S-1/A 1 lcm_s1a4-052010.htm LIVE CURRENT MEDIA INC. lcm_s1a4-052010.htm


AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 21, 2010

REGISTRATION STATEMENT NO. 333-158951

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Amendment No. 4
to
FORM S-1

REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
 

LIVE CURRENT MEDIA INC.
 (Exact name of registrant as specified in its charter)

Nevada
7389
88-0346310
(State or other jurisdiction of
(Primary Standard Industrial
(IRS Employee Identification No.)
incorporation or organization)
Classification Code Number)
 

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
Phone:  (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. o

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. o

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. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer o
 
Accelerated filer o
     
Non-accelerated filer o (Do not check if a smaller reporting company)
 
Smaller reporting company x
 

 
CALCULATION OF REGISTRATION FEE
 
   
Amount to be
Registered
(1)
 
Proposed
Maximum
Offering
Price Per
Share(2)
 
Proposed
Maximum
Aggregate
Offering
Price
 
Amount of
Registration
Fee(3)(4)
 
Title of Each Class of Securities to be Registered
                         
Common stock, par value $0.001 per share,
   
1,000,000
 
$0.105(2)
 
$105,000
 
$7.49
 
                           
Total
   
1,000,000
 
$0.105     $105,000  
  $7.49  


 
(1)
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.
(2)
Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c) under the Securities Act of 1933, based on $0.345, the average of the bid and ask prices of the registrant’s common stock on May 18, 2010.
(3)  Calculated in accordance with Rule 457(g) of the Securities Act of 1933. 
(4)
The registrant previously paid the amount of $108.06 in connection with the initial filing of this registration statement on May 1, 2009.
 
 
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 21, 2010
 
 
PROSPECTUS
LIVE CURRENT MEDIA INC.

4,254,682 shares of common stock

This prospectus covers the resale by selling stockholders named on page 67 of up to 4,254,682 shares of our common stock, $0.001 par value, which include:

·
2,627,344 shares of common stock; and

·
1,627,338 shares of common stock underlying common stock purchase warrants.

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 May 19, 2010, the closing price of our common stock was $0.08 per share.

AN INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.  SEE “RISK FACTORS” BEGINNING ON PAGE 7.

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 _______________

 
 
 

 

TABLE OF CONTENTS

Prospectus Summary
5
Risk Factors
Special Note Regarding Forward Looking Statements
14 
Use of Proceeds
15 
Market for Common Equity
15 
Management’s Discussion and Analysis of Financial Conditions and Results of Operations
16 
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
60 
Business
61 
Description of Property
65 
Legal Matters
65 
Directors and Executive Officers
66 
Executive Compensation
68 
Certain Relationships and Related Transactions
74 
Selling Stockholders
74 
Plan of Distribution
77 
Security Ownership of Certain Beneficial Owners and Management
79 
Description of Securities
81 
Disclosure of Commission Position of Indemnification for Securities Act Liabilities
82 
Transfer Agent and Registrar
83 
Interests of Named Experts and Counsel
83 
Experts
83 
Where You Can Find More Information
83
Index to Financial Statements – March 31, 2010
F-1
Index to Financial Statements – December 31, 2009
F-27
 
 

 
 
 

 
PROSPECTUS SUMMARY

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.  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 (Karate.com and Boxing.com), we also maintained a website for global trade (Importers.com) and travel websites (such as Brazil.com and Indonesia.com) up to the date they were sold.

We also earn a small portion of our revenues (less than 2% in 2008 and 2009) 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 $7 million and $9 million in revenues during 2009 and 2008 respectively, our revenues have not been 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.   Since 2008, we have also sold non-core 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.  During the quarter ended March 31, 2010, the Company generated a consolidated net income of $74,345 (Q1 of 2009 – consolidated net loss of $916,408) and realized a negative cash flow from operating activities of $335,164 (Q1 of 2009 - $1,903,550).  At March 31, 2010, there is an accumulated deficit of $16,703,130 and a working capital deficiency of $938,772.

We generated a consolidated net loss of $4,010,013 during the year ended December 31, 2009 compared to a consolidated net loss of $9,987,270 in 2008.  We realized a negative cash flow from operating activities of $4,210,644 in 2009 compared to $4,854,260 in 2008.  At December 31, 2009, we had an accumulated deficit of $16,787,208 and a working capital deficiency of $1,216,325.  At December 31, 2008, we had negative working capital of $3,199,931 and an accumulated deficit of $12,777,195.  Our stockholders’ deficit was $148,448 at December 31, 2009 compared to stockholders’ equity of $1,995,592 at December 31, 2008. 
 
 
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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.  The outcome of these matters is dependent 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:

·
2,627,344 shares of common stock issued pursuant to various subscription agreements entered into in November 2008; and

·
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.

The shares of common stock issued and outstanding prior to this offering consist of 24,026,180 shares of common stock.  This number does not include:

·
2,845,000 shares of common stock reserved for issuance upon the exercise of outstanding stock options granted pursuant to our 2007 Stock Incentive Plan at exercise prices ranging from $0.16 to $0.65;

·
1,782,102 shares of common stock reserved for issuance pursuant to our 2007 Stock Incentive Plan which have not yet been issued; and

· 
1,699,738 shares of common stock that are reserved for issuance in connection with the offering of convertible notes that we completed in August 2009 with the shareholders of Entity Inc. (“Auctomatic”).

If all of our other issued and outstanding options and warrants are exercised, all of the convertible notes issued to the Auctomatic shareholders are converted to shares, and all of the warrant shares covered by this prospectus are issued, we will have a total of 31,980,358 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.
 
 
6

 

RESTATEMENT OF FINANCIAL STATEMENTS

On June 18, 2009, we were advised by Ernst & Young, LLP, then our independent registered public accounting firm, that our consolidated financial statements for the quarter ended March 31, 2009, as well as the consolidated financial statements for the years ended December 31, 2008 and 2007 contained errors.  Based on the foregoing, C. Geoffrey Hampson, the Company’s Chief Executive Officer and Chief Financial Officer, concluded that these financial statements should no longer be relied upon.  These errors affected opening balances as at December 31, 2007 and the financial position, results of operations and cash flows for the comparative period ended December 31, 2008.  Please see the discussion in the section of this prospectus titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, as well as Note 2 to our restated financial statements, for further information about the restatement.
   
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 GENERATED A NET INCOME OF $74,345 DURING THE QUARTER ENDED MARCH 31, 2010 AND A NET LOSS OF $4,062,823 and $10,103,137 BEFORE TAXES FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008, RESPECTIVELY.  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 generated a consolidated net income of $74,345 during the quarter ended March 31, 2010 and realized a negative cash flow from operating activities of $335,164.  At March 31, 2010, there is an accumulated deficit of $16,703,130 and a working capital deficiency of $938,772.   We generated a consolidated net loss before taxes of $4,062,823 for the year ended December 31, 2009 and realized a negative cash flow from operating activities of $4,210,644.  At December 31, 2009, we had an accumulated deficit of $16,787,208 and a working capital deficiency of $1,216,325.  We had stockholders’ deficit of $148,448 at December 31, 2009.  We generated a consolidated net loss before taxes of $10,103,137 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 $3,199,931 and an accumulated deficit of $12,777,195.  Stockholders’ equity was $1,995,592 at December 31, 2008.
 
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.  The outcome of these matters is dependent on factors outside of our control and cannot be predicted at this time.

DUE TO THE EXTREME PRICE COMPETITION IN THE DISCOUNT FRAGRANCE E-MARKET, WE CHANGED THE STRATEGY OF OUR PERFUME.COM BUSINESS FROM SELLING DISCOUNTED PRODUCTS TO SELLING FRAGRANCES AT FULL PRICE.  WE DID THIS IN ORDER TO INCREASE OUR GROSS MARGINS.  THIS STRATEGY MAY NOT BE SUCCESSFUL AND, AS A RESULT, OUR RESULTS OF OPERATIONS AND THE BUSINESS OF PERFUME.COM MAY BE ADVERSELY AFFECTED.
 
Our Perfume.com website has historically sold brand name fragrances, including women’s perfume, men’s cologne, and skin care products, direct to consumers at discounted prices well below the Manufacturer's Suggested Retail Price.  However, due to the large number of discount perfume eCommerce websites and the extreme price competition in the discount fragrance e-market, we recently transitioned our website to a luxury brand site where product is sold at full price.  The website has been re-targeted to appeal to the luxury brand conscious consumer who is seeking original and targeted content and products and to address the inherent conflict brand manufacturers have with discount resellers.  The goal of the new strategy is to position the business to be able to purchase both the newest fragrance releases and the time tested classics directly from the brand manufacturers.
 
 
7

 
 
We believe that online shopping behavior is evolving and that luxury and brand conscious consumers will pay full price for branded goods when the experience and the content on the website are consistent with a luxury “look and feel”.  Since making this transition, revenue has declined but margins have increased.  Both are currently meeting management’s expectations.  However there is a risk that, in the longer term, this strategy will not yield the results that management is anticipating and our results of operations and the business of Perfume.com may be adversely affected.

IN OUR ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2009 AND IN OUR QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2010 WE DISCLOSED A MATERIAL WEAKNESS IN OUR DISCLOSURE CONTROLS AND PROCEDURES.  OUR BUSINESS AND STOCK PRICE MAY BE ADVERSELY AFFECTED IF WE DO NOT REMEDIATE THIS WEAKNESS OR IF WE HAVE OTHER MATERIAL WEAKNESSES IN OUR INTERNAL CONTROLS.

As we disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2009 and in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2010, our management concluded that our disclosure controls and procedures were not effective as of these dates because we do not have formalized documentation of our internal control policies and procedures.  While we are in the process of preparing this documentation, this deficiency will not be considered to be remediated until this process is complete, our internal controls are again tested and management is able to conclude that our internal controls are operating effectively.

Any failure to implement and maintain the improvements in our controls, or difficulties encountered in the implementation of new controls, could cause us to fail to meet our reporting obligations.  Any such failure could cause investors to lose confidence in our reported financial information, which could harm our operations or results or cause us to fail to meet our reporting obligations, and could have a negative impact on the trading price of our stock.

FAILURE TO MAINTAIN EFFECTIVE INTERNAL CONTROL OVER FINANCIAL REPORTING IN ACCORDANCE WITH SECTION 404 OF THE SARBANES-OXLEY ACT OF 2002 MAY RESULT IN ACTIONS FILED AGAINST US BY REGULATORY AGENCIES OR MAY RESULT IN A REDUCTION IN THE PRICE OF OUR COMMON SHARES.

We are required to maintain effective internal control over financial reporting under the Sarbanes-Oxley Act of 2002 and related regulations. Any material weakness in our internal control over financial reporting that needs to be addressed, or disclosure of a material weakness in management’s assessment of internal control over financial reporting, may reduce the price of our common shares because investors may lose confidence in our financial reporting.  Our failure to maintain effective internal control over financial reporting could also lead to actions being filed against us by regulatory agencies.

In connection with the audit of our consolidated financial statements for the year ended December 31, 2008, we identified weaknesses in internal control over financial reporting that were material weaknesses as defined by standards established by the Public Company Accounting Oversight Board. We have restated our financial statements for the years ended December 31, 2008 and 2007 and for the period ended March 31, 2009 to correct the accounting treatment for these errors.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. The material weakness in our internal control over financial reporting as of December 31, 2008 and March 31, 2009 resulted from our failure to maintain effective processes and controls over the accounting for and reporting of complex and non-routine transactions. Specifically, we did not have an appropriate level of technical knowledge, experience and training in the accounting for business combinations, stock-based compensation, deferred income taxes, and financial statement presentation.  This control deficiency resulted in the restatement. While we believe that we have remediated these weaknesses in our internal control over financial reporting, we cannot provide assurance that material weaknesses will not occur in the future.
 
 
8

 
 
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 HAVE IMPACTED, AND MAY CONTINUE TO IMPACT 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 have negatively affected our business, operating results, and financial condition and may continue to do so.  For example, the downturn in consumer spending, especially in the United States, has resulted 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 tight 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 business websites 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.
 
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.
 
 
9

 
 
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 Domain Strategies, Inc., an internet development and management company, and Develep, a partnership, to jointly establish a limited liability company for the purpose of developing, managing and monetizing our Karate.com domain name.  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 and Ms. Chantal Iorio, our Vice President Finance, would be detrimental.  We have employment agreements with Mr. Hampson and Ms. Iorio that provide for their continued service to us until June 1, 2012 and January 7, 2013 respectively.

WE WILL NEED TO RAISE ADDITIONAL CAPITAL IN 2010.  IF WE ARE UNABLE TO DO SO, OUR BUSINESS WOULD BE ADVERSELY AFFECTED.

We will be required to raise additional funds for our operations in 2010 and intend to do so primarily through the sale or lease of a few of our non-core domain names.  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 29.79% 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.
 
 
10

 
 
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.
 

 
 
11

 
 
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 trademarks or copyrights 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, in addition to the great amount of time lost, in defending any trademark or copyright infringement suits or in asserting any trademark or copyright rights in a suit with another party.
 
Risks Relating to Ownership of Our Securities

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.
 
 
12

 
 
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 4,254,682 SHARES OF COMMON STOCK, WHICH IS APPROXIMATELY 18% 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 4,254,682 shares, or approximately 18%, of the 24,026,180 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.

The Over the Counter Bulletin Board (the “OTCBB”) is a regulated quotation service that displays real-time quotes, last sale prices and volume limitations in over-the-counter securities.   Because trades and quotations on the OTCBB involve a manual process, the market information for such securities cannot be guaranteed.  In addition, quote information, or even firm quotes, may not be available.  The manual execution process may delay order processing and intervening price fluctuations may result in the failure of a limit order to execute or the execution of a market order at a significantly different price.  Execution of trades, execution reporting and the delivery of legal trade confirmations may be delayed significantly.  Consequently, one may not be able to sell shares of our common stock at the optimum trading prices.

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.
 
 
13

 
 
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 and resources. 

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;
   
·
our growth strategies;
   
·
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 include those listed under “Risk Factors” beginning on page 7 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. 
 
 
14

 
 
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 and through May 19, 2010, 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.  As of May 19, 2010, the high and low bid price of our common stock was $0.08 and $0.08 , respectively.
 
Common Stock
 
High & Low Bids
 
Period ended
 
High
   
Low
 
                 
March 31, 2010
 
$
0.27
   
$
0.136
 
                 
December 31, 2009
 
$
0.22
   
$
0.13
 
                 
September 30, 2009
 
$
0.30
   
$
0.15
 
                 
June 30, 2009
 
$
0.35
   
$
0.18
 
                 
March 31, 2009
 
$
0.41
   
$
0.15
 
                 
December 31, 2008 
 
$
1.34
   
$
0.25
 
                 
September 30, 2008
 
$
2.81
   
$
1.25
 
                 
June 30, 2008 
 
$
3.10
   
$
2.26
 
                 
March 31, 2008 
 
$
3.47
   
$
2.37
 
 
HOLDERS

We have approximately 71 record holders of our common stock as of May 19, 2010 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.
 
 
15

 
 
 
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 quarter ended March 31, 2010 and the fiscal years ended December 31, 2009 and 2008 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.  In addition, we own hundreds of non-core domain names that we may choose to develop, lease or sell in the future to raise funds in a non-dilutive manner.  We generate revenues from consumer internet experiences in two different ways; through the online sales of products (eCommerce) and through the sale of advertising.  Currently, almost all of the revenues we earn are generated from our main health and beauty website, Perfume.com.  Through this website, we sell brand name fragrances, skin care and hair care products directly to consumers.  We also generate revenues by selling online advertising space to advertisers or in partnership with third party advertising networks.  However, since 2008, advertising accounted for less than 2% of total revenues.

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 results 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.

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 2008 and for 2009 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.  Both our sales and our ability to raise capital have been negatively impacted as a result of the current recession in the U.S. and we expect this to continue for at least the short-term.

During 2008, 2009, and the period ended March 31, 2010, our revenues were not sufficient to support our operations.  We do not expect to make significant progress this year in better aligning costs with gross margins generated from operations but will continue to generate losses from operations for the foreseeable future.  Since the end of the 2008 fiscal year, there have been many challenges in raising capital through the sale of our securities and these challenges are on-going.  Financing opportunities have become more expensive and difficult to find.  Furthermore, if we attempted to raise funds through the sale of our securities, the steep decline in the price of our common stock would result in significant dilution to our current stockholders.  As a result, management sold some of our non-core domain names to raise funds.  From January 1 through December 31, 2009, we sold ten domain names, not including our cricket.com domain name, for a total of nearly $3.2 million.  In April, 2010 we sold another name for $150,000.  Management may elect to sell additional non-core domain names if needed should the opportunity arise.  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 2011.
 
 
16

 
 
In 2008, we had a significant net loss and significant cash outflows.  In late 2008 and early 2009 we instituted cost-cutting measures, which continue to this date, including layoffs of staff and the termination of consulting and investor relations contracts.  In addition, our Chief Executive Officer amended his employment agreement to reduce his annual base salary from CDN$300,000 to CDN$120,000 effective February 1, 2009.  Furthermore, he agreed that the eight months of salary payable between February 1 and September 30, 2009, which totalled CDN$80,000, would be decreased to CDN$72,000 and the payment was deferred until the end of 2009.  As a result of these efforts, our net cash outflows have begun to decrease.

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

RECENT DEVELOPMENTS

Perfume.com

The Company is considering segregating the Perfume.com business from its other website businesses, which do not involve retail sales.  In order to segregate the business, management plans to move the domain names related to Perfume.com and its other brand-related assets into one of the Company's wholly-owned subsidiaries.  This transfer is still being reviewed by management and there is no assurance that it will be completed.

Karate.com

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

Exit from Cricket

On March 31, 2009 the Company, Global Cricket Ventures Pte. Ltd. (sometimes referred to in this prospectus as “GCV”), a subsidiary of the Company, and the Board of Control for Cricket in India (“BCCI”) entered into a Novation Agreement (the “Novation”) pursuant to which GCV was granted all of the Company’s rights, and assumed all of the Company’s obligations, under the Memorandum of Understanding (the “Original Agreement”) dated April 16, 2008 that had been executed by the Company and the BCCI, acting for and on behalf of its separate subcommittee unit known as the Indian Premier League.
 
 
17

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

In conjunction with the Assignment, on August 25, 2009, DHI entered into the Cricket.com Lease and Transfer Agreement (the “Lease”) with Mauritius.  The Lease is dated August 20, 2009.  Pursuant to the Lease, DHI leased to Mauritius the cricket.com domain name, the cricket.com website (the “Website”), and certain support services in exchange for the payment of $1 million (the “Purchase Price”) plus the expenses described below.  The Purchase Price is to be paid in 4 equal installments, each of $250,000.  The first installment was received subsequent to the execution of the Lease, the second and third instalments have been received in 2010, and the remaining installment is to be paid in May 2010.  Upon the payment of the final installment and the expenses described below, DHI will assign to Mauritius all rights, title and interest in the Website, the cricket.com domain name and the registration thereof, all trademarks, services marks and logos that incorporate the term cricket.com and the goodwill (if any) associated with the foregoing.

In order to facilitate the transfer of the Website, DHI agreed to provide Mauritius with support services for a period of no more than 6 months (the “Transition Period”).  In exchange for the support services, Mauritius agreed to the payment of certain expenses related to the support services including (i) direct costs incurred by DHI for maintaining the Website, (ii) rent and overhead costs in the amount of $2,500 per month, (iii) employee related costs, and (iv) severance costs (not to exceed $60,000) related to the termination of employees whose employment will be terminated as a result of the transfer of the Website.  The payments for support services noted above have been received, including the $60,000 severance costs.  In addition, Mauritius has agreed that, prior to the expiration of the Transition Period, it will either enter into an employment agreement with Mark Melville, the Company’s President and Chief Corporate Development Officer, or pay any severance costs related to his termination without cause (with the exception of special bonus payments), in accordance with the terms of his employment agreement with the Company.  These two agreements will result in our full exit from the Cricket business with the exception of interim support services which we have agreed to provide for a period of six months.  The Transition Period ended February 20, 2010.  Subsequent to the end of the Transition Period, the Company and Mauritius verbally agreed to extend the services agreement and Mauritius agreed to continue paying Mr. Melville’s salary on a month to month basis.  We expect Mauritius or another entity connected with the cricket.com website to continue Mr. Melville’s employment.  Mr. Melville has indicated that he plans to resign his positions as President and Chief Corporate Development Officer with our company if Mauritius offers him employment, although he has not advised us, as of the date of this prospectus, of a termination date.  Once we receive Mr. Melville’s resignation, our Chief Executive Officer, C. Geoffrey Hampson, will assume the office of President and the office of Chief Corporate Development Officer will remain vacant.

Entity Inc. (“Auctomatic”)

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

In August 2009, we reached an agreement with twelve of the eighteen Auctomatic shareholders to convert $424,934 of the $800,000 payable to them into convertible notes bearing interest at 10%. The payment due date is May 22, 2010.  The Company is currently seeking to renegotiate the payment date and the interest rate through the issuance of new non-convertibles notes.

Also in August 2009, we reached an agreement with the remaining two founders of Auctomatic to terminate their employment.  Under their severance agreements, we agreed to pay the amounts owed under the Merger Agreement at a 10% discount to face value.  We are paying these amounts in instalments.  During Q3 of 2009, we also paid them a total of $60,000 of severance costs due pursuant to the terms of their employment agreements.  These severance costs were recovered through the agreement for support services described above.  In consideration of these payments, these individuals have each agreed to forfeit their rights to 91,912 shares of Live Current common stock that were due to be issued to each of them in May 2010 and May 2011 under the Merger Agreement.
 
 
18

 

RESTATEMENT OF FINANCIAL STATEMENTS

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

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

The Company’s intangible assets, comprised of its domain names, have book values in excess of their tax values.  The December 31, 2008 financial statements considered the taxable temporary differences associated with these indefinite life intangible assets in reducing the valuation allowance associated with its loss carryforwards.  This was an incorrect application of GAAP.   Correction of this error resulted in the recognition of a deferred tax liability of $206,370 at March 31, 2009 and as at December 31, 2008, and a deferred income tax recovery of $40,389 in the year ended December 31, 2008.  There was an immaterial effect to the consolidated statements of operations for the quarter ended March 31, 2009.

B. Non-Controlling Interest:

The Company discovered an error in its continuity of non-controlling interest in its subsidiaries as at January 1, 2007, resulting in a $100,676 increase to the opening non-controlling interest liability and deficit.

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

Prior to recognizing the non-controlling interest liabilities as described in the preceding two paragraphs, the non-controlling interest’s share of subsidiary losses in 2008 was limited to the non-controlling interest liability.  As a consequence of the above increases to non-controlling interest liabilities, the non-controlling interest’s share in subsidiary losses was increased by $75,748 in the year ended December 31, 2008.  There was no effect to the non-controlling interest at March 31, 2009, or for the quarter then ended.

C. Management Compensation:

The March 31, 2009 financial statements overaccrued $72,741, and the December 31, 2008 financial statements did not accrue $119,045, in bonuses payable and expense for two CDN$100,000 special bonuses to be paid on January 1, 2009 and January 1, 2010 to our current President and Chief Corporate Development Officer pursuant to his employment agreement.  These special bonuses are not discretionary, but will only be paid if he remains employed as an officer of the Company on the dates payable.

D. Estimated life of stock options:

The Company originally estimated the life of its stock options as equal to the vesting period for these options, 3 years.  The estimated life should have been 3.375 years, resulting in an increase of $155,500 to stock-based compensation expense in the quarter ended March 31, 2009, and a decrease of $118,893 to our stock-based compensation expense in the year ended December 31, 2008.
 
 
19

 

E. Other

(i)           Expense accruals

The Company discovered an accrual and cutoff error in its recorded accounting fees, resulting in an underaccrual of accounting expense (included in Corporate General and Administrative expenses) of $83,271 in the quarter ended March 31, 2009, and an overaccrual of $19,521 in the year ended December 31, 2008.

(ii)           Gain on sale of domain name

The Company failed to record website development costs attributable to a domain name sold in 2008, reducing website development costs and gain on sale of domain names by $37,408 in the year ended December 31, 2008.  As a result, a corresponding decrease to the gain on sale of domain names in the quarter ended March 31, 2009 was made.  There was no effect to the consolidated balance sheet as at March 31, 2009.

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

In November 2008, the Company raised $1,057,775 of cash by selling 1,627,344 units consisting of one share of the Company’s common stock and two warrants, each for the purchase of a half share of common stock.  The offering price was $0.65 per unit.  The estimated fair value of the warrants was $157,895 and was presented as equity in the financial statements for the fiscal year ended December 31, 2008.  The warrants contained provisions which could require their redemption in cash in certain circumstances which may not all be within the Company’s control.  The fair value of the warrants therefore should have been recorded as a liability, with future changes to fair value reported as either income or expense in the period in which the change in fair value occurs.  There were no changes to the fair value of the warrants between the November 2008 issue date and December 31, 2008.  
 
At March 31, 2009, the fair value of the warrants was $242,704.  The Company recorded an increase to the liability of $84,809 at March 31, 2009 and the corresponding expense was recorded as an increase to corporate general and administrative expense.

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

(i)           Valuation of shares issued as purchase consideration

The Auctomatic merger closed on May 22, 2008.  The original estimate of the fair value of the share purchase consideration attributable to the acquisition was based on the trading value of the shares around March 25, 2008.  However, the Merger Agreement had an adjustment provision regarding the number of shares to be issued, such that the shares should have been valued with reference to the May 22, 2008 closing date as opposed to the announcement date on March 25, 2008.  Using the average share price around the closing date, an additional $110,746 should have been recorded as additional paid-in capital and goodwill during the year ended December 31, 2008 and the quarter ended March 31, 2009.

(ii)            Shares issued to Auctomatic founders

As part of the merger with Auctomatic, the Company agreed to distribute 413,604 shares of its common stock payable on the first, second, and third anniversaries of the Closing Date (the “Distribution Date”) to the Auctomatic founders subject to their continuing employment with the Company or a subsidiary on each Distribution Date.  These shares, which were not accounted for in the Auctomatic purchase, also were not properly accounted for as compensation to the Auctomatic founders for their continued employment with the Company.  The related stock-based compensation expense that should have been recorded in 2008 was $170,065.  The related stock-based compensation expense that should have been recorded in the quarter ended March 31, 2009 was $68,330.
 
 
20

 

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

In order to provide clarity, the Company also classified separately on its consolidated balance sheets and consolidated statements of operations the amounts payable to the BCCI and IPL of $750,000 at March 31, 2009 and $1,000,000 at December 31, 2008.

I. Tax Impact:

Exclusive of Item A, none of the above adjustments gave rise to an increase or decrease in the Company’s tax position.
 
 
 
 
 
 
 
21

 
 
The following table illustrates the effect of the adjustments by financial statement line item in the Company’s consolidated balance sheets as of December 31, 2008:
 
December 31, 2008
 
Reference
   
As previously
reported
   
Restatement
 adjustment
   
As restated
 
ASSETS
                       
Current
                       
Cash and cash equivalents
        $ 1,832,520     $ -     $ 1,832,520  
Accounts receivable (net of allowance for doubtful accounts of nil)
      93,582       -       93,582  
Prepaid expenses and deposits
          109,543       -       109,543  
Inventory
          74,082       -       74,082  
Current portion of receivable from sales-type lease
          23,423       -       23,423  
Total current assets
          2,133,150       -       2,133,150  
                               
Long-term portion of receivable from sales-type lease
          23,423       -       23,423  
Deferred acquisition costs
          -       -       -  
Property & equipment
          1,042,851       -       1,042,851  
Website development costs
 
E(ii)
      392,799       (37,408 )     355,391  
Intangible assets
          1,587,463       -       1,587,463  
Goodwill
  B, G (i)       2,428,602       177,438       2,606,040  
Total Assets
          $ 7,608,288     $ 140,030     $ 7,748,318  
                                 
LIABILITIES AND STOCKHOLDERS' EQUITY
                               
Current
                               
Accounts payable and accrued liabilities
  E (i), H     $ 4,131,264     $ (1,083,271 )   $ 3,047,993  
Amounts payable to the BCCI and IPL
    H       -       1,000,000       1,000,000  
Bonuses payable
 
C(ii)
      235,650       119,045       354,695  
Due to shareholders of Auctomatic
            789,799       -       789,799  
Deferred revenue
            120,456       -       120,456  
Current portion of deferred lease inducements
            20,138       -       20,138  
Total current liabilities
            5,297,307       35,774       5,333,081  
                                 
Deferred income tax
  A       -       206,370       206,370  
Warrants
  F       -       157,895       157,895  
Deferred lease inducements
            55,380       -       55,380  
Total Liabilities
            5,352,687       400,039       5,752,726  
                                 
STOCKHOLDERS' EQUITY
                               
Common Stock
            14,855       -       14,855  
Additional paid-in capital
            14,772,880       (14,948 )     14,757,932  
Accumulated deficit
            (12,532,134 )     (245,061 )     (12,777,195 )
Total Stockholders' Equity
            2,255,601       (260,009 )     1,995,592  
Total Liabilities and Stockholders' Equity
          $ 7,608,288     $ 140,030     $ 7,748,318  
 
 
 
22

 
 
The following table illustrates the effect of the adjustments by financial statement line item in the Company’s consolidated statements of operations as of December 31, 2008 as disclosed in the 2008 Form 10K as amended and filed with the Securities and Exchange Commission on October 26, 2009:
 
For the year ended December 31, 2008
 
Reference
   
As previously
 reported
   
Restatement
adjustment
   
Global Cricket
Venture
Reclassification
   
As restated
 
                               
SALES
        $ 9,364,833     $ -     $ -     $ 9,364,833  
                                       
COSTS OF SALES (excluding depreciation and amortization as shown below)
      7,683,812       -       -       7,683,812  
                                       
GROSS PROFIT
          1,681,021       -       -       1,681,021  
                                       
OPERATING EXPENSES
                                     
Amortization and depreciation
          253,141       -       -       253,141  
Amortization of website development costs
          58,640       -       -       58,640  
Corporate general and administrative
   E(i)       2,537,422       377,612       397,133       2,915,034  
ECommerce general and administrative
            567,980       -       -       567,980  
Management fees and employee salaries
 
C(i), C(ii), D, G(ii)
      4,746,255       1,052,473       973,679       5,798,728  
Corporate marketing
            42,399       105,443       105,443       147,842  
ECommerce marketing
            766,393       -       -       766,393  
Other expenses
            708,804       -       -       708,804  
Total Operating Expenses
            9,681,034       1,535,528       1,476,255       11,216,562  
                                         
NON-OPERATING INCOME (EXPENSES)
                                       
Global Cricket Venture expenses
   H       (2,476,255 )     1,000,000       1,476,255       -  
Global Cricket Venture payments
   H       -       (1,000,000 )     -       (1,000,000 )
Gain from sales and sales-type lease of domain names
 
E(ii)
      498,829       (37,408 )     -       461,421  
Accretion interest expense
            (96,700 )     -       -       (96,700 )
Interest and investment income
            67,683       -       -       67,683  
Total Non-Operating Income (Expenses)
            (2,006,443 )     (37,408 )     1,476,255       (567,596 )
                                         
NET LOSS BEFORE TAXES
            (10,006,456 )     (1,572,936 )     -       (10,103,137 )
                                         
Deferred tax recovery
   A       -       (40,389 )     -       (40,389 )
                                         
CONSOLIDATED NET LOSS
            (10,006,456 )     (1,532,547 )     -       (10,062,748 )
                                         
ADD: NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST
  B       -       75,478       -       75,478  
                                         
NET LOSS AND COMPREHENSIVE LOSS FOR THE YEAR ATTRIBUTABLE TO LIVE CURRENT MEDIA INC.
    $ (10,006,456 )   $ (1,457,069 )   $ -     $ (9,987,270 )
                                         
LOSS PER SHARE - BASIC AND DILUTED
                                       
Net loss attributable to Live Current Media Inc. common stockholders
    $ (0.46 )     0.00       (0.00 )   $ (0.46 )
Weighted Average Number of Common Shares Outstanding - Basic and Diluted
      21,937,179       -       -       21,937,179  
 
 
 
23

 
 
The following table illustrates the effect of the adjustments by financial statement line item in the Company’s consolidated statements of cash flows as of December 31, 2008 as disclosed in the 2008 Form 10K as amended and filed with the Securities and Exchange Commission on October 26, 2009:

For the year ended December 31, 2008
 
Reference
   
As previously
reported
   
Restatement
adjustment
   
As restated
 
OPERATING ACTIVITIES
                       
Net loss for the period
        $ (10,006,456 )   $ 19,186     $ (9,987,270 )
Non-cash items included in net loss:
                             
Deferred tax recovery
  A       -       (40,389 )     (40,389 )
Gain from sales and sales-type lease of domain names
 
E(ii)
      (498,829 )     37,408       (461,421 )
Accretion interest expense
            96,700       -       96,700  
Stock-based compensation
 
D, G(ii)
      2,111,354       51,172       2,162,526  
Warrants issued
            45,500       -       45,500  
Issuance of common stock for services
            303,859       -       303,859  
Extinguishment of debt by issuance of common stock
            16,500       -       16,500  
Amortization and depreciation
            291,643       -       291,643  
Change in operating assets and liabilities:
                               
Accounts receivable
            45,348       -       45,348  
Prepaid expenses and deposits
            136,631       -       136,631  
Inventory
            (74,082 )     -       (74,082 )
Accounts payable and accrued liabilities
  E (i), H       2,615,835       (1,019,521 )     1,596,314  
Amounts payable to the BCCI and IPL
  H       -       1,000,000       1,000,000  
Bonuses payable
 
C(i), C(ii)
      (5,640 )     27,622       21,982  
Deferred revenue
            67,377       -       67,377  
Cash flows used in operating activities
            (4,854,260 )     75,478       (4,778,782 )
                                 
INVESTING ACTIVITIES
                               
Net proceeds from sale of domain name
            369,041       -       369,041  
Net proceeds from sales-type lease of domain name
            140,540       -       140,540  
Cash consideration for Auctomatic
            (1,530,047 )     -       (1,530,047 )
Purchases of property & equipment
            (187,532 )     -       (187,532 )
Website development costs
            (451,439 )     -       (451,439 )
Cash flows used in (from) investing activities
            (1,659,437 )     -       (1,659,437 )
                                 
FINANCING ACTIVITIES
                               
Proceeds from sale of common stock (net of share issue costs)
      970,972       -       970,972  
Net loss attributable to non-controlling interest
  B       -       (75,478 )     (75,478 )
Cash flows from financing activities
            970,972       (75,478 )     895,494  
                                 
Net increase (decrease) in cash and cash equivalents
            (5,542,725 )     -       (5,542,725 )
                                 
Cash and cash equivalents, beginning of year
            7,375,245       -       7,375,245  
Cash and cash equivalents, end of year
          $ 1,832,520     $ -     $ 1,832,520  

 
 
24

 
 
The following table illustrates the effect of the adjustments by financial statement line item in the Company’s consolidated statements of stockholders’ equity as of December 31, 2008 and December 31, 2007:
 
           As previously reported              
         
Common stock
   
Additional Paid-in Capital
   
Accumulated Deficit
   
Total
   
Restatement Adjustment
   
As Restated 
Total
 
   
Reference
   
Number of Shares
   
Amount
                               
Balance, December 31, 2006
          17,836,339     $ 8,846     $ 3,605,579     $ (507,729 )   $ 3,106,696     $ -       3,106,696  
Adjustment to opening accumulated deficit
 
A, B, E(iii)
      -       -       -       -       -       (319,850 )     (319,850 )
Balance, December 31, 2006
          17,836,339       8,846       3,605,579       (507,729 )     3,106,696       (319,850 )     2,786,846  
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       -       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       -       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       -       5,100,000  
Share issue costs
            -               (100             (100 )             (100 )
Stock-based compensation
    D       -               428,028               428,028       (18,971 )     409,057  
Net loss and comprehensive loss
 
A, B, C(i), D, E(i), E(iii)
      -                       (2,017,949 )     (2,017,949 )     55,603       (1,962,346 )
Balance, December 31, 2007
            21,446,623       12,456       10,188,975       (2,525,678 )     7,675,753       (283,218 )     7,392,535  
Stock-based compensation
 
D, G(ii)
      -       -       2,111,354               2,111,354       51,172       2,162,526  
Issuance of 586,403 common shares per the merger agreement with Auctomatic
    G(i)       586,403       586       1,137,533               1,138,119       110,746       1,248,865  
Issuance of 33,000 common shares to investor relations firm
            33,000       33       85,649               85,682       -       85,682  
Issuance of 120,000 common shares to investor relations firm
            120,000       120       218,057               218,177       -       218,177  
Issuance of 50,000 warrants to investor relations firm
            -       -       45,500               45,500       -       45,500  
Cancellation of 300,000 common shares not distributed
            (300,000     -       -               -       -       -  
Private Placement of 1,627,344 units at $0.65 per share
    F       1,627,344       1,627       1,056,148               1,057,775       (157,895 )     899,880  
Share issue costs
            -       -       (86,803             (86,803 )     -       (86,803 )
Extinguishment of accounts payable
            33,000       33       16,467               16,500       -       16,500  
Net loss and comprehensive loss
 
A - E(ii), G(ii)
                              (10,006,456 )     (10,006,456 )     19,186       (9,987,270 )
Balance, December 31, 2008
            23,546,370     $ 14,855     $ 14,772,880     $ (12,532,134 )   $ 2,255,601     $ (260,009 )     1,995,592  
 

 
 
 
25

 

Selected Financial Data
 
March 31, 2010 as compared to March 31, 2009
 
The following selected financial data was derived from our unaudited interim consolidated financial statements for the quarter ended March 31, 2010.  The information set forth below should be read in conjunction with our financial statements and related notes included elsewhere in this prospectus.
 
 
Expressed in US Dollars  
Three Months
Ended
March 31, 2010
   
 Three Months
Ended
March 31, 2009
(As Restated)
 
             
SALES
           
Health and beauty eCommerce
  $ 873,959     $ 1,720,167  
Domain name advertising
    17,197       24,453  
Miscellaneous income
    17,078       7,762  
Total Sales
    908,234       1,752,382  
                 
COSTS OF SALES
               
Health and Beauty eCommerce
    630,846       1,386,619  
Total Costs of Sales (excluding depreciation and amortization as shown below)
    630,846       1,386,619  
                 
GROSS PROFIT
    277,388       365,763  
                 
OPERATING EXPENSES
               
Amortization and depreciation
    16,370       98,166  
Amortization of website development costs
    26,124       32,562  
Corporate general and administrative
    109,882       361,123  
ECommerce general and administrative
    76,661       80,220  
Management fees and employee salaries
    698,351       1,193,595  
Corporate marketing
    84       3,771  
ECommerce marketing
    79,799       111,422  
Other expenses
    -       264,904  
Total Operating Expenses
    1,007,271       2,145,763  
                 
NON-OPERATING INCOME (EXPENSES)
               
Gain on settlement of amounts due regarding Global Cricket Venture
    250,000       250,000  
Gain from sales and sales-type lease of domain names
    600,000       617,933  
Accretion interest expense
    -       (40,000 )
Interest expense
    (10,594 )     -  
Interest and investment income
    297       890  
Foreign exchange gain (loss)
    (35,475 )     34,769  
Total Non-Operating Income
    804,228       863,592  
                 
CONSOLIDATED NET INCOME (LOSS)
    74,345       (916,408 )
                 
ADD: NET (INCOME) LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST
    9,733       -  
                 
NET INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) FOR
               
THE PERIOD ATTRIBUTABLE TO LIVE CURRENT MEDIA INC.
  $ 84,078     $ (916,408 )
                 
INCOME (LOSS) PER SHARE - BASIC AND DILUTED
               
Basic Net Income (Loss) attributable to Live Current Media Inc. common stockholders
  $ 0.00     $ (0.04 )
Weighted Average Number of Common Shares Outstanding - Basic
    24,005,471       22,509,120  
                 
Diluted Net Income (Loss) attributable to Live Current Media Inc. common stockholders
  $ 0.00     $ (0.04 )
Weighted Average Number of Common Shares Outstanding - Diluted
    30,155,159       22,509,120  
 
 
 
 
26

 
 
 
BALANCE SHEET DATA
           
   
March 31,
   
December 31,
 
     2010    
2009
 
Assets
           
Current Assets
  $ 782,340     $ 1,214,924  
Property & equipment
    216,699       231,327  
Website development costs
    191,759       217,883  
Intangible assets
    963,133       963,133  
Goodwill
    66,692       66,692  
Total Assets
  $ 2,220,623     $ 2,693,959  
                 
Liabilities
               
Current Liabilities
  $ 1,721,112     $ 2,431,249  
Deferred income tax
    125,207       125,207  
Deferred lease inducements
    30,207       35,241  
Warrants
    94,398       250,710  
Total Liabilities
    1,970,924       2,842,407  
                 
Stockholders' Equity (Deficit)
               
Common Stock
    15,335       15,335  
Additional paid-in capital
    16,918,874       16,595,072  
Accumulated deficit
    (16,703,130 )     (16,787,208 )
Total Live Current Media Inc. stockholders' equity (deficit)
    231,079       (176,801
Non-controlling interest
    18,620       28,353  
Total Stockholders' Equity (Deficit)
    249,699       (148,448
Total Liabilities and Stockholders' Equity
  $ 2,220,623     $ 2,693,959  
 
 
 
RESULTS OF OPERATIONS
 
Sales and Costs of Sales
 
Quarter over Quarter Analysis
 
Overall, combined sales in Q1 of 2010 totaled $908,234, which is just over half of the combined sales of $1,752,382 in Q1 of 2009.  This significant decrease was almost entirely driven by the decrease in sales at Perfume.com as noted below.  Overall, Health & Beauty eCommerce product sales, consisting of Perfume.com sales, represented 96.2% of total revenues in Q1 of 2010, compared to 98.2% of total revenues in Q1 of 2009.  A discussion of the decline in our revenues is included below.
 
Costs of sales were $630,846 in Q1 of 2010 compared to $1,386,619 during Q1 of 2009, a decrease of 120%.  This resulted in an overall gross margin in Q1 of 2010 of $277,388, or 30.5%, compared to a gross margin of $365,763, or 20.9% in Q1 of 2009.  This significant increase in the overall gross margin in Q1 of 2010 over Q1 of 2009 is due to a change in management’s focus regarding product sale prices and discounts on our Perfume.com website as discussed below, as well as the implementation of other income opportunities that require few costs to manage and have a 100% gross margin.
 
Health and Beauty eCommerce Sales
 
Our Perfume.com sales result from the sale of fragrances and designer skin care products.  Our health and beauty eCommerce product sales through our Perfume.com website accounted for nearly all of our eCommerce sales since 2008 and we expect that this will continue in the short term.
 
 
27

 
 
The following table summarizes our revenues earned on the sale of Health and Beauty products during each quarter since January 1, 2009.
 
Quarter Ended
 
Total Quarterly Sales
   
Average Daily Sales
 
March 31, 2010
  $ 873,959     $ 9,711  
Fiscal Year-to-Date 2010 Totals
  $ 873,959     $ 9,711  
                 
March 31, 2009
  $ 1,720,167     $ 19,113  
June 30, 2009
    1,663,182       18,277  
September 30, 2009
    1,498,265       16,285  
December 31, 2009
    2,334,865       25,379  
Fiscal Year 2009 Totals
  $ 7,216,479     $ 19,771  
 
The most recent quarters have presented great challenges for all retailers, including eCommerce, due to the worldwide economic downturn.  As noted above, the majority of our revenues come from consumers in the United States, which is still experiencing a severe recession that has adversely affected consumer spending on discretionary items.  This decline in discretionary consumer spending has contributed to the decrease in revenues from Perfume.com.
 
Quarter Ended
 
Quarterly Gross
   
Quarterly Gross
 
   
Margins
   
Margin %
 
March 31, 2010
  $ 243,113     27.8%  
Fiscal Year-to-Date 2010 Totals
  $ 243,113     27.8%  
               
March 31, 2009
  $ 333,548     19.4%  
June 30, 2009
    347,435     20.9%  
September 30, 2009
    314,786     21.0%  
December 31, 2009
    543,705     23.3%  
Fiscal Year 2009 Totals
  $ 1,539,474     21.3%  
                        
Quarter over Quarter Analysis

Perfume.com revenues decreased to $873,959 in Q1 of 2010, which is just over half the revenues earned of $1,720,167 in Q1 of 2009.  Daily sales averaged $9,711 in Q1 of 2010 compared to $19,113 per day in Q1 of 2009.  This decrease was due both to the decline in economic conditions and a shift in management’s strategy away from discount pricing to full retail pricing to keep in line with the luxury brand strategy.  In 2008 and 2009, we focused on increasing revenues through ineffective and expensive search engine optimization (“SEO”), as well as the aggressive use of coupons and discounts which resulted in a decrease in our gross margin ratios.  In 2009, the strategy changed to increase gross margins by limiting aggressive and unprofitable SEO practices and discounts, to decrease the use of discounts and coupons, to increase the value of the content on the site, and to increase the sales prices of products on our website in small increments.  In the middle of Q1 2010, we altered the strategy to better align the “look and feel” of the perfume.com website by increasing the selling price to full Manufacturer's Suggested Retail Price (“MSRP”).  As a result, our revenues declined substantially but our margins increased significantly.  Management believes that this business segment, especially with the new strategy of higher engagement and higher prices, continues to demonstrate strong potential.  This view is reinforced by the fact that despite the economic decline in the United States over the last number of quarters and management’s move away from the discount strategy, the business has performed as anticipated.  However, it is possible that consumer spending on discretionary items such as perfume will continue to decline due to recessionary pressure in the U.S., from which we earn the majority of our eCommerce revenues.

Costs of shipping and purchases totaled $630,846 in Q1 of 2010 as compared to $1,386,619 in Q1 of 2009.  This produced a gross margin for our eCommerce sales of $243,113 or 27.8% in Q1 of 2010, an increase of 8 percentage points compared to $333,548 or 19.4% in Q1 of 2009.  The increasing trend of our gross profit margins throughout 2009 and into 2010 demonstrates management’s continued effort in 2009 to increase gross margins even at the risk of decreased revenues.  The change of strategy in late Q1 of 2010 to increase the product prices to full MSRP provided significantly larger gross profit margins during the quarter.  Management continues to research and pursue opportunities that may contribute to higher gross margin percentages in the future.  Management anticipates that it will maintain a profit margin of approximately 30-40% through 2010 with this new strategy.  Over the next several quarters, management intends to explore opportunities to introduce and implement more robust supply chain capability which, if realized, should also increase gross margins by the end of 2010.
 
 
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Advertising

Quarter over Quarter Analysis

In Q1 of 2010, we generated advertising revenues of $17,197 compared to $24,453 in Q1 of 2009, a decrease of $7,256 or 42.2%.  Advertising revenues have decreased every quarter in 2008 and 2009 primarily as a result of the termination of a large advertising contract in early 2008 due to its restrictive conditions, but also as a result of the sale of domain names from which we received advertising revenues.  In Q1 of 2010, advertising accounted for 1.9% of total revenues, consistent with 1.4% of total revenues in Q1 of 2009.  Advertising revenues are expected to continue to account for a small percentage of total revenues in the next few quarters.  Management continues to investigate new advertising monetization opportunities with vendors and continues to seek to increase advertising revenues.

Miscellaneous Income

In early 2009, we implemented a new cost sharing arrangement with a related party whereby we would earn $6,000 per month for providing administrative, technical, and other services.  Effective January 2010, the arrangement was modified to $3,500 per month.  This income is included in miscellaneous and other income on our consolidated statements of operations.

Domain Name Leases and Sales

By selling some of our non-core domain names, management has successfully raised significant funds in order to provide liquidity to the Company.  Management continues to evaluate expressions of interest from domain name buyers, and continues to search for other domain names that would complement either the advertising or eCommerce businesses.  There were ten sales or sales-type leases of domain names in 2009, not including cricket.com.  There have been no sales or sales-type leases of domain names in the first quarter of 2010.

General and Administrative
 
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.  The following tables summarize our total general and administrative expenses, and the breakdown of our corporate and eCommerce general and administrative expenses during each quarter since January 1, 2009.

Quarter Ended
 
Corporate
G&A
   
eCommerce
G&A
   
Total G&A*
   
As a % of
Total Sales
March 31, 2010
  $ 109,882     $ 76,661       186,543       20.5 %
Fiscal Year-to-Date 2010 Totals
  $ 109,882     $ 76,661     $ 186,543       20.5 %
                                 
March 31, 2009 (as restated)
  $ 361,123     $ 80,220     $ 441,343       25.2 %
June 30, 2009
    176,532       73,668       250,200       14.7 %
September 30, 2009
    138,409       63,461       201,870       13.1 %**
December 31, 2009
    327,987       101,806       429,793       18.0 %**
Fiscal Year 2009 Totals
  $ 1,004,051     $ 319,155     $ 1,323,206       17.9 %**
 
* Excluding foreign exchange gain or loss which was reported as part of G&A expenses until Q4 2009
**Excluding cricket.com sponsorship revenues
 
 
 
29

 

Quarter over Quarter Analysis

In Q1 of 2010, we recorded total general and administrative expense of $186,543 of 20.5% of total sales as compared to $441,343 or 25.2% of total sales in Q1 of 2009, a decrease of $254,800 or over 57.7%. This total includes corporate and eCommerce related general and administrative costs.  Management expects general and administrative expenses to decrease as a percentage of revenue as the eCommerce business grows and as continued efforts are made to cut costs, and expects to maintain general and administrative costs well below 20% of total sales.

Corporate general and administrative costs of $109,882 have decreased from the amount of $361,123 in Q1 of 2009 by $251,241, or 228.7%.  Some of the significant costs we incurred during Q1 of 2009 which were not incurred in Q1 of 2010 were approximately $30,700 in payments made both in cash and common stock for investor relations services, as well as Cricket related costs of $40,064.  There were increases in accounting and legal costs of $47,400 due to timing and accrual of year-end audit and legal fees.  However, these changes in the expenses have been offset by the quarterly revaluation of warrants which produced a decrease to corporate and general administrative expenses in Q1 of 2010 of $241,100.  In total, corporate general and administrative expenses accounted for 12.1% of total revenues in Q1 of 2010, compared to 20.6% in Q1 of 2009.

ECommerce general and administrative costs, which totaled $76,661 in Q1 of 2010, decreased by $3,559, or 4.6%, over Q1 of 2009 primarily due to a $19,300 decrease in merchant fees, offset by increases of $5,200 in internet traffic expenses, $3,200 in telephone charges, and $8,600 in travel, accommodation and entertainment costs.  These expenses represented 8.8% of eCommerce sales in Q1 of 2010 compared to 4.7% in Q1 of 2009.   Although the expenses increased as a percentage of eCommerce revenues quarter over quarter, the actual expenses have decreased primarily due to overall cost cutting measures.  The downward trend in these expenses is the culmination of our active efforts to curtail spending.  Management believes these expense ratios are reasonable given the increasingly competitive environment for eCommerce sales in the United States and management’s continued focus on growing the eCommerce business.

Management Fees and Employee Salaries

The following table details the breakdown of our management fees and employee salaries expense during each quarter since January 1, 2009.
 
Quarter Ended
 
Total
   
Accrued
   
Stock-Based
   
Normalized
 
   
Expense
   
Bonuses
   
Compensation
   
Expense
 
March 31, 2010
  $ 698,351     $ 9,555     $ 323,802     $ 364,994  
Fiscal Year-to-Date 2010 Totals
  $ 698,351     $ 9,555     $ 323,802     $ 364,994  
                                 
March 31, 2009 (as restated)
  $ 1,193,595     $ 8,919     $ 610,342     $ 574,334  
June 30, 2009
    996,661       10,427       452,487       533,747