Effective January
1, 2008, the Company adopted the revised CICA Section 1506, “Accounting changes”
which require that (i) voluntary changes in accounting policies can be made if,
and only if, the changes result in more reliable and relevant information (ii)
changes in accounting policies are accompanied by disclosure of prior period
amounts and justification for the changes, and (iii) for changes in
estimates, the nature and amount of the change should be disclosed. The Company
has not made any voluntary change in accounting policies since the adoption of
the revised Standard.





F
- 11





LiveReel
Media Corporation


Notes
to Consolidated Financial Statements


(Canadian
Dollars)


June
30, 2008 and 2007








2. SIGNIFICANT ACCOUNTING POLICIES(continued)





Financial
Instruments





In January 2005,
the CICA issued Handbook Section 3855, Financial Instruments – Recognition and
Measurement; and Section 3865, Hedges. The standard is effective for interim and
annual financial statements relating to fiscal year beginning on or after
October 1, 2006, specifically July 1, 2007 for this Company.  The standards
require presentation of separate statement of comprehensive income under
specific circumstances.  Derivative financial instruments will be recorded
in the balance sheet at fair value and the changes in fair value of derivatives
designated as cash flow hedges will be reported in comprehensive income. 
The standards have no effect on the company financial statements.





Recent
accounting pronouncements




(a)       
Capital disclosures





In
December 2006, the Canadian Institute of Chartered Accountants (CICA) issued a
new handbook section 1535, “capital disclosure”, which requires an entity to
disclose its objectives, policies and processes for managing capital. This new
standard is effective for fiscal years beginning on or after October 1, 2007.
The Company will adopt this standard, and management is currently assessing its
impact on the Company’s interim and annual financial statements.





(b)      
Financial instruments





In
December 2006, the CICA issued two new handbook sections 3862 “Financial
instruments – Disclosures” and 3863 “Financial instruments – Presentation”.
These sections replace the handbook section 3861 “Financial instruments-
Disclosure and Presentation.” These new sections enhance disclosure requirements
on the nature and extent of risks arising from financial instruments and how the
entity manages those risks. These new standards are effective for fiscal years
beginning on or after October 1, 2007. The Company will adopt this standard, and
management is currently assessing its impact on the Company’s interim and annual
financial statements.





(c)       
General standards of financial statement presentation





In
May 2007, the Accounting Standards Board amended Section 1400 “General Standards
of Financial Statement Presentation” to change guidance on management’s
responsibility to assess and disclose the Company’s ability  to continue as
a going concern The amendments are effective for fiscal years beginning on or
after January 1, 2008. The Company will adopt this standard, and management is
currently assessing its impact on the Company’s interim and annual financial
statements.




F
- 12





LiveReel
Media Corporation


Notes
to Consolidated Financial Statements


(Canadian
Dollars)


June
30, 2008 and 2007








2. SIGNIFICANT ACCOUNTING POLICIES(continued)





(d)      
Adoption of International Financial Reporting Standards





In
February 2008, the CICA Accounting Standards Board confirmed that publicly
accountable companies will be required to prepare interim and annual financial
statements under International Financial Reporting Standards (“IFRS”) for fiscal
years beginning on or after January 1, 2011. Management is currently assessing
the impact of adopting IFRS and has not yet determined its effect on the
Company’s financial statements.





(e)      
Inventories





CICA Handbook
Section 3031, Inventories, replaces Section 3030 and establishes new standards
for the measurement and disclosure of inventories.  The main features of
the new Section are as follows:





·
            Measurement
      of inventories at the lower of cost and net realizable
    value


·
            Consistent
      use of either first-in, first-out or a weighted average cost formula to
      measure cost


·
            Reversal of
      previous write-downs to net realizable value when there is a subsequent
      increase to the value of
inventories.




This standard is
effective for interim and annual financial statements relating to fiscal years
beginning on or after January 1, 2008.  The Company has not yet determined
the impact of the adoption of this change on the disclosure in its financial
statements.





(f)      
Goodwill and intangible assets





In January 2008,
the CICA issued Section 3064 “Goodwill and Intangible Assets”, which replaces
Section 3062 “Goodwill and Other Intangible Assets”, and results in the
withdrawal of Section 3450 “Research and Development Costs”, and Emerging Issues
Committee Abstract 27 “Revenues and Expenditures during the Pre-operating
Period”, and amendments to Accounting Guideline No 11 “Enterprises in the
Development Stage”.  The standard provides guidance on the recognition of
intangible assets in accordance with the definition of an asset and the criteria
for asset recognition as well as clarifying the application of the concept of
matching revenues and expenses, whether these assets are separately acquired or
internally developed.  This standard applies to interim and annual
financial statements relating to fiscal years beginning on or after October 1,
2008.  Earlier adoption is encouraged.





F
- 13





LiveReel
Media Corporation


Notes
to Consolidated Financial Statements


(Canadian
Dollars)


June
30, 2008 and 2007







3. ACCOUNTS
RECEIVABLE AND PREPAYMENTS







As at June
      30,
            
            
            2008
            
            
            2007Due from
      Production companies
            (a)
            
            $
            20,179
            
            
            $
            419,850Taxes
      recoverable
            
            
            
            11,049
            
            
            
            11,309Deposits and
      prepayments
            (b)
            
            
            25,134
            
            
            
            4,591$
            56,362
            
            
            $
            435,750





Represents funds
advanced to multiple production companies, owned by a former officer and
director of the Company and a former executive of the Company’s subsidiary. The
Company and its wholly owned subsidiary have entered into various agreements to
provide financing, license scripts and screen plays and handle global
distribution for these entities. These funds are provided to the production
companies and are secured by the film elements and are repayable at various
interest rates and are generally due on demand.





In
October and November 2007, the various production companies to whom advances had
been made and their distribution partners received advances and or sold the
rights to various territories that were lower than previous
estimates.  As a result, management revised its estimated future
repayments from these production companies downward and wrote down the advances
to the production companies to a net recoverable level of $100,000 and recorded
a charge of $376,910 in the three months ended September 30,
2007.    In the three months ended December 31, 2007, the
Company made additional advances totalling $57,060 and expensed these amounts in
the period.





In
April 2008, the Company received payment of $29,840 from distributing one of the
films which was applied to reduce this receivable.  After evaluating
the future expected proceeds from various unsold territories of the properties
the production companies hold, the Company wrote off $49,974 of the production
advances effective June 30, 2008, reducing the balance to $20,179 at year
end.




Subsequent to the
end of the year, the Company received the remaining $20,179 outstanding at year
end.





(b)
            The Company
      paid an advance of US $ 7,500 in October 2005 to a firm of lawyer to
      defend itself against a legal action initiated by an individual in
      Florida. The lawyer firm filed a motion to dismiss the case against the
      company in October 2005. This case was dismissed in April,
      2007.  The balance of the advance after accounting for the legal
      costs charged up to June 30, 2008 which was previously held against future
      legal costs of approximately $1,900 is included  in deposits and
      prepayments.





F
- 14





LiveReel
Media Corporation


Notes
to Consolidated Financial Statements


(Canadian
Dollars)


June
30, 2008 and 2007












3.ACCOUNTS RECEIVABLE AND
PREPAYMENTS(continued)





The balance of the
deposits and prepayments are for an extension of the Company’s director’s and
officer’s insurance policy entered into April 2008, which extended the coverage
to December 2008.  The costs of the policy are expensed on a straight
line basis over the life of the policy.





4.  DEFERRED
STOCK BASED COMPENSATION





Deferred
      stock based compensation relates to the fair value of 1,000,000 shares
      issued under the Company’s 2006 Consultant Stock Compensation Plan for
      services that were to be performed by three consultants through December
      31, 2006.  On March 6, 2006, the board of directors of the
      Company authorized the issuance, including 100,000 shares issued to the
      former director and Chief Financial Officer for his services under a
      consulting contract.  At the time of issuance, the shares were
      valued at fair market value of $228,000, and this amount was to be
      amortized on a straight line basis over the 12 months ended December 31,
      2006.  This resulted in a charge of $114,001 being amortized in
      the year ended June 30, 2006.  The balance of $113,999 was fully
      amortized in the year ended June 30, 2007 and is included in consulting
      expense during that year.





On December
      15, 2006, the Company cancelled 800,000 shares issued to a consultant due
      to a lack of performance of duties.  The Company recorded a
      reduction in share capital related to the cancellation of shares of
      $182,400, and an increase in contributed surplus of previously amortized
      charges of $136,800.





Stock based
      compensation included in consulting expense is $nil in fiscal 2008
      ($204,578 – 2007; $114,001-2006).








5. INVESTMENT
IN FILM AND TELEVISION PROGRAMS





Theatrical
      films
            
            
            Total
            
            
            Theatrical
      films
            
            
            TotalScripts
      & Synopsis
            
            
            Distribution
      contracts
            
            
            Total
            
            
            Scripts
      & Synopsis
            
            
            Distribution
      contracts
            
            
            TotalAs at June
      30,
            
            2008
            
            
            
            
            
            
            
            
            2007Balance at
      beginning
            
            $
            25,000
            
            
            $
            -
            
            
            $
            25,000
            
            
            $
            25,000
            
            
            $
            -
            
            
            $
            25,000Acquisitions
      during period
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Amortization
            
            
            (25,000
            )
            
            
            -
            
            
            
            (25,000
            )
            
            
            -
            
            
            
            -
            
            
            
            -Balance at
      end of period
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            25,000
            
            
            $
            -
            
            
            $
            25,000




F
- 15





LiveReel
Media Corporation


Notes
to Consolidated Financial Statements


(Canadian
Dollars)


June
30, 2008 and 2007











As
at June 30, 2006, Management concluded that its short term business plan would
not include development of any of the previously acquired scripts except one,
King of Sorrow, which was licensed and has now developed into a commercial
feature film. Management therefore decided to fully write off the carrying value
of all scripts except for King of Sorrow. Management carried out evaluation of
its estimated costs and revenue details of King of Sorrow as at June 30, 2007
and concluded that no further amortization was required to the carrying value of
this script.





In
October and November 2007, the various production companies to whom advances had
been made and their distribution partners received advances and or sold the
rights to various territories that were lower than previous
estimates.  As a result, management revised its estimated future
repayments from these production companies downward and wrote down the value of
the King of Sorrow script to nil in the three months ended September 30,
2007.




6. ACCOUNTS
PAYABLE AND ACCRUED LIABILITIES







As
      at June 30,
            
            
            2008
            
            
            2007Accounts  payable
            (a)
            
            $
            129,505
            
            
            $
            59,395Accruals
            (b)
            
            
            22,500
            
            
            
            22,500Production
      advances
            (c)
            
            
            32,540
            
            
            
            32,540$
            184,545
            
            
            $
            114,435







(a)  As at
June 30, 2008, accounts payable were regular trade payables incurred in the
normal course of business, primarily for legal fees incurred during the year and
the director’s and officer’s insurance policy.  In addition, accounts
payable include $31,000 due to the Chief Executive Officer for reimbursable
office and general expenses.





(b)  Accruals
at June 30, 2008 and 2007 are for estimated audit fees.





(c) 
Production advances were received from two production companies towards script
and screen play development. A former director and officer of the company and a
former executive of its subsidiary are among the owners of one of the production
companies, which advanced $26,540 (2007: $26,540).





F
- 16





LiveReel
Media Corporation


Notes
to Consolidated Financial Statements


(Canadian
Dollars)


June
30, 2008 and 2007





7. CAPITAL
STOCK





(a)  
Authorized:  Unlimited number of common shares




(b) Issued:





As
      at June 30,
            
            
            2008
            
            
            2007Restated
      -(Note
      16)Common
            
            
            
            
            
            CommonShares
            
            
            Amount
            
            
            Shares
            
            
            AmountBeginning
      of year
            
            
            
            13,721,744
            
            
            $
            6,656,265
            
            
            
            14,521,744
            
            
            $
            6,838,665Cancelled
      under 2006 Consultant stock compensation plan
            (i)
            
            
            -
            
            
            
            -
            
            
            
            (800,000
            )
            
            
            (182,400
            )13,721,744
            
            
            $
            6,656,265
            
            
            
            13,721,744
            
            
            $
            6,656,265




­­­­­­­­­­­­­­­­­­­­­___________




(i) On February 20,
2006, the Company filed for registration with the United States Securities and
Exchange Commission, two Plans - (a) 2006 stock option plan for 1 million
options and (b) 2006 Consultant stock compensation plan for 1 million common
shares.




On
March 6, 2006, the board of directors of the Company allotted 1 million shares
under the 2006 Consultant stock compensation plan to three consultants for
services during the year ending December 31, 2006. The shares were valued at
fair market value on the date of allotment which was US$0.20 per share. See Note
4 for further details.  On December 15, 2006, 800,000 shares were
cancelled due to non-performance of duties by one of the consultants granted
shares.




(c) Stock
Options:




On February 9,
2007, 1,000,000 options were granted to management by the board of
directors.  The options granted were issued at a strike price of
US$0.15 per share, expiring on February 9, 2012 and were fully
vested.  On the same date, the board of directors increased the number
of options available to be granted under the plan to 3,000,000.  The
board of directors of the Company has full discretion to decide the option price
and vesting periods.  The options are convertible into an equal number
of common shares of the Company.





F
- 17








LiveReel
Media Corporation


Notes
to Consolidated Financial Statements


(Canadian
Dollars)


June
30, 2008 and 2007








7.
(c)CAPITAL STOCK
(continued)




As a result of the
granting of the options described above, the fair value of these options has
been estimated, on February 9, 2007, the date of the grant, using a
Black-Scholes option price model with the following assumptions:





Risk
      free interest rate
            4.5%Expected
      dividend
            nilExpected
      volatility
            146%Expected
      life
            1826
      daysMarket
      price
            US$0.15





The amount of
$136,179 has been accounted for as a stock compensation expense in the year
ended June 30, 2007.  None of the options were exercised or expired as
at June 30, 2008.





8. WARRANTS





As
      at June 30,
            
            2008
            
            
            2007#
      of warrants
            
            
            Fair
      value
            
            
            # of
      warrants
            
            
            Fair value
      (Restated - Note 16Issued and
      outstanding at end of year
            
            
            6,193,600
            
            
            $
            1,146,081
            
            
            
            6,193,600
            
            
            $
            1,146,081





The shares issuable
upon exercise of the warrants issued are restricted in terms of their
saleability in accordance with the regulations of the U.S. Securities and
Exchange Commission.





Option price models
used for calculating fair value of warrants require input of highly subjective
assumptions including the expected price volatility. Changes in the subjective
input assumptions can materially affect the fair value estimate, and therefore
the models do not necessarily provide a reliable measure of the fair value of
the Company’s warrants.





Correction of an error in
valuation





During the fiscal
years 2004 and 2006, 6,193,600 warrants were issued in connection with various
private placements and the acquisition of certain theatrical film
properties.  These warrants together with common shares formed a Unit
subscribed and paid for under the private placements and were combined with
shares in the acquisition of the theatrical film properties.  These
warrants were originally valued at $5,729,352 using the Black-Scholes valuation
model in the 2006 fiscal year.








F
- 18








LiveReel
Media Corporation


Notes
to Consolidated Financial Statements


(Canadian
Dollars)


June
30, 2008 and 2007








8. WARRANTS
(continued)





On
February 27, 2007, the conversion price of all previously issued warrants was
reduced to US$0.10 per warrant and the expiry date was extended to November 30,
2009 by the board of directors of the Company.  The warrants were
valued at $486,395 using the Black-Scholes valuation model.





The valuation in
2006 and 2007 were applied to the capital stock and resulted in a negative
amount, which is not permitted under CICA handbook section 3861.22.





Management has
therefore revised the valuation of these warrants using the relative fair value
method allowed under both the Canadian and US accounting
standards.  Based on the valuation method, the revised value of the
warrants issued came to $1,146,081.  The excess value of $4,583,271
was credited to capital stock.  The valuation in 2007 was reversed
from the financial statements previously issued.





These changes have
no effect on the shareholder’s equity, the consolidated statement of operations,
consolidated statements of cash flows, and the basic and diluted loss per
share.







9. LOSS PER
SHARE





Loss per share is
calculated on the weighted average number of commonshares outstanding during the
year ended June 30, 2008, which were 13,721,744 shares (2007: 14,089,963 and
2006: 9,494,677).





The Company had 6.2
million share purchase warrants and 1,000,000 stock options issued and
outstanding as at June 30, 2008. Inclusion of these warrants in the computation
of diluted loss per share would have an anti-dilutive effect on loss per share
and is therefore excluded from the computation. Consequently, there is no
difference between loss per share and diluted loss per share.





F
- 19





LiveReel
Media Corporation


Notes
to Consolidated Financial Statements


(Canadian
Dollars)


June
30, 2008 and 2007








10. INCOME
TAXES





The effective tax
rate of Nil (2007 – Nil; 2006 - Nil) for income taxes varies from the statutory
income tax rate of approximately 36% (2007 – 36%; 2006 - 36%) due to the fact
that no tax recoveries have been recorded for losses incurred, as management has
determined that it is more likely than not that the losses will be utilized
before they expire.





The temporary
differences that give rise to future income tax assets and future income tax
liabilities are presented below:





2008
            
            
            2007
            
            
            2006Amounts
      related to tax loss and credit carry forwards
            
            $
            933,000
            
            
            $
            628,000
            
            
            $
            467,000Net future
      tax assets
            
            $
            933,000
            
            
            $
            628,000
            
            
            $
            467,000Less:
      valuation allowance
            
            
            (933,000
            )
            
            
            (628,000
            )
            
            
            (467,000
            )$
            -
            
            
            $
            -
            
            
            $
            -




The Company has
carry forward tax losses of approximately $2.6 million, which may be applied
against future taxable income and expire as detailed below. The benefit arising
from these losses has not been recorded in the financial
statements.





2009
            
            
            19,0002010
            
            
            212,0002011
            
            
            214,0002015
            
            
            204,0002016
            
            
            505,0002027
            
            
            536,0002028
            
            
            902,000$
            2,592,000








11.           RELATED
PARTY TRANSACTIONS





Transactions with
related parties are incurred in the normal course of business and are measured
at the exchange amount. The transactions recorded approximate the fair market
value of the transactions.  Related party transactions and balances
not disclosed elsewhere in the financial statements are:





i.
            Consulting
      fees include $60,000 paid to the existing Chief Financial Officer for
      services rendered during the period (2007 –
      $65,000).  Consulting fees in 2007 also include $40,000 of fees
      paid to a former director and officer for various
      services.  (2006 - $75,000 – fees to other
      officers).





F
- 20





LiveReel
Media Corporation


Notes
to Consolidated Financial Statements


(Canadian
Dollars)


June
30, 2008 and 2007








ii.
            Office and
      general expenses include approximately $58,000 of reimbursable expenses to
      the Chief Executive Officer for various costs including rent,
      communications, health benefits, and professional fees.  (2007 –
      nil; 2006 – nil).




iii.
              Current
      Capital Corp., a shareholder corporation owned by one of the former
      directors charged approximately $nil for the premises rent, telephone,
      consultants’ fees and other office expenses in 2008 and 2007 (2006 -
      $4,200).
  iv.
                Rent of $nil
      in 2008 and 2007 (2006: $15,600) was charged in respect of rent for
      premises owned by a former director of the
  Company.


12.           COMMITMENTS
AND CONTINGENT LIABILITIES





(i)
            The Company's
      wholly owned subsidiary, LRPC has entered into various film distribution,
      joint venture and co-producing arrangements under which the Company will
      co-produce two films, in addition to its current wholly-owned slate of
      projects. Under these arrangements, co-producers, who will own 50% of the
      net revenue will contribute half of the development fees to LRPC toward
      the development of the projects.  LRPC will utilize these fees, in
      conjunction with its own, in order to develop the projects and bring them
      to maturity. The extent of financial commitments required under these
      arrangements cannot be reasonably determined at this
  time.




(ii)
              On March 6,
      2006, the board of directors of the Company agreed to give an option to a
      corporate shareholder to subscribe, at its sole discretion, up to US$1.25
      million in a private placement involving issuance of Units to be priced at
      US$0.50 per Unit. Each such Unit will comprise one common share of the
      company and one half warrant. One whole warrant is convertible into one
      common share at a conversion price of US$0.65 per warrant within two years
      of its issuance. The proceeds of this private placement will have to be
      spent on film projects at the discretion of the
    shareholder.


13.           SEGMENTED
INFORMATION





The Company has
three identifiable segments, namely licensing, production and
distribution.





The accounting
policies of the segments are same as those described in Note 2. The Company
evaluates each segment’s performance based on its contribution to consolidated
net earnings. There are no inter-segment charges or transactions. The table
below presents summarised financial information for the fiscal years ended June
30, 2008, 2007 and 2006.








F
- 21








LiveReel
Media Corporation


Notes
to Consolidated Financial Statements


(Canadian
Dollars)


June
30, 2008 and 2007








Geographic
Information





The Company
operates from one location in Canada. All its assets are located at this
location.





Business
Segments


2008
              
              
              2007
              
              
              2006Licen.
              
              
              Prod.
              
              
              Dist.
              
              
              Total
              
              
              Licensing
              
              
              Prod.
              
              
              Dist.
              
              
              Total
              
              
              Licensing
              
              
              Prod.
              
              
              Dist.
              
              
              TotalTotal
      revenue
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              20,941
              
              
              $
              20,941
              
              
              
              -
              
              
              
              -
              
              
              
              7,052
              
              
              $
              7,052Earnings
      (losses) from operations
              
              
              (25,000
              )
              
              
              -
              
              
              
              (483,944
              )
              
              
              (508,944
              )
              
              
              (16,413
              )
              
              
              (16,413
              )
              
              
              4,528
              
              
              
              (28,298
              )
              
              
              (239,060
              )
              
              
              (91,560
              )
              
              
              (144,508
              )
              
              $
              (475,128
              )Total
      assets
              
              
              -
              
              
              
              -
              
              
              
              20,179
              
              
              
              20,179
              
              
              
              25,000
              
              
              
              -
              
              
              
              419,850
              
              
              
              444,850
              
              
              
              25,000
              
              
              
              -
              
              
              
              34,213
              
              
              $
              59,213Total
      liabilities
              
              
              -
              
              
              
              32,540
              
              
              
              -
              
              
              
              32,540
              
              
              
              -
              
              
              
              32,540
              
              
              
              -
              
              
              
              32,540
              
              
              
              -
              
              
              
              32,540
              
              
              
              -
              
              
              $
              32,540Reconciliation
      to Financial StatementsRevenueTotal revenue
      from reportable segments
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              -
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              20,941
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              7,052Other
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              40,012
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              51,756
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              -$
              40,012
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              72,697
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              5,031Net
      LossTotal losses
      from reportable segments
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              (508,944
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              (28,298
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (475,128
              )Other
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (279,867
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (596,397
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (206,969
              )$
              (788,811
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              (624,695
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              (682,097
              )AssetsTotal assets
      used for reportable segments
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              20,179
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              444,850
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              366,213Other
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,366,220
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,660,250
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              2,275,387$
              1,386,399
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              2,105,100
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              2,641,600LiabilitiesTotal
      liabilities of the reportable segments
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              32,540
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              32,540
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              32,540Other
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              152,005
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              81,895
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              84,279$
              184,545
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              114,435
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              116,819




F
- 22





LiveReel
Media Corporation


Notes
to Consolidated Financial Statements


(Canadian
Dollars)


June
30, 2008 and 2007








14.FINANCIAL
INSTRUMENTS AND CONCENTRATION OF RISKS





The Company is
exposed in varying degrees to a number of risks arising from financial
instruments. Management’s close involvement in the operations allows for the
identification of risks and variances from expectations. The Company does not
participate in the use of financial instruments to mitigate these risks and has
no designated hedging transactions. The Board approves and monitors the risk
management processes. The Board’s main objectives for managing risks are to
ensure liquidity, the fulfilment of obligations, the continuation of the
Company’s search for new business participation opportunities, and limited
exposure to credit and market risks while ensuring greater returns on the
surplus funds on hand. There were no changes to the objectives or the process
from the prior period.  The types of risk exposure and the way in which
such exposures are managed are as follows:





(a)
Concentration risk:





Concentration risks
exist in cash and cash equivalents because significant balances are maintained
with one financial institution. The risk is mitigated because the financial
institution is a prime Canadian bank.





(b)
Exchange rate risk:





The operating
results and financial position of the Company are reported in Canadian
dollars.  A significant part of company’s cash is held in US dollars –
approximately 95% of total assets at June 30, 2008 (74% as of June 30,
2007).  The results of the company’s operations are therefore subject
to currency transaction and translation risk.





Comparative foreign
exchange rates as at June 30, 2008 are as follows:





June
      30,2008
            
            2007US Dollar to
      CDN Dollar
            
            1.0197
            
            1.0654










15. DIFFERENCES
BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES





These financial
statements have been prepared in accordance with generally accepted accounting
principles in Canada (“Canadian GAAP”). There are no material variations in the
accounting principles, practices and methods used in preparing these
consolidated financial statements from principles, practices and methods used in
the United States (“US GAAP”) and in SEC Regulation S-X.





F
- 23





LiveReel
Media Corporation


Notes
to Consolidated Financial Statements


(Canadian
Dollars)


June
30, 2008 and 2007








15. DIFFERENCES BETWEEN CANADIAN AND
UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES(continued)





A separate
statement of comprehensive loss has not been presented as there are no
differences between net loss and comprehensive loss.




Recently
issued accounting standards




In December 2007,
The Financial Accounting Standards Board (FASB) issued a revised Financial
Accounting Standard (FAS) 141, “Business Combinations” which broadens the cope
and defines the acquirer.  The standard applies to reporting periods
beginning on or after December 15, 2008.  The Company will evaluate
the effect of this standard on any future acquisitions or business combination
transactions.




In December 2007,
FASB issued a new FAS 160, “Noncontrolling Interest in Consolidated Financial
Statements” – an amendment of ARB No. 51.  This Statement establishes
accounting and reporting standards for the noncontrolling interest in a
subsidiary and for the deconsolidation of a subsidiary and changes the way the
consolidated income is presented.  The standard applies to reporting
periods beginning on or after December 15, 2008.  The Company does not
believe that implementation of this Statement will have any effect on its
financial statements.




In March 2008, FASB
issued FAS 161, “Disclosure about Derivative Instruments and Hedging Activities”
– an amendment of FASB Statement No. 133.  The Statement changes the
disclosure requirements for derivative instruments and hedging
activities.  The standard applies to reporting periods beginning on or
after November 15, 2008.  The Company does not currently have nor
anticipate to have in the near future any derivative instruments or hedging
activities.




In May 2008, FASB
issued FAS 162, “The Hierarchy of Generally Accepted Accounting
Principles.”  The Statement identifies the sources of accounting
principles and the framework for selecting the principles to be used in the
preparation of financial statements.  This Statement is not expected
to result in any change in the current practice.  This Statement is
effective 60 days following the SEC’s approval of the Public Accounting
Oversight Board amendments to AU Section 411, The Meaning of Present fairly in
Conformity with Generally Accepted Accounting Principles.  The Company
does not believe that implementation of this statement will have any effect on
its financial statements.




In May 2008, FASB
issued FAS 163, “Accounting for Financial Guarantee Insurance Contracts” – and
interpretation of FAS No. 60.  This Statement applies only to
Insurance Enterprises and is not applicable to the Company.





F
- 24




LiveReel
Media Corporation


Notes
to Consolidated Financial Statements


(Canadian
Dollars)


June
30, 2008 and 2007





16.RESTATEMENT OF
PRIOR YEAR COMPARATIVES





During the fiscal
years 2004 and 2006, 6,193,600 warrants were issued in connection with various
private placements and the acquisition of certain theatrical film
properties.  These warrants together with common shares formed a Unit
subscribed and paid for under the private placements and were combined with
shares in the acquisition of the theatrical film properties.  These
warrants were originally valued at $5,729,352 using the Black-Scholes valuation
model.





On
February 27, 2007, the conversion price of all previously issued warrants was
reduced to US$0.10 per warrant and the expiry date was extended to November 30,
2009 by the board of directors of the Company.  The warrants were
valued at $486,395 using the Black-Scholes valuation model.





The valuation in
2006 and 2007 were applied to the capital stock and resulted in a negative
amount, which is not permitted under CICA handbook section 3861.22.





Management has
therefore revised the valuation of these warrants using the relative fair value
method allowed under both the Canadian and US accounting
standards.  Based on the valuation method, the revised value of the
warrants issued came to $1,146,081.  The excess value of $4,583,271
was credited to capital stock.  The valuation in 2007 was reversed
from the financial statements previously issued.





The effect of the
above mentioned restatement is as follows:





Fiscal year 2007As restated
            
            
            As previously reportedCapital
      stock
            
            $
            6,656,265
            
            
            $
            1,586,599Warrants
            
            
            1,146,081
            
            
            
            6,215,747





These changes have
no effect on the shareholder’s equity, the consolidated statement of operations,
consolidated statements of cash flows, and the basic and diluted loss per
share.






17.SUBSEQUENT
EVENTS





On July 22, 2008,
the board of directors agreed to increase the size of the option pool to
4,000,000 options.  In addition, the 900,000 options previously issued
to the Chief Executive Officer were cancelled.   Finally, a new
grant of 3,900,000 options to the Chief Executive Officer, at a strike price of
$0.01 per option, expiring July 22, 2013, and fully vested was
approved.




As a result of the
granting of the options described above, the fair value of these options has
been estimated, on July 22, 2008, the date of the grant, using a Black-Scholes
option price model with the following assumptions:





F
- 25




LiveReel
Media Corporation


Notes
to Consolidated Financial Statements


(Canadian
Dollars)


June
30, 2008 and 2007











17.SUBSEQUENT
EVENTS  (continued)





Risk free
      interest rate
            3.25%Expected
      dividend
            nilExpected
      volatility
            129%Expected
      life
            1826
      daysMarket
      price
            US$0.01




The amount of
$33,581 will be accounted for as a stock compensation expense in the first
quarter ended September 30, 2008.




On July 22, 2008,
the conversion price of all previously issued warrants was reduced to US$0.01
per warrant and the expiry date was extended to November 30, 2010 by the board
of directors of the Company.  There is no financial impact related to
this transaction.







F
- 26