UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 20-F
 


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

OR

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

For the fiscal year ended June 30, 2006
 
OR

[ ] ™   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to __________________
 
                                 OR

[ ] SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15D OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
Date of event requiring this shell company report

Commission file number: 000-50492

LiveReel Media Corporation
( Formerly Noble House Entertainment Inc.)
(Exact name of Registrant as specified in its charter)


Canada
(Jurisdiction of incorporation or organization)

429 Spadina Road, Toronto, Ontario M5P 2W3, Canada
(Address of principal executive offices)

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

 



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

Common shares without par value
               (Title of Class)

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

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

Common shares without par value - 14,521,744 as at June 30, 2006

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
¨ Yes þ No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
þ Yes ¨ No

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such report) and (2) has been subject to such filing requirements for the past 90 days.
þ Yes ¨ No

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

Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer þ

Indicate by check mark which financial statement item the registrant has elected to follow

Item 17 : X Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
¨ Yes þ No


 




TABLE OF CONTENTS

 
     
Page No.
   
Forward-looking Statements
1
   
Foreign Private Issuer Status and Currencies and Exchange Rates
2
   
   
Part I  
 
   
Item 1. Identity of Directors, Senior Management and Advisors
2
Item 2. Offer Statistics and Expected Timetable
2
Item 3. Key Information
2
Item 4. Information on the Company
10
Item 5. Operating and Financial Review and Prospects
13
Item 6. Directors, Senior Management and Employees
22
Item 7. Major Shareholders and Related Party Transactions
28
Item 8. Financial Information
30
Item 9. The Offer and Listing
31
Item 10. Additional Information
33
Item 11. Quantitative and Qualitative Disclosures About Market Risk  
50
Item 12. Description of Securities Other Than Equity Securities
51
   
Part II
 
   
Item 13. Defaults, Dividend Arrearages and Delinquencies  
51
Item 14. Material Modifications to the Rights of Security Holders
51
       and Use of Proceeds
 
Item 15. Controls and procedures  
51
Item 16. Audit Committee, Code of Ethics, and Principal Accountant's Fees, and Services  
52
   
Part III
 
   
Item 17. Financial Statements
53
Item 18. Financial Statements
53
Item 19. Exhibits
53
Signature
57


 





FORWARD LOOKING STATEMENTS


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

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

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

- Future earnings and cash flow, - future plans and capital expenditures, - expansion and other development trends of the resource sector.

- Expansion and growth of our business and operations, and

- Our prospective operational and financial information.

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

 
-
Fluctuations in prices of our products and services,
 
-
Potential acquisitions and other business opportunities,
 
-
General economic, market and business conditions, and
 
-
Other risks and factors beyond our control.

Consequently, all of the forward-looking statements made in this annual report are qualified by these cautionary statements. We cannot assure you that the actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected effect on us or our business or operations.
 
Unless the context indicates otherwise, the terms "LiveReel Media Corporation" the "Company”, "LiveReel", “we”, “us”, “our” and “registrant” are used interchangeably in this Annual Report and mean LiveReel Media Corporation. and its subsidiary.
 

1

FOREIGN PRIVATE ISSUER STATUS AND CURRENCIES AND EXCHANGE RATES


Foreign Private Issuer Status

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

Currency

The financial information presented in this Annual Report is expressed in Canadian dollars ("CDN $") and the financial data in this Annual Report is presented in accordance with accounting principles generally accepted in Canada ("Can. GAAP"). Such financial data conforms in all material respects with accounting principles generally accepted in the United States ("U.S. GAAP") except as disclosed in Note 17 of the Notes to Consolidated Financial Statements contained herein.

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

PART I


ITEM 1 - IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

Not applicable.

ITEM 2 - OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3 - KEY INFORMATION

(A) SELECTED FINANCIAL DATA

This Report includes consolidated financial statements of the Company for the years ended June 30, 2006, 2005 and 2004.These financial statements were prepared in accordance with accounting principles generally accepted in Canada. Reference is made to Financial Statement Notes for a discussion of the material differences between Canadian GAAP and U.S. GAAP, and their effect on the Company's financial statements.

2


The following is a selected financial data for the Company for each of the last five fiscal years 2002 through 2006 on a consolidated basis. The data is extracted from the audited financial statements of the Company for each of the said years.


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

 
 
2006
 
2005
 
2004
 
2003
 
2002
 
 
                     
Revenue
 
$
7,052
 
$
5,031
 
$
-
 
$
-
 
$
3,420
 
Net Loss
   
($682,097
)
 
($259,333
)
 
($214,601
)
 
($108,514
)
 
($272,851
)
Net loss per share (1)
   
($0.07
)
 
($0.04
)
 
($0.06
)
 
($0.06
)
 
($0.18
)
Working capital (Deficit)
 
$
2,499,781
   
($194,696
)
 
($57,478
)
 
($106,350
)
 
($49,271
)
Total assets
 
$
2,641,600
 
$
240,112
 
$
2,867
 
$
111,612
 
$
76,385
 
Capital stock
 
$
2,255,394
 
$
4,815,672
 
$
4,460,857
 
$
4,307,384
 
$
4,145,949
 
Warrants
 
$
5,729,352
 
$
-
 
$
-
 
$
-
 
$
-
 
Shareholders' equity(Deficit)
 
$
2,524,781
 
$
37,804
   
($57,478
)
$
3,650
   
($49,271
)
Weighted average number of shares outstanding ( 2 )
   
9,494,677
   
6,629,968
   
3,680,536
   
1,906,654
   
1,543,456
 
                                 
(1) The effect of potential share issuances pursuant to the exercise of warrants would be anti-dilutive and, therefore, basic and diluted losses per share are the same.
(2) Weighted average number of shares for a year was calculated by dividing the total of the number of shares outstanding at the end of each of the months by twelve. Weighted average number for the fiscal years 2003,and 2002 were adjusted to reflect stock consolidations in fiscal 2004 and 2005


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

 
 
2006
 
2005
 
2004
 
2003
 
2002
 
 
                     
Revenue
 
$
7,052
 
$
5,031
 
$
-
 
$
-
 
$
3,420
 
net loss
 
$
(648,139
)
$
(259,736
)
$
(104,601
)
$
(143,514
)
$
(347,851
)
Comprehensive Loss
   
($682,097
)
 
($259,533
)
 
($104,601
)
 
($143,514
)
 
($347,851
)
Loss per share
   
($0.07
)
 
($0.04
)
 
($0.03
)
 
($0.08
)
 
($0.23
)
Total assets
 
$
2,641,600
 
$
240,112
 
$
2,876
 
$
1,612
 
$
1,385
 
Shareholders' equity(Deficit)
 
$
2,524,781
 
$
37,804
   
($57,478
)
 
($106,350
)
 
($124,271
)


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

Exchange Rates

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

3

On November 30, 2006, the exchange rate, based on the noon buying rates, for the conversion of Canadian dollars into United States dollars (the “Noon Rate of Exchange”) was $1.14.

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


      2006
 
November
 
October
 
September
 
August
 
July
 
June
 
                           
High for period
 
$
1.15
 
$
1.14
 
$
1.13
 
$
1.14
 
$
1.15
 
$
1.13
 
Low for period
 
$
1.13
 
$
1.11
 
$
1.10
 
$
1.10
 
$
1.11
 
$
1.10
 


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

Year Ended June 30,
 
2006
2005
2004
2003
2002
Average for the year
1.16
1.25
1.34
1.51
1.57


(B) CAPITALIZATION AND INDEBTEDNESS

Not applicable

(C) REASONS FOR THE OFFER AND USE OF PROCEEDS

Not applicable

(D) RISK FACTORS

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



4

THE COMPANY HAS AN UNSUCCESSFUL OPERATING HISTORY

The Company is not profitable and has no significant revenues since its incorporation in March 1997. While one of the film properties acquired by the Company in fiscal 2005 has now been developed into a feature film for which the Company holds certain distribution rights, it is not clear whether this will generate any revenue for the Company. The Company has operated at a loss to date and in all likelihood will continue to sustain operating expenses in the foreseeable future. As of June 30, 2006, the Company had incurred cumulative losses of approximately $5.5 million. There is no assurance that the Company will ever be profitable.

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

UNCERTAINTY REGARDING AUDIENCE ACCEPTANCES OF PROGRAMS

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

UNAUTHORIZED OR PIRATED USE MAY ADVERSELY AFFECT REVENUE

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

5

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

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

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

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

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

FOREIGN EXCHANGE RISK

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


6

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

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


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

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

 
THE COMPANY MAY NEED TO RAISE ADDITIONAL FINANCING TO MEET FUTURE OPERATING NEEDS.  
 
The Company is in the business of film production, financing and distribution, which requires a level of liquidity. The Company hopes to earn sufficient revenue from distribution and scripts licensing to meet its operating needs. The Company cannot ensure that future operating cash flows will be sufficient to fund its needs. If the Company requires additional financing, the Company cannot ensure that it will be able to obtain additional financing on acceptable terms, or at all. Any debt financing could impose significant financial and operational restrictions on the Company. Any additional equity financing could substantially dilute the equity interests of shareholders.
 

7

DIVIDENDS  

All of the Company's available funds will be invested to finance the growth of the Company's business and therefore investors should not anticipate receiving a dividend on the Company's common shares in the foreseeable future.
 
DILUTION
 
The Company may in the future grant to some or all of its own and its subsidiaries' directors, officers, insiders and key consultants options to purchase the Company's Common Shares as non-cash incentives to those people. Such options may be granted at exercise prices equal to market prices at time when the public market is depressed or at exercise prices which may be substantially lower than the market prices. To the extent that significant numbers of such options may be granted and exercised, the interests of the then existing shareholders of the Company may be subject to additional dilution.
 
 
The Company is currently without proven sources of revenue and may be required to issue additional securities to finance its operation and may also issue additional securities to finance the development of any or all of its projects. These actions could cause further dilution of the interests of the existing shareholders.
 
SHARES ELIGIBLE FOR FUTURE SALE MAY DEPRESS OUR STOCK PRICE
 
At June 30, 2006, we had approximately 14.5 million shares of common stock outstanding of which approximately 9 million are restricted securities under Rule 144 promulgated under the Securities Act. We also have approximately 6.2 million shares of common stock issuable under presently exercisable warrants which have not yet been registered under the US Securities Act.
 
Sales of shares of common stock pursuant to an effective registration statement or under Rule 144 or another exemption under the US Securities Act could have a material adverse effect on the price of our common stock and could impair our ability to raise additional capital through the sale of equity securities.

OUR OFFICERS AND DIRECTORS RESIDE OUTSIDE OF UNITED STATES AND THERE IS A RISK THAT CIVIL LIABILITIES AND JUDGEMENTS MAY BE UNENFORCEABLE
 
Half of the Company’s directors and officers are residents of countries other than the United States, and most of the Company's assets are located outside the United States.  As a result, it may not be possible for investors to effect service of process within the United States upon such persons or enforce in the United States against such persons judgments obtained in United States courts, including judgments predicated upon the civil liability provisions of United States federal securities laws or state securities laws.

8


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

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

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

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


9

IF WE FAIL TO COMPLY WITH SECTION 404 OF THE SARBANES-OXLEY ACT OF 2002, OUR REPUTATION AND THE VALUE OF OUR SECURITIES MAY BE ADVERSELY AFFECTED

Beginning with our annual report for the year ending June 30, 2007, Section 404 of the Sarbanes-Oxley Act of 2002 will require us to include an internal control report of management with our annual report on Form 20-F, which is to include management’s assessment of the effectiveness of our internal control over financial reporting as of the end of the fiscal year. That report will also be required to include a statement that our independent auditors have issued an attestation report on management’s assessment of our internal control over financial reporting. In order to achieve compliance with Section 404 within the prescribed period, management is in the process of adopting a detailed project work plan to assess the adequacy of our internal control over financial reporting, validate through testing that controls are functioning as documented, remediate any control weaknesses that may be identified, and implement a continuous reporting and improvement process for internal control over financial reporting. Any failure to comply with Section 404, including issuing the required management report and obtaining the attestation report on management’s assessment from our independent auditors, may materially adversely affect our reputation and the value of our securities.

 
ITEM 4 - INFORMATION ON THE COMPANY

(A) HISTORY AND DEVELOPMENT OF THE COMPANY

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

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

On October 26, 2006, LiveReel completed its continuance under the jurisdiction of the Canada Business Corporation Act.

The Company was originally incorporated under the Business Corporation Act (Ontario) on March 18, 1997 as a result of an amalgamation under the name "Biolink Corp." The Company went through several name changes and changes in its business activities. Details of these changes were provided in the Registration Statement F-20 dated June 12, 2000 and the annual report F-20 dated November 16, 2005.


10

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

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

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

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

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

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

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

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

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

11

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

The Company’s principal business office is located at 429 Spadina Road, Toronto, Ontario M5P 2W3 and its telephone number is 416-607-6793.


(B) BUSINESS OVERVIEW


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

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

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


(C) ORGANIZATIONAL STRUCTURE

As at June 30, 2006, the Company had only one wholly-owned subsidiary, LiveReel Productions Corporation, as explained above in (A).

(D) PROPERTY PLANTS AND EQUIPMENT

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

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

12


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

Effective August 1, 2006, the Company and its subsidiary both were relocated to another location at 429 Spadina Road, Toronto, Ontario M5P 2W3, Canada. The Company subleases the space on a month to month basis at a cost of approximately $4,700 per month.

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


ITEM 5 - OPERATING AND FINANCIAL REVIEW AND PROSPECTS

(A) OPERATING RESULTS

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

Results of operations

Year ended June 30
 
2006
 
2005
 
2004
 
   
in 000' CDN $
 
in 000' CDN $
 
in 000' CDN $
 
Income
   
7
   
5
   
-
 
Expenses
   
(689
)
 
(265
)
 
(215
)
                     
Net loss for year
   
(682
)
 
(260
)
 
(215
)
Deficit at end of year
   
(5,480
)
 
(4,798
)
 
(4,539
)

Overview

The following were the key events in fiscal 2006 -

1.   One of the scripts, King of Sorrow, was sold by the Company and produced into a feature film by another production company. In exchange for the rights to the screenplay, the Company holds certain distribution rights to the film. Sales and distribution efforts have begun for this film.
 
2.   The company was a co-producer in a feature film, “Due Process”. This film has been produced and is now ready for commercial exploitation. The company has distribution rights to this film.

13



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

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

The following were the key events in fiscal 2005 -

 
1.
The Company changed its name on November 4, 2004 from First Empire Corporation Inc. to Noble House Entertainment Inc.

 
2.
On November 19, 2004, the Company carried out a reverse stock split under which one new common share of the Company was issued for every two old common shares of the Company.
 
 
3.
Under the Company’s share buy-back plan to deal with fractional shares arising from the reverse stock split per (i) above, the Holders of less than ten old common shares were not issued any new shares of the Company. Instead, they were entitled to a payment of $0.10 per share, subject to minimum of $1. As a result, a maximum of 619 existing common shares are expected to be returned to the Company for cancellation for a total cash consideration of $185 under the buy-back plan. The plan has no expiry date.
 
 
4.
On November 30, 2004, the Company issued 3.5 million common shares plus 3.5 million warrants to an independent production house in settlement of the value of acquisition of certain theatrical films properties valued at $350,000 (see “Acquisition” below). These shares cannot be sold or transferred by the vendor for at least five years from the date of issuance without the approval of the Company as per the terms of the assets purchase agreement dated November 30, 2004. On January 18, 2006, the conversion price of the above warrants was reduced to US $0.50 per warrant and the expiry date was extended to November 30, 2008 by the board of directors of the Company. As at June 30, 2006, none of the warrants was exercised.
 
 
5.
On December 1, 2004, the Company entered into a consulting contract with Mr. Damian Lee, one of the owners of the production House from which the Company acquired certain film properties. The Contract was effective January 15, 2005 for a five-year term up to January 15, 2010. The contract provided for a monthly fee of $6,000 plus taxes plus reimbursement of expenses. In addition, Mr. Lee would also be entitled to production fees and incentives linked to his role and responsibility on each film or television production.
 
 
6.
On December 1, 2004, Mr. Damian Lee was appointed a director and chief executive officer of the Company.
 


14

 

 
 
7.
On January 21, 2005, the Company’s wholly owned subsidiary, First Empire Music Corp changed its name to Noble House Film & Television Inc. ( NHFT).
 
 
8.
NHFT became the operating arm of the Company. All film assets acquired in November 2004 from Noble House production Inc. were transferred to NHFT and Mr. Damian Lee took the charge of NHFT as president and brought in his team of consultants with considerable experience and contacts in the movie industry.
 
 
9.
On April 27, 2005, NASDAQ accepted the Company’s application for a listing and trading of its common shares on Over the Counter Bulletin Board and assigned a trading symbol of NHSEF to the Common shares of the Company.

During the fiscal year 2004, the Company abandoned its “Jenn Project” and wrote off all the investment in that project. The Jenn Project involved the Company acquiring a right to represent a singer and securing a recording contract, which did not materialize. In that fiscal year, the Company carried out a 2:1 reverse stock split of its Common shares together with a buy back plan to acquire fractional and small holdings. The Company also filed a registration statement (in Form 20-F) with the US Securities and Exchange Commission.

Income

Revenues were $7,052 in fiscal 2006 and $5,031 in fiscal 2005. Revenues consisted of the net distribution commission received in the second quarter of fiscal 2006 from one of the distribution rights owned by the Company.

The Company’s activities failed to generate any revenues during the fiscal year 2004.

Expenses

The overall analysis of the expenses is as follows:

Year ended June 30
 
2006
 
2005
 
2004
 
               
Operating expenses
 
$
367,648
 
$
142,064
 
$
99,451
 
Amortisation of investments in film and television programs
   
207,500
   
117,500
   
-
 
Stock based compensation
   
114,001
   
5,000
   
5,000
 
Deferred development costs written off
   
-
   
-
   
110,150
 
   
$
689,149
 
$
264,564
 
$
214,601
 


15

Operating Expenses

The overall analysis of operating expenses is as follows:

Year ended June 30
 
2006
 
2005
 
2004
 
               
Consulting
 
$
199,488
 
$
71,095
 
$
64,840
 
Professional fees
   
37,849
   
9,680
   
21,309
 
Shareholders information
   
8,935
   
20,122
   
3,142
 
Promotion
   
7,999
   
13,543
   
-
 
Bank charges
   
1,009
   
563
   
207
 
Office and general
   
112,368
   
27,061
   
9,953
 
   
$
367,648
 
$
142,064
 
$
99,451
 

Overall increase in operational costs during fiscal 2006 compared to the previous two fiscal years was mainly due to the full year operations of the subsidiary, LRPC, which accounted for approximately $275,000 or 75% of the total costs.

LRPC became fully operational in February 2005 and thus had only five months operational costs in fiscal 2005.

Consulting

Consulting fees for fiscal 2006 mainly included fees paid to nine consultants by LRPC. Two of the former executives of the subsidiary, Mr. Damian Lee, the former president and Mr. Lowell Conn, the vice president were paid a total of approximately $131,000 or 66% of the fees. All long term consulting contracts with the Company’s senior management were cancelled without any penalty or further obligation.

Consulting fees in fiscal 2005 mainly consists of monthly fees paid to eight consultants working for LRPC which became fully operational in February 2005.

The majority of the consulting fee - $60,374 - in fiscal 2004 was charged by a shareholder corporation, Snapper Inc., under a consulting contract providing for a monthly fee of US$5,000 for arranging interest-free working capital, introduction to business opportunities and public relations. The contract with Snapper Inc. was terminated on June 30, 2004.

Professional fees

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

Fiscal 2005 professional fees comprise the audit fee provision.

16

The major items in fiscal 2004 were audit fees of $16,365 to cover the 2004 audit and also to cover US reporting on fiscal 2003 for the purpose of filings with US Securities and Exchange Commission.

Shareholder Information

Shareholder information costs consist of the cost of holding shareholders’ meetings and regulatory and related filing fees and transfer agent fees.

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

During 2005, the Company paid to a market maker in the US , a one-time total fee of $11,250 comprising US$ 5,000 in cash (CDN$6,250) and $5,000 in 50,000 restricted common shares of the Company. The fee was paid for their services in connection with the Company’s application to NASDAQ for a listing and trading symbol.

The Company also paid a one-time non refundable fee of $2,000 to Canadian National Quotation Exchange (CNQ) for potentially listing the Company on CNQ. However, the Company decided not to pursue this listing further after it was accepted on NASDAQ over the counter bulletin board listing. The balance of the costs for fiscal 2005 included filing fees paid to Ontario Securities Commission and other regulatory bodies and $1,981 towards shareholders’ meeting.

Fiscal 2004 costs comprised filing fees of $1,875 and a shareholders’ meeting fee of $1,267.

Promotion costs

Promotion costs for fiscal 2006 were incurred by the executives at LRPC in visiting Europe and US for exploration of new production opportunities.

Promotional costs for fiscal 2005 included costs of hosting a major event in September 2004 for a group of prospective investors and people in the entertainment industry. The primary purpose was to introduce Noble House and Mr. Damian Lee and his team and also to identify new business opportunities.
 
There was no promotional activity during the fiscal year 2004.


Office and general
 
These costs include rent, telephone, Internet, and other general and administration costs. The key components of these costs are as follows:

17

 

Year ended June 30
 
2006
 
2005
 
2004
 
               
Exchange loss
 
$
33,958
 
$
(203
)
$
-
 
Rent
   
18,505
   
8,728
   
2,248
 
Telephone
   
9,279
   
3,666
   
947
 
Website development
   
4,910
   
-
   
-
 
Travel and entertainment
   
19,213
   
-
   
-
 
Miscelleneous
   
26,503
   
14,870
   
6,758
 
   
$
112,368
 
$
27,061
 
$
9,953
 
 
 
Exchange loss for fiscal 2006 related entirely to the year end translation of US dollar balances and transactions into Canadian dollars at the year end and yearly average exchange rates as per the Company’s accounting policy. During the year, the Company had a large number of transactions in US dollars arising from two private placements in which the Company received approximately $2.7 million in US funds. At the year end, approximately $1.8 million was held in US funds.
 
The above transactions took place during the last quarter of the fiscal year 2006 when the exchange rate for the US dollar declined from CDN$1.16 at the end of March 2006 to CDN$1.12 at the end of June 2006. The average for the year declined from CDN$1.25 for fiscal 2005 to CDN$1.16 for fiscal 2006. The strengthening of Canadian dollar resulted in lesser value being assigned to the US dollar balances and transactions giving rise to a significant exchange loss on translation.
 
For fiscal years 2005 and 2004, there were minimal US dollar or other foreign currency transactions or balances and hence no significant exchange gain or loss resulted at the year end.
 
Rent for the fiscal year 2006 included rent of $16,153 relating to the office space for the subsidiary, LRPC, which was rented at $1,300 per month under a month-to month lease.
 
For the fiscal year 2005, LRPC rent was only for five months.
 
For the fiscal year 2004, there was no rent for the subsidiary. The only rent consisted of the rent for the corporate office.
 
During fiscal 2006, LRPC developed a web site to promote its film properties and incurred $4,900 towards the development costs. No such costs were incurred in fiscal 2005 and 2004.
 
Significant increase in other operating costs for fiscal 2006 compared to the previous years was mainly attributable to the full year’s operational costs of LRPC.

18

 
Amortization of Investments in Film and Television Programs

During fiscal 2006, LRPC was holding nine scripts at a carrying value of $172,500 and four distribution contracts at a carrying value of $60,000. At the year end, management decided to fully amortize all but one script and all distribution contracts because it has decided not to pursue development of these properties any further. The only script not amortized and kept at its carrying value of $25,000 was that of King of Sorrow. The script, as explained earlier, has been developed into a feature film for which the Company held certain world wide distribution rights. Management concluded that based on the estimates of potential revenue that would be realized by the film, the carrying value of the script was fully recoverable.

During fiscal 2005, the carrying value of $15,000 of one of the ten scripts was fully amortized since its development plan was postponed for an indefinite period and three other scripts were partially amortised by $42,500 since they were to be re-written before being developed.

Similarly, the carrying values of three of the seven distribution contracts were fully amortised by $20,000 since no reasonable estimate of expected distribution commission can be made for the foreseeable future while the carrying value of one other distribution contract was partially amortised by $40,000.

In fiscal 2004, the Company had no film properties and hence there was no amortization.

Stock based Compensation

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

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

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

19



 
2.
2006 Stock Option Plan covering one million options. None of the options were granted as at June 30, 2006.

During fiscal 2005, a fee of $5,000 was paid to an independent brokerage firm for financial services by way of 50,000 restricted common shares of the Company.

During fiscal 2004, a fee of $5,000 was paid to Mr. Kam Shah, the Chief Financial Officer at the time in the form of 50,000 post reverse-split common shares for accounting services.

Deferred Development Costs Written Off

During fiscal 2004, the Company wrote off contract rights and production costs of $110,000 incurred in the previous year and deferred in respect of Jenn Project.

(B) LIQUIDITY AND CAPITAL RESOURCES

Working Capital

As at June 30, 2006, the Company had a net working capital surplus of approximately $2.5 million compared to a working capital deficit of $194,696 as at June 30, 2005.

Approximately 84% of the working capital - approximately $2.1 million - at June 30, 2006 was in the form of cash and treasury bills compared to only 1% at June 30, 2005.

Significant improvement in the liquid working capital was due to raising of equity through two private placements as explained earlier in this report.

Cash on hand as at June 30, 2006 was $1.9 million compared to $1,629 as at June 30, 2005.

Operating cash flow

During fiscal 2006, operating activities required a net cash flow of $650,000. Approximately $300,000 was spent on LRPC and corporate operations and $350,000 was advanced to King of Sorrow Production Company.

The operating cash requirement was met primarily through the cash raised from the private placements.

Investment cash flows

The company invested approximately $279,000 of the funds raised through a private placement in US treasury bills held with a brokerage firm.

20


Financing cash flows

The following outlines the Company’s key financing activities during the fiscal year 2006:

1.   On April 15, 2006, the Company completed its first private placement in which it issued 2,387,200 Units (at US$0.50 each) comprising 2,387,200 common shares and 1,193,600 warrants exercisable at US$0.50 per warrant to convert into an equal number of common shares for total proceeds of $1,394,360 (US$1,193,600). The Company paid a finder’s fee of $139,436 to Current Capital Corp., a corporation owned by John Robinson, a former director of the Company. Four accredited investors participated in this private placement including Current Capital Corp., which acquired 100,000 Units.

2.   On June 27, 2006, the Company completed its second private placement in which it issued 3 million Units (at US$0.50 each) comprising 3 million common shares and 1.5 million warrants exercisable at US$0.50 per warrant to convert into an equal number of common shares for total proceeds of $1,686,150 (US$1.5 million). The Company did not pay any finders fee on this second round of the financing. Two independent accredited investors participated in this private placement. One other private placee subscribed to 80,000 Units and paid $44,112 (US$40,000). However, subsequently, it was found that the private placee was not an accredited investor and was therefore not eligible to participate in the private placement. US$40,000 was therefore refunded to him subsequent to June 30, 2006. The amount received by the company was included in payables at June 30, 2006.

3.   Warrants issued in connection with the above private placements were valued at $5.7 million based on Black-Scholes option price model. None of the warrants were exercised at June 30, 2006.
 
(C)   RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES
 
The Company has not spent any funds on research and development during the fiscal years 2006, 2005 and 2004.
 
(D)   TREND INFORMATION
 
 
There are no trends, commitments, events or uncertainties presently known to management that are reasonably expected to have a material effect on the Company’s business, financial condition or results of operation other than the nature of the business (Refer to the heading entitled “Risk Factors”).
 

21

 
(E)   OFF-BALANCE SHEET ARRANGEMENTS
 
At June 30, 2006, 2005 and 2004, the Company did not have any off balance sheet arrangements, including any relationships with unconsolidated entities or financial partnerships to enhance perceived liquidity.

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

In all such cases, LiveReel does not record any production costs nor will it record any losses that may be sustained by such production companies on the feature films made with the help of LiveReel on the ground that LiveReel has not given any guarantee or is otherwise not responsible for any production costs or any other liabilities of the production companies.
 
(F)   CONTRACTUAL OBLIGATIONS
 
Other than the lease obligations relating to the lease of office space (See Item 4(D)), the Company has no known contractual obligations as of June 30,2006. Subsequent to year end, the Company entered into a consulting contract with a former officer and director to provide accounting services until December 31, 2006 for a fee of $40,000.
 
(G)   SAFE HARBOUR
 
Not applicable.
 
 
ITEM 6 - DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES


(A) DIRECTORS AND SENIOR MANAGEMENT

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


22

Mr. Stephen Wilson became a director and Chief financial officer and Corporate Secretary on September 14, 2006. Mr. Wilson has held various senior financial and operating positions in a number of private and public companies over the last 12 years in both Canada and the United States. He has extensive experience in mergers and acquisitions and raising capital for high growth companies. He is a graduate of the University of Michigan and a chartered accountant.

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

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


(B) COMPENSATION

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

1.   General

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

The Company does not have any pension plans.

2.   Statement of Executive Compensation

Mr. Gregg Goldstein receives no remuneration nor has he signed any consulting contract with the Company. Mr. J. Stephen Wilson has a consulting contract calling for the payment of monthly fees of $5,000 and can be terminated with one month’s notice.

The former members of the management team who held executive positions during the fiscal year 2006 have all resigned now and their long term consulting contracts cancelled without any penalty.

23


 
The following table and accompanying notes set forth all compensation paid by the Company to its directors and senior management for the fiscal years ended June 30, 2006, 2005 and 2004
 
 
ANNUAL COMPENSATION
LONG-TERM COMPENSATION
 
 
 
 
 
 
Awards
Payouts
Name and principal position
Year
Fee
Bonus
Other annual compensation
Securities under options/SARs Granted (1)
Shares or units subject to resale restrictions
LTIP (2) payouts
all other compensation
 
 
($)
($)
($)
(#)
($)
($)
 
Damian Lee - CEO & President of LRPC
2006
75,145
-
-
-
-
-
-
 
2005
30,000
-
-
-
-
-
-
 
2004
Not applicable
             
 
 
Kam Shah - CFO (3)
2006
22,800
-
-
Nil/Nil
-
-
-
CFO
2005
-
-
-
Nil/Nil
-
-
-
CFO
2004
5,000
-
-
Nil/Nil
-
-
-
                 
Lowell Conn- Executive Vice-President, LRPC
2006
55,480
-
-
Nil/Nil
-
-
-
 
2005
21,750
-
-
Nil/Nil
-
-
-
 
2004
Not applicable
       
 
       
Terence Robinson - Consultant (4)
2006
182,400
 
 
Nil/Nil
     
 
2005
-
-
-
Nil/Nil
-
-
-
 
2004
-
-
-
Nil/Nil
-
-
-

Notes:

 
1.
“SAR” means stock appreciation rights
 
2.
“LTIP” means long term incentive plan
 
3.
During the fiscal year 2006, Mr. Shah received consulting fee of $22,800, which was settled by issuance of 100,000 common shares valued at US$0.20, being the market price on the date of the issuance. The shares were registered with SEC under 2006 Consultant stock compensation plan.
 
4.
During the fiscal year 2006, Mr. Robinson received consulting fee of $182,400, which was settled by issuance of 800,000 common shares valued at US$0.20, being the market price on the date of the issuance. The shares were registered with SEC under 2006 Consultant stock compensation plan.  Subsequent to year end, these shares were cancelled as the Company did not feel the services provided justified the shares being issued.

24
 
 
Long Term Incentive Plan (LTIP) Awards
 
The Company does not have a LTIP, pursuant to which cash or non-cash compensation intended to serve as an incentive for performance (whereby performance is measured by reference to financial performance or the price of the Company’s securities) was paid or distributed to the Named Executive Officers during the most recently completed financial year.
 
Defined Benefit or Actuarial Plan Disclosure
 
There is no pension plan or retirement benefit plan that has been instituted by the Company and none are proposed at this time.
 
(C) BOARD PRACTICES

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

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

Mandate of the Board
 
The Board has adopted a mandate, in which it has explicitly assumed responsibility for the stewardship of LiveReel. In carrying out its mandate the Board holds at least four meetings annually.  The frequency of meetings, as well as the nature of the matters dealt with, will vary from year to year depending on the state of our business and the opportunities or risks, which we face from time to time. The Board held a total of 8 meetings during our financial year ended June 30, 2006.  To assist in the discharge of its responsibilities, the Board has designated two standing committee: a Corporate governance Committee and an Audit Committee, as more particularly discussed below.
 
Corporate Governance Committee

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

25

Audit Committee

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

The Company’s Audit Committee’s charter was detailed in the annual report for fiscal 2005 and became effective on August 2, 2005. An updated Charter is included under Exhibits.
 
Audit Committee charter assists the Board in fulfilling its responsibilities for our accounting and financial reporting practices by:
 
·
·reviewing the quarterly and annual consolidated financial statements and management discussion and analyses;
·
·
meeting at least annually with our external auditor;
·
·
reviewing the adequacy of the system of internal controls in consultation with the chief executive and financial officer;
·
·
reviewing any relevant accounting and financial matters including reviewing our public disclosure of information extracted or derived from our financial statements;
·
·
establishing procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal controls or auditing matters and the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters;
·
·
pre-approving all non-audit services and recommending the appointment of external auditors; and
·
·
reviewing and approving our hiring policies regarding personnel of our present and former external auditor
 



26

 
Compensation Committee

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

(D) EMPLOYEES

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

(E) SHARE OWNERSHIP

The Corporation had the following plans as at June 30, 2006:

 
1.
2006 Stock Option Plan covering one million options registered under the Securities Act of 1933 , United States of America ( the Act) on February 20, 2006

 
2.
2006 Consultant Stock Compensation Plan covering one million shares registered under the Act on February 20, 2006.

All shares reserved under compensation plan were issued before June 30, 2006. No options have yet been allotted.
 
The objective of these Plans is to provide for and encourage ownership of common shares of the Company by its directors, officers, consultants and employees and those of any subsidiary companies so that such persons may increase their stake in the Company and benefit from increases in the value of the common shares. The Plans are designed to be competitive with the benefit programs of other companies in the industry. It is the view of management that the Plans are a significant incentive for the directors, officers, consultants and employees to continue and to increase their efforts in promoting the Company’s operations to the mutual benefit of both the Company and such individuals and also allow the Company to avail of the services of experienced persons with minimum cash outlay.
 
The following table sets forth the share ownership of those persons listed in subsection 6.B above and includes details of all warrants held by such persons at December 21, 2006:
 

27

 

 
Name
# of Common shares held
at December 21, 2006
# of Warrants
Exercise price - in US$
Expiry date(s)
Gregg Goldstein
2,800,000
1,400,000
$.050
26-Jun-06



ITEM 7 - MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

 
(A)
MAJOR SHAREHOLDERS

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

As at December 21, 2006, Intermediaries like CDS & Co, Toronto, Canada and Cede & Co of New York, USA held approximately 20% of the issued and outstanding common shares of the company on behalf of several beneficial shareholders whose individual holdings details were not available. The following are the other registered shareholders holding more than 5% of the common shares of the company as at December 21, 2006.


Name of shareholder
No. of shares held
% of issued shares
Sui & Company in trust [1]
4,563,250
33%
Gregg Goldstein
2,800,000
20%
Crystal Star Productions Limited
2,000,000
15%
Snapper Inc.
795,000
6%

________

[1] Shares held in trust for certain arms length shareholders, none of whom is a beneficial owner of more than 5% of the common shares.

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

At December 21, 2006, the Company had 13,721,744 shares of common stock outstanding, which, as per the details provided by the Transfer Agents, were held by 353 record holders excluding the beneficial shareholders held through the intermediaries, 9 of which, holding an aggregate of 5,044,718 shares (37%) of common stock, were in the United States.

28

 
The Registrant is a publicly owned Canadian corporation, the shares of which are owned by Canadian residents, US residents, and residents of other countries. The Registrant is not owned or controlled directly or indirectly by another corporation or any foreign government. There are no arrangements, known to the Company, the operation of which may at a subsequent date result in a change of control of the Company.
 
(B) RELATED PARTY TRANSACTIONS
 
Transactions with related parties are incurred in the normal course of business and are measured at the exchange amount. Related party transactions and balances as at June 30, 2006 have been listed below:
 
 
·
Current Capital Corp., a corporation owned by John Robinson, a former director, charged approximately $4,200 for the premises rent, telephone, consultants’ fees and other office expenses in fiscal 2006. It also charged $139,436 as a finder’s fee in connection with the private placement in April 2006.

 
·
Consulting fees include approximately $75,000 of fees paid to a former officer and director in fiscal 2006.

 
·
Rent of $15,600 is charged in respect of rent for premises owned by a former director of the Company.

 
·
Expenses reimbursed to Damian Lee, the former Chief Executive Officer and Chairman, $9,600

 
·
Included in accounts payable are balances due to Current Capital Corp. of $1,562 and $3,610 due to the Chief Executive Officer for travel reimbursements.
 
 
·
Receivable includes $341,213 advanced to a production company owned by Mr. Damian Lee and Mr. Lowell Conn, the former directors and executives of the Company and its subsidiary and which had licensed the scripts from the Company and has given the company distribution rights to the film produced from the licensed script, “King of Sorrow”. Subsequent to year end, approximately $148,000 was repaid to the Company.
 
 
·
Payable includes $32,540 received from two production companies. The Company is a co-producer in one of these production companies and former directors of the subsidiary are the owners of the other production company.
 
 
·
Advances from shareholders as at June 30, 2006 were $4,346.

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Indebtedness to Company of Directors, Executive Officers and Senior Officers
 
None of the directors, consultants, executive officers and senior officers of the Company or any of its subsidiaries, proposed nominees for election or associates of such persons is or has been indebted to the Company at any time for any reason whatsoever, including the purchase of securities of the Company or any of its subsidiaries.
 
(C) INTERESTS OF EXPERTS AND COUNSEL

Not applicable
 

ITEM 8 - FINANCIAL INFORMATION

(A) CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION
 
Information regarding our financial statements is contained under the caption "Item 17. Financial Statements" below.
 
Legal Proceedings

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

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

Notwithstanding the above, the Company does not believe that the case is valid and has therefore made no provision in the financial statements against the claim.

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

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(B) SIGNIFICANT CHANGES
 
There were a number of corporate changes subsequent to June 30, 2006, which will have significant effect on the future operations of the Company and its subsidiary. The key events are described below:

 
1.
A name change for the Company and its subsidiary as explained earlier in the report. The previous name Noble House was used by several other corporations globally and was too common to enable us to promote our company effectively.

 
2.
The Company held a special shareholders meeting on October 4, 2006 to obtain shareholders approval to move jurisdiction from Ontario to Federal. The approval was given by unanimous vote. On October 26, 2006, The Company completed its continuance under the jurisdiction of the Canada Business Corporations Act. (CBCA) The Company will continue to be a reporting issuer to Ontario Securities Commission.

 
3.
In the same special meeting as above, the shareholders also approved adoption of new by-laws in compliance with CBCA. The adopted by-laws are included under Exhibits.
 
 
ITEM 9 - THE OFFER AND LISTING
 
 
(A) OFFER AND LISTING DETAILS
 
The Company’s common shares began trading on OTCBB on April 27 2005. Prior to that date, the Company’s shares were traded “Over -the Counter” on the Canadian Unlisted Board (“CUB”) for a brief while in 2000. No real-time quotes or trades were available to the public. There is no record of quotations under the CUB.

The following tables set forth the reported high and low sale prices for the common shares of the Company as quoted on OTCBB.
 
The following table outlines the annual high and low market prices for each of the fiscal years since the trading date of April 27, 2005:
 

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Fiscal year ended June 30
 
High
In US $
 
Low
In US$
 
2006
   
2.15
   
.61
 
2005 (April 28, 2005 to June 30, 2005)
   
.65
   
.54
 
 
The following table outlines the high and low market prices for each fiscal financial quarter for each of the quarters since April 27, 2005 and any subsequent period:
 
Fiscal Quarter ended
 
High
 
Low
 
 
 
In US$
 
In US$
 
           
September 30, 2006
   
1.70
   
.30
 
June 30, 2006
   
0.85
   
2.15
 
March 31, 2006
   
1.20
   
.20
 
December 31, 2005
   
.65
   
.35
 
September 30, 2005
   
.61
   
.56
 
June 30, 2005
   
.62
   
..56
 
 
The following table outlines the high and low market prices for each of the most recent six months:
 
Month
 
High
 
Low
 
 
 
 In US$
 
In US$
 
October, 2006
   
.50
   
.25
 
September, 2006
   
.90
   
.30
 
August , 2006
   
1.02
   
.90
 
July, 2006
   
1.70
   
1.05
 
June, 2006
   
1.85
   
1.40
 
May, 2006
   
2.15
   
1.72
 

 
(B) PLAN OF DISTRIBUTION
 
Not applicable
 

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(C) MARKETS
 
The company's common shares were traded briefly during the fiscal 2000 "over-the-counter" on the Canadian Unlisted Board ("CUB") with the trading symbol "FEPR" and CUSIP #32008X 10 2. The CUB system was implemented in November 2000 but has currently been discontinued. It was only available to traders and brokers for reporting trades that they had arranged in unlisted and unquoted equity securities in Ontario. No real-time quotes or trades were available to the public. There is no record of quotations under the CUB.
 
 
Since April 27, 2005, the Company’s common shares began trading on OTCBB of NASDAQ under a trading symbol “NHSEF”.
 
The Company received a new CUSIP number and changed its trading and listing symbol to LVRLF effective December 1, 2006.
 
(D) SELLING SHAREHOLDERS
 
Not applicable.
 
(E) DILUTION
 
Not applicable
 
(F) EXPENSES OF THE ISSUE
 
Not applicable
 
 
ITEM 10 - ADDITIONAL INFORMATION
 
(A) SHARE CAPITAL  
 
This Form 20F is being filed as an Annual Report under the Exchange Act and, as such, there is no requirement to provide any information under this section.
 
(B) MEMORANDUM AND ARTICLES OF ASSOCIATION
 
Following approval by the shareholders in a special meeting held on October 4, 2006 as explained in item 8(B) above, the Company applied for authorization to continue in another jurisdiction and was granted approval on October 26, 2006 to continue under the jurisdiction of the Canada Business Corporation Act. An application for authorization to continue in another jurisdiction is included under the Exhibits.
 
New by-laws were adopted in the special meeting of shareholders on October 4, 2006 in compliance with the requirements of the Canada Business Corporation Act. The new by-laws are included in the Exhibits.
 

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(C) MATERIAL CONTRACTS
 
Except for contracts entered into in the ordinary course of its business, the only material contract to which we are or have been a party for the two years preceding this annual report are as follows:
 
On November 30, 2004, the Company entered into a purchase agreement with Noble House Production Limited to acquire certain film properties at an agreed price of $350,000, which was settled by issuance of 3.5 million restricted common shares plus 3.5 million warrants exercisable at US$1 each to acquire equal number of common shares, which price was reduced to US$0.50 on January 18, 2006.
 
(D)   EXCHANGE CONTROLS
 
Limitations on the ability to acquire and hold shares of the Company may be imposed by the Competition Act (Canada) (the “Competition Act”).  This legislation permits the Commissioner of Competition to review any acquisition of a significant interest in us.  This legislation grants the Commissioner jurisdiction, for up to three years, to challenge this type of acquisition before the Competition Tribunal if the Commissioner believes that it would, or would be likely to, result in a substantial lessening or prevention of competition in any market in Canada.
 
The Competition Act requires that any person proposing to acquire any of the assets in Canada of an operating business file a notification with the Competition Bureau where (a) the parties to the transaction, together with their respective affiliates, have (i) assets in Canada the value of which exceeds $400,000,000 in the aggregate, or (ii) annual gross revenues from sales in, from or into Canada that exceed $400,000,000 in the aggregate; and (b) the aggregate value of those assets, or the gross revenues from sales in or from Canada generated from those assets, would exceed $50,000,000.  For the purposes of the Competition Act, asset values and gross revenues are to be determined as of the last day of the period covered by the most recent audited financial statements in which the assets or gross revenues are accounted for.
 
This legislation also requires any person who intends to acquire shares to file a notification with the Competition Bureau if certain financial thresholds are exceeded, and that person would hold more than 20% of our voting shares as a result of the acquisition.  If a person already owns 20% or more of our voting shares, a notification must be filed when the acquisition would bring that person’s holdings over 50%.  Where a notification is required, the legislation prohibits completion of the acquisition until the expiration of a statutory waiting period, unless the Commissioner provides written notice that he does not intend to challenge the acquisition.
 

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There are no governmental laws, decrees or regulations in Canada that restrict the export or import of capital or that affect the remittance of dividends, interest or other payments to non-resident holders of our securities.  However, any such remittance to a resident of the United States may be subject to a withholding tax pursuant to the Income Tax Act (Canada).  For further information concerning such withholding tax, see “Taxation" below.
 
Except as may be provided under the Investment Canada Act (the "ICA"), there are no specific limitations under the laws of Canada, the Province of British Columbia, or in the Notice of Articles and Articles of the Company with respect to the rights of non-residents of Canada to hold and/or vote securities of the Company.
 
The ICA requires each individual, government or agency thereof, corporation, partnership, trust or joint venture that is not a “Canadian” as defined in the ICA (a “non-Canadian”) making an investment to acquire control of a Canadian business, the gross assets of which exceed certain defined threshold levels, to file an application for review with the Investment Review Division of Industry Canada.  The current threshold level for non-Canadians who are World Trade Organization investors (as defined in the ICA) is $265,000,000 (in 2006).  This amount is subject to an annual adjustment on the basis of a prescribed formula in the ICA to reflect inflation and real growth within Canada.
 
In the context of the Company, in essence, three methods of acquiring control of a Canadian business are regulated by the ICA: (i) the acquisition of all or substantially all of the assets used in carrying on business in Canada; (ii) the acquisition, directly or indirectly, of voting shares of a Canadian corporation carrying on business in Canada; (iii) the acquisition of voting shares of an entity which controls, directly or indirectly, another entity carrying on business in Canada.  An acquisition of a majority of the voting interests of an entity, including a corporation, is deemed to be an acquisition of control under the ICA.  However, under the ICA, there is a rebuttable presumption that control is acquired if one-third of the voting shares of a Canadian corporation or an equivalent undivided interest in the voting shares of such corporation are held by a non-Canadian person or entity.  An acquisition of less than one-third of the voting shares of a Canadian corporation is deemed not to be an acquisition of control.  An acquisition of less than a majority, but one-third or more, of the voting shares of a Canadian corporation is presumed to be an acquisition of control unless it can be established that on the acquisition the Canadian corporation is not, in fact, controlled by the acquirer through the ownership of voting shares.  Certain transactions relating to the acquisition of common shares would be exempt from review from the ICA, including:
 
(a) acquisition of common shares by a person in the ordinary course of a person’s business as a trader or dealer in securities;
 
(b) acquisition of control of a Canadian corporation in connection with the realization of security granted for a loan or other financial assistance and not for any purpose related to the provisions of the ICA; and
 

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(c) acquisition of control of a Canadian corporation by reason of an amalgamation, merger, consolidation or corporate reorganization following which the ultimate direct or indirect control in fact of the corporation, through the ownership of voting interests, remains unchanged.
 
In addition, if less than a majority of voting interests of a Canadian corporation are owned by Canadians, the acquisition of control of any other Canadian corporation by such corporation may be subject to review unless it can be established that the corporation is not in fact controlled through the ownership of voting interests and that two-thirds of the members of the board of directors of the corporation are Canadians.
 
 
Where an investment is reviewable under the ICA, it may not be implemented unless it is likely to be of net benefit to Canada.  If an applicant is unable to satisfy the Minister responsible for Industry Canada that the investment is likely to be of net benefit to Canada, the applicant may not proceed with the investment.  Alternatively, an acquiror may be required to divest control of the Canadian business that is the subject of the investment.
 
In addition to the foregoing, the ICA requires formal notification to the Canadian government of all other acquisitions of control of Canadian businesses by non-Canadians.  These provisions require a foreign investor to give notice in the required form, which notices are for information, as opposed to review purposes.
 
(E) TAXATION
 
Canadian Federal Income Tax Consequences
 
We consider that the following general summary fairly describes the principal Canadian federal income tax considerations applicable to holders of our common shares who, for purposes of the Income Tax Act (Canada) (the “ITA”), deal at arm’s length with the Company, hold such shares as capital property, do not carry on business in Canada, have not been at any time residents of Canada for purposes of the ITA and are residents of the United States (“US Residents”) under the Canada-United States Income Tax Convention (1980) (the “Convention”).
 
This summary is based upon the current provisions of the ITA, the Income Tax Regulations (the “Regulations”), the current publicly announced administrative and assessing policies of the Canada Revenue Agency (formerly Canada Customs and Revenue Agency), and all specific proposals (the “Tax Proposals”) to amend the ITA and Regulations publicly announced prior to the date hereof by the Minister of Finance (Canada).  This description is not exhaustive of all possible Canadian federal income tax consequences and, except for the Tax Proposals, does not take into account or anticipate any changes in law, whether by legislative, governmental or judicial action, nor does it take into account provincial or foreign tax considerations which may differ significantly from those discussed herein.
 

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The following discussion is for general information only and it is not intended to be, nor should it be construed to be, legal or tax advice to any holder or prospective holder of our common shares and no opinion or representation with respect to any Canadian federal, provincial or foreign tax consequences to any such holder or prospective holder is made.  Accordingly, holders and prospective holders of our common shares should consult with their own tax advisors about the Canadian federal, provincial and foreign tax consequences of purchasing, owning and disposing of our common shares.
 
Dividends
 
Dividends, including stock dividends, paid or credited or deemed to be paid or credited on our common shares to a US Resident will be subject to withholding tax at a rate of 25%.  The Convention provides that the normal 25% withholding tax rate will generally be reduced to 15% on dividends paid on shares of a corporation resident in Canada for federal income tax purposes (such as the Company) to US Residents, and also provides for a further reduction of this rate to 5% where the beneficial owner of the dividends is a corporation which is a resident of the United States and owns at least 10% of the voting shares of the corporation paying the dividend.  These Convention reductions are not available to beneficial owners who are a US LLC corporation.
 
Capital Gains
 
The Convention provides that a US Resident will not be subject to tax under the ITA in respect of any capital gain on the disposition of our common shares unless such shares constitute taxable Canadian property of the US Resident and the US Resident is not entitled to the benefits of the Convention with regards to capital gains.  Our common shares will constitute taxable Canadian property if at any time during the five year period immediately preceding the disposition of our common shares, the US Resident, or persons with whom the US Resident did not deal at arm’s length, or the US Resident together with persons with whom the US resident did not deal at arm’s length owned 25% or more of the issued shares of any class of our capital stock.
 
Where a US resident realizes a capital gain on a disposition of shares that constitute “taxable Canadian property”, the Convention relieves the US resident from liability for Canadian tax on such capital gains unless:

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

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

37


 
(c)   the shares formed part of the business property of a “permanent establishment” or pertained to a fixed base used for the purpose of performing independent personal services that the shareholder has or had in Canada within the 12 months preceding the disposition.
 
These Convention benefits are generally not available to beneficial owners who are a US LLC corporation.
 
U.S. Federal Income Tax Consequences
 
The following is a summary of the anticipated material U.S. federal income tax consequences to a U.S. Holder (as defined below) arising from and relating to the acquisition, ownership, and disposition of our common shares (“Common Shares”).

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

Scope of this Disclosure

Authorities

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

38

U.S. Holders

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

Non-U.S. Holders

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


39

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

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

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

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

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

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

General Taxation of Distributions

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

Reduced Tax Rates for Certain Dividends

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

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

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We do not believe that we were a “passive foreign investment company” for the taxable year ended June 30, 2006.   (See more detailed discussion at “Additional Rules that May Apply to U.S. Holders” below).  There can be no assurance that the IRS will not challenge the determination made by us concerning our “passive foreign investment company” status or that we will not be a “passive foreign investment company” for the current or any future taxable year.  Accordingly, there can be no assurances that we will be a QFC for the current or any future taxable year, or that we will be able to certify that it is a QFC in accordance with the certification procedures issued by the Treasury and the IRS.

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

Distributions Paid in Foreign Currency

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

Dividends Received Deduction

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

Disposition of Common Shares

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

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

Foreign Tax Credit

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

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



43

Information Reporting; Backup Withholding Tax

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

Additional Rules that May Apply to U.S. Holders

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

Controlled Foreign Corporation

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

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

44

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

Passive Foreign Investment Company  

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

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

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

Default PFIC Rules Under Section 1291 of the Code

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

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

45


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

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

QEF Election

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

46


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

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

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

47


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

Mark-to-Market Election

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

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

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

48


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

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

Other PFIC Rules

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

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

The PFIC rules are complex, and each U.S. Holder should consult its own financial advisor, legal counsel, or accountant regarding the PFIC rules and how the PFIC rules may affect the U.S. federal income tax consequences of the acquisition, ownership, and disposition of Common Shares.
 
This summary is of a general nature only and is not intended to be relied on as legal or tax advice or representations to any particular investor.  Consequently, potential investors are urged to seek independent tax advice in respect of the consequences to them of the acquisition of common stock having regard to their particular circumstances.
 
(F) DIVIDEND AND PAYING AGENTS
 
Not applicable
 

49

 
(G) STATEMENT BY EXPERTS
 
Not applicable
 
(H) DOCUMENTS ON DISPLAY
 
The documents concerning the Company referred to in this Annual Report may be inspected at the Company's office at 429 Spadina Road, Toronto, Ontario, Canada, M5P 2W3. The Company may be reached at (416) 607-6793. Documents filed with the Securities and Exchange Commission ("SEC") may also be read and copied at the SEC's public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms.
 
The Company is subject to reporting requirements as a “reporting issuer” under applicable securities legislation in Canada and as a “foreign private issuer” under the Securities Exchange Act of 1934 (the “Exchange Act”). As a result, we must file periodic reports and other information with the Canadian securities regulatory authorities and the Securities and Exchange Commission.

A copy of this Annual Information Form/Form 20-F Annual Report and certain other documents referred to in this Annual Report and other documents filed by us may be retrieved from the system for electronic document analysis and retrieval (“SEDAR”) system maintained by the Canadian securities regulatory authorities at www.sedar.ca or from the Securities and Exchange Commission electronic data gathering, analysis and retrieval system(“EDGAR”) at www.sec.gov/edgar .
 
(I) SUBSIDIARY INFORMATION
 
The documents concerning the Company’s subsidiaries referred to in this Annual Report may be inspected at the Company's office at 429 Spadina Road, Toronto, Ontario, Canada, M5P 2W3
 
 
ITEM 11 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
We are exposed to foreign currency exchange rates.  We do not use derivative financial instruments.  
 
The Company held at June 30, 2006, surplus cash of approximately $ 279,000 in interest earning US treasury bills. Generally, however, the Company‘s surplus funds are held with Canadian banks in US and Canadian currencies in interest earning accounts.
 
The Company has no debt instruments subject to interest payments, sales contracts, swaps, derivatives, or forward agreements or contracts, or inventory.
 
The Company has no currency or commodity contracts, and the Company does not trade in such instruments.
 

50

 
The Company periodically accesses the capital markets with the issuance of new shares to fund operating expenses and new projects,
 
 
ITEM 12 - DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
 
 
Not required since this is an annual report.
 
 
PART II
 
 
ITEM 13 - DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
 
None.
 
 
ITEM 14 - MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
 
No modifications or qualifications have been made to the instruments defining the rights of the holders of our Common Shares and no material amount of assets securing our securities has been withdrawn or substituted by us or anyone else (other than in the ordinary course of business).

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

ITEM 15 CONTROLS AND PROCEDURES
 
A.    Evaluation of Disclosure Controls and Procedures
 
The Company evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-14(c) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, the Company's disclosure controls and procedures were effective in timely alerting them to the material information relating to the Company (or the Company's consolidated subsidiaries) required to be included in the Company's periodic SEC filings.
 

51

 
B.     Changes in Internal Controls
 
There were no significant changes made in the Company's internal controls or, to the Company's knowledge, in other factors that could significantly affect these controls subsequent to the date of their evaluation.
 
 
ITEM 16   [RESERVED]
 

ITEM 16 (A) AUDIT COMMITTEE FINANCIAL EXPERTS
 
As at the Company’s financial year ended June 30, 2006, the audit committee consisted of two directors, one of whom, Ms. Joanne Butterfield Douglas would be determined as a financial expert, as that term is defined under Section 407 of the Sarbanes-Oxley Act of 2002 . Ms. Douglas’s background is described under Item 6(A) Directors and senior management.
 
One of the members of the audit committee, Mr. John Robinson resigned on October 26, 2006 and was replaced by Mr. Steve Dabbah who joined as director on the same date.
 

I TEM 16 (B) CODE OF ETHICS

We have adopted a Code of Ethics, which applies to all employees, consultants, officers and directors.
 
 
ITEM 16 (C)   PRINCIPAL ACCOUNTANT’S FEES AND SERVICES
 
The following outlines the expenditures for accounting fees for the last two fiscal periods ended:
 
 
 
June 30 2006
 
June 30 2005
 
 
 
 
 
 
 
Audit Fees (1)
   
21,000
   
14,846
 
Audit Related Fees
   
-
   
-
 
Tax Fees
   
--
   
-
 
All Other Fees
   
-
   
-
 

(1)   Audit fee for the fiscal year 2006 has not yet been agreed. The amount shown is the management’s estimate.

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

52

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

The information referred to in this section is not required as to the fiscal year ended June 30, 2006, which is the period covered by this Annual Report on Form 20-F.

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

The information referred to in this section is not required as to the fiscal year ended June 30, 2006, which is the period covered by this Annual Report on Form 20-F.

 
PART III
 
 
ITEM 17 - FINANCIAL STATEMENTS
 
See the Financial Statements and Exhibits listed in Item 19 hereof and filed as part of this Annual Report.  These financial statements were prepared in accordance with Canadian GAAP and are expressed in Canadian dollars.  Such financial statements have been reconciled to U.S. GAAP (see Note 17 therein).  For a history of exchange rates in effect for Canadian dollars as against U.S. dollars, see Item 3(A) Exchange Rates of this Annual Report.
 
 
ITEM 18 - FINANCIAL STATEMENTS
 
Not applicable.
 

ITEM 19 -- EXHIBITS

(a)   Financial Statements


Description of Document
Page No.
Cover Sheet
F-1
Index
F-2
Independent Auditor’s Report dated October 23, 2006
F-3
Consolidated Balance Sheets as at June30, 2006 and 2005
F-4
Consolidated Statements of Operations for the Fiscal Years Ended June 30, 2006, 2005 and 2004
F-5
Consolidated Statements of Cash Flows for the Fiscal Years Ended June 30, 2006, 2005, and 2004
F-6
Consolidated Statements of Shareholders’ Equity (Deficiency) for the Fiscal Years Ended June 30, 2006, 2005, and 2004
F-7
Notes to Consolidated Financial Statements
F-8


53

b)   Exhibits
 
The following documents are filed as part of this Annual Report on Form 20-F
 
1.1
Application for Authorization to continue in another jurisdiction dated October 20, 2006.
   
1.2
Articles of Incorporation of the Company - Incorporated herein by reference to Exhibit 1.1 to the Company’s Registration Statement on Form 20-F filed on March 12, 2004.
   
1.3
By-Laws of the Company
   
1.4
Certificate of name change from Minedel Mining & Development Company Limited to Minedel Mines Limited - Incorporated herein by reference to Exhibit 1.3 to the Company’s Registration Statement on Form 20-F filed on March 12, 2004
   
1.5
Certificate of name change from Minedel Mines Limited to Havelock Energy & Resources Inc.. - Incorporated herein by reference to Exhibit 1.4 to the Company’s Registration Statement on Form 20-F filed on March 12, 2004
   
1.6
Certificate of name change from Havelock energy & Resources Inc. to Municipal Ticket Corporation - Incorporated herein by reference to Exhibit 1.5 to the Company’s Registration Statement on Form 20-F filed on March 12, 2004
   
1.7
Certificate of name change from Municipal Ticket Corporation to I.D.Investment Inc. - Incorporated herein by reference to Exhibit 1.6 to the Company’s Registration Statement on Form 20-F filed on March 12, 2004
   
1.8
Certificate of amalgmation. to Biolink Corporation - Incorporated herein by reference to Exhibit 1.7 to the Company’s Registration Statement on Form 20-F filed on March 12, 2004
   
1.9
Certificate of name change from Biolink Corp. to First Empire Entertainment.com Inc. - Incorporated herein by reference to Exhibit 1.8 to the Company’s Registration Statement on Form 20-F filed on March 12, 2004

54


   
1.10
Certificate of name change from First Empire Entertainment.com Inc. to First Empire Corporation Inc. - Incorporated herein by reference to Exhibit 19 to the Company’s Annual Report on Form 20-F filed on March 12, 2004
   
1.11
Certificate of name change from First Empire Corporation Inc. to Noble House Entertainment Inc. dated November 4, 2004 - Incorporated herein by reference to Exhibit 1.10 to the Company’s Annual Report on Form 20-F filed on December 1, 2005
   
1.12
Articles of Amendment dated November 19, 2004 consolidating the common shares of the Company on the basis of one new common share in exchange for every two old common shares - Incorporated herein by reference to Exhibit 1.11 to the Company’s Annual Report on Form 20-F filed on December 1, 2005
   
1.13
Certificate of name change from First Empire Music Corp. to Noble house Film & Television Inc. dated January 21, 2005 - Incorporated herein by reference to Exhibit 1.12 to the Company’s Annual Report on Form 20-F filed on December 1, 2005.
   
1.14
Certificate of name change from Noble house Film & Television Inc. to LiveReel Productions Corporation dated August 10, 2006.
   
1.15
Certificate of name change from Noble House Entertainment Inc. to LiveReel Media Corporation dated October 12, 2006.
   
2.(a).
Specimen Common Share certificate - Incorporated herein by reference to Exhibit 2.(a) to the Company’s Annual Report on Form 20-F filed on December 1, 2005.
   

55


4.(b)
Offer to Purchase dated November 30, 2004 regarding acquisition of film properties from Noble House Production Inc. - Incorporated herein by reference to Exhibit 1.12 to the Company’s Annual Report on Form 20-F filed on December 1, 2005.
   
4.(c)
2006 Consultant Stock Compensation Plan and 2006 Stock Option Plan - Incorporated herein   by reference to Form S-8 filed on March 9, 2006.
   
12
The certifications required by Rule 13a-14(a) (17 CFR 240.13a-14(a)) or Rule 15d-14(a) (17 CFR 240.15d-14(a)).
   
13.a
The Certifications Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
   
14(a)(i)Corporate Governance Charter
   
14(a)(ii)Audit Committee Charter
   



56

SIGNATURES

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

Dated at Toronto, Ontario, Canada, this November 30, 2006


LIVEREEL MEDIA CORPORATION

Per:   (signed) Gregg Goldstein
Title:  Chairman and CEO
 
 
57
 
 
 



LIVEREEL MEDIA CORPORATION
(Formerly Noble House Entertainment Inc.)

Consolidated Financial Statements

For the Years Ended June 30, 2006 and 2005

(Canadian Dollars)




 
INDEX


   
Page
Auditors’ Report
 
1
Consolidated Balance Sheets
 
2
Consolidated Statements of Operations
 
3
Consolidated Statements of Cash Flows
 
4
Consolidated Statements of Shareholders’ Equity (Deficiency)
 
5
Notes to Consolidated Financial Statements
 
6-23




 
Schwartz Levitsky Feldman llp
CHARTERED ACCOUNTANTS
TORONTO, MONTREAL, OTTAWA


AUDITORS’ REPORT


To the Shareholders of
LiveReel Media Corporation
(Formerly Noble House Entertainment Inc.)
 
 
We have audited the consolidated balance sheet of LiveReel Media Corporation (Formerly Noble House Entertainment Inc.)   as at June 30, 2006 and the related consolidated statements of operations, shareholders' equity and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
 
We conducted our audit in accordance with Canadian generally accepted auditing standards and with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
 
In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at June 30, 2006 and the results of its operations and its cash flows for the year then ended, in accordance with Canadian generally accepted accounting principles which differ in certain respects from generally accepted accounting principles in the United States (refer to note 17).

The consolidated financial statements of LiveReel Media Corporation (Formerly Noble House Entertainment Inc.)   as of June 30, 2005 and for the years ended June 30, 2005 and 2004, were audited by other auditors whose report dated October 20, 2005, expressed an unqualified opinion on those statements.


“SCHWARTZ LEVITSKY FELDMAN LLP”
Chartered Accountants
Toronto, Ontario, Canada
October 23, 2006

1167 Caledonia Road
Toronto, Ontario M6A 2X1
Tel: 416 785 5353
Fax: 416 785 5663

1

LiveReel Media Corporation
(Formerly Noble House Entertainment Inc.)
Consolidated Balance Sheets
(Canadian Dollars)
 

As at June 30
 
Note
 
2006
 
2005
 
Assets
             
Current
             
     Bank
       
$
1,861,545
 
$
1,629
 
     Treasury bills
   
3
   
279,125
   
-
 
     Accounts receivable and prepayments
   
4
   
361,931
   
5,983
 
     Deferred stock based compensation
   
5
   
113,999
   
-
 
           
2,616,600
   
7,612
 
Investment in film and television programs
   
6
   
25,000
   
232,500
 
                     
 
   
 
 
$
2,641,600
 
$
240,112
 
Liabilities
                   
Current
                   
     Accounts payable and accrued liabilities
   
7
 
$
112,473
 
$
46,877
 
     Note payable
         
-
   
11,494
 
     Advances from shareholders
   
8
   
4,346
   
143,937
 
 
   
 
   
116,819
   
202,308
 
Shareholders' Equity
                   
Capital stock
   
9
   
2,255,394
   
4,815,672
 
Contributed surplus
         
20,391
   
20,391
 
Warrants
   
10
   
5,729,352
   
-
 
Deficit
         
(5,480,356
)
 
(4,798,259
)
 
   
 
   
2,524,781
   
37,804
 
 
   
 
 
$
2,641,600
 
$
240,112
 
                     
Related Party Transactions (Note 13)
                   
Commitments and contingencies (Note 14)
                   
                     
 
 
Approved by the Board   ”/s/ Gregg Goldstein ” Director       ”/s/ J. Stephen Wilson” Director
                            (signed)                              (signed)
 


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

2

LiveReel Media Corporation
(Formerly Noble House Entertainment Inc.)
Consolidated Statements of Operations
(Canadian Dollars)


For the Years Ended June 30
 
Note
 
2006
 
2005
 
2004
 
Revenue
                 
     Distribution income
   
 
 
$
7,052
 
$
5,031
 
$
-
 
                           
Expenses
                         
     Amortization of investment in film
   
6
   
207,500
   
117,500
   
-
 
           and television programs
                         
     Stock based compensation
   
5
   
114,001
   
5,000
   
5,000
 
     Consulting
         
199,488
   
71,095
   
64,840
 
     Office and general
         
112,368
   
27,061
   
9,953
 
     Shareholders information
         
8,935
   
20,122
   
3,142
 
     Promotion
         
7,999
   
13,543
   
-
 
     Professional fees
         
37,849
   
9,680
   
21,309
 
     Bank charges and interest
         
1,009
   
563
   
207
 
     Deferred development costs written off
         
-
   
-
   
110,150
 
 
   
 
   
689,149
   
264,564
   
214,601
 
Net loss for year
   
 
 
$
(682,097
)
$
(259,533
)
$
(214,601
)
Net loss per share - basic and diluted
   
11
 
$
(0.07
)
$
(0.04
)
$
(0.06
)

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

3

LiveReel Media Corporation
(Formerly Noble House Entertainment Inc.)
Consolidated Statements of Cash Flows
(Canadian Dollars)


For the Years Ended June 30
 
2006
 
2005
 
2004
 
Cash flows from operating activities
             
     Net loss for year
 
$
(682,097
)
$
(259,533
)
$
(214,601
)
                     
Items not affecting cash
                   
     Amortization of investment in film and television programs
   
207,500
   
117,500
   
-
 
     Write-off of deferred development costs
   
-
   
-
   
110,150
 
     Stock based compensation
   
114,001
   
5,000
   
5,000
 
Cash effect of changes in:
                   
     Accounts receivable and prepayments
   
(355,948
)
 
(3,361
)
 
(1,234
)
     Accounts payable and accrued liabilities
   
65,596
   
36,047
   
5,026
 
 
   
(650,948
)
 
(104,347
)
 
(95,659
)
Cash flows from investing activities
                   
     Investment in Jenn Project
   
-
   
-
   
(150
)
     Investment in treasury bills
   
(279,125
)
 
-
   
-
 
 
   
(279,125
)
 
-
   
(150
)
                     
Cash flows from financing activities
                   
     Common shares issued
   
2,941,074
             
     Net advances from shareholders
   
(139,591
)
 
105,916
   
60,863
 
     Note payable
   
(11,494
)
 
-
   
(38,506
)
     Shares cashed-out
   
-
   
(185
)
 
(1,527
)
     Warrants exercised
   
-
   
-
   
75,000
 
 
   
2,789,989
   
105,731
   
95,830
 
Increase in cash
   
1,859,916
   
1,384
   
21
 
Cash, beginning of year
   
1,629
   
245
   
224
 
Cash, end of year
 
$
1,861,545
 
$
1,629
 
$
245
 
Supplemental disclosures
                   
Non-cash investing and financing activities
                   
     Conversion of loan to equity investment
 
$
-
 
$
-
 
$
75,000
 
     Acquisition of film and television programs for shares issued
   
-
   
350,000
   
-
 
 
  $  
 -
 
$
350,000
 
$
75,000
 

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

4

LiveReel Media Corporation
(Formerly Noble House Entertainment Inc.)
Consolidated Statement of Shareholders’ Equity (Deficiency)
(Canadian Dollars)


For the Years Ended June 30, 2006, 2005 and 2004
 
 
Number of Shares
 
Share
Capital
 
Warrants
 
Contributed surplus
 
Deficit
 
Shareholders' Equity (Deficiency)
 
Balance June 30, 2003
   
3,035,695
 
$
4,307,384
       
$
20,391
 
$
(4,324,125
)
$
3,650
 
     Buy-back of fractional shares
   
(532
)
 
(1,527
)
       
-
   
-
   
(1,527
)
     Exercise of warrants
   
750,000
   
75,000
         
-
   
-
   
75,000
 
     Issued in settlement of debts
   
750,000
   
75,000
         
-
   
-
   
75,000
 
     Issued in settlement of fees
   
50,000
   
5,000
         
-
   
-
   
5,000
 
     Net loss
   
-
   
-
   
 
   
-
   
(214,601
)
 
(214,601
)
Balance June 30, 2004
   
4,585,163
   
4,460,857
         
20,391
   
(4,538,726
)
 
(57,478
)
     Buy-back of fractional shares
   
(619
)
 
(185
)
       
-
   
-
   
(185
)
     Issuance on acquisition of film and television programs
   
3,500,000
   
350,000
         
-
   
-
   
350,000
 
     Issued in settlement of fees
   
50,000
   
5,000
         
-
   
-
   
5,000
 
     Net loss
   
-
   
-
   
 
   
-
   
(259,533
)
 
(259,533
)
Balance June 30, 2005
   
8,134,544
   
4,815,672
         
20,391
   
(4,798,259
)
 
37,804
 
     Issued under private placements
   
5,467,200
   
3,124,622
         
-
   
-
   
3,124,622
 
     Shares issued under private
          placement subsequently  canceled
          and subscription refunded
   
(80,000
)
 
(44,112
)
       
-
         
(44,112
)
Finder's fee
         
(139,436
)
                   
(139,436
)
Issued under 2006 consultant stock compensation plan
   
1,000,000
   
228,000
         
-
   
-
   
228,000
 
     Valuation of warrants previously
          issued upon changes in their terms
          during year
   
-
   
(2,094,580
)
 
2,094,580
         
-
   
-
 
Valuation of warrants issued under private placements
   
-
   
(3,634,772
)
 
3,634,772
         
-
   
-
 
Net loss
   
-
   
-
   
 
   
-
   
(682,097
)
 
(682,097
)
Balance June 30, 2006
   
14,521,744
 
$
2,255,394
 
$
5,729,352
 
$
20,391
 
$
(5,480,356
)
$
2,524,781
 

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

5

LiveReel Media Corporation
(Formerly Noble House Entertainment Inc.)
Notes to Consolidated Financial Statements
(Canadian Dollars)
June 30, 2006 and 2005


1.
NATURE OF OPERATIONS

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

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

The Company changed its name from Noble House Entertainment Inc. to LiveReel Media Corporation effective October 12, 2006.


2.    SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

These consolidated financial statements are prepared in Canadian dollars in accordance with accounting principles generally accepted in Canada, which conform, in all material respects, with accounting principles generally accepted in the United States, except as disclosed in Note 17.

Principles of Consolidation

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

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

All intercompany balances and transactions have been eliminated on consolidation.

Revenue Recognition

Revenue from the licensing of film and television programs is recognized when:
i.   the Company has persuasive evidence of a contractual arrangement;
ii.   the production has been completed;
iii.   the contractual delivery arrangements have been satisfied;
 
iv.
the licensing period has commenced and the customer can begin its exploitation,
exhibition or sale;
v.   the fee is fixed or determinable; and
vi.   collectibility of proceeds is reasonably assured.

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

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



6

LiveReel Media Corporation
(Formerly Noble House Entertainment Inc.)
Notes to Consolidated Financial Statements
(Canadian Dollars)
June 30, 2006 and 2005


2.   SIGNIFICANT ACCOUNTING POLICIES (continued)

Investment in Film and Television Programs

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

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

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

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

Foreign Currency Translation

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

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

7



LiveReel Media Corporation
(Formerly Noble House Entertainment Inc.)
Notes to Consolidated Financial Statements
(Canadian Dollars)
June 30, 2006 and 2005


2.   SIGNIFICANT ACCOUNTING POLICIES (continued)

Stock-Based Compensation Plan

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

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

Loss Per Share

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

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

   Use of estimates

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

3.   TEASURY BILLS

The Company invested its surplus funds in US treasury bills through a brokerage firm, which is a shareholder of the Company. The treasury bills expire in October 2006 and their carrying value is not significantly different from its market value as at the balance sheet date.

8

LiveReel Media Corporation
(Formerly Noble House Entertainment Inc.)
Notes to Consolidated Financial Statements
(Canadian Dollars)
June 30, 2006 and 2005

 
4.   ACCOUNTS RECEIVABLE AND PREPAYMENTS
 

As at June 30,
     
2006
 
2005
 
               
Due from Production company
   
(a
)
$
341,213
 
$
3,777
 
Taxes recoverable
         
13,782
   
2,206
 
Deposits and prepayments
   
(b
)
 
6,936
   
-
 
                     
         
$
361,931
 
$
5,983
 
 
   (a)   Represents funds advanced to a production company, owned by the former chief executive officer and a director of the Company and an executive of the Company’s subsidiary. The Company’s subsidiary has entered into agreements to license scripts and screen plays and handle global distribution. These funds are provided or incurred on behalf of the production company and are repayable on demand and carry no interest.

(b)   The Company paid an advance of US $ 7,500 in October 2005 to a firm of lawyer to defend itself against a legal action initiated by an individual in Florida. The lawyer firm filed a motion to dismiss the case against the company in October 2005. There has not been any further development in the matter since then. The balance of the advance after accounting for the legal costs charged up to June 30, 2006 is held against future legal costs if any in the matter and is included in deposits and prepayments.


5.   DEFERRED STOCK BASED COMPENSATION

Deferred stock based compensation relates to the fair value of shares issued under the Company’s 2006 Consultant stock compensation Plan for services that will be performed during the period subsequent to the balance sheet date. Changes during the fiscal years 2006 and 2005 were respectively as follows:

 
Year ended June 30,
 
2006
 
2005
 
   
No. of shares issued
 
Fair value
 
No. of shares issued
 
Fair value
 
Balance at the beginning of year
 
-
 
-
 
-
 
-
 
Issued during year
   
1,000,000
 
$
228,000
   
-
 
$
-
 
Expensed during year
         
(114,001
)
 
-
   
-
 
Balance at end of year
   
1,000,000
 
$
113,999
   
-
 
$
-
 


The above shares were issued to three consultants for services for twelve-month period ending December 31, 2006 and includes 100,000 issued to the former chief Financial Officer and a director for his services under a consulting contract. The issue was authorised by the board of directors of the Company on March 6, 2006.




9




LiveReel Media Corporation
(Formerly Noble House Entertainment Inc.)
Notes to Consolidated Financial Statements
(Canadian Dollars)
June 30, 2006 and 2005

6.
INVESTMENT IN FILM AND TELEVISION PROGRAMS

   
Scripts & Synopsis
 
Distribution contracts
 
Total
 
Scripts & Synopsis
 
Distribution contracts
 
Total
 
As at June 30,
 
2006
 
2005
 
Balance at beginning
 
$
172,500
 
$
60,000
 
$
232,500
 
$
-
 
$
-
 
$
-
 
Acquisitions during period
   
-
   
-
   
-
   
230,000
   
120,000
   
350,000
 
Amortization
   
(147,500
)
 
(60,000
)
 
(207,500
)
 
(57,500
)
 
(60,000
)
 
(117,500
)
Balance at end of period
 
$
25,000
 
$
-
 
$
25,000
 
$
172,500
 
$
60,000
 
$
232,500
 


The value assigned on the acquisition of the scripts and synopsis and distribution contracts was based on an independent valuation provided by a Los Angeles based film distribution and sales house and was based on title by title evaluation.

Based on industry knowledge, experience and expertise, the management established the production budget estimates as well as potential revenues for each of the scripts based on a Low, Medium and High projection. It determined the budget for the individual projects taking a completed script and breaking down individual elements -- character/actor, locations/set, service/production requirements.  Based on these elements, the management built a budget to estimate the cost to produce each film. At this point, no quotations were obtained from third parties for the elements of the budgets. This is because many budget elements are variable right up until the actual production on the film.

 These variable elements include talent costs, crew labour rates, equipment rental and post-production service costs. Generally, the management expects to negotiate a reduction against budget in the costs for variable elements. Thus, the estimated production budget is viewed as a high estimate.

The management then determined the projections of revenue after distribution commission, by comparing the actual prior experience of the management and consultants and with reports from various sales agencies that work, and have worked, with them. The management built low, medium and high revenue models form the bottom up based on estimated revenues by individual territory sales throughout the world.  

The management believes that the Low, Medium and High projections account for both the variable quality of the final product and the general performance of the entertainment industry.

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

The carrying value of the distribution contract was fully written off since management review at June 30, 2006 concluded that no further revenue was expected without incurring significant costs which the management was not prepared to do.

10

 

LiveReel Media Corporation
(Formerly Noble House Entertainment Inc.)
Notes to Consolidated Financial Statements
(Canadian Dollars)
June 30, 2006 and 2005

 
7.   ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
 
 
As at June 30,
     
2006
 
2005
 
Accounts payable
   
(a
)
$
16,821
 
$
24,243
 
Accrual
   
(b
)
 
63,112
   
11,694
 
Production advances
   
(c
)
 
32,540
   
10,940
 
         
$
112,473
 
$
46,877
 
 

 
(a)   Accounts payable includes $1,562 (2005: $15,728) due to a corporate shareholder, Current Capital Corp., which is owned by one of the directors of the Company, and $3,610 (2005: $nil) due to the chief executive officer.
 
(b)   Accruals include $44,112 representing a subscription received from a private placee who originally participated in the private placement but later proved ineligible to participate and hence his subscription was refunded and shares issued to him were cancelled subsequent to the balance sheet date. (See also Note 9(b)(ii)).

(c)   Production advances were received from two production companies towards script and screen play development. A former director of the company and an executive of its subsidiary are among the owners of one of the production companies, which advanced $26,540 (2005: $8,900)

8.
ADVANCES FROM SHAREHOLDERS

 
Advances from shareholders represent funds advanced or expenses incurred on behalf of the Company by shareholder corporations from time to time. These advances are unsecured, non-interest bearing and are payable on demand.

11

LiveReel Media Corporation
(Formerly Noble House Entertainment Inc.)
Notes to Consolidated Financial Statements
(Canadian Dollars)
June 30, 2006 and 2005

9.   CAPITAL STOCK
 
a)   Authorized: Unlimited number of common shares
 
(b)   Issued:
 
As at June 30,
 
 
 
2006
 
2005
 
 
 
 
 
Common
 
 
 
Common
 
 
 
 
 
 
 
Shares
 
Amount
 
Shares
 
Amount
 
                        
Beginning of year
         
8,134,544
 
$
4,815,672
   
9,168,991
 
$
4,460,857
 
Reverse stock split
         
-
   
-
   
(4,583,828
)
 
-
 
Buy-back of fractional shares
         
-
   
-
   
(619
)
 
(185
)
Issued to acquire film and
         
-
   
-
   
3,500,000
   
350,000
 
     television programs
          (iii)                      
Issued in settlement of fees
         
-
   
-
   
50,000
   
5,000
 
Issued under 2006 Consultant stock compensation plan
          (i)
  1,000,000
   
228,000
             
Issued under a private placement
  (ii) 
5,467,200
   
3,124,622
             
Shares issued under private placement being canceled subsequently
   
Note 7
 
  ( b)
(80,000
)
 
(44,112
)
           
Expenses relating to private palcement
         (ii)
      
   
(139,436
)
           
Warrants ( note 10)
               
(5,729,352
)
       
-
 
                                 
 
   
 
   
14,521,744
 
$
2,255,394
   
8,134,544
 
$
4,815,672
 
 
(i)     On February 20, 2006, the Company filed for registration with the United States Securities and Exchange Commission, two Plans - (a) 2006 stock option plan for 1 million options and (b) 2006 Consultant stock compensation plan for 1 million common shares.
 
On March 6, 2006, the board of directors of the Company allotted 1 million shares under the 2006 Consultant stock compensation plan to three consultants for services during the year ending December 31, 2006. The shares were valued at fair market value on the date of allotment which was US$0.20 per share. See Note 5 for further details.
 
No options have yet been allotted. The board of directors of the Company shall have the full discretion to decide the option price and vesting periods. The options are convertible into an equal number of common shares of the Company.
 
(ii)   On March 6, 2006, the board of directors of the Company approved a private placement arrangement with a group of accredited investors. The private placement involved issuance of a Unit at a price of US$0.50. The Unit consisted of one common share of the Company and one half warrant expiring within two years of issuance of the Unit. One whole warrant is convertible into one common share of the Company at a conversion price of US$0.65. The conversion price was reduced to US$0.50 by a Board resolution dated June 21, 2006.

12

 
 
LiveReel Media Corporation
(Formerly Noble House Entertainment Inc.)
Notes to Consolidated Financial Statements
(Canadian Dollars)
June 30, 2006 and 2005

9.   CAPITAL STOCK , (b) Issued, (ii) - continued…….
 
The private placement was closed on April 15, 2006. 2,387,200 units were subscribed and paid for resulting in issuance of 2,387,200 common shares and 1,193,600 whole warrants.
 
The company paid a finders fee of $139,436 at the rate of 10% of the proceeds from the private placement to Current Capital Corp ., a related shareholder corporation owned by one of the directors of the Company.
 
On April 24, 2006, the board of directors of the Company approved another private placement arrangement with a group of accredited investors. The private placement involved issuance of a Unit at a price of US$0.50. The Unit consisted of one common share of the Company and one half warrant expiring within two years of issuance of the Unit. One whole warrant is convertible into one common share of the Company at a conversion price of US$0.50.
 
This private placement was closed on June 27, 2006. 3,080,000 units were subscribed and paid for resulting in issuance of 3,000,000 common shares and 1,500,000 whole warrants. Subscription funds received in respect of 80,000 units were returned subsequently as explained in Note 7(b).
 
The shares issued under the above private placements are restricted in terms of their saleability in accordance with the regulations of the U.S. Securities and Exchange Commission.

(iii) The Company issued 3.5 million shares in November 2004 to an independent production house in settlement of the value of acquisition of certain theatrical film properties. These shares cannot be sold or transferred by the vendor for at least five years from the date of issuance without the approval of the Company as per the terms of the asset purchase agreement dated November 30, 2004.

10.   WARRANTS

As at June 30,
   
 
2006
 
2005
 
 
 
 
 
# of warrants
 
Fair value
 
# of warrants
 
Fair value
 
Issued and outstanding at beginning of year
         
3,500,000
         
3,500,000
   
-
 
Issued previously being revalued
   
i
         
2,094,580
   
-
   
-
 
Isuued with private placement closed on April 15,2006
   
ii
   
1,193,600
   
1,150,081
   
-
   
-
 
Isuued with private placement closed on June 27, 2006
   
iii
   
1,500,000
   
2,484,691
   
-
   
-
 
Issued and outstanding at end of year
   
iv
   
6,193,600
 
$
5,729,352
   
3,500,000
 
$
-
 

 

13
 

 
LiveReel Media Corporation
(Formerly Noble House Entertainment Inc.)
Notes to Consolidated Financial Statements
(Canadian Dollars)
June 30, 2006 and 2005

10. W ARRANTS, (i) - continued
 
(i)     On November 30, 2004, the Company issued 3.5 million warrants to a production house, in which a former director and chief executive officer of the Company holds controlling interest, in settlement of the value of acquisition of certain theatrical film properties. These warrants are convertible into an equal number of common shares of the Company. The conversion price was $1 per warrant and conversion expiry date was November 30, 2006.
 
On January 18, 2006, the conversion price of the above warrants was reduced to US$0.50 per warrant and the expiry date was extended to November 30, 2008 by the board of directors of the Company.
 
As a result of changes in terms of the warrants issued, the fair value of these warrants has been estimated, on January 18, 2006, the date of the changes, using a Black-Scholes option price model with the following assumptions:
 

Risk free interest rate            
5%
Expected dividend              
nil
Expected volatility              
128%
Expected life              
1047 days
Market price              
US$0.66
 
             The amount of $2,094,240 has been accounted for as a reduction of the value of the shares issued. None of the warrants were exercised or expired as at June 30, 2006.

(ii)        The company issued 1,193,600 warrants under a 2006 private placement as explained in Note 9(b) (ii). These warrants are convertible into equal number of common shares at an exercise price of US$0.50 per warrant and expiry within two years of their issue. As at June 30, 2006, none of the warrants were exercised or expired.
 
The fair value of these warrants on April 15, 2006, the closing date for the private placement, has been estimated using a Black-Scholes option price model with the following assumptions:

Risk free interest rate            
5%
Expected dividend            
nil
Expected volatility            
330%
Expected life              
731 days
Market price              
US$0.85
 
                 The amount of $1,150,081 has been accounted for as a reduction of the value of the shares issued.
 


14

LiveReel Media Corporation
(Formerly Noble House Entertainment Inc.)
Notes to Consolidated Financial Statements
(Canadian Dollars)
June 30, 2006 and 2005


10.    WARRANTS - Continued…….

(iii)       The company issued 1,500,000 warrants under another 2006 private placement as explained in Note 9(b) (ii). These warrants are convertible into equal number of common shares at an exercise price of US$0.50 per warrant and expire within two years of their issue. As at June 30, 2006, none of the warrants were exercised or expired.
 
The fair value of these warrants, on June 27, 2006, the closing date for this private placement has been estimated using a Black-Scholes option price model with the following assumptions:

Risk free interest rate            
5%
Expected dividend            
nil
Expected volatility            
203%
Expected life              
731 days
Market price              
US$1.60
 
The amount of $2,484,691 has been accounted for as a reduction of the value of the shares issued.

Option price models used for calculating fair value of warrants require input of highly subjective assumptions including the expected price volatility. Changes in the subjective input assumptions can materially affect the fair value estimate, and therefore the models do not necessarily provide a reliable measure of the fair value of the Company’s warrants.
 
(iv)     The shares issuable upon exercise of the warrants issued are restricted in terms of their saleability in accordance with the regulations of the U.S. Securities and Exchange Commission.

11.   LOSS PER SHARE

Loss per share is calculated on the weighted average number of common   shares outstanding during the year ended June 30, 2006, which were 9,494,677 shares (2005: 6,629,968 and 2004: 3,680,536 (post-2005 reverse-split)).

The Company had 6.2 million share purchase warrants issued and outstanding as at June 30, 2006. Inclusion of these warrants in the computation of diluted loss per share would have an anti-dilutive effect on loss per share and is therefore excluded from the computation. Consequently, there is no difference between loss per share and diluted loss per share.



15

LiveReel Media Corporation
(Formerly Noble House Entertainment Inc.)
Notes to Consolidated Financial Statements
(Canadian Dollars)
June 30, 2006 and 2005


12.   INCOME TAXES

The effective tax rate of Nil (2005 - Nil) for income taxes varies from the statutory income tax rate of approximately 36% (2005 - 36%) due to the fact that no tax recoveries have been recorded for losses incurred, as management has not determined that it is more likely than not that the losses will be utilized before they expire.

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

   
2006
 
2005
 
Amounts related to tax loss and credit carry forwards
 
$
467,000
 
$
273,000
 
               
Net future tax assets
 
$
467,000
 
$
273,000
 
Less: valuation allowance
   
(467,000
)
 
(273,000
)
 
    $  -    
$
-
 


The Company has carry forward tax losses of approximately $1.3 million, which may be applied against future taxable income and expire as detailed below. The benefit arising from these losses has not been recorded in the financial statements.

2007
 
$
77,000
 
2008
   
31,000
 
2009
   
19,000
 
2010
   
212,000
 
2011
   
214,000
 
2015
   
204,000
 
2016
   
539,000
 
   
$
1,296,000
 
 
13.   RELATED PARTY TRANSACTIONS

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

 
i.
Current Capital Corp., a shareholder corporation owned by one of the directors charged approximately $4,200 for the premises rent, telephone, consultants’ fees and other office expenses (2004 - $5,400; 2004 - $12,600).

 
ii.
Consulting fees include amounts to Snapper Inc., a shareholder corporation, of $Nil (2005 - $nil; 2004 - $60,372).

 
iii.
Consulting fees include approximately $75,000 of fees paid to a former director (2005: $30,000 and 2004 - $Nil).

 
iv.
Rent of $15,600 (2005: $6,500 and 2004 - $Nil) is charged in respect of rent for premises owned by a former director of the Company.

 
v.
Expenses reimbursed to Chief Executive Officer and a director $9,600 (2005 and 2004: $nil)

16

LiveReel Media Corporation
(Formerly Noble House Entertainment Inc.)
Notes to Consolidated Financial Statements
(Canadian Dollars)
June 30, 2006 and 2005


14.   COMMITMENTS AND CONTINGENT LIABILITIES

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

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

Notwithstanding the above, the Company believes that the case is without merit, given that the Company never received the funds. In the opinion of management, the outcome of the case is not reasonably expected to result in a material adverse effect on the Company’s financial position, and therefore, no provision has been made for this claim in the financial statements. The Company’ lawyer has filed a motion to dismiss the case.

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

15.   SEGMENTED INFORMATION

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

The accounting policies of the segments are same as those described in Note 2. The Company evaluates each segment’s performance based on its contribution to consolidated net earnings. There are no inter-segment charges or transactions. The table below presents summarised financial information for the fiscal years ended June 30, 2006 and 2005. There were no operating segments in the fiscal year 2004 and therefore no comparatives are provided for that year.
 

17
 
 
LiveReel Media Corporation
(Formerly Noble House Entertainment Inc.)
Notes to Consolidated Financial Statements
(Canadian Dollars)
June 30, 2006 and 2005


15.   SEGMENTED INFORMATION - continued..

Geographic Information

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

Business Segments

   
2006
 
 
2005
 
 
 
Licensing
 
Production
 
Distribution
 
Total
 
Licensing
 
Production
 
Distribution
 
Total
 
Total revenue
 
$
-
 
$
-
 
$
7,052
 
$
7,052
   
-
   
-
   
5,031
   
5,031
 
Earnings (losses) from operations
   
(239,060
)
 
(91,560
)
 
(144,508
)
 
(475,128
)
 
(27,586
)
 
(27,586
)
 
(27,586
)
 
(82,758
)
Total assets
   
25,000
   
-
   
341,213
   
366,213
   
172,000
   
3,752
   
60,000
   
235,752
 
Total liabilities
   
-
   
32,540
   
-
   
32,540
   
-
   
11,900
   
-
   
11,900
 
Reconciliation to Financial Statements
                                                 
Revenue
                                                 
Total revenue from reportable segments
                   
$
7,052
                     
5,031
 
Other
                     
-
                     
-
 
                     
$
7,052
                     
5,031
 
Net Loss
                                                 
Total losses from reportable segments
                   
$
(475,128
)
                   
(82,758
)
Other
                     
(206,969
)
                   
(176,775
)
                     
$
(682,097
)
                   
(259,533
)
Assets
                                                 
Total assets used for reportable segments
                   
$
366,213
                     
235,752
 
Other
                     
2,275,387
                     
4,360
 
                     
$
2,641,600
                     
240,112
 
Liabilities
                                                 
Total liabilities of the reportable segments
                   
$
32,540
                     
11,900
 
Other
                     
84,279
                     
190,408
 
                     
$
116,819
                     
202,308
 


18

LiveReel Media Corporation
(Formerly Noble House Entertainment Inc.)
Notes to Consolidated Financial Statements
(Canadian Dollars)
June 30, 2006 and 2005

16.   FINANCIAL INSTRUMENTS

The fair value for all financial assets and liabilities are considered to approximate their carrying values due to their short-term nature.


17.
    DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

These financial statements have been prepared in accordance with generally accepted accounting principles in Canada (“Canadian GAAP”). Material variations in the accounting principles, practices and methods used in preparing these consolidated financial statements from principles, practices and methods used in the United States (“US GAAP”) and in SEC Regulation S-X are described and quantified below.

June 30,
 
2006
 
2005
 
 
 
Balance under Canadian GAAP
 
Adjustment
 
Balance under US GAAP
 
Balance under Canadian GAAP
 
Adjustment
 
Balance under US GAAP
 
Balance Sheets
                         
                           
Current assets
 
$
2,616,600
       
$
2,616,600
 
$
7,612
       
$
7,612
 
Long term assets
   
25,000
   
-
   
25,000
   
232,500
   
-
 
$
232,500
 
Total assets
 
$
2,641,600
 
$
-
 
$
2,641,600
 
$
240,112
 
$
-
 
$
240,112
 
                                       
Current Liabilities
   
116,819
         
116,819
   
202,308
         
202,308
 
Capital stock
   
2,255,394
         
2,255,394
   
4,815,672
         
4,815,672
 
Warrants
   
5,729,352
         
5,729,352
   
-
         
-
 
Accumulated other comprehensive income(loss)
   
-
   
(33,755
)
 
(33,755
)
 
-
   
203
   
203
 
Contributed surplus
   
20,391
         
20,391
   
20,391
         
20,391
 
Deficit
   
(5,480,356
)
 
33,755
   
(5,446,601
)
 
(4,798,259
)
 
(203
)
 
(4,798,462
)
Liabilities and shareholders' equity
 
$
2,641,600
 
$
-
 
$
2,641,600
 
$
240,112
 
$
-
 
$
240,112
 

 

19

LiveReel Media Corporation
(Formerly Noble House Entertainment Inc.)
Notes to Consolidated Financial Statements
(Canadian Dollars)
June 30, 2006 and 2005


17.
DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued)

The impact of significant US GAAP variations on the Consolidated Statement of Operations are as follows:

Year ended June 30
 
2006
 
2005
 
2004
 
               
Net loss for year, Canadian GAAP
 
$
(682,097
)
$
(259,533
)
$
(214,601
)
Adjustment re: 2003 write down of production costs and contract rights costs
   
-
   
-
   
110,000
 
Reclassification of exchange loss(gain) on year end translation of foreign currency items and balances
   
33,958
   
(203
)
 
-
 
Loss for year, US GAAP
   
(648,139
)
 
(259,736
)
 
(104,601
)
Reclassification of exchange gain(loss) on period end translation of foreign currency items and balances
   
(33,958
)
 
203
   
-
 
Comprehensive loss for year, US GAAP
   
(682,097
)
 
(259,533
)
 
(104,601
)
                     
Basic and diluted loss per share, US GAAP
   
(0.07
)
 
(0.04
)
 
(0.03
)


Net loss per share for the fiscal year 2004 is based on the post-reverse split number of shares issued and outstanding.

The impact of the above differences between Canadian GAAP and US GAAP on the consolidated statements of cash flows would be as follows:

Year ended June 30
 
2006
 
2005
 
2004
 
               
Operating activities under Canadian GAAP
 
$
( 650,948
)
  $
 (104,347
)
  $
( 95,659
)
Production costs
   
-
   
-
   
(150
)
Operating activities under US GAAP
   
(650,948
)
 
(104,347
)
 
(95,809
)
Investing activities under Canadian GAAP
   
(279,125
)
 
-
   
(150
)
Deferred production costs
   
-
   
-
   
150
 
Investing activities under US GAAP
   
(279,125
)
 
-
   
-
 
Financing activities under Canadian and US GAAP
   
2,789,989
   
105,731
   
95,830
 
Increase in cash
   
1,859,916
   
1,384
   
21
 
Cash, beginning of year
   
1,629
   
245
   
224
 
Cash, end of year
 
$
1,861,545
 
$
1,629
 
$
245
 

 
20

LiveReel Media Corporation
(Formerly Noble House Entertainment Inc.)
Notes to Consolidated Financial Statements
(Canadian Dollars)
June 30, 2006 and 2005


17.
   DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued)
 
 
Recently issued accounting standards
 
 
The following standards were issued by the Financial accounting Standards Board during 2006 and 2005:
 
 
In December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 123R, Share-Based Payment , SFAS No. 123R requires measurement and recording to the financial statements of the costs of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award, recognized over the period during which an employee is required to provide services in exchange for such award. Additionally, SFAS No. 123R requires the benefits of tax deductions different from recognized compensation expense to be reported as a financing cash flow, rather than as an operating cash flow as required under current literature. SFAS 123R will become effective for all registrants as of the first fiscal year beginning after June 15, 2005. Therefore, the required effective date was July 1, 2005. The adoption of SFAS 123R did not have a material impact on our consolidated financial position, results of operations or cash flows.

In March 2005, the SEC staff issued Staff Accounting Bulletin (“SAB”) No. 107, Share-Based Payment , which provides guidance on the interaction between SFAS No. 123R and certain SEC rules and regulations, as well as on the valuation of share-based payments. SAB No. 107 provides interpretive guidance related to valuation methods (including assumptions such as expected volatility and expected term), first time adoption of SFAS No. 123R in an interim period, the classification of compensation expense and disclosures subsequent to adoption of SFAS No. 123R. The Company believes this Statement will have no impact on the financial statements of the Company once adopted.
 
In March 2005, the FASB issued Interpretation 47 (“FIN 47”), Accounting for Conditional Asset Retirement Obligations - an interpretation of FASB No. 143 . FIN 47 clarifies that the term “conditional asset retirement obligation” as used in SFAS No. 143 refers to a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the entity. The obligation to perform the asset retirement activity is unconditional even though uncertainty exists about the timing and/or method of settlement. FIN 47 requires a liability to be recognized for the fair value of a conditional asset retirement obligation if the fair value of the liability can be reasonably estimated. FIN 47 was effective for fiscal years ending after December 15, 2005. The adoption of FIN 47 did not have a material impact on our consolidated financial position, results of operations or cash flows.
 
 
In May 2005, the FASB issued SFAS Statement No. 154, Accounting Changes and Error Corrections (“SFAS 154”). SFAS 154 is a replacement of Accounting Principles Board Opinion No. 20 (“APB 20”) and FASB Statement No. 3. SFAS 154 provides guidance on the accounting for and reporting of accounting changes and error corrections. It establishes retrospective application, or the latest practicable date, as the required method for reporting a change in accounting principle and the reporting of a correction of an error. SFAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The adoption of SFAS 154 is not expected to have a material impact on our consolidated financial position, results of operations or cash flows.
 
 
 
21
 

LiveReel Media Corporation
(Formerly Noble House Entertainment Inc.)
Notes to Consolidated Financial Statements
(Canadian Dollars)
June 30, 2006 and 2005

 

17.
DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued)
 
In June 2005, the FASB issued Staff Position Paper ( “FSP”) 115-1, The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments , superseding EITF 03-1. FSP 115-1 will replace the accounting guidance on the determination of whether an investment is other-than-temporarily impaired as set forth in EITF 03-1 with references to existing other-than-temporary impairment guidance. FSP 115-1 is effective for reporting periods beginning after December 15, 2005. Adoption of FSP 115-1 is not expected to have any material impact on our consolidated financial position, results of operations or cash flows.

In February 2006, FASB issued SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments - an Amendment of FASB Statements No. 133 and 140”. Among other things, SFAS No. 155 permits the election of fair value remeasurement for certain hybrid financial instruments that would otherwise require bifurcation under Statement 133, Accounting for Derivative Instruments and Hedging Activities. These hybrid financial instruments would include both assets and liabilities. SFAS No. 155 is effective for fiscal years beginning after September 15, 2006.
 
The Company has not yet determined the effect of future implementation of this new standard on its financial statements.

In March 2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial Assets” (“SFAS 156”). SFAS 156 addresses the accounting for recognized servicing assets and servicing liabilities related to certain transfers of the servicer’s financial assets and for acquisitions or assumptions of obligations to service financial assets that do not relate to the financial assets of the servicer and its related parties. SFAS 156 requires that all recognized servicing assets and servicing liabilities are initially measured at fair value, and subsequently measured at either fair value or by applying an amortization method for each class of recognized servicing assets and servicing liabilities. SFAS 156 is effective in fiscal years beginning after September 15, 2006. The adoption of SFAS 156 is not expected to have a material impact on our consolidated financial statements.

In July 2006, FASB issued FIN 48 “Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109” FIN 48 seeks to reduce the significant diversity in practice associated with financial statement recognition and measurement in accounting for income taxes. FIN 48 is effective in fiscal years beginning after December 15, 2006.
 
 
The Company has not yet determined the effect of future implementation of this new interpretation on its financial statements.

In September 2006, FASB issued Standard 157 ‘Fair Value Measurements’. FAS 157 provides enhanced guidance for using fair values to measure assets and liabilities and applies whenever other standards require (or permit) assets or liabilities to be measured at fair value. FAS157 does not expand the use of fair values in any new circumstances. FAS 157 is effective for fiscal years beginning after November 15, 2007.

The Company has not yet determined the effect of future implementation of this new interpretation on its financial statements.

In September 2006, FASB issued Statement No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements No. 87, 88, 106, and 132(R) .  This Statement applies to employers that sponsor single-employer defined benefit pension and other postretirement plans.

22

 

LiveReel Media Corporation
(Formerly Noble House Entertainment Inc.)
(Canadian Dollars)
June 30, 2006 and 2005
 

17.
DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued)

The requirement to recognize the funded status of a benefit plan and the disclosure requirements for entities with publicly traded equity securities are effective as of the end of the fiscal year ending after December 15, 2006

The Company currently does not have any defined benefit plan or any other post retirement plans. The Company will therefore determine the effect of future implementation of this new FAS, if and when it introduces any post retirement plans.

1 8     PRESENTATION

Certain prior year’s amounts have been reclassified to conform to current presentation.
 

 

23
 

 

 

Exhibit 1.1
 
 
PAGE 1
 
 
 
EXHIBIT 1.3
 


EXHIBIT 19(b)1.3



BY-LAW 1

A by-law relating generally to the transaction of the business and affairs of

LIVEREEL MEDIA CORPORATION




Contents

One    
-
Interpretation
     
Two    
-
Business of the Corporation
     
Three    
-
Borrowing and Security
     
Four    
-
Directors
     
Five    
-
Committees
     
Six    
-
Officers
     
Seven    
-
Protection of Directors, Officers and Others
     
Eight    
-
Shares
     
Nine    
-
Dividends and Rights
     
Ten    
-
Meetings of Shareholders
     
Eleven    
-
Notices
     
Twelve    
-
Effective Date and Repeal


BE IT ENACTED AS A BY-LAW OF THE CORPORATION AS FOLLOWS:


 


 

TABLE OF CONTENTS FOR BY-LAW 1
 
   
SECTION ONE INTERPRETATION
21
1.01 Definitions
21
SECTION TWO BUSINESS OF THE CORPORATION
22
2.01 Registered Office
22
2.02 Corporate Seal
22
2.03 Financial Year
22
2.04 Execution of Instruments
22
2.05 Banking Arrangements
22
2.06 Voting Rights in Other Bodies Corporate
22
2.07 Divisions
22
SECTION THREE BORROWING AND SECURITY
23
3.01 Borrowing Power
23
3.02 Delegation
23
SECTION FOUR DIRECTORS
24
4.01 Number of Directors
24
4.02 Qualification
24
4.03 Election and Term
24
4.04 Removal of Directors
24
4.05 Vacation of Office
24
4.06 Appointment of Additional Directors
24
4.07 Action by the Board
24
4.08 Canadian Directors Present at Meetings
24
4.09 Meeting by Telephone
25
4.10 Signed Resolutions
25
4.11 Place of Meetings
25
4.12 Calling of Meetings
25
4.13 Notice of Meeting
25
4.14 First Meeting of New Board
25
4.15 Adjourned Meeting
26



4.16 Regular Meetings
26
4.17 Chair
26
4.18 Quorum
26
4.19 Votes to Govern
26
4.20 Conflict of Interest
26
4.21 Remuneration and Expenses
26
SECTION FIVE COMMITTEES
27
5.01 Committees of the Board
27
5.02 Transaction of Business
27
5.03 Audit Committee
27
5.04 Advisory Bodies
27
5.05 Procedure
27
SECTION SIX OFFICERS
28
6.01 Appointment
28
6.02 Powers and Duties of Officers
28
6.03 Term of Office
28
6.04 Agents and Attorneys
28
6.05 Conflict of Interest
28
SECTION SEVEN PROTECTION OF DIRECTORS, OFFICERS AND OTHERS
29
7.01 Limitation of Liability
29
7.02 Indemnity
29
7.03 Advance of Costs
29
7.04 Additional Advance
29
7.05 Indemnities Not Limiting
29
7.06 Insurance
29
SECTION EIGHT SHARES
30
8.01 Allotment of Shares
30
8.02 Commissions
30
8.03 Registration of Transfers
30
8.04 Non-recognition of Trust
30
8.05 Share Certificates
30
8.06 Replacement of Share Certificates
30
8.07 Joint Shareholders
30
8.08 Deceased Shareholders
31
8.09 Transfer Agents and Registrars
31
8.10 Record Dates
31
SECTION NINE DIVIDENDS
32



9.01 Dividends
32
9.02 Dividend Cheques
32
9.03 Record Date
32
SECTION TEN MEETINGS OF SHAREHOLDERS
33
10.01 Annual Meetings
33
10.02 Special Meetings
33
10.03 Place of Meetings
33
10.04 Participation in Meeting by Electronic Means
33
10.05 Meeting held by Electronic Means
33
10.06 Notice of Meetings
33
10.07 List of Shareholders Entitled to Notice
33
10.08 Record Date for Notice
34
10.09 Meetings Without Notice
34
10.10 Chair, Secretary and Scrutineers
34
10.11 Persons Entitled to be Present
34
10.12 Quorum
34
10.13 Right to Vote
34
10.14 Proxyholders and Representatives
35
10.15 Time for Deposit of Proxies
35
10.16 Joint Shareholders
35
10.17 Votes to Govern
35
10.18 Show of Hands
35
10.19 Ballots
35
10.20 Adjournment
36
SECTION ELEVEN NOTICES
37
11.01 Method of Giving Notices
37
11.02 Notice to Joint Shareholders
37
11.03 Computation of Time
37
11.04 Undelivered Notices
37
11.05 Omissions and Errors
37
11.06 Persons Entitled by Death or Operation of Law
37
11.07 Waiver of Notice
37
11.08 Interpretation
38
11.09 Electronic Documents
38
SECTION TWELVE EFFECTIVE DATE AND REPEAL
39
12.01 Effective Date
39
12.02 Repeal
39






SECTION ONE

1.01

INTERPRETATION

Definitions .   - In the by-laws of the Corporation, unless the context otherwise
requires:

“Act” means the Canada Business Corporations Act , or any statute that may be
substituted therefore, and the regulations to the Act, as from time to time amended;

“Appoint” includes “elect” and vice versa;

“Articles” means the articles attached to the certificate of continuance of the Corporation, as from time to time amended or restated;

“Board” means the board of directors of the Corporation;

“By-laws” means this by-law and all other by-laws of the Corporation from time
to time in force and effect;

“Corporation” means the corporation continued under the Act by the said certificate to which the articles are attached, and named “The Descartes Systems Group Inc.”;

“Director” means a member of the board;

“Including” means including, without limitation;

“Meeting of shareholders” includes an annual meeting of shareholders and a special meeting of shareholders; and “special meeting of shareholders” includes a meeting of any class or classes of shareholders and a special meeting of all shareholders entitled to vote at an annual meeting of shareholders;

“Prescribed” means prescribed in accordance with the Act; and

“Recorded address” has the meaning set forth in section 11.08. Save as aforesaid, words and expressions defined in the Act, including “distributing corporation”, “electronic document” and “resident Canadian”, have the same meanings when used herein. Words importing the singular number include the plural and vice versa; and words importing a person include an individual, partnership, association, body corporate, trustee, executor, administrator and legal representative.







SECTION TWO

BUSINESS OF THE CORPORATION

2.01   Registered Office.   - The registered office of the Corporation shall be in the province in Canada from time to time specified in the articles, and at such location therein initially as is specified in the notice thereof filed with the articles and thereafter as the board may from time to time determine.

2.02   Corporate Seal.   - The Corporation may, but need not, adopt a corporate seal and
if one is adopted it shall be in a form approved from time to time by the board.

2.03   Financial Year.   - Until changed by the board, the financial year of the
Corporation shall end on the last day of June in each year.

2.04   Execution of Instruments.   - Deeds, transfers, assignments, contracts, obligations, certificates and other instruments may be signed on behalf of the Corporation by any two of the directors and officers of the Corporation. In addition, any two of the directors and officers of the Corporation may from time to time direct the manner in which and the person or persons by whom any particular instrument or class of instruments may or shall be signed. Any signing officer may affix the corporate seal to any instrument requiring the same.

2.05   Banking Arrangements.   - The banking business of the Corporation, including the borrowing of money and the giving of security therefore, shall be transacted with such banks, trust companies or other bodies corporate or organizations as may from time to time be designated by or under the authority of the board. Such banking business or any part thereof shall be transacted under such agreements, instructions and delegations of powers as the board may from time to time prescribe.

2.06   Voting Rights in Other Bodies Corporate.   - The signing officers of the Corporation under section 2.04 may execute and deliver proxies and arrange for the issuance of voting certificates or other evidence of the right to exercise the voting rights attaching to any securities held by the Corporation. Such instruments shall be in favour of such persons as may be determined by the officers executing or arranging for the same. In addition, the board may from time to time direct the manner in which and the persons by whom any particular voting rights or class of voting rights may or shall be exercised.

2.07   Divisions. - The board may cause the business and operations of the Corporation or any part thereof to be divided into one or more divisions upon such basis, including types of business or operations, geographical territories, product lines or goods or services, as may be considered appropriate in each case. In connection with any such division the board or, subject to any direction by the board, the chief executive officer may authorize from time to time, upon such basis as may be considered appropriate in each case:




(a)  
Subdivision and Consolidation - the further division of the business and operations of any such division into sub-units and the consolidation of the business and operations of any such divisions and sub-units;

(b)  
Name - the designation of any such division or sub-unit by, and the carrying on of the business and operations of, any such division or sub-unit under, a name other than the name of the Corporation; provided that the Corporation shall set out its name in legible characters in all places required by law; and Officers - the appointment of officers for any such division or sub-unit, the determination of their powers and duties, and the removal of any of such officers so appointed, provided that any such officers shall not, as such, be officers of the Corporation.

(c)   Officers - the appointment of officers for any such division or sub-unit, the determination of their powers and duties, and the removal of any of such officers so appointed, provided that any such officers shall not, as such, be officers of the Corporation.





SECTION THREE

BORROWING AND SECURITY

3.01
Borrowing Power.   - Without limiting the borrowing powers of the Corporation as set forth in the Act, but subject to the articles, the board may from time to time on behalf of the Corporation, without authorization of the shareholders:

(a)   Borrow money upon the credit of the Corporation;

(b)
Issue, reissue, sell, pledge or hypothecate bonds, debentures, notes or other evidences of indebtedness or guarantee of the Corporation, whether secured or unsecured;

(c)
Give a guarantee on behalf of the Corporation to secure performance of any present or future indebtedness, liability or obligation of any person; and

(d)
Mortgage, hypothecate, pledge or otherwise create a security interest in all or any currently owned or subsequently acquired real or personal, movable or immovable, property of the Corporation, including book debts, rights, powers, franchises and undertakings, to secure any such bonds, debentures, notes or other evidences of indebtedness or guarantee or any other present or future indebtedness, liability or obligation of the Corporation.

Nothing in this section limits or restricts the borrowing of money by the Corporation on bills of exchange or promissory notes made, drawn, accepted or endorsed by or on behalf of the Corporation.

3.02   Delegation.   - Unless the articles of the Corporation otherwise provide, the board may from time to time delegate to a director, a committee of the board, or an officer of the Corporation any or all of the powers conferred on the board by section 3.01 to such extent and in such manner as the board may determine at the time of such delegation.




SECTION FOUR

DIRECTORS

4.01   Number of Directors .   - Until changed in accordance with the Act, the board shall consist of not fewer than the minimum number and not more than the maximum number of directors provided in the articles. The board shall consist of not fewer than the minimum number of directors required by the Act for a distributing corporation.

4.02   Qualification .   - No person shall be qualified for election as a director if such person is less than 18 years of age, is of unsound mind and has been so found by a court in Canada or elsewhere, is not an individual, or has the status of a bankrupt. Unless the articles otherwise provide, a director need not be a shareholder. Subject to the Act, at least 25 per cent of the directors shall be resident Canadians, or if the number of directors is fewer than four, at least one director shall be a resident Canadian. At least such number of directors as may be specified by the Act, other applicable law or stock exchange requirements shall not be officers or employees of the Corporation or of its affiliates.

4.03   Election and Term .   - Subject to the Act, the number of directors to be elected at each annual meeting of shareholders shall be the number of directors as determined by the board. Each director shall hold office for the stated term at the time of their election at any such meeting of shareholders or, if not stated, until the close of the first annual meeting of shareholders following the director’s election. Where the shareholders adopt an amendment to the articles to increase the number or maximum number of directors, the shareholders may, at the meeting at which they adopt the amendment, elect the additional number of directors authorized by the amendment. The election shall be by resolution. If an election of directors is not held at the proper time, the incumbent directors shall continue in office until their successors are elected.

4.04   Removal of Directors .   - Subject to the Act, the shareholders may by resolution passed at a meeting of shareholders specially called for such purpose remove any director from office and the vacancy created by such removal may be filled at the same meeting, failing which, subject to the Act, it may be filled by the board.

4.05   Vacation of Office .   - A director ceases to hold office on death, on removal from office by the shareholders, on ceasing to be qualified for election as a director, on receipt of a written resignation by the Corporation, or, if a time is specified in such resignation, at the time so specified, whichever is later. Subject to the Act, a quorum of the board may appoint a qualified individual to fill a vacancy in the board.

4.06   Appointment of Additional Directors .   - If the articles of the Corporation so provide, the directors may, within the maximum number permitted by the articles, appoint one or more additional directors, who shall hold office for a term expiring not later than the close of the next annual meeting of the shareholders, but the total number of directors so appointed may not exceed one third of the number of directors elected at the previous annual meeting of shareholders.

4.07   Action by the Board . - The board shall manage, or supervise the management of, the business and affairs of the Corporation. The powers of the board may be exercised at a meeting (subject to sections 4.08 and 4.09) at which a quorum is present or by resolution in writing signed by all the directors entitled to vote on that resolution at a meeting of the board. Where there is a vacancy in the board, the remaining directors may exercise all the powers of the board so long as a quorum remains in office.




4.08   Canadian Directors Present at Meetings . - Subject to the Act, the board shall not transact business at a meeting, other than filling a vacancy in the board, unless at least 25 per cent of the directors present are resident Canadians, or if the Corporation has fewer than four directors, at least one of the directors present is a resident Canadian, except where:

(a) A resident Canadian director who is unable to be present approves in writing, or by telephonic, electronic or other communication facility, the business transacted at the meeting; and

(b) The required number of resident Canadians would have been present had that director been present at the meeting.

4.09   Meeting by Telephone .   - Subject to the Act, if all the directors of the Corporation consent thereto generally or in respect of a particular meeting, a director may participate in a meeting of the board or of a committee of the board by means of a telephonic, electronic or other communication facility that permits all participants to communicate adequately with each other during the meeting, and a director participating in such a meeting by such means is deemed to be present at the meeting. Any such consent shall be effective whether given before or after the meeting to which it relates and may be given with respect to all meetings of the board and of committees of the board.

4.10   Signed Resolutions .   - Any resolution in writing may be signed in counterparts and if signed as of any date shall be deemed to have been passed on such date.

4.11   Place of Meetings . - Subject to the articles, meetings of the board may be held at any place in or outside Canada.

4.12   Calling of Meetings .   - Meetings of the board shall be held from time to time at such time and at such place as the board, the chair of the board, the chief executive officer, the president or any two directors may determine.

4.13   Notice of Meeting .   - Notice of the time and place of each meeting of the board shall be given in the manner provided in Section Eleven to each director not less than 48 hours before the time when the meeting is to be held. A notice of a meeting of directors need not specify the purpose of or the business to be transacted at the meeting except where the Act requires such purpose or business to be specified, including, if required by the Act, any proposal to:

(a) Submit to the shareholders any question or matter requiring approval of the shareholders;

(b) Fill a vacancy among the directors or in the office of auditor, or appoint additional directors;

(c) Issue securities except as authorized by the board;

(d) Issue shares of a series except as authorized by the board;

(e) Declare dividends;

(f) Purchase, redeem or otherwise acquire shares issued by the Corporation;

(g) Pay a commission for the sale of shares except as authorized by the board;

(h) Approve a management proxy circular;

(i) Approve a take-over bid circular or directors’ circular;




(j) Approve any annual financial statements; or

(k) Adopt, amend or repeal by-laws.

A director may in any manner waive a notice of a meeting of directors, and attendance of a director at a meeting of directors is a waiver of notice of the meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully called.

4.14   First Meeting of New Board .   - Provided a quorum of directors is present, each newly elected board may without notice hold its first meeting immediately following the meeting of shareholders at which such board is elected.

4.15   Adjourned Meeting .   - Notice of an adjourned meeting of the board is not required if the time and place of the adjourned meeting is announced at the original meeting.

4.16   Regular Meetings .   - The board may appoint a day or days in any month or months for regular meetings of the board at a place and hour to be named. A copy of any resolution of the board fixing the place and time of such regular meetings shall be sent to each director forthwith after being passed, but no other notice shall be required for any such regular meeting except where the Act requires the purpose thereof or the business to be transacted there at to be specified.

4.17   Chair .   - The chair of any meeting of the board shall be the first mentioned of such of the following positions as have been appointed and who is a director and is present at the meeting: chair of the board or the chair of the audit committee. If no person holding such a position is present, the directors present shall choose one of their numbers to be chair.

4.18   Quorum .   - Subject to the articles and subject to section 4.08, the quorum for the transaction of business at any meeting of the board shall consist of a majority of the minimum number of directors required by the articles or such greater number of directors as the board may from time to time determine.

4.19   Votes to Govern .   - At all meetings of the board every question shall be decided by a majority of the votes cast on the question. In case of an equality of votes the chair of the meeting shall not be entitled to a second or casting vote.

4.20   Conflict of Interest .   - A director or officer of the Corporation shall disclose to the Corporation, in the manner and to the extent provided by the Act, any interest that such
director or officer has in a material contract or transaction, whether made or proposed, with the Corporation, if such director or officer (a) is a party to the contract or transaction; (b) is a director or an officer, or an individual acting in a similar capacity, of a party to the contract or transaction; or (c) has a material interest in a party to the contract or transaction. Such a director shall not vote on any resolution to approve the same except as provided by the Act.

4.21   Remuneration and Expenses .   - The directors shall be paid such remuneration for their services as the board may from time to time determine. The directors shall also be entitled to be reimbursed for traveling and other expenses properly incurred by them in attending meetings of the board or any committee thereof. Nothing herein contained shall preclude any director from serving the Corporation in any other capacity and receiving remuneration therefore.





SECTION FIVE

COMMITTEES

5.01   Committees of the Board .   - The board may appoint one or more committees of the board, however designated, and delegate to any such committee any of the powers of the board except those, which pertain to items, which, under the Act, a committee of the board has no authority to exercise.

5.02   Transaction of Business . - The powers of a committee of the board may be exercised by a meeting at which a quorum is present or by resolution in writing signed by all members of such committee who would have been entitled to vote on that resolution at a meeting of the committee. Meetings of such committee may be held at any place in or outside Canada.

5.03   Audit Committee .   The board shall appoint annually from among its number an audit committee to be composed of not fewer than two directors who meet the independence and other requirements as may be specified by the Act, other applicable law and stock exchange requirements and who are not officers or employees of the Corporation or its affiliates. The audit committee shall have the powers and duties provided in the Act and in other applicable law and in addition, such other powers and duties as the board may determine.

5.04   Advisory Bodies . - The board may from time to time appoint such advisory bodies, as it may deem advisable.

5.05   Procedure .   - Unless otherwise determined by the board, each committee and advisory body shall have power to fix its quorum at not less than a majority of its members and to regulate its procedure.





SECTION SIX

OFFICERS

6.1   Appointment .   - The board may from time to time appoint a chair of the board, a
chief executive officer, a president, one or more vice-presidents (to which title may be added words indicating seniority or function), a secretary, a treasurer and such other officers as the board may determine, including one or more assistants to any of the officers so appointed. One person may hold more than one office. The board may specify the duties of and, in accordance with this by-law and subject to the Act, delegate to such officers powers to manage the business and affairs of the Corporation. Subject to section 6.02, an officer may but need not be a director.

6.02   Powers and Duties of Officers .   - The board may from time to time specify the duties of each officer, delegate to him or her powers to manage any business or affairs of the Corporation (including the power to sub-delegate) and change such duties and powers, all insofar as not prohibited by the Act. To the extent not otherwise so specified or delegated, and subject to the Act, the duties and powers of the officers of the Corporation shall be those usually pertaining to their respective offices.

6.03   Term of Office .   - The board, in its discretion, may remove any officer of the Corporation. Otherwise each officer appointed by the board shall hold office until a successor is appointed or until the officer resigns.

6.04   Agents and Attorneys . - The Corporation, by or under the authority of the board, shall have power from time to time to appoint agents or attorneys for the Corporation in or outside Canada with such powers (including the power to sub delegate) of management, administration or otherwise as may be thought fit.

6.05   Conflict of Interest .   - An officer shall disclose any interest in a material contract or material transaction, whether made or proposed, with the Corporation in accordance with section 4.20.

SECTION SEVEN

PROTECTION OF DIRECTORS, OFFICERS AND OTHERS

7.01   Limitation of Liability . - All directors and officers of the Corporation in exercising their powers and discharging their duties shall act honestly and in good faith with a view to the best interests of the Corporation and exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. Subject to the foregoing, and without limiting any defenses available to a director or an officer under the Act or otherwise, no director or officer shall be liable for the acts, omissions, failures, neglects or defaults of any other director, officer or employee, or for any loss, damage or expense happening to the Corporation through the insufficiency or deficiency of title to any property acquired for or on behalf of the Corporation, or for the insufficiency or deficiency of any security in or upon which any of the moneys of the Corporation shall be invested, or for any loss or damage arising from the bankruptcy, insolvency or tortious acts of any person with whom any of the moneys, securities or effects of the Corporation shall be deposited, or for any loss occasioned by any error of judgment or oversight on the part of such director or officer, or for any other loss, damage or misfortune which shall happen in the execution of the duties of office or in relation thereto; provided that nothing herein shall relieve any director or officer from the duty to act in accordance with the Act or from liability for any breach thereof.

7.02     Indemnity .   - Subject to the Act, the Corporation shall indemnify a director or an officer, a former director or officer, or another individual who acts or acted at the Corporation’s request as a director or officer, or an individual acting in a similar capacity, of another entity, and their heirs and legal representatives, against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by the individual in respect of any civil, criminal, administrative, investigative or other proceeding in which the individual is involved because of that association with the Corporation, or other entity, if such individual (a) acted honestly and in good faith with a view to the best interests of the Corporation, or, as the case may be, to the best interests of the other entity for which the individual acted as director or officer or in a similar capacity at the Corporation’s request; and (b) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, the individual had reasonable grounds for believing that the individual’s conduct was lawful.

7.03   Advance of Costs .   - The Corporation shall advance moneys to a director, officer or other individual for the costs, charges and expenses of a proceeding referred to in section 7.02. The individual shall repay the moneys if the individual does not fulfill the conditions of section 7.02.

7.04   Additional Advance .   - The Corporation shall, with the approval of a court, indemnify an individual referred to in section 7.02, or advance moneys under section 7.03, in respect of an action by or on behalf of the Corporation or other entity to procure a judgment in its favour, to which the individual is made a party because of the individual’s association with the Corporation or other entity as described in section 7.02 against all costs, charges and expenses reasonably incurred by the individual in connection with such action, if the individual fulfils the conditions set out in section 7.02.

7.05   Indemnities Not Limiting . - The provisions of this Article Seven shall be in addition to and not in substitution for or limitation of any rights, immunities and protections to which a person is otherwise entitled.

7.06   Insurance . - Subject to the Act, the Corporation may purchase and maintain insurance for the benefit of an individual referred to in section 7.02 hereof as the board may from time to time determine.





SECTION EIGHT

SHARES

8.01   Allotment of Shares .   - Subject to the Act and the articles, the board may from time to time allot or grant options to purchase the whole or any part of the authorized and unissued shares of the Corporation at such times and to such persons and for such consideration as the board shall determine, provided that no share shall be issued until it is fully paid as provided by the Act.

8.02   Commissions .   - The board may from time to time authorize the Corporation to pay a reasonable commission to any person in consideration of such person’s purchasing or agreeing to purchase shares of the Corporation, whether from the Corporation or from any other person, or procuring or agreeing to procure purchasers for any such shares. The board may, to the extent permitted by the Act, delegate this authority to a committee of directors.

8.03   Registration of Transfers .   - Subject to the Act, no transfer of a share shall be registered in a securities register except upon presentation of the certificate representing such share with an endorsement which complies with the Act made thereon or delivered therewith duly executed by an appropriate person as provided by the Act, together with such reasonable assurance that the endorsement is genuine and effective as the board may from time to time prescribe, upon payment of all applicable taxes and any reasonable fees prescribed by the board.

8.04   Non-recognition of Trusts.   - Subject to the Act, the Corporation may treat the registered holder of any share as the person exclusively entitled to vote, to receive notices, to receive any dividend or other payment in respect of the share, and otherwise to exercise all the rights and powers of an owner of the share.

8.05     Share Certificates . - Every holder of one or more shares of the Corporation shall be entitled, at the holder’s option, to a share certificate, or to a non-transferable written acknowledgement of such right to obtain a share certificate, stating the number and class or series of shares held by such holder as shown on the securities register. Subject to the Act, such certificates shall be in such form as the board may from time to time approve. Any such certificate shall be signed in accordance with section 2.04 and need not be under the corporate seal. Notwithstanding the foregoing, unless the board otherwise determines, certificates representing shares in respect of which a transfer agent and/or registrar has been appointed shall not be valid unless countersigned by or on behalf of such transfer agent and/or registrar. The signature of one of the signing officers under section 2.04 or, in the case of a certificate which is not valid unless countersigned by or on behalf of a transfer agent and/or registrar and in the case of a certificate which does not require a manual signature under the Act, the signatures of both signing officers under section 2.04 may be printed or otherwise mechanically reproduced in facsimile thereon. Every such facsimile signature shall for all purposes be deemed to be the signature of the officer whose signature it reproduces and shall be binding upon the Corporation. A certificate executed as aforesaid shall be valid notwithstanding that one or both of the officers whose facsimile signature appears thereon no longer holds office at the date of issue of the certificate.

8.06   Replacement of Share Certificates .   - The board or any officer or agent designated by the board may direct the issue of a new share or other such certificate in lieu of and upon cancellation of a certificate that has been mutilated or in substitution for a certificate claimed to have been lost, destroyed or wrongfully taken on payment of such reasonable fee and on such terms as to indemnity, reimbursement of expenses and evidence of loss and of title as the board may from time to time prescribe, whether generally or in any particular case.




8.07   Joint Shareholders .   - If two or more persons are registered as joint holders of any share, the Corporation shall not be bound to issue more than one certificate in respect thereof, and delivery of such certificate to one of such persons shall be sufficient delivery to all of them. Any one of such persons may give effectual receipts for the certificate issued in respect thereof or for any dividend, bonus, return of capital or other money payable or warrant issuable in respect of such share.

8.08   Deceased Shareholders .   - In the event of the death of a holder, or of one of the joint holders, of any share, the Corporation shall not be required to make any entry in the securities register in respect thereof or to make any dividend or other payments in respect thereof except upon production of all such documents as may be required by law and upon compliance with the reasonable requirements of the Corporation and its transfer agents.

8.09   Transfer Agents and Registrars .   - The board may from time to time appoint one or more agents to maintain, in respect of each class of shares of the Corporation issued by it, a central securities register and one or more branch securities registers. Such a person may be designated as transfer agent or registrar according to the functions of such person and one person may be designated both registrar and transfer agent subject to any applicable stock exchange requirements. The board may at any time terminate such appointment.

8.10   Record Dates .   - The board may, within the prescribed period, fix in advance a date as the record date for the purpose of determining the shareholders: (a) entitled to receive notice of a meeting of shareholders; (b) entitled to vote at a meeting of shareholders; (c) entitled to receive payment of a dividend; or (d) for any other purpose, and, unless waived in accordance with the Act, notice of any such record date shall be given within the prescribed period in the manner provided in the Act.





SECTION NINE

DIVIDENDS


9.01   Dividends .   - Subject to the Act, the board may from time to time declare dividends payable to the shareholders according to their respective rights and interests in the Corporation. Dividends may be paid in money or property or by issuing fully paid shares of the Corporation. Any dividend unclaimed after a period of six years from the date on which the same has been declared to be payable shall be forfeited and shall revert to the Corporation.

9.02   Dividend Cheques .   - A dividend payable in money shall be paid by cheque to the order of each registered holder of shares of the class or series in respect of which it has been declared and mailed by prepaid ordinary mail to such registered holder at the holder’s recorded address, unless such holder otherwise directs. In the case of joint holders the cheque shall, unless such joint holders otherwise direct, be made payable to the order of all of such joint holders and mailed to them at their recorded address. The mailing of such cheque as aforesaid, unless the same is not paid on due presentation, shall satisfy and discharge the liability for the dividend to the extent of the sum represented thereby plus the amount of any tax which the Corporation is required to and does withhold. In the event of non-receipt of any dividend cheque by the person to whom it is sent as aforesaid, the Corporation shall issue to such person a replacement cheque for a like amount on such terms as to indemnity, reimbursement of expenses and evidence of non-receipt and of title as the board may from time to time prescribe, whether generally or in any particular case.

9.03   Record Date . - The board may, within the prescribed period, fix in advance a date as the record date for the purpose of determining shareholders entitled to receive payment of a dividend and notice of the record date shall be given within the prescribed period in the manner provided by the Act. If no date is so fixed, the record date for the determination of the shareholders entitled to receive payment of any dividend or for such other purposes shall be at the close of business on the day on which the directors pass the resolution relating thereto.





SECTION TEN

MEETINGS OF SHAREHOLDERS

10.1   Annual Meetings .   - Subject to the Act, the board shall call an annual meeting of shareholders: (a) not later than 18 months after the Corporation comes into existence; and (b) subsequently, not later than 15 months after holding the last preceding annual meeting but no later than six months after the end of the Corporation’s preceding financial year. The annual meeting of shareholders shall be held for the purpose of considering the financial statements and reports required by the Act to be placed before the annual meeting, electing directors, appointing auditors and for the transaction of such other business as may properly be brought before the meeting.

10.02   Special Meetings . - The board shall have power to call a special meeting of shareholders at any time.

10.03   Place of Meetings .   - Meetings of shareholders shall be held at the registered office of the Corporation or elsewhere in Canada if the board shall so determine. A meeting of shareholders may be held at a place outside Canada if the place is specified in the articles or all the shareholders entitled to vote at the meeting agree that the meeting is to be held at that place. A shareholder who attends a meeting of shareholders held outside Canada is deemed to have agreed to it being held outside Canada except when the shareholder attends the meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully held. A meeting held pursuant to section 10.05 shall be deemed to be held at the place where the registered office of the Corporation is located.

10.04   Participation in Meeting by Electronic Means .   - Any person entitled to attend a meeting of shareholders may participate in the meeting, in accordance with the Act, by means of a telephonic, electronic or other communication facility that permits all participants to communicate adequately with each other during the meeting, if the Corporation makes available such a communication facility. A person participating in a meeting by such means is deemed for the purposes of the Act to be present at the meeting.

10.05   Meeting held by Electronic Means . - If the directors or the shareholders of the Corporation call a meeting of shareholders pursuant to the Act, those directors or shareholders, as the case may be, may determine that the meeting shall be held, in accordance with the Act, entirely by means of a telephonic, electronic or other communication facility that permits all participants to communicate adequately with each other during the meeting.

10.06     Notice of Meetings .   - Notice of the time and place of each meeting of shareholders shall be given in the manner provided in Section Eleven within the prescribed time to each director, to the auditor, and to each shareholder who at the close of business on the record date for notice is entered in the securities register as the holder of one or more shares carrying the right to vote at the meeting. Notice of a meeting of shareholders called for any purpose other than consideration of the financial statements and auditor’s report, election of directors and reappointment of the incumbent auditor shall state the nature of such business in sufficient detail to permit the shareholder to form a reasoned judgment thereon and shall state the text of any special resolution to be submitted to the meeting.



10.07   List of Shareholders Entitled to Notice .   - For every meeting of shareholders, the
Corporation shall prepare a list of shareholders entitled to receive notice of the meeting, arranged in alphabetical order and showing the number of shares held by each shareholder entitled to vote at the meeting, within the time period required by the Act. If a record date for notice of the meeting is fixed pursuant to section 10.08, the shareholders listed shall be those registered at the close of business on such record date. If no record date for notice is fixed, the shareholders listed shall be those registered at the close of business on the day immediately preceding the day on which notice of the meeting is given or, where no such notice is given, on the day on which the meeting is held. The list shall be available for examination by any shareholder during usual business hours at the registered office of the Corporation or at the place where the central securities register is maintained and at the meeting for which the list was prepared. Where a separate list of shareholders has not been prepared, the names of persons appearing in the securities register at the requisite time as the holder of one or more shares carrying the right to vote at such meeting shall be deemed to be a list of shareholders.

10.08     Record Date for Notice .   - The board may, within the prescribed period, fix in advance a date as the record date for the purpose of determining the shareholders entitled to vote at a meeting of shareholders and notice of the record date shall be given within the prescribed period in the manner provided by the Act. If no such record date is so fixed, the record date for the determination of the shareholders entitled to receive notice of the meeting shall be at the close of business on the day immediately preceding the day on which the notice is given or, if no notice is given, shall be the day on which the meeting is held.

10.09   Meetings Without Notice . - A meeting of shareholders may be held without notice at any time and place permitted by the Act (a) if all the shareholders entitled to vote thereat are present or duly represented or if those not present or represented waive notice of or otherwise consent to such meeting being held, and (b) if the auditors and the directors are present or waive notice of or otherwise consent to such meeting being held; so long as such shareholders, auditors or directors present are not attending for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully called. At such a meeting any business may be transacted which the Corporation at a meeting of shareholders may transact. If the meeting is held at a place outside Canada, shareholders not present or duly represented, but who have waived notice of or otherwise consented to such meeting, shall also be deemed to have consented to the meeting being held at such place.

10.10     Chair, Secretary and Scrutineers . - The chair of any meeting of shareholders shall be the first mentioned of such of the following officers as have been appointed and who is present at the meeting: chair of the board, the chief executive officer, president, or a vice president who is a shareholder. If no such officer is present within 15 minutes from the time fixed for holding the meeting, the persons present and entitled to vote shall choose one of their number to be chair. If the secretary of the Corporation is absent, the chair shall appoint some person, who need not be a shareholder, to act as secretary of the meeting. If desired, one or more scrutineers, who need not be shareholders, may be appointed by a resolution or by the chair with the consent of the meeting.

10.11   Persons Entitled to be Present .   - The only persons entitled to be present at a meeting of shareholders shall be those entitled to vote thereat, the directors and auditor of the Corporation and others who, although not entitled to vote, are entitled or required under any provision of the Act or the articles or by-laws to be present at the meeting. Any other person may be admitted only on the invitation of the chair of the meeting or with the consent of the meeting.



10.12   Quorum .   - Subject to the Act in respect of a majority shareholder, a quorum for the transaction of business at any meeting of shareholders shall be persons not being less than two in number and holding or representing by proxy not less than 20 percent of the issued and outstanding shares of the Corporation for the time being enjoying voting rights at such meeting. If a quorum is present at the opening of any meeting of shareholders, the shareholders present or represented may proceed with the business of the meeting notwithstanding that a quorum is not present throughout the meeting. If a quorum is not present at the opening of any meeting of shareholders, the shareholders present or represented may adjourn the meeting to a fixed time and place but may not transact any other business.

10.13   Right to Vote .   - The board may, within the prescribed period, fix in advance a date as the record date for the purpose of determining the shareholders entitled to vote at a meeting of shareholders and notice of the record date shall be given within the prescribed period in the manner provided by the Act. If a record date for voting is fixed, the Corporation shall prepare, within the time period required by the Act, an alphabetical list of shareholders who are entitled to vote as of the record date that shows the number of shares held by each shareholder. If no record date for voting is fixed, the Corporation shall prepare, within the time period required by the Act, an alphabetical list of shareholders who are entitled to vote as of the record date determined under the Act that shows the number of shares held by each shareholder. Each shareholder whose name appears on the list prepared as aforesaid is entitled to vote the shares shown opposite their name at the meeting to which the list relates.

10.14   Proxyholders and Representatives . - Every shareholder entitled to vote at a meeting of shareholders may appoint a proxyholder, or one or more alternate proxyholders, to attend and act as the shareholder’s representative at the meeting in the manner and to the extent authorized and with the authority conferred by the proxy. A proxy shall be in writing executed by the shareholder or the shareholder’s attorney authorized in writing and shall conform to the requirements of the Act. The Corporation shall recognize any individual authorized by a resolution of the directors or governing body of a body corporate or association to represent it at a meeting of shareholders and such individual may exercise on the shareholder’s behalf all the powers it could exercise if it were an individual shareholder. The authority of such an individual shall be established by depositing with the Corporation a certified copy of such resolution, or in such other manner as may be satisfactory to the secretary of the Corporation or the chair of the meeting. Any such proxyholder or representative need not be a shareholder.

10.15   Time for Deposit of Proxies .   - The board may specify in a notice calling a meeting of shareholders a time, preceding the time of such meeting by not more than 48 hours, excluding Saturdays and holidays, before which time proxies to be used at such meeting must be deposited. A proxy shall be acted upon only if, prior to the time so specified, it shall have been deposited with the Corporation or an agent thereof specified in such notice, or such later time before the time of voting as the chairman of the meeting may determine, or if, no such time having been specified in such notice, it has been received by the secretary of the Corporation or by the chair of the meeting or any adjournment thereof prior to the time of voting.

10.16   Joint Shareholders .   - If two or more persons hold shares jointly, any one of them present or duly represented at a meeting of shareholders may, in the absence of the other or others, vote the shares; but if two or more of those persons are present or represented and vote, they shall vote as one the shares jointly held by them.



10.17   Votes to Govern . - At any meeting of shareholders every question shall, unless otherwise required by the articles or by-laws or by law, be determined by a majority of the votes cast on the question. In case of an equality of votes either upon a show of hands or upon a poll, the chair of the meeting shall not be entitled to a second or casting vote.

10.18   Show of Hands .   - Subject to the Act, any question at a meeting of shareholders shall be decided by a show of hands, unless a ballot thereon is required or demanded as hereinafter provided. Upon a show of hands every person who is present and entitled to vote shall have one vote, subject to any provision of the Act restricting the ability of a proxyholder or alternate proxyholder to vote by way of show of hands where such person has conflicting instructions from more than one shareholder. Whenever a vote by show of hands shall have been taken upon a question, unless a ballot thereon is so required or demanded, a declaration by the chair of the meeting that the vote upon the question has been carried or carried by a particular majority or defeated and an entry to that effect in the minutes of the meeting shall be prima facie proof of the fact without proof of the number or proportion of the votes recorded in favour of or against any resolution or other proceeding in respect of the said question, and the result of the vote so taken shall be the decision of the shareholders upon the said question. Any vote referred to in section 10.17 and this section 10.18 may be held, subject to and in accordance with the Act,   partly or entirely by means of a telephonic, electronic or other communication facility, if the Corporation makes available such a communication facility. Any person participating in a meeting of shareholders under section 10.04 or 10.05 and entitled to vote at that meeting may vote, subject to and in accordance with the Act by means of the telephonic, electronic or other communication facility that the Corporation has made available for that purpose.

10.19   Ballots .   - On any question proposed for consideration at a meeting of shareholders, and whether or not a show of hands has been taken thereon, the chair may require a ballot or any person who is present and entitled to vote on such question at the meeting may demand a ballot. A ballot so required or demanded shall be taken in such manner as the chair shall direct. A requirement or demand for a ballot may be withdrawn at any time prior to the taking of the ballot. If a ballot is taken each person present shall be entitled, in respect of the shares which such person is entitled to vote at the meeting upon the question, to that number of votes provided by the Act or the articles, and the result of the ballot so taken shall be the decision of the shareholders upon the said question.

10.20     Adjournment .   - The chair at a meeting of shareholders may, with the consent of the meeting and subject to such conditions as the meeting may decide, adjourn the meeting from time to time and from place to place. If a meeting of shareholders is adjourned for less than 30 days, it shall not be necessary to give notice of the adjourned meeting, other than by announcement at the earliest meeting that is adjourned. Subject to the Act, if a meeting of shareholders is adjourned by one or more adjournments for an aggregate of 30 days or more, notice of the adjourned meeting shall be given as for an original meeting.




SECTION ELEVEN

NOTICES

11.01   Method of Giving Notices . - Any notice (which term includes any communication or document) to be given (which term includes sent, delivered or served) pursuant to the Act, the articles, the by-laws or otherwise to a shareholder, director, officer, auditor or member of a committee of the board shall be sufficiently given, subject to any provisions in the Act regarding certain types of communications or documents, if delivered personally to the person to whom it is to be given; if delivered to the person’s recorded address or if mailed to such person at such recorded address by prepaid ordinary mail; if sent to such person at such recorded address by any means of prepaid transmitted or recorded communication; or if sent by email, electronic document or other form of electronically transmitted message. A notice so delivered shall be deemed to have been given when it is delivered personally or to the recorded address as aforesaid; a notice so mailed shall be deemed to have been given when deposited in a post office or public letter box; and a notice so sent by any means of transmitted or recorded communication or by email, electronic document or other form of electronically transmitted message shall be deemed to have been given when dispatched or transmitted. A notice so delivered shall be deemed to have been received when it is personally delivered; a notice so mailed shall be deemed to be received at the time it would be delivered in the ordinary course of mail; and a notice so sent by any means of transmitted or recorded communication or by email, electronic document or other form of electronically transmitted message shall be deemed to have been received on the day it is dispatched or transmitted. The secretary may change or cause to be changed the recorded address of any shareholder, director, officer, auditor or member of a committee of the board in accordance with any information believed by the secretary to be reliable.

11.02   Notice to Joint Shareholders .   - If two or more persons are registered as joint holders of any share, any notice may be addressed to all such joint holders, but notice addressed to one of such persons shall be sufficient notice to all of them.

11.03   Computation of Time .   - In computing the date when notice must be given under any provision requiring a specified number of days’ notice of any meeting or other event, the day of giving the notice shall be excluded and the day of the meeting or other event shall be included.

11.04   Undelivered Notices .   - If any notice given to a shareholder pursuant to section 11.01 is returned on two consecutive occasions because the shareholder cannot be found, the Corporation shall not be required to give any further notices to such shareholder until informed in writing by the shareholder of a new address.

11.05   Omissions and Errors . - The accidental omission to give any notice to any shareholder, director, officer, auditor or member of a committee of the board or the non-receipt of any notice by any such person or any error in any notice not affecting the substance thereof shall not invalidate any action taken at any meeting held pursuant to such notice or otherwise founded thereon.

11.6   Persons Entitled by Death or Operation of Law .   - Every person who, by operation of law, transfer, death of a shareholder or any other means whatsoever shall become entitled to any share, shall be bound by every notice in respect of such share which shall have been duly given to the shareholder from whom such person derives title to such share prior to the name and address of such person being entered on the securities register (whether such notice was given before or after the happening of the event upon which such person became so entitled) and prior to such person furnishing to the Corporation the proof of authority or evidence of entitlement prescribed by the Act.




11.07 Waiver of Notice .   - Any shareholder, proxyholder, director, officer, auditor or member of a committee of the board, or any other person entitled to receive notice of a meeting of shareholders or any other notice from the Corporation, may at any time waive any notice, or waive or abridge the time for any notice, required to be given to such person under the Act, the articles, the by-laws or otherwise, and such waiver or abridgement, whether given before or after the meeting or other event of which notice is required to be given, shall cure any default in the giving or in the time of such notice, as the case may be. Any such waiver or abridgement shall be in writing except a waiver of notice of a meeting of shareholders or of the board or a committee of the board, which may be given in any manner.

11.08 Interpretation .   - In the by-laws, “recorded address” means: in the case of a shareholder, the address as recorded in the securities register; in the case of joint shareholders, the address appearing in the securities register in respect of such joint holding or the first address so appearing if there are more than one; and in the case of a director, officer, auditor or member of a committee of the board, the latest address as shown in the records of the Corporation.

11.09 Electronic Documents .   A requirement under these by-laws that a notice, document or other information be provided in writing may be satisfied by providing an electronic document and a requirement under these by-laws for a signature or that a document be executed, in relation to an electronic document, may be satisfied, in each case, if the requirements in the Act in respect thereof are met.




SECTION TWELVE

EFFECTIVE DATE AND REPEAL

12.01   Effective Date . - Subject to its being confirmed by the shareholders, this by-law shall come into force on the date set forth in the certificate of continuance continuing the Corporation under the Act.

12.02  
Repeal .   - All previous by-laws of the Corporation are repealed as of the coming into force of this by-law. Such repeal shall not affect the previous operation of any by-law so repealed, or affect the validity of any act done or right, privilege, obligation or liability acquired or incurred under, or the validity of any contract or agreement made pursuant to, or the validity of any articles (as defined in the Act) or predecessor charter documents of the Corporation obtained pursuant to, any such by-law prior to its repeal. All officers and persons acting under any by-law so repealed shall continue to act as if appointed under the provisions of this by-law and all resolutions of the shareholders or the board or a committee of the board with continuing effect passed under any repealed by-law shall continue to be good and valid except to the extent inconsistent with this by-law and until amended or repealed.



 
Exhibit 1.14
 
 
 
 
 
PAGE 2
 
 
 
Exhibit 1.15
 
 
EXHIBIT 1.15 PAG 1
 
 
 
 
 
PAGE 2
 

Exhibit 12
CERTIFICATION
 
I, Gregg Goldstein certify that:
 
1.  I have reviewed this annual report on Form 20-F of LiveReel Media Corporation;

2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4.   The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)) and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5.  The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date:  November 30, 2006

/s/ Gregg Goldstein

Gregg Goldstein
Chief Executive Officer

4



Exhibit 12
CERTIFICATION

I, J. Stephen Wilson certify that:
 
1.  I have reviewed this annual report on Form 20-F of LiveReel Media Corporation;

2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4.   The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)) and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5.  The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date:  November 30, 2006

/s/ J. Stephen Wilson
 
J. Stephen Wilson
Chief Financial Officer & Corporate Secretary

Exhibit 13a

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the annual report on Form 20-F of LiveReel Media Corporation for the year ended June 30, 2006, as filed with the Securities and Exchange Commission, I hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.  The annual report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2.  The information contained in the annual report fairly presents, in all material respects, the financial condition and results of operations of the registrant.


Date:  November 30, 2006


/s/ Gregg Goldstein

Gregg Goldstein
Chief Executive Officer



A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.














Exhibit 13a

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the annual report on Form 20-F of LiveReel Media Corporation. for the year ended June 30, 2006, as filed with the Securities and Exchange Commission, I hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.  The annual report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2.  The information contained in the annual report fairly presents, in all material respects, the financial condition and results of operations of the registrant.


Date:  November 30, 2006


/s/ J. Stephen Wilson

J. Stephen Wilson
Chief Financial Officer & Corporate Secretary



A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.



EXHIBIT 14(a)(i)


LIVEREEL MEDIA CORPORATION

CHARTER FOR THE CORPORATE GOVERNANCE COMMITTEE OF
THE BOARD OF DIRECTORS

1. PURPOSE

The primary function of the Corporate Governance Committee is to assist the Board of Directors in fulfilling its corporate governance oversight responsibilities.

2. MEMBERSHIP AND ORGANIZATION

1. Composition — The Corporate Governance Committee shall consist of not less than three members of the Board. At the invitation of the Corporate Governance Committee, members of the Company’s senior management and others may attend Corporate Governance Committee meetings as the Corporate Governance Committee considers necessary or desirable.

2. Appointment and Removal of Corporate Governance Committee Members — Each member of the Corporate Governance Committee shall be appointed by the Board on an annual basis and shall serve at the pleasure of the Board, or until the earlier of (a) the close of the next annual meeting of the Company’s shareholders at which the member's term of office expires, (b) the death of the member, or (c) the resignation, disqualification or removal of the member from the Corporate Governance Committee or from the Board. The Board may fill a vacancy in the membership of the Corporate Governance Committee.

3. Chair — At the time of the annual appointment of the members of the Corporate Governance Committee, the Board shall appoint a Chair of the Corporate Governance Committee. The Chair shall: be a member of the Corporate Governance Committee, be an independent director, preside over all Corporate Governance Committee meetings, coordinate the Corporate Governance Committee's compliance with this mandate, work with management to develop the Corporate Governance Committee's annual work-plan and provide reports of the Corporate Governance Committee to the Board.

4. Independence -- A majority of the members of the Corporate Governance Committee shall meet any requirements promulgated by any exchange upon which securities of the Company are traded, or any governmental or regulatory body exercising authority over the Company (collectively, the “Applicable Requirements”) related to independence.

3. MEETINGS

1. Meetings — The members of the Corporate Governance Committee shall hold meetings as are required to carry out this mandate. The Chair, any member of the Corporate Governance Committee, the Chairman of the Board or the Chief Executive Officer may call meetings of the Corporate Governance Committee by notifying the Company’s Corporate Secretary who will notify the members of the Corporate Governance Committee. In the absence of the Chair, the members of the Corporate Governance Committee present may appoint a chair from their number for a meeting.




2. Corporate Secretary and Minutes — The Corporate Secretary, his or her designate or any other person the Corporate Governance Committee requests, shall act as secretary of Corporate Governance Committee meetings. Minutes of Corporate Governance Committee meetings shall be recorded and maintained by the Corporate Secretary and subsequently presented to the Corporate Governance Committee for approval.

3. Quorum — A majority of the members of the Corporate Governance Committee shall constitute a quorum.

4. Access to Management and Outside Advisors — The Corporate Governance Committee shall have unrestricted access to the Company’s management and employees. The Corporate Governance Committee shall have the authority to retain external legal counsel, consultants or other advisors to assist it in fulfilling its responsibilities and to set and pay the respective compensation for these advisors without consulting or obtaining the approval of the Board or any Company officer. The Company shall provide appropriate funding, as determined by the Corporate Governance Committee, for the services of these advisors.

4. FUNCTIONS AND RESPONSIBILITIES

The Corporate Governance Committee shall have the functions and responsibilities set out below as well as any other matters that are specifically delegated to the Corporate Governance Committee by the Board. In addition to these functions and responsibilities, the Corporate Governance Committee shall perform the duties required of a corporate governance committee by Applicable Requirements.

4. Oversight of Corporate Governance Matters

a. Governance Framework - At least annually, the Corporate Governance Committee shall review and, if advisable, approve and recommend for Board approval, the Company’s corporate governance framework generated by management.
b. Governance Activity - At least annually, the Corporate Governance Committee shall review the Company’s corporate governance activities and approve changes it considers appropriate. As part of its review, the Corporate Governance Committee shall take into account Applicable Requirements and best practices. At least annually, the Corporate Governance Committee shall report to the Board on the state of the Company’s corporate governance activities.
c. Governance Disclosure — The Corporate Governance Committee shall prepare, in conjunction with management, corporate governance disclosure for the Company’s annual reports and management information circulars.



5. Performance of the Board and its Committees

a. Director Qualifications/Competencies — The Corporate Governance Committee shall establish and recommend for Board approval appropriate criteria for the selection and composition of Board and Board committee members, including criteria for determining director independence. At least annually, the Corporate Governance Committee shall review the Company’s director qualification criteria and recommend for Board approval changes it considers appropriate in light of Applicable Requirements.
b. Director Orientation — The Corporate Governance Committee shall oversee the development of the Company’s director orientation program. At least annually, the Corporate Governance Committee shall review this program and approve changes it considers appropriate.
c. Governing Documents Review — At least annually, the Corporate Governance Committee shall review and assess the adequacy of the Company’s organizing documents and by-laws, and the mandate, charters, and role descriptions for the Board, each Board committee, the Chief Executive Officer and the Chairman of the Board (the “Governing Documents”) to determine if amendment in light of principles and policies of corporate governance developed by the Corporate Governance Committee is advisable, and if so, approve and recommend for Board approval amendments to the Governing Documents. d. Performance Assessment — At least annually, the Corporate Governance Committee shall conduct an assessment of the performance of the Board, the individual directors, each Board committee and the Chairman of the Board against their respective mandates and any other criteria the Corporate Governance Committee considers appropriate. The Corporate Governance Committee shall report its findings to the Board and, based on those findings, recommend any action plans that the Corporate Governance Committee considers appropriate.
e. Evaluation of Independence — At least annually, the Corporate Governance Committee shall evaluate each director against the independence criteria approved by the Board and Applicable Requirements and shall make a recommendation to the Board, based on these criteria, on the independence of each director.

6. Chief Executive Officer and Chairman of the Board Succession — At least annually, and in conjunction with the Chief Executive Officer and the Chairman of the Board, the Corporate Governance Committee shall review a succession and emergency preparedness plan for the Chief Executive Officer and the Chairman of the Board and recommend these plans for Board approval. The Corporate Governance Committee may recommend for Board approval the removal of the Chief Executive Officer, the Chairman of the Board or any director of the Board for any reason the Corporate Governance Committee considers appropriate. Upon the vacancy of the Chief Executive Officer or the Chairman of the Board, the Corporate Governance Committee may make a replacement recommendation to the Board based on the applicable succession plan; provided that to the extent that any recommendation requires the appointment of a new director to the Board, the recommendation shall instead be made to the Nominating Committee.

7. Compliance with Code of Business Conduct and Ethics — The Corporate Governance Committee shall: i. at least annually, review and assess the adequacy of and, if advisable, approve and recommend for Board approval of any amendments to the Company’s Code of Business Conduct & Ethics; ii. review and, if advisable, approve the Company’s processes for administering the Code of Business Conduct & Ethics; iii. review with management the results of their assessment of the Company’s compliance with the Code of Business Conduct & Ethics and their plans to remediate any deficiencies identified; and iv. review and, if advisable, approve any waiver from a provision of the Code of Business Conduct & Ethics requested by a member of the Board or senior management.

8. Delegation — The Corporate Governance Committee may, to the extent permissible by Applicable Requirements, designate a sub-committee to review any matter within this mandate as the Corporate Governance Committee deems appropriate.



5. REPORTING TO THE BOARD

1. The Chair shall report to the Board on material matters arising at Corporate Governance Committee meetings and, where applicable, shall present the Corporate Governance Committee's recommendations to the Board for its approval.
2. After each meeting of the Corporate Governance Committee where conduct review matters are discussed, the Chair shall report to the Board on the conduct review matters considered by the Corporate Governance Committee.

6. BOARD ORIENTATION PROGRAM

1. The Chair shall co-ordinate director orientation programs relating to this mandate for Corporate Governance Committee members.

7. GENERAL

1. The Corporate Governance Committee shall, to the extent permissible by Applicable Requirements, have such additional authority as may be reasonably necessary or desirable, in the Corporate Governance Committee’s discretion, to exercise its powers and fulfill the duties under this mandate.


EXHIBIT 14(a)(ii)

LIVEREEL MEDIA CORPORATION


CHARTER FOR THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

1. PURPOSE

1. The primary functions of the Audit Committee are to oversee the accounting and financial reporting practices of the Company and the audits of the Company’s financial statements and to exercise the responsibilities and duties set forth below, including, but not limited to, assisting the Board in fulfilling its responsibilities in reviewing the following: financial disclosures and internal controls over financial reporting; monitoring the system of internal control; monitoring the Company’s compliance with Applicable Requirements (as defined below); selecting the auditors for shareholder approval; reviewing the qualifications, independence and performance of the auditors; and reviewing the qualifications, independence and performance of the Company’s financial management.

2. MEMBERSHIP AND ORGANIZATION
1. Composition — The Audit Committee shall consist of not less than two independent members of the Board. At the invitation of the Audit Committee, members of the Company’s management and others may attend Audit Committee meetings as the Audit Committee considers necessary or desirable.

2. Appointment and Removal of Audit Committee Members — Each member of the Audit Committee shall be appointed by the Board on an annual basis and shall serve at the pleasure of the Board, or until the earlier of (a) the close of the next annual meeting of the Company’s shareholders at which the member's term of office expires, (b) the death of the member, or (c) the resignation, disqualification or removal of the member from the Audit Committee or from the Board. The Board may fill a vacancy in the membership of the Audit Committee.

3. Chair — At the time of the annual appointment of the members of the Audit Committee, the Board shall appoint a Chair of the Audit Committee. The Chair shall: be a member of the Audit Committee, preside over all Audit Committee meetings, coordinate the Audit Committee's compliance with this mandate, work with management to develop the Audit Committee's annual work-plan and provide reports of the Audit Committee to the Board.

4. Independence — Each member of the Audit Committee shall meet the requirements promulgated by any exchange upon which securities of the Company are traded, or any governmental or regulatory body exercising authority over the Company, as are in effect from time to time (collectively, the “Applicable Requirements”) related to independence and audit committee composition.



5. Financial Literacy — At the time of his or her appointment to the Audit Committee, each member of the Audit Committee shall be able to read and understand fundamental financial statements, including a balance sheet, cash flow statement and income statement and not have participated in the preparation of the financial statements of the Company or any current subsidiary of the Company at any time during the preceding three years. At least one member of the Audit Committee shall have past employment experience in financing or accounting, requisite professional certificate in accounting, or other comparable experience or background which results in the individual’s financial sophistication, including being or having been a chief executive officer, chief financial officer or other senior officer with financial oversight responsibilities. Further, at least one member of the Audit Committee shall qualify as an “audit committee financial expert” (as such term is defined under the Securities and Exchange Commission’s rules).

3. MEETINGS

1. Meetings — The members of the Audit Committee shall hold meetings as are required to carry out this mandate, and in any case no less than four meetings annually. The external auditors are entitled to attend and be heard at each Audit Committee meeting. The Chair, any member of the Audit Committee, the external auditors, the Chairman of the Board or the Chief Executive Officer or the Chief Financial Officer may call a meeting of the Audit Committee by notifying the Company’s Corporate Secretary who will notify the members of the Audit Committee. The Chair shall chair all Audit Committee meetings that he or she attends, and in the absence of the Chair, the members of the Audit Committee present may appoint a chair from their number for a meeting.

2. Corporate Secretary and Minutes — The Corporate Secretary, his or her designate or any other person the Audit Committee requests, shall act as secretary at Audit Committee meetings. Minutes of Audit Committee meetings shall be recorded and maintained by the Corporate Secretary and subsequently presented to the Audit Committee for approval.

3. Quorum - A majority of the members of the Audit Committee shall constitute a quorum.

4. Access to Management and Outside Advisors — The Audit Committee shall have unrestricted access to the Company’s management and employees and the books and records of the Company, and, from time to time may hold unscheduled or regularly scheduled meetings or portions of regularly scheduled meetings with the auditor, the Chief Financial Officer or the Chief Executive Officer. The Audit Committee shall have the authority to retain external legal counsel, consultants or other advisors to assist it in fulfilling its responsibilities and to set and pay the respective compensation for these advisors without consulting or obtaining the approval of the Board or any Company officer. The Company shall provide appropriate funding, as determined by the Audit Committee, for the services of these advisors.

5. Meetings Without Management — The Audit Committee shall hold unscheduled or regularly scheduled meetings, or portions of regularly scheduled meetings, at which management is not present.

4. FUNCTIONS AND RESPONSIBILITIES
The Audit Committee shall have the functions and responsibilities set out below as well as any other functions that are specifically delegated to the Audit Committee by the Board and that the Board is authorized to delegate by applicable laws and regulations. In addition to these functions and responsibilities, the Audit Committee shall perform the duties required of an audit committee by the Applicable Requirements.




1. Financial Reports
a. General — The Audit Committee is responsible for overseeing the Company’s financial statements and financial disclosures. Management is responsible for the preparation, presentation and integrity of the Company’s financial statements and financial disclosures and for the appropriateness of the accounting principles and the reporting policies used by the Company. The auditors are responsible for auditing the Company’s annual consolidated financial statements and for reviewing the Company’s unaudited interim financial statements.

b. Review of Annual Financial Reports — The Audit Committee shall review the annual consolidated audited financial statements of the Company, the auditors' report thereon and the related management's discussion and analysis of the Company’s financial condition and results of operation (“MD&A”). After completing its review, if advisable, the Audit Committee shall approve and recommend for Board approval the annual financial statements and the related MD&A.

c. Review of Interim Financial Reports — The Audit Committee shall review the interim consolidated financial statements of the Company, the auditors review report thereon and the related MD&A. After completing its review, if advisable, the Audit Committee shall approve and recommend for Board approval the interim financial statements and the related MD&A.

d. Review Considerations — In conducting its review of the annual financial statements or the interim financial statements, the Audit Committee shall:

i. meet with management and the auditors to discuss the financial statements and MD&A;

ii. review the disclosures in the financial statements;

iii. review the audit report or review report prepared by the auditors;

iv. discuss with management, the auditors and internal legal counsel, as requested, any litigation claim or other contingency that could have a material effect on the financial statements;

v. review critical accounting and other significant estimates and judgments underlying the financial statements as presented by management;

vi. review any material effects of regulatory accounting initiatives or off-balance sheet structures on the financial statements as presented by management;

vii. review any material changes in accounting policies and any significant changes in accounting practices and their impact on the financial statements as presented by management;

viii. review management's report on the effectiveness of internal controls over financial reporting;

ix. review the factors identified by management as factors that may affect future financial results;

x. review results of the Company’s audit committee hotline program; and xi. review any other matters, related to the financial statements, that are brought forward by the auditors, management or which are required to be communicated to the Audit Committee under accounting policies, auditing standards or Applicable Requirements. e. Approval of Other Financial Disclosures — The Audit Committee shall review and, if advisable, approve and recommend for Board approval financial disclosure in a prospectus or other securities offering document of the Company, press releases disclosing financial results of the Company and any other material financial disclosure, including financial guidance provided to analysts rating agencies or otherwise publicly disseminated.



2. Auditors
a. General — The Audit Committee shall be responsible for oversight of the work of the auditors, including the auditors work in preparing or issuing an audit report, performing other audit, review or attest services or any other related work.

b. Appointment and Compensation — The Audit Committee shall review and, if advisable, select and recommend for shareholder approval the appointment of, the auditors. The Audit Committee shall have ultimate authority to approve all audit engagement terms and fees, including the auditor’s audit plan.

c. Resolution of Disagreements -- The Audit Committee shall resolve any disagreements between management and the auditors as to financial reporting matters brought to its attention.

d. Discussions with Auditor -- At least annually, the Audit Committee shall discuss with the auditor such matters as are required by applicable auditing standards to be discussed by the auditor with the audit committee, including the matters required to be discussed by Statement on Auditing Standards 61, as it may be modified or supplemented.

e. Audit Plan — At least annually, the Audit Committee shall review a summary of the auditors' annual audit plan. The Audit Committee shall consider and review with the auditors any material changes to the scope of the plan.

f. Quarterly Review Report — The Audit Committee shall review a report prepared by the auditors in respect of each of the interim financial statements of the Company.

g. Independence of Auditors — At least annually, and before the auditors issue their report on the annual financial statements, the Audit Committee shall: obtain from the auditors a formal written statement describing all relationships between the auditors and the Company; discuss with the auditors any disclosed relationships or services that may affect the objectivity and independence of the auditors; and obtain written confirmation from the auditors that they are objective and independent within the meaning of the applicable Rules of Professional Conduct/Code of Ethics adopted by the provincial institute or order of chartered accountants to which it belongs and other Applicable Requirements. The Audit Committee shall take appropriate action to oversee the independence of the auditors.

h. Evaluation and Rotation of Lead Partner — At least annually, the Audit Committee shall review the qualifications and performance of the lead partner(s) of the auditors. The Audit Committee shall obtain a report from the auditors annually verifying that the lead partner of the auditors has served in that capacity for no more than five fiscal years of the Company and that the engagement team collectively possesses the experience and competence to perform an appropriate audit.

i. Requirement for Pre-Approval of Non-Audit Services — The Audit Committee shall approve in advance any retainer of the auditors to perform any non-audit service to the Company that it deems advisable in accordance with Applicable Requirements, and Board approved policies and procedures. The Audit Committee may delegate pre-approval authority to a member of the Audit Committee. The decisions of any member of the Audit Committee to whom this authority has been delegated must be presented to the full Audit Committee at its next scheduled Audit Committee meeting.

j. Approval of Hiring Policies — The Audit Committee shall review and approve the Company’s hiring policies regarding partners, employees and former partners and employees of the present and former external auditor of the Company.



3. Internal Controls

a. General — The Audit Committee shall review the Company’s system of internal controls.

b. Establishment, Review and Approval — The Audit Committee shall require management to implement and maintain appropriate systems of internal controls in accordance with Applicable Requirements and guidance, including internal control over financial reporting and disclosure and to review, evaluate and approve these procedures. At least annually, the Audit Committee shall consider and review with management and the auditors:

i. the effectiveness of, or weaknesses or deficiencies in: the design or operation of the Company’s internal controls (including computerized information system controls and security); the overall control environment for managing business risks; and accounting, financial and disclosure controls (including, without limitation, controls over financial reporting), non-financial controls, and legal and regulatory controls and the impact of any identified weaknesses in internal controls on management's conclusions.

ii. any significant changes in internal control over financial reporting that are disclosed, or considered for disclosure, including those in the Company’s periodic regulatory filings;

iii. any material issues raised by any inquiry or investigation by the Company’s regulators;

iv. the Company’s fraud prevention and detection program, including deficiencies in internal controls that may impact the integrity of financial information, or may expose the Company to other significant internal or external fraud losses and the extent of those losses and any disciplinary action in respect of fraud taken against management or other employees who have a significant role in financial reporting; and

v. any related significant issues and recommendations of the auditors together with management's responses thereto, including the timetable for implementation of recommendations to correct weaknesses in internal controls over financial reporting and disclosure controls.

4. Compliance with Legal and Regulatory Requirements — The Audit Committee shall review reports from the Company’s Corporate Secretary and other management members on: legal or compliance matters that may have a material impact on the Company; the effectiveness of the Company’s compliance policies; and any material communications received from regulators.
The Audit Committee shall review management's evaluation of and representations relating to compliance with specific Applicable Requirements, and management's plans to remediate any deficiencies identified.

5. Audit Committee Hotline Procedures — The Audit Committee shall establish for (a) the receipt, retention, and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters; and (b) the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters. Any such complaints or concerns that are received shall be reviewed by the Audit Committee and, if the Audit Committee determines that the matter requires further investigation, it will direct the Chair of the Audit Committee to engage outside advisors, as necessary or appropriate, to investigate the matter and will work with management and the general counsel to reach a satisfactory conclusion.

6. Audit Committee Disclosure — The Audit Committee shall prepare, review and approve any audit committee disclosures required by Applicable Requirements in the Company’s disclosure documents.



7. Delegation — The Audit Committee may, to the extent permissible by Applicable Requirements, designate a sub-committee to review any matter within this mandate as the Audit Committee deems appropriate.

5. REPORTING TO THE BOARD
1. The Chair shall report to the Board, as required by Applicable Requirements or as deemed necessary by the Audit Committee or as requested by the Board, on matters arising at Audit Committee meetings and, where applicable, shall present the Audit Committee's recommendation to the Board for its approval.

6. GENERAL
1. The Audit Committee shall, to the extent permissible by Applicable Requirements, have such additional authority as may be reasonably necessary or desirable, in the Audit Committee’s discretion, to exercise its powers and fulfill the duties under this mandate.