As used in this Quarterly Report, the terms "we," "us," "our," "Live Current," and the "Company" mean Live Current Media Inc. and its subsidiaries, unless otherwise indicated. All dollar amounts in this Quarterly Report are expressed in U.S. dollars, unless otherwise indicated.
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, IMEDIAAT Creations, Inc. changed its name to "Communicate.com Inc." and was redomiciled from British Columbia to the jurisdiction of Alberta. On April 5, 2002, Comminicate.com Inc. changed its name to Domain Holding 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 March 31, 2020, the Company has not achieved profitable operations, has incurred recurring operating losses and further losses are possible. The Company has an accumulated deficit of $17,638,175. 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 operation through the issuance of capital stock and debt. Management plans to continue raising additional funds through equity or debt financing and loans from directors. There is no certainty that further funding will be available as needed. These directors 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 shod the Company be unable to continue as a going concern.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These condensed interim consolidated financial statements and related notes are presented in accordance with accounting principles generally accepted in the United State ("US GAAP"), and are expressed in United States dollars.
Basis of Presentation
The accompanying unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, the financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments consisting of normal recurring entries necessary for a fair statement of the periods presented for: (a) the balance sheet; (b) the result of operations; and (c) cash flows, have been made in order to make the financial statements presented not misleading. The results of operations for such interim periods are not necessarily indicative of operations for a full year. The accompanying unaudited interim consolidated financial statements should be read in conjunction with the financial statements and related notes included in the Company's Annual Report in Form 10-K, for the year ended December 31, 2019, as filed with the SEC on March 31, 2020.
WEBSITE DEVELOPMENT COSTS
The Company has adopted the provision of ASC 985-20-25, Costs of Software to Be Sold, Leased or Marketed, whereby costs incurred to establish the technological feasibility of a computer software product to be sold, leased to marketed are research and development costs. Those costs are expensed as incurred; costs of producing product masters incurred subsequent to establishing technological feasibility are capitalized; and costs incurred when the product is available for general release to the customers are expensed as incurred. Upgrades and enhancements are capitalized if they result in added functionality which enables the software to perform tasks it was previously incapable of performing.
EQUITY INVESTMENTS
Equity investments are classified as available for sale and are stated at fair market value. Unrealized gains and losses are recognized in the Company's statement of operations.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments include cash, equity investments, accounts payable, and other payable. The carrying value of these financial instruments approximates their fair value based on their short-term nature. The Company is not exposed to significant interest, exchange or credit risk arising from these financial instruments.
The fair value hierarchy under US GAAP is based on the following three levels of inputs, of which the first two are considered observable and the last unobservable:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2: Observable inputs other than Level I, quoted prices for similar assets or liabilities in active prices whose inputs are observable or whose significant value drivers are observable; and
Level 3: Assets and liabilities whose significant value drivers are unobservable by little or no market activity and that are significant to the fair value of the assets or liabilities.
Certain assets and liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances (for example, when there is evidence of impairment). There were no assets or liabilities measured at fair value on a nonrecurring basis during the period ended March 31, 2020.
Cash and equity investments are measured at fair value using level 1 inputs and level 2 inputs respectively.
3. INTANGIBLE ASSETS
The Company's portfolio of domain names is considered by management to consist of indefinite life intangible assets not subject to amortization.
During the three months period ended March 31, 2020, the Company entered a consulting agreement with a third-party contractor for the website development for SPRT MRTX. A total of $30,679 related to website development costs was capitalized as intangible assets.
4. EQUITY INVESTMENT AND ROYALTIES
On March 21, 2019, the Company entered an agreement with Cell MedX Corp. ("CMXC") to purchase the direct rights to distribute the eBalance device from CMXC. On January 29, 2020 the Company and CMXC entered a Buyback agreement to sell the exclusive distribution rights to the eBalance microcurrent device back to CMXC.
The sales price included a retained royalty on future sales of the eBalance device capped at US$507,000 and share purchase warrants for 2,000,000 shares of CMXC of which 1,000,000 is exercisable at $0.50 and 1,000,000 exercisable at $1.00. As at March 31, 2020, the Company’s equity investment consists of 2,000,000 share purchase warrants. Each CMXC’s warrant is exercisable for a period of three years, expiring on January 31, 2023. CMXC has the right to accelerate the expire date of the warrants based on the trading price of CMXC’s shares.
As at March 31, 2020, the fair value of the equity investment was calculated to be $417,537 based on the market price of $0.26 per CMXC's common share using a Black Scholes Options Pricing model with the following assumptions:
Assumptions:
|
Risk-free rate (%)
|
0.29
|
Expected stock price volatility (%)
|
183
|
Expected dividend yield (%)
|
0
|
Expected life of options (years)
|
2.83
|
The initial recognition of the equity investment in CMXC resulted in $351,134 gain on sale of distribution license from fair value of equity investments received and $66,403 gain on fair value when the CMXC warrants were revalued on March 31, 2020. During the three month period ended March 31, 2020, no CMXC warrants were sold and $nil realized gain or loss from sale of equity investment was realized.
5. SHARE CAPITAL
During the three months period ended March 31, 2020, 200,000 options expired. The Company granted 200,000 incentive stock options to one of its contractors to purchase an aggregate of 200,000 shares of the Company’s common stock at $0.10 per share. These stock options vest as to one-fourth immediately and one-fourth after the first, second and third six months of the date of grant. The fair value of the options granted calculated to be $11,673. The Company recognized a total of $2,918 as share-based compensation related to stock options vested during three month period ended March 31, 2020. The fair value determined using the Black-Sholes Option Pricing model with the following assumptions:
Assumptions:
|
Risk-free rate (%)
|
1.34
|
Expected stock price volatility (%)
|
208
|
Expected dividend yield (%)
|
0
|
Expected life of options (years)
|
2
|
As at March 31, 2020, the Company had 1,900,000 options outstanding with a weighted average exercise price and weighted average life of $.10 and .77 years, respectively. 1,750,000 options were exercisable with a weighted average price and weighted average life of $.10 and .68 years, respectively.