ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
Management's Discussion and Analysis
The following selected financial data was derived from the Company's audited and unaudited financial statements. The information set forth below should be read in conjunction with the Company's financial statements and related notes included elsewhere in this registration statement. In addition, the Company expects to focus its resources on the development of its eSports and Gaming business in the near future. This business is significantly different from the domain name and web development business that the Company has historically been engaged in. As a result, historical results and capital requirements are not expected to be reflective of the Company's financial results and capital requirements moving forward.
Summary of Results
|
|
For the Year ended December 31, 2019
(audited)
|
|
|
For the year ended December 31, 2018
(audited)
|
|
|
|
|
|
|
|
|
Income from operations
|
$
|
15,765
|
|
$
|
(782,368
|
)
|
|
|
|
|
|
|
|
Current Taxes Recovered
|
|
-
|
|
|
11,515
|
|
Gain on debt retirement
|
|
-
|
|
|
-
|
|
Interest income
|
|
-
|
|
|
-
|
|
Other income
|
|
-
|
|
|
-
|
|
Foreign exchange
|
|
-
|
|
|
-
|
|
Net and comprehensive income (Loss)
|
$
|
15,765
|
|
$
|
(770,853
|
)
|
Revenue
The Company recognized a gain of $359,200 from the sale of domain names during the year ended December 31, 2019 (2018 - $nil). The Company did not recognize recurring revenues during its 2019 or 2018 fiscal years. The Company continues to market its domain names in its portfolio and considers offers received for domain names in its portfolio. The Company believes its portfolio of domain names will continue to maintain its value over time. The Company does not anticipate earning significant advertising revenue from Boxing.com or SPRT MTRX in the 2020 fiscal year.
The Company has an accumulated deficit of $17,969,641 to December 31, 2019. The Company is presently in the development stage of its business and cannot provide any assurances that it will be able to generate regular or recurring revenues in the near future.
Results of Operation
Year Ended December 31, 2019 and 2018
The Company recorded a net profit of $15,765 for the year ended December 31, 2019 and net loss of $770,853 for the year ended December 31, 2018. The difference is the result of three extraordinary transactions as follows: During the year ended December 31, 2018, the Company incurred non-cash expenses of $113,336 related to the issuance of options to management, directors and consultants as compared to $nil for the year ended December 31, 2019. In addition, due to the uncertainty associated with the commercial success of the e-Balance device, the Company expensed the balance of the $250,000 deposit paid on the execution of the letter of intent with Cell MedX in the year ended December 31, 2018. And in the year ended December 31, 2019 the Company had an extraordinary gain of $359,200 from the sale of domain names compared to $0 in the year ended December 31, 2018.
Liquidity and Capital Resources
At December 31, 2019, the Company had a working capital surplus of $324,145, compared to $308,380 at December 31, 2018. The Company's only source of cashflow during the year ended December 31, 2019 was through the sale of domain names totaling $359,200. Due to the fact that the Company has incurred recurring losses and anticipates incurring further losses in the future, the Company has determined there is substantial doubt as to its ability to continue as a going concern.
The Company does not believe it has the necessary cash requirements for the next 12 months without having to raise additional funds.
The Company does not anticipate purchasing any plant or significant equipment in the immediate future.
Off-Balance Sheet Arrangements
The Company has no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to shareholders.
Critical Accounting Policies
On January 1, 2018, the Company adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09"), which amended the existing accounting standards for revenue recognition. ASU 2014-09 establishes principles for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. The Company adopted ASU 2014-09 effective January 1, 2018 and applied the modified retrospective approach. There was no impact to the Company's recognition of revenue as a consequence of adopting this new standard.
Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the SEC did not, or are not believed by management to, have a material impact on the Company's present or future financial position, results of operations or cash flows.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
LIVE CURRENT MEDIA INC.
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2019
(Expressed in US Dollars)
Report of Independent Registered Public Accounting Firm
To the shareholders and the board of directors of Live Current Media Inc.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Live Current Media Inc. (the "Company") as of December 31, 2019 and 2018, the related consolidated statements of operations, stockholders’ equity and cash flows for the years then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has not achieved profitable operations with further losses anticipated and has an accumulated deficit of $17,969,641. The Company requires additional funds to meet its obligations and the costs of its operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in this regard are described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting in accordance with the standards of the PCAOB. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion in accordance with the standards of the PCAOB.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ DMCL LLP
DALE MATHESON CARR-HILTON LABONTE LLP
CHARTERED PROFESSIONAL ACCOUNTANTS
We have served as the Company’s auditor since 2017
Vancouver, Canada
March 27, 2020
LIVE CURRENT MEDIA INC.
|
|
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
December 31, 2019
|
|
|
December 31, 2018
|
|
(expressed in US dollars)
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
Cash
|
$
|
432,850
|
|
$
|
388,906
|
|
|
Domain proceeds receivable
|
|
-
|
|
|
22,500
|
|
|
|
|
432,850
|
|
|
411,406
|
|
Non-current assets
|
|
|
|
|
|
|
|
Intangible assets
|
|
111,951
|
|
|
111,951
|
|
|
|
$
|
544,801
|
|
$
|
523,357
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
Accounts payable
|
$
|
91,060
|
|
$
|
85,585
|
|
|
Other payable
|
|
17,645
|
|
|
17,441
|
|
|
|
|
108,705
|
|
|
103,026
|
|
Stockholders' equity
|
|
|
|
|
|
|
|
Capital stock
|
|
|
|
|
|
|
|
Authorized:
|
|
|
|
|
|
|
|
500,000,000 common shares, par value $0.001 per share
|
|
|
|
|
|
|
Issued and outstanding:
|
|
|
|
|
|
|
|
34,837,625 common shares (34,837,625 at December 31, 2018)
|
34,838
|
|
|
34,838
|
|
|
Additional paid in capital
|
|
18,370,899
|
|
|
18,370,899
|
|
|
Deficit
|
|
(17,969,641
|
)
|
|
(17,985,406
|
)
|
|
|
|
436,096
|
|
|
420,331
|
|
|
|
$
|
544,801
|
|
$
|
523,357
|
|
The accompanying notes are an integral part of these consolidated financial statements
LIVE CURRENT MEDIA INC.
|
|
|
|
|
|
|
CONSOLIDATED STATEMENTS OF OPERATIONS
(expressed in US dollars)
|
|
|
|
|
|
|
|
|
|
For the years ended
|
|
|
|
|
December 31, 2019
|
|
|
December 31, 2018
|
|
Operating expenses (income)
|
|
|
|
|
|
|
|
Consulting
|
$
|
-
|
|
$
|
113,336
|
|
|
Domain content and registration
|
|
13,405
|
|
|
16,340
|
|
|
Distribution rights
|
|
-
|
|
|
250,000
|
|
|
General and administration
|
|
47,922
|
|
|
27,881
|
|
|
Interest expense
|
|
205
|
|
|
205
|
|
|
Gain on sale of domain names
Impairment of assets
|
|
(359,200)
-
|
|
|
-
94,199
|
|
|
Management fees
|
|
120,000
|
|
|
140,000
|
|
|
Marketing
|
|
47,733
|
|
|
-
|
|
|
Professional fees
|
|
57,248
|
|
|
104,313
|
|
|
Transfer agent and regulatory
|
|
29,211
|
|
|
31,014
|
|
|
Travel
|
|
9,495
|
|
|
5,080
|
|
|
Website Development
|
|
18,216
|
|
|
-
|
|
Income (Loss) from operations
|
|
15,765
|
|
|
(782,368
|
)
|
|
|
|
|
|
|
|
|
Net income (loss) before taxes
|
|
15,765
|
|
|
(782,368
|
)
|
Provision for taxes
|
|
|
|
|
|
|
|
Current taxes recovered
|
|
-
|
|
|
11,515
|
|
|
|
|
|
|
|
|
Net income (loss) for the year
|
$
|
15,765
|
|
$
|
(770,853
|
)
|
|
|
|
|
|
|
|
Basic and diluted loss per share
|
$
|
-
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
Weighted average number of basic common shares outstanding
|
|
34,837,625
|
|
|
34,837,625
|
|
The accompanying notes are an integral part of these consolidated financial statements
LIVE CURRENT MEDIA INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(expressed in US dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
Additional
|
|
|
|
|
|
Total
|
|
|
|
Number
|
|
|
|
|
|
Paid In
|
|
|
Accumulated
|
|
|
Stockholders'
|
|
|
|
of Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Deficit
|
|
Balance, December 31, 2017
|
|
34,837,625
|
|
|
34,838
|
|
|
18,257,563
|
|
|
(17,214,553
|
)
|
|
1,077,848
|
|
Stock-based compensation
|
|
-
|
|
|
-
|
|
|
113,336
|
|
|
-
|
|
|
113,336
|
|
Net loss
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(770,853
|
)
|
|
(770,853
|
)
|
Balance, December 31, 2018
|
|
34,837,625
|
|
$
|
34,838
|
|
$
|
18,370,899
|
|
$
|
(17,985,406
|
)
|
$
|
420,331
|
|
Net income
|
|
-
|
|
|
-
|
|
|
-
|
|
|
15,765
|
|
|
15,765
|
|
Balance, December 31, 2019
|
|
34,837,625
|
|
$
|
34,838
|
|
$
|
18,370,899
|
|
$
|
(17,969,641
|
)
|
$
|
436,096
|
|
The accompanying notes are an integral part of these consolidated financial statements
LIVE CURRENT MEDIA INC.
|
|
|
|
|
|
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
(expressed in US dollars)
|
|
|
|
|
|
|
|
|
|
|
For the years ended
|
|
|
|
|
|
December 31, 2019
|
|
|
December 31, 2018
|
|
Cash flows used in operating activities
|
|
|
|
|
|
|
|
Net income (loss) for the year
|
$
|
15,765
|
|
$
|
(770,853
|
)
|
|
Non-cash items
|
|
|
|
|
|
|
|
|
Impairment of intangible assets
|
|
-
|
|
|
94,199
|
|
|
|
Gain on sale of domain names
|
|
(359,200
|
)
|
|
-
|
|
|
|
Bad debt expense
|
|
-
|
|
|
5,435
|
|
|
|
Stock-based compensation
|
|
-
|
|
|
113,336
|
|
|
|
Accrued interest
|
|
205
|
|
|
205
|
|
|
|
Income taxes recovered
|
|
-
|
|
|
(11,515
|
)
|
|
Changes in non-cash working capital item
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
5,474
|
|
|
(88,450
|
)
|
|
|
Cash used in operating activities
|
|
(337,756
|
)
|
|
(657,643
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows used in investing activities
|
|
|
|
|
|
|
|
Proceeds received for sale of domain name
|
|
381,700
|
|
|
90,000
|
|
|
|
Cash provided by investing activities
|
|
381,700
|
|
|
90,000
|
|
|
|
|
|
|
|
|
|
|
Change in cash
|
|
43,944
|
|
|
(567,643
|
)
|
Cash, beginning of year
|
|
388,906
|
|
|
956,549
|
|
Cash, end of year
|
$
|
432,850
|
|
$
|
388,906
|
|
|
|
|
|
|
|
|
Supplemental cash flow information:
|
|
|
|
|
|
|
Interest paid
|
$
|
-
|
|
$
|
-
|
|
Income taxes paid
|
$
|
-
|
|
$
|
-
|
|
The accompanying notes are an integral part of these consolidated financial statements
LIVE CURRENT MEDIA INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
December 31, 2019
|
1. NATURE AND CONTINUANCE OF OPERATIONS
Live Current Media Inc. (the "Company" or "Live Current") was incorporated under the laws of the State of Nevada on October 10, 1995. The Company's wholly owned principal operating subsidiary, Domain Holdings Inc. ("DHI"), was incorporated under the laws of British Columbia on July 4, 1994 under the name "IMEDIAT Digital Creations Inc.". On April 14, 1999, IMEDIAT Creations, Inc. changed its name to "Communicate.com Inc." and was redomiciled from British Columbia to the jurisdiction of Alberta. On April 5, 2002, Communicate.com Inc. changed its name to Domain Holdings Inc.
On March 13, 2008, the Company incorporated a wholly owned subsidiary in the state of Delaware, Perfume.com Inc. (Perfume Inc.) which is a dormant and inactive company.
Live Current is a technology company involved in the entertainment industry. Currently developing two projects for release in 2020, Boxing.com FEDERATION and SPRT MTRX, both of which are positioned in the eSports and gaming sector.
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As of December 31, 2019, the Company has not achieved profitable operations, has incurred recurring operating losses and further losses are possible. The Company has an accumulated deficit of $17,969,641. The Company's ability to continue as a going concern is dependent upon its ability to obtain the necessary financing to further develop its business. To date, the Company has funded operations through the issuance of capital stock and debt. Management plans to continue raising additional funds through equity or debt financings and loans from directors. There is no certainty that further funding will be available as needed. These factors raise substantial doubt about the ability of the Company to continue operating as a going concern. The ability of the Company to continue its operations as a going concern is dependent upon its ability to raise sufficient new capital to fund its operating commitments and ongoing losses and ultimately on generating profitable operations. The financial statements do not include any adjustments to be recorded to assets or liabilities that might be necessary should the Company be unable to continue as a going concern.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These consolidated financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States ("US GAAP'), and are expressed in United States dollars.
Basis of Presentation
These consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany balances have been eliminated on consolidation.
Use of Estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions. The Company bases its estimates and assumptions on current facts, historical experience and various other factors it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company's estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
LIVE CURRENT MEDIA INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
December 31, 2019
|
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Cash and cash equivalents
All highly liquid investments, with an original term to maturity of three months or less are classified as cash and cash equivalents. Cash and cash equivalents are stated at cost which approximates market value.
Intangible Assets not subject to amortization
Intangible assets not subject to amortization consist of direct navigation domain names. While the domain names are renewed annually, through payment of a renewal fee to the applicable registry, the Company has the exclusive right to renew these names at its option. The Company has determined that there are currently no legal, regulatory, contractual, economic or other factors that limit the useful life of these domain names on an aggregate basis and accordingly treat the portfolio of domain names as indefinite life intangible assets.
The Company reviews individual domain names in the portfolio for potential impairment throughout the fiscal year in determining whether a particular URL should be renewed. Impairment is recognized for names that are not renewed. The Company performs an annual assessment of individual domain names in its portfolio to determine whether it is more likely than not that the fair market value of a domain name is less than its carrying amount. When it is determined that the fair value of a domain name is less than its carrying amount, impairment is recognized.
Foreign Currency Translation
The Company's functional currency is the US dollar and reporting currency is the United States dollar. The Company translates assets and liabilities to US dollars using year-end exchange rates, stockholders' deficit accounts are translated at historical exchange rates, and translates revenues and expenses using average exchange rates during the period. Gains and losses arising on settlement of foreign currency denominated transactions or balances are included in the Statement of Operations.
Income taxes
The Company follows the liability method of accounting for income taxes. Under this method, current income taxes are recognized for the estimated income taxes payable for the current year. Deferred income tax assets and liabilities are recognized in the current year for temporary differences between the tax and accounting basis of assets and liabilities as well as for the benefit of losses available to be carried forward to future years for tax purposes. Deferred income tax assets and liabilities are measured using tax rates and laws expected to apply in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred income tax assets and liabilities is recognized in operations in the year of change. A valuation allowance is recorded when it is "more likely-than-not" that a deferred tax asset will not be realized. Deferred tax assets and deferred tax liabilities, along with any associated valuation allowance, are offset and shown in the financial statements as a single noncurrent amount when these items arise within the same tax jurisdiction.
The Company and its subsidiaries are subject to U.S. federal income tax and Canadian income tax, as well as income tax of multiple state and local jurisdictions. Based on the Company's evaluation, the Company has concluded that there are no significant uncertain tax positions requiring recognition in the Company's financial statements.
LIVE CURRENT MEDIA INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
December 31, 2019
|
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Share Based Payments
The Company accounts for all stock-based payments and awards under the fair value based method. The Company accounts for the granting of stock options to employees using the fair value method whereby all awards to employees will be measured at fair value on the date of the grant. The fair value of all stock options are expensed over their vesting period with a corresponding increase to additional paid-in capital. Upon exercise of stock options, the consideration paid by the option holder, together with the amount previously recognized in additional paid-in capital is recorded as an increase to share capital. Stock options granted to employees are accounted for as liabilities when they contain conditions or other features that are indexed to other than a market, performance or service condition. Stock-based payments to non-employees are measured at the fair value of the consideration received, or the fair value of the equity instruments issued, or liabilities incurred, whichever is more reliably measurable. The fair value of stock-based payments to non-employees is periodically re-measured until the counterparty performance is complete, and any change therein is recognized over the vesting period of the award and in the same manner as if the Company had paid cash instead of paying with or using equity based instruments. The fair value of the stock-based payments to non-employees that are fully vested and non-forfeitable as at the grant date are measured and recognized at that date.
The Company uses the Black-Scholes option pricing model to calculate the fair value of stock options. The use of the Black-Scholes option pricing model requires management to make assumptions with respect to the expected term of the option, the expected volatility of the common stock consistent with the expected term of the option, risk-free interest rates, the value of the common stock and expected dividend yield of the common stock. Changes in these assumptions can materially affect the fair value estimate.
Fair Value of Financial Instruments
The estimated fair values for financial instruments are determined based on relevant market information. These estimates involve uncertainties and cannot be determined with precision. The estimated fair value of cash, receivable, accounts payable and amounts due to shareholders of Auctomatic approximate their carrying value due to the short-term nature of those instruments.
ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:
Level 1 - Quoted prices in active markets for identical assets or liabilities;
Level 2 - Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable; and
Level 3 - Unobservable inputs that are supported by little or no market activity, there for requiring an entity to develop its own assumptions about the assumption that market participants would use in pricing.
The Company had no Level 3 assets or liabilities required to be recorded at fair value on a recurring basis in accordance with US GAAP as at December 31, 2019 and 2018.
LIVE CURRENT MEDIA INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
December 31, 2019
|
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Basic and Diluted Income (Loss) per Share
Earnings or loss per share ("EPS") is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted EPS is computed by dividing net income (loss) by the weighted-average of all potentially dilutive shares of the common stock that were outstanding during the years presented. The treasury stock method is used in calculating diluted EPS for potentially dilutive stock options and share purchase warrants, which assumes that any proceeds received from the exercise of in-the-money stock options and share purchase warrants, would be used to purchase common shares at the average market price for the period.
Adoption of New Accounting Pronouncement
On January 1, 2018, the Company adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09"), which amended the existing accounting standards for revenue recognition. ASU 2014-09 establishes principles for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. The Company adopted ASU 2014-09 effective January 1, 2018 and applied the modified retrospective approach. There was no impact to the Company's recognition of revenue as a consequence of adopting this new standard.
3. SHARE CAPITAL
Authorized
The authorized capital of the Company consists of 500,000,000 shares of common stock with a par value of $0.001 per share. No other shares have been authorized
4. STOCK OPTIONS
The Company's Stock Option Plan (the "Plan") provides the grant of 5,000,000 shares of common stock of the Company, subject to increase after March 31, 2019, upon approval by the Company's directors, provided that the total number of shares that may be optioned and sold under the Plan shall at no time be greater than 15% of total number of shares of common stock outstanding, less any options still outstanding under any previous stock option plan.
The Company uses the Black-Scholes option pricing model to calculate the fair value of stock options. The use of the Black-Scholes option pricing model requires management to make assumptions with respect to the expected term of the option, the expected volatility of the common stock consistent with the expected term of the option, risk-free interest rates, the value of the common stock and expected dividend yield of the common stock. Changes in these assumptions can materially affect the fair value estimates
On November 30, 2018, the board of directors granted 1,000,000 options to the CEO, 400,000 options to its directors and 400,000 options to consultants.
The fair value of the options granted to the CEO, directors and consultants calculated to be $59,712, $23,885, and $23,885. Total $107,482. The fair values were determined using the Black-Scholes Option Pricing model with the following assumptions:.
LIVE CURRENT MEDIA INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
December 31, 2019
|
4. STOCK OPTIONS continued
|
At November 30, 2018
|
Expected Life of Options
|
2 years
|
Risk-Free Interest Rate
|
1.63%
|
Expected Dividend Yield
|
Nil
|
Expected Stock Price Volatility
|
409%
|
On November 30, 2018, the board of directors of the Company granted a Non-Plan option to purchase up to 100,000 shares of the Company to a non-related party. The fair value were determined using the Black-Scholes Option Pricing model with the following assumptions:.
|
At November 30, 2018
|
Expected Life of Options
|
1 ½ years
|
Risk-Free Interest Rate
|
1.63%
|
Expected Dividend Yield
|
Nil
|
Expected Stock Price Volatility
|
382%
|
The fair value of the options granted were $5,854.
During the year ended December 31, 2019 there were no share or stock options issued.
As at December 31, 2019, the Company had 1,900,000 option outstanding with a weighted average exercise price and weighted average life of $.10 and .89 years, respectively.
5. DOMAIN PROCEEDS RECEIVABLE
On October 6, 2017, the Company sold a domain name for total consideration of $150,000 less a brokerage fee of $15,000. The domain purchase and transfer agreement included terms that allowed the purchaser to make monthly instalment payments of $7,500, net of the brokerage fee, over a period of 18 months. The domain was being held by an independent escrow agent during the period the remaining balance in respect of this sale was outstanding. The purchaser was entitled to control the domain name while being held in escrow but, in the event of a default that is not successfully remedied, all rights to the domain name would be transferred back to the Company and all payments made by the purchaser would be forfeited. As at December 31, 2019 the remaining balance is $NIL, and the domain name was released from escrow.
6. DEPOSIT
On September 10, 2018, Live Current entered into a non-binding letter of intent (the "LOI") with Cell MedX Corp. (Cell MedX) for worldwide distribution rights of the e-Balance device for home-based usage. The e-Balance device is a micro-current therapy device designed to target complications arising from diabetes but has yet to receive approval from the Food and Drug Administration ("FDA"). Pursuant to the LOI, the Company agreed to enter into negotiations aimed at obtaining a definitive agreement within a 90-day period. The Company advanced US$250,000 as a deposit for exclusive worldwide distribution rights. The probability of success and length of time to obtain Federal Drug Administration approval of the e-Balance device is difficult to determine and there are uncertainties associated with the timely completion of the device's commercial success. Due to the uncertainties associated with the successful commercialization of the e-Balance device, it has been determined that the payment of this deposit does not meet the definition of an asset and is thus expensed within general and administrative expenses.
LIVE CURRENT MEDIA INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
December 31, 2019
|
On March 21, 2019, the Company executed an Agreement with Cell MedX, pursuant to which Cell MedX has granted to the Company an exclusive worldwide license to distribute its e-Balance microcurrent device to households and individual users. To acquire these rights, the Company paid to Cell MedX the sum of $250,000, the full amount of which was paid to Cell MedX upon signing of the letter of intent between the Company and Cell MedX in September 2018. Under the terms of the Distribution Agreement, the Company has agreed to pay to Cell MedX a fee (the "License Fee") for each e-Balance device sold. In addition, the users of the e-Balance device will be charged a periodic user fee (the "User Fee") that will be split between the Company and Cell MedX. To maintain its exclusive distribution rights, the Company is subject to minimum sales and, after a period of time, minimum User Fee, requirements. If the Company fails to meet the minimum sales requirements, the Company will maintain its distribution rights, however those rights will cease to be exclusive.)
Subsequent to the year ended December 31, 2019, the Company sold the exclusive distribution right to the eBalance device to Cell Medx Corp. (Note 9).
7. INTANGIBLE ASSETS
|
|
December 31, 2019
|
|
|
December 31, 2018
|
|
|
|
|
|
|
|
|
Domain names
|
$
|
111,951
|
|
$
|
111,951
|
|
|
$
|
111,951
|
|
$
|
111,951
|
|
The Company's portfolio of domain names are considered by management to be indefinite life intangible assets not subject to amortization. Management performs an annual impairment assessment of its domain names; during the year ended December 31, 2019, the Company recorded an impairment charge of $Nil (2018: $89,545).
8. INCOME TAXES
The Company was subject to United States federal income taxes at an approximate rate of 21%. The reconciliation of the provision for income taxes at the United States federal statutory rate compared to the Company's income tax expense as reported is as follows:
|
|
December 31, 2019
|
|
|
December 31, 2018
|
|
|
|
|
|
|
|
|
Net income (loss) for the year
|
$
|
15,765
|
|
$
|
(770,853
|
)
|
Statutory rate
|
|
21%
|
|
|
21%
|
|
Expected income tax expense (recovery)
|
|
3,000
|
|
|
(162,000
|
)
|
Impact of statutory tax rate on earnings of subsidiary
|
|
11,000
|
|
|
(26,000
|
)
|
Non-taxable earnings
|
|
49,000
|
|
|
24,000
|
|
Adjustment to prior year tax provision
|
|
-
|
|
|
1,000
|
|
Change in valuation allowance
|
|
(63,000
|
)
|
|
151,000
|
|
|
$
|
-
|
|
$
|
(12,000
|
)
|
LIVE CURRENT MEDIA INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
December 31, 2019
|
8. INCOME TAXES continued
The significant components of deferred income tax assets at December 31, 2019 and December 31, 2018 are as follows:
|
|
December 31, 2019
|
|
|
December 31, 2018
|
|
|
|
|
|
|
|
|
Net operating losses
|
$
|
1,705,000
|
|
$
|
1,706,000
|
|
Intangible assets
|
|
11,000
|
|
|
67,000
|
|
|
|
1,716,000
|
|
|
1,773,000
|
|
Valuation allowance
|
|
(1,716,000
|
)
|
|
(1,773,000
|
)
|
|
$
|
-
|
|
$
|
-
|
|
At December 31, 2019, the Company had accumulated non-capital loss carry-forwards of approximately $7,599,000 that may be carried forward indefinitely, subject to limitations. The potential future tax benefits of these expenses and losses carried-forward have not been reflected in these financial statements due to the uncertainty regarding their ultimate realization. Tax attributes are subject to review, and potential adjustment by tax authorities.
9. SUBSEQUENT EVENT
On January 29, 2020, Live Current Media sold the exclusive home marketing rights to the eBalance device back to Cell MedX Corp. The Company bought the rights in March of 2019 (Note 6). The sales price includes a retained royalty on future sales of the eBalalnce device capped at USD$507,500 and share purchase warrants for 2,000,000 shares of Cell MedX Corp. 1,000,000 warrants are exercisable at USD$0.50 and 1,000,000 warrants are exercisable at USD$1.00 per share. The warrants expire three years after their date of issue. Cell MedX Corp. has the right to accelerate the expire date of the warrants based on the trading price of Cell MedX Corp's shares.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We carried out an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of December 31, 2019 (the "Evaluation Date"). This evaluation was carried out under the supervision and with the participation of our principal executive officer and principal financial officer. Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of the Evaluation Date.
Management's Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, for the Company.
Our internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with United States generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Under the supervision and with the participation of our principal executive officer and principal financial officer, management conducted an evaluation of the effectiveness of our internal control over financial reporting, as of the Evaluation Date, based on the framework set forth in Internal Control-Integrated Framework 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on its evaluation under this framework, management concluded that our internal control over financial reporting was effective as of the Evaluation Date.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to provide only management's report in this annual report.
Changes in Internal Control Over Financial Reporting
As of the Evaluation Date, there were no changes in our internal control over financial reporting that occurred during the fiscal year ended December 31, 2019 that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Controls and Procedures
Our management, including our principal executive officer and principal financial officer, do not expect that our controls and procedures will prevent all potential error and fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met