QSB

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-QSB

[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2004

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

Commission File Number 000-29929

COMMUNICATE.COM INC.

(Exact name of small business as specified in its charter)

Nevada 33-0786959

(State or other jurisdiction of (IRS Employer

incorporation or organization) Identification Number)

#600 – 1100 Melville Street, Vancouver, B.C. V6E 4A6

(Address of principal executive offices)

(604) 697-0136

(Issuer's telephone number)

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date.

Common Stock 14,741,339 shares outstanding

$.001 Par Value as of August 13, 2004

Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]


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COMMUNICATE.COM INC.

REPORT ON FORM 10-QSB

QUARTER ENDED JUNE 30, 2004

TABLE OF CONTENTS

PART I. Financial Information

Item 1. Financial Statements

Consolidated Balance sheets as of June 30, 2004 and December 31, 2003

Consolidated Statements of Operations for the periods ended June 30, 2004 and June 30, 2003

Consolidated Statements of Cash Flows for the periods ended June 30, 2004 and June 30, 2003

Notes to the Consolidated Financial Statements

Item 2. Management's discussion and analysis of financial condition and results of operations

Item 3. Controls and Procedures.

PART II. Other Information

Item 1. Legal Proceedings.

Item 2. Changes in Securities.

Item 3. Defaults Upon Senior Securities.

Item 4. Submission of Matters to a Vote of Security Holders.

Item 5. Other Information.

Item 6. Exhibits and Reports on Form 8-K.

Signatures

Certifications


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PART I

Item 1: Financial Statements.

The response to Item 1 has been submitted as a separate section of this Report beginning on page F-1.

Item 2: Management’s discussion and analysis of financial condition and results of operations

Registrant, through its majority-owned subsidiaries, Domain Holdings, Inc. (“DHI”, formerly Communicate.com Inc.) and FrequentTraveller.com Inc.(“FT”) (together the "Subsidiaries"), is involved in businesses that exploit commercial uses of the Internet. The Subsidiaries market and license a portfolio of domain names, 25 of which generate high amounts of internet traffic because of, among other things, their generic description of a specific product or services category.

Registrant has focused since the beginning of 2001 on developing revenue streams from its domain names and reducing the debt of DHI. Registrant generates revenue from leasing domain names, from sales commissions from the sale of third-party products and services utilizing the Internet, from "pay-per-click" revenue and from the sale of domain name assets that Registrant believes are not essential to its business. Since May 2003, Registrant has begun selling fragrances and other beauty products online directly to consumers and in October 2003 begun selling travel services.

Registrant presently has ten full-time employees and three consultants and occupies approximately 3,000 square feet of office space.

(a) Selected Financial Data

The following selected financial data was derived from Communicate’s unaudited consolidated financial statements. The information set forth below should be read in conjunction with the Company’s financial statements and related notes included elsewhere in this report.


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	Three Months Ended						Six Months Ended

		June 30, 2004			June 30, 2003			June 30, 2004			June 30, 2003

Statements of Operations Data

Domain Name Leasing and Advertising	$	159,456		$	118,203		$	226,004		$	199,294
Domain Name Sales		200,000			--			400,000			--
Product Sales and Other		373,651			55,692			603,212			55,758
Total Revenues	$	733,107		$	173,895		$	1,229,216		$	255,052

Cost of Domain Name Sales and Commission	$	107,794			--		$	182,651			--
Product Purchases		297,827		$	46,401			477,409		$	46,401
Total Cost of Revenues	$	405,621		$	46,401		$	660,060		$	46,401

Gross Profit	$	327,486		$	127,494		$	569,156		$	208,651

Marketing		($ 21,698	)		--			($ 26,719	)		--
General and Administrative		(120,361	)		($47,401	)		(255,439	)		($ 78,396	)
Management Fees and Salaries		(64,000	)		36,000			(122,500	)		(72,000	)
Professional Fees		(5,707	)		15,498			(15,328	)		(22,910	)
Depreciation		(562	)		794			(1,170	)		(1,674	)

Operating Income	$	115, 158		$	27,801		$	148,000		$	33,671

Non-Controlling Interest Share of Loss	$	2,325			--		$	9,016			--
Dilution Gain in Subsidiary		3,425			--			9,079			--

Net Income for the Quarter	$	120,908		$	27,801		$	166,095		$	33,671

Basic Earnings (Loss) per Share	$	0.01		$	0.00		$	0.01		$	0.00
Weighted Average Shares Outstanding		14,739,416			14,691,339			14,739,416			14,691,339

Balance Sheet Data		As at June 30, 2004			As at December 31, 2003

Current Assets	$	504,978		$	424,295
Fixed Assets		8,447			9,618
Intangible Assets		1,633,726			1,764,714
Total Assets	$	2,147,151		$	2,198,627

Accounts Payable & Accrued Liabilities	$	458,483		$	589,144
Loan Payable		152,694			250,000
Total Liabilities	$	611,177		$	839,144

Non-Controlling Interest		--		$	2,345

Common Stock	$	5,751		$	5,701
Additional Paid in Capital		3,076,466			3,066,516
Accumulated Deficit		(1,546,243	)		(1,715,079	)
Total Stockholders’ Equity	$	1,535,974		$	1,357,138


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(b) Results of Operations

REVENUES AND COSTS OF REVENUES.

Domain Name Leasing and Advertising. In the second quarter of 2004, Registrant generated domain name leasing and advertising revenue of $159,456 as compared to $118,203 in the second quarter of 2003, an increase of 34.9%. Included in the quarter is an annual minimum commission of Can$50,000 from a tourism operator administering a geographic domain name. The last annual commission payment ends in 2006 at which time the operator has the option to acquire the domain name for Can$150,000. While pay-per-click rates and Internet traffic have increased, pay-per-click advertising revenue has increased for the second quarters as a new rate contract becomes effective. Management believes monthly advertising revenue will be sustained at $50,000 for the third and subsequent quarters.

Domain Name Sales. In the second quarter of 2004, Registrant completed the sale of exercise.com with a carrying value of $87,794 pursuant to an option-to-purchase agreement entered into in 2003 with a third party and paid a finder’s fee of $20,000 to a related party who is a principal of Pacific Capital Markets Inc. which holds a promissory note issued by the Registrant. No such revenue was recorded in the second quarter of 2003. While the Registrant has received four of the five installments under the option-to-purchase agreement, the third party purchaser has not indicated to the Registrant if it intends to exercise on the final option payment which is due to expire on September 2, 2004. Other than the option-to-purchase agreement hereforth discussed, Registrant is not expected to generate any other trading revenue in the coming quarters; however Registrant will evaluate opportunities as they arise.

Product Sales. Registrant began converting Internet traffic into customers by directly marketing and selling consumable goods. Beginning in May 2003, Registrant launched its cologne.com Internet site and perfume.com shortly thereafter. In the second quarter of 2004, the sites generated sales of $304,213, or approximately $3,340 per day, with cost of purchases and shipping totaling $245,631 resulting in gross profit margin of approximately 19.3% which is as expected. Compared to the second quarter of 2003 when the Registrant first began selling fragrance products online, sales have increased by approximately $248,500 or 446%. Management expects to see continued growth for the next quarter with sales currently averaging over $3,000 per day and with a gross profit margin averaging around 20%. Management plans to maintain or improve margins by negotiating with multiple suppliers for better pricing and by automating the fulfillment process.

In the second quarter of 2004, Registrant through its travel business subsidiary generated product sales of $69,403 at a cost of $52,196 as compared to sales of $10,524 at a cost of $11,252 in the first quarter. There were no travel-related sales in 2003. The travel operation made a net loss of $25,700 in the second quarter and a net loss of $61,250 year to date after overhead, management fee and salary. Management continues to build its travel business by forming affiliations with partners in Southeast Asia and in Brazil and estimates that the travel business will break-even when sales approach $150,000 per quarter and believes the goal is achievable within six months.


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MARKETING. Registrant has begun to advertise online by paying-for-clicks and search-engine-placements and other media in 2004. In the second quarter of 2004, Registrant recorded marketing expenses of $21,698, or 5.8% of product sales. There was no marketing expenditure in the second quarter of 2003. Management expects marketing expense to increase as sales increase and has budgeted 10% of gross product sales for marketing use in 2004.

GENERAL AND ADMINISTRATIVE. Registrant’s general and administrative expenses consist of salaries and related costs for general and corporate functions, including facilities fees, travel, and investor relations. In the second quarter of 2004, Registrant recorded general and administrative expense of $120,361 as compared to $47,401 in 2003 – an increase of 154% over the second quarter of 2003 but a decrease of 10.9% over the first quarter of 2004. Management believes these expenses are in line with expectations as they include costs for several business projects currently under development. Management expects general and administrative expenses to remain at their current level for the remainder of 2004.

MANAGEMENT FEES. In the second quarter of 2004, Registrant incurred management fees of $64,000, an increase of 77% over the second quarter of 2003. Two managers have been added to the travel business in the first six months of 2004. Management expects to maintain management fees at the current level for the next two quarters of 2004.

PROFESSIONAL FEES. Professional fees include legal and auditing fees. During the second quarter of 2004, professional fees totalled $5,707 as compared to $15,498 in 2003, a decrease of 63.2%. As most litigations are resolved, management believes professional fees are reasonable. While Management contemplates various fund raising avenues in the public capital market, Management has not made any decision and therefore has not incurred any significant legal expenses in the second quarter of 2004; however, legal expenses can be expected to increase if Registrant decides to solicit funds from the capital market. Other than professional fees related to capital raising, Management is unaware of factors which are likely to increase professional fees in the third quarter of 2004.

(c) Liquidity and Capital Resources

Registrant seeks to generate revenue from (i) leasing domain names to third parties to conduct on-line businesses; (ii) selling products and services of owned inventory and of third parties; (iii) fees resulting from Internet traffic click-throughs generated by the domain name assets; and (iv) trading of non-core domain name assets.

At June 30, 2004 Registrant had current liabilities in excess of current assets resulting in a working capital deficit of $106,199. During the six-months ended June 30, 2004 Registrant had net income of $166,095 and an increase in cash of $94,659, compared to net income of $33,671 and an increase in cash of $52,463 for the same six-month period of last year. Operating activities generated cashflows of $216,168 from net income after adding back the non-cash cost of domain names sold and reduced by a decline in accounts payable during the six month period ended June 30, 2004. Registrant has accumulated a deficit of $1,530,703 since inception and has a stockholders’ equity of $1,535,974 as at June 30, 2004. The working capital deficiency of $106,199 has occurred because the balance of a note payable, being $150,000, is due and payable on June 30, 2005. Since December 31, 2003, Registrant has used the proceeds from the sale of domain names to repay $150,000 of the $300,000 note payable.


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While Management cannot give assurance that operations can continue to be profitable, Management believes that positive cashflow can be achieved in the third quarter of 2004 and will strive to eliminate its working capital deficiency.

In October 2003, Registrant became a majority shareholder of FrequentTraveller.com which has developed and is operating travel sales websites utilizing non-exclusive access to the Registrant’s domain names Vietnam.com, Malaysia.com, Indonesia.com, Brazil.com and Canadian.com. Registrant will continue to own the aforementioned domain names and to develop businesses other than travel sales for them. FrequentTraveller.com has three employees and two managers and is not expected to generate sufficient revenue to cover expenses for at least twelve months. Any fund shortfall will be covered by the Registrant or by raising outside capital.

As the Registrant is working to achieve a positive working capital position and is currently profitable, opportunities may arise which would require the Registrant to seek additional capital other than for operations from external sources. Registrant expects to raise any additional funds by way of equity and/or debt financing, and through the sale of non-strategic domain name assets. However, Registrant may not be able to raise the required funds from such financings, depending on volatile market conditions and the perception by investors of those companies that, like the Registrant, engage in e-commerce and related businesses.

Registrant has no current plans to purchase any plant or significant equipment.

(d) Uncertainties Relating to Forward-Looking Statements

Management’s discussion and analysis of Registrant’s financial condition and the results of its operations and other sections of this report, contain forward looking statements, that are based upon the current beliefs and expectations of Registrant’s management, as well as assumptions made by, and information currently available to, Registrant’s management. Because these statements involve risks and uncertainties, actual actions and strategies and the timing and expected results may differ materially from those expressed or implied by the forward-looking statements. As well, Registrant’s future results, performance or achievements could differ materially from those expressed in, or implied by, any forward-looking statements. Future events and actual results could differ materially from those set forth in or underlying the forward-looking statements.

Item 3: Controls and Procedures.

Based on their most recent evaluation, which was completed within 90 days of the filing of this Form 10-QSB, the Registrant’s Chief Executive Officer and Chief Financial Officer believe the Registrant’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) are effective to ensure that information required to be disclosed by the Registrant in this report is accumulated and communicated to the Registrant’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. There were no significant changes in the Registrant’s internal controls or other factors that could significantly affect these controls subsequent to the date of their evaluation and there were no corrective actions with regard to significant deficiencies and material weaknesses.


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PART II

OTHER INFORMATION

Item 1. Legal Proceedings.

In December 1999, the Subsidiary commenced a lawsuit in the Supreme Court of British Columbia (No. C996417) against Paul Green, the former chief executive officer of the Subsidiary, for breach of fiduciary duty for wrongfully attempting to appropriate the Subsidiary’s business opportunities. The Subsidiary is seeking an undetermined amount of damages and a declaration that it had just cause to terminate Paul Green as the CEO in or about June 1999. No decision has been rendered in this case and the Company cannot predict whether it will prevail, and if it does, what the terms of any judgment may be.

On March 9, 2000, Paul Green commenced a separate action in the Supreme Court of British Columbia (No. S001317) against the Subsidiary. In that action, Paul Green claimed wrongful dismissal and a breach of contract on the part of the Subsidiary. Paul Green is seeking an undetermined amount of damages and, among others, an order of specific performance for the issuance of a number of shares in the capital of the Subsidiary equal to 18.9% or more of the outstanding shares of the Subsidiary. On June 1, 2000, the Subsidiary filed a statement of defence and counterclaim. Management intends to defend this action vigorously.

Registrant is not aware of any other pending or threatened material legal proceedings.

Item 2. Changes in Securities.

On January 7, 2004, the Board of Directors issued 50,000 shares of common stock to two employees as bonuses recorded by DHI. Registrant relied on an exemption from registration under Section 4(2) of the Securities Act of 1933 in issuing the shares. These shares are restricted securities and are subject to resale restrictions under Rule 144.


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Item 3. Defaults Upon Senior Securities.

None.

Item 4. Submission of Matters to a Vote of Security Holders.

No matter was submitted to a vote of security holders, through the solicitation of proxies or otherwise, during the three months of the fiscal year covered by this report.

Item 5. Other Information.

None.

Item 6. Exhibits and Reports on Form 8-K.

(A) Index to and Description of Exhibits.

EXHIBIT	DESCRIPTION
F-1	Financial Statements.
31	Section 302 Certification of Chief Executive Officer and Chief Financial Officer
32	Section 906 Certificate of Chief Executive Office and Chief Financial Officer

(B) Reports on Form 8-K.

There were no report on Form 8-K filed by Registrant during the second quarter ending June 30, 2004.


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PART II - SIGNATURES

In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

COMMUNICATE.COM INC.

By: /s/ David M. Jeffs

Name: David M. Jeffs

Title: Director and CEO

Dated: August 13, 2004

By: /s/ J. Cameron Pan

Name: J. Cameron Pan

Title: CFO

Dated: August 13, 2004


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Exhibit 31


	*Page - 11*

CERTIFICATIONS

I, David M Jeffs, certify that:

1. I have reviewed this quarterly report on Form 10-QSB of Communicate.com Inc.;

2. Based on my knowledge, this quarterly 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 quarterly report;

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

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: August 13, 2004

/s/ David M Jeffs
David M Jeffs, Director and CEO


	*Page - 12*

CERTIFICATIONS

I, J Cameron Pan, certify that:

1. I have reviewed this quarterly report on Form 10-QSB of Communicate.com Inc.;

b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

Date: August 13, 2004

/s/ J Cameron Pan
J Cameron Pan - CFO


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Exhibit 32


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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 Quarterly Report of Communicate.com Inc. (“Communicate”) on Form 10-QSB for the period ending June 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David M. Jeffs, President, Chief Executive Officer of Communicate and the sole member of the Board of Directors, certify, pursuant to s.906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly represents, the financial condition and result of operations of Communicate.

/s/ David M. Jeffs
David M. Jeffs
Chief Executive Officer
August 13, 2004


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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 Quarterly Report of Communicate.com Inc. (“Communicate”) on Form 10-QSB for the period ending June 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, J. Cameron Pan, Secretary, Treasurer, and Chief Financial Officer of Communicate, certify, pursuant to s.906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly represents, the financial condition and result of operations of Communicate.

/s/ J. Cameron Pan
J. Cameron Pan
Chief Financial Officer
August 13, 2004


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COMMUNICATE.COM INC.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2004

(UNAUDITED)

INTERIM CONSOLIDATED BALANCE SHEETS

INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS


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COMMUNICATE.COM INC.

CONSOLIDATED BALANCE SHEETS

		June 30, 2004			December 31, 2003
(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	487,698		$	393,039
Accounts receivable		14,633			27,968
Advances receivable		2,647			1,221
Prepaid expenses		-			2,067

		504,978			424,295

FIXED ASSETS		8,447			9,618
INTANGIBLE ASSETS (Note 2)		1,633,726			1,764,714

	$	2,147,151		$	2,198,627

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities	$	458,483		$	536,214
Loan payable (Note 4)		152,694			52,930

		611,177			589,144

LOAN PAYABLE (Note 4)		-			250,000

		611,177			839,144

NON-CONTROLLING INTEREST		-			2,345

COMMITMENTS AND CONTINGENCIES (Notes 1 and 10)

STOCKHOLDERS’ EQUITY
Capital stock (note 6)
Authorized
50,000,000 Common shares, $.001 par value
Issued and outstanding
14,741,339 (2003 – 14,691,339) Common shares		5,751			5,701
Additional paid in capital		3,076,466			3,066,516
Accumulated deficit		(1,530,703	)		(1,696,798	)
Accumulated other comprehensive income (loss)		(15,540	)		(18,281	)

		1,535,974			1,357,138

	$	2,147,151		$	2,198,627

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


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COMMUNICATE.COM INC.

INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

		Three months ended June 30, 2004			Three months ended June 30, 2003			Six months ended June 30, 2004			Six months ended June 30, 2003

REVENUES
Domain name leasing and advertising	$	159,456		$	118,203		$	226,004		$	199,294
Domain name sales (Note 11)		200,000			-			400,000			-
Product sales and other		373,651			55,692			603,212			55,758
Total revenues		733,107			173,895			1,229,216			255,052

COST OF REVENUES
Cost of domain name sales and commissions		107,794			-			182,651			-
Product purchases and other		297,827			46,401			477,409			46,401

Total cost of revenues		405,621			46,401			660,060			46,401

GROSS PROFIT		327,486			127,494			569,156			208,651

EXPENSES
Marketing		21,698			-			26,719			-
General and administrative		120,361			47,401			255,439			78,396
Management fees and salaries		64,000			36,000			122,500			72,000
Professional fees		5,707			15,498			15,328			22,910
Depreciation		562			794			1,170			1,674

		212,328			99,693			421,156			174,980

INCOME BEFORE OTHER ITEMS		115,158			27,801			148,000			33,671

NON-CONTROLLING INTEREST SHARE OF LOSS IN SUBSIDIARY		2,325			-			9,016			-
DILUTION GAIN IN FT (Note 3)		3,425			-			9,079			-

INCOME BEFORE INCOME TAXES		120,908			27,801			166,095			33,671

INCOME TAXES
Current		51,625			12,227			73,049			14,809
Recovery of deferred tax assets		(51,625	)		(12,227	)		(73,049	)		(14,809	)


NET INCOME (LOSS) FOR THE PERIOD	$	120,908		$	27,801		$	166,095		$	33,671

EARNINGS (LOSS) PER SHARE:
Basic	$	0.01		$	0.00		$	0.01		$	0.00

Fully diluted	$	0.01		$	0.00		$	0.01		$	0.00

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:
Basic		14,739,416			14,691,339			14,739,416			14,691,339

Fully diluted		17,944,416			14,691,339			17,944,416			14,691,339

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


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COMMUNICATE.COM INC.

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

		Six months ended June 30, 2004			Six months ended June 30, 2003

CASH FLOWS FROM OPERATING ACTIVITIES
Net income for the period	$	166,095		$	33,671
Adjustments to reconcile net income to net cash From operating activities
- non-controlling interest share of losses		(9,016	)		-
- dilution gain in FT		(9,079	)		-
- non-cash cost of domain name sales		130,988			-
- depreciation		1,171			1,674
- accrued interest		(236	)		-
- deferred revenue		-			9,746
- accounts and advances receivable		11,909			(2,598	)
- prepaid expenses		2,067			(5,085	)
- accounts payable and accrued liabilities		(77,731	)		41,730

CASH FROM OPERATING ACTIVITIES		216,168			79,138


CASH FLOWS FROM FINANCING ACTIVITIES
- issuance of common stock		25,750			-
- loan proceeds (repayments)		(150,000	)		-


CASH FLOWS USED IN FINANCING ACTIVITIES		(124,250	)		-


EFFECT OF EXCHANGE RATE CHANGES		2,741			(26,675	)


INCREASE IN CASH AND CASH EQUIVALENTS		94,659			52,463

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		393,039			55,527


CASH AND CASH EQUIVALENTS, END OF PERIOD	$	487,698		$	107,990

SUPPLEMENTAL CASH FLOW INFORMATION (Refer to Note 9)

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


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COMMUNICATE.COM INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2004

(Unaudited)

NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION

The Company was incorporated October 10, 1995 under the laws of the State of Nevada and effective August 24, 2000 changed its name from Troyden Corporation to Communicate.com Inc. (“CMNN” or “the Company”). Effective November 10, 2000 the Company acquired a 52% controlling interest in Communicate.com Inc., an Alberta private company that changed its name to Domain Holdings Inc. on April 5, 2002 (“DHI”). During December 2000, CMNN acquired from minority shareholders an additional 31% of the outstanding shares of DHI. In the second quarter of 2002, CMNN acquired a further 10% of the outstanding shares of DHI from minority shareholders and in the end of the third quarter of 2003, acquired another 1% of the outstanding shares of DHI from a minority shareholder. As at June 30, 2004, CMNN owns 94% of the outstanding shares of DHI.

DHI owns a portfolio of generic domain names. DHI’s current business strategy is to develop or to seek partners to develop its domain names to include content, commerce and community applications. DHI has developed websites that sell fragrance and beauty care products to North American consumers. DHI is developing other sites with the goal of facilitating business transactions both at the wholesale level and at the consumer level. DHI sells advertising services on its domains held for development and seeks to acquire other domains to complement its retail strategy or its advertising strategy. DHI has an in-house development team that develops its corporate websites.

On October 1, 2003 the Company acquired a 71% controlling interest in FrequentTraveller.com Inc. (“FT”), a Nevada private company incorporated on October 29, 2002. FT is a full service travel agency that caters to Internet-based customers seeking tours and other travel services to geographic destinations currently owned by DHI. As at June 30, 2004, CMNN owns 55% of the outstanding shares of FT. (Refer to Note 3.)

These financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America with the on-going assumption applicable to a going concern which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The continued operations of the Company and the recoverability of the carrying value of its assets is dependent upon the ability of the Company to maintain profitable operations. The accompanying financial statements do not include any adjustments relative to the recoverability and classification of assets carrying amounts or the amount and classification of liabilities that might result from the outcome of this uncertainty. To date, the Company has a limited history of profitable operations and at June 30, 2004 had a working capital deficit of $106,199 (2003 - $646,104).

Unaudited Interim Financial Statements

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB of Regulation S-B. They do not include all information and footnotes required by generally accepted accounting principles for complete financial statements. However, except as disclosed herein, there have been no material changes in the information disclosed in the notes to the financial statements for the year ended December 31, 2003 included in the Company’s Annual Report on Form 10-KSB filed with the Securities and Exchange Commission. The interim unaudited consolidated financial statements should be read in conjunction with those financial statements included in the Form 10-KSB. In the opinion of Management, all adjustments considered necessary for a fair presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the six months ended June 30, 2004 are not necessarily indicative of the results that may be expected for the year ending December 31, 2004.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The accompanying financial statements are presented in United States dollars and are prepared in accordance with accounting principles generally accepted in the United States.

Principles of Consolidation

The financial statements include the accounts of the Company, the 94% interest in its subsidiary, DHI, and the 55% interest in FT. All significant intercompany balances and transactions are eliminated on consolidation.


	*Page - 21*

COMMUNICATE.COM INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2004

(Unaudited)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Revenue recognition

Revenue from the sale and lease of domain names, whose carrying values are recorded as intangible assets, consists primarily of funds earned for the transfer of rights to domain names that are currently in the Company’s control. Collectibility of revenues generated is subject to a high level of uncertainty; accordingly revenues are recognized only as received. Lease payments paid in advance are recorded as deferred revenue.

Web advertising revenue consists primarily of commissions earned from the referral of visitors to the Company’s sites to other parties. The amount and collectibility of these referral commissions is subject to uncertainty; accordingly revenues are recognized when the amount can be determined and collectibility can be reasonably assured.

Revenues, and associated costs of goods sold, from the on-line sales of products, currently consisting primarily of fragrances and other beauty products, are recorded upon shipment of products and determination that collection is reasonably assured. The Company does not record inventory as an asset because all products sold are delivered to the customer on a “just-in-time” basis.

Revenues from the sales of travel products, including tours, airfares and hotel reservations, are non-refundable upon receipt of payment and are accordingly recognized as received. All costs relating to travel related sales are accrued at that time.

Stock-based compensation

In December 2002, the Financial Accounting Standards Board issued Financial Accounting Standard No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure” (“SFAS No. 148”), an amendment of Financial Accounting Standard No. 123 “Accounting for Stock-Based Compensation” (“SFAS No. 123”). The purpose of SFAS No. 148 is to: (1) provide alternative methods of transition for an entity that voluntarily changes to the fair value based method of accounting for stock-based employee compensation, (2) amend the disclosure provisions to require prominent disclosure about the effects on reported net income of an entity’s accounting policy decisions with respect to stock-based employee compensation, and (3) to require disclosure of those effects in interim financial information. The disclosure provisions of SFAS No. 148 were effective for the Company commencing December 31, 2002 and the required disclosures have been made below.

The Company has elected to continue to account for stock-based employee compensation arrangements in accordance with the provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees”, (“APB No. 25”) and comply with the disclosure provisions of SFAS No. 123 as amended by SFAS No. 148 as described above. In addition, in accordance with SFAS No. 123 the Company applies the fair value method using the Black-Scholes option-pricing model in accounting for options granted to consultants. Under APB No. 25, compensation expense is recognized based on the difference, if any, on the date of grant between the estimated fair value of the Company’s stock and the amount an employee must pay to acquire the stock. Compensation expense is recognized immediately for past services and pro-rata for future services over the option-vesting period.

The following table illustrates the pro forma effect on net income (loss) and net income (loss) per share as if the Company had accounted for its for stock-based employee compensation using the fair value provisions of SFAS No. 123 using the assumptions as described in Note 5:

			Six months ended June 30, 2004			Six months ended June 30, 2003

Net income for the period	As reported	$	166,095		$	33,671
SFAS 123 compensation expense	Pro-forma		(12,456	)		(12,354	)


Net income for the period	Pro-forma	$	153,639		$	21,317


Pro-forma basic net income per share	Pro-forma	$	0.01		$	0.00

Pro-forma diluted net income per share	Pro-forma	$	0.01		$	0.00


	*Page - 22*

COMMUNICATE.COM INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2004

(Unaudited)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with SFAS No. 123 and the conclusions reached by the Emerging Issues Task Force in Issue No. 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring or in Conjunction with Selling Goods or Services” (“EITF 96-18”). Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earlier of a performance commitment or completion of performance by the provider of goods or services as defined by EITF 96-18.

The Company has also adopted the provisions of the Financial Accounting Standards Board Interpretation No.44, Accounting for Certain Transactions Involving Stock Compensation – An Interpretation of APB Opinion No. 25 (“FIN 44”), which provides guidance as to certain applications of APB 25. FIN 44 is generally effective July 1, 2000 with the exception of certain events occurring after December 15, 1998.

Income taxes

The Company follows the liability method of accounting for income taxes. Under this method, future tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax balances. Future tax assets and liabilities are measured using enacted or substantially enacted tax rates expected to apply to the taxable income in the years in which those differences are expected to be recovered or settled. The effect on future tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the date of enactment or substantive enactment. A valuation allowance is provided for deferred tax assets if it is more likely than not that the Company will not realize the future benefit, or if the future deductibility is uncertain.

Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States 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 revenue and expenses for the periods that the financial statements are prepared. Actual amounts could differ from these estimates.

Foreign currency transactions

The financial statements are presented in United States dollars. In accordance with Statement of Financial Accounting Standards No. 52, “Foreign Currency Translation”, the foreign currency financial statements of the Company’s subsidiaries are re-measured into U.S. dollars. Monetary assets and liabilities are re-measured using the foreign exchange rate that prevailed at the balance sheet date. Revenue and expenses are translated at weighted average rates of exchange during the year and stockholders’ equity accounts and certain other non-monetary assets and liabilities are translated by using historical exchange rates. Resulting re-measurement gains or losses are reported as a component of other comprehensive income.

Earnings (loss) per share

Basic earnings (loss) per share is computed by dividing earnings (loss) for the period by the weighted average number of common shares outstanding for the period. Fully diluted earnings (loss) per share reflects the potential dilution of securities by including other potential common stock, including convertible preferred shares, in the weighted average number of common shares outstanding for a period and is not presented where the effect is anti-dilutive.

Comprehensive income

Comprehensive income is defined as the change in equity from transactions, events and circumstances, other than those resulting from investments by owners and distributions to owners. Comprehensive income to date consists only of the cumulative net loss resulting from translation of the foreign currency financial statements of DHI.


	*Page - 23*

COMMUNICATE.COM INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2004

(Unaudited)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Intangible assets

The Company has adopted the provision of the Statement of Financial Accounting Standards No. 142 (“SFAS 142”), “Goodwill and Intangible Assets”, which revises the accounting for purchased goodwill and intangible assets. Under SFAS 142, goodwill and intangible assets with indefinite lives are no longer amortized and are be tested for impairment annually. The determination of any impairment would include a comparison of estimated future operating cash flows anticipated during the remaining life with the net carrying value of the asset as well as a comparison of the fair value to book value of the Company.

Effective January 1, 2002, the Company adopted the provisions of SFAS 142 which, upon adoption, required the Company to make an initial determination as to whether an impairment of its intangible assets held for resale had occurred as a result of adopting this new accounting policy. In accordance with the provisions of SFAS 142, the Company is required to compare its net book value to the overall market capitalization of the Company and if the market capitalization is less than the Company’s net book value, to record an impairment of its intangible assets accordingly. As a result of applying this impairment test in the first quarter of 2002, the Company recorded a charge in the period of $1,426,736 as a cumulative effect of an accounting change. The balance of the Company’s intangible assets, has been determined to have an indefinite life and management has determined, based upon projected cash flows and market capitalization, that the value of its intangible assets does not require a further impairment charge.

Website development costs

The Company has adopted the provisions of EITF 00-2 "Accounting for Web Site Development Costs" and AICPA SOP 98-1 “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use” whereby costs incurred in the preliminary project phase are expensed as incurred; costs incurred in the application development phase are capitalized; and costs incurred in the post-implementation operating phase are expensed as incurred. The Company has not currently incurred any significant development costs relating to its operational websites.

Comparative figures

Certain of the comparative figures have been restated to conform to the current year’s presentation.

NOTE 3 – ACQUISITION

By agreement dated October 1, 2003 the Company acquired 350,000 common shares of FT, representing 71% of the outstanding shares of FT, in consideration for settlement of a $35,000 debt owing to the Company by FT for previous consulting work provided. Subsequent to October 1, 2003, FT issued 113,637 shares of its common stock to non-controlling interests for total proceeds of $50,000 resulting in a gain on dilution of $30,555 in 2003 and issued 30,727 shares for total proceeds of $15,750 resulting in a gain of $9,079 in 2004. As a result, at June 30, 2004, CMNN owns 55% of the outstanding shares of FT.

NOTE 4 – LOAN PAYABLE

In connection with the acquisition of DHI, the Company entered into a Loan and Security Agreement dated November 10, 2000 with Pacific Capital Markets Inc. (“PCMI”), a British Columbia corporation. Under the terms of the agreement, PCMI agreed to loan the Company up to $1,500,000 to satisfy its obligation pursuant to the DHI purchase agreement dated November 10, 2000. Amounts loaned by PCMI are secured by a promissory demand note (subsequently amended to a promissory note due June 28, 2005), bearing interest at the Royal Bank of Canada United States dollar prime rate plus 2%. In the event that the Company fails to repay the amounts due under this agreement, PCMI may, at its option, convert the balance of principal and interest due pursuant to this agreement into shares of the Company’s common stock at a price equal to 80% of the average selling price of the Company’s common stock for the fifteen days prior to conversion. As at June 30, 2004 the outstanding loan balance was $150,000 (2003 - $375,000) and a total of $13,028 (2003 - $21,503) of interest was incurred for the six-month ended June 30, 2004 and $2,694 remains payable at June 30, 2004.


	*Page - 24*

COMMUNICATE.COM INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2004

(Unaudited)

NOTE 5 – CAPITAL STOCK

The authorized capital of the Company consists of 50,000,000 Common Shares with a par value of $.001.

During the period ended June 30, 2004, the Company issued 50,000 shares of restricted common stock of the Company to two employees in satisfying bonuses of $10,000 granted and recorded by DHI in 2003.

Stock options

The Company does not have a formal Stock Option Plan, however, options may be granted with terms and conditions at the discretion of the Company’s board of directors.

On July 24, 2002 the Company granted an officer 580,000 stock options at an exercise price of $0.10 per share. The options vest evenly over two years commencing July 24, 2002. No compensation expense will be recorded upon vesting of these options in accordance with the provisions of APB No. 25 as the exercise price of the options awarded approximated the market price of the Company’s common shares as at the date of the award.

In accordance with the provisions of SFAS No. 123, for stock options granted to officers, directors and employees, the Company has provided pro forma information regarding net income (loss) and net income (loss) per share as if the Company had accounted for these stock options using the fair value method. The fair value of the options vested in the period was estimated at the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions: risk free interest rate of 4%; dividend yield of 0%; volatility factor of the expected market price of the Company's common stock of 205% and a weighted average expected life of the option of 2 years.

For purposes of the pro-forma disclosures, the estimated fair value of the options of $49,823 is amortized to expense over the vesting period. In accordance with the provisions of SFAS 148, the Company’s pro-forma information relating to the granting and vesting of stock options has been shown in Note 2.

NOTE 6 – RELATED PARTY TRANSACTIONS

During the six month period ended June 30, 2004 consulting fees and salaries totalling $122,500 (2003 - $36,000) were incurred and paid to the executives of the Company. At June 30, 2004 $76,000 of prior year’s consulting fees, included in accounts payable, were owed to one officer. The $76,000 payable is unsecured and non-interest bearing and was paid in July 2004.

During the six month period ended June 30, 2004 commissions totalling $40,000 from the sales of domain names were paid to a principal of Pacific Capital Markets Inc. (See Note 11.)

NOTE 7 – FINANCIAL INSTRUMENTS

Interest rate risk exposure

The Company has limited exposure to any fluctuation in interest rates.

Foreign exchange risk

The Company is subject to foreign exchange risk for sales and purchases denominated in foreign currencies. Foreign currency risk arises form the fluctuation of foreign exchange rates and the degree of volatility of these rates relative to the United States dollar. The Company does not actively manage this risk.

Concentration of credit risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and cash equivalents and trade accounts receivable. The Company limits its exposure to credit loss by placing its cash and cash equivalents on deposit with high credit quality financial institutions. Receivables arising from sales to customers are generally not significant individually and are not collateralized. Management continually monitors the financial condition of its customers to reduce the risk of loss.


	*Page - 25*

COMMUNICATE.COM INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2004

(Unaudited)

NOTE 7 – FINANCIAL INSTRUMENTS (cont’d)

Fair values of financial instruments

The Company’s financial instruments include cash and cash equivalents, accounts receivable, bank indebtedness, accounts payable and accrued liabilities and loan payable. The fair values of these financial instruments approximate their carrying values.

NOTE 8 – INCOME TAXES

The Company’s subsidiary, DHI is subject to Canadian federal and British Columbia provincial taxes in Canada and the Company is subject to United States federal and state taxes.

The Company’s subsidiary, DHI is subject to Canadian federal and British Columbia provincial taxes in Canada and the Company and FT are subject to United States federal and state taxes.

As at June 30, 2004 the Company and its subsidiaries have net operating loss carryforwards of approximately $3,350,000 that result in deferred tax assets. The majority of the loss carryforwards will expire, if not utilized, over the next ten years, commencing in 2006. The Company’s subsidiary DHI also has approximately $1,150,000 in undepreciated capital costs relating to fixed assets that have not been amortized for tax purposes. These costs may be amortized in future as necessary to reduce taxable income. Management believes that the realization of the benefits from these deferred tax assets appears uncertain due to the Company’s limited profitable operating history and current business plans. Accordingly, a full deferred tax asset valuation allowance has been provided and no deferred tax asset benefit has been recorded.

NOTE 9 – SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS

		Six months ended June 30, 2004		Six months ended June 30, 2003

Cash paid during the period for:
Interest	$	13,028	$	21,503
Income taxes	$	-	$	-

On January 7, 2004, 50,000 shares were issued in settlement of $10,000 of DHI’s bonus payable. (Refer to Note 5.)

NOTE 10 – CONTINGENCIES

The former Chief Executive Officer of DHI commenced a legal action against DHI on March 9, 2000 for wrongful dismissal and breach of contract. He is seeking, at a minimum, 18.39% of the outstanding shares of DHI, specific performance of his contract, special damages in an amount of CAN $37,537, aggravated and punitive damages, interest and costs. On June 1, 2000, Communicate.com filed a Defence and Counterclaim against this individual claiming damages and special damages for breach

of fiduciary duty and breach of his employment contract. The outcome of these legal actions is currently not determinable and as such the amount of loss, if any, resulting from this litigation is presently not determinable.


	*Page - 26*

COMMUNICATE.COM INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2004

(Unaudited)

NOTE 11 – DOMAIN NAME SALES

On July 3, 2003, DHI entered into agreements to sell automobile.com, body.com, exercise.com and makeup.com to Manhattan Assets Corp. for a total sales price of $1,000,000. Upon entering into the agreements, DHI received a non-refundable $50,000 payment for each of the four domain names totalling $200,000 and granted Manhatten Assets the option to purchase four domain names for $200,000 each, with payments due beginning on November 3, 2003 and every three-months thereafter until August 3, 2004. If any of the payments are not made on the specified date, Manhattan Assets forfeits its rights to purchase under the agreement. As of June 30, 2004, Manhatten Assets has paid $800,000 to DHI under the terms of the contract and the Company has paid $80,000 in commissions on the $800,000. (See Note 7.)

DHI retains a perpetual royalty right to each of the domain names sold commencing on the fourth month after each sale. The royalty is calculated and payable monthly as the greater of 5% of net revenues or $2,500. A commission of 10% is payable to a related party on the sales proceeds of $1,000,000, but only as the proceeds are received.

NOTE 12 – SUBSEQUENT EVENTS

Exercise of Options

On July 23, 2004, an Officer of the Company gave notice to exercise stock purchase options to acquire 580,000 common shares of the Company at $0.10 per share. (See Notes 5 and 7.)


	*Page - 27*