REGISTRATION
STATEMENT NO. 333-__________
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
S-1
REGISTRATION
STATEMENT
UNDER
THE SECURITIES ACT OF 1933
LIVE
CURRENT MEDIA INC.
(Exact
name of registrant as specified in its charter)
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Nevada
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7389
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88-0346310
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(State
or other jurisdiction of
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(Primary
Standard Industrial
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(IRS
Employee Identification No.)
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incorporation
or organization)
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Classification
Code Number)
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375
Water Street, Suite 645
Vancouver,
BC, V6B5C6, Canada
(604)
453-4870
(Address,
including zip code, and telephone number,
including
area code, of registrant’s principal executive offices)
Nevada
Agency and Trust Company
50
West Liberty Street, Suite 880
Reno,
Nevada 89501
(775)
322-0626
(Name,
address, including zip code, and telephone number,
including
area code, of agent for service)
COPIES
TO:
C.
Geoffrey Hampson
LIVE
CURRENT MEDIA INC.
375
Water Street, Suite 645
Vancouver,
BC, V6B5C6, Canada
Phone:
(604) 453-4870
Fax:
(604) 453-4871
Mary
Ann Sapone, Esq.
RICHARDSON
& PATEL LLP
10900
Wilshire Boulevard, Suite 500
Los
Angeles, California 90024
(707)
937-2059
Fax:
(310) 208-1154
APPROXIMATE
DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: FROM TIME TO TIME AFTER THE
EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If any of
the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, check
the following box. [X]
If this
form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this
form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. [ ]
If this
form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. [ ]
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
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Large
accelerated filer [ ]
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Accelerated
filer [ ]
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Non-accelerated
filer [ ] (Do not check if a smaller reporting
company)
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Smaller
reporting company [X]
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Amount to be
Registered
(1)
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Proposed
Maximum
Offering
Price Per
Share
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Proposed
Maximum
Aggregate
Offering
Price
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Amount of
Registration
Fee
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Title of Each
Class of Securities to be Registered
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Common
stock, par value $0.001 per share,
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1,627,344
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$
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0.28
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(2)
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$
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455,656.32
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$
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25.43
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Common
stock, par value $0.001 per share, issuable upon exercise
of warrants
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813,669
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$
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0.78
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(3)
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$
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634,661.82
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$
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35.41
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Common
stock, par value $0.001 per share, issuable upon exercise
of warrants
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813,669
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$
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0.91
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(3)
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740,438.79
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$
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41.32
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Total
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3,254,682
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$
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1,830,756.93
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$
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102.16
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(1)
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Pursuant
to Rule 416 under the Securities Act of 1933, this Registration Statement
also covers any additional securities that may be offered or issued in
connection with any stock split, stock dividend or similar
transaction.
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(2)
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Estimated
solely for the purpose of calculating the registration fee pursuant to
Rule 457(c) under the Securities Act of 1933, based on $0.28, the average
of the bid and ask prices of the registrant’s common stock on April 29,
2009.
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(3)
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Calculated
in accordance with Rule 457(g) of the Securities Act of
1933.
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The registrant hereby amends this
Registration Statement on such date or
dates as may be necessary to delay
its effective date until the registrant
shall file a further amendment which
specifically states that this Registration
Statement shall thereafter become
effective in accordance with Section 8(a) of
the Securities Act, as amended, or
until this Registration Statement shall
become effective on such date as the
Commission, acting pursuant to Section 8(a), may determine.
The
information in this prospectus is not complete and may be
changed. The selling stockholders may not sell these securities until
the registration statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these securities
and is not soliciting an offer to buy these securities in any jurisdiction where
the offer or sale is not permitted.
SUBJECT
TO COMPLETION, DATED MAY 1, 2009
PROSPECTUS
LIVE
CURRENT MEDIA INC.
3,254,682
shares of common stock
This
prospectus covers the resale by selling stockholders named on page 46 of up to
3,254,682 shares of our common stock, $0.001 par value, which
include:
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·
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1,627,344
shares of common stock; and
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·
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1,627,338
shares of common stock underlying common stock purchase
warrants.
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These
securities will be offered for sale by the selling stockholders identified in
this prospectus in accordance with the methods and terms described in the
section of this prospectus titled “Plan of Distribution.” We will not
receive any of the proceeds from the sale of these shares. However, we may
receive up to $1,375,101 upon the exercise of the warrants. If some
or all of the warrants are exercised, the money we receive will be used for
general corporate purposes, including working capital
requirements. The selling stockholders may be deemed “underwriters”
within the meaning of the Securities Act of 1933, as amended, in connection with
the sale of their common stock under this prospectus. We will pay all the
expenses incurred in connection with the offering described in this prospectus,
with the exception of brokerage expenses, fees, discounts and commissions,
which will all be paid by the selling stockholders. Our common stock
is more fully described in the section of this prospectus titled “Description of
Securities.”
The
prices at which the selling stockholders may sell the shares of common stock
that are part of this offering will be determined by the prevailing market price
for the shares at the time the shares are sold, a price related to the
prevailing market price, at negotiated prices or prices determined, from time to
time, by the selling stockholders. See the section of this prospectus
titled “Plan of Distribution.”
Our
common stock is registered under Section 12(g) of the Securities Exchange Act of
1934
and is currently
quoted on the OTC Bulletin Board under the symbol “LIVC.” On April 29, 2009, the
closing price of our common stock was $0.30 per share.
AN
INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE “RISK
FACTORS” BEGINNING ON PAGE 8.
NEITHER
THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS
APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR
ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date
of this prospectus is
__________
___
, 2009.
TABLE
OF CONTENTS
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Prospectus
Summary
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5
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Risk
Factors
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8
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Cautionary
Statement Regarding Forward Looking Statements
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15
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Use
of Proceeds
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16
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Market
for Common Equity
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16
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Management’s
Discussion and Analysis of Financial Conditions and Results of
Operations
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17
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Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
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29
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Business
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31
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Property
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37
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Legal
Proceedings
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37
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Directors
and Executive Officers
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38
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Executive
Compensation
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40
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Transactions
with Related Persons, Promoters and Certain Control
Persons
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45
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Selling
Stockholders
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46
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Plan
of Distribution
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48
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Security
Ownership of Certain Beneficial Owners and Management
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50
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Description
of Securities
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52
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Disclosure
of Commission Position of Indemnification for Securities Act
Liabilities
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53
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Transfer
Agent and Registrar
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54
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Interests
of Named Experts and Counsel
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54
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Experts
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54
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Where
You Can Find More Information
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55
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Index
to Financial Statements
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F-1
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This
summary highlights information contained elsewhere in this
prospectus. It does not contain all of the information that you
should consider before investing in our common stock. You should read
the entire prospectus carefully, including the section titled “Risk Factors” and
our consolidated financial statements and the related notes. You
should only rely on the information contained in this prospectus. We
have not, and the selling stockholders have not, authorized any other person to
provide you with different information. This prospectus is not an
offer to sell, nor is it seeking an offer to buy, these securities in any state
where the offer or sale is not permitted. The information in this
prospectus is accurate only as of the date on the front cover, but the
information may have changed since that date.
Unless
the context otherwise requires, when we use the words “Live Current,” “LCM,”
“the Company,” “we,” “us” or “our Company” in this prospectus, we are referring
to Live Current Media Inc., a Nevada corporation, and all of its
subsidiaries.
OUR
COMPANY
We build
businesses around domain names that we own. Currently, almost all of
our revenues are generated by www.perfume.com, a website that sells fragrances
and other beauty products. Through our interest in Global Cricket
Venture Pte. Ltd. (referred to in this prospectus as “Global Cricket Venture”),
we are also working with the Board of Control for Cricket in India (referred to
in this prospectus as the “BCCI”) and the Indian Premier League, which is a unit
of the BCCI (referred to in this prospectus as the “IPL”), to create an official
website for the IPL. The website can currently be found at
www.iplt20.com
.
Our goal
is to build businesses around domain names that tap into large, passionate,
pre-existing communities of interested users. We do this by making
sure that our websites are built to be found easily through
search. One of the best ways to ensure that a business is found
through search is to have a powerful domain name. A business with a
powerful domain name not only possesses a low-cost customer acquisition vehicle,
but the domain name may provide domination of the subject category.
Generally,
our domain name assets are easy to remember and descriptive of the content
included on the website. For example, in addition to health and
beauty (Perfume.com) and sports (Cricket.com and Boxing.com) we maintain
websites for travel (such as Brazil.com and Indonesia.com) and global trade
(Importers.com).
We also
earn a small portion of our revenues (less than 1% in 2008) from advertising
and, on occasion, we sell or lease domain names to raise funds for
operations.
Most of
the sales of our health and beauty products from the Perfume.com website are
made to consumers in the United States, although during 2008 we began shipping
products to non-U.S. locations, with the greatest portion of these sales being
made in Canada and the United Kingdom.
While we
earned over $9 million in revenues during 2008, our revenues were not sufficient
to support our operations. In order to raise money for our
operations, on November 19, 2008 we completed a private offering of our
securities. We accepted subscriptions from 11 accredited investors
pursuant to which we sold 1,627,344 units at a price of $0.65 per unit for total
gross proceeds of $1,057,775. Each unit consisted of (i) one share of
common stock, par value $0.001 per share, (ii) a two-year warrant to purchase
one-half share of common stock at an exercise price of $0.78 and (iii) a
three-year warrant to purchase one-half share of common stock at an exercise
price of $0.91. Accordingly, we issued an aggregate of 1,627,344
shares of common stock, warrants to purchase 813,669 shares of common stock with
an exercise price of $0.78, and warrants to purchase 813,669 shares of common
stock with an exercise price of $0.91. We are filing the registration
statement of which this prospectus is a part pursuant to the agreements we
entered into with the investors. During 2008 and continuing into
2009, we also sold domain names to raise working capital.
Our
consolidated financial statements have been prepared on a going concern basis
which assumes that we will be able to realize our assets and discharge our
liabilities in the normal course of business for the foreseeable
future. We generated a consolidated net loss of $10,006,456 and
realized negative cash flow from operating activities of $4,854,260 for the year
ended December 31, 2008. At this date, we had negative working
capital of $3,164,157, as compared to positive working capital of $5,930,413 at
December 31, 2007. At December 31, 2008 we had an accumulated deficit
of $12,532,134, as compared to an accumulated deficit of $2,525,678 at December
31, 2007. Stockholders equity was $2,255,601 at December 31, 2008, as
compared to stockholders equity of $7,675,753 at December 31, 2007.
Our
ability to continue as a going-concern is in substantial doubt as it is
dependent on a number of factors including, but not limited to, the receipt of
continued financial support from our investors, our ability to sell additional
non-core domain names, our ability to raise equity or debt financing as we need
it and whether we will be able to satisfy our liabilities as they become due,
including providing funding to Global Cricket Venture if we are required to do
so. The outcome of these matters is dependant on factors outside of
our control and cannot be predicted at this time.
Our
financial statements do not include any adjustments relating to the
recoverability or classification of assets or the amounts or classification of
liabilities that might be necessary if we were unable to continue as a going
concern.
THE
OFFERING
We are
registering shares of our common stock for sale by the selling stockholders
identified in the section of this prospectus titled “Selling Stockholders.”
The shares included in the table identifying the selling stockholders
consist of:
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1,627,344
shares of common stock issued pursuant to various subscription agreements
entered into in November 2008; and
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1,627,338
shares of common stock underlying common stock purchase warrants issued in
November 2008 in conjunction with the sale of our common
stock.
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The
shares of common stock issued and outstanding prior to this offering consist of
23,934,268 shares of common stock. This number does not
include:
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·
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1,000,000
shares of restricted common stock issuable upon the exercise of warrants
issued June 11, 2007 to Hampson Equities Ltd. (a company owned and
controlled by C Geoffrey Hampson, our Chief Executive Officer) at an
exercise price of $1.25 per share and effective until June 10, 2009 in
exchange for $1,000,000 cash pursuant to a subscription agreement dated
June 1, 2007;
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·
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3,225,000
shares of common stock reserved for issuance upon the exercise of
outstanding stock options granted pursuant to our 2007 Stock Incentive
Plan at exercises prices ranging from $0.30 to
$0.65;
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·
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1,402,102
shares of common stock reserved for issuance pursuant to our 2007 Stock
Incentive Plan which have not yet been
issued;
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·
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50,000
shares of restricted common stock issuable upon the exercise of warrants
issued June 30, 2008 to our investor relations firm at an exercise price
of $2.33 per share and effective until May 1, 2010, in exchange for
services rendered; and
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·
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275,736
shares of common stock that are reserved for issuance in connection with
our acquisition of Auctomatic (Entity, Inc.) in May
2008.
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If all of
our other issued and outstanding options and warrants are exercised, and all of
the warrant shares covered by this prospectus are issued, we will have a total
of 30,112,342 shares of common stock issued and outstanding.
Information
regarding our common stock is included in the section of this prospectus titled
“Description of Securities.”
The
shares of common stock offered under this prospectus may be sold by the selling
stockholders in the public market, in negotiated transactions with a
broker-dealer or market maker as principal or agent, or in privately negotiated
transactions not involving a broker or dealer. Information regarding the
selling stockholders, the common shares they are offering to sell under this
prospectus, and the times and manner in which they may offer and sell those
shares is provided in the sections of this prospectus titled “Selling
Stockholders” and “Plan of Distribution.” We will not receive any of the
proceeds from those sales. We will only receive proceeds if the selling
stockholders exercise the warrants for cash. The registration of common
shares pursuant to this prospectus does not necessarily mean that any of those
shares will ultimately be offered or sold by the selling
stockholders.
CORPORATE
INFORMATION
Our
principal executive offices are located at 375 Water Street, Suite 645,
Vancouver, British Columbia V6B5C6, Canada. Our telephone number is
(604) 453-4870. Our corporate website is
www.livecurrent.com
. Information included on our
website is not part of this prospectus.
RISK
FACTORS
This
offering involves a high degree of risk. You should carefully
consider the risks described below and the other information in this prospectus,
including our financial statements and the notes to those statements, before you
purchase our common stock. The risks and uncertainties described
below are those that we currently believe may materially affect our
company. Additional risks and uncertainties may also impair our
business operations. If the following risks actually occur, our
business, financial condition and results of operations could be seriously
harmed, the trading price of our common stock could decline and you could lose
all or part of your investment.
Risks
Relating to Our Business
WE
INCURRED A NET LOSS OF $10,006,456 AND REALIZED NEGATIVE CASH FLOW FROM
OPERATING ACTIVITIES OF $4,854,260 FOR THE YEAR ENDED DECEMBER 31,
2008. WE MAY BE UNABLE TO CONTINUE AS A GOING CONCERN.
Our
consolidated financial statements have been prepared on a going concern basis
which assumes that we will be able to realize our assets and discharge our
liabilities in the normal course of business for the foreseeable
future. We have generated a consolidated net loss of $10,006,456 and
realized a negative cash flow from operating activities of $4,854,260 for the
year ended December 31, 2008. At this date, we had a working capital
deficiency of $3,164,157, as compared to positive working capital of $5,930,413
at December 31, 2007. At December 31, 2008 we had an accumulated
deficit of $12,532,134, as compared to an accumulated deficit of $2,525,678 at
December 31, 2007. Stockholders equity was $2,255,601 at December 31,
2008, as compared to stockholders equity of $7,675,753 at December 31,
2007.
Our
ability to continue as a going-concern is in substantial doubt as it is
dependent on a number of factors including, but not limited to, the receipt of
continued financial support from our investors, our ability to market and sell
domain name assets for cash, our ability to raise equity or debt financing as we
need it, and whether we will be able to use our securities to meet certain of
our liabilities as they become payable, including our commitments, if any, for
Global Cricket Venture. The outcome of these matters is dependent on
factors outside of our control and cannot be predicted at this
time.
CURRENTLY,
ALMOST ALL OF OUR REVENUES ARE GENERATED BY THE SALE OF HEALTH AND BEAUTY
PRODUCTS, PARTICULARLY PERFUME, OVER THE INTERNET. THE EFFECTS OF THE
RECENT ECONOMIC DOWNTURN MAY HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS,
OPERATING RESULTS, OR FINANCIAL CONDITION.
The
recent economic downturn has caused disruptions and extreme volatility in global
financial markets, has increased rates of default and bankruptcy, and has
impacted consumer and business spending. These developments may
negatively affect our business, operating results, or financial
condition. For example, the downturn in consumer spending, especially
in the United States, may result in decreased sales of our health and beauty
products, since most of these products are not necessities but are purchased
with discretionary funds. Furthermore, the tightening credit market
may make it impossible for us to obtain financing if it is
required. We are not sure when this economic downturn will
end.
WE
BUILD BUSINESSES AROUND OUR DOMAIN NAME PORTFOLIO. WE MAY NOT BE ABLE
TO PROTECT OUR DOMAIN NAMES, WHICH WOULD ADVERSELY AFFECT OUR BUSINESS, RESULTS
OF OPERATIONS AND FINANCIAL CONDITION.
We seek
to develop a portfolio of operating businesses either by ourselves or by
entering into arrangements with businesses that operate in the product or
service categories that are described by the domain name assets owned by our
subsidiary, Domain Holdings Inc. We may not be able to prevent third
parties from acquiring domain names that are confusingly similar to our domain
names, which could adversely affect our business. Governmental
agencies and their designees generally regulate the acquisition and maintenance
of internet addresses. However, the regulation of internet addresses
in the United States and in foreign countries is subject to
change. As a result, we may not be able to acquire or maintain
relevant internet addresses in all countries where we conduct
business. All of our online businesses and web sites are copyrighted
upon loading. “Livecurrent.com” is a registered domain name of Domain Holdings
Inc. While we will consider seeking further protection for our
intellectual property, we may be unable to avail ourselves of protection under
United States laws because, among other things, our domain names are generic and
intuitive. Consequently, we will seek protection of our intellectual
property only where we determine that the cost of obtaining protection and the
scope of protection provided result in a meaningful benefit to us.
WE
ESTABLISHED GLOBAL CRICKET VENTURE WITH NETLINKBLUE, A JOINT VENTURE PARTNER, IN
ORDER TO EXPLOIT THE RIGHTS WE RECEIVED FROM THE BCCI TO CREATE AN OFFICIAL
WEBSITE FOR THE IPL. PROVIDED THAT NETLINKBLUE TRANSFERS CERTAIN
RIGHTS TO GLOBAL CRICKET VENTURE, WE WILL BE REQUIRED TO PARTIALLY FUND GLOBAL
CRICKET VENTURE. IF WE ARE NOT SUCCESSFUL IN RAISING FUNDS FOR GLOBAL
CRICKET VENTURE, IT MAY LOSE SOME OR ALL OF THESE RIGHTS. THIS WOULD
LIKELY HAVE A NEGATIVE EFFECT ON OUR RESULTS OF OPERATIONS AND OUR
BUSINESS.
On April
17, 2008, we entered into agreements with the BCCI and the IPL pursuant to which
we acquired the rights to create and operate an official website for the
IPL. On June 10, 2008 we and our joint venture partner, Netlinkblue,
formed Global Cricket Venture for the purpose of exploiting these rights and
certain rights acquired by Netlinkblue. Provided that we and
Netlinkblue transfer the rights that each of us acquired from the BCCI and the
IPL into Global Cricket Venture, we will be required to provide funding to
Global Cricket Venture. On March 31, 2009, we and the BCCI jointly
terminated our agreement and we assigned all of the rights we received under our
agreement with the IPL to Global Cricket Venture, which also assumed all of our
duties and obligations. We did not, however, transfer our rights to
the website
www.cricket.com
, which our
agreement with Netlinkblue requires. Furthermore, to our knowledge,
to date, Netlinkblue has not transferred the rights it received from the BCCI
and the IPL into Global Cricket Venture. On July 1, 2009 Global
Cricket Venture will be required to make a payment of $2,250,000 under the
agreement with the IPL. Currently, we do not have the cash to meet
our portion of this funding commitment if we are required to do so, and we
cannot guarantee that we will be able to raise sufficient funds before July 1,
2009.
If we are
required to provide funds to Global Cricket Venture and we fail to do so, and no
extension or renegotiation of the payment terms can be arranged, Global Cricket
Venture may have to forfeit some or all of its rights under the agreement with
the IPL. If that were to happen, Netlinkblue may seek to recover
potential claims for breach of contract, lack of performance and other
damages. Either of these events may have a negative effect on our
results of operations and our business.
For a
more complete discussion of Global Cricket Venture, please see the section of
this prospectus titled “Business – Global Cricket Venture”.
OUR
EXPANSION INTO NEW GEOGRAPHIC AREAS AND INTERNATIONAL OPERATIONS IN CONNECTION
WITH THE ACTIVITIES OF GLOBAL CRICKET VENTURE CREATES ADDITIONAL RISKS WHICH
COULD NEGATIVELY IMPACT OUR BUSINESS PROSPECTS AND OUR ABILITY TO MAXIMIZE
REVENUES AND PROFITS.
By virtue
of our interest in Global Cricket Venture, we are expanding our business into
new geographic areas where our partners and the cricket leagues are located,
such as Dubai, South Africa, India, and the UK. We have limited
experience with operations outside North America. As a result of
doing business in these new geographic areas, we may be subject to a number of
risks, including the following:
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local
economic conditions;
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geopolitical
events, including war and terrorism;
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challenges
caused by distance, language and cultural differences and by doing
business with foreign agencies and governments;
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longer
payment cycles in some countries;
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uncertainty
regarding liability for services and
content;
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currency
exchange rate fluctuations;
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potentially
adverse tax consequences;
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higher
costs associated with doing business
internationally;
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different
employee/employer relationships and the existence of workers’ councils and
labor unions.
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The
business of Global Cricket Venture is centered in an area of the world that has
recently experienced significant geopolitical events, including the November
2008 terrorist attacks in Mumbai, India and the February 2009 attacks against
the Sri Lankan cricket team in Pakistan. As a result of these events,
the Champions League cricket tournament was cancelled following the terrorist
attacks in Mumbai, which resulted in lost revenue generating opportunities in
December 2008. In addition, on March 24, 2009, the IPL announced that
its second season will be relocated from India to South
Africa. Future geopolitical activity may negatively impact the
business prospects of Global Cricket Venture.
CURRENTLY,
SUBSTANTIALLY ALL OF OUR REVENUES COME FROM OUR SALES OF HEALTH AND BEAUTY
PRODUCTS THROUGH OUR WEBSITE “PERFUME.COM”. WE MAY NOT BE ABLE TO
COMPETE SUCCESSFULLY AGAINST OTHER RETAILERS OF SIMILAR PRODUCTS.
The
internet renders eCommerce inherently more competitive than bricks and mortar
and catalogue retail selling because of the low barriers to entry and the ease
with which consumers may comparison shop.
We
currently earn substantially all of our revenues from the sale of health and
beauty products through our website, “Perfume.com”. The fragrance
eCommerce business is extremely competitive. Perfume.com has many
current and potential competitors including specialized online fragrance
retailers, other eCommerce retailers selling a wide variety of products
including fragrances, and traditional brick and mortar retailers with a high
degree of brand awareness among consumers that have expanded into online sales
such as department stores and specialty health and beauty
stores. Many of our current competitors have greater resources, more
customers, longer operating histories and greater brand
recognition. They may secure better terms from suppliers, have more
efficient distribution capability, and devote more resources to technology,
fulfillment and marketing. Increased competition may reduce our sales
and profits. We do not represent a significant presence in our
industry and we may not be able to compete effectively against other retailers
of similar products.
NEW
ROOT DOMAIN NAMES MAY HAVE THE EFFECT OF ALLOWING THE ENTRANCE OF NEW
COMPETITORS AT LIMITED COST, WHICH MAY REDUCE THE VALUE OF OUR DOMAIN NAME
ASSETS.
The
Internet Corporation for Assigned Names and Numbers (“ICANN”) has introduced,
and has proposed the introduction of, additional new domain name suffixes. We do
not presently intend to acquire domain names using newly authorized root domain
names to match our existing domain names, although we have certain .cn (China)
root domain names to complement our growth strategy. ICANN regularly
develops new domain name suffixes that may make a number of domain names
available in different formats, many of which may be more attractive than the
formats held by us and which may allow the entrance of new competitors at
limited cost. New root domain names may reduce the value of our
domain name assets.
WE
ARE PLANNING TO EXPAND OUR BUSINESS. OUR FAILURE TO MANAGE THE GROWTH
OF OUR BUSINESS EFFECTIVELY COULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
We seek
to develop a portfolio of operating businesses either by ourselves or by
entering into arrangements with businesses that operate in the product or
service categories that are described by our domain name assets. For
example, we entered into an agreement with Netlinkblue to form Global Cricket
Venture for the purpose of becoming the exclusive online provider of the IPL
official website. The success of our future operating activities will
depend upon our ability to expand our support system to meet the demands of our
growing business. Any failure by our management to effectively
anticipate, implement, and manage changes required to sustain our growth would
have a material adverse effect on our business, financial condition, and results
of operations. We cannot assure you that we will be able to
successfully operate acquired businesses, become profitable in the future, or
effectively manage any other change.
THE
LOSS OF CERTAIN KEY PERSONNEL COULD SIGNIFICANTLY HARM OUR BUSINESS, RESULTS OF
OPERATIONS AND FINANCIAL CONDITION.
Our
performance is substantially dependent upon the services of our executive
officers and other key employees, as well as on our ability to recruit, retain,
and motivate other officers and key employees. Competition for qualified
personnel is intense and there are a limited number of people with knowledge of
and experience in the ownership, development, and management of websites and
internet domain names. The loss of the services of any of our
officers or key employees, or our inability to hire and retain a sufficient
number of qualified employees, will harm our business. Specifically, the loss of
Mr. Hampson, our Chief Executive Officer and Chairman, Mr. Melville, our
President and Chief Corporate Development Officer, and Chantal Iorio, our Vice
President Finance, would be detrimental. We have employment
agreements with Mr. Hampson, Mr. Melville and Ms. Iorio that provide for their
continued service to us until June 1, 2012, January 1, 2013 and January 7, 2013
respectively.
WE
MAY BE UNABLE TO REALIZE VALUE FROM THE ACQUISITION OF ENTITY,
INC. THIS ACQUISITION COULD HAVE AN ADVERSE EFFECT ON OUR BUSINESS,
RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
On May
22, 2008 we acquired Entity, Inc. (known as “Auctomatic”) for the primary
purpose of employing its founders, who we believe will enable us to execute on
our strategy of building successful websites in various commerce
segments. We may not be able to successfully integrate the Auctomatic
development team into our existing personnel groups over time, or it may turn
out that the skills the Auctomatic development team bring are not the skills we
will ultimately need. We may not realize expected synergies from this
acquisition. There can be no assurance that this acquisition, or any
acquisition we choose to make in the future, will not have an adverse effect on
our business, results of operations, and financial condition.
WE
WILL NEED TO RAISE ADDITIONAL CAPITAL IN 2009. IF WE NEED TO RAISE
ADDITIONAL CAPITAL, BUT ARE UNABLE TO DO SO, OUR BUSINESS WOULD BE ADVERSELY
AFFECTED.
We will
be required to raise additional funds for our operations in 2009 and intend to
do so primarily through the sale or lease of a few of our non-core domain
names. It is possible that if we are unable to raise adequate funds
from the sale or lease of these domain names, we would have to raise additional
funds through public or private financing, strategic relationships or other
arrangements to continue our business. We cannot be certain that any
financing will be available on acceptable terms, or at all. Equity
financing may be dilutive to the holders of our common stock, and debt
financing, if available, may involve restrictive covenants. Moreover,
strategic relationships, if necessary to raise additional funds, may require
that we relinquish valuable rights. If we need to raise additional
capital but are unable to do so, we may be required to curtail our
operations.
OUR
EXECUTIVE OFFICERS, DIRECTORS AND MAJOR STOCKHOLDERS OWN A SIGNIFICANT
PERCENTAGE OF OUR VOTING SECURITIES. OUR NON-MANAGEMENT STOCKHOLDERS
MAY HAVE NO EFFECTIVE VOICE IN OUR MANAGEMENT.
Our
current directors, officers and more than 5% stockholders, as a group,
beneficially own approximately 21.7% of our outstanding common
stock. These stockholders may be able to control matters requiring
approval by our stockholders, including the election of directors, mergers or
other business combinations. Such concentrated control may also make
it difficult for our stockholders to receive a premium for their shares of our
common stock in the event we merge with a third party or enter into other types
of transactions that require stockholder approval. Our non-management
stockholders may have no effective voice in our management.
WE MAY BE SUBJECT TO RECENTLY
ENACTED PRIVACY LEGISLATION AND REGULATIONS WHICH COULD REDUCE
OUR POTENTIAL REVENUES AND
PROFITABILITY.
Entities
engaged in operations over the internet, particularly relating to the collection
of user information, are subject to limitations on their ability to utilize such
information under federal and state legislation and regulation. In
2000, the Gramm-Leach-Bliley Act required that the collection of identifiable
information regarding users of financial services be subject to stringent
disclosure and “opt-out” provisions. While this law and the
regulations enacted by the Federal Trade Commission and others relates primarily
to information relating to financial transactions and financial institutions,
the broad definitions of those terms may make the businesses entered into by the
Company and its strategic partners subject to the provisions of the Act, which
may, in turn, increase the cost of doing business and reduce our
revenues. Similarly, the Children On-line Privacy and Protection Act
(“COPPA”) imposes strict limitations on the ability of internet ventures to
collect information from minors. The impact of COPPA may be to increase the cost
of doing business on the internet and reduce potential revenue
sources. We may also be impacted by the USA Patriot Act, which
requires certain companies to collect and provide information to United States
governmental authorities. A number of state governments have also proposed or
enacted privacy legislation that reflects or, in some cases, extends the
limitations imposed by the Gramm-Leach-Bliley Act and COPPA. These
laws may further impact the cost of doing business on the internet.
ANY
ATTEMPT OF FEDERAL OR STATE GOVERNMENT TO TAX INTERNET TRANSACTIONS COULD CREATE
UNCERTAINTY IN OUR ABILITY TO COMPLY WITH VARYING, AND POTENTIALLY
CONTRADICTORY, REQUIREMENTS WHICH COULD NEGATIVELY IMPACT OUR BUSINESS, RESULTS
OF OPERATIONS, AND FINANCIAL CONDITION.
Currently,
the sale of goods and services on the internet is not subject to a uniform
system of taxation. A number of states, as well as the federal
government, have considered enacting legislation that would subject internet
transactions to sales, use or other taxes. Because there are a
variety of jurisdictions considering such actions, any attempt to tax internet
transactions could create uncertainty in the ability of internet-based companies
to comply with varying, and potentially contradictory,
requirements. We cannot predict whether any of the presently proposed
schemes will be adopted. We cannot predict the effect, if any, that
the adoption of such proposed schemes would have on our business with certainty;
however, they are likely to have a negative impact on our business, results of
operations or financial condition.
LAWS
MAY BE ADOPTED IN THE FUTURE REGULATING COMMUNICATIONS AND COMMERCE ON THE
INTERNET WHICH COULD HAVE A NEGATIVE IMPACT UPON OUR BUSINESS, RESULTS OF
OPERATIONS AND FINANCIAL CONDITION.
There are
currently few laws or regulations that specifically regulate communications,
access to, or commerce on the internet. Governing bodies have, and
may continue to, adopt laws and regulations in the future that address issues
such as user privacy, pricing and the characteristics and quality of products
and services offered over the internet. For example, the
Telecommunications Act of 1996 sought to prohibit transmitting various types of
information and content over the internet. Several telecommunications
companies have petitioned the Federal Communications Commission to regulate
internet service providers and on-line service providers in a manner similar to
long distance telephone carriers and to impose access fees on those
companies. This could increase the cost of transmitting data over the
internet. Moreover, it may take years to determine the extent to
which existing laws relating to issues such as intellectual property ownership,
libel and personal privacy are applicable to the internet. Any new
laws or regulations relating to the internet or any new interpretations of
existing laws could have a negative impact on our business and add additional
costs to doing business on the internet. Currently we have no
significant expenses associated with legal or regulatory
compliance.
WE
MAY BE EXPOSED TO LIABILITY FOR INFRINGING INTELLECTUAL PROPERTY RIGHTS OF OTHER
COMPANIES WHICH COULD RESULT IN SUBSTANIAL COSTS TO US IN THE DEFENSE OF
INFRINGEMENT SUITS.
Our
success will, in part, depend on our ability to operate without infringing on
the proprietary rights of others. Although we have conducted searches
and are not aware of any intellectual property belonging to others upon which
our domain names or their use might infringe, and the majority of our portfolio
of domain names is generic in nature, we cannot be certain that infringement has
not or will not occur. We could incur substantial costs, and
management’s attention to our day-to-day operations could be disrupted
significantly, in defending any legal actions based on
infringement.
OUR
COMMON STOCK IS CONSIDERED A “PENNY STOCK”. THE APPLICATION OF THE “PENNY STOCK”
RULES TO OUR COMMON STOCK COULD LIMIT THE TRADING AND LIQUIDITY OF OUR COMMON
STOCK, ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON STOCK AND INCREASE THE
TRANSACTION COSTS TO SELL THOSE SHARES.
Our
common stock is a “low-priced” security or “penny stock” under rules promulgated
under the Securities Exchange Act of 1934, as amended. In accordance
with these rules, broker-dealers participating in transactions in low-priced
securities must first deliver a risk disclosure document which describes the
risks associated with such stocks, the broker-dealer’s duties in selling the
stock, the customer’s rights and remedies and certain market and other
information. Furthermore, the broker-dealer must make a suitability
determination approving the customer for low-priced stock transactions based on
the customer’s financial situation, investment experience and
objectives. Broker-dealers must also disclose these restrictions in
writing to the customer, obtain specific written consent from the customer, and
provide monthly account statements to the customer. The effect of
these restrictions will likely decrease the willingness of broker-dealers to
make a market in our common stock, will decrease liquidity of our common stock
and will increase transaction costs for sales and purchases of our common stock
as compared to other securities.
THE
STOCK MARKET IN GENERAL HAS EXPERIENCED VOLATILITY THAT OFTEN HAS BEEN UNRELATED
TO THE OPERATING PERFORMANCE OF COMPANIES. THESE BROAD FLUCTUATIONS
MAY BE THE RESULT OF UNSCRUPULOUS PRACTICES THAT MAY ADVERSELY AFFECT THE PRICE
OF OUR STOCK, REGARDLESS OF OUR OPERATING PERFORMANCE.
Stockholders
should be aware that, according to SEC Release No. 34-29093 dated April 17,
1991, the market for penny stocks has suffered from patterns of fraud and
abuse. Such patterns include (1) control of the market for the
security by one or a few broker-dealers that are often related to the promoter
or issuer; (2) manipulation of prices through prearranged matching of purchases
and sales and false and misleading press releases; (3) boiler room practices
involving high-pressure sales tactics and unrealistic price projections by
inexperienced sales persons; (4) excessive and undisclosed bid-ask differential
and markups by selling broker-dealers; and (5) the wholesale dumping of the same
securities by promoters and broker-dealers after prices have been manipulated to
a desired level, along with the resulting inevitable collapse of those prices
and with consequent investor losses. The occurrence of these patterns
or practices could increase the volatility of our share price.
WE DO NOT EXPECT TO PAY DIVIDENDS
FOR THE FORESEEABLE FUTURE, AND WE MAY NEVER PAY DIVIDENDS
.
INVESTORS SEEKING CASH DIVIDENDS
SHOULD NOT PURCHASE OUR COMMON STOCK.
We
currently intend to retain any future earnings to support the development of our
business and do not anticipate paying cash dividends in the foreseeable
future. Our payment of any future dividends will be at the discretion
of our board of directors after taking into account various factors, including
but not limited to our financial condition, operating results, cash needs,
growth plans and the terms of any credit agreements that we may be a party to at
the time. In addition, our ability to pay dividends on our common
stock may be limited by Nevada state law. Accordingly, investors must
rely on sales of their common stock after price appreciation, which may never
occur, as the only way to realize a return on their investment. Investors
seeking cash dividends should not purchase our common stock.
LIMITATIONS
ON DIRECTOR AND OFFICER LIABILITY AND OUR INDEMNIFICATION OF OFFICERS AND
DIRECTORS MAY DISCOURAGE STOCKHOLDERS FROM BRINGING SUIT AGAINST A
DIRECTOR.
Our
Articles of Incorporation and bylaws provide, with certain exceptions as
permitted by governing Nevada law, that a director or officer shall not be
personally liable to us or our stockholders for breach of fiduciary duty as a
director, except for acts or omissions which involve intentional misconduct,
fraud or knowing violation of law, or unlawful payments of dividends. These
provisions may discourage stockholders from bringing suit against a director for
breach of fiduciary duty and may reduce the likelihood of derivative litigation
brought by stockholders on our behalf against a director. In
addition, our Articles of Incorporation and bylaws provide for mandatory
indemnification of directors and officers to the fullest extent permitted by
Nevada law.
IN
THIS OFFERING WE ARE REGISTERING 3,254,682 SHARES OF COMMON STOCK, WHICH IS
APPROXIMATELY 14% OF THE SHARES OF COMMON STOCK WE HAVE
OUTSTANDING. DUE TO THE LARGE AMOUNT OF COMMON STOCK SOLD IN THIS
OFFERING, THE PER SHARE PRICE OF OUR COMMON STOCK COULD BE ADVERSELY
AFFECTED.
Through
this offering we are registering 3,254,682 shares, or approximately 14%, of the
23,934,268 shares of common stock we have outstanding. If the selling
stockholders sell all of the common stock that we are registering, or if the
public market perceives that these sales may occur, the market price of our
common stock could decline.
THE
OVER THE COUNTER BULLETIN BOARD IS A QUOTATION SYSTEM, NOT AN ISSUER LISTING
SERVICE, MARKET OR EXCHANGE. THEREFORE, BUYING AND SELLING STOCK ON THE OTC
BULLETIN BOARD IS NOT AS EFFICIENT AS BUYING AND SELLING STOCK THROUGH AN
EXCHANGE. AS A RESULT, IT MAY BE DIFFICULT FOR YOU TO SELL YOUR COMMON STOCK OR
YOU MAY NOT BE ABLE TO SELL YOUR COMMON STOCK FOR AN OPTIMUM TRADING
PRICE.
When
fewer shares of a security are being traded on the OTCBB, volatility of prices
may increase and price movement may outpace the ability to deliver accurate
quote information. Lower trading volumes in a security may result in
a lower likelihood of an individual’s orders being executed, and current prices
may differ significantly from the price one was quoted by the OTCBB at the time
of the order entry. Orders for OTCBB securities may be canceled or
edited like orders for other securities. All requests to change or
cancel an order must be submitted to, received and processed by the
OTCBB. Due to the manual order processing involved in handling OTCBB
trades, order processing and reporting may be delayed, and an individual may not
be able to cancel or edit his order. Consequently, one may not be
able to sell shares of common stock at the optimum trading prices.
The
dealer’s spread (the difference between the bid and ask prices) may be large and
may result in substantial losses to the seller of securities on the OTCBB if the
common stock or other security must be sold immediately. Further,
purchasers of securities may incur an immediate “paper” loss due to the price
spread. Moreover, dealers trading on the OTCBB may not have a bid
price for securities bought and sold through the OTCBB. Due to the
foregoing, demand for securities that are traded through the OTCBB may be
decreased or eliminated.
WE
EXPECT VOLATILITY IN THE PRICE OF OUR COMMON STOCK, WHICH MAY SUBJECT US TO
SECURITIES LITIGATION RESULTING IN SUBSTANTIAL COSTS AND LIABILITIES AND
DIVERTING MANAGEMENT’S ATTENTION AND RESOURCES.
The
market for our common stock may be characterized by significant price volatility
when compared to seasoned issuers, and we expect that our share price will be
more volatile than a seasoned issuer for the indefinite future. In
the past, plaintiffs have often initiated securities class action litigation
against a company following periods of volatility in the market price of its
securities. We may in the future be a target of similar
litigation. Securities litigation could result in substantial costs
and liabilities and could divert management’s attention from our day-to-day
operations and consume resources, such as cash.
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus, including the sections titled “Prospectus Summary,” “Risk Factors,”
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations” and “Business,” contains forward-looking statements.
Forward-looking
statements include, but are not limited to, statements about:
|
·
|
our
projected sales and profitability;
|
|
·
|
anticipated
trends in our industry;
|
|
·
|
our
ability to utilize and sell or lease our domain
names;
|
|
·
|
our
ability to protect our domain
names;
|
|
·
|
our
ability to operate our business without infringing upon the intellectual
property rights of others;
|
|
·
|
our
future financing plans and our ability to raise capital when it is
required; and
|
|
·
|
our
anticipated needs for working
capital.
|
These
statements relate to future events or our future financial performance, and
involve known and unknown risks, uncertainties, assumptions and other factors
that may cause our actual results, levels of activity, performance or
achievements to be materially different from those expressed or implied by these
forward-looking statements. These risks and other factors include
those listed under “Risk Factors” beginning on page 8 and elsewhere in this
prospectus. In some cases, you can identify forward-looking
statements by terminology such as “may,” “could,” “should,” “expect,” “intend,”
“plan,” “anticipate,” “believe,” “estimate,” “project,” “potential,” “continue”
or the negative of these terms or other comparable
terminology. Although we believe that the expectations reflected in
the forward-looking statements are reasonable, we cannot guarantee future
results, levels of activity, performance or achievements. We do not intend
to update any of the forward-looking statements after the date of this
prospectus or to conform these statements to actual results.
This
prospectus may contain market data related to our business, which may have been
included in articles published by independent industry
sources. Although we believe these sources are reliable, we have not
independently verified this market data. This market data includes
projections that are based on a number of assumptions. If any one or
more of these assumptions turns out to be incorrect, actual results may differ
materially from the projections based on these assumptions.
Each
forward-looking statement should be read in context with, and with an
understanding of, the various other disclosures concerning the Company and our
business made elsewhere in this prospectus as well as other public reports which
may be filed with the United States Securities and Exchange Commission (the
“SEC”). You should not place undue reliance on any forward-looking
statement as a prediction of actual results or developments. As noted
above, the Company is not obligated to update or revise any forward-looking
statement contained in this prospectus to reflect new events or
circumstances.
USE
OF PROCEEDS
We are
registering the shares of common stock offered by this prospectus for sale by
the selling stockholders identified in the section of this prospectus titled
“Selling Stockholders.” We will not receive any of the proceeds from the
sale of these shares. However, if all of the warrants held by the selling
stockholders are exercised for cash, we will receive $1,375,101 which will be
used for general working capital purposes. We will pay all expenses
incurred in connection with the offering described in this prospectus. We
are registering the shares in this offering pursuant to the terms of the
subscription agreements entered into between the Company and the selling
stockholders dated on or about November 19, 2008, under which the shares of
common stock and warrants were issued. Our common stock is more fully
described in the section of this prospectus titled “Description of
Securities.”
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our
common stock, $0.001 par value per share, has been quoted on the OTC Bulletin
Board under the symbol “LIVC” since August 4, 2008. Before that date,
our common stock traded under the symbol “CMNN”. The following table
sets forth, for each fiscal quarter for the past two years, the reported high
and low closing bid quotations for our common stock as reported on the OTC
Bulletin Board. The bid information was obtained from the OTC
Bulletin Board and reflects inter-dealer prices, without retail mark-up,
markdown or commission, and may not represent actual transactions.
Common
Stock
|
|
High
& Low Bids
|
|
|
|
Period
ended
|
|
High
|
|
|
Low
|
|
Source
|
|
|
|
December
31, 2008
|
|
$
|
1.34
|
|
|
$
|
0.25
|
|
OTC
Bulletin Board
|
|
|
|
September
30, 2008
|
|
$
|
2.81
|
|
|
$
|
1.25
|
|
OTC
Bulletin Board
|
|
|
|
June
30, 2008
|
|
$
|
3.10
|
|
|
$
|
2.26
|
|
OTC
Bulletin Board
|
|
|
|
March
31, 2008
|
|
$
|
3.47
|
|
|
$
|
2.37
|
|
OTC
Bulletin Board
|
|
|
|
December
31, 2007
|
|
$
|
2.05
|
|
|
$
|
2.03
|
|
OTC
Bulletin Board
|
|
|
|
September
30, 2007
|
|
$
|
2.65
|
|
|
$
|
1.60
|
|
OTC
Bulletin Board
|
|
|
|
June
30, 2007
|
|
$
|
2.10
|
|
|
$
|
1.01
|
|
OTC
Bulletin Board
|
|
|
|
March
31, 2007
|
|
$
|
1.48
|
|
|
$
|
0.90
|
|
OTC
Bulletin Board
|
|
HOLDERS
We have
approximately 74 record holders of our common stock as of April 29, 2009
according to a stockholders’ list provided by our transfer agent as of that
date. The number of registered stockholders does not include any
estimate by us of the number of beneficial owners of common shares held in
street name. The transfer agent and registrar for our common stock is
Computershare Trust Company, 350 Indiana Street, Suite 800, Golden, Colorado,
80401.
DIVIDENDS
We have
never declared nor paid any cash dividends on our common stock and we do not
anticipate that we will pay any cash dividends on our common stock in the
foreseeable future. Any future determination regarding the payment of
cash dividends will be at the discretion of our board of directors and will be
dependent upon our financial condition, results of operations, capital
requirements and other factors as our board of directors may deem relevant at
that time.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF
FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The
following discussion and analysis of our results of operations and financial
condition for the fiscal years ended December 31, 2008 and 2007 should be read
in conjunction with our financial statements and the notes to those financial
statements that are included elsewhere in this prospectus.
OVERVIEW
We build
consumer internet experiences around our large portfolio of domain
names. We have developed content or commerce experiences across our
core domain names. In addition, we own hundreds of non-core domain
names that we may choose to develop, lease or sell in the future to raise funds
in a non-dilutive manner. We generate revenues from this portfolio in
two different ways; through the online sales of products (eCommerce) and through
the sale of advertising. Almost all of the revenues we earned in 2008
were generated from our main health and beauty website,
Perfume.com. Through this website, we sell discount brand name
fragrances, skin care and hair care products directly to
consumers. We also generate revenues by selling online advertising
space to advertisers or in partnership with third party advertising
networks. However, in 2008, advertising accounted for less than 1% of
total revenues.
In 2008,
we began shipping our Perfume.com products to selected international
markets. Until then, we shipped only to delivery addresses located in
the United States. However, sales of products shipped to non-U.S.
locations were immaterial for the 2008 fiscal year and therefore are not
disclosed separately.
The
recent downturn in the global economy has significantly impacted the U.S.
economy and consumer confidence. It remains a challenge for all
retailers, including online retailers, to achieve sales growth with adequate
gross margins. As a result of our dependence on the U.S. marketplace
for sales, it is likely that the current recession will cause a negative impact
to our results for at least the short-term.
During
2008, our revenues were not sufficient to support our operations and we do not
expect this to change soon. Therefore, we must find ways to raise
funds for working capital. Toward the end of the 2008 fiscal year, we
began to experience significant challenges in raising capital through the sale
of our securities and these challenges are on-going. Financing
opportunities have become more expensive and difficult to
find. Furthermore, if we attempted to raise funds through the sale of
our securities, the steep decline in the price of our common stock would result
in significant dilution to our current stockholders. As a result,
management has decided to actively pursue the sale of some of our non-core
domain names to raise funds. At the end of 2008 we sold one domain
name for CDN$500,000, and thus far during 2009 we sold an additional two domain
names for USD$1.65 million. We believe these sales are a testament to
the inherent value of our domain name assets, and together with other
cost-cutting measures, the proceeds will help meet our working capital needs and
management’s strategy to achieve the goal of cash flow positive operations by
the end of 2009.
In 2008,
we had a significant net loss and significant cash outflows. As noted
above, in late 2008 and early 2009 we instituted cost-cutting measures,
including layoffs of staff and the termination of consulting and investor
relations contracts. In addition, our Chief Executive Officer has
agreed to defer the payment of his salary indefinitely.
For the
immediate future, we do not anticipate independently developing technologies,
processes, products or otherwise engaging in research, development or similar
activities. Instead, if we find these activities to be necessary to our
business, we intend to enter into relationships with strategic partners who
conduct such activities.
RESULTS
OF OPERATIONS
Fiscal
Year Ended December 31, 2008 as compared to the Fiscal Year Ended December 31,
2007
Sales
and Costs of Sales
Combined
gross sales totalled $9,364,833 for the year ended December 31, 2008 as compared
to $9,063,329 during the year ended December 31, 2007, a 3.3% overall
increase. The 2007 total included $480,591 in sales related to the
operations of a travel website, FrequentTraveller.com Inc. (“Frequent
Traveller”), which we disposed of in November 2007. Without these
revenues, 2007 total revenues were $8,582,738 and our combined gross sales in
2008 actually grew by over 9.1%. Health and beauty eCommerce product
sales represented 99.0% of total revenues in 2008, compared to 94.3% of total
revenues in 2007.
During
the year ended December 31, 2008, costs of sales overall increased to $7,683,812
as compared to costs of sales of $7,021,473 for the year ended December 31,
2007. The amounts incurred during the 2007 fiscal year included
$506,588 of costs of sales relating to Frequent Traveller’s operations,
therefore total costs of sales incurred during the 2007 fiscal year without this
amount were $6,514,885. This resulted in an increase in costs of
sales of 17.9% which is directly attributable to an increase in costs of sales
with respect to the growth of our eCommerce business as discussed
below.
For the
2008 fiscal year, gross margin was 18.0% compared to an overall gross margin of
22.5% in 2007. These decreases are due to a material decrease in
online advertising revenues which have very high gross margins, as well as an
increase in our efforts to generate significant sales growth by providing more
aggressive discounts, coupons and promotions such as free shipping to
customers.
Total
revenues in Q4 of 2008 of $3,622,036 dropped by 7.8% due to a large decrease in
our advertising revenues and miscellaneous income in this quarter compared to Q4
of 2007, without amounts relating to Frequent Traveller’s
operations. Overall, health and beauty eCommerce product sales
represented 99.5% of total revenues in Q4 of 2008, compared to 94.4% of total
revenues in Q4 of 2007.
Costs of
sales were $3,012,434 in Q4 of 2008 compared to $3,087,927 in Q4 of 2007, a
decrease of 2.4% without costs of sales relating to Frequent Traveller’s
operations. This decrease in costs of sales was primarily due to the
slight decrease in sales in the quarter in our eCommerce business, as well as
the inclusion of inventory on our balance sheet at the end of the fiscal year to
reflect inventories in transit, which had been immaterial at the end of the 2007
fiscal year. Overall gross margin in Q4 of 2008 was 16.8% compared to
a gross margin of 20.6% during Q4 of 2007, without taking into account the
results from Frequent Traveller’s operations.
Health
and Beauty eCommerce Sales
Our
health and beauty eCommerce sales result from the sale of fragrances and
designer skin care and hair care products to customers at Perfume.com and
Body.com. ECommerce monetization of Body.com ended in early 2008 and
since then the domain name has been sold. Perfume.com accounted for
nearly all of our health and beauty eCommerce sales in 2007 and 2008 and we
expect that this will continue in the short term.
The
second half of 2008 presented great challenges for all retailers including
eCommerce, due to the worldwide economic downturn. Despite these
challenges, we were able to achieve significant revenue growth in our health and
beauty eCommerce business compared to 2007. In addition to the
decrease in overall demand, the holiday shopping season was compressed in
2008. This season begins around the U.S. Thanksgiving holiday, which
was later in 2008 than in 2007, resulting in 5 fewer holiday shopping
days. We believe that the continued increases in sales we have
experienced in each quarter demonstrate the strong potential of this business
segment. There is no certainty, however, that such results can be
continued into the foreseeable future. Moreover, it is possible that
due to the continued decline in economic conditions, there may be a further
decrease in consumer spending on discretionary items. Such a decrease
will likely adversely affect the revenues from Perfume.com over the
short-term. All figures below exclude any results from Frequent
Traveller’s operations during the 2007 fiscal year.
In a
press release dated January 2, 2009, ComScore, Inc., a marketing research
company that measures use of the Internet, indicated that eCommerce sales
declined during the 2008 holiday season as compared to the 2007 holiday season,
defined as November 1
st
to
December 24
th
of each
year. According to their research, online sales of "flowers, greetings and
gifts", a category we believe comparable to Perfume.com’s business, declined by
7% over last year's holiday season.
In
contrast to the performance of online sales trends as measured by ComScore Inc.,
we were able to maintain strong sales during the holiday season, resulting in
relatively flat eCommerce sales from Perfume.com in Q4 of 2008 compared to Q4 of
2007.
In Q4 of
2008, the combined health and beauty retail sites generated sales of $3,604,003
compared to $3,705,635 in Q4 of 2007, a decrease of 2.7% year over
year. This resulted in average sales of approximately $39,174 per day
in Q4 of 2008 compared to $40,279 per day in Q4 of 2007. Cost of
purchases and shipping totalled $3,012,606 in Q4 of 2008 compared to $3,085,334
in Q4 of 2007. This produced a gross margin of $591,397 or 16.4% in
Q4 of 2008 compared to $620,301 or 16.7% in Q4 of 2007.
Health
and beauty eCommerce sales in Q4 accounted for 38.9% of total 2008 annual
eCommerce sales compared to 45.8% of total 2007 annual eCommerce
sales.
During
the fiscal year ended December 31, 2008, the combined health and beauty retail
sites generated sales of $9,271,237 compared to $8,092,707 in 2007, or an
average of $25,331 per day in 2008 compared to $22,172 per day in
2007. Costs of purchases and shipping in 2008 totalled $7,683,432
compared to $6,512,292 in 2007, resulting in gross margin of $1,587,805 or 17.1%
in 2008 compared to $1,580,415 or 19.5% in 2007.
Comparable
annual sales have increased by 14.6% while gross margins have decreased to 17.1%
from 19.5%. This decrease in gross margin in 2008 was attributed to a
significant rise in oil prices leading to increased shipping costs, as well as
product discounting and free shipping promotions in 2008 to drive customer and
revenue growth due to increasingly competitive market conditions. We
continue to monitor our overall product offerings, discounts and promotions to
increase, or at least maintain, these profit margins during
2009. While we plan to increase or maintain this profit margin, there
is no certainty that this can be achieved and sustained throughout the year or
continue into the foreseeable future. We also intend to explore
opportunities to introduce and implement a more robust supply chain capability
which, if realized, should increase gross margins by the end of
2010.
Other
eCommerce Sales
In Q1 of
2008, we ceased offering goods or services for sale on any of our websites other
than Perfume.com and undertook to re-evaluate the business models around which
these websites were built. As a result, these websites generated no
revenue after the first quarter of the 2008 fiscal year. For the
first half of 2009 we will continue to allocate our resources to the
development of Perfume.com.
Not
including the revenue earned from Perfume.com or from the operations of Frequent
Traveller, during the 2008 fiscal year our eCommerce retail sites generated
sales of $455 compared to $4,608 in 2007. Costs of sales in the 2008
fiscal year totaled $380 compared to $2,593 in 2007, resulting in gross margin
of $75 or 16.5% in 2008 compared to $2,015 or 43.7% in 2007.
Annual
results for the 2007 fiscal year included eCommerce service sales earned through
Frequent Traveller of $480,591 and costs of sales of $506,588, resulting in a
negative gross margin of 5.4%. Effective November 12, 2007, we
terminated our relationship with Frequent Traveller. Up to the
termination date in Q4 of 2007, Frequent Traveller‘s operations generated sales
of $18,317 and costs of sales of $102,505. This resulted in a
negative gross margin in the period of $84,188 or negative
460%. During 2007, there was no requirement to record any
non-controlling interest in the share of the loss in Frequent
Traveller.
Advertising
In Q4 of
2008, we generated advertising revenues of $18,033 compared to $180,956 in Q4 of
2007, a decrease of 90.0%. We terminated our primary advertising
contract in early 2008 because its restrictive conditions limited monetization
in the medium and long term. Advertising revenues have decreased
every quarter as a result. In Q4 of 2008, advertising accounted for
less than 1% of total revenues. This is similar to every other
quarter in 2008. However in Q4 of 2008, advertising revenues
accounted for 4.7% of total revenues, excluding the results from Frequent
Travellers’s operations. Advertising revenues are expected to
continue to account for a small percentage of total revenues in 2009 as we
investigate new monetization strategies and review our opportunities to increase
advertising options available on our domain properties.
Overall,
during the 2008 fiscal year, advertising revenues of $93,141 were generated
compared to $449,613 in 2007, a decrease of 79.3%. Advertising
revenue had improved in 2007 primarily due to management’s decisions to focus on
search engine optimization, restructure existing relationships and pursue new
relationships with advertising vendors, and redesign the main operating websites
to increase their visibility. However, as a result of the high costs
required to maximize the monetization of our domain names, advertising revenues
dropped in 2008. Management is now pursuing new opportunities to earn
additional advertising revenues, and expects these revenues to increase to
approximately 3% of total revenues in the short term.
Domain
Name Leases and Sales
In 2008,
we entered into one agreement for a sales-type lease of one of our domain names
for CDN$200,000 and one agreement for an outright sale of another domain name
for CDN$500,000. The net gain on the disposal of these two domain
names was USD$498,829 as disclosed in the consolidated financial statements
.
In 2007, there
were no sales or leases of any domain names.
We have
announced our intention to sell six of our non-core but highly valuable dot.com
domain names from our portfolio in order to provide additional working capital
in a non-dilutive manner. We engaged the services of brokers to
assist us with sales of our domain names. As a result of actively
marketing some of our non-core domain name assets for sale, we successfully sold
one domain name in December 2008, as well as two additional domain names thus
far during 2009. We continue to evaluate any interest we receive from
domain name buyers, and continue to consider acquiring certain other domain
names that would complement either our advertising or eCommerce
businesses.
General
and Administrative Expenses
General
and administrative expenses consist of costs for general and corporate
functions, including facility fees, travel, telecommunications, investor
relations, insurance, merchant charges, and professional fees.
Overall,
during 2008, general and administrative expenses of $3,105,402, or 33.2% of
total revenues, were incurred compared to $991,133, or 11.5% of total revenues,
in 2007, an increase of 213.3%. This total includes corporate and
eCommerce related general and administrative costs. We expect these
expenses to decrease as a percentage of revenue in 2009 as the eCommerce
business grows and as a result of our cost cutting measures.
Corporate
general and administrative expenses of $2,537,422 have increased over the 2007
expenses of $686,921 by $1,850,501, or over 269%. This was primarily
due to expenses incurred for investor relations services of approximately
$347,000 in cash and common stock valued at approximately $366,000, costs of
$381,143 related to our acquisition activities that were expensed during the
year, and $283,414 in increased rent and overhead due to our move to our new
offices, increased telecommunications for new staff and website related hosting
costs, and increased travel and office expenses due to increased
growth. The remainder of the increase in corporate general and
administrative expenses was due to increases in legal fees of $267,160 and audit
and accounting fees of $164,246 due to increased corporate activity and SEC
filings, as well as the purchase of additional insurance policies and increased
premium costs which combined totalled $40,165. In total, these
expenses accounted for 27.1% of total revenues in 2008 and 8.0% of total
revenues in 2007. We are implementing strategies in 2009 to decrease
corporate general and administrative costs as a percentage of revenue in the
future, however there is no certainty that our attempts will be
successful.
We
anticipate that we may incur additional legal expenses to comply with new
disclosure and reporting requirements mandated by the British Columbia
Securities Commission for companies listed on the OTC Bulletin Board with a
presence in British Columbia. These regulations were effective as of
September 15, 2008.
ECommerce
general and administrative costs of $567,980 have increased over the 2007
expense of $304,212 by $263,768, or 86.7%. This was primarily a
result of human resources costs of approximately $105,271 which have been
eliminated for 2009. In 2008, there were also increased travel
expenses of $57,202, internet traffic and telecommunication charges of $18,814,
IT consulting of $54,337 and $21,704 in increased merchant fees generated on
increased sales. These expenses represented 6.1% of eCommerce sales
in 2008 compared to 3.8% of eCommerce sales in 2007. We believe that
these expense ratios are reasonable given the increasingly competitive
environment for eCommerce sales and our continued focus on growing the eCommerce
business throughout 2009. We expect to maintain eCommerce general and
administrative costs below 10% of eCommerce sales.
Management
Fees and Employee Salaries
In 2008,
we incurred $4,746,255 in management fees and staff salaries compared to
$1,981,051 in 2007. However, these amounts include items such as
stock based compensation expense of $2,111,354 in 2008 and $428,028 in 2007, and
bonuses accrued but unpaid of $235,650 in 2008 and $241,290 in
2007. Excluding these amounts, normalized management fees were
$2,399,251 in 2008, representing an increase of 82.9% over normalized management
fees of $1,311,733 in 2007. The addition of a new executive management
team in late 2007 and early 2008, acquiring new senior employees through the
Auctomatic merger, an expansion of the IT department, and the use of various
consultants in our eCommerce business to help scale revenues, all contributed to
a larger expense in 2008. Normalized management fees and salaries
represented 25.6% of total revenues in 2008 and 15.3% in
2007. Subsequent to the end of the 2008 fiscal year, our staffing
requirements were restructured and a number of employees were laid off,
including our former President and Chief Operating Officer. After
severance payments have been fully paid out, the reduced number of staff will
contribute to a decrease in management fees and salaries as a percentage of
revenue. We anticipate maintaining salary expense at approximately
20% of revenues.
Executive
compensation in 2008 of $3,354,064, as compared to $1,452,611 in 2007, accounted
for 70.7% of the total management fees and employee salary expense, as compared
to 73.0% in 2007. Excluding executive compensation, employee salaries
increased by 163% due to the addition of personnel resources in both the health
and beauty business and administrative support.
Marketing
We
generate internet traffic through paid search, email and affiliate
marketing. We pay marketing costs related to search and email in
order to drive traffic to our various websites. We pay our affiliates
sales commissions if they deliver traffic to Perfume.com that result in a
successful sale. In the year ended December 31, 2008, total marketing
expenses were $808,792, or 8.6% of total revenues, compared to $817,101, or 9.5%
of total revenues, in 2007, a 1.0% decrease year over year.
Expenses
related to corporate activity, which we classify as corporate marketing
expenditures, totalled $42,399 for 2008. These expenses consisted
entirely of costs related to public relations. There were no such
costs in 2007.
ECommerce
marketing expenses relate entirely to advertising costs incurred in our
eCommerce business, particularly email advertising, search engine marketing, and
affiliate marketing programs. In 2008, eCommerce marketing expenses
of $766,393 decreased by 6.2% compared to $817,101 in 2007. These
expenses decreased steadily during 2008 due to management’s decision to move key
marketing efforts in-house, thereby eliminating agency expenses, as well as to
take steps to increase the effectiveness of our search engine and email
marketing campaigns for Perfume.com. We believe that customer
acquisition is the key to accelerated growth, and deploying direct, measurable
marketing vehicles like search, email, and affiliate marketing account for the
largest part of these marketing expenditures.
In 2008
eCommerce marketing expenses were 8.3% of eCommerce sales, compared to 10.1% of
eCommerce sales in 2007. This was largely due to expenses related to
television advertising and internet search positioning during the 2007 holiday
season, which we did not incur in 2008.
Organic
search rankings for Perfume.com currently perform
adequately. However, we believe when these results are complemented
with targeted, paid keyword advertising at opportune times, it brings additional
traffic to Perfume.com. We believe that the more strategic and
measurable advertising expenditures implemented during the year were a
contributing factor to increased revenues in 2008.
Marketing
costs coincide with revenue growth and are expected to be in the range of 10% of
gross product revenue. We have been able to maintain marketing costs below
10% of revenues while aggressively marketing our products and
services.
Other
Expenses
In 2008,
we incurred various restructuring costs of $708,804. These included
approximately $168,400 in severance payments and $25,700 in consulting fees for
assistance with the transition of the new management team, both of which were
paid to our former Chief Financial Officer, $317,100 in signing bonuses which
were paid to our new Chief Corporate Development Officer and our new Vice
President Finance, additional severance of $53,600 paid to one of our full time
employees, $39,800 in costs related to changing the Company name and rebranding,
$31,700 in valuation costs relating to the issuance of Domain Holdings
Inc.’s common stock to the Company for the conversion of $3,000,000 in
intercompany debt, and $27,300 in some final windup costs related to the
disposition of Frequent Traveller in late 2007. This total also
included $45,000 in financing costs related to our discussions with investment
bankers to raise capital. Financing costs that were directly
identifiable with the raising of our round of capital during the fourth quarter
were charged to equity. However, the amounts included in “other
expenses” are costs relating to transactions that are no longer being pursued,
and therefore are no longer directly identifiable with the raising of capital
and expensed during the quarter.
In 2007,
we incurred costs relating to restructuring and the recruiting and relocating
costs associated with attracting the new management team. These costs
included a $205,183 severance payment to our former Chief Executive Officer,
$30,558 in consulting fees to our former Chief Executive Officer, a $205,183
signing bonus to our President and Chief Operating Officer, and $196,806 of
general legal costs associated with the preparation of employment agreements,
severance agreements and stock option agreements.
Global
Cricket Venture Expenses
We
incurred costs of approximately $1.47 million relating to the initial
performance of our obligations under agreements we entered into with each of the
BCCI and the IPL, and establishing Global Cricket Venture with
Netlinkblue. These costs are related to, but are not limited to,
expenditures for business development, product development, travel, consulting,
and salaries. We incurred no such costs during the 2007 fiscal
year. Furthermore, pursuant to these agreements, on October 1, 2008
we were scheduled to make payments to the BCCI and the IPL in the amounts of
$625,000 and $375,000, respectively. Therefore, an additional $1
million was accrued and expensed in 2008, resulting in $2.47 million in total
costs expensed for the year related to this venture. On March 31,
2009 the agreements with the BCCI and the IPL were terminated as to
us. Our rights and obligations relating to the agreement with the IPL
were assigned to, and assumed by, Global Cricket Venture. We may be
required to provide Global Cricket Venture with a portion of the funds necessary
to make these payments. The payments are now due on July 1,
2009.
Liquidity
and Capital Resources
We
generate revenues from the sale of third-party products over the internet,
“pay-per-click” advertising, selling advertising on media rich websites with
relevant content, and the sale or lease of domain name
assets. However, during the 2008 fiscal year our revenues were not
adequate to support our operations. In order to conserve cash, we
paid certain service providers with shares of our common stock during the year,
and we continue to explore opportunities to do so in 2009 as well.
In
November 2008, we also raised $1,057,775 of cash by selling 1,627,344 units
consisting of one share of our common stock and two warrants, each for the
purchase of a half share of common stock. The offering price was
$0.65 per unit.
As at
December 31, 2008, current liabilities were in excess of current assets
resulting in a working capital deficiency of $3,164,157 as compared to positive
working capital of $5,930,413 at the fiscal year ending December 31,
2007. During the year ended December 31, 2008, we incurred a loss of
$10,006,456 and a decrease in cash of $5,542,725, compared to net loss of
$2,017,949 and an increase in cash of $5,269,905 for the year ended December 31,
2007. The net loss for 2008 included incorporation and start up
expenses for Global Cricket Venture of $2,476,255, which have been expensed in
the year due to uncertainty regarding reimbursement of these costs by Global
Cricket Venture. During 2008, we increased our accumulated deficit to
$12,532,134 from $2,525,678 in 2007 and have stockholders’ equity of $2,255,601,
primarily due to the net loss for the year and the issuance of common
stock.
The
decrease in cash during the 2008 fiscal year includes cash outlays that are
either unusual or non-operational in nature. During the year, cash
outlays included amounts paid in connection with the acquisition of Auctomatic
of $1.29 million, payments relating to Global Cricket Venture and expenses
incurred to perform under the agreements with the BCCI, the IPL and Netlinkblue
of $1.1 million, and other expenditures of $709,000 relating to changing our
name, rebranding and restructuring the management team. Without these
expenditures, cash decreased due to operations by approximately $204,000 per
month.
Operating
Activities
Operating
activities in 2008 resulted in cash outflows of $4,854,260 after adjustments for
non-cash items, the most significant of which were the stock-based compensation
expensed during the year of $2,111,354 and the increase in accounts payable of
$2,615,835 partially due to large accruals and unpaid invoices for goods and
services at the end of 2008.
Operating
activities in 2007 resulted in cash outflows of $951,973 after adjustments for
non-cash items, the most significant of which were the stock-based compensation
expensed during the year of $428,028 and the increase in accounts payable of
$523,574 partially due to accrued audit fees that did not exist at the 2006 year
end, as well as accrued bonuses of $241,290.
Investing
Activities
Investing
activities in 2008 generated cash outflows of $1,659,437, primarily due to cash
consideration and related acquisition costs of $1,530,047 related to the
Auctomatic merger. We also invested $187,532 in the purchase of
property and equipment, as well as approximately $451,000 in website development
as we worked towards our pre-holiday launch of Perfume.com.
Investing
activities in 2007 generated cash inflows of $101,978, due to the sale of all
“available for sale” securities and the purchase of approximately $160,000 of
property and equipment, mostly consisting of leasehold improvements for our new
office location.
Financing
Activities
Financing
activities in 2008 generated $970,972 of cash inflows due to the issuance of 1.6
million shares of common stock in connection with our November 2008 private
placement.
Financing
activities in 2007 generated $6,119,900 of cash inflows due primarily to the
issuance of 1,000,000 shares of common stock to our new Chief Executive Officer
in June 2007 and the issuance of common stock in the private offering that we
undertook in September and October 2007, which raised approximately
$5,100,000.
Future
Operations
At the
2008 year end we had a working capital deficiency and for the past two fiscal
years we have experienced substantial losses. We expect to continue
to incur losses in the coming quarters even though costs have been reduced
through lay-offs and restructuring. We may also seek to explore new
business opportunities, including the partnering, building or acquisition of a
distribution center or warehouse in the United States to enhance our fragrance
fulfillment capability and improve gross margins. These acquisitions
may require additional cash beyond what is currently available and such funds
may be raised by future equity and/or debt financings and through the sale of
non-core domain name assets.
During
the 2009 fiscal year we expect to expend significant funds toward additional
marketing costs, which we believe will translate into higher revenue growth, as
well as to fund costs related to Global Cricket Venture. There is no
certainty that the revenues we may generate going forward, together with any
funds we may be able to raise through the sale of our debt or equity securities,
will be sufficient to offset the anticipated marketing costs, Global Cricket
Venture costs, and other expenditures of our busines and may result in net cash
outflow for the 2009 fiscal year.
We have
curtailed some operations and growth activities in an effort to reduce costs and
preserve cash on hand. We are also continuing to seek opportunities
to sell selected domain names in order to address short term liquidity
needs. As a result, we have entered into agreements with brokers to
sell several of our non-core but highly valuable dot-com domain names from our
portfolio of more than 800 domain names. One domain name was
successfully sold on December 31, 2008 for CDN$500,000. To date in
2009, we sold an additional two domain names for proceeds of $1.65
million. We anticipate that further strategic sales of these domain
names, if successful, will provide us with the required cash to meet our working
capital needs, to fund the expenditures related to Global Cricket Venture, and
to provide for general operating capital needs over the next 12 to 18
months. There can be no assurances that any future sales of domain
names on terms acceptable to us will occur.
The
consolidated financial statements included in this prospectus have been prepared
on a going concern basis which assumes that we will be able to realize assets
and discharge liabilities in the normal course of business for the foreseeable
future. Our ability to continue as a going-concern is in substantial
doubt as it is dependent on continued financial support from our investors, our
ability to sell additional non-core domain names, our ability to raise money
through future debt or equity financings, and the attainment of profitable
operations to meet our liabilities as they become payable. The
outcome of our operations and fundraising efforts is dependent in part on
factors and sources beyond our direct control that cannot be predicted with
certainty. Access to future debt or equity financing is not assured
and we may not be able to enter into arrangements with financing sources on
acceptable terms, if at all. Our financial statements do not include
any adjustments relating to the recoverability or classification of assets or
the amounts or classification of liabilities that might be necessary should we
be unable to continue as a going concern.
On
October 1, 2008 and on January 1, 2009 we were scheduled to make payments to the
BCCI, each in the amount of $625,000, and payments to the IPL, each in the
amount of $375,000, pursuant to the agreements that were signed on April 16,
2008. On March 31, 2009 we and the BCCI agreed to terminate our
agreement and we, the IPL and Global Cricket Venture amended the agreement with
the IPL. Pursuant to the amendment, we assigned to Global Cricket
Venture our rights, and Global Cricket Venture assumed our obligations, under
our agreement with the IPL, including the obligation that we make certain
minimum payments to the IPL and the BCCI. Through LCM Cricket Venture
Pte. Ltd., our current ownership interest in Global Cricket Venture is
50.05%.
According
to our agreement with our joint venture partner, Netlinkblue, once we and
Netlinkblue each transfer the rights we received from the BCCI and the IPL into
Global Cricket Venture, certain rights and obligations will arise, including the
obligation that each of us provides funding to Global Cricket
Venture. On March 31, 2009, we and the BCCI jointly terminated our
agreement and we assigned our agreement with the IPL to Global Cricket
Venture. To our knowledge, Netlinkblue has not transferred the rights
it received from the BCCI and the IPL to Global Cricket Venture, therefore, as
of the date of this prospectus, we do not believe that we have an obligation to
provide funding to Global Cricket Venture. The first payment due from
Global Cricket Venture to the BCCI and the IPL is to be paid on July 1,
2009. The amount of the payment is $2,250,000. If Global
Cricket Venture is unable to make the required payments to the BCCI or the IPL,
and no extension or renegotiation of the payment terms can be arranged, it may
be exposed to potential liability for defaulting on its payment. Such
claims could include breach of contract, lack of performance and other claims
for damages. If these events were to occur, they could have a
negative effect on our overall anticipated results of operations and
performance.
We have
no current plans to purchase any significant property or equipment.
Our
online business is subject to seasonal influences. Sales volumes in
the fragrance industry typically accelerate during the fourth quarter,
especially in November and December. In 2008, fourth quarter
eCommerce product sales accounted for approximately 39% of total eCommerce
product sales.
OFF
BALANCE SHEET ARRANGEMENTS
As of
December 31, 2008, we did not have any off-balance sheet arrangements, including
any outstanding derivative financial instruments, off-balance sheet guarantees,
interest rate swap transactions or foreign currency contracts. We do
have off-balance sheet commitments as disclosed in the notes to our consolidated
financial statements. We do not engage in trading activities
involving non-exchange traded contracts.
APPLICATION
OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Basis
of presentation
Our
consolidated financial statements and accompanying notes are prepared in
accordance with United States generally accepted accounting
principles. Preparing financial statements requires management to
make estimates and assumptions that affect the reported amounts of assets,
liabilities, revenue, and expenses. These estimates and assumptions
are affected by management's application of accounting policies. We
believe that understanding the basis and nature of the estimates and assumptions
involved with the following aspects of our consolidated financial statements is
critical to an understanding of our operating results and financial
position.
Going
Concern
Our
consolidated financial statements have been prepared on a going concern basis
which assumes that we will be able to realize our assets and discharge our
liabilities in the normal course of business for the foreseeable
future. We have generated a consolidated net loss of $10,006,456 and
realized a negative cash flow from operating activities of $4,854,260 for the
year ended December 31, 2008. At this date, we had a working capital
deficiency of $3,164,157, as compared to positive working capital of $5,930,413
at December 31, 2007. At December 31, 2008 we had an accumulated
deficit of $12,532,134, as compared to an accumulated deficit of $2,525,678 at
December 31, 2007. Stockholders equity was $2,255,601 at December 31,
2008, as compared to stockholders equity of $7,675,753 at December 31,
2007.
Our
ability to continue as a going-concern is in substantial doubt as it is
dependent on a number of factors including, but not limited to, the receipt of
continued financial support from our investors, our ability to sell additional
non-core domain names, our ability to raise equity or debt financing as we need
it, and whether we will be able to use our securities to meet certain of our
liabilities as they become payable. The outcome of these matters is
dependant on factors outside of our control and cannot be predicted at this
time.
Our
financial statements do not include any adjustments relating to the
recoverability or classification of assets or the amounts or classification of
liabilities that might be necessary if we were unable to continue as a going
concern.
Principles
of Consolidation
Our
consolidated financial statements include our accounts as well as those of our
subsidiaries. The comparative figures for the 2007 fiscal year
include our 50.4% interest in Frequent Traveller (from January 1, 2007 until the
sale of our controlling interest in Frequent Traveller on November 12,
2007). All significant intercompany balances and transactions are
eliminated on consolidation.
Revenue
Recognition
Revenues
and associated costs of goods sold from the on-line sales of products, which
currently consist primarily of fragrances and other beauty products, are
recorded upon delivery of products and determination that collection is
reasonably assured. We record inventory as an asset for items in
transit as title does not pass until received by the customer. All
associated shipping and handling costs are recorded as cost of goods sold upon
delivery of products.
Web
advertising revenue consists primarily of commissions earned from the referral
of visitors to our sites from other parties. The amount and
collectibility of these referral commissions is subject to uncertainty;
accordingly, revenues are recognized when the amount can be determined and
collectibility can be reasonably assured. In accordance with Emerging
Issues Task Force (“EITF”) 99-19,
Reporting Revenue Gross as a
Principal versus Net as an Agent
, we record web advertising revenue on a
gross basis.
Until the
disposal of our shares in FrequentTraveller.com Inc. on November 12, 2007,
revenues from the sales of travel products, including tours, airfares and hotel
reservations, where we acted as the merchant of record and had inventory risk,
were recorded on a gross basis. Customer deposits received prior to
ticket issuance or 30-days prior to travel were recorded as deferred
revenue. Where we did not act as the merchant of record and had no
inventory risk, revenues were recorded at the net amounts, without any
associated cost of revenue in accordance with EITF 99-19. See also
Note 4 to our consolidated financial statements.
Revenue
from the sale of domain names, whose carrying values are recorded as intangible
assets, consists primarily of funds earned for the transfer of rights to domain
names that are currently in our control. Revenues have been
recognized when the sale agreement is signed and the collectibility of the
proceeds is reasonably assured. In 2008, there was a sale of a domain
name for net proceeds of $369,041. Collectibility of the amounts
owing on this sale are reasonably assured and therefore accounted for as a sale
in the period the transaction occurred. There were no sales of domain
names during 2007.
Revenue
from the sales-type leases of domain names, whose carrying values are recorded
as intangible assets, consists primarily of funds earned over a period of time
for the transfer of rights to domain names that are currently in our
control. Collectibility of these revenues is reasonably assured and
therefore accounted for as a sales-type lease in the period the transaction
occurs. See also Note 11 to our consolidated financial
statements.
Stock-Based
Compensation
During
the third quarter of 2007, we implemented the following accounting policy
related to our stock-based compensation. Beginning July 1, 2007, we
began accounting for stock options under the provisions of Financial Accounting
Standards No. 123 (revised 2004),
Share-Based Payment
(“FAS
123(R)”), which requires the recognition of the fair value of stock-based
compensation. Under the fair value recognition provisions for FAS
123(R),stock-based compensation cost is estimated at the grant date based on the
fair value of the awards expected to vest and is recognized as expense ratably
over the requisite service period of the award. We have used the
Black-Scholes valuation model to estimate fair value of our stock-based awards
which require various assumptions including estimating price volatility and
expected life. Our computation of expected volatility is based on a
combination of historic and market-based implied volatility. In
addition, we consider many factors when estimating expected life, including
types of awards and historical experience. If any of these assumptions used in
the Black-Scholes valuation model change significantly, stock-based compensation
expense may differ materially in the future from what is recorded in the current
period.
In August
2007, our board of directors approved a Stock Incentive Plan to make available
5,000,000 shares of common stock for the grant of stock options, including
incentive stock options. Stock options may be granted to our
employees (who may receive incentive stock options), officers, directors,
consultants, independent contractors and advisors, provided such consultants,
independent contractors and advisors render bona-fide services not in connection
with the offer and sale of securities in a capital-raising transaction or
promotion of our securities. See also Note 10 to our consolidated
financial statements.
We
account for equity instruments issued in exchange for the receipt of goods or
services from other than employees in accordance with FAS No. 123(R) and the
conclusions reached by the EITF in Issue No. 96-18. Costs are
measured at the estimated fair market value of the consideration received or the
estimated fair value of the equity instruments issued, whichever is more
reliably measurable. The value of equity instruments issued for
consideration other than employee services is determined on the earliest of a
performance commitment or completion of performance by the provider of goods or
services as defined by EITF 96-18.
Inventory
Inventory
is recorded at the lower of cost or market using the first-in first-out (FIFO)
method. We maintain little or no inventory of perfume which is
shipped from the supplier directly to the customer. The inventory on
hand as at December 31, 2008 is recorded at cost of $74,082 and represents
inventory in transit from the supplier to the customer.
Website
development costs
We have
adopted the provisions of EITF No. 00-2,
Accounting for Web Site Development
Costs
, whereby costs incurred in the preliminary project phase are
expensed as incurred; costs incurred in the application development phase are
capitalized; and costs incurred in the post-implementation operating phase are
expensed as incurred. Website development costs are stated at cost
less accumulated amortization and are amortized using the straight-line method
over its estimated useful life. Upgrades and enhancements are
capitalized if they result in added functionality which enables the software to
perform tasks it was previously incapable of performing.
Intangible
Assets
We have
adopted the provision of FAS No. 142,
Goodwill and Intangible
Assets
, which revises the accounting for purchased goodwill and
intangible assets. Under FAS No. 142, intangible assets with
indefinite lives are no longer amortized and are tested for impairment
annually. The determination of any impairment would include a
comparison of estimated future operating cash flows anticipated during the
remaining life with the net carrying value of the asset as well as a comparison
of the fair value to its book value.
Our
intangible assets, which consist of our portfolio of generic domain names, have
been determined to have an indefinite life and as a result are not
amortized. Management has determined that there is no impairment of
the carrying value of intangible assets at December 31, 2008.
Goodwill
Goodwill
represents the excess of acquisition cost over the fair value of the net assets
of acquired entities.
In accordance with FAS
No. 142,
Accounting for
Goodwill and Other Intangible Assets
,
we are
required to assess the carrying value of goodwill annually or whenever
circumstances indicate that a decline in value may have occurred, utilizing a
fair value approach at the reporting unit level.
A reporting unit is the
operating segment, or a business unit one level below that operating segment,
for which discrete financial information is prepared and regularly reviewed by
segment management.
The
goodwill impairment test is a two-step impairment test.
In the first step, we
compare the fair value of each reporting unit to its carrying value.
We determine the fair
value of our reporting units using a discounted cash flow approach.
If the fair value of the
reporting unit exceeds the carrying value of the net assets assigned to that
reporting unit, goodwill is not impaired and we are not required to perform
further testing.
If the carrying value of
the net assets assigned to the reporting unit exceeds the fair value of the
reporting unit, then we must perform the second step in order to determine the
implied fair value of the reporting unit’s goodwill and compare it to the
carrying value of the reporting unit’s goodwill.
The activities in the
second step include valuing the tangible and intangible assets and liabilities
of the impaired reporting unit based on their fair value and determining the
fair value of the impaired reporting unit’s goodwill based upon the residual of
the summed identified tangible and intangible assets and
liabilities.
The fair
value of the Perfume.com reporting unit exceeded the carrying value of the
assigned net assets, therefore no further testing was required and an impairment
charge was not required.
Income
Taxes
During
the first quarter of 2007, we adopted the following accounting policy related to
income tax. Beginning on January 1, 2007, we began accounting for
income tax under the provisions of Financial Accounting Standards Board (“FASB”)
Interpretation No. 48,
Accounting for Uncertainty in Income
Taxes-an interpretation of FASB Statement No. 109
(“FIN
48”). FIN 48 clarifies the accounting for uncertainty in income taxes
recognized in an enterprise’s financial statements in accordance with FASB
Statement 109,
Accounting for
Income Taxes
, and prescribes a recognition threshold and measurement
process for financial statement recognition and measurement of a tax position
taken or expected to be taken in a tax return. FIN 48 also provides
guidance on derecognition, classification, interest and penalties, accounting in
interim periods, disclosure and transition. We and our
subsidiaries are subject to U.S. federal income tax and Canadian
income tax, as well as income tax of multiple state and local
jurisdictions. Based on our evaluation, we have concluded that there
are no significant uncertain tax positions requiring recognition in our
financial statements. Our evaluation was performed for the tax years
ended December 31, 2002, 2003, 2004, 2005, 2006, 2007 and 2008, the tax years
which remain subject to examination by major tax jurisdictions as of December
31, 2008. We may from time to time be assessed interest or penalties
by major tax jurisdictions, although any such assessments historically have been
minimal and immaterial to our financial results. We classified these
assessments in our financial statements as selling, general and administrative
expense.
RECENT
ACCOUNTING PRONOUNCEMENTS
FAS
No. 162
In May,
2008, the FASB issued FAS No. 162,
The Hierarchy of Generally Accepted
Accounting Principles.
The new standard is intended to improve financial
reporting by identifying a consistent framework, or hierarchy, for selecting
accounting principles to be used in preparing financial statements that are
presented in conformity with U.S. generally accepted accounting principles
(GAAP) for nongovernmental entities. This Statement is effective 60 days
following the SEC’s approval of the Public Company Accounting Oversight Board
amendments to AU Section 411,
The Meaning of
Present Fairly in Conformity With
Generally Accepted Accounting Principles
. We do not expect
that this Statement will result in a change in current practice.
FAS
No. 161
In
March 2008, the FASB issued FAS No. 161,
Disclosures about Derivative
Instruments and Hedging Activities
,
an amendment of FAS
No. 133
. FAS No. 161 is intended to improve
financial standards for derivative instruments and hedging activities by
requiring enhanced disclosures to enable investors to better understand their
effects on an entity's financial position, financial performance and cash flows.
Entities are required to provide enhanced disclosures about: how and why an
entity uses derivative instruments; how derivative instruments and related
hedged items are accounted for under FAS No. 133 and its related
interpretations; and how derivative instruments and related hedged items affect
an entity's financial position, financial performance and cash
flows. FAS No. 161 is effective for financial statements issued
for fiscal years and interim periods beginning after November 15, 2008,
which, for us, would be the fiscal year beginning January 1, 2009. We are
currently assessing the impact of FAS No. 161 on our financial position and
results of operations.
FAS
142-3
In April
2008, the FASB issued FSP FAS 142-3,
Determination of the Useful Life of
Intangible Assets
(“FSP FAS 142-3”). FSP FAS 142-3 amends the
factors that should be considered in developing renewal or extension assumptions
used to determine the useful life of a recognized intangible asset under SFAS
No. 142,
Goodwill and Other
Intangible Assets
(“SFAS 142”). The intent of FSP FAS 142-3 is
to improve the consistency between the useful life of a recognized intangible
asset under SFAS 142 and the period of expected cash flows used to measure the
fair value of the asset under SFAS 141(R) and other applicable accounting
literature. FSP FAS 142-3 is effective for financial statements
issued for fiscal years beginning after December 15, 2008, which, for us, would
be the fiscal year beginning January 1, 2009. We are currently
assessing the impact of FSP FAS 142-3 on our financial position and results of
operations.
FAS
141
In
December 2007, the FASB issued FAS No. 141 (revised 2007),
Business Combinations
("141R"). FAS No. 141R significantly changes the accounting for
business combinations in a number of areas including the treatment of contingent
consideration, pre-acquisition contingencies, transaction costs, in-process
research and development and restructuring costs. In addition, under FAS
No. 141R, changes in an acquired entity's deferred tax assets and uncertain
tax positions after the measurement period will impact income tax expense. This
standard will change accounting treatment for business combinations on a
prospective basis. FAS No. 141R is effective for fiscal years beginning
after December 15, 2008, which, for us, would be the fiscal year beginning
January 1, 2009. We are currently assessing the impact of FAS No.
141R on our financial position and results of operations.
FAS
160
In
December 2007, the FASB issued FAS No. 160
Noncontrolling Interests in
Consolidated Financial Statements
, and simultaneously revised FAS 141
Business
Combinations
. This Statement applies prospectively to business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15, 2008, which,
for us, would be the fiscal year beginning January 1, 2009. An entity may not
adopt the policy before the transitional date. We are currently
assessing the impact of FAS No. 160 and the revision of FAS 141 on our financial
position and results of operations.
Fas
159
In
February 2007, the FASB issued FAS 159,
Fair Value Option for Financial
Assets and Financial Liabilities
, which allows an irrevocable option, the
Fair Value Option, to carry eligible financial assets and liabilities at fair
value. The election is made on an instrument-by-instrument basis. Changes in
fair value for these instruments are recorded in earnings. The objective of FAS
159 is to improve financial reporting by providing entities with the opportunity
to mitigate volatility in reported earnings caused by measuring related assets
and liabilities differently without having to apply complex hedge accounting
provisions.
We
adopted FAS 159 in 2008. The adoption did not have a material effect
on our financial results.
FAS
157
In
September 2006, the FASB issued FAS No. 157,
Fair Value
Measurements
. This Statement defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles
(GAAP), and expands disclosures about fair value measurements. This
standard does not require any new fair value measurements.
In
February 2008, the FASB issued FASB Staff Position (“FSP”) FAS 157-2, which
delays the effective date of FAS No. 157 to fiscal years beginning after
November 15, 2008 for nonfinancial assets and nonfinancial liabilities, except
for those items that are recognized or disclosed at fair value in the financial
statements on a recurring basis, which for us would be the fiscal year beginning
January 1, 2009.
In 2008,
we adopted FAS 157 for financial assets and liabilities recognized at fair value
on a recurring basis. The adoption did not have a material effect on our
financial results. The disclosures required by FAS 157 for financial assets and
liabilities measured at fair value on a recurring basis as at December 31, 2008
are included in Note 3.
We will
apply the requirements of FAS 157 for fair value measurements of financial and
nonfinancial assets and liabilities not valued on a recurring basis in 2009. We
are currently evaluating the effect of this application on our financial
reporting and disclosures.
In
October 2008, the FASB issued FSP No. FAS 157-3,
Determining the Fair Value of a
Financial Asset When the Market for that Asset is Not Active
, which
clarifies the application of FAS 157 in determining the fair value of a
financial asset when the market for that asset is not active. FSP FAS
157-3 is effective as of the issuance date and has not affected the valuation of
our financial assets.
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Effective
January 24, 2008, Dale Matheson Carr-Hilton LaBonte LLP (“Dale Matheson”) was
dismissed as our certifying independent public accountant engaged to audit our
consolidated financial statements. Dale Matheson audited our
financial statements for the fiscal years ended December 31, 2006 and 2005, and
it reviewed our unaudited financial statements for the fiscal quarters ended
March 31, 2007, June 30, 2007, and September 30, 2007. The report of
Dale Matheson on our consolidated financial statements for the fiscal years
ended December 31, 2006 and 2005 did not contain an adverse opinion, or a
disclaimer of opinion, and was not qualified or modified as to uncertainty,
audit scope, or accounting principles, except for an explanatory paragraph in
our Form 10-KSB for the year ended December 31, 2006 as filed with the
Securities and Exchange Commission on April 2, 2007, which provides that
subsequent to the issuance of our 2005 consolidated financial statements and
Dale Matheson’s initial report dated March 24, 2006, management discovered facts
that existed at the date of the report, related to certain equity transactions,
which resulted in a restatement of certain information in the 2005 consolidated
financial statements.
During
the 2005 and 2006 fiscal years and the subsequent interim period through the
date of dismissal of Dale Matheson, there were no disagreements with Dale
Matheson on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure, which disagreements if not
resolved to the satisfaction of Dale Matheson would have caused Dale Matheson to
make reference to the subject matter of the disagreement in connection with
their report, nor were there any “reportable events” as described in regulations
promulgated under the Securities Exchange Act of 1934, as amended.
Effective
January 24, 2008, we engaged Ernst & Young LLP (“EY”) to serve as our new
independent certifying public accountant to audit our financial statements
beginning with the fiscal year ended December 31, 2007.
Prior to
engaging EY, we had not consulted EY regarding the application of accounting
principles to a specified transaction, completed or proposed, the type of audit
opinion that might be rendered on our financial statements or a reportable
event, nor did we consult with EY regarding any disagreements with our prior
auditors on any matter, scope or procedure, which disagreements, if not resolved
to the satisfaction of the prior auditor, would have caused it to make a
reference to the subject matter of the disagreements in connection with its
reports.
The
dismissal of Dale Matheson as our certifying independent public accountant and
the engagement of EY as our new certifying independent public accountant were
both approved by our board of directors on January 24, 2008.
BUSINESS
We were
incorporated under the laws of the State of Nevada on October 10, 1995 under the
name “Troyden Corporation”. We changed our name on August 21, 2000
from Troyden Corporation to “Communicate.com Inc.”, and again on May 30, 2008 to
Live Current Media Inc.
Our
corporate website is located at
www.livecurrent.com
. Information
included on the website is not a part of this prospectus.
We have 6
subsidiaries, 3 of which are significant to our business.
Our
principal operating subsidiary is Domain Holdings Inc. (“Domain
Holdings”). We own approximately 98.2% of Domain Holdings’
outstanding capital stock. Domain Holdings owns our domain names,
including Perfume.com.
On March
13, 2008, we incorporated a wholly owned subsidiary in the state of Delaware,
Communicate.com Delaware, Inc. (“Delaware”). Delaware was
incorporated to facilitate the merger with Auctomatic, described
below.
On August
8, 2008, we formed a wholly-owned subsidiary in Singapore, LCM Cricket Ventures
Pte. Ltd. (“LCM Cricket Ventures”). This company holds 50.05% of
Global Cricket Venture Pte. Ltd., which is also described below in the section
titled “Global Cricket Venture: Development of IPLt20.com”
.
OUR
BUSINESS
Through
Domain Holdings, we own more than 800 domain names. Our goal is to
develop a portfolio of operating businesses either by ourselves or by entering
into arrangements with businesses that operate in the product or service
categories that are described by the domain name assets we own. Our
domain names span several consumer and business-to-business categories including
health and beauty (such as Perfume.com), sports and recreation (such as
Cricket.com and Boxing.com), travel (such as Brazil.com and Indonesia.com), and
global trade (Importers.com). We believe that we can develop and
sustain businesses based on these intuitive domain names in part because of the
significant amount of search and direct type-in traffic they
receive. One of the best ways to ensure sites are found through
search is to have a powerful domain name asset as a low-cost customer
acquisition vehicle that easily enables ownership of the subject
category.
We own a
number of .cn (China) domain names. We believe that the .cn domain
names could have significant value as the internet market in China
develops. We also have a number of non-core “bound.com” domain names
that we may choose to develop that cover expansive categories of interest such
as shoppingbound.com, pharmacybound.com and vietnambound.com.
We have
organized our operations into two principal segments: (1)
eCommerce Products
, which we
refer to in this discussion as “health and beauty”, and (2)
Advertising.
Our
health and beauty websites generate revenue by facilitating the sale of products
direct to consumers (eCommerce). Currently, our eCommerce revenues
are primarily derived from the sale of fragrance products to consumers at our
Perfume.com website. Our sports and recreation, travel, and global
trade websites generate revenues through the sale of online advertising space to
advertisers, derived by offering “pay per click” and display advertising on
various websites in our portfolio.
Prior to
November 12, 2007, we also sold travel services through our majority-owned
subsidiary FrequentTraveller.com Inc. This business has been
terminated.
eCommerce
Revenues
We
currently generate almost all of our eCommerce revenues through product sales on
Perfume.com. We plan to continue to build Perfume.com eCommerce
revenues by expanding to more efficient distribution and fulfillment channels,
creating a more engaging consumer experience, and performing continued technical
improvements to the websites. We will also continue to explore other
product-related revenue streams across our domain name portfolio.
Health
and Beauty Products
Our
Perfume.com website sells discounted brand name fragrances, including women’s
perfume, men’s cologne, and designer hair care and skin care products direct to
consumers in the United States and select international
markets. Perfume.com sells 100% authentic products and provides
customers with a satisfaction guarantee. We are not dependent on any
single supplier for the products that we sell. The products are
supplied by various wholesale suppliers located in the United
States. Most of the sales of our health and beauty products from the
Perfume.com website are made to consumers in the United States, although during
2008 we began shipping products to non-U.S. locations, with the greatest portion
of these sales being made in Canada and the United
Kingdom. During 2008, international sales were
immaterial.
Our
products are described in detail on our website. The products are
offered through an easily navigated website experience within a transaction
secure environment accepting the usual modes of secure credit card payments,
PayPal and Google Checkout. Products can also be ordered using our
toll-free telephone number.
By way of
its intuitive domain name and through ongoing technical optimizations,
Perfume.com consistently ranks highly in organic, unpaid search results across
major search engines. Organic search traffic delivers the majority of
traffic and customers to Perfume.com. The site also realizes traffic
through direct navigation by visitors. Finally, we acquire internet
traffic through paid search, comparison shopping websites, and our robust email
marketing efforts as well as through affiliate sales.
We pay our affiliates
sales commissions if they deliver traffic to Perfume.com that result in a
successful sale. Affiliates do not represent themselves as
Perfume.com, and through a rigorously enforced policy, are not allowed to use
our name. Affiliates place our advertisements on their
websites. We pay these affiliates a commission when visitors to their
sites click on our advertisements and make purchases on
Perfume.com.
Advertising
Revenues
Over
time, we expect to generate significant revenues by selling advertising either
directly to advertisers or in partnership with third party advertising
networks. During 2007 and early 2008, we had an arrangement with
Overture Services, Inc. (“Overture”) pursuant to which we were paid a fee for
referrals to sites with connections to Overture. We terminated our
relationship with Overture effective February 29, 2008, to give us more
flexibility to deploy advertising across our websites. Currently,
many of our websites are part of Google AdSense's network of publishers which
generates advertising revenues and monetizes our properties. Google
AdSense matches ads to our sites’ content and audiences, and depending on the
type of ad, we earn revenues from clicks or impressions. The
relationship with Google is a non-exclusive agreement and as we develop our
domain websites we may revisit direct relationships or other third party
advertising networks.
Sports
and Recreation
We
currently host one sports-related website, Cricket.com. Cricket.com
is a community website for cricket fans. The site includes
cricket-related news, schedules of games played worldwide, scores, photos and an
active fantasy cricket league. Cricket.com generates revenue through
paid advertisements on the website.
Travel
We host 2
travel websites; Brazil.com and Indonesia.com. These sites seek to
provide much of the information a traveler to these destinations might
need. Aside from information and access to flights and hotels, the
sites provide basic facts about the countries (history, language, maps and
facts), information on tourist attractions and major cities, weather, blogs from
travelers and links to other sites about the destination. We earn
advertising revenues and affiliate commission revenues for the referred sales of
hotels, flights and travel bookings from these websites.
As of
December 31, 2006, we owned a 50.4% controlling interest in
FrequentTraveller.com Inc. (“Frequent Traveller”) a private Nevada corporation
incorporated on October 29, 2002. Through Frequent Traveller, we sold
travel services to customers online and by telephone to destinations encompassed
by our geographic domain names, pursuant to a Domain Lease Agreement entered
into with Frequent Traveller dated May 1, 2005. Frequent Traveller’s
travel sites were launched late in 2003 and conducted limited business in 2006
and 2007 as Frequent Traveller continued to develop its
business. Frequent Traveller had not become profitable throughout
2007 and was expected to operate at a loss for the year. The business
did not reach its goal for break-even sales of $150,000 per
month. Accordingly, effective on November 12, 2007, we unwound our
relationship with Frequent Traveller via an Asset Purchase
Agreement. As part of this agreement the Domain Lease Agreement was
cancelled for minimal consideration and all ties with Frequent Traveller were
severed.
Global
Trade
Importers.com
is a trade website that connects businesses around the world by providing tools
such as an e-mail service and a searchable, online database which helps
facilitate communication between buyers and sellers. Businesses
register on the website for free. Once registered, buyers and
distributors can access information about manufacturers and wholesalers and vice
versa. The information is grouped in product categories or may be
found via a search bar included on the website. As long as both
parties are members, they may contact each other via e-mail. The
website also provides useful information concerning international trade-related
issues such as customs clearance, transportation providers and trade development
organizations. We earn advertising revenues from this
website.
Joint
Ventures and Participations
On
September 30, 2008 we announced that we entered into a letter of intent with
Domain Strategies, Inc., an internet development and management company, to
jointly establish a new company for the purpose of building, managing and
monetizing our domain name www.karate.com. As discussed below, we
have also invested in Global Cricket Venture, which is to become the exclusive
online provider of content for the Bureau of Control for Cricket in India
(Indian Premier League) at the website, iplt20.com. We believe
that joint ventures and partnerships like these are a viable and potentially
attractive way to build profitability. Each opportunity will be
evaluated based on its prospects for long term value creation. These
partnerships may take several forms including leasing, renting or co-investing
to develop one or more of the websites. We expect to continue to seek
opportunities with third parties to utilize our domain names; however, there can
be no assurance that we will be able to do so.
Sale
and Lease of Domain Names
We own
more than 800 domain names. We believe that there is high value in
building businesses around the domain names we own, however we recognize that
there are opportunities whereby selling or leasing them may be more valuable
than exploiting the ownership value of the names. We also recognize
that selling some non-core domain names is an effective way to raise funds in a
non-dilutive manner. Therefore, we actively marketed a few domain
name assets for sale during late 2008 which resulted in one sale in December
2008 and two additional sales in early 2009. We continue to evaluate
any offers received. In the future, we may buy domain names to
complement our existing businesses in the health and beauty, sports, travel and
global trade categories.
RECENT
TRANSACTIONS
Auctomatic
Merger
On March
25, 2008, we entered into an Agreement and Plan of Merger (the “Merger
Agreement”) with Delaware (a wholly-owned subsidiary), Entity, Inc., a Delaware
corporation, (“Auctomatic”), Harjeet Taggar, Kulveer Taggar and Patrick
Collison, the founding members of Auctomatic (each a “Founder” and collectively,
the “Founders”) and Harjeet Taggar as representative of the stockholders of
Auctomatic (the “Stockholder Representative”).
Pursuant
to the Merger Agreement, Auctomatic merged with and into Delaware with Delaware
as the surviving corporation (the “Merger”). The Merger closed on May
22, 2008 (the “Closing Date”). In connection with the Merger
Agreement, the stockholders of Auctomatic received in total (i) $2,000,000 cash
minus $152,939 in certain assumed liabilities (the “Cash Consideration”) and
(ii) 1,000,007 shares of our common stock (equal to $3,000,000 divided by $3.00
per share, the last price of a single share of our common stock as reported by
the OTC Bulletin Board on the business day immediately preceding the Closing
Date) in exchange for all the issued and outstanding shares of
Auctomatic.
The
consideration was payable as follows: (i) 340,001 shares, or 34%, of the common
stock and (ii) $1,200,000 less $152,939 in assumed liabilities (the “Initial
Cash”). An additional 246,402 shares of the common stock were issued
and are to be distributed in equal amounts to the Auctomatic stockholders on
each of the first, second and third anniversaries of the Closing
Date. The remaining $800,000 of the total Cash Consideration (the
“Distribution Cash”) is to be distributed on the first anniversary of the
Closing Date. All amounts of cash and common stock will be
distributed pro rata among the Auctomatic stockholders. The
distribution of the remaining 413,604 shares (“the “Distribution Shares”) of the
common stock payable on the first, second and third anniversaries of the Closing
Date (the “Distribution Date”) to the Auctomatic Founders is subject to their
continuing employment with us or a subsidiary on each Distribution
Date. In 2009, one of the Founders resigned from his employment, and
therefore the distribution of 137,868 shares of the common stock on the first,
second and third anniversaries of the Closing Date is no longer payable to
him. The remaining 275,736 shares of common stock owed to the
Founders continuing in our employ remain payable on the anniversary dates as
noted above. See also Note 6 and Note 10 to our financial
statements.
Global
Cricket Venture
On April
17, 2008, we signed 2 Memoranda of Understanding (individually the “BCCI
Memorandum” and the “IPL Memorandum” and, together, the “Memoranda”) with each
of the Board of Control for Cricket in India (“BCCI”) and the DLF Indian Premier
League (“IPL”). The Memoranda, each of which had a term of 10 years,
granted to us the exclusive right to provide the official websites for the
BCCI and the IPL (the “Cricket Websites”). As consideration for the
rights conveyed, we agreed to pay a minimum annual fee to the BCCI of the
greater of 50% of all revenues generated from the BCCI website or an average
payment of $3 million per year and a minimum annual fee to the IPL of the
greater of 50% of all revenues generated from the IPL website or an average
payment of $2 million per year. In addition to the annual fee, we
agreed to pay a total of 5% of the revenues generated by a third website,
Cricket.com, to the BCCI and the IPL. Revenues were defined as all
revenues generated by the Cricket Websites with the exception of revenues earned
from the sale of tickets to the matches. We agreed that the minimum
annual fee would be paid on a quarterly basis during the first 3 years of the
term. The payments, when made, may have been subject to certain
withholding or other taxes which we may have been required to gross up pursuant
to the terms of the Memoranda. The first payment to the BCCI of
$625,000 was due on October 1, 2008, with additional payments of $625,000 due on
January 1, 2009, April 1, 2009 and July 1, 2009. The first payment to
the IPL of $375,000 was due on October 1, 2008, with additional payments of
$375,000 due on January 1, 2009, April 1, 2009 and July 1, 2009. We
did not make any of the payments called for by the Memoranda.
In
conjunction with our execution of the Memoranda, we signed an agreement (the
“Venture Agreement”) with Netlinkblue, the owner of the live streaming and
mobile rights to the BCCI and IPL cricket matches. Under the Venture
Agreement, we and Netlinkblue agreed to create a new company into which we would
transfer our rights under the Memoranda and Netlinkblue would transfer the
rights it acquired to live stream the matches. As contemplated by the
Venture Agreement, a company was incorporated in Singapore on June 10, 2008 and
named Global Cricket Venture Pte. Ltd. (“Global Cricket
Venture”). Our wholly-owned subsidiary, LCM Cricket Ventures,
currently owns 50.05% of the shares of Global Cricket
Venture. Pursuant to the Venture Agreement, once we and Netlinkblue
each transfer the rights we received from the BCCI and the IPL into Global
Cricket Venture, certain rights and obligations will arise, including the
obligation that each of us provides funding to Global Cricket
Venture. As described below, on March 31, 2009, we and the BCCI
jointly terminated the BCCI Memorandum and we assigned the IPL Memorandum to
Global Cricket Venture. We did not, however, transfer our rights to
the website
www.cricket.com
, which our
agreement with Netlinkblue requires. Furthermore, to our knowledge,
Netlinkblue has not transferred the rights it received from the BCCI and the IPL
to Global Cricket Venture, therefore, as of the date of this prospectus, we do
not believe that we have an obligation to provide funding to Global Cricket
Venture. The Venture Agreement also required that we and Netlinkblue
negotiate and enter into definitive agreements with further terms and conditions
to govern our relationship. To date, no definitive agreements have
been prepared.
On March
31, 2009, we and the BCCI entered into a Termination Agreement, pursuant to
which the BCCI Memorandum was terminated. On that same date, we,
Global Cricket Venture and the BCCI, on behalf of the IPL, entered into a
Novation Agreement (the “Novation”) with respect to the IPL
Memorandum. Pursuant to the Novation, Global Cricket Venture was
granted all of our rights, and assumed all of our obligations, under the IPL
Memorandum. Global Cricket Venture also assumed certain payments due
to the BCCI under the BCCI Memorandum.
As a
result of the Novation,
|
·
|
Global
Cricket Venture, rather than Live Current, is the party to the IPL
Memorandum;
|
|
·
|
the
term of the IPL Memorandum has been modified, so that it began on April 1,
2008 and will end on December 31,
2017;
|
|
·
|
the
minimum payments due on October 1, 2008 to the BCCI and the IPL of
$625,000 and $375,000, respectively, as well as any other payments owed to
the BCCI and the IPL through March 31, 2009 were assumed by Global Cricket
Venture and are to be paid on July 1,
2009;
|
|
·
|
a
right to terminate the IPL Memorandum due to a material breach or on the
insolvency of either party has been added;
and
|
|
·
|
the
“Minimum Annual Fee Payment Schedule” (Schedule 2 to the IPL Memorandum)
has been revised. The first payment of $2,250,000 is due on
July 1, 2009.
|
COMPETITIVE
CONDITIONS
Currently
almost all of our revenues are earned through our Perfume.com
website. The fragrance eCommerce business is intensely
competitive. Perfume.com’s current and potential competitors include
eCommerce sites specializing in fragrance products, other eCommerce sites
offering a wide variety of products including fragrances,
and traditional brick and mortar retailers with a high degree of
brand awareness among consumers that have expanded into online sales, including
various department stores and specialty health and beauty stores. We
believe that the principal competitive factors in our Perfume.com business
include price, selection, ease of website use, fast and reliable fulfillment,
strong customer service and development of a trusted brand. Many of
our current competitors have greater resources, more customers, longer operating
histories and greater brand recognition. They may secure better terms
from suppliers, have more efficient distribution capability, and devote more
resources to technology, fulfillment and marketing.
In
addition, the Internet Corporation for Assigned Names and Numbers (“ICANN”) has
introduced, and has proposed the introduction, of additional new domain name
suffixes, which may be as or more attractive than the “.com” domain name
suffix. New root domain names may have the effect of allowing the
entrance of new competitors at limited cost, which may further reduce the value
of our domain name assets. We do not presently intend to acquire
domain names using newly authorized root domain names to match our existing
domain names, although we acquired certain .cn (China) root domain names to
complement our growth strategy.
DEPENDENCE
ON ONE OR A FEW MAJOR CUSTOMERS
We do not
depend on any single customer for a significant proportion of our
business.
PATENTS,
TRADEMARKS AND PROPRIETARY RIGHTS
On
November 16, 2007, we filed a trademark application with the US Patent &
Trademark Office (“USPTO”) for the mark “LIVE CURRENT”. A certificate
of registration was issued on October 14, 2008 and the mark was assigned
registration number 3,517,876.
On March
11, 2008, we filed a trademark application with the USPTO for the mark
“DESTINATIONHUB”. A certificate of registration was issued on
December 9, 2008 and the mark was assigned registration number
3,544,934.
We
currently do not own any patents and we are not a party to any license or
franchise agreements, concessions, or labor contracts arising from our
intellectual property.
All of
our online businesses and web sites are copyrighted upon
loading. Our domain name, “Livecurrent.com”, has been
registered with ICANN.
While we
will consider seeking further protections for our intellectual property, we may
be unable to avail ourselves of protections under United States laws because,
among other things, our domain names are generic and
intuitive. Consequently, we will seek protection of our intellectual
property only where we have determined that the cost of obtaining protection,
and the scope of protection provided, results in a meaningful benefit to
us.
EFFECT
OF EXISTING GOVERNMENTAL REGULATION
Our
business is subject to regulation at the federal, state and local
levels. To date, we have not found it burdensome to comply with
regulatory requirements. The enactment of new adverse regulation or
regulatory requirements, however, may have a negative impact upon us and our
business
Licensing
Other
than business and operations licenses applicable to most commercial ventures, we
are not required to obtain any governmental approval for our business
operations. There can be no assurance, however, that governmental
institutions will not, in the future, impose licensing or other requirements to
which we will be subject. Additionally, as noted below, there are a
variety of laws and regulations that may, directly or indirectly, have an impact
on our business.
Privacy
Legislation and Regulations
Entities
engaged in operations over the internet, particularly relating to the collection
of user information, are subject to limitations on their ability to utilize such
information under federal and state legislation and regulation. In
2000, the Gramm-Leach-Bliley Act required that the collection of identifiable
information regarding users of financial services be subject to stringent
disclosure and “opt-out” provisions. While this law and the
regulations enacted by the Federal Trade Commission and others relates primarily
to information relating to financial transactions and financial institutions,
the broad definitions of those terms may make the businesses we enter into
subject to the provisions of the Act. This may increase the cost of
doing business which may, in turn, may reduce our
revenues. Similarly, the Children On-line Privacy and Protection Act
(“COPPA”) imposes strict limitations on the ability of internet ventures to
collect information from minors. The impact of COPPA may be to
increase the cost of doing business on the internet and reduce potential revenue
sources. We may also be impacted by the USA Patriot Act, which
requires certain companies to collect and provide information to United States
governmental authorities. A number of state governments have also
proposed or enacted privacy legislation that reflects or, in some cases, extends
the limitations imposed by the Gramm-Leach-Bliley Act and
COPPA. These laws may further impact the cost of doing business on
the internet and the attractiveness of our inventory of domain
names.
Advertising
Regulations
In
response to concerns regarding “spam” (unsolicited electronic messages),
“pop-up” web pages and other internet advertising, the federal government and a
number of states have adopted or proposed laws and regulations which would limit
the use of unsolicited internet advertisements. The cumulative effect
of these laws may be to limit the attractiveness of effecting sales on the
internet, thus reducing the value of our inventory of domain names.
Taxation
Currently,
the sale of goods and services on the internet is not subject to a uniform
system of taxation. A number of states, as well as the federal
government, have considered enacting legislation that would subject internet
transactions to sales, use or other taxes. Because there are a
variety of jurisdictions considering such actions, any attempt to tax internet
transactions could create uncertainty in the ability of internet-based companies
to comply with varying, and potentially contradictory,
requirements. We cannot predict whether any of the presently proposed
schemes will be adopted, or the effect any of them would have on our
operations.
EMPLOYEES
We
presently employ 23 full-time and 2 part-time employees, as well as 1
consultant.
Our
principal office is located at #645-375 Water Street, Vancouver, British
Columbia V6B5C6, Canada. We lease this office space, which consists
of approximately 5,400 square feet. The lease has a term of 5 years,
beginning on October 1, 2007 and ending on September 30,
2012. Pursuant to the terms of the lease agreement, we have committed
to basic rent costs for the remaining 4 fiscal years commencing January 1, 2009
as follows: (a) year 1 - $116,188; (b) year 2 - $121,531; (c) year 3 - $126,873;
(d) year 4 (which will be comprised of nine months only) -
$98,159. We are also responsible for common area costs which are
currently estimated to be equal to approximately 43% of basic rent.
We also
lease an office located at 12201 Tukwila Intl. Blvd, Suite 200, Tukwila,
Washington 98168 for a nominal amount per month.
LEGAL
MATTERS
In the
normal course of business, we may become involved in various legal
proceedings. Except as stated below, we know of no pending or
threatened legal proceeding to which we are or will be a party which, if
successful, might result in a material adverse change in our business,
properties or financial condition.
In
December 1999, Domain Holdings commenced a lawsuit in the Supreme Court of
British Columbia (No. C996417) against Paul Green for breach of fiduciary duty
for wrongfully attempting to appropriate Domain Holdings’ business
opportunities. Mr. Green was Domain Holdings’ former Chief Executive
Officer. Domain Holdings is seeking an undetermined amount of damages
and a declaration that it had just cause to terminate Mr. Green’s employment in
or about June 1999. No decision has been rendered in this case and Domain
Holdings cannot predict whether it will prevail, and if it does, what the terms
of any judgment may be.
On March
9, 2000, Paul Green commenced a separate action in the Supreme Court of British
Columbia (No. S001317) against Domain Holdings. In that action, Mr.
Green claimed wrongful dismissal and breach of contract on the part of Domain
Holdings. Mr. Green is seeking an undetermined amount of damages and,
among other things, an order of specific performance for the issuance of a
number of shares in Domain Holdings’ capital stock equal to 18.9% or more of its
outstanding shares. On June 1, 2000, Domain Holdings filed a
statement of defense and counterclaim. We intend to vigorously defend
this action.
DIRECTORS
AND EXECUTIVE OFFICERS
The
following table identifies our executive officers and directors, their ages,
their respective offices and positions, and their respective dates of election
or appointment.
|
|
Name
|
Age
|
Position
|
Officer/Director
Since
|
|
|
|
|
|
|
|
|
|
|
C.
Geoffrey Hampson
|
51
|
Chief
Executive Officer, Principal Accounting Officer and Chairman of the
Board
|
June
1, 2007
|
|
|
|
|
|
|
|
|
|
|
Mark
Melville
|
40
|
President
and Chief Corporate Development Officer
|
January
1, 2008 (Chief Corporate Development Officer)/February 4, 2009
(President)
|
|
|
|
|
|
|
|
|
|
|
Chantal
Iorio
|
31
|
Vice
President, Finance
|
January
7, 2008
|
|
|
|
|
|
|
|
|
|
|
James
P. Taylor
|
53
|
Director
|
July
23, 2007
|
|
|
|
|
|
|
|
|
|
|
Mark
Benham
|
58
|
Director
|
September
12, 2007
|
|
|
|
|
|
|
|
|
|
|
Boris
Wertz
|
35
|
Director
|
March
14, 2008
|
|
The
directors named above will serve until the next annual meeting of our
stockholders or until their successors are duly elected and have
qualified. Officers will hold their positions at the pleasure of the
board of directors, absent any employment agreement. There is no
arrangement or understanding between any of our directors or officers and any
other person pursuant to which any director or officer was or is to be selected
as a director or officer.
BUSINESS
EXPERIENCE DESCRIPTIONS
C. Geoffrey Hampson
has been
our Chief Executive Officer (“CEO”) and a director since June 1, 2007 and has
been our Principal Accounting Officer since January 31, 2008. Mr.
Hampson has been the founder, president, and CEO of many successful start-up and
operating companies over the last 25 years. He was CEO, President and
a director of Peer 1 Network Enterprises, Inc., an internet infrastructure
company from September 2000 to January 2006. He has been the CEO of
Corelink Data Centers, LLC since November 2008 and the CEO and a co-owner of
Techvibes Media Inc., a local market technology resource website and blog, since
March 2007. Mr. Hampson sits on the boards of directors of several
companies including Corelink Data Centers, LLC, a private company, since
November 2008, Cricket Capital Corp., a company listed on the TSX Venture
market, since March 2008, Techvibes Media Inc., a private company, since March
2007, Carat Exploration Inc., a company listed on the TSX Venture market, since
January 2006, and Pacific Rodera Energy Inc., a company listed on the TSX
Venture market, since May 2002. Mr. Hampson devotes between 120 hours
and 150 to our business per month.
James P. Taylor
has been our
director since July 23, 2007, and is the Chair of the Audit
Committee. Mr. Taylor has over 20 years of experience in corporate
management, finance and planning. From April 2008 to the present, he
has served as the Chief Financial Officer of Corelink Data Centers,
LLC. From April 2007 to December 2007, he was the Chief Financial
Officer of Lakewood Engineering and Manufacturing. From May 2006 to
April 2007, he was engaged as a financing and management consultant for various
companies. From February 2002 to April 2006, Mr. Taylor served as the
Chief Financial Officer for Peer 1 Network Enterprises, Inc., a publicly traded
company and North American provider of Internet infrastructure
services. While at Peer 1, he was responsible for financial and
administrative operations and led the development of annual and strategic
business plans and financial models. From 2001 to 2002, Mr. Taylor
served as Chief Operating Officer and Chief Financial Officer of Chicago
Aerosol, LLC. Mr. Taylor is a member of the Society of Competitive
Intelligence. Mr. Taylor is a graduate of Indiana University where he
obtained a Bachelor of Science degree in Finance and Accounting. He
earned his MBA from DePaul University where he focused his studies on
International Business and Corporate Finance.
Mark Benham
has been our
director since September 12, 2007. He is Chair of the Compensation
Committee and is also a member of the Audit Committee. Mr. Benham has
fifteen years of experience in private equity and investment
banking. Since 1994, Mr. Benham has been a partner at Celerity
Partners, a private equity fund based in California. He has also been
a director of Peer 1 Network, a TSX-Venture listed company, since September 2,
2005. Mr. Benham holds a B.A. in English from the University of
California, Berkeley, and an M.A. and M.B.A. from the University of
Chicago.
Mark Melville
has been our
Chief Corporate Development Officer since January 1, 2008. On
February 4, 2009, he was also named our President. From July 2005 to
November 2007, Mr. Melville was Global Account Manager at Monitor Group L.P.,
one of the world’s premier strategic consulting and investment
firms. While at Monitor, he worked directly with senior
executives of Fortune 500 companies on a
range of strategic initiatives and co-led Monitor’s West Coast technology
practice. From August 2002 to July 2005, Mr. Melville was Chief
Executive Officer of SteelTrace Ltd., a leading provider of business process and
requirements management software. Mr. Melville sold SteelTrace to
Compuware Corporation in 2006. Prior to SteelTrace, from 1999 to
2001, he was the Vice President of Corporate Development at MobShop, a pioneer
in online commerce. Prior to MobShop from 1998 to 1999, he was a
senior member of Exchange.com, which was sold to Amazon.com in 1999. Mr.
Melville holds a Masters in Business Administration degree from the Harvard
Graduate School of Business, a Masters in Public Administration degree from
Harvard's JFK School of Government, and an Honors Bachelor degree in Finance
from the University of British Columbia.
Chant
al Iorio
has served as our
Vice President, Finance since January 7, 2008. From 2000 to November
2007, Ms. Iorio was employed at HLB Cinnamon Jang Willoughby & Company,
Chartered Accountants. Most recently, she was a manager responsible for
the supervision and training of staff, managing, delegating and reviewing files,
completing and supervising audit, non-audit and tax procedures, as well as
administering client relations. Since September 2004, Ms. Iorio has been
Treasurer, board of directors (volunteer) for the Vancouver Community Network, a
not-for-profit organization focused on providing low-cost access to the internet
to communities in Vancouver. Ms. Iorio is a Chartered Accountant in
British Columbia, Canada and a Certified Public Accountant in the state of
Illinois. She also holds a Bachelor of Commerce in International Business
with a focus in Accounting from the University of British Columbia.
Boris Wertz
was appointed as a
director effective March 14, 2008. Dr. Wertz was also appointed to serve
as Chair of the Governance Committee of the board. Dr. Wertz has an
established career of strategic management and operational experience in the
area of consumer internet use. From February 2008 to the present, he has
served as CEO of Nexopia, the most popular social networking utility for
Canadian youth. From November 2007 to the present, he has served as
CEO of W Media Ventures, a Vancouver-based venture capital firm that focuses on
consumer internet investments. From 2002 to 2007, Dr. Wertz was the Chief
Operating Officer of AbeBooks.com, the world's largest online marketplace for
books, which was recently sold to Amazon.com. He also served as a
Director of AbeBooks.com from November 2003 to November 2008. He
currently serves on the Board of Directors for Suite 101, Inc., Indochino.com,
TeamPages, Techvibes Media Inc. and Nexopia.com. Dr. Wertz completed
his Ph. D. as well as his graduate studies at the Graduate School of Management
(WHU), Koblenz, majoring in Business Economics and Business
Management.
FAMILY
RELATIONSHIPS
There are
no family relationships among our directors and executive officers.
INVOLVEMENT
IN CERTAIN LEGAL PROCEEDINGS
To the
best of our knowledge, none of our directors or executive officers has, during
the past five years:
|
·
|
been
convicted in a criminal proceeding or been subject to a pending criminal
proceeding (excluding traffic violations and other minor
offences);
|
|
·
|
had
any bankruptcy petition filed by or against any business of which he was a
general partner or executive officer, either at the time of the bankruptcy
or within two years prior to that
time;
|
|
·
|
been
subject to any order, judgment, or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction, permanently
or temporarily enjoining, barring, suspending or otherwise limiting his
involvement in any type of business, securities, futures, commodities or
banking activities; or
|
|
·
|
been
found by a court of competent jurisdiction (in a civil action), the
Securities and Exchange Commission or the Commodity Futures Trading
Commission to have violated a federal or state securities or commodities
law, and the judgment has not been reversed, suspended, or
vacated.
|
EXECUTIVE
COMPENSATION
The
following table summarizes all compensation for the 2007 and 2008 fiscal years
received by our Chief Executive Officer and our two most highly compensated
executive officers who earned more than $100,000. All annual totals
have been converted from Canadian dollars to U.S. dollars at the average 2008
foreign exchange rate of 0.9371.
|
Summary
Compensation Table
|
|
Name
and principal
position
|
Year
|
Salary
($)(1)
|
Bonus
($)(1)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-Equity
Incentive Plan
($)
|
Non-qualified
Deferred Compen-
sation
Earnings ($)
|
All
Other Compensation
($)
|
Total
($)
|
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
(i)
|
(j)
|
|
David
Jeffs
Former
Chief Executive Officer
July
2002 – September 30, 2007
|
2008
2007
|
None
102,100
|
None
98,726
|
None
3,311
|
None
None
|
None
None
|
None
None
|
None
175,382
|
None
379,519
|
|
Cameron
Pan
Former
Chief Financial Officer
Aug
2000 – Feb 2002
July
2002 – Jan 31, 2008
|
2008
2007
|
206,487
149,090
|
None
133,728
|
None
3,320
|
None
None
|
None
None
|
None
None
|
35,750
None
|
242,237
286,138
|
|
C.
Geoffrey Hampson
Chief
Executive Officer, Principal Accounting Officer and Chairman of the
Board
June
1, 2007 – present (2)
|
2008
2007
|
285,320
162,908
|
None
167,563
|
None
None
|
594,030
198,610
|
None
None
|
None
None
|
None None
|
879,350
529,081
|
|
Mark
Melville,
Chief Corporate
Development Officer January 1, 2008 to Present; President January 31, 2009
to Present (3)
|
2008
2007
|
230,276
None
|
281,130
None
|
None
None
|
350,000
None
|
None
None
|
None
None
|
35,844
None
|
897,250
None
|
|
Jonathan
Ehrlich,
Chief Operating
Officer and President
Oct
2007 – January 31, 2009 (4)
|
2008
2007
|
258,612
65,823
|
235,650
186,181
|
None
None
|
724,010
181,251
|
None
None
|
None
None
|
49,198
None
|
1,267,470
433,254
|
(1) These
amounts were paid by Domain Holdings. As of the end of 2008, we owed
no balances to Mr. Hampson or Mr. Melville, but owed $235,650 to Mr.
Ehrlich.
(2) Mr.
Hampson did not receive any compensation for services as our
director. We valued Mr. Hampson’s options using the Black Scholes
option pricing model using the following assumptions: no dividend yield;
expected volatility rate of 118.02%; a risk free interest rate of 3.97 and an
expected life of 3 years resulting in a value of $1.78 per option
granted.
(3) We
valued Mr. Melville’s options using the Black Scholes option pricing model using
the following assumptions: no dividend yield; expected volatility rate of
75.66%; risk free interest rate of 3.07% and an expected life of 3 years
resulting in a value of $1.05 per option granted.
(4) We
valued Mr. Ehrlich’s options using the Black Scholes option pricing model using
the following assumptions: no dividend yield; expected volatility rate of
118.02%; risk free interest rate of 4.05% and an expected life of 3 years
resulting in a value of $1.45 per option granted.
There are
no plans that provide for the payment of retirement benefits, or benefits that
will be paid primarily following retirement, including but not limited to
tax-qualified defined benefit plans, supplemental executive retirement plans,
tax-qualified defined contribution plans and nonqualified defined contribution
plans.
Other
than as discussed below in “Employment Agreements,” there are no contracts,
agreements, plans or arrangements, written or unwritten, that provide for
payment to a named executive officer at, following, or in connection with the
resignation, retirement or other termination of a named executive officer, or a
change in control of our company or a change in the named executive officer's
responsibilities following a change in control, with respect to each named
executive officer.
On June
1, 2007, David Jeffs resigned as our Chief Executive Officer and remained
President until September 27, 2007. Pursuant to the terms and
conditions of an employment severance agreement dated September 27, 2007 between
us and Mr. Jeffs, Mr. Jeffs resigned as our President and as a
director. Pursuant to the severance agreement, we agreed to pay Mr.
Jeffs a severance allowance in the amount of CDN$200,000 less any and all
applicable government withholdings and deductions. Furthermore,
pursuant to the severance agreement, for a period starting on October 1, 2007
until December 31, 2007, we agreed to retain Mr. Jeffs as a consultant for a
monthly fee of CDN$10,000 to assist in the day to day operations of Live
Current, the transition of duties from Mr. Jeffs to Mr. Jonathan Ehrlich who
assumed the position of President and Chief Operating Officer of Live Current on
October 1, 2007, and the relocation of Live Current’s offices.
On
January 31, 2008, Cameron Pan resigned as our Chief Financial
Officer. Pursuant to the terms and conditions of an employment
severance agreement dated January 17, 2008 between us and Mr. Pan, Mr. Pan
resigned as our Chief Financial Officer. Pursuant to the severance
agreement, we agreed to pay Mr. Pan CDN$248,000 representing CDN$158,400 of
severance allowance, CDN$79,200 of accrued bonus and CDN$10,400 for other
benefits, less any and all applicable government withholdings and
deductions. Furthermore, pursuant to the severance agreement, for a
period starting on February 1, 2008 until April 30, 2008, we agreed to retain
Mr. Pan as a consultant for a daily fee of CDN$750 or at an hourly rate of
CDN$120, to assist in the day to day operations of Live Current and the
transition of duties from Mr. Pan to others designated by Live
Current.
On
February 4, 2009, Jonathan Ehrlich resigned as our President and Chief Operating
Officer, effective January 31, 2009. Pursuant to the terms and
conditions of an employment severance agreement dated February 4, 2009 between
us and Mr. Ehrlich, the Company agreed to pay CDN$600,000 to Mr. Ehrlich, which
consists of a severance allowance in the amount of CDN$298,000 and an accrued
special bonus in the amount of CDN$250,000, less any and all applicable
government withholdings and deductions, as well as other benefits in the amount
of CDN$52,000. The severance allowance and other benefits will be
paid over a period of 12 months. The accrued special bonus had become
due on October 1, 2008 and has been expensed in the fourth quarter of the 2008
fiscal year. The other benefits were owing to Mr. Ehrlich before his
resignation. The payment of the net amount of the accrued special
bonus is to be converted to equity and paid in restricted shares of the
Company’s common stock over a period of 12 months. The number of
shares of common stock to be issued for each payment will be computed using the
closing price of the common stock on the 15
th
day of
each month or, in the event that the 15
th
day is
not a trading day, on the trading day immediately before the 15
th
day of
the month.
EMPLOYMENT
AGREEMENTS
C.
Geoffrey Hampson, Chief Executive Officer, Principal Accounting Officer and
Chairman
We
entered into an employment agreement with C. Geoffrey Hampson on May 31,
2007. Pursuant to the employment agreement, Mr. Hampson is to serve
as our Chief Executive Officer for a term of five years effective June 1, 2007
and subject to certain termination rights on the part of Live Current and Mr.
Hampson. The employment agreement provides that Mr. Hampson will
receive an annual base salary of CDN$300,000, subject to annual review as well
as a bonus of up to 60% of base salary as determined by the board
of directors. The employment agreement also entitles him
to participate in the health, dental and other benefits or policies available to
personnel with commensurate duties. In connection with the employment
agreement, on September 11, 2007 we granted to Mr. Hampson a stock option to
purchase up to 1,000,000 shares of our common stock at an exercise price of
$2.50 per share. The option to purchase shares of our common stock
vests over the term of the employment agreement as follows: (i) 333,333 shares
were exercisable on September 11, 2008 and (ii) thereafter the right to purchase
83,333 shares vests after each successive three-month period until the entire
option has vested. Unless earlier terminated, the option will expire
on September 11, 2012. The stock option was granted pursuant to our
2007 Stock Incentive Plan.
Jonathan
Ehrlich, former Chief Operating Officer and President
We
entered into an employment agreement with Jonathan Ehrlich on September 11,
2007. Pursuant to the employment agreement, Mr. Ehrlich was to serve
as the Chief Operating Officer and President of Live Current for a term of five
years effective October 1, 2007, subject to certain early termination rights on
the part of Live Current and Mr. Ehrlich. The employment agreement
provided that Mr. Ehrlich was to receive an annual base salary of CDN$275,000,
subject to annual review by the Chief Executive Officer and the board of
directors as well as a bonus of up to 50% of his base salary, to be determined
by the board of directors in its sole discretion. He also was paid a
signing bonus of CDN$200,000 upon his start date and was to be paid two special
bonuses of CDN$250,000 each on each of October 1, 2009 and October 1, 2010
unless earlier terminated. The employment agreement also entitled Mr.
Ehrlich to participate in the health and dental and other benefits or policies
available to personnel with commensurate duties. In connection with
the employment agreement, on September 8, 2007, Live Current granted a stock
option to Mr. Ehrlich to purchase up to 1,500,000 shares of common stock at an
exercise price of $2.04 per share. The option was to vest over the
term of the employment agreement as follows: (i) 500,000 shares were exercisable
on October 1, 2008 and (ii) the right to purchase 125,000 shares vested on the
last day of each successive three-month period thereafter until the entire
option vested. Unless earlier terminated, the option would expire on
October 1, 2012. The stock option was granted pursuant to our 2007
Stock Incentive Plan. Mr. Ehrlich resigned as our Chief Operating
Officer and President on February 4, 2009.
Mark
Melville, Chief Corporate Development Officer
We
entered into an employment agreement with Mark Melville on November 9,
2007. Pursuant to the employment agreement, Mr. Melville serves as
our Chief Corporate Development Officer for a term of five years effective
January 1, 2008, subject to certain early termination rights on the part of Live
Current and Mr. Melville. The employment agreement provides that Mr.
Melville will receive an annual base salary of CDN$250,000, beginning January 1,
2008, subject to annual review by the Chief Executive Officer and the board of
directors, as well as a bonus of up to 50% of his base salary, to be determined
by the board of directors in its sole discretion. He also was paid a
signing bonus of CDN$300,000 on his start date and is to be paid two special
bonuses of CDN$100,000 each on each of January 1, 2009 and January 1,
2010. We have not yet paid the bonus that was due on January 1,
2009. The employment agreement also entitles Mr. Melville to
participate in the health and dental and other benefits or policies available to
personnel with commensurate duties. In connection with the employment
agreement, on January 1, 2008, we granted a stock option to Mr. Melville to
purchase up to 1,000,000 shares of our common stock at an exercise price of
$2.05 per share. The option vests over the term of the employment
agreement as follows: (i) the right to purchase 333,333 shares vested on January
1, 2009 and (ii) the right to purchase an additional 83,333 shares vests on the
last day of each successive three month period thereafter, until the entire
option has vested. Unless earlier terminated, the option will expire
on January 1, 2013. The stock option was granted pursuant to our 2007
Stock Incentive Plan. On February 4, 2009, Mr. Melville assumed the
duties of the office of President.
OUTSTANDING
EQUITY AWARDS AT DECEMBER 31, 2008
The
following table sets forth certain information concerning unexercised stock
options for each named executive officer above. There were no stock
awards outstanding as of end of fiscal year 2008.
|
|
|
|
|
OPTION
AWARDS
|
|
STOCK
AWARDS
|
|
Name
|
|
Number
of securities underlying unexercised options (#)
Exercisable
|
|
|
Number
of
securities
underlying
unexercised
options
(#)
Unexercisable
|
|
Equity
Incentive
Plan Awards:
Number
of Securities underlying unexercised unearned options (#)
|
|
Option
exercise
price
($)
|
|
Option
expiration
date
|
|
Number
of
shares
or
units
of
stock
that
have
not
vested
(#)
|
Market
value
of shares or units of
stock
that have not vested
($)
|
Equity
incentive
plan
awards:
number of unearned shares,
units
or
other
rights
that have not vested
(#)
|
Equity
incentive
plan
awards:
Market or payout
value
of unearned shares,
units
or
other
rights that have
not
vested
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
C.
Geoffrey Hampson
|
|
|
416,666
|
(1)
|
|
|
583,334
|
(1)
|
|
|
$
|
2.50
|
|
09/11/2012
|
|
|
|
|
|
|
Jonathan
Ehrlich
|
|
|
500,000
|
(2)
|
|
|
1,000,000
|
(2)
|
|
|
$
|
2.04
|
|
10/01/2012
|
|
|
|
|
|
|
Mark
Melville
|
|
|
--
|
|
|
|
1,000,000
|
(3)
|
|
|
$
|
2.06
|
|
01/01/2013
|
|
|
|
|
|
|
(1)
|
|
The
option became exercisable as to 333,333 shares on September 11, 2008 and
83,333 shares on December 11, 2008, and will become exercisable as to an
additional 83,333 shares on the last day of each successive three-month
period thereafter, until all such shares have vested.
|
|
(2)
|
|
The
option became exercisable as to 500,000 shares on October 1, 2008 and will
become exercisable as to an additional 125,000 shares on the last day of
each successive three-month period thereafter, until all such shares have
vested.
|
|
(3)
|
|
The
option will become exercisable as to (i) 333,333 shares on January 1, 2009
and (ii) an additional 83,333 shares on the last day of each successive
three-month period thereafter, until all such shares have
vested.
|
DIRECTOR
COMPENSATION
On March
14, 2008, we granted to Dr. Boris Wertz a stock option to purchase up to 100,000
shares of our common stock at the exercise price of $2.49 per
share. The term of the option is 5 years. The option is
subject to vesting as follows: (i) the right to purchase 33,333 shares vests on
the first anniversary of the stock option agreement and (ii) thereafter the
right to purchase 8,333 shares vests after each successive three-month period.
The stock option was granted under our 2007 Stock Incentive
Plan.
The
following chart reflects all compensation awarded to, earned by or paid to the
directors below for the fiscal year ended December 31, 2008.
|
DIRECTOR
COMPENSATION
|
|
|
Name
|
|
Fees
Earned
or
Paid in
Cash
($)
|
|
|
Stock
Awards
($)
|
|
|
Option
Awards
($)
|
|
|
Non-
Equity
Incentive
Plan
Compen-
sation
($)
|
|
|
Change
in Pension
Value
and Nonqualified Deferred Compensation Earnings
($)
|
|
All
Other
Compen-
sation
($)
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Boris
Wertz (1)
|
|
|
--
|
|
|
|
--
|
|
|
$
|
31,711
|
|
|
|
--
|
|
|
|
--
|
|
|
|
$
|
31,711
|
|
|
(1)
|
|
The
aggregate number of stock awards and option awards granted to
Dr. Wertz and outstanding as of December 31, 2008 is
100,000. We valued these options using the Black Scholes option
price model using the following assumptions: no dividend yield; expected
volatility rate of 73.39%; risk free interest rate of 1.65% and an
expected life of 3 years resulting in a value of $1.21 per
option
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions
with Related Persons
The
following describes all transactions since January 1, 2006 and all proposed
transactions in which we are, or we will be, a participant and the amount
involved exceeds the lesser of $120,000 or 1% of the average of our total assets
at year-end for the last two completed fiscal years, and in which any related
person had or will have a direct or indirect material interest.
On June
30, 2006, in exchange for the return of the domain name “call.com”, we agreed to
settle royalty obligations owed to us by Manhattan Assets Corp. The
value of this transaction was determined to be $250,000. At the time
of the transaction, one of the directors of Manhattan Assets Corp. was Richard
N. Jeffs, who is the father of our then Chief Executive Officer, David
Jeffs.
We issued
32,400 shares of our restricted common stock during the 2006 fiscal year to our
former Chief Executive Officer, David Jeffs, as partial payment for compensation
due to him. During the 2006 fiscal year we also issued 32,400 shares
of our restricted common stock to Cameron Pan, our former Chief Financial
Officer, as partial payment for compensation due to him.
On June
11, 2007, our board of directors issued 1,000,000 shares of common stock and
warrants to purchase up to 1,000,000 additional shares of restricted common
stock at the price of $1.25 effective until June 10, 2009 to Hampson Equities
Ltd., a company owned and controlled by C. Geoffrey Hampson, our Chief Executive
Officer, pursuant to a subscription agreement dated June 1, 2007. The
amount of the subscription was $1,000,000.
On
September 24, 2007 we closed a $5,100,000 private placement financing in which
Mr. Hampson invested $110,000. Mr. Hampson received 55,000 restricted
shares of our common stock.
On
November 19, 2008, we closed a private placement financing in which Mr. Hampson
invested $126,750. Mr. Hampson received 195,000 restricted shares of
common stock, two-year warrants to purchase 97,500 common shares at an exercise
price of $0.78, and three-year warrants to purchase 97,500 common shares at an
exercise price of $0.91.
On March
25, 2009, our board of directors reduced the exercise price of all outstanding
stock options granted pursuant to the Live Current Media Inc. 2007 Stock
Incentive Plan to $0.65. These options are held by our officers,
directors, employees, consultants and agents. The original exercise
prices ranged from a high of $3.30 to a low of $0.65. As a result of
this reduction, the exercise price of the outstanding stock option granted to
Mr. Hampson was reduced from $2.50 per share and the exercise price of the
outstanding stock options granted to Mr. Melville were reduced from $2.06 per
share. No other terms or conditions of the stock option grants were
modified.
Certain
of our current officers and directors have employment agreements with us and we
entered into employment severance agreements with certain of our former
officers. See the section of this prospectus titled “Executive
Compensation” for a discussion of these agreements.
Director
Independence
We
currently have three directors, Mr. Mark Benham, Mr. James P. Taylor, and Dr.
Boris Wertz, who are independent directors as that term is defined under the
rules of the NASDAQ Capital Market. Mr. Benham serves as the chairman
of the Compensation Committee and as a director of the Audit
Committee. Mr. Taylor serves as the chairman of the Audit
Committee. Dr. Wertz serves as the chairman of the Nominating and
Governance Committee. Both Mr. Benham and Mr. Taylor meet the
independence requirements for Audit Committee members.
SELLING
STOCKHOLDERS
We are
registering shares of common stock owned by the selling stockholders and shares
of common stock that may be acquired by them upon exercise of warrants they own.
The common stock and warrants were acquired in a private placement which
closed on November 19, 2008. The private placement was conducted under
Regulation D of the Securities Act with a limited number of accredited
investors. A more complete description of this offering is included
at the section of this prospectus titled “Prospectus Summary” at page
5.
With the
exception of Geoffrey Hampson, our Chief Executive Officer, Chief Financial
Officer, and a director, Mark Melville, our President and Chief Corporate
Development Officer and Jonathan Ehrlich, our former President, no selling
stockholder has, or within the past three years has had, any position, office or
other material relationship with us or any of our predecessors or affiliates
other than as a result of the ownership of our securities.
The
following table also provides certain information with respect to the selling
stockholders’ ownership of our securities as of April 29, 2009, the total number
of securities they may sell under this prospectus from time to time, and the
number of securities they will own thereafter assuming no other acquisitions or
dispositions of our securities. The selling stockholders can offer
all, some or none of their securities, thus we have no way of determining the
number they will hold after this offering. Therefore, we have
prepared the table below on the assumption that the selling stockholders will
sell all shares covered by this prospectus.
Some of
the selling stockholders may distribute their shares, from time to time, to
their limited and/or general partners or managers, who may sell shares pursuant
to this prospectus. Each selling stockholder may also transfer shares
owned by him or her by gift, and upon any such transfer the donee would have the
same right of sale as the selling stockholder.
We may
amend or supplement this prospectus from time to time to update the disclosure
set forth herein, however, if a selling stockholder transfers his or her
interest in the common stock or the common stock purchase warrants prior to the
effective date of the registration statement of which this prospectus is a part,
we will be required to file a post-effective amendment to the registration
statement to provide the information concerning the
transferee. Alternatively, if a selling stockholder transfers his or
her interest in the common stock or the common stock purchase warrants after the
effective date of the registration statement of which this prospectus is a part,
we may use a supplement to update this prospectus. With the exception
of Mr. Scott Lamacraft, who is an affiliate of a broker-dealer, none of the
selling stockholders are or were affiliated with registered
broker-dealers. See our discussion titled “Plan of Distribution” for
further information regarding the selling stockholders’ method of distribution
of these shares.
|
Selling
Stockholder
|
Shares
held
before the
Offering
|
Shares
being
Offered
|
Shares
held
after the
Offering
|
Percentage
Owned after
the
Offering
(1)
|
|
|
|
|
|
|
|
Ehrlich
Real Estate Advisors
(2)(12)
|
187,845
|
153,845
|
34,000
|
*
|
|
|
|
|
|
|
|
Mark
Ernst
(3)
|
307,692
(14)
|
307,692
|
0
|
0
|
|
|
|
|
|
|
|
Rick
Meslin
(3)
|
307,692
|
307,692
|
0
|
0
|
|
|
|
|
|
|
|
Carl
H. Jackson and Jodi Sansone
(4)
|
1,374,545
|
553,845
|
820,700
|
3.4%
|
|
|
|
|
|
|
|
Scott
E. Lamacraft
(5)
|
1,008,129
|
719,229
|
288,900
|
1.2%
|
|
|
|
|
|
|
|
Jonathan
Ehrlich
(6)
|
320,321
|
76,921
|
243,400
|
1.01%
|
|
|
|
|
|
|
|
Mark
Melville
(7)
|
107,692
|
107,692
|
0
|
0
|
|
|
|
|
|
|
|
Penson
Financial Services Canada Inc. ITF Michael Bernstein A/C 6YA413F
(8)
|
157,000
|
157,000
|
0
|
0
|
|
|
|
|
|
|
|
Mark
L. Casey
(9)
|
163,460
|
163,460
|
0
|
0
|
|
|
|
|
|
|
|
Mark
L. Casey and Carrie G. Casey, TR, UA 08-19-2008 The Casey Family
Trust
(10)
|
413,461
|
163,461
|
250,000
|
1.04%
|
|
|
|
|
|
|
|
Geoffrey
Hampson
(11)
|
3,038,333
|
390,000
|
2,648,333
|
10.4%
(15)
|
|
|
|
|
|
|
|
Benham
Trust
(2)(13)
|
153,845
|
153,845
|
0
|
0
|
|
|
|
|
|
|
|
TOTAL
|
7,540,015
|
3,254,682
|
4,285,333
|
17.05%
|
*
Indicates less than 1%.
(1) Based
on 23,934,268 shares outstanding on April 29, 2009.
(2) The
number of shares being offered includes 76,923 shares of common stock, 38,461
shares of common stock which may be acquired upon exercise of a warrant having
an exercise price of $0.78 per share and 38,461 shares of common stock which may
be acquired upon exercise of a warrant having an exercise price of $0.91 per
share.
(3) The
number of shares being offered includes 153,846 shares of common stock, 76,923
shares of common stock which may be acquired upon exercise of a warrant having
an exercise price of $0.78 per share and 76,923 shares of common stock which may
be acquired upon exercise of a warrant having an exercise price of $0.91 per
share.
(4) The
number of shares being offered includes 276,923 shares of common stock, 138,461
shares of common stock which may be acquired upon exercise of a warrant having
an exercise price of $0.78 per share and 138,461 shares of common stock which
may be acquired upon exercise of a warrant having an exercise price of $0.91 per
share.
(5) The
number of shares being offered includes 359,615 shares of common stock, 179,807
shares of common stock which may be acquired upon exercise of a warrant having
an exercise price of $0.78 per share and 179,807 shares of common stock which
may be acquired upon exercise of a warrant having an exercise price of $0.91 per
share.
(6) The
number of shares being offered includes 38,461 shares of common stock, 19,230
shares of common stock which may be acquired upon exercise of a warrant having
an exercise price of $0.78 per share and 19,230 shares of common stock which may
be acquired upon exercise of a warrant having an exercise price of $0.91 per
share.
(7) The
number of shares being offered includes 53,846 shares of common stock, 26,923
shares of common stock which may be acquired upon exercise of a warrant having
an exercise price of $0.78 per share and 26,923 shares of common stock which may
be acquired upon exercise of a warrant having an exercise price of $0.91 per
share.
(8) The
number of shares being offered includes 78,500 shares of common stock, 39,250
shares of common stock which may be acquired upon exercise of a warrant having
an exercise price of $0.78 per share and 39,250 shares of common stock which may
be acquired upon exercise of a warrant having an exercise price of $0.91 per
share.
(9) The
number of shares being offered includes 81,730 shares of common stock
which may be acquired upon exercise of a warrant having an exercise price of
$0.78 per share and 81,730 shares of common stock which may be acquired upon
exercise of a warrant having an exercise price of $0.91 per share.
(10) The
persons having voting and investment control over the securities owned by the
Casey Family Trust are Mark L. Casey and Carrie G. Casey.
(11) The
number of shares being offered includes 195,000 shares of common stock, 97,500
shares of common stock which may be acquired upon exercise of a warrant having
an exercise price of $0.78 per share and 97,500 shares of common stock which may
be acquired upon exercise of a warrant having an exercise price of $0.91 per
share.
(12) The
person having voting and investment control over the securities owned by Ehrlich
Real Estate Advisors is Tom Ehrlich.
(13) The
person having voting and investment control over the securities owned by the
Benham Trust is Derek Benham.
(14) This
information has been taken from the records of our stock transfer agent and has
not been independently verified by Mr. Ernst.
(15)
Please refer to the beneficial ownership table on page 51 of this prospectus for
a description of Mr. Hampson’s beneficial ownership of our
securities.
PLAN
OF DISTRIBUTION
We are
registering the shares of common stock on behalf of the selling
stockholders. Sales of shares may be made by selling stockholders,
including their respective donees, transferees, pledgees or other
successors-in-interest directly to purchasers or to or through underwriters,
broker-dealers or through agents. Sales may be made from time to time
on the OTC Bulletin Board or any exchange upon which our shares may trade in the
future, in the over-the-counter market or otherwise, at market prices prevailing
at the time of sale, at prices related to market prices, or at negotiated or
fixed prices. The shares may be sold by one or more of, or a
combination of, the following:
|
·
|
a
block trade in which the broker-dealer so engaged will attempt to sell the
shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction (including crosses in which the
same broker acts as agent for both sides of the
transaction);
|
|
·
|
purchases
by a broker-dealer as principal and resale by such broker-dealer,
including resales for its account, pursuant to this
prospectus;
|
|
·
|
ordinary
brokerage transactions and transactions in which the broker solicits
purchases;
|
|
·
|
through
options, swaps or derivatives;
|
|
·
|
in
privately negotiated transactions;
|
|
·
|
in
making short sales or in transactions to cover short
sales;
|
|
·
|
put
or call option transactions relating to the shares;
and
|
|
·
|
any
other method permitted under applicable
law.
|
The
selling stockholders may effect these transactions by selling shares directly to
purchasers or to or through broker-dealers, which may act as agents or
principals. These broker-dealers may receive compensation in the form
of discounts, concessions or commissions from the selling stockholders and/or
the purchasers of shares for whom such broker-dealers may act as agents or to
whom they sell as principals, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions). The
selling stockholders have advised us that they have not entered into any
agreements, understandings or arrangements with any underwriters or
broker-dealers regarding the sale of their securities.
The
selling stockholders may enter into hedging transactions with broker-dealers or
other financial institutions. In connection with those transactions,
the broker-dealers or other financial institutions may engage in short sales of
the shares or of securities convertible into or exchangeable for the shares in
the course of hedging positions they assume with the selling
stockholders. The selling stockholders may also enter into options or
other transactions with broker-dealers or other financial institutions which
require the delivery of shares offered by this prospectus to those
broker-dealers or other financial institutions. The broker-dealer or
other financial institution may then resell the shares pursuant to this
prospectus (as amended or supplemented, if required by applicable law, to
reflect those transactions).
The
selling stockholders and any broker-dealers that act in connection with the sale
of shares may be deemed to be “underwriters” within the meaning of Section 2(11)
of the Securities Act of 1933, and any commissions received by broker-dealers or
any profit on the resale of the shares sold by them while acting as principals
may be deemed to be underwriting discounts or commissions under the Securities
Act. The selling stockholders may agree to indemnify any agent,
dealer or broker-dealer that participates in transactions involving sales of the
shares against liabilities, including liabilities arising under the Securities
Act. We have agreed to indemnify each of the selling stockholders and
each selling stockholder has agreed, severally and not jointly, to indemnify us
against some liabilities in connection with the offering of the shares,
including liabilities arising under the Securities Act.
The
selling stockholders will be subject to the prospectus delivery requirements of
the Securities Act. We have informed the selling stockholders that
the anti-manipulative provisions of Regulation M promulgated under the
Securities Exchange Act of 1934 may apply to their sales in the
market.
Selling
stockholders also may resell all or a portion of the shares in open market
transactions in reliance upon Rule 144 under the Securities Act, provided they
meet the criteria and conform to the requirements of Rule 144.
Upon
being notified by a selling stockholder that a material arrangement has been
entered into with a broker-dealer for the sale of shares through a block trade,
special offering, exchange distribution or secondary distribution or a purchase
by a broker or dealer, we will file a supplement to this prospectus, if required
pursuant to Rule 424(b) under the Securities Act, disclosing:
|
·
|
the
name of each such selling stockholder and of the participating
broker-dealer(s);
|
|
·
|
the
number of shares involved;
|
|
·
|
the
initial price at which the shares were
sold;
|
|
·
|
the
commissions paid or discounts or concessions allowed to the
broker-dealer(s), where applicable;
|
|
·
|
that
such broker-dealer(s) did not conduct any investigation to verify the
information set out or incorporated by reference in this prospectus;
and
|
|
·
|
other
facts material to the transactions.
|
In
addition, if required under applicable law or the rules or regulations of the
Commission, we will file a supplement to this prospectus when a selling
stockholder notifies us that a donee or pledgee intends to sell more than 500
shares of common stock.
We are
paying all expenses and fees in connection with the registration of the
shares. The selling stockholders will bear all brokerage or
underwriting discounts or commissions paid to broker-dealers in connection with
the sale of the shares.
Security
Ownership of Certain Beneficial Owners (more than 5%)
The
following table sets forth certain information, as of April 29, 2009, with
respect to the holdings of (1) each person who is the beneficial owner of more
than 5% of our common stock, (2) each of our directors, (3) each named executive
officer, and (4) all of our directors and executive officers as a
group.
Beneficial
ownership of the common stock is determined in accordance with the rules of the
Securities and Exchange Commission and includes any shares of common stock over
which a person exercises sole or shared voting or investment powers, or of which
a person has a right to acquire ownership at any time within 60 days of April
29, 2009. Except as otherwise indicated, and subject to applicable
community property laws, we believe that the persons named in this table have
sole voting and investment power with respect to all shares of common stock held
by them. Applicable percentage ownership in the following table is
based on 23,934,268 shares of common stock outstanding as of April 29, 2009
plus, for each individual, any securities that individual has the right to
acquire within 60 days of April 29, 2009.
|
|
Title of
Class
|
Name and Address
(1)
|
Shares
Beneficially
Owned
(2)
|
Percentage of
Class
(2)
|
|
|
|
|
Beneficial Owners
of
More than
5%:
|
|
|
|
|
|
Common
Stock
|
Odyssey
Value Advisors, LLC
601
Montgomery Street, Suite 1112
San
Francisco, CA 94111
|
1,521,525
|
6.36%
|
|
|
|
|
Current Directors and
Named Executive
Officers:
|
|
|
|
|
|
Common
Stock
|
C.
Geoffrey Hampson, Chief Executive Officer, Principal Accounting Officer,
Director (3)
|
3,038,333
|
11.82%
|
|
|
|
Common
Stock
|
Mark
Melville, President, Chief Corporate Development Officer
(4)
|
524,359
|
2.15%
|
|
|
|
Common
Stock
|
Jonathan
Ehrlich, former Chief Operations Officer, former President
(5)
|
306,621
|
1.28%
|
|
|
|
Common
Stock
|
Mark
Benham, Director (6)
|
83,333
|
0.35%*
|
|
|
|
Common
Stock
|
James
P. Taylor, Director (7)
|
68,333
|
0.28%*
|
|
|
|
Common
Stock
|
Boris
Wertz,
Director
(8)
|
0
|
0.17%*
|
|
|
|
|
All Directors and
Executive Officers as a
group (6
persons)
|
4,020,979
|
16.05%
|
|
*Less
than 1%.
(1)
Unless otherwise indicated, the address of the beneficial owner is c/o Live
Current Media Inc., 375 Water Street, Suite 645, Vancouver, BC, V6B5C6,
Canada.
(2)
Percentage based upon 23,934,268 shares of our common stock outstanding as of
April 29, 2009.
(3)
Includes 1,260,000 shares of common stock, a 2-year warrant issued to
Hampson Equities Ltd. (a company owned and controlled by C. Geoffrey Hampson,
our Chief Executive Officer and a director) to purchase 1,000,000 shares of our
common stock at an exercise price of $1.25 in exchange for $1,000,000 cash
(received) pursuant to a subscription agreement dated June 1, 2007 and an option
to purchase 583,333 shares of our common stock granted on September 11, 2007
pursuant to an employment agreement that will have vested within 60 days of
March 20, 2009. Does not include an option to purchase 416,667 shares
of our common stock under the same grant, as Mr. Hampson will not have the right
to acquire shares pursuant to this option until September 11,
2009. Mr. Hampson’s holdings also include a warrant to purchase
97,500 shares of our common stock with an exercise price of $0.78 effective
November 19, 2008, exercisable at any time, and expiring November 19, 2010 and a
warrant to purchase 97,500 shares of our common stock with an exercise price of
$0.91 effective November 19, 2008, exercisable at any time, and expiring
November 19, 2011. Both these warrants were issued as part of our
private placement on November 19, 2008.
(4)
Includes an option to purchase 416,667 shares of our common stock granted on
January 1, 2008 pursuant to an employment agreement that will have vested within
60 days of March 20, 2009. Does not include an option to purchase
583,333 shares of our common stock under the same grant, as Mr. Melville will
not have the right to acquire shares pursuant to this option until July 1,
2009.
Includes
a warrant to purchase 26,923 shares of our common stock with an exercise price
of $0.78 effective November 19, 2008, exercisable at any time, and expiring
November 19, 2010. Also includes a warrant to purchase 26,923 shares
of our common stock with an exercise price of $0.91 effective November 19, 2008,
exercisable at any time, and expiring November 19, 2011. Both these
warrants were issued as part of our private placement on November 19,
2008.
(5)
Includes a warrant to purchase 19,230 shares of our common stock with an
exercise price of $0.78 effective November 19, 2008, exercisable at any time,
and expiring November 19, 2010. Also includes a warrant to purchase
19,230 shares of our common stock with an exercise price of $0.91 effective
November 19, 2008, exercisable at any time, and expiring November 19,
2011. Both these warrants were issued as part of our private
placement on November 19, 2008.
(6)
Includes an option to purchase 58,333 shares of our common stock granted on
September 11, 2007 for services as a member of our Board of Directors that will
have vested within 60 days of March 20, 2009. Does not include an
option to purchase 41,667 shares of our common stock under the same grant, as
Mr. Benham will not have the right to acquire shares pursuant to this option
until September 11, 2009.
(7)
Includes an option to purchase 58,333 shares of our common stock granted on
September 11, 2007 for services as a member of our Board of Directors that will
have vested within 60 days of March 20, 2009. Does not include an
option to purchase 41,667 shares of our common stock under the same grant, as
Mr. Taylor will not have the right to acquire shares pursuant to this option
until September 11, 2009.
(8)
Includes an option to purchase 41,667 shares of our common stock granted on
March 14, 2008 for services as a member of our Board of Directors that will have
vested within 60 days of March 20, 2009. Does not include an option
to purchase 58,333 shares of our common stock under the same grant, as Dr. Wertz
will not have the right to acquire shares pursuant to this option until
September 14, 2009.
CHANGE
OF CONTROL
To our
knowledge, there are no present arrangements or pledges of securities of our
company that may result in a change in control.
DESCRIPTION
OF SECURITIES
GENERAL
We are
presently authorized under our Articles of Incorporation to issue 50,000,000
shares of common stock $.001 par value per share. The following
description of our capital stock is only a summary and is subject to and
qualified by our Articles of Incorporation, as amended, copies of which will be
provided by us upon request, and by the provisions of applicable corporate laws
of the State of Nevada.
Article
I, section 2 of our bylaws states in pertinent part, “Special meetings of the
stockholders may be held at the office of the Company in the State Of Nevada, or
elsewhere, whenever called by the President, or by the Board of Directors, or by
vote of, or by an instrument in writing signed by the holders of 51% of the
issued and outstanding capital stock of the Company.” This provision
could have an effect of delaying, deferring or preventing a change in control
because ownership of our common stock is widely disbursed. The costs
to an individual stockholder or to a group of stockholders wishing to call a
special meeting of stockholders to, for example, remove the board, may be
prohibitive or it may not be possible to obtain the approval of at least 51% of
the outstanding shares to call the meeting..
COMMON
STOCK
The
holders of our common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. The
presence, in person or by proxy, of holders of 51% of the common stock is
necessary to constitute a quorum at any meeting of our stockholders. An
affirmative vote of a majority in interest is required for the election of
directors. We may pay dividends at such time and to the extent declared by
the board of directors in accordance with Nevada corporate law. Our common
stock has no preemptive or other subscription rights, and there are no
conversion rights or redemption or sinking fund provisions with respect to such
shares. All outstanding shares of common stock are fully paid and
non-assessable. To the extent that additional shares of common stock may
be issued in the future, the relative interests of the then existing
stockholders may be diluted.
WARRANTS
We are
registering 1,627,338 shares of common stock underlying warrants issued to the
investors in the private offering we closed on November 19,
2008. Warrants with an exercise price of $0.78 per share and
conveying the right to purchase a total of 813,669 shares of common stock have a
term of 2 years from the date of issuance. Warrants with an exercise
price of $0.91 per share and converying the right to purchase a total of 813,669
shares of common stock have a term of 3 years from the date of
issuance.
To the
extent there is no effective registration statement registering the resale of
the shares underlying the warrants, the warrant holders may, at their option,
elect to exercise the warrants on a cashless basis, by canceling a portion of
the warrants in payment of the purchase price payable in respect of the number
of warrant shares purchased upon such exercise. In the event of a
cashless exercise, the number of warrant shares issued to the holder shall be
determined according to the following formula:
X =
Y(A-B)
A
|
Where:
|
X
=
|
the
number of warrant shares that are to be issued to the
holder;
|
|
|
|
|
|
|
Y
=
|
the
number of warrant shares for which the warrant is being exercised (which
includes both the number of warrant shares issued to the holder and the
number of warrant shares subject to the portion of the warrant being
cancelled in payment of the purchase
price);
|
|
|
A
=
|
the
fair market value of one share of common stock; and
|
|
|
|
|
|
|
B =
|
the
purchase price then in effect.
|
The
warrants have standard provisions for adjustment in the event of a stock split,
reverse stock split, stock dividend or reclassification. In the event
we reorganize our capital, reclassify our capital stock, consolidate or merge
with or into another corporation, or sell, transfer or otherwise dispose of our
property, assets or business to another corporation and, pursuant to the terms
of such reorganization, reclassification, merger, consolidation or disposition
of assets, shares of common stock of the successor or acquiring corporation, or
any cash, shares of stock or other securities or property are to be received by
or distributed to the holders of our common stock, then the holder shall have
the right to receive, at the option of the holder, (a) upon exercise of the
warrant, the number of shares of common stock of the successor or acquiring
corporation and other property receivable upon or as a result of such
reorganization, reclassification, merger, consolidation or disposition of assets
or (b) cash equal to the value of this warrant as determined in accordance with
the Black Scholes option pricing formula. In case of any such
reorganization, reclassification, merger, consolidation or disposition of
assets, the successor or acquiring corporation must expressly assume the
performance of the warrants, subject to such modifications as may be deemed
appropriate by resolution of our board of directors.
DISCLOSURE
OF COMMISSION POSITION OF INDEMNIFICATION FOR
SECURITIES
ACT LIABILITIES
Our
Articles of Incorporation provides the following with respect to
liability:
“No
director or officer of the corporation shall be personally liable to the
corporation of any of its stockholders for damages for breach of fiduciary duty
as a director or officer involving any act or omission of any such director or
officer provided, however, that the foregoing provision shall not eliminate or
limit the liability of a director or officer for acts or omissions which involve
intentional misconduct, fraud or a knowing violation of law, or the payment of
dividends in violation of Section 78.300 of the Nevada Revised Statutes.
Any repeal or modification of this Article of the Stockholders of the
Corporation shall be prospective only, and shall not adversely affect any
limitation on the personal liability of a director of officer of the Corporation
for acts or omissions prior to such repeal or modification.”
Section
78.7502 of the Nevada Revised Statutes provides that we may indemnify any person
who was or is a party, or is threatened to be made a party, to any action, suit
or proceeding brought by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation or other entity. The expenses that are subject to this indemnity
include attorneys’ fees, judgments, fines and amounts paid in settlement
actually and reasonably incurred by the indemnified party in connection with the
action, suit or proceeding. In order for us to provide this statutory indemnity,
the indemnified party must not be liable under Nevada Revised Statutes section
78.138 or must have acted in good faith and in a manner he reasonably believed
to be in, or not opposed to, the best interests of the corporation. With respect
to a criminal action or proceeding, the indemnified party must have had no
reasonable cause to believe his conduct was unlawful.
Section
78.7502 also provides that we may indemnify any person who was or is a party, or
is threatened to be made a party, to any action or suit brought by or on behalf
of the corporation by reason of the fact that he is or was serving at the
request of the corporation as a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or other entity
against expenses actually or reasonably incurred by him in connection with the
defense or settlement of such action or suit if he is not liable under Nevada
Revised Statutes section 78.138 of if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation. We may not indemnify a person if the person is adjudged by a court
of competent jurisdiction, after exhaustion of all appeals therefrom, to be
liable to the corporation, or for amounts paid in settlement to the corporation,
unless and only to the extent that the court in which such action or suit was
brought or another court of competent jurisdiction shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, the person is fairly and reasonably entitled to
indemnity.
Section
78.7502 requires us to indemnify our directors or officers against expenses,
including attorneys’ fees, actually and reasonably incurred by him in connection
with his defense, if he has been successful on the merits or otherwise in
defense of any action, suit or proceeding, or in defense of any claim, issue or
matter.
These
indemnification provisions may be sufficiently broad to permit indemnification
of the Company’s executive officers and directors for liabilities (including
reimbursement of expenses incurred) arising under the Securities
Act.
TRANSFER
AGENT AND REGISTRAR
The
transfer agent and registrar for our common stock Computershare Trust Company.
Computershare’s address is 350 Indiana Street, Suite 800, Golden,
Colorado, 80401.
INTERESTS
OF NAMED EXPERTS AND COUNSEL
We did
not hire any expert or counsel on a contingent basis who will receive a direct
or indirect interest in the Company or who was a promoter, underwriter, voting
trustee, director, officer, or employee of the Company. Richardson
& Patel LLP, our legal counsel, has given an opinion regarding certain legal
matters in connection with this offering of our securities. Both
Richardson & Patel LLP and its principals have accepted our common stock in
exchange for services rendered to us in the past and, although they are under no
obligation to do so, they may continue to accept our common stock for services
rendered to us. As of the date of this prospectus, Richardson &
Patel LLP and its principals collectively own 284,175 shares of our common
stock.
EXPERTS
The
financial statements included in this prospectus have been audited by Ernst
& Young, LLP, independent certified public accountants, to the extent and
for the periods set forth in their report appearing elsewhere herein and are
included in reliance upon such report given upon the authority of that firm as
experts in auditing and accounting.
WHERE
YOU CAN FIND MORE INFORMATION
We have
filed with the Securities and Exchange Commission a registration statement on
Form S-1 under the Securities Act with respect to the shares of common stock
being offered by this prospectus. This prospectus does not contain
all of the information included in the registration statement. For
further information pertaining to us and our common stock, you should refer to
the registration statement and its exhibits. Statements contained in
this prospectus concerning any of our contracts, agreements or other documents
are not necessarily complete. If a contract or document has been
filed as an exhibit to the registration statement, we refer you to the copy of
the contract or document that has been filed. Each statement in this
prospectus relating to a contract or document filed as an exhibit is qualified
in all respects by the filed exhibit.
We are
subject to the informational requirements of the Securities Exchange Act of 1934
and file annual, quarterly and current reports, proxy statements and other
information with the Securities and Exchange Commission. You can read
our filings, including the registration statement, over the internet at the
Security and Exchange Commission’s website at www.sec.gov. You may
also read and copy any document we file with the Securities and Exchange
Commission at its public reference facility at 100 F Street, N.E., Washington,
D.C., 20549, on official business days during the hours of 10 a.m. to 3
p.m. You may also obtain copies of the documents at prescribed rates
by writing to the Public Reference Section of the Securities and Exchange
Commission at 100 F Street, N.E., Washington, D.C., 20549. Please
call the Securities and Exchange Commission at 1-800-SEC-0330 for further
information on the operation of the public reference facility.
LIVE
CURRENT MEDIA INC.
(formerly
COMMUNICATE.COM INC.)
CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER
31, 2008 AND 2007
|
REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
|
F-2
|
|
|
|
|
CONSOLIDATED BALANCE
SHEETS
|
F-3
|
|
|
|
|
CONSOLIDATED STATEMENTS OF
OPERATIONS
|
F-4
|
|
|
|
|
CONSOLIDATED STATEMENTS OF
STOCKHOLDERS’ EQUITY
|
F-5
|
|
|
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
F-6
|
|
|
|
|
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
|
F-7
- F-29
|
|
LIVE
CURRENT MEDIA INC.
|
|
(formerly
COMMUNICATE.COM INC.)
|
|
CONSOLIDATED
BALANCE SHEETS
|
|
Expressed
In U.S. Dollars
|
|
(Going
Concern - See Note 1)
|
|
As
at December 31
|
|
2008
|
|
|
2007
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
1,832,520
|
|
|
$
|
7,375,245
|
|
|
Accounts
receivable (net of allowance for doubtful accounts of nil)
|
|
|
93,582
|
|
|
|
138,930
|
|
|
Prepaid
expenses and deposits
|
|
|
109,543
|
|
|
|
246,174
|
|
|
Inventory
|
|
|
74,082
|
|
|
|
-
|
|
|
Current
portion of receivable from sales-type lease
(Note
11)
|
|
|
23,423
|
|
|
|
-
|
|
|
Total
current assets
|
|
|
2,133,150
|
|
|
|
7,760,349
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
portion of receivable from sales-type lease
(Note
11)
|
|
|
23,423
|
|
|
|
-
|
|
|
Property
& equipment
(Note
7)
|
|
|
1,042,851
|
|
|
|
175,797
|
|
|
Website
development costs
(Note
8)
|
|
|
392,799
|
|
|
|
-
|
|
|
Intangible
assets
|
|
|
1,587,463
|
|
|
|
1,645,061
|
|
|
Goodwill
(Note
6)
|
|
|
2,428,602
|
|
|
|
-
|
|
|
Total
Assets
|
|
$
|
7,608,288
|
|
|
$
|
9,581,207
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
$
|
4,131,264
|
|
|
$
|
1,515,429
|
|
|
Bonuses
payable
|
|
|
235,650
|
|
|
|
241,290
|
|
|
Due
to shareholders of Auctomatic
(Note
6)
|
|
|
789,799
|
|
|
|
-
|
|
|
Deferred
revenue
|
|
|
120,456
|
|
|
|
53,079
|
|
|
Current
portion of deferred lease inducements
(Note
9)
|
|
|
20,138
|
|
|
|
20,138
|
|
|
Total
current liabilities
|
|
|
5,297,307
|
|
|
|
1,829,936
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
lease inducements
(Note
9)
|
|
|
55,380
|
|
|
|
75,518
|
|
|
Total
Liabilities
|
|
|
5,352,687
|
|
|
|
1,905,454
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS'
EQUITY
|
|
|
|
|
|
|
|
|
|
Common
Stock
(Note
10)
|
|
|
|
|
|
|
|
|
|
Authorized:
50,000,000 common shares, $0.001 par value
|
|
|
|
|
|
|
|
|
|
Issued
and outstanding:
|
|
|
|
|
|
|
|
|
|
23,546,370
common shares (December 31, 2007 - 21,446,623)
|
|
|
14,855
|
|
|
|
12,456
|
|
|
Additional
paid-in capital
|
|
|
14,772,880
|
|
|
|
10,188,975
|
|
|
Accumulated
deficit
|
|
|
(12,532,134
|
)
|
|
|
(2,525,678
|
)
|
|
Total
Stockholders' Equity
|
|
|
2,255,601
|
|
|
|
7,675,753
|
|
|
Total
Liabilities and Stockholders' Equity
|
|
$
|
7,608,288
|
|
|
$
|
9,581,207
|
|
|
Commitments
and Contingency
(Notes
15 and 16)
|
|
Subsequent
Events
(Note
18)
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to consolidated financial
statements
|
|
/s/
James P.
Taylor
|
|
/s/ Mark
Benham
|
|
James P. Taylor,
Director
|
|
Mark Benham,
Director
|
|
LIVE
CURRENT MEDIA INC.
|
|
(formerly
COMMUNICATE.COM INC)
|
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
Expressed
In U.S. Dollars
|
|
Years
Ended December 31
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
SALES
|
|
|
|
|
|
|
|
Health
and beauty eCommerce
|
|
$
|
9,271,237
|
|
|
$
|
8,092,707
|
|
|
Other
eCommerce
|
|
|
455
|
|
|
|
485,199
|
|
|
Domain
name advertising
|
|
|
93,141
|
|
|
|
449,613
|
|
|
Miscellaneous
income
|
|
|
-
|
|
|
|
35,810
|
|
|
Total
Sales
|
|
|
9,364,833
|
|
|
|
9,063,329
|
|
|
|
|
|
|
|
|
|
|
|
|
COSTS
OF SALES
|
|
|
|
|
|
|
|
|
|
Health
and Beauty eCommerce
|
|
|
7,683,432
|
|
|
|
6,512,292
|
|
|
Other
eCommerce
|
|
|
380
|
|
|
|
509,181
|
|
|
Total
Costs of Sales
|
|
|
7,683,812
|
|
|
|
7,021,473
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT
|
|
|
1,681,021
|
|
|
|
2,041,856
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
|
Amortization
and depreciation
|
|
|
253,141
|
|
|
|
29,169
|
|
|
Amortization
of website development costs
(Note
8)
|
|
|
58,640
|
|
|
|
-
|
|
|
Corporate
general and administrative
|
|
|
2,537,422
|
|
|
|
686,921
|
|
|
ECommerce
general and administrative
|
|
|
567,980
|
|
|
|
304,212
|
|
|
Management
fees and employee salaries
|
|
|
4,746,255
|
|
|
|
1,981,051
|
|
|
Corporate
marketing
|
|
|
42,399
|
|
|
|
-
|
|
|
ECommerce
marketing
|
|
|
766,393
|
|
|
|
817,101
|
|
|
Other
expenses
(Note
12)
|
|
|
708,804
|
|
|
|
637,730
|
|
|
Total
Expenses
|
|
|
9,681,034
|
|
|
|
4,456,184
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS
FROM OPERATIONS BEFORE OTHER ITEMS
|
|
|
(8,000,013
|
)
|
|
|
(2,414,328
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Global
Cricket Venture expenses
(Note 5)
|
|
|
(2,476,255
|
)
|
|
|
-
|
|
|
Gain
from sales and sales-type lease of domain names
(Note
11)
|
|
|
498,829
|
|
|
|
-
|
|
|
Accretion
expense
(Note
6)
|
|
|
(96,700
|
)
|
|
|
-
|
|
|
Interest
and investment income
|
|
|
67,683
|
|
|
|
119,574
|
|
|
Gain
on disposal of subsidiary of Frequenttraveler.com Inc.
(Note
4)
|
|
|
-
|
|
|
|
276,805
|
|
|
NET
LOSS AND COMPREHENSIVE LOSS FOR THE PERIOD
|
|
$
|
(10,006,456
|
)
|
|
$
|
(2,017,949
|
)
|
|
|
|
|
|
|
|
|
|
|
|
BASIC
AND DILUTED LOSS PER SHARE
|
|
$
|
(0.46
|
)
|
|
$
|
(0.11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE NUMBER OF COMMON
|
|
|
|
|
|
|
|
|
|
SHARES
OUTSTANDING - BASIC AND DILUTED
|
|
|
21,937,179
|
|
|
|
19,070,236
|
|
See
accompanying notes to consolidated financial statements
|
LIVE
CURRENT MEDIA INC.
|
|
(formerly
COMMUNICATE.COM INC)
|
|
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY
|
|
Expressed
In U.S. Dollars
|
|
|
|
Common
stock
|
|
|
Additional
Paid-in Capital
|
|
|
Accumulated
Deficit
|
|
|
Total
|
|
|
Years
ended December 31
|
|
Number
of Shares
|
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2006
|
|
|
17,836,339
|
|
|
$
|
8,846
|
|
|
$
|
3,605,579
|
|
|
$
|
(507,729
|
)
|
|
$
|
3,106,696
|
|
|
Issuance
of 60,284 common shares at $0.98 per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in
lieu of accrued bonuses to officers
|
|
|
60,284
|
|
|
|
60
|
|
|
|
59,018
|
|
|
|
|
|
|
|
59,078
|
|
|
Issuance
of 1,000,000 common shares at $1.00 per share to CEO
|
|
|
1,000,000
|
|
|
|
1,000
|
|
|
|
999,000
|
|
|
|
|
|
|
|
1,000,000
|
|
|
Private
Placement of 2,550,000 common shares at $2.00 per share
|
|
|
2,550,000
|
|
|
|
2,550
|
|
|
|
5,097,450
|
|
|
|
|
|
|
|
5,100,000
|
|
|
Share
issue costs
|
|
|
|
|
|
|
|
|
|
|
(100
|
)
|
|
|
|
|
|
|
(100
|
)
|
|
Stock-based
compensation
|
|
|
|
|
|
|
|
|
|
|
428,028
|
|
|
|
|
|
|
|
428,028
|
|
|
Net
loss and comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,017,949
|
)
|
|
|
(2,017,949
|
)
|
|
Balance,
December 31, 2007
|
|
|
21,446,623
|
|
|
|
12,456
|
|
|
|
10,188,975
|
|
|
|
(2,525,678
|
)
|
|
|
7,675,753
|
|
|
Stock-based
compensation
(Note
10d)
|
|
|
|
|
|
|
|
|
|
|
2,111,354
|
|
|
|
|
|
|
|
2,111,354
|
|
|
Issuance
of 586,403 common shares per the merger
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
agreement
with Auctomatic
(Note
6)
|
|
|
586,403
|
|
|
|
586
|
|
|
|
1,137,533
|
|
|
|
|
|
|
|
1,138,119
|
|
|
Issuance
of 33,000 common shares to investor relations firm
(Note
10b)
|
|
|
33,000
|
|
|
|
33
|
|
|
|
85,649
|
|
|
|
|
|
|
|
85,682
|
|
|
Issuance
of 120,000 common shares to investor relations firm
(Note
10b)
|
|
|
120,000
|
|
|
|
120
|
|
|
|
218,057
|
|
|
|
|
|
|
|
218,177
|
|
|
Issuance
of 50,000 warrants to investor relations firm
(Note
10e)
|
|
|
|
|
|
|
|
|
|
|
45,500
|
|
|
|
|
|
|
|
45,500
|
|
|
Cancellation
of 300,000 common shares not distributed
(Note
10b)
|
|
|
(300,000
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
Private
Placement of 1,627,344 units at $0.65 per share
(Note
10b)
|
|
|
1,627,344
|
|
|
|
1,627
|
|
|
|
1,056,148
|
|
|
|
|
|
|
|
1,057,775
|
|
|
Share
issue costs
(Note
10b)
|
|
|
|
|
|
|
|
|
|
|
(86,803
|
)
|
|
|
|
|
|
|
(86,803
|
)
|
|
Extinguishment
of accounts payable
(Note 10b)
|
|
|
33,000
|
|
|
|
33
|
|
|
|
16,467
|
|
|
|
|
|
|
|
16,500
|
|
|
Net
loss and comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,006,456
|
)
|
|
|
(10,006,456
|
)
|
|
Balance,
December 31, 2008
|
|
|
23,546,370
|
|
|
$
|
14,855
|
|
|
$
|
14,772,880
|
|
|
$
|
(12,532,134
|
)
|
|
$
|
2,255,601
|
|
See
accompanying notes to consolidated financial statements
|
LIVE
CURRENT MEDIA INC.
|
|
(formerly
COMMUNICATE.COM INC)
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
Expressed
In U.S. Dollars
|
|
Years
Ended December 31
|
|
2008
|
|
|
2007
|
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
|
|
|
Net
loss for the period
|
|
$
|
(10,006,456
|
)
|
|
$
|
(2,017,949
|
)
|
|
Non-cash
items included in net loss:
|
|
|
|
|
|
|
|
|
|
Gain
from sales and sales-type lease of domain name
|
|
|
(498,829
|
)
|
|
|
-
|
|
|
Accretion
expense
|
|
|
96,700
|
|
|
|
-
|
|
|
Stock-based
compensation
|
|
|
2,111,354
|
|
|
|
428,028
|
|
|
Accrued
and unpaid bonuses payable
|
|
|
235,650
|
|
|
|
241,290
|
|
|
Warrants
issued
|
|
|
45,500
|
|
|
|
-
|
|
|
Issuance
of common stock
(Note
10b)
|
|
|
303,859
|
|
|
|
-
|
|
|
Extinguishment
of debt by issuance of common stock
(Note
10b)
|
|
|
16,500
|
|
|
|
-
|
|
|
Amortization
and depreciation
|
|
|
291,643
|
|
|
|
24,135
|
|
|
Issuance
of common stock for bonuses
(Note
10b)
|
|
|
-
|
|
|
|
59,078
|
|
|
Change
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
45,348
|
|
|
|
(117,724
|
)
|
|
Prepaid
expenses and deposits
|
|
|
136,631
|
|
|
|
(246,174
|
)
|
|
Inventory
|
|
|
(74,082
|
)
|
|
|
-
|
|
|
Accounts
payable and accrued liabilities
|
|
|
2,615,835
|
|
|
|
523,574
|
|
|
Bonuses
payable
|
|
|
(241,290
|
)
|
|
|
-
|
|
|
Deferred
revenue
|
|
|
67,377
|
|
|
|
53,079
|
|
|
Deferred
lease inducements
|
|
|
-
|
|
|
|
100,690
|
|
|
Cash
flows used in operating activities
|
|
|
(4,854,260
|
)
|
|
|
(951,973
|
)
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Proceeds
from disposal of available for sale securities
|
|
|
-
|
|
|
|
261,912
|
|
|
Net
proceeds from sale of domain name
|
|
|
369,041
|
|
|
|
-
|
|
|
Net
proceeds from sales-type lease of domain name
|
|
|
140,540
|
|
|
|
-
|
|
|
Cash
consideration for Auctomatic
(Note
6)
|
|
|
(1,530,047
|
)
|
|
|
-
|
|
|
Purchases
of property & equipment
|
|
|
(187,532
|
)
|
|
|
(159,934
|
)
|
|
Website
development costs
(Note
8)
|
|
|
(451,439
|
)
|
|
|
-
|
|
|
Cash
flows used in (from) investing activities
|
|
|
(1,659,437
|
)
|
|
|
101,978
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Proceeds
from restricted cash
|
|
|
-
|
|
|
|
20,000
|
|
|
Proceeds
from sale of common stock (net of share issue costs)
|
|
|
970,972
|
|
|
|
6,099,900
|
|
|
Cash
flows from financing activities
|
|
|
970,972
|
|
|
|
6,119,900
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
(5,542,725
|
)
|
|
|
5,269,905
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, beginning of year
|
|
|
7,375,245
|
|
|
|
2,105,340
|
|
|
Cash
and cash equivalents, end of year
|
|
$
|
1,832,520
|
|
|
$
|
7,375,245
|
|
See
accompanying notes to consolidated financial statements
SUPPLEMENTAL
INFORMATION
|
|
|
2008
|
|
|
2007
|
|
|
Cash
paid during the year for:
|
|
|
|
|
|
|
|
Interest
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Income taxes
|
|
$
|
6,944
|
|
|
$
|
-
|
|
Live
Current Media Inc.
(formerly
Communicate.com Inc.)
Notes
to the Consolidated Financial Statements
For
the year ended December 31, 2008
NOTE
1 – NATURE OF BUSINESS AND BASIS OF PRESENTATION
Nature
of business
Live
Current Media Inc. (the “Company”) was incorporated under the laws of the State
of Nevada on October 10, 1995 under the name “Troyden Corporation” and changed
its name on August 21, 2000 from Troyden Corporation to “Communicate.com
Inc.”. On May 30, 2008, the Company changed its name from
Communicate.com Inc. to Live Current Media Inc. after obtaining formal
shareholder approval to do so at the Annual General Meeting in May
2008.
Our
principal operating subsidiary, Domain Holdings Inc. (“DHI”), was incorporated
under the laws of British Columbia on July 4, 1994 under the name “IMEDIAT
Digital Creations Inc.”. On April 14, 1999, IMEDIAT Digital
Creations, Inc. changed its name to “Communicate.com Inc.” and was redomiciled
from British Columbia to the jurisdiction of Alberta. On April 5,
2002, Communicate.com Inc. changed its name to Domain Holdings
Inc. DHI has 62,635,383 shares of common stock currently issued and
outstanding. 61,478,225 shares, or approximately 98.2% of the
outstanding shares, are held by Live Current.
Through
its majority-owned subsidiary, Domain Holdings, Inc. (“DHI”), the Company builds
consumer Internet experiences around its large portfolio of domain
names. DHI’s current business strategy is to develop or to seek
partners to develop its domain names to include content, commerce and community
applications. DHI is currently actively developing websites on two
domain names; one that provides e-commerce for fragrance
and
other health and beauty products, and another that will be a media rich consumer
experience on a sports related website where the revenue model is based on paid
advertising and sales of digital content and merchandise. DHI
develops
content and sells advertising services on other domains held for
future
development.
On March
13, 2008, the Company incorporated a wholly owned subsidiary in the state of
Delaware, Communicate.com Delaware, Inc. (“Delaware”). The new
subsidiary has been incorporated in relation to the Auctomatic transaction.
Refer to Note 6.
The
Company’s other subsidiary, DHI, owns 100% of 0778229 B.C. Ltd. (“Importers”),
Acadia Management Corp. (“Acadia”), and a dormant company 612793 B.C. Ltd.
(“612793”). Acadia’s assets and liabilities were assigned to DHI in
October 2008, and that company was dissolved and struck from the registrar of
British Columbia on January 21, 2009.
On August
8, 2008, the Company also formed a wholly-owned subsidiary in Singapore, LCM
Cricket Ventures Pte. Ltd. (“LCM Cricket Ventures”). This company
holds 50.05% of Global Cricket Venture Pte. Ltd. (“Global Cricket Venture” or
“GCV”).
As at
December 31, 2006, the Company owned 50.4% of the outstanding shares in
FrequentTraveller.com Inc. (“FT”), a Nevada private company incorporated on
October 29, 2002. FT was a full service travel agency that catered to
Internet-based customers seeking tours and other travel services. On
November 12, 2007, the Company disposed of its controlling interest in FT and at
the end of 2007 no longer had any ownership in FT. Refer to Note
4.
Basis
of presentation
The
consolidated financial statements are presented in United States dollars and are
prepared in accordance with accounting principles generally accepted in the
United States.
Going
Concern
The
consolidated financial statements have been prepared on a going concern basis
which assumes that the Company will be able to realize assets and discharge
liabilities in the normal course of business for the foreseeable future. The
Company has generated a consolidated net loss of $10,006,456 and realized a
negative cash flow from operating activities of $4,854,260 for the year ended
December 31, 2008. There is an accumulated deficit of $12,532,134
(December 31, 2007 - $2,525,678) and a working capital deficiency of $3,164,157
at December 31, 2008.
The
Company's ability to continue as a going-concern is in substantial doubt as it
is dependent on the continued financial support from its investors, the ability
of the Company to raise equity financing and the attainment of profitable
operations and further share issuances to meet the Company's liabilities as they
become payable, including its commitments for the Global Cricket Venture as
disclosed in Note 5. The outcome of these matters is dependant
on factors outside of the Company’s control and cannot be predicted at this
time.
Live
Current Media Inc.
(formerly
Communicate.com Inc.)
Notes
to the Consolidated Financial Statements
For
the year ended December 31, 2008
NOTE
1 – NATURE OF BUSINESS AND BASIS OF PRESENTATION (continued)
Going
Concern (continued)
The
accompanying consolidated financial statements have been prepared on a going
concern basis which assumes that the Company will be able to realize assets and
discharge liabilities in the normal course of business for the foreseeable
future. These financial statements do not include any adjustments
relating to the recoverability or classification of assets or the amounts or
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern.
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The
following is a summary of significant accounting policies used in preparation of
these consolidated financial statements:
Principles
of consolidation
The
consolidated financial statements include the accounts of the Company, its
wholly owned subsidiary Delaware, its wholly-owned subsidiary LCM Cricket
Ventures, its 98.2% (December 31, 2007 - 94.9%) interest in its subsidiary DHI,
DHI’s wholly owned subsidiaries Importers, Acadia, and 612793, and LCM Cricket
Ventures’ 50.05% interest in Global Cricket Venture. The comparative
figures in 2007 include its 50.4% interest in FT (from January 1, 2007 until the
sale of the Company’s controlling interest in FT on November 12,
2007). All significant intercompany balances and transactions are
eliminated on consolidation.
Use
of estimates
The
preparation of consolidated financial statements in conformity with U.S.
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of intangible assets, fair
value measurement, related party transactions, stock based compensation,
determination and disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and for the periods that the consolidated
financial statements are prepared. Actual results could differ from these
estimates.
Revenue
recognition
Revenues
and associated costs of goods sold from the on-line sales of products, currently
consisting primarily of fragrances and other beauty products, are recorded upon
delivery of products and determination that collection is reasonably
assured. The Company records inventory as an asset for items in
transit as title does not pass until received by the customer. All
associated shipping and handling costs are recorded as cost of goods sold upon
delivery of products.
Web
advertising revenue consists primarily of commissions earned from the referral
of visitors to the Company’s sites from other parties. The amount and
collectibility of these referral commissions is subject to uncertainty;
accordingly, revenues are recognized when the amount can be determined and
collectibility can be reasonably assured. In accordance with Emerging
Issues Task Force (“EITF”) 99-19,
Reporting Revenue Gross as a
Principal versus Net as an Agent,
the Company records web advertising
revenues on a gross basis.
Until the
disposal of the Company’s shares in FrequentTraveller.com Inc. on November 12,
2007, revenues from the sales of travel products, including tours, airfares and
hotel reservations, where the Company acted as the merchant of record and had
inventory risk, were recorded on a gross basis. Customer deposits
received prior to ticket issuance or 30-days prior to travel were recorded as
deferred revenue. Where the Company did not act as the merchant of
record and had no inventory risk, revenues were recorded at the net amounts,
without any associated cost of revenue in accordance with EITF
99-19. See also Note 4.
Revenue
from the sale of domain names, whose carrying values are recorded as intangible
assets, consists primarily of funds earned for the transfer of rights to domain
names that are currently in the Company’s control. Revenues have been
recognized when the sale agreement is signed and the collectibility of the
proceeds is reasonably assured. In 2008, there was a sale of a
geo-domain name for net proceeds of $369,041. Collectibility of the
amounts owing on this sale are reasonably assured and therefore accounted for as
a sale in the period the transaction occurred. There were no sales of
domain names during 2007.
Revenue
from the sales-type leases of domain names, whose carrying values are recorded
as intangible assets, consists primarily of funds earned over a period of time
for the transfer of rights to domain names that are currently in the Company’s
control. Collectibility of these revenues generated are reasonably assured and
therefore accounted for as a sales-type lease in the period the transaction
occurs. See also Note 11.
Live
Current Media Inc.
(formerly
Communicate.com Inc.)
Notes
to the Consolidated Financial Statements
For
the year ended December 31, 2008
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Foreign
currency transactions
The
consolidated financial statements are presented in United States
dollars. The functional currency of the Company is United States
dollars. In accordance with FAS No. 52,
Foreign Currency Translation
,
the foreign currency financial statements of the Company’s subsidiaries are
translated into U.S. dollars. Monetary assets and liabilities are
translated using the foreign exchange rate that prevailed at the balance sheet
date. Revenue and expenses are translated at weighted average rates
of exchange during the year and stockholders’ equity accounts and certain other
historical cost balances are translated by using historical exchange
rates. Any resulting exchange gains and losses are presented as
cumulative foreign currency translation gains (losses) within other accumulated
comprehensive income (loss). There was no effect to comprehensive
income (loss) related to the share conversion with DHI.
Transactions
denominated in foreign currencies are remeasured at the exchange rate in effect
on the respective transaction dates and gains and losses are reflected in the
consolidated statements of operations.
Comprehensive
loss
Comprehensive
loss includes all changes in equity of the Company during a period except those
resulting from investments by shareholders and distributions to
shareholders. Comprehensive income (loss) includes net income (loss)
and other comprehensive income (loss) (“OCI”). The major components
included in OCI are cumulative translation adjustments arising on the
translation of the financial statements of self-sustaining foreign operations
and unrealized gains and losses on financial assets classified as
available-for-sale, of which we have none.
Loss
per share
Basic
loss per share is computed by dividing losses for the period by the weighted
average number of common shares outstanding for the period. Diluted
loss per share reflects the potential dilution of securities by including other
potential common stock in the weighted average number of common shares
outstanding for a period and is not presented where the effect is
anti-dilutive.
Cash
and cash equivalents
The
Company considers all highly liquid instruments, with original maturity dates of
three months or less at the time of issuance, to be cash
equivalents.
Accounts
receivable and allowance for doubtful accounts
The
Company’s accounts receivable balance consists primarily of goods and services
taxes (GST) receivable, advertising revenues receivable and the balance
receivable relating to our December 31, 2008 sale of a domain name as disclosed
in Note 11. Per the Company’s review of open accounts and collection
history, the accounts receivable balances are reasonably collectible and
therefore no allowance for doubtful accounts has been reflected at year
end.
Inventory
Inventory
is recorded at the lower of cost or market using the first-in first-out (FIFO)
method. The Company maintains little or no inventory of perfume which
is shipped from the supplier directly to the customer. The inventory
on hand as at December 31, 2008 is recorded at cost of $74,082 and represents
inventory in transit from the supplier to the customer.
Deferred
Financing Costs
Costs
directly identifiable with the raising of capital are charged against the
related capital stock. Costs incurred to obtain debt financing are
deferred and amortized by a charge to interest expense over the term of the
related debt. Debt financing fees are amortized and included as part
of interest expense. During the period, financing costs were charged
against the capital stock issued during the period in a private
placement. As there were no debt financings, no financing costs were
amortized to interest expense.
Deferred
Acquisition Costs
Deferred
acquisition costs are direct or incremental costs directly related to
acquisitions, and are deferred and added to the cost of the
purchase. Only costs that are directly related to proposed
transactions, where completion is considered more likely than not, are
deferred. Once the Company ceases to be engaged on a regular ongoing
basis and it is not likely that activities will resume, the costs are
expensed. During the period, deferred acquisition costs were expensed
in full as it is not possible to predict whether the related acquisition
activities will resume.
Live
Current Media Inc.
(formerly
Communicate.com Inc.)
Notes
to the Consolidated Financial Statements
For
the year ended December 31, 2008
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Property &
Equipment
These
assets are stated at cost. Minor additions and improvements are charged to
operations, and major additions are capitalized. Upon retirement, sale or other
disposition, the cost and accumulated depreciation are eliminated from the
accounts, and a gain or loss is included in operations.
Amortization
for equipment is computed using declining balance method at the following annual
rates:
|
|
Office Furniture and
Equipment
|
20%
|
|
|
|
Computer
Equipment
|
30%
|
|
|
|
Computer
Software
|
100%
|
|
|
|
Auction
Software
|
3 years
straight-line
|
|
Amortization
for leasehold improvements is based on a straight-line method calculated over
the term of the lease. Auction software is amortized straight line
over the life of the asset. Other additions are amortized on a
half-year basis in the year of acquisition.
Website
development costs
The
Company has adopted the provisions of EITF No. 00-2,
Accounting for Web Site Development
Costs
, whereby costs incurred in the preliminary project phase are
expensed as incurred; costs incurred in the application development phase are
capitalized; and costs incurred in the post-implementation operating phase are
expensed as incurred. Website development costs are stated at cost
less accumulated amortization and are amortized using the straight-line method
over its estimated useful life. Upgrades and enhancements are
capitalized if they result in added functionality which enables the software to
perform tasks it was previously incapable of performing. See also
Note 8.
Intangible
assets
The
Company has adopted the provisions of FAS No. 142,
Goodwill and Intangible
Assets
, which revises the accounting for purchased goodwill and
intangible assets. Under FAS No. 142, intangible assets with indefinite lives
are no longer amortized and are tested for impairment annually. The
determination of any impairment would include a comparison of estimated future
operating cash flows anticipated during the remaining life with the net carrying
value of the asset as well as a comparison of the fair value to book value of
the Company.
The
Company’s intangible assets, which consist of its portfolio of generic domain
names, have been determined to have an indefinite life and as a result are not
amortized. Management has determined that there is no impairment of
the carrying value of intangible assets at December 31, 2008.
Goodwill
Goodwill
represents the excess of acquisition cost over the fair value of the net assets
of acquired entities.
In accordance with FAS
No. 142,
Accounting for
Goodwill and Other Intangible Assets
.
the
Company is required to assess the carrying value of goodwill annually or
whenever circumstances indicate that a decline in value may have occurred,
utilizing a fair value approach at the reporting unit level.
A reporting unit is the
operating segment, or a business unit one level below that operating segment,
for which discrete financial information is prepared and regularly reviewed by
segment management.
The
goodwill impairment test is a two-step impairment test.
In the first step, the
Company compares the fair value of each reporting unit to its carrying value.
The Company
determines the fair value of its reporting units using a discounted cash flow
approach.
If the
fair value of the reporting unit exceeds the carrying value of the net assets
assigned to that reporting unit, goodwill is not impaired and the Company is not
required to perform further testing.
If the carrying value of
the net assets assigned to the reporting unit exceeds the fair value of the
reporting unit, then the Company must perform the second step in order to
determine the implied fair value of the reporting unit’s goodwill and compare it
to the carrying value of the reporting unit’s goodwill.
The activities in the
second step include valuing the tangible and intangible assets and liabilities
of the impaired reporting unit based on their fair value and determining the
fair value of the impaired reporting unit’s goodwill based upon the residual of
the summed identified tangible and intangible assets and
liabilities.
The fair
value of the Perfume.com reporting unit exceeded the carrying value of the
assigned net assets, therefore no further testing was required and an impairment
charge was not required.
Live
Current Media Inc.
(formerly
Communicate.com Inc.)
Notes
to the Consolidated Financial Statements
For
the year ended December 31, 2008
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Deferred
Revenue
Revenue
that has been received but does not yet qualify for recognition under the
Company's policies is reflected as either deferred revenue or long-term deferred
revenue.
Deferred
Lease Inducements
Lease
inducements, including rent free periods, are deferred and accounted for as a
reduction of rent expense over the term of the related lease on a straight-line
basis.
Advertising Costs
The
Company recognizes advertising expenses in accordance with SOP 93-7,
Reporting on Advertising
Costs
. As such, the Company expenses the costs of producing
advertisements at the time production occurs or the first time the advertising
takes place and expenses the cost of communicating advertising in the period
during which the advertising space or airtime is used. Internet
advertising expenses are recognized as incurred based on the terms of the
individual agreements, which are generally: 1) a commission for traffic
driven to the Website that generates a sale or 2) a referral fee based on
the number of clicks on keywords or links to our Website generated during a
given period. Total advertising expense in 2008 of $808,792 (2007 -
$817,101) were reported in “Corporate Marketing” and “eCommerce Marketing” on
the Company’s consolidated statements of operations.
Stock-based
compensation
During
the third quarter of 2007, the Company implemented the following new critical
accounting policy related to our stock-based compensation. Beginning on
July 1, 2007, the Company began accounting for stock options under the
provisions of Financial Accounting Standards No. 123 (revised 2004),
Share-Based Payment
(FAS 123(R)), which requires the recognition of the fair value of
stock-based compensation. Under the fair value recognition provisions for
FAS 123(R), stock-based compensation cost is estimated at the grant date
based on the fair value of the awards expected to vest and recognized as expense
ratably over the requisite service period of the award. The Company has used the
Black-Scholes valuation model to estimate fair value of its stock-based awards
which requires various judgmental assumptions including estimating stock price
volatility and expected life. The Company’s computation of expected volatility
is based on a combination of historical and market-based volatility. In
addition, the Company considers many factors when estimating expected life,
including types of awards and historical experience. If any of the assumptions
used in the Black-Scholes valuation model change significantly, stock-based
compensation expense may differ materially in the future from that recorded in
the current period.
In August
2007, the Company’s Board of Directors approved an Incentive Stock Option Plan
to make available 5,000,000 shares of common stock for the grant of stock
options, including incentive stock options. Incentive stock options
may be granted to employees of the Company, while non-qualified stock options
may be granted to employees, officers, directors, consultants, independent
contractors and advisors of the Company, provided such consultants, independent
contractors and advisors render bona-fide services not in connection with the
offer and sale of securities in a capital-raising transaction or promotion of
the Company’s securities. See also Note 10.
The
Company accounts for equity instruments issued in exchange for the receipt of
goods or services from other than employees in accordance with FAS No. 123R and
the conclusions reached by the EITF in Issue No. 96-18. Costs are measured
at the estimated fair market value of the consideration received or the
estimated fair value of the equity instruments issued, whichever is more
reliably measurable. The value of equity instruments issued for
consideration other than employee services is determined on the earliest of a
performance commitment or completion of performance by the provider of goods or
services as defined by EITF 96-18.
Live
Current Media Inc.
(formerly
Communicate.com Inc.)
Notes
to the Consolidated Financial Statements
For
the year ended December 31, 2008
NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)
Income
taxes
During
the first quarter of 2007, the Company adopted the following new critical
accounting policy related to income tax. Beginning on January 1, 2007, the
Company began accounting for income tax under the provisions of Financial
Accounting Standards Board (“FASB”) Interpretation No. 48,
Accounting for Uncertainty in Income
Taxes-an interpretation of FASB Statement No. 109
(“FIN
48”). FIN 48 clarifies the accounting for uncertainty in income taxes
recognized in an enterprise’s financial statements in accordance with FASB
Statement 109,
Accounting for
Income Taxes
, and prescribes a recognition threshold and measurement
process for financial statement recognition and measurement of a tax position
taken or expected to be taken in a tax return. FIN 48 also provides
guidance on derecognition, classification, interest and penalties, accounting in
interim periods, disclosure and transition. The Company and its
subsidiaries are subject to U.S. federal income tax and Canadian
income tax, as well as income tax of multiple state and local jurisdictions.
Based on the Company’s evaluation, the Company has concluded that there are no
significant uncertain tax positions requiring recognition in the Company’s
financial statements. The Company’s evaluation was performed for the tax years
ended December 31, 2002, 2003, 2004, 2005, 2006, 2007 and 2008, the tax years
which remain subject to examination by major tax jurisdictions as of December
31, 2008. The Company may from time to time be assessed interest or
penalties by major tax jurisdictions, although any such assessments historically
have been minimal and immaterial to the Company’s financial
results. In the event the Company has received an assessment for
interest and/or penalties, it has been classified in the financial statements as
selling, general and administrative expense.
Recent
Accounting Pronouncements
FAS
162
In May,
2008, the FASB issued FAS No. 162,
The Hierarchy of Generally Accepted
Accounting Principles.
The new standard is intended to improve financial
reporting by identifying a consistent framework, or hierarchy, for selecting
accounting principles to be used in preparing financial statements that are
presented in conformity with U.S. generally accepted accounting principles
(GAAP) for nongovernmental entities. This Statement is effective 60 days
following the SEC’s approval of the Public Company Accounting Oversight Board
amendments to AU Section 411,
The Meaning
of
Present Fairly in Conformity With
Generally Accepted Accounting Principles
. The Company does not
expect that this Statement will result in a change in current
practice.
FAS
161
In
March 2008, the FASB issued FAS No. 161,
Disclosures about Derivative
Instruments and Hedging Activities
,
an amendment of FAS
No. 133
. FAS No. 161 is intended to improve financial standards
for derivative instruments and hedging activities by requiring enhanced
disclosures to enable investors to better understand their effects on an
entity's financial position, financial performance and cash flows. Entities are
required to provide enhanced disclosures about: how and why an entity uses
derivative instruments; how derivative instruments and related hedged items are
accounted for under FAS No. 133 and its related interpretations; and how
derivative instruments and related hedged items affect an entity's financial
position, financial performance and cash flows. FAS No. 161 is effective
for financial statements issued for fiscal years and interim periods beginning
after November 15, 2008, which, for the Company, would be the fiscal year
beginning January 1, 2009. The Company is currently assessing the impact of FAS
No. 161 on its financial position and results of operations.
FAS
142-3
In April
2008, the FASB issued FSP FAS 142-3,
Determination of the Useful Life of
Intangible Assets
(“FSP FAS 142-3”). FSP FAS 142-3 amends the
factors that should be considered in developing renewal or extension assumptions
used to determine the useful life of a recognized intangible asset under SFAS
No. 142,
Goodwill and Other
Intangible Assets
(“SFAS 142”). The intent of FSP FAS 142-3 is
to improve the consistency between the useful life of a recognized intangible
asset under SFAS 142 and the period of expected cash flows used to measure the
fair value of the asset under SFAS 141(R) and other applicable accounting
literature. FSP FAS 142-3 is effective for financial statements
issued for fiscal years beginning after December 15, 2008, which for the
Company, would be the fiscal year beginning January 1, 2009. The
Company is currently assessing the impact of FSP FAS 142-3 on its financial
position and results of operations.
Live
Current Media Inc.
(formerly
Communicate.com Inc.)
Notes
to the Consolidated Financial Statements
For
the year ended December 31, 2008
NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)
Recent
Accounting Pronouncements (continued)
FAS
141R
In
December 2007, the FASB issued FAS No. 141 (revised 2007),
Business Combinations
("141R"). FAS No. 141R significantly changes the accounting for
business combinations in a number of areas including the treatment of contingent
consideration, preacquisition contingencies, transaction costs, in-process
research and development and restructuring costs. In addition, under FAS
No. 141R, changes in an acquired entity's deferred tax assets and uncertain
tax positions after the measurement period will impact income tax expense. This
standard will change accounting treatment for business combinations on a
prospective basis. FAS No. 141R is effective for fiscal years beginning
after December 15, 2008, which, for the Company, would be the fiscal year
beginning January 1, 2009. The Company is currently assessing the
impact of FAS No. 141R on its financial position and results of
operations.
FAS
160
In
December 2007, the FASB issued FAS No. 160
Noncontrolling Interests in
Consolidated Financial Statements
, and simultaneously revised FAS 141
Business
Combinations
. This Statement applies prospectively to business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15, 2008, which,
for the Company, would be the fiscal year beginning January 1, 2009. An entity
may not adopt the policy before the transitional date. The Company is
currently assessing the impact of FAS No. 160 and the revision of FAS 141 on its
financial position and results of operations.
FAS
159
In
February 2007, the FASB issued FAS 159, “Fair Value Option for Financial Assets
and Financial Liabilities,” which allows an irrevocable option, the Fair Value
Option, to carry eligible financial assets and liabilities at fair value. The
election is made on an instrument-by-instrument basis. Changes in fair value for
these instruments are recorded in earnings. The objective of FAS 159 is to
improve financial reporting by providing entities with the opportunity to
mitigate volatility in reported earnings caused by measuring related assets and
liabilities differently without having to apply complex hedge accounting
provisions.
We
adopted FAS 159 in 2008. The adoption did not have a material effect
on our financial results.
FAS
157
In
September 2006, the FASB issued FAS No. 157,
Fair Value
Measurements
. This Statement defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles
(GAAP), and expands disclosures about fair value measurements. This
standard does not require any new fair value measurements.
In
February 2008, the FASB issued FASB Staff Position (“FSP”) FAS 157-2, which
delays the effective date of FAS No. 157 to fiscal years beginning after
November 15, 2008 for nonfinancial assets and nonfinancial liabilities, except
for those items that are recognized or disclosed at fair value in the financial
statements on a recurring basis, which for the Company would be the fiscal year
beginning January 1, 2009.
In 2008,
we adopted FAS 157 for financial assets and liabilities recognized at fair value
on a recurring basis. The adoption did not have a material effect on our
financial results. The disclosures required by FAS 157 for financial assets and
liabilities measured at fair value on a recurring basis as at December 31, 2008
are included in Note 3.
We will
apply the requirements of FAS 157 for fair value measurements of financial and
nonfinancial assets and liabilities not valued on a recurring basis in 2009. We
are currently evaluating the effect of this application on our financial
reporting and disclosures.
In
October 2008, the FASB issued FSP No. FAS 157-3,
Determining the Fair Value of a
Financial Asset When the Market for that Asset is Not Active
, which
clarifies the application of FAS 157 in determining the fair value of a
financial asset when the market for that asset is not active. FSP FAS
157-3 is effective as of the issuance date and has not affected the valuation of
our financial assets.
Live
Current Media Inc.
(formerly
Communicate.com Inc.)
Notes
to the Consolidated Financial Statements
For
the year ended December 31, 2008
NOTE
3 – FINANCIAL INSTRUMENTS
Interest
rate risk exposure
The
Company currently has limited exposure to any fluctuation in interest
rates.
Foreign
exchange risk
The
Company is subject to foreign exchange risk for sales and purchases denominated
in foreign currencies. Foreign currency risk arises from the fluctuation of
foreign exchange rates and the degree of volatility of these rates relative to
the United States dollar. The Company does not actively manage this
risk.
Concentration
of credit risk
Financial
instruments, which potentially subject the Company to concentrations of credit
risk, consist primarily of cash and cash equivalents, and trade accounts
receivable. The Company limits its exposure to credit loss by placing
its cash and cash equivalents on deposit with high credit quality financial
institutions. Receivables arising from sales to customers are generally
immaterial and are not collateralized. Management regularly monitors the
financial condition of its customers to reduce the risk of loss.
Fair
values of Financial Instruments
As
described in Note 2, the Company adopted the provisions of FAS 157 as of January
1, 2008. FAS 157 defines fair value, establishes a consistent
framework for measuring fair value, and expands disclosures for each major asset
and liability category measured at fair value on either a recurring or
nonrecurring basis. FAS 157 clarifies that fair value is an exit price,
representing the amount that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants. As
such, fair value is a market-based measurement that should be determined based
on assumptions that market participants would use in pricing an asset or
liability. As a basis for considering such assumptions, FAS 157 establishes a
three-tier fair value hierarchy which prioritizes the inputs used in measuring
fair value as follows:
Level 1 -
observable inputs such as quoted prices in active markets for identical assets
and liabilities;
Level 2 -
observable inputs such as quoted prices for similar assets or liabilities in
active markets, quoted prices for identical or similar assets or liabilities in
markets that are not active, other inputs that are observable, or can be
corroborated by observable market data; and
Level 3 -
unobservable inputs for which there are little or no market data, which require
the reporting entity to develop its own assumptions.
The
Company’s financial instruments consist of cash and cash equivalents, accounts
receivable, investment in sales-type lease, accounts payable, bonuses payable
and due to shareholders of Auctomatic. The Company did not elect to
value its financial assets or liabilities in accordance with FAS 159. The
Company believes that the recorded values of all of its financial instruments
approximate their fair values because of their nature and respective
durations.
Live
Current Media Inc.
(formerly
Communicate.com Inc.)
Notes
to the Consolidated Financial Statements
For
the year ended December 31, 2008
NOTE
4 – NON-CONTROLLING INTEREST
The
Company currently holds 98.2% (December 31, 2007 – 94.9%) of the issued and
outstanding shares of its principal operating subsidiary, DHI. During
Q1 2008, DHI issued 40,086,645 shares to Live Current Media Inc. at fair value
in exchange for a conversion of intercompany debt of $3,000,000, therefore
diluting the non-controlling interest by 3.3%. This conversion was accounted for
using the purchase method. There was no effect to the consolidated
financial statements in the year ended December 31, 2008 to the non-controlling
interest of DHI.
As of
December 31, 2006, the Company owned a 50.4% controlling interest in
FrequentTraveller.com Inc. (“FT”) a private Nevada corporation incorporated on
October 29, 2002. FT provided travel services to customers online and
by telephone to destinations encompassed by the geographic domain names owned by
the Company, pursuant to a domain lease agreement entered into with FT dated May
1, 2005 (the “Domain Lease Agreement”). FT commenced operations in
November 2003. On November 12, 2007, the Company sold its remaining
50.4% shareholdings in FT via an Asset Purchase Agreement (“APA”). As
part of this agreement the Domain Lease Agreement was cancelled for minimal
consideration and all ties with FT were severed. Intercompany debt of
$265,000 was cancelled and the rights to use the domain names were returned to
the Company. The Company assumed no liabilities of FT
going-forward. The resulting gain of $276,805 on the disposal of the
subsidiary was booked as other income. The following table summarizes the assets
and liabilities foregone in exchange for the Company’s
shareholding.
|
|
Assets
|
|
|
|
|
|
|
Cash
|
|
$
|
46,974
|
|
|
|
|
Accounts
Receivable
|
|
|
7,570
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Account
payable and accrued liabilities
|
|
|
(176,312
|
)
|
|
|
|
Deferred
Revenue
|
|
|
(111,857
|
)
|
|
|
|
Loan
|
|
|
(43,180
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
Liabilities
|
|
$
|
276,805
|
|
|
Live
Current Media Inc.
(formerly
Communicate.com Inc.)
Notes
to the Consolidated Financial Statements
For
the year ended December 31, 2008
NOTE
5 – GLOBAL CRICKET VENTURE
Memoranda
of Understanding
On April
17, 2008, the Company signed a Memorandum of Understanding (“MOU” or “Original
MOU”) with the Board of Control for Cricket in India (“BCCI”) and the DLF Indian
Premier League (“IPL”). The Company will be the exclusive online
provider of content for the BCCI and the IPL. The ten-year agreement
outlined in the MOU includes extensive co-marketing and exclusive online content
rights agreements for the Company to build, launch and operate the official
online destinations for the BCCI and the IPL. The BCCI will be guaranteed
a minimum of US $3 million annually and the IPL US $2 million annually through
revenue sharing agreements including percentages of advertising, sponsorship and
merchandising sales.
The
Company signed a separate MOU (“Venture MOU”) with Netlinkblue (“NLB”) to create
a venture combining all of the digital assets secured independently by the
Company and NLB through the formation of a new company in Singapore
(“Newco”). As contemplated by the Venture MOU, Newco was incorporated
in Singapore on June 10, 2008 and named Global Cricket Venture Pte. Ltd.
(“Global Cricket Venture” or “GCV”). Pursuant to the Venture MOU with
NLB, GCV controls the right to live stream IPL matches over the internet and has
exclusive IPL-related global mobile rights in addition to the digital
cricket-related assets referenced above. To date, Global Cricket
Venture has nominal assets and operations.
Pursuant
to both MOUs, the parties agreed to negotiate and enter into definitive
agreements, however the parties are currently operating, performing, and funding
obligations under the MOUs.
On August
8, 2008, the Company formed a wholly-owned subsidiary in Singapore, LCM Cricket
Ventures Pte. Ltd. (“LCM Cricket Ventures”) which will support the Company’s
activities relating to cricket and the IPL. Pursuant to the Venture
MOU, the Company is entitled to a 40% equity interest in the GCV. On
October 30, 2008, as part of the formation process, LCM Cricket Ventures was
issued 50.05% of the shares of GCV. To date, LCM Cricket Venture has
nominal assets and limited operations.
The
Company has incurred $1.47m of costs relating to initial performance of its
obligations under the MOUs with each of the BCCI and the IPL, and establishing
Global Cricket Venture with NLB. These costs relate to, but are not
limited to, expenditures for business development, travel, consulting, and
salaries. There were no such costs in any period of
2007. An additional $1 million owing in aggregate to the BCCI and IPL
for the October 1, 2008 minimum payments under the initial MOUs have also been
accrued and expensed in 2008, therefore, the total costs expensed for the year
related to this venture are $2.47 million. Currently, GCV has not yet
obtained outside funding. Therefore, all of these costs were expensed
during the year ended December 31, 2008 due to uncertainty regarding
reimbursement of these costs by the GCV.
The
payments due to the BCCI and the IPL for the October 1, 2008 commitment have not
been made to date.
Live
Current Media Inc.
(formerly
Communicate.com Inc.)
Notes
to the Consolidated Financial Statements
For
the year ended December 31, 2008
NOTE
6 – MERGER AGREEMENT
On March
25, 2008, the Company and its wholly owned subsidiary, Communicate.com Delaware,
Inc. (“Delaware”) entered into an Agreement and Plan of Merger (the “Merger
Agreement”) with Entity, Inc., a Delaware corporation, (“Auctomatic”). The
Company believed that Auctomatic’s technology framework and toolset will
strengthen its commerce platform and Auctomatic’s team will dramatically enhance
the Company’s product and technology capability.
The
Merger Agreement closed on May 22, 2008 (the “Closing Date”). In
connection with the Merger Agreement, the stockholders of Auctomatic received in
total (i) $2,000,000 cash minus $152,939 in certain assumed liabilities and (ii)
1,000,007 shares of common stock of the Company (equal to $3,000,000 divided by
$3.00 per share, the closing price of one share of the Company’s common stock on
the business day immediately preceding the Closing Date) in exchange for all the
issued and outstanding shares of Auctomatic.
The
consideration was payable on the Closing Date as follows: (i) 340,001 shares, or
34%, of the common stock and (ii) $1,200,000 less $152,939 in assumed
liabilities. An additional 246,402 shares of common stock were issued
and shall be distributed in equal amounts to the Auctomatic shareholders on each
of the first, second and third anniversary of the Closing Date. The remaining
$800,000 of the total Cash Consideration shall be distributed on the first
anniversary of the Closing Date. All amounts of cash and common stock
shall be distributed pro rata among the Auctomatic Stockholders.
The
distribution of the remaining 413,604 shares of the common stock payable on the
first, second and third anniversary of the Closing Date to the Auctomatic
founders is subject to their continuing employment with the Company or a
subsidiary on each Distribution Date. Subsequent to year end, one of
the founders resigned from Live Current, and therefore the distribution of
137,868 shares of the common stock on the first, second and third anniversary
will no longer be payable. The remaining 275,736 shares of the common
stock owing to the other founders remain payable on the anniversary dates as
noted above. See also Note 10.
At May
22, 2008, the present value of the amounts payable in cash to shareholders of
Auctomatic on the first anniversary of the closing date was
$640,000. At year end, the present value discount was accreted by
$96,700, leaving a present value remaining at December 31, 2008 of
$736,700.
Also at
year end, $53,099 of cash owing at closing has yet to be paid to one of the
Auctomatic shareholders. As a result, at year end, amounts payable to
shareholders of Auctomatic totaled $789,799.
The
purchase price to affect the merger was allocated as following on the closing
date:
|
|
Purchase
Price Paid
|
|
|
|
|
|
|
|
|
|
|
|
Cash
(net of assumed liabilities)
|
|
$
|
1,046,695
|
|
|
|
Transaction
Costs
|
|
|
387,358
|
|
|
|
|
|
|
|
|
|
|
Cash
consideration for Auctomatic
|
|
|
1,434,053
|
|
|
|
|
|
|
|
|
|
|
Present
value of shares of common stock paid and payable to shareholders of
Auctomatic
|
|
|
1,138,119
|
|
|
|
Present
value of amounts payable to shareholders of Auctomatic
|
|
|
640,000
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,212,172
|
|
Live
Current Media Inc.
(formerly
Communicate.com Inc.)
Notes
to the Consolidated Financial Statements
For
the year ended December 31, 2008
NOTE
6 – MERGER AGREEMENT (continued)
|
|
Net
Assets Acquired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
Cash
|
|
$
|
3,066
|
|
|
|
|
Share
subscriptions receivable
|
|
|
780
|
|
|
|
|
Computer
hardware
|
|
|
7,663
|
|
|
|
|
Auction
software
|
|
|
925,000
|
|
|
|
|
Goodwill
|
|
|
2,428,602
|
|
|
|
|
|
|
|
|
|
|
|
|
Less
Liabilities
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
|
(85,622
|
)
|
|
|
|
Loan
payable
|
|
|
(67,317
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
Assets Acquired
|
|
$
|
3,212,172
|
|
|
To show
effect to the merger of Auctomatic and Delaware as if the merger had occurred on
January 1, 2008, the pro forma information for the nine months ended December
31, 2008 would have resulted in revenues that remain unchanged from those
reported in the consolidated financial statements, no cumulative effect of
accounting changes, and income before extraordinary items and net income which
both would have decreased by $106,035. To show effect to the merger
of Auctomatic and Delaware as if the merger had occurred on January 1, 2007, the
comparative pro forma information for the year ended December 31, 2007 would
have no effect to reported revenues, cumulative effect of accounting changes,
income before extraordinary items or net income.
NOTE
7 – PROPERTY & EQUIPMENT
|
|
2008
|
|
Cost
|
|
|
Accumulated
Amortization
|
|
|
Net
Book Value
|
|
|
|
|
Office
Furniture and Equipment
|
|
$
|
165,868
|
|
|
$
|
30,778
|
|
|
$
|
135,090
|
|
|
|
|
Computer
Equipment
|
|
|
100,789
|
|
|
|
51,554
|
|
|
|
49,235
|
|
|
|
|
Computer
Software
|
|
|
27,276
|
|
|
|
13,638
|
|
|
|
13,638
|
|
|
|
|
Auction
Software
|
|
|
925,000
|
|
|
|
179,861
|
|
|
|
745,139
|
|
|
|
|
Leasehold
Improvements
|
|
|
142,498
|
|
|
|
42,749
|
|
|
|
99,749
|
|
|
|
|
|
|
$
|
1,361,431
|
|
|
$
|
318,580
|
|
|
$
|
1,042,851
|
|
|
|
|
2007
|
|
Cost
|
|
|
Accumulated
Amortization
|
|
|
Net
Book Value
|
|
|
|
|
Office
Furniture and Equipment
|
|
$
|
28.644
|
|
|
$
|
14,159
|
|
|
$
|
14,485
|
|
|
|
|
Computer
Equipment
|
|
|
70,095
|
|
|
|
37,031
|
|
|
|
33,064
|
|
|
|
|
Leasehold
Improvements
|
|
|
142,498
|
|
|
|
14,250
|
|
|
|
128,248
|
|
|
|
|
|
|
$
|
241,237
|
|
|
$
|
65,440
|
|
|
$
|
175,797
|
|
|
NOTE
8 – WEBSITE DEVELOPMENT COSTS
Website
development costs are related to infrastructure development of various websites
that the Company operates. In previous years, costs qualifying for
capitalization were immaterial and therefore were expensed as
incurred. Website maintenance, training, data conversion and business
process reengineering costs are expensed in the period in which they are
incurred. Costs incurred in the application development phase are
capitalized, and when the related websites reach the post-implementation
operating phase, the Company begins amortizing these costs on a straight-line
basis over 36 months beginning in the month following the implementation of the
related websites.
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
Website
Development Costs
|
|
$
|
451,439
|
|
|
$
|
-
|
|
|
|
|
Less:
Amortization
|
|
|
( 58,640
|
)
|
|
|
-
|
|
|
|
|
|
|
$
|
392,799
|
|
|
$
|
-
|
|
|
Live
Current Media Inc.
(formerly
Communicate.com Inc.)
Notes
to the Consolidated Financial Statements
For
the year ended December 31, 2008
NOTE
9 – DEFERRED LEASE INDUCEMENTS
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
Deferred
Lease Inducements
|
|
$
|
75,518
|
|
|
$
|
95,656
|
|
|
|
|
Less:
Current Portion
|
|
|
(20,138
|
)
|
|
|
(20,138
|
)
|
|
|
|
|
|
$
|
55,380
|
|
|
$
|
75,518
|
|
|
The
authorized capital of the Company consists of 50,000,000 common shares with a
par value of $0.001 per share. No other shares have been
authorized.
At
December 31, 2008, there were 23,546,370 (2007 – 21,446,683) shares issued and
outstanding.
2008
In June
2008, the Company issued 586,403 shares of common stock in relation to the May
22, 2008 merger with Auctomatic. Of those total issued shares,
340,001 shares were distributed to the shareholders and an additional 246,402
shares are being held for future distribution in three equal installments on the
next three anniversary dates of the merger pursuant to the terms of the merger
agreement. The value of the stock consideration was added to the cash
consideration in our determination of the purchase price. See also
Note 6. The remaining 413,604 shares of common stock are reserved for
future issuance to the Auctomatic founders. See also Note
10c.
In May
and June 2008, the Company issued 45,000 shares to an investor relations firm
that had been engaged to provide investor relations services to the
Company. Of the 45,000 shares, 30,000 shares with a value of $85,350
were issued as partial consideration for services rendered, while the remaining
15,000 shares with an estimated value of $42,300 were recorded as a prepaid
expense in June 2008 for services to be rendered in July 2008. In
July 2008, this amount was revalued to $36,573 based on the July average stock
price and expensed with the difference between the estimated and actual values
adjusted to Additional Paid-In Capital.
The
Company also issued 50,000 warrants to the investor relations firm in May 2008,
and expensed $45,500 in relation to the value of the warrants. See
also Note 10(e).
In August
2008, the Company issued 33,000 shares to an investor relations firm that had
previously been engaged to provide investor relations services to the
Company. The contract with this former investor relations firm
terminated August 1, 2008. The 33,000 shares owing to the firm had a
value of $85,682 and were issued as full consideration for services
rendered.
In August
and September 2008, the Company issued 30,000 shares to an investor relations
firm that had been engaged to provide investor relations services to the
Company. These shares, which were valued at $57,254, were issued as
partial consideration for services rendered during the year.
In
October 2008, the Company cancelled 300,000 shares of common stock that had been
pre-maturely issued in a prior year in anticipation of a transaction that was
never consummated.
Live
Current Media Inc.
(formerly
Communicate.com Inc.)
Notes
to the Consolidated Financial Statements
For
the year ended December 31, 2008
NOTE
10 – COMMON STOCK (continued)
2008
(continued)
During
November 2008, the Company accepted subscriptions from 11 accredited investors
pursuant to which the Company issued and sold 1,627,344 units consisting of one
share of the Company’s common stock and two warrants, each for the purchase of
one-half a share of common stock. The price per unit was
$0.65. The Company raised gross proceeds of $1,057,775 (the
“Offering”). The private placement closed on November 19, 2008. One
warrant is exercisable at $0.78 (a 20% premium) and expires November 19,
2010. The other warrant is exercisable at $0.91 (a 40% premium) and
expires November 19, 2011. The Company incurred $86,803 in share
issuance costs related to the private placement. The Company is
required to use its reasonable best efforts to file an S-1 Registration
Statement with the SEC to register for resale the common stock and the common
stock underlying the warrants. The securities were offered and sold
by the Company to accredited investors in reliance on Section 506 of Regulation
D of the Securities Act of 1933, as amended.
In
December 2008, the Company extinguished $16,500 of accounts payable by issuing
33,000 shares to the investor relations firm that had previously been engaged to
provide investor relations services to the Company.
In
October, November and December 2008, the Company issued 45,000 shares to an
investor relations firm that had been engaged to provide investor relations
services to the Company. These shares, which were valued at $39,000,
were issued as partial consideration for services rendered.
2007
On May
24, 2007 the Company issued 60,284 shares of common stock to management in lieu
of $59,078 of bonuses payable.
On June
11, 2007, the Company issued 1,000,000 shares of common stock and 1,000,000
common stock share purchase warrants to a company owned and controlled by the
Company’s Chief Executive Officer (“CEO”) in exchange for $1,000,000
cash. See also Note 10(e). The warrants expire June 10,
2009.
During
September and October 2007 the Company accepted subscriptions from 11 accredited
investors pursuant to which the Company issued and sold 2,550,000 of the
Company’s shares of common stock at a price of $2.00 per share for total gross
proceeds of $5,100,000 (the “Offering”). The shares were issued pursuant
to the subscriptions as follows: 1,000,000 shares for $1,999,956 net cash
proceeds were issued before September 30, 2007, and the balance of 1,550,000
shares for net cash proceeds of $3,099,944, were issued in October
2007. Pursuant to the terms of the Offering, the Company filed a
registration statement on Form SB-2 with the Securities and Exchange Commission
(the “Registration Statement”) before December 31, 2007 covering the resale of
the common stock (the “Registerable Securities”) sold. The Company is
further required to use its reasonable best efforts to maintain the Registration
Statement effective for a period of (i) two years or (ii) until such time as all
the Registerable Securities are eligible for sale under Rule 144 of the
Securities Act of 1933, as amended. The securities were offered and
sold by the Company to accredited investors in reliance on Section 506 of
Regulation D of the Securities Act of 1933, as amended.
2008
At the
year end, the Company reserved 413,604 shares of common stock for future
issuance and distribution in relation to the May 22, 2008 merger with
Auctomatic. These shares were to be issued to the Auctomatic founders
in three equal instalments on the next three anniversary dates of the merger
contingent on their continued employment with the Company pursuant to the terms
of the merger agreement. Subsequent to year end, one of the
Auctomatic founders resigned from the Company. As a result, 137,868
shares reserved for distribution to this individual have been released
subsequent to year end and are no longer payable. Pursuant to the
release, the balance of reserved shares of common stock for future issuance and
distribution is 275,736. See also Note 6.
Live
Current Media Inc.
(formerly
Communicate.com Inc.)
Notes
to the Consolidated Financial Statements
For
the year ended December 31, 2008
NOTE
10 – SHARE CAPITAL (continued)
The Board
of Directors and stockholders approved the 2007 Stock Incentive Plan and adopted
it August 21, 2007 (the “Plan”). The Company has reserved
5,000,000 shares of its common stock for issuance to directors, employees
and consultants under the Plan. The Plan is administered by the Board of
Directors. Vesting terms of the options range from immediately to
five years and no options will be exercisable for a period of more than ten
years.
All stock
options noted herein vest over three years and are exercisable for a period of
five years based on the date of grant. The Company values the options
granted to employees and directors using the Black Scholes option pricing model
at the date of grant. The Company values the options to consultants
at each reporting period under FAS 123(R) for non-employees using the Black
Scholes option pricing model. The assumptions used in the pricing
model include:
|
|
|
2008
|
2007
|
|
|
|
Dividend
yield
|
0%
|
0%
|
|
|
|
Expected
volatility
|
64.86%-75.68%
|
118.02%
|
|
|
|
Risk
free interest rate
|
1.62%
- 3.07%
|
3.97%
- 4.05%
|
|
|
|
Expected
lives
|
3
years
|
3
years
|
|
|
(i)
|
On
September 11, 2007, the Company granted a total of 1,200,000 stock options
at an exercise price of $2.50 per share. 1,000,000 options were
granted to the Company’s CEO and 100,000 options were granted to each of
two directors. These options have a fair value of $1.74-$1.78
per option granted.
|
|
(ii)
|
On
September 11, 2007, the Company granted 50,000 stock options at an
exercise price of $2.50 per share to a consultant. These
options have a fair value of $0.37 per option granted at December 31,
2008.
|
|
(iii)
|
On
October 1, 2007, the Company granted to its Chief Operating Officer
(“COO”) 1,500,000 options at an exercise price of $2.04 per
share. These options have a fair value of $1.45 per option
granted. All of these options were forfeited subsequent to year
end.
|
|
(iv)
|
On
January 1, 2008, the Company granted to its Chief Corporate Development
Officer (“CCDO”) 1,000,000 options at an exercise price of $2.06 per
share. These options have a fair value of $1.05 per option
granted.
|
|
(v)
|
On
January 7, 2008, the Company granted to its Vice President, Finance (“VP
Finance”) 150,000 options at an exercise price of $1.98 per
share. These options have a fair value of $1.01 per option
granted.
|
|
(vi)
|
On
March 14, 2008, the Company granted to a director 100,000 options at an
exercise price of $2.49 per share. These options have a fair
value of $1.21 per option granted.
|
|
(vii)
|
On
May 27, 2008, the Company granted to its Vice President, General Counsel
(“VP GC”) 125,000 options at an exercise price of $3.10 per
share. These options have a fair value of $1.45 per option
granted.
|
|
(viii)
|
Between
January 1, 2008 and December 31, 2008, the Company granted to its
full-time corporate directors a total of 425,000 options at a range of
exercise prices between $2.06 and $3.30 per share. These
options have a fair value of between $1.05 and $1.66 per option
granted. 25,000 of these options were forfeited during 2008,
and an additional 100,000 options were forfeited subsequent to year
end.
|
Live
Current Media Inc.
(formerly
Communicate.com Inc.)
Notes
to the Consolidated Financial Statements
For
the year ended December 31, 2008
NOTE
10 – SHARE CAPITAL (continued)
|
d)
|
Stock Options
(continued)
|
|
|
(ix)
|
Between
January 1, 2008 and December 31, 2008, the Company granted to its
full-time employees a total of 290,000 options at a range of exercise
prices between $0.65 and $3.10 per share. These options have a
fair value of between $0.30 and $1.45 per option
granted. 17,500 of these options have been forfeited during
2008, and an additional 92,500 options were forfeited subsequent to year
end.
|
|
|
(x)
|
Between
January 1, 2008 and December 31, 2008, the Company granted to consultants
a total of 70,000 options at exercise prices ranging from $2.06 to $2.49
per share. All of these options were forfeited during
2008.
|
The
Company recognizes stock-based compensation expense over the requisite service
period of the individual grants, which generally equals the vesting period.
FAS 123(R) requires forfeitures to be estimated at the time of grant and
revised, if necessary, in subsequent periods if actual forfeitures differ from
those estimates. Due to recent economic developments, the Company has
experienced a high level of forfeitures during the fourth quarter of 2008 and
subsequent to year end. The Company assesses forfeiture rates for
each class of grantees; executive management and directors, corporate directors,
and general staff members. Executive management and directors are
relatively few in number and turnover is considered remote, therefore the
Company estimates forfeitures for this class of grantees to be
10%. Corporate directors are high level senior staff members with a
forfeiture rate of 25% and general staff members have a slightly higher
forfeiture rate due to higher average turnover rates at 35%. Estimate
of forfeitures is reviewed on an annual basis. Stock-based compensation is
expensed on a straight-line basis over the requisite service
period.
The fair
value of these options at December 31, 2008 of $6,142,660 (2007 - $4,396,000)
will be recognized on a straight-line basis over a vesting term of 3 years and
accordingly, an expense has been recognized in the year ended December 31, 2008
of $2,111,354 (2007 - $428,028) and included in management fees and employee
salaries expense.
A summary
of the option activity under the 2007 Plan during 2007 and 2008 is presented
below:
|
|
Options
|
|
Shares
|
|
|
Weighted
Average
Exercise
Price
$
|
|
|
Intrinsic
Value
$
|
|
|
|
|
Options
outstanding, January 1, 2007
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
Granted
|
|
|
2,750,000
|
|
|
|
2.25
|
|
|
|
0.37
- 1.78
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
Cancelled
or expired
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
Options
outstanding, December 31, 2007
|
|
|
2,750,000
|
|
|
|
2.25
|
|
|
|
0.37
- 1.78
|
|
|
|
|
Granted
|
|
|
2,160,000
|
|
|
|
2.34
|
|
|
|
0.30
- 1.66
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
Cancelled
or expired
|
|
|
112,500
|
|
|
|
2.29
|
|
|
|
1.05
|
|
|
|
|
Options
outstanding, December 31, 2008
|
|
|
4,797,500
|
|
|
|
2.29
|
|
|
|
0.30
- 1.78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
vested or expected to vest at December 31, 2008
|
|
|
2,750,000
|
|
|
$
|
2.25
|
|
|
|
0.37
- 1.78
|
|
|
|
|
Weighted
average remaining life
|
|
3.90
Years
|
|
|
|
|
|
|
|
|
|
|
Live
Current Media Inc.
(formerly
Communicate.com Inc.)
Notes
to the Consolidated Financial Statements
For
the year ended December 31, 2008
NOTE
10 – SHARE CAPITAL (continued)
|
e)
|
Common Stock Purchase
Warrants
|
2008
On May 1,
2008, the Company issued 50,000 common stock share purchase warrants with an
exercise price of $2.33 to its investor relations firm in connection with a
services agreement. The warrants expire May 1, 2010. The
Company valued these options using the Black Scholes option pricing model using
the following assumptions: no dividend yield; expected volatility rate of
69.27%; risk free interest rate of 2.37% and an expected life of 2 years
resulting in a fair value of $0.91 per option granted, and a total fair value of
$45,500.
In
connection with the private placement in November 2008, the Company issued
1,627,344 warrants for the purchase of one-half share of the Company’s common
stock with an exercise price of $0.78 expiring November 19, 2010 and 1,627,344
warrants for the purchase of one-half share of the Company’s common stock with
an exercise price of $0.91 expiring November 19, 2011.
2007
On June
11, 2007, in connection with the issuance of 1,000,000 common shares to a
company owned and controlled by the Company’s Chief Executive Officer (“CEO”),
the Company also issued 1,000,000 common stock share purchase warrants with an
exercise price of $1.25. The warrants expire June 10,
2009.
As of
December 31, 2008, 4,304,688 warrants to purchase the Company’s common stock
remain outstanding as follows:
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
Outstanding
|
|
|
Average
Exercise
|
|
Date
of
|
|
|
|
|
|
Warrants
|
|
|
Price
|
|
Expiry
|
|
|
|
Warrants
outstanding, January 1, 2007
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
Granted
June 11, 2007
|
|
|
1,000,000
|
|
|
|
1.25
|
|
June
10, 2009
|
|
|
|
Cancelled
or expired
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
Warrants
outstanding, December 31, 2007
|
|
|
1,000,000
|
|
|
|
1.25
|
|
|
|
|
|
Granted
May 1, 2008
|
|
|
50,000
|
|
|
|
2.33
|
|
May
1, 2010
|
|
|
|
Granted
November 19, 2008
|
|
|
1,627,344
|
|
|
|
0.78
|
|
November
19, 2010
|
|
|
|
Granted
November 19, 2008
|
|
|
1,627,344
|
|
|
|
0.91
|
|
November
19, 2011
|
|
|
|
Cancelled
or expired
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
Warrants
exercisable December 31, 2008
|
|
|
4,304,688
|
|
|
$
|
0.96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average remaining life
|
|
1.92
Years
|
|
|
|
|
|
|
|
NOTE 11 – DOMAIN NAME LEASES AND
SALES
On
January 17, 2008, the Company entered into an agreement to lease one domain name
to an unrelated third party for CDN$200,000. The terms of the
agreement provide for the receipt of this amount in five irregular lease
payments over a two-year term. The first payment of CDN$25,000 was
due on January 17, 2008 (the “Effective Date”), CDN$45,000 was due 3 months
after the Effective Date, CDN$80,000 was due 6 months after the Effective Date,
CDN$25,000 is due 1 year after the Effective Date, and CDN$25,000 is due 2 years
after the Effective Date. The Company will lease the domain name to
the third party exclusively during the term of the agreement. Title
and rights to the domain name will be transferred to the purchaser only when
full payment is received at the end of the lease term. If the third
party defaults on any payments, the agreement terminates, funds received to date
are forfeited by the lessee, and rights to the domain name return to the
Company. This transaction was recorded as a sales-type lease in
2008. The investment in a sales-type lease of $163,963 was recorded
on the balance sheet on a net basis after the lease payments received to
date. The gain of $168,206 was recorded at the present value of the
lease payments over the term, net of the cost of the domain name, at an implicit
rate of 6%. Payments have been collected to date according to the
terms of the agreement.
Live
Current Media Inc.
(formerly
Communicate.com Inc.)
Notes
to the Consolidated Financial Statements
For
the year ended December 31, 2008
NOTE 11 – DOMAIN NAME LEASES AND
SALES (continued)
On
December 31, 2008, the Company entered into an agreement to sell one domain name
to an unrelated third party for CDN$500,000. The terms of the
agreement provided for the receipt of CDN$476,190 on December 31, 2008 and the
balance of CDN$23,810 by March 31, 2009. The title of the domain name
transferred to the buyer at December 31, 2008 and collection of the balance is
reasonably assured, therefore the disposal and resulting gain of $330,623 was
recorded on December 31, 2008.
There
were no sales of domain names in the 2007 fiscal year.
In 2008,
the Company incurred various restructuring costs of
$708,804. These included approximately $168,400 in severance payments
to the former Chief Financial Officer (“CFO”), $25,700 in consulting fees to the
former CFO to aid with transition of the new management team, $317,100 in
signing bonuses to the new Chief Corporate Development Officer and the new Vice
President Finance, additional severance of $53,600 paid to full time employees,
$39,800 in costs related to changing the Company name and rebranding, $31,700 in
valuation costs relating to the first quarter share issuance of DHI shares to
the Company, $45,000 in financing costs relating to transactions with investment
bankers that are no longer being pursued, and $27,300 in some final windup costs
related to the FT disposition in late 2007.
In 2007,
the Company incurred costs relating to restructuring, recruiting and relocating
expenses associated with attracting the new management team totaling
$637,730. Such costs included a $205,183 severance payment to the
former Chief Executive Officer, $30,558 in consulting fees to the former Chief
Executive Officer, a $205,183 signing bonus to the new President and Chief
Operating Officer, $196,806 of general legal costs associated with the
preparation of employment agreements, severance agreements and stock option
agreements.
The
Company’s subsidiaries, DHI, Acadia, Importers, and 612793 are subject to
federal and provincial taxes in Canada. The Company, its subsidiaries
Delaware and FT (until the date of disposition of FT on November 12, 2007) are
subject to United States federal and state taxes.
As at
December 31, 2008, the Company and its US subsidiaries have net operating loss
carryforwards of approximately $4,138,000 and capital loss carryforwards of
$120,000 that result in deferred tax assets. The Company’s Canadian
subsidiaries have non capital loss carryforwards of approximately $6,353,000
that result in deferred tax assets. These loss carryforwards will
expire, if not utilized, through 2028. The Company’s subsidiary DHI
also has approximately $896,300 in undepreciated capital costs relating to
property and equipment that have not been amortized for tax
purposes. The costs may be amortized in future years as
necessary to reduce taxable income. Management believes that the
realization of the benefits from these deferred tax assets is uncertain and
accordingly, a full deferred tax asset valuation allowance has been provided and
no deferred tax asset benefit has been recorded.
Live
Current Media Inc.
(formerly
Communicate.com Inc.)
Notes
to the Consolidated Financial Statements
For
the year ended December 31, 2008
NOTE
13 – INCOME TAXES (continued)
The
Company’s actual income tax provisions differ from the expected amounts
determined by applying the appropriate combined effective tax rate to the
Company’s net income before taxes. The significant components of these
differences are as follows:
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(Loss) before income taxes
|
|
$
|
(10,006,456
|
)
|
|
$
|
(2,017,948
|
)
|
|
|
|
Combined
corporate tax rate
|
|
|
35.0
|
%
|
|
|
34.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected
corporate tax recovery (expense)
|
|
|
3,502,260
|
|
|
|
688,524
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective
foreign tax rate adjustment
|
|
|
(158,446
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
(decrease) resulting from:
|
|
|
|
|
|
|
|
|
|
|
|
Non-taxable
gain on disposal
|
|
|
-
|
|
|
|
146,937
|
|
|
|
|
Effect
of tax rate changes
|
|
|
(239,819
|
)
|
|
|
(339,265
|
)
|
|
|
|
Reduction
in future tax benefits related to Auctomatic
|
|
|
(219,980
|
)
|
|
|
-
|
|
|
|
|
Reduction
in future tax benefits related to intangible assets
|
|
|
(1,038,825
|
)
|
|
|
-
|
|
|
|
|
Non-taxable
portion of domain name sales
|
|
|
154,637
|
|
|
|
-
|
|
|
|
|
Stock
based compensation
|
|
|
(684,073
|
)
|
|
|
(146,043
|
)
|
|
|
|
Non-deductible
items and other
|
|
|
(120,007
|
)
|
|
|
7,736
|
|
|
|
|
Exchange
adjustment to foreign denominated future tax assets
|
|
|
(153,388
|
)
|
|
|
348,690
|
|
|
|
|
Change
in valuation allowance due to disposal of subsidiary
|
|
|
-
|
|
|
|
(271,460
|
)
|
|
|
|
Change
in valuation allowance
|
|
|
(1,042,359
|
)
|
|
|
(435,119
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
The tax
effects of temporary differences that give rise to significant components of
future income tax assets and liabilities are as follows:
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
income tax assets:
|
|
|
|
|
|
|
|
|
|
Operating
losses available for future periods
|
|
$
|
3,099,956
|
|
|
$
|
752,303
|
|
|
|
|
Property
and equipment in excess of net book value
|
|
|
-
|
|
|
|
477,792
|
|
|
|
|
Intangible
assets in excess of net book value
|
|
|
-
|
|
|
|
882,952
|
|
|
|
|
Other
differences
|
|
|
14,408
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,114,364
|
|
|
|
2,113,047
|
|
|
|
|
Deferred
income tax liabilities
|
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment in excess of net book value
|
|
|
(28,325
|
)
|
|
|
-
|
|
|
|
|
Intangible
assets in excess of net book value
|
|
|
(210,552
|
)
|
|
|
-
|
|
|
|
|
Other
differences
|
|
|
-
|
|
|
|
(279,920
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,875,487
|
|
|
|
1,833,127
|
|
|
|
|
Valuation
allowance
|
|
|
(2,875,487
|
)
|
|
|
(1,833,127
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
deferred income tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Live
Current Media Inc.
(formerly
Communicate.com Inc.)
Notes
to the Consolidated Financial Statements
For
the year ended December 31, 2008
NOTE
14 – SEGMENTED INFORMATION
The
Company’s eCommerce operations have historically been conducted in three
business segments, Domain Advertising, eCommerce Products, and eCommerce
Services. The business segment of eCommerce services ended upon the termination
of the Company’s relationship with FT on November 12, 2007.
During
2008, the Company began offering international shipping on its Perfume.com
website. The operations from Perfume.com are included as the
eCommerce Products business segment. The sales generated from regions
other than North America have been immaterial during the year, and therefore no
geographic segment reporting is required for 2008.
Revenues,
operating profits and net identifiable assets by business segments are as
follows:
|
For the year ended
December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
eCommerce
|
|
|
eCommerce
|
|
|
Total
|
|
|
|
|
Advertising
|
|
|
Products
|
|
|
Services
|
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Revenue
|
|
|
93,141
|
|
|
|
9,271,692
|
|
|
|
-
|
|
|
|
9,364,833
|
|
|
Segment
Loss From Operations
|
|
|
(2,828,239
|
)
|
|
|
(5,171,774
|
)
|
|
|
-
|
|
|
|
(8,000,013
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
at December 31, 2008
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Total
Assets
|
|
|
1,665,723
|
|
|
|
5,942,565
|
|
|
|
-
|
|
|
|
7,608,288
|
|
|
Intangible
Assets
|
|
|
1,398,417
|
|
|
|
189,046
|
|
|
|
-
|
|
|
|
1,587,463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended
December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
eCommerce
|
|
|
eCommerce
|
|
|
Total
|
|
|
|
|
Advertising
|
|
|
Products
|
|
|
Services
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Revenue
|
|
|
449,613
|
|
|
|
8,133,125
|
|
|
|
480,591
|
|
|
|
9,063,329
|
|
|
Segment
Loss From Operations
|
|
|
(658,409
|
)
|
|
|
(1,586,411
|
)
|
|
|
(169,508
|
)
|
|
|
(2,414,328
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
at December 31, 2007
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Total
Assets
|
|
|
1,384,718
|
|
|
|
8,196,489
|
|
|
|
-
|
|
|
|
9,581,207
|
|
|
Intangible
Assets
|
|
|
1,384,718
|
|
|
|
260,343
|
|
|
|
-
|
|
|
|
1,645,061
|
|
The
reconciliation of the segment profit to net income as reported in the
consolidated financial statements is as follows:
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Segment
Loss From Operations
|
|
$
|
(8,000,013
|
)
|
|
$
|
(2,414,328
|
)
|
|
Non-recurrring
income
|
|
|
|
|
|
|
|
|
|
Global
Cricket Venture expenses
(Note 5)
|
|
|
(2,476,255
|
)
|
|
|
-
|
|
|
Net
proceeds from sales-type lease of domain names
|
|
|
498,829
|
|
|
|
-
|
|
|
Accretion
expense
|
|
|
(96,700
|
)
|
|
|
-
|
|
|
Interest
and investment income
|
|
|
67,683
|
|
|
|
119,574
|
|
|
Gain
on Disposal of Investment of FrequentTraveler.com Inc.
|
|
|
|
|
|
|
276,805
|
|
|
Net
loss for the year
|
|
$
|
(10,006,456
|
)
|
|
$
|
(2,017,949
|
)
|
Substantially
all property and equipment and intangible assets are located in
Canada.
Live
Current Media Inc.
(formerly
Communicate.com Inc.)
Notes
to the Consolidated Financial Statements
For
the year ended December 31, 2008
NOTE
15 – COMMITMENTS
Premise
Lease
Effective
October 1, 2007 the Company leased its office in Vancouver, Canada from an
unrelated party for a 5-year period from October 1, 2007 to September 30,
2012. Pursuant to the terms of the lease agreement, the Company is
committed to basic rent payments expiring September 30, 2012 as
follows.
|
|
|
CDN
$
|
|
|
2009
|
|
|
116,188
|
|
|
2010
|
|
|
121,531
|
|
|
2011
|
|
|
126,873
|
|
|
2012
|
|
|
98,159
|
|
The
Company will also be responsible for common costs currently estimated to be
equal to approximately 43% of basic rent.
Cricket
Venture
The MOU
with the BCCI and the IPL requires the Company to pay both the BCCI and the IPL
minimum payments over the next ten years, beginning on October 1,
2008. See also Note 5. Pursuant to the terms of the MOU,
the future minimum payments are listed in the table below.
|
|
BCCI
USD$
|
IPL
USD$
|
TOTAL
USD
$
|
|
|
2009
|
2,625,000
|
1,625,000
|
4,275,000
|
|
|
2010
|
3,000,000
|
2,000,000
|
5,000,000
|
|
|
2011
|
3,750,000
|
2,500,000
|
6,250,000
|
|
|
2012
|
3,000,000
|
2,000,000
|
5,000,000
|
|
|
2013
|
3,000,000
|
2,000,000
|
5,000,000
|
|
|
2014
|
3,000,000
|
2,000,000
|
5,000,000
|
|
|
2015
|
3,000,000
|
2,000,000
|
5,000,000
|
|
|
2016
|
3,000,000
|
2,000,000
|
5,000,000
|
|
|
2017
|
3,250,000
|
2,250,000
|
5,500,000
|
|
|
2018
|
1,750,000
|
1,250,000
|
3,000,000
|
|
Although
no formal amendment to the MOU has been executed, the parties have agreed to
decrease the amount owing to the BCCI on October 1, 2009 of $750,000 was
eliminated entirely. The amounts due to the IPL have not
changed. The commitment schedule above reflects the original
commitments according to the MOUs, not including any of the parties’
renegotiations. Such payments made be subject to certain withholding
or other taxes which the Company may be required to gross up pursuant to the
terms of the MOU.
A former
Chief Executive Officer of DHI commenced a legal action against DHI on March 9,
2000 for wrongful dismissal and breach of contract. He is seeking, at
a minimum, 18.39% of the outstanding shares of DHI, specific performance of his
contract, special damages in an approximate amount of $30,000, aggravated and
punitive damages, interest and costs. On June 1, 2000, DHI filed a Defense and
Counterclaim against this individual claiming damages and special damages for
breach of fiduciary duty and breach of his employment contract. The outcome of
these legal actions is currently not determinable and as such the amount of
loss, if any, resulting from this litigation is presently not
determinable. To date, there has been no further action taken by the
plaintiff since the filing of the initial legal action on March 9,
2000.
Live
Current Media Inc.
(formerly
Communicate.com Inc.)
Notes
to the Consolidated Financial Statements
For
the year ended December 31, 2008
NOTE
17 – RELATED PARTY TRANSACTIONS
The
Company issued shares of common stock to related parties pursuant to private
placements in 2007 and 2008 as follows:
2008
On
November 19, 2008, we closed a private placement financing in which Mr. Hampson
invested $126,750. Mr. Hampson received 195,000 restricted shares of
common stock, two-year warrants to purchase 97,500 common shares at an exercise
price of $0.78, and three-year warrants to purchase 97,500 common shares at an
exercise price of $0.91.
On
November 19, 2008, we closed a private placement financing in which Jonathan
Ehrlich, our then President and Chief Operating Officer, invested
$25,000. Mr. Ehrlich received 38,461 restricted shares of common
stock, two-year warrants to purchase 19,230 common shares at an exercise price
of $0.78, and three-year warrants to purchase 19,230 common shares at an
exercise price of $0.91.
On
November 19, 2008, we closed a private placement financing in which Mark
Melville, our Chief Corporate Development Officer, invested
$35,000. Mr. Melville received 53,846 restricted shares of common
stock, two-year warrants to purchase 26,923 common shares at an exercise price
of $0.78, and three-year warrants to purchase 26,923 common shares at an
exercise price of $0.91.
2007
On
September 24, 2007 we closed a $5,100,000 private placement financing in which
Mr. Hampson invested $110,000. Mr. Hampson received 55,000 restricted
shares of our common stock.
On June
11, 2007, the Board of Directors of Live Current issued 1,000,000 shares of
common stock and warrants to purchase up to 1,000,000 additional shares of
restricted common stock at the price of $1.25 effective until June 10, 2009 to
Hampson Equities Ltd., a company owned and controlled by C. Geoffrey Hampson,
our Chief Executive Officer, pursuant to a subscription agreement dated June 1,
2007. The amount of the subscription was $1,000,000.
The
Company has not entered into any other significant related party transactions
with individuals or companies either owned or subject to significant influence
by management, directors, and principal shareholders.
NOTE
18 – SUBSEQUENT EVENTS
Employment
Severance Agreement
Pursuant
to the terms and conditions of an employment severance agreement dated February
4, 2009 (the “COO Severance Agreement”) between the Company and its former
President and Chief Operating Officer (“COO”), the COO resigned as the Company’s
President and Chief Operating Officer and as an officer of the Company’s
subsidiaries effective January 31, 2009. The Company has agreed to
pay the COO CDN$600,000, which consists of a severance allowance in the amount
of CDN$298,000 and an accrued special bonus in the amount of CDN$250,000, less
any and all applicable government withholdings and deductions, as well as other
benefits in the amount of CDN$52,000. The severance allowance and
other benefits will be paid over a period of 12 months. The accrued
special bonus was expensed in 2008 when it became due and is included in bonuses
payable at the year end. The other benefits were owing to the COO
before his resignation. The payment of the net amount of the accrued
special bonus is to be converted to equity and paid in restricted shares of the
Company’s common stock over a period of 12 months. The number of
shares of common stock to be issued for each payment will be computed using the
closing price of the common stock on the 15
th
day of
each month or, in the event that the 15
th
day is
not a trading day, on the trading day immediately before the 15
th
day of
the month. The Company has expensed the severance allowance in the
first quarter of 2009.
Live
Current Media Inc.
(formerly
Communicate.com Inc.)
Notes
to the Consolidated Financial Statements
For
the year ended December 31, 2008
NOTE
18 – SUBSEQUENT EVENTS (continued)
Stock
Issuances
On
January 2, 2009, the Company issued 15,000 shares to the investor relations firm
that was engaged to provide investor relations services to the
Company. This was the Company’s final share issuance to this investor
relations firm. The agreement has been terminated.
On
January 8, 2009, the Company entered into an agreement whereby $120,776 of its
accounts payable were extinguished in exchange for the issuance of 345,075
shares of its common stock. As a result of this agreement, 172,538
shares were issued on January 22, 2009 and 172,537 shares were issued on
February 20, 2009.
Termination
of Agreement
In
January 2009, the Company terminated the investor relations contract with the
investor relations firm that had been engaged in 2008.
Stock
Option Plan
In
January 2009, 1,692,500 stock options were forfeited.
On March
25, 2009, a total of 115,000 stock options were granted to five of its full-time
employees at an exercise price of $0.30 per share.
On March
25, 2009, our Board of Directors reduced the exercise price of all outstanding
stock options granted pursuant to the Live Current Media Inc. Stock Incentive
Plan to $0.65. These options are held by our officers, directors,
employees, consultants and agents.
Sales
of Domain Names
In
February and March of 2009, the Company sold two domain names to third party
purchasers. One domain name was sold for $1.25 million, to be paid in
irregular instalments between February 2009 and February 2010. The
other domain name was sold for $400,000, to be paid in one full instalment in
March 2009.
NOTE
19 – COMPARATIVE FIGURES
Certain
comparative figures have been reclassified to conform to the basis of
presentation adopted in the current period.
PART II
INFORMATION
NOT REQUIRED IN PROSPECTUS
ITEM
13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The
following table sets forth the costs and expenses payable by us in connection
with the sale of common stock being registered. All amounts are estimated,
except the registration fee:
|
Securities
and Exchange Commission registration fee
|
|
$
|
108.06
|
|
|
Printing
fees and expense
|
|
$
|
3,000.00
|
|
|
Legal
fees and expenses
|
|
$
|
15,000.00
|
|
|
Accounting
fees and expenses
|
|
$
|
10,000.00
|
|
|
Transfer
agent and registrar fees and expenses
|
|
$
|
0
|
|
|
Miscellaneous
|
|
$
|
1,000.00
|
|
|
Total
|
|
$
|
29,108.06
|
|
ITEM
14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The
Company’s Articles of Incorporation provides the following with respect to
liability:
“No
director or officer of the corporation shall be personally liable to the
corporation of any of its stockholders for damages for breach of fiduciary duty
as a director or officer involving any act or omission of any such director or
officer provided, however, that the foregoing provision shall not eliminate or
limit the liability of a director or officer for act or omissions which involve
intentional misconduct, fraud or a knowing violation of law, or the payment of
dividends in violation of Section 78.300 of the Nevada Revised Statutes. Any
repeal or modification of this Article of the Stockholders of the Corporation
shall be prospective only, and shall not adversely affect any limitation on the
personal liability of a director of officer of the Corporation for acts or
omissions prior to such repeal or modification.”
Section
78.7502 of the Nevada Revised Statutes provides that the Company may indemnify
any person who was or is a party, or is threatened to be made a party, to any
action, suit or proceeding brought by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation or other entity. The expenses that are subject to this
indemnity include attorneys’ fees, judgments, fines and amounts paid in
settlement actually and reasonably incurred by the indemnified party in
connection with the action, suit or proceeding. In order for us to provide this
statutory indemnity, the indemnified party must not be liable under Nevada
Revised Statutes section 78.138 or must have acted in good faith and in a manner
he reasonably believed to be in, or not opposed to, the best interests of the
corporation. With respect to a criminal action or proceeding, the indemnified
party must have had no reasonable cause to believe his conduct was
unlawful.
Section
78.7502 also provides that the Company may indemnify any person who was or is a
party, or is threatened to be made a party, to any action or suit brought by or
on behalf of the corporation by reason of the fact that he is or was serving at
the request of the corporation as a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or other entity
against expenses actually or reasonably incurred by him in connection with the
defense or settlement of such action or suit if he is not liable under Nevada
Revised Statutes section 78.138 of if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation. We may not indemnify a person if the person is adjudged by a court
of competent jurisdiction, after exhaustion of all appeals therefrom, to be
liable to the corporation, or for amounts paid in settlement to the corporation,
unless and only to the extent that the court in which such action or suit was
brought or another court of competent jurisdiction shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, the person is fairly and reasonably entitled to
indemnity.
Section
78.7502 requires the Company to indemnify our directors or officers against
expenses, including attorneys’ fees, actually and reasonably incurred by him in
connection with his defense, if he has been successful on the merits or
otherwise in defense of any action, suit or proceeding, or in defense of any
claim, issue or matter.
The
Company has been advised that it is the position of the Commission that insofar
as the provision in the Company's Articles of Incorporation, as amended, may be
invoked for liabilities arising under the Securities Act, the provision is
against public policy and is therefore unenforceable.
ITEM
15. RECENT SALES OF UNREGISTERED SECURITIES
We have
sold or issued the following securities not registered under the Securities Act
of 1933, as amended (the “Securities Act”) by reason of the exemption afforded
under Section 4(2) of the Securities Act within the past three years.
Except as stated below, no underwriting discounts or commissions were
payable with respect to any of the following transactions. Unless
otherwise indicated below, the offers and sales of the following securities were
exempt from the registration requirements of the Securities Act under Rule 506
insofar as (1) except as stated below, each of the investors was accredited
within the meaning of Rule 501(a); (2) the transfer of the securities was
restricted by the Company in accordance with Rule 502(d); (3) there were no more
than 35 non-accredited investors in any transaction within the meaning of Rule
506(b); and (4) none of the offers and sales were effected through any general
solicitation or general advertising within the meaning of Rule
502(c).
On
October 3, 2006, we issued 40,000 restricted shares of common stock to each
of David Jeffs, our former Chief Executive Officer, and to Cameron Pan, our
former Chief Financial Officer in settlement of bonuses earned by each officer
in 2006. Our common stock had a value of $0.81 per share on October
3, 2006. We relied on section 4(2) of the Securities Act of 1933 to
issue the securities inasmuch as the securities were offered and sold without
any form of general solicitation or general advertising and the offerees had
access to the kind of information which registration would
disclose.
On May
25, 2007, we issued 30,100 restricted shares of common stock to David Jeffs, our
former Chief Executive Officer, and 30,184 restricted shares of common stock to
Cameron Pan, our former Chief Financial Officer, in settlement of bonuses earned
by each officer in 2006. Our common stock had a value of $1.09 per
share on May 25, 2007. We relied on section 4(2) of the Securities
Act of 1933 to issue the securities inasmuch as the securities were offered and
sold without any form of general solicitation or general advertising and the
offerees had access to the kind of information which registration would
disclose.
On June
11, 2007, our Board of Directors issued 1,000,000 shares of common stock and
warrants to purchase up to 1,000,000 additional shares of restricted common
stock at the price of $1.25 effective until June 10, 2009 to Hampson Equities
Ltd. (a company owned and controlled by C. Geoffrey Hampson) pursuant to a
subscription agreement dated June 1, 2007. We relied on section 4(2)
of the Securities Act of 1933 to issue the securities inasmuch as the securities
were offered and sold without any form of general solicitation or general
advertising and the offeree had access to the kind of information which
registration would disclose.
On
September 24, 2007, we issued 2,550,000 restricted shares of common stock to
accredited investors for aggregate consideration of $5,100,000.
On March
25, 2008, we entered into an Agreement and Plan of Merger (the “Merger
Agreement”) with Delaware (a wholly-owned subsidiary), Entity, Inc., a Delaware
corporation, (“Auctomatic”), Harjeet Taggar, Kulveer Taggar and Patrick
Collison, the founding members of Auctomatic (each a “Founder” and collectively,
the “Founders”) and Harjeet Taggar as representative of the stockholders of
Auctomatic (the “Stockholder Representative”). In connection with the
Merger Agreement, the stockholders of Auctomatic received in total (i)
$2,000,000 cash minus $152,939 in certain assumed liabilities (the “Cash
Consideration”) and (ii) 1,000,007 shares of our common stock (equal to
$3,000,000 divided by $3.00 per share, the last price of a single share of our
common stock as reported by the OTC Bulletin Board on the business day
immediately preceding the Closing Date) in exchange for all the issued and
outstanding shares of Auctomatic. On June 17, 2008, we issued 340,001
shares of our common stock and an additional 246,402 shares of the common stock
were issued and are to be distributed in equal amounts to the Auctomatic
stockholders on each of the first, second and third anniversaries of the Closing
Date. The distribution of the remaining 413,604 shares of the common
stock payable on the first, second and third anniversaries of the Closing Date
to the Auctomatic Founders is subject to their continuing employment with us or
a subsidiary on each Distribution Date. In 2009, one of the Founders
resigned from his employment, and therefore the distribution of 137,868 shares
of the common stock on the first, second and third anniversaries of the Closing
Date is no longer payable to him. The remaining 275,736 shares of
common stock owed to the Founders continuing in our employ remain payable on the
anniversary dates as noted above.
On May 1,
2008, we issued a warrant for the purchase of 50,000 of common stock with an
exercise price of $2.33 to Lexington Advisors LLC, an investor relations firm,
in connection with a services agreement. The warrants expire May 1,
2010. We relied on section 4(2) of the Securities Act of 1933 to
issue the securities inasmuch as the securities were offered and sold without
any form of general solicitation or general advertising and the offerees had
access to the kind of information which registration would
disclose.
On June
6, 2008, we issued 30,000 shares of common stock to Lexington Advisors LLC, an
investor relations firm, as partial consideration for services rendered having a
value of $85,350. We relied on section 4(2) of the Securities Act of
1933 to issue the securities inasmuch as the securities were offered and sold
without any form of general solicitation or general advertising and the offerees
had access to the kind of information which registration would
disclose.
On June
30, 2008, we issued 15,000 shares of common stock to Lexington Advisors LLC, an
investor relations firm, as partial consideration for services rendered having a
value of $36,573. We relied on section 4(2) of the Securities Act of
1933 to issue the securities inasmuch as the securities were offered and sold
without any form of general solicitation or general advertising and the offerees
had access to the kind of information which registration would
disclose.
On August
6, 2008, we issued 15,000 shares of common stock to Lexington Advisors LLC, an
investor relations firm, as partial consideration for services rendered having a
value of $31,071. We relied on section 4(2) of the Securities Act of
1933 to issue the securities inasmuch as the securities were offered and sold
without any form of general solicitation or general advertising and the offerees
had access to the kind of information which registration would
disclose.
On August
25, 2008, we issued 33,000 shares of common stock to Alliance Advisors LLC, our
former investor relations firm, as full consideration for services rendered
having a value of $85,682. We relied on section 4(2) of the
Securities Act of 1933 to issue the securities inasmuch as the securities were
offered and sold without any form of general solicitation or general advertising
and the offerees had access to the kind of information which registration would
disclose.
On August
28, 2008, we issued 15,000 shares of common stock to Lexington Advisors LLC, an
investor relations firm, as partial consideration for services rendered having a
value of $26,183. We relied on section 4(2) of the Securities Act of
1933 to issue the securities inasmuch as the securities were offered and sold
without any form of general solicitation or general advertising and the offerees
had access to the kind of information which registration would
disclose.
On
October 1, 2008, we issued 15,000 shares of common stock to Lexington Advisors
LLC, an investor relations firm, as partial consideration for services rendered
having a value of $20,250. We relied on section 4(2) of the
Securities Act of 1933 to issue the securities inasmuch as the securities were
offered and sold without any form of general solicitation or general advertising
and the offerees had access to the kind of information which registration would
disclose.
On October
31, 2008, we issued 15,000 shares of common stock to Lexington Advisors LLC, an
investor relations firm, as partial consideration for services rendered having a
value of $11,250. We relied on section 4(2) of the Securities Act of
1933 to issue the securities inasmuch as the securities were offered and sold
without any form of general solicitation or general advertising and the offerees
had access to the kind of information which registration would
disclose.
On
November 19, 2008, we completed a private offering of securities. We
accepted subscriptions from 11 accredited investors pursuant to which we issued
and sold 1,627,344 equity units at a price of $0.65 per unit for total gross
proceeds of $1,057,775. Each unit consisted of (i) one share of
common stock, (ii) a two-year warrant to purchase one-half share of common stock
at an exercise price of $0.78 and (iii) a three-year warrant to purchase
one-half share of common stock at an exercise price of
$0.91. Accordingly, we issued an aggregate of 1,627,344 shares of
common stock, 1,627,344 warrants with an exercise price of $0.78, and 1,627,344
warrants with an exercise price of $0.91.
On
December 16, 2008, we issued 33,000 shares of common stock to an investor
relations firm, Alliance Advisors LLC, in payment of services that had been
rendered to us having a value of $16,500. We relied on section 4(2)
of the Securities Act of 1933 to issue the securities inasmuch as the securities
were offered and sold without any form of general solicitation or general
advertising and the offerees had access to the kind of information which
registration would disclose.
In
December 2008, we issued 15,000 shares to Lexington Advisors LLC, an investor
relations firm, which provided investor relations services to us. These shares
had a value of $7,500 and were issued as partial consideration for services
rendered during the month. The offer and sale of the securities were exempt from
the registration requirements of the Securities Act in accordance with Section
4(2). The offer and sale was not effected through any general
solicitation or general advertising and the offeree was an accredited
investor.
ITEM
16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
EXHIBIT
INDEX
|
Number
|
Description
|
|
|
|
|
3.1
|
Articles
of Incorporation
(1)
|
|
|
|
|
3.2
|
Bylaws
(2)
|
|
|
|
|
3.3
|
Certificate
of Amendment to the Articles of Incorporation
(3)
|
|
|
|
|
3.4
|
Text
of Amendment to the Bylaws
(4)
|
|
|
|
|
5
|
Legal
Opinion of Richardson & Patel LLP*
|
|
|
|
|
10.1
|
Live
Current Media Inc. 2007 Stock Incentive Plan
(6)
|
|
|
|
|
10.2
|
Employment
agreement between Live Current Media Inc. and C. Geoffrey Hampson dated
May 31, 2007
(7)
|
|
10.3
|
Real
Property Lease Agreement between Live Current Media Inc. and Landing
Holdings Limited and Landing Properties Limited dated July 16, 2007
(8)
|
|
|
|
|
10.4
|
Employment
Agreement between Live Current Media Inc. and Jonathan Ehrlich dated
September 8, 2007
(9)
|
|
|
|
|
10.5
|
Incentive
Stock Option Agreement between Live Current Media Inc. and Jonathan
Ehrlich dated September 8, 2007
(10)
|
|
|
|
|
10.6
|
Incentive
Stock Option Agreement between Live Current Media Inc. and C. Geoffrey
Hampson dated September 11, 2007
(11)
|
|
|
|
|
10.7
|
Incentive
Stock Option Agreement between Live Current Media Inc. and James P. Taylor
dated September 11, 2007
(12)
|
|
|
|
|
10.8
|
Incentive
Stock Option Agreement between Live Current Media Inc. and Mark Benham
dated September 12, 2007
(13)
|
|
|
|
|
10.9
|
Employment
Severance Agreement between Live Current Media Inc. and David M. Jeffs
dated September 27, 2007
(14)
|
|
|
|
|
10.10
|
Employment
Agreement between Live Current Media Inc. and Mark Melville dated November
9, 2007
(15)
|
|
|
|
|
10.11
|
Incentive
Stock Option Agreement between Live Current Media Inc. and Mark Melville
dated November 9, 2007
(16)
|
|
|
|
|
10.12
|
Asset
Purchase Agreement between Live Current Media Inc. and
FrequentTraveller.com, Inc. dated November 12, 2007
(17)
|
|
|
|
|
10.13
|
Form
of Subscription Agreement
(5)
|
|
|
|
|
10.14
|
Employment
Agreement between Live Current Media Inc. and Chantal Iorio dated December
12, 2007
(19)
|
|
10.15
|
Employment
Severance Agreement between Live Current Media Inc. and Cameron Pan dated
January 17, 2008
(20)
|
|
|
|
|
10.16
|
Agreement
and Plan of Merger, dated March 25, 2008
(22)
|
|
|
|
|
10.17
|
Founders
Employment Agreement (Harjeet Taggar), dated March 25, 2008
(23)
|
|
|
|
|
10.18
|
Founders
Employment Agreement (Kulveer Taggar), dated March 25, 2008
(24)
|
|
|
|
|
10.19
|
Founders
Employment Agreement (Patrick Collison), dated March 25, 2008
(25)
|
|
|
|
|
10.20
|
Employment
Agreement (Phillip Kast), dated March 25, 2008
(26)
|
|
|
|
|
10.21
|
Employment
Agreement (Brian Collins), dated March 25, 2008
(27)
|
|
|
|
|
10.22
|
Interim
Consulting Agreement (Harjeet Taggar) dated March 10, 2008
(28)
|
|
|
|
|
10.23
|
Interim
Consulting Agreement (Kulveer Taggar) dated February 28, 2008
(29)
|
|
|
|
|
10.24
|
Interim
Consulting Agreement (Patrick Collison) dated February 28, 2008
(30)
|
|
|
|
|
10.25
|
Interim
Consulting Agreement (Phillip Kast) dated March 10, 2008
(31)
|
|
|
|
|
10.26
|
Interim
Consulting Agreement (Brian Collins) dated March 25, 2008
(32)
|
|
|
|
|
10.27
|
Secondment
Agreement (Harjeet Taggar), dated March 25, 2008
(33)
|
|
|
|
|
10.28
|
Secondment
Agreement (Kulveer Taggar), dated March 25, 2008
(34)
|
|
|
|
|
10.29
|
Secondment
Agreement (Patrick Collison) dated March 25, 2008
(35)
|
|
|
|
|
10.30
|
Secondment
Agreement (Phillip Kast), dated March 25, 2008
(36)
|
|
|
|
|
10.31
|
Secondment
Agreement, dated (Brian Collins) March 25, 2008
(37)
|
|
|
|
|
10.32
|
Subscription
Agreement
(38)
|
|
|
|
|
10.33
|
Common
Stock Purchase Warrant dated November 19, 2008
(38)
|
|
|
|
|
10.34
|
Common
Stock Purchase Warrant dated November 19, 2008
(38)
|
|
|
|
|
10.35
|
Employment
Severance Agreement dated February 4, 2009 between Live Current Media Inc.
and Jonathan Ehrlich
(39)
|
|
|
|
|
10.36
|
Memorandum
of Understanding between Live Current Media Inc. and Board of Control for
Cricket in India dated April 16, 2008
(40)
|
|
|
|
|
10.37
|
Memorandum
of Understanding between Live Current Media Inc. and Board of Control for
Cricket in India for and on behalf of Indian Premier League dated April
16, 2008
(41)
|
|
|
|
|
10.38
|
Novation
Agreement dated March 31, 2009 among Live Current Media Inc., Global
Cricket Ventures Pte. Ltd. and Board of Control for Cricket in India
(42)
|
|
|
|
|
10.39
|
Mutual
Termination Agreement dated March 31, 2009 Live Current Media Inc. and
Board of Control for Cricket in India
(43)
|
|
21
|
List
of Subsidiaries *
|
|
|
|
|
23.1
|
Consent
of Independent Registered Public Accounting Firm *
|
|
|
|
|
23.2
|
Consent
of Richardson & Patel LLP, included in Exhibit 5
*
|
*Filed
herewith.
|
(1)
|
Previously
filed as Exhibit 2(a) to Live Current Media Inc.’s Registration Statement
on Form 10-SB as filed on March 10, 2000 and incorporated herein by this
reference.
|
|
|
|
|
(2)
|
Previously
filed as Exhibit 2(b) to Live Current Media Inc.’s Registration Statement
on Form 10-SB as filed on March 10, 2000 and incorporated herein by this
reference.
|
|
|
|
|
(3)
|
Previously
filed as Exhibit 3.3 to Live Current Media Inc.’s Quarterly Report on Form
10-QSB for period ended September 30, 2007 as filed on November 19, 2007
and incorporated herein by this reference.
|
|
|
|
|
(4)
|
Previously
filed as Exhibit 3.4 to Live Current Media Inc.’s Current Report on Form
8-K as filed on August 22, 2007 and incorporated herein by this
reference.
|
|
|
|
|
(5)
|
Previously
filed as Exhibit 10.1 to Live Current Media Inc.’s Current Report on Form
8-K as filed on September 25, 2007 and incorporated herein by this
reference.
|
|
|
|
|
(6)
|
Previously
filed as Exhibit 4.1 to Live Current Media Inc.’s Registration Statement
Form S-8 as filed on August 22, 2007 and incorporated herein by this
reference.
|
|
|
|
|
(7)
|
Previously
filed as Exhibit 10.7 to Live Current Media Inc.’s Current Report on Form
8-K as filed on June 5, 2007 and incorporated herein by this
reference.
|
|
|
|
|
(8)
|
Previously
filed as Exhibit 10.8 to Live Current Media Inc.’s Quarterly Report on
Form 10-QSB for period ended September 30, 2007 as filed on November 19,
2007 and incorporated herein by this reference.
|
|
|
|
|
(9)
|
Previously
filed as Exhibit 10.1 to Live Current Media Inc.’s Current Report on Form
8-K as filed on September 12, 2007 and incorporated herein by this
reference.
|
|
|
|
|
(10)
|
Previously
filed as Exhibit 10.2 to Live Current Media Inc.’s Current Report on Form
8-K as filed on September 12, 2007 and incorporated herein by this
reference.
|
|
|
|
|
(11)
|
Previously
filed as Exhibit 10.6 to Live Current Media Inc.’s Registration Statement
on Form SB-2 as filed on November 28, 2007 and incorporated herein by this
reference.
|
|
|
|
|
(12)
|
Previously
filed as Exhibit 10.7 to Live Current Media Inc.’s Registration Statement
on Form SB-2 as filed on November 28, 2007 and incorporated herein by this
reference.
|
|
|
|
|
(13)
|
Previously
filed as Exhibit 10.8 to Live Current Media Inc.’s Registration Statement
on Form SB-2 as filed on November 28, 2007 and incorporated herein by this
reference.
|
|
(14)
|
Previously
filed as Exhibit 10.1 to Live Current Media Inc.’s Current Report on Form
8-K as filed on October 3, 2007 and incorporated herein by this
reference.
|
|
|
|
|
(15)
|
Previously
filed as Exhibit 10.1 to Live Current Media Inc.’s Current Report on Form
8-K as filed November 16, 2007 and incorporated herein by this
reference.
|
|
|
|
|
(16)
|
Previously
filed as Exhibit 10.2 to Live Current Media Inc.’s Current Report on Form
8-K as filed November 16, 2007 and incorporated herein by this
reference.
|
|
|
|
|
(17)
|
Previously
filed as Exhibit 10.1 to Live Current Media Inc.’s Current Report on Form
8-K as filed November 16, 2007 and incorporated herein by this
reference.
|
|
|
|
|
(18)
|
Previously
filed as exhibit 14.1 to Live Current Media Inc.’s Registration Statement
on Form SB-2 as filed on November 28, 2007 and incorporated herein by this
reference.
|
|
|
|
|
(19)
|
Previously
filed as Exhibit 10.1 to Live Current Media Inc.’s Current Report on Form
8-K as filed December 18, 2007 and incorporated herein by this
reference.
|
|
|
|
|
(20)
|
Previously
filed as Exhibit 10.1 to Live Current Media Inc.’s Current Report on Form
8-K as filed January 18, 2008 and incorporated herein by this
reference.
|
|
|
|
|
(21)
|
Previously
filed as Exhibit 16.1 to Live Current Media Inc.’s Current Report on Form
8-K as filed January 28, 2008 and incorporated herein by this
reference.
|
|
|
|
|
(22)
|
Previously
filed as Exhibit 10.1 to Live Current Media Inc.’s Current Report on Form
8-K as filed March 26, 2008 and incorporated herein by this
reference.
|
|
|
|
|
(23)
|
Previously
filed as Exhibit 10.2 to Live Current Media Inc.’s Current Report on Form
8-K as filed March 26, 2008 and incorporated herein by this
reference.
|
|
|
|
|
(24)
|
Previously
filed as Exhibit 10.3 to Live Current Media Inc.’s Current Report on Form
8-K as filed March 26, 2008 and incorporated herein by this
reference.
|
|
|
|
|
(25)
|
Previously
filed as Exhibit 10.4 to Live Current Media Inc.’s Current Report on Form
8-K as filed March 26, 2008 and incorporated herein by this
reference.
|
|
|
|
|
(26)
|
Previously
filed as Exhibit 10.5 to Live Current Media Inc.’s Current Report on Form
8-K as filed March 26, 2008 and incorporated herein by this
reference.
|
|
|
|
|
(27)
|
Previously
filed as Exhibit 10.6 to Live Current Media Inc.’s Current Report on Form
8-K as filed March 26, 2008 and incorporated herein by this
reference.
|
|
|
|
|
(28)
|
Previously
filed as Exhibit 10.7 to Live Current Media Inc.’s Current Report on Form
8-K as filed March 26, 2008 and incorporated herein by this
reference.
|
|
|
|
|
(29)
|
Previously
filed as Exhibit 10.8 to Live Current Media Inc.’s Current Report on Form
8-K as filed March 26, 2008 and incorporated herein by this
reference.
|
|
|
|
|
(30)
|
Previously
filed as Exhibit 10.9 to Live Current Media Inc.’s Current Report on Form
8-K as filed March 26, 2008 and incorporated herein by this
reference.
|
|
|
|
|
(31)
|
Previously
filed as Exhibit 10.10 to Live Current Media Inc.’s Current Report on Form
8-K as filed March 26, 2008 and incorporated herein by this
reference.
|
|
(32)
|
Previously
filed as Exhibit 10.11 to Live Current Media Inc.’s Current Report on Form
8-K as filed March 26, 2008 and incorporated herein by this
reference.
|
|
|
|
|
(33)
|
Previously
filed as Exhibit 10.12 to Live Current Media Inc.’s Current Report on Form
8-K as filed March 26, 2008 and incorporated herein by this
reference.
|
|
|
|
|
(34)
|
Previously
filed as Exhibit 10.13 to Live Current Media Inc.’s Current Report on Form
8-K as filed March 26, 2008 and incorporated herein by this
reference.
|
|
|
|
|
(35)
|
Previously
filed as Exhibit 10.14 to Live Current Media Inc.’s Current Report on Form
8-K as filed March 26, 2008 and incorporated herein by this
reference.
|
|
|
|
|
(36)
|
Previously
filed as Exhibit 10.15 to Live Current Media Inc.’s Current Report on Form
8-K as filed March 26, 2008 and incorporated herein by this
reference.
|
|
|
|
|
(37)
|
Previously
filed as Exhibit 10.16 to Live Current Media Inc.’s Current Report on Form
8-K as filed March 26, 2008 and incorporated herein by this
reference.
|
|
|
|
|
(38)
|
Previously
filed as Exhibit 10.1 to Live Current Media Inc.’s Current Report on Form
8-K as filed November 20, 2008 and incorporated herein by this
reference.
|
|
|
|
|
|
Previously
filed as Exhibit 10.1 to Live Current Media Inc.’s Current Report on Form
8-K as filed February 5, 2009 and incorporated herein by this
reference.
|
|
|
|
|
(40)
|
Previously
filed as Exhibit 10.1 to Live Current Media Inc.’s Current Report on Form
8-K as filed April 8, 2009 and incorporated herein by this
reference.
|
|
|
|
|
(41)
|
Previously
filed as Exhibit 10.2 to Live Current Media Inc.’s Current Report on Form
8-K as filed April 8, 2009 and incorporated herein by this
reference.
|
|
|
|
|
(42)
|
Previously
filed as Exhibit 10.3 to Live Current Media Inc.’s Current Report on Form
8-K as filed April 8, 2009 and incorporated herein by this
reference.
|
|
|
|
|
(43)
|
Previously
filed as Exhibit 10.4 to Live Current Media Inc.’s Current Report on Form
8-K as filed April 8, 2009 and incorporated herein by this
reference.
|
ITEM
17. UNDERTAKINGS
The
undersigned registrant hereby undertakes:
1.
To file,
during any period in which offers or sales are being made, a post-effective
amendment to this registration statement:
2.
That, for
the purpose of determining any liability under the Securities Act of 1933, each
such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
4.
That, for
the purpose of determining liability under the Securities Act of 1933 to any
purchaser:
B.
Each prospectus required to be filed pursuant to Rule 424(b)(2),
(b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B
relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for
the purpose of providing the information required by section 10(a) of the
Securities Act of 1933 shall be deemed to be part of and included in the
registration statement as of the earlier of the date such form of prospectus is
first used after effectiveness or the date of the first contract of sale of
securities in the offering described in the prospectus. As provided
in Rule 430B, for liability purposes of the issuer and any person that is at
that date an underwriter, such date shall be deemed to be a new effective date
of the registration statement relating to the securities in the registration
statement to which that prospectus relates, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof. Provided, however, that no statement made in a registration
statement or prospectus that is part of the registration statement or made in a
document incorporated or deemed incorporated by reference into the registration
statement or prospectus that is part of the registration statement will, as to a
purchaser with a time of contract of sale prior to such effective date,
supersede or modify any statement that was made in the registration statement or
prospectus that was part of the registration statement or made in any such
document immediately prior to such effective date; or
5.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
Pursuant
to the requirements of the Securities Act of 1933, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Vancouver, British
Columbia, on May 1, 2009.
|
|
LIVE
CURRENT MEDIA INC.
|
|
|
|
|
|
|
|
|
By:
|
/s/
C. Geoffrey Hampson
|
|
|
|
|
C.
Geoffrey Hampson
|
|
|
|
|
Chief
Executive Officer and Principal Accounting Officer
|
|
|
|
|
|
|
Pursuant
to the requirements of the Securities Act of 1933, this registration statement
has been signed by the following persons in the capacities and on the dates
indicated.
|
/s/
C. Geoffrey Hampson
|
|
|
|
|
|
C.
Geoffrey Hampson
|
|
Chief
Executive Officer,
Principal
Accounting Officer and Director
|
|
May
1, 2009
|
|
|
|
|
|
|
|
/s/
Mark Benham
|
|
|
|
|
|
Mark
Benham
|
|
Director
|
|
May
1, 2009
|
|
|
|
|
|
|
|
/s/
James P. Taylor
|
|
|
|
|
|
James
P. Taylor
|
|
Director
|
|
May
1, 2009
|
|
|
|
|
|
|
|
/s/
Boris Wertz
|
|
|
|
|
|
Boris
Wertz
|
|
Director
|
|
May
1, 2009
|
II-11
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