EX-31

0001104540-05-000220.txt : 20051114 0001104540-05-000220.hdr.sgml : 20051111 20051114122159 ACCESSION NUMBER: 0001104540-05-000220 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20050930 FILED AS OF DATE: 20051114 DATE AS OF CHANGE: 20051114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMMUNICATE COM INC CENTRAL INDEX KEY: 0001108630 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 880346310 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-29929 FILM NUMBER: 051198469 BUSINESS ADDRESS: STREET 1: 600-1100 MELVILLE ST CITY: VANCOUVER BC V6E 4A6 STATE: A1 ZIP: 89502 BUSINESS PHONE: 6046892944 MAIL ADDRESS: STREET 1: 600-1100 MELVILLE ST CITY: VANOURVER BC V6E 4A6 STATE: A1 ZIP: 89502 FORMER COMPANY: FORMER CONFORMED NAME: TROYDEN CORP DATE OF NAME CHANGE: 20000307 10QSB 1 qsb.htm QSB EX-31

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 September 30, 2005

[ ] 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)

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 reports), and (2) has been subject to such filing requirements for the past 90 days.

[ X ] Yes [ ] No

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

[ ] Yes [ X ] No

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 17,756,339 shares outstanding

$.001 Par Value as of November 10, 2005

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

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COMMUNICATE.COM INC.

REPORT ON FORM 10-QSB

QUARTER ENDED SEPTEMBER 30, 2005

TABLE OF CONTENTS

PART I. Financial Information

Item 1. Financial Statements

Consolidated Balance sheets as of September 30, 2005 and December 31, 2004

Consolidated Statements of Operations for the periods ended September 30, 2005 and September 30, 2004

Consolidated Statements of Cash Flows for the periods ended September 30, 2005 and September 30, 2004

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. Unregistered Sales of Equity Securities and Use of Proceeds.

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 - FINANCIAL INFORMATION

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. (“FrequentTraveller”) (together the "Subsidiaries"), is involved in businesses that exploit commercial uses of the Internet. DHI markets and licenses a portfolio of domain names, a number 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 its debts. Registrant generates revenue from leasing domain names, sales commissions from the sale of third-party products and services utilizing the Internet, "pay-per-click" revenue and the trading of domain name assets. Since May 2003, Registrant has begun selling fragrances and beauty and sports products online directly to consumers and in October 2003 begun selling travel services through its website FrequentTraveller.com.

Registrant presently employs twenty-three full-time employees and three consultants and occupies approximately 5,000 square feet of office space in Vancouver, British Columbia and Bellingham, Washington.

(a) Selected Financial Data

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

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	For the Quarters Ended
		September 30, 2005			September 30, 2004
Statements of Operations Data
Domain Name Leasing and Advertising	$	256,705		$	171,885
Domain Name		--			200,000
eCommerce		760,954			445,271
Total Sales		1,017,659			817,156

Domain Names		--			96,835
eCommerce		602,648			356,526
Total Cost of Sales		602,648			453,361

Gross Profit		415,011			363,795

Marketing		(43,295	)		(24,274	)
General and Administrative		(80,307	)		(67,922	)
Management Fees and Salaries		(217,750	)		(166,735	)
Professional Fees		(24,404	)		(2,782	)
Depreciation		(3,113	)		(801	)

Operating Income		46,142			101,281

Gain on Debt Settlement		52,788			--
Non-Controlling Interest Share of Loss		17,679			32,702
Dilution Gain in Subsidiary		--			3,274

Net Income for the Period	$	116,609		$	137,257

Basic Earnings (Loss) per Share	$	0.01		$	0.01
Weighted Average Shares Outstanding		16,068,613			14,933,793

Balance Sheet Data		As at September 30, 2005			As at December 31, 2004
Current Assets	$	1,492,469		$	1,064,928
Fixed Assets		48,663			26,394
Intangible Assets		1,539,678			1,502,178
Total Assets	$	3,080,810		$	2,605,164

Accounts Payable & Accrued Liabilities	$	450,006		$	665,195
Non-Controlling Interest		10,784			--

Common Stock		10,708			6,331
Additional Paid in Capital		3,443,809			3,133,886
Accumulated Deficit		(834,497	)		(1,200,248	)
Total Stockholders’ Equity	$	2,620,020		$	1,939,969
Total Liabilities and Stockholders’ Equity	$	3,080,810		$	2,605,164

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(b) Results of Operations

REVENUES AND COSTS OF REVENUES.

Domain Name Leasing and Advertising. In the third quarter of 2005, Registrant generated domain name leasing and advertising revenue of $256,705 as compared to $171,885 in the third quarter of 2004, an increase of 49.4%. Management is satisfied with the current result as it surpasses Management’s growth target of 40% year-over-year. Management is continuing its effort to add to its domain portfolio to enhance revenue generation and is maintaining its growth target while certain domain names, such as body.com, are slated for development into ecommerce retailing sites. As more domain names are converted to retailing sites, domain name leasing and advertising growth will be curtailed while eCommerce sales will increase.

Domain Name Sales.

In the third quarter of 2005, the Registrant did not sell any domain names. Management has concluded its strategy to recapitalize the Registrant through the selling of non-strategic domain names. Proceeds from the prior sales in 2003 and 2004 were used to repay a note payable and to enhance the Registrant’s financial ratios and liquidity. Management has begun acquiring new domain names both individually and as a portfolio to replenish its asset base and to increase its advertising revenue. While Registrant has no immediate plans to sell any domain names in the near future, it will evaluate opportunities as they arise.

eCommerce Sales. Registrant began converting Internet traffic into customers by directly marketing and selling consumable goods. Beginning in May 2003, Registrant launched its cologne.com and perfume.com Internet retail sites and karate.com Internet retail site in 2004. In the third quarter of 2005, the combined retail sites generated sales of $583,933 (2004 Q3 - $339,604), or approximately $6,347 per day (2004 Q3 - $3,691 per day), with cost of purchases and shipping totaling $456,071 (2004 Q3 - $268,890) resulting in gross profit of $127,862 and gross profit margin of approximately 21.9% (2004 Q3 - 20.8%). Comparable quarterly sales have increased by 72.0% and gross profit margin in percentage term has increased by 5.3%. The improvement to current gross margin percentage over the previous quarter’s gross margin percentage of 17.1% reflected a more stringent fragrance vendor selection process based on analyzing a vendor’s stock selection, quoted margin, past service history and shipping costs. Also, with respect to karate.com, management improved on the sporting goods product mix and profit margin by eliminating items which involve high shipping costs. Management is continuously monitoring its overall product offerings and profit margins to maintain an acceptable gross profit margin of between 20% to 22% and to add growth to overall eCommerce sales. One disappointment is that the launch of body.com has been delayed to 2006 as management will instead focus on the holiday shopping period occurring in the fourth quarter of 2005.

In the third quarter of 2005, Registrant through its travel business subsidiary generated product sales of $172,337 at a cost of $146,577 as compared to sales of $105,603 at a cost of $87,636 in the third quarter of 2004. The travel operation incurred a net loss of $35,629 in the third quarter of 2005 and an accumulated deficit of $317,192 since inception in October 2002. During the third quarter of 2005, the subsidiary incurred accounting and legal fees of $13,168 related to its Form SB-2 filing. By excluding such fees, the loss would have been reduced to $22,461, an increase over the previous quarter’s loss of $15,787. While Management has reduced the monthly overhead by consolidating its base of operation it has not reached its revenue target of $150,000 per month and will continue to work to meet this goal. 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 month and believes the goal is achievable within twelve 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 and has continued its effort into 2005. In the third quarter of 2005, Registrant recorded marketing expenses of $43,295 or 7.4% of eCommerce sales as compared to $24,274 or 7.2% of comparable third quarter sales in 2004. Marketing expense is in line with expectation, and Management expects marketing expenses to increase as sales increase and has planned to use up to 10% of gross product sales for marketing in 2005.

GENERAL AND ADMINISTRATIVE. Registrant’s general and administrative expenses consist of costs for general and corporate functions, including facility fees, travel, telecommunications and investor relations. In the third quarter of 2005, Registrant recorded general and administrative expense of $80,307 (7.9% of total sales) as compared to $67,922 in the third quarter of 2004, an increase of 18.2%. Overhead costs have increased in line with increased staff and related costs. The currency exchange rate between the Canadian dollar and the US dollar has increased by over 10% and has contributed to costs which were primarily invoiced in Canadian dollars. Management expects general and administrative expenses to increase as total revenue increases but will attempt to maintain general and administrative costs below 10% of total sales.

MANAGEMENT FEES AND SALARIES. In the third quarter of 2005, Registrant incurred management fees and staff salaries of $217,750, an increase of 30.6% over the third quarter of 2004 of $166,735. New hires, scheduled salary and wage increases, and the fluctuation in the Canadian dollar have all impacted this line of expenses. Management expects staff salaries to increase slightly in the coming quarters as hiring slows down while management assesses productivity returns.

PROFESSIONAL FEES. Professional fees include legal and auditing fees. During the third quarter of 2005, professional fees totaled $24,404 as compared to $2,782 in 2004, an increase of 777%. Both legal and auditing fees have increased because the Registrant’s travel services subsidiary has filed its Form SB-2 to offer up to 4,000,000 common shares at a price of $0.50 per share. Any funds received by the Registrant’s travel business subsidiary on this offering will be used for the development of its travel business. Other than professional fees related to the travel subsidiary’s Form SB-2 filing, Management is unaware of factors which are likely to increase professional fees in the fourth quarter of 2005.

(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 both company owned inventory and of inventory owned by third parties; (iii) fees resulting from Internet traffic click-throughs generated by company owned domain name assets; and (iv) trading of domain name assets.

Page - 6

Management’s previously stated goal of eliminating the working capital deficiency has been achieved in the third quarter of 2004 and maintained into the third quarter of 2005. At September 30, 2005 Registrant had current assets in excess of current liabilities resulting in a positive working capital of $1,042,463 as compared to a working capital of $411,397 at the fiscal year ending December 31, 2004. During the nine-months ended September 30, 2005 Registrant had net income of $365,751 and an increase in cash of $424,888, compared to net income of $303,352 and an increase in cash of $192,537 for the same nine-month period of last year. Operating activities generated cash inflows of $157,768 after primarily reducing accounts payable and excluding the non-cash dilution gains from the sale of equity in the Registrant’s travel subsidiary during the nine-month period ended September 30, 2005. During the nine months ended September 30, 2005, the Registrant raised a net of $297,100 through: i) the completion of a private placement of 275,000 common shares for $100,000 cash; ii) the exercise of stock purchase warrants into 2,000,000 common shares for $100,000; and iii) the net private placement to non-controlling interest of FT of $97,100. From the beginning of the fiscal year to September 30, 2005, Registrant has reduced its accumulated deficit to $834,497 from $1,200,248 and has stockholders’ equity of $2,620,020.

In October 2003, Registrant became a majority shareholder of FrequentTraveller which has developed and is operating travel sale websites utilizing non-exclusive access to 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 has two managers and is not expected to generate sufficient revenue to cover expenses for at least twelve months. Any fund shortfall, currently requiring $10,000 per month, will be covered by Registrant or by sourcing outside capital. During the first nine months of 2005, FT completed a private placement of $147,100 in new common share at a price of $0.05 per common share, including $50,000 invested by the Registrant. Since inception, FT has raised $338,926 in private placement equity, including $120,000 invested by the Registrant, and accumulated a deficit of $317,192 with total shareholders’ equity of $21,734. On July 19, 2005, FT filed a Form SB-2 offering up to 4,000,000 common shares at a price of $0.50 per share on a non-sponsored best effort basis. While the offering has been filed, it is not yet effective and may not become effective. FT plans to use any proceeds from this planned offering to expand its business and for working capital purposes.

As Registrant is working to achieve a positive working capital position and is currently profitable, opportunities may arise which would require 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 Registrant, engage in e-commerce and related businesses.

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

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(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.

Disclosure Controls and Procedures

David M. Jeffs, Registrant’s Chief Executive Officer, and J. Cameron Pan, Registrant’s Chief Financial Officer have evaluated the effectiveness of Registrant’s disclosure controls and procedures (as such term is defined in Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934 (the “Exchange Act” )) as of the end of the period covered by this quarterly report (the “Evaluation Date”). Based on such evaluation, they have concluded that, as of the Evaluation Date, Registrant’s disclosure controls and procedures are effective in alerting Registrant on a timely basis to material information required to be included in its reports filed or submitted under the Exchange Act.

Changes in Internal Controls

During the quarter of the fiscal year covered by this report, there were no changes in Registrant’s internal controls or, to the Registrant’s knowledge, in other factors that have materially affected, or are reasonably likely to materially affect, these controls and procedures subsequent to the date Registrant carried out this evaluation.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

In December 1999, DHI commenced a lawsuit in the Supreme Court of British Columbia (No. C996417) against Paul Green, the former chief executive officer of DHI, for breach of fiduciary duty for wrongfully attempting to appropriate the Subsidiary’s business opportunities. DHI 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 Registrant cannot predict whether DHI will prevail, and if it does, what the terms of any judgment may be.

The former Chief Executive Officer of DHI, Paul Green, commenced a legal action against DHI on March 9, 2000 in the Supreme Court of British Columbia (No. S001317) 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 approximate amount of $30,000, aggravated and punitive damages, interest and costs. On June 1, 2000, DHI 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.

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

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

During the quarter of the fiscal year covered by this report, (i) Registrant did not modify the instruments defining the rights of its shareholders, (ii) no rights of any shareholders were limited or qualified by any other class of securities, and (iii) Registrant did not sell any unregistered equity securities.

Item 3. Defaults Upon Senior Securities.

During the quarter of the fiscal year covered by this report, no material default has occurred with respect to any indebtedness of Registrant. Also, during this quarter, no material arrearage in the payment of dividends has occurred.

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.

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Item 5. Other Information.

During the quarter of the fiscal year covered by this report, Registrant reported all information that was required to be disclosed in a report on Form 8-K.

Item 6. Exhibits.

(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

Page - 10

SIGNATURES

In accordance with the requirements of the Exchange Act, 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: November 10, 2005

By: /s/ J. Cameron Pan

Name: J. Cameron Pan

Title: CFO

Dated: November 10, 2005

Page - 11

Exhibit 31

Page - 12

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 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 small business issuer as of, and for, the periods presented in this report;

4. The small business issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer 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 small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the small business issuer’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 small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

5. The small business issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small business issuer’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 small business issuer’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 small business issuer’s internal control over financial reporting.

Date: November 10, 2005

/s/ David M Jeffs

David M Jeffs, Director and CEO

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CERTIFICATIONS

I, J Cameron Pan, certify that:

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

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

Date: November 10, 2005

/s/ J Cameron Pan

J Cameron Pan - CFO

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Exhibit 32

Page - 15

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 September 30, 2005 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

November 10, 2005

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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 September 30, 2005 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

November 10, 2005

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COMMUNICATE.COM INC.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2005

(UNAUDITED)

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

		September 30, 2005			December 31, 2004
		(unaudited)
ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	1,489,816		$	1,064,928
Accounts receivable		2,653			9,373
Advances receivable		-			2,291

		1,492,469			1,076,592

FIXED ASSETS		48,663			26,394
INTANGIBLE ASSETS (Note 2)		1,539,678			1,502,178

	$	3,080,810		$	2,605,164


LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES
Accounts payable and accrued liabilities	$	450,006		$	665,195

NON-CONTROLLING INTEREST (Note 3)		10,784			-

STOCKHOLDERS’ EQUITY
Capital stock (note 4)
Authorized
50,000,000 Common shares, $0.001 par value
Issued and outstanding
17,756,339 Common shares (December 31, 2004 - 15,321,339)		10,708			6,331
Additional paid in capital		3,443,809			3,133,886
Accumulated deficit		(834,497	)		(1,200,248	)


		2,620,020			1,939,969

	$	3,080,810		$	2,605,164

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 Sept. 30, 2005			Three months ended Sept. 30, 2004			Nine months ended Sept. 30, 2005			Nine months ended Sept. 30, 2004

SALES
Domain name leasing and advertising	$	256,705		$	171,885		$	844,185		$	397,889
Domain names		-			200,000			-			600,000
eCommerce		760,954			445,271			2,201,855			1,048,483
Total sales		1,017,659			817,156			3,046,040			2,046,372
COST OF SALES
Domain names		-			96,835			-			279,486
eCommerce		602,648			356,526			1,821,507			833,935
Total cost of sales		602,648			453,361			1,821,507			1,113,421

GROSS PROFIT		415,011			363,795			1,224,533			932,951

EXPENSES
Marketing		43,295			24,274			119,368			50,993
General and administrative		80,307			67,922			216,031			229,872
Management fees and salaries		217,750			166,735			614,896			382,724
Professional fees		24,404			2,782			56,092			18,110
Depreciation		3,113			801			7,711			1,971
		368,869			262,514			1,014,098			683,670

INCOME BEFORE OTHER ITEMS		46,142			101,281			210,435			249,281

GAIN ON DEBT SETTLEMENT		52,788			-			69,000			-
NON-CONTROLLING INTEREST SHARE OF LOSS IN FREQUENT TRAVELER.COM (Note 3)		17,679			32,702			60,044			41,718
DILUTION GAIN IN FREQUENT TRAVELLER.COM (Note 3)		-			3,274			26,272			12,353

INCOME BEFORE INCOME TAXES		116,609			137,257			365,751			303,352

INCOME TAXES (Note 7)
Current		44,312			60,366			138,986			133,415
Recovery of deferred tax assets		(44,312	)		(60,366	)		(138,986	)		(133,415	)

NET INCOME FOR THE PERIOD	$	116,609		$	137,257		$	365,751		$	303,352


EARNINGS PER SHARE:
Basic	$	0.01		$	0.01		$	0.02		$	0.02
Diluted	$	0.01		$	0.01		$	0.02		$	0.02

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:
Basic		16,068,613			14,933,793			16,068,613			14,856,485
Diluted		16,068,613			17,142,126			16,068,613			17,064,818

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

Page - 20

COMMUNICATE.COM INC.

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

		Nine months ended Sept. 30, 2005			Nine months ended Sept. 30, 2004

CASH FLOWS FROM OPERATING ACTIVITIES
Net income for the period	$	365,751		$	303,352
Adjustments to reconcile net income to net cash from operating activities
- non-controlling interest share of losses (Note 3)		(60,044	)		(41,718	)
- dilution gain in Frequent Traveller.com (Note 3)		(26,272	)		(12,353	)
- non-cash cost of domain name sales		-			209,090
- depreciation		7,711			1,971
- accounts and advances receivable		9,011			11,120
- prepaid expenses		-			2,067
- accounts payable and accrued liabilities		(138,389	)		(173,780	)

CASH FROM (USED IN) OPERATING ACTIVITIES		157,768			299,749

CASH FLOWS FROM INVESTING ACTIVITIES
- purchase of computer equipment		(29,980	)		(7,502	)

CASH FLOWS USED IN INVESTING ACTIVITIES		(29,980	)		(7,502	)

CASH FLOWS FROM FINANCING ACTIVITIES
- issuance of common stock for share subscriptions (Note 4)		100,000			68,000
- issuance of common stock for warrants exercised (Note 4 and 5)		100,000			-
- issuance of common stock by FT.com(Note 3)		97,100			51,726
- loan proceeds (repayments)		-			(200,000	)

CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES		297,100			(80,274	)

EFFECT OF EXCHANGE RATE CHANGES		-			(19,436	)

INCREASE IN CASH AND CASH EQUIVALENTS		424,888			192,537

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		1,064,928			393,039

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	1,489,816		$	585,576

SUPPLEMENTAL CASH FLOW INFORMATION (Refer to Note 8)

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

Page - 21

COMMUNICATE.COM INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2005

(unaudited)

NOTE 1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION

The Company’s subsidiary Domain Holdings Inc. (“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 and sporting goods 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 and advertising strategy. DHI has an in-house development team that develops its corporate and retailing 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. As at September 30, 2005, the Company owns 50.4% of the outstanding shares of FT. (Refer to Note 3.)

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 has been no material changes in the information disclosed in the notes to the financial statements for the year ended December 31, 2004 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 three months ended September 30, 2005 are not necessarily indicative of the results that may be expected for the year ending December 31, 2005.

Comparative figures

Certain comparative figures have been reclassified in order to conform to the current period’s financial statement presentation.

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 50.4% interest in FT. All significant intercompany balances and transactions are eliminated on consolidation.

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.

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. In accordance with EITF 99-19 the Company records web advertising revenue net of service costs.

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.

Page - 22

COMMUNICATE.COM INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2005

(unaudited)

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

Revenues from the sales of travel products, including tours, airfares and hotel reservations, where the Company acts as the merchant of record and has inventory risk are recorded on a “gross” basis. Customer deposits received prior to ticket issuance or 30-days prior to travel are recorded as deferred revenue. Where the Company does not act as the merchant of record and has no inventory risk, revenues are recorded at the “net” amounts, without any associated cost of revenue in accordance with EITF 99-19.

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 and net earnings per share as if the Company had accounted for its stock-based employee compensation using the fair value provisions of SFAS No. 123 using the assumptions as described in Note 4:

			Nine months ended September 30, 2005		Nine months ended September 30, 2004
Net income for the period	As reported	$	365,751	$	303,352
SFAS 123 compensation expense	Pro-forma		-		(1,468	)
Net income for the period	Pro-forma	$	365,751	$	301,884

Pro-forma basic net income per share	Pro-forma	$	0.02	$	0.02
Pro-forma diluted net income per share	Pro-forma	$	0.02	$	0.02

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.

Page - 23

COMMUNICATE.COM INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2005

(unaudited)

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

Income taxes

The Company follows the liability method of accounting for income taxes. Under this method, deferred 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 .deferred 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 deferred 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 intangible assets, stock based compensation, disclosure of contingent assets and liabilities at the date of the financial statements and 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 historical cost balances are translated by using historical exchange rates. Resulting re-measurement gains or losses are reported on the consolidated statement of operations.

Earnings per share

Basic earnings per share is computed by dividing earnings for the period by the weighted average number of common shares outstanding for the period. Fully diluted earnings 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.

Cash and cash equivalents

The company considers all highly liquid instruments with an original maturity of three months or less at the time of issuance to be cash equivalents.

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 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.

The Company’s intangible assets, which consist of its portfolio of generic domain names, has been determined to have an indefinite life and management has determined, that there is no impairment of the carrying value of intangible assets at September 30, 2005.

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.

Page - 24

COMMUNICATE.COM INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2005

(unaudited)

NOTE 3 - NON CONTROLLING INTEREST

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 fiscal 2003. In 2004, FT issued 350,000 shares to the Company in settlement of advances of $35,000 and issued 334,578 shares to non-controlling interests for total proceeds of $51,726 resulting in a net gain on dilution of $12,353 in fiscal 2004. On November 16, 2004, FT declared a nine share for every one share stock dividend.

On May 1, 2005, FT completed a private placement of common shares at $0.05 per common share and raised $147,100 of which $50,000 was invested by the Company. FT issued 1,000,000 common shares to the Company and 1,942,000 to non-controlling interests. The monies were used to recapitalize FT and for working capital purposes. The Company recorded a dilution gain of $68,837 and a non-controlling interest in FT of $28,463 in the quarter. As of September 30, 2005, FT has 15,878,690 common shares issued and outstanding and the Company owns 8,000,000 common shares representing 50.4% of FT’s issued and outstanding common shares.

On May 5, 2005, DHI entered into an agreement with FT whereby FT would have the right to sell travel products on Brazil.com, Indonesia.com, Malaysia.com, Canadian.com and GreatBritain.com by agreeing to pay at least a minimum royalty commencing 2006 of $150,000 per annum. The royalty, which is 5% on the first $20 million and decreases by 1% on every subsequent $20 million to a minimum of 1% on sales greater than $80 million, is based on sales of travel products by FT. DHI retains the rights to sell other services, including advertising, on the websites. Beginning in the calendar year of 2006 the annual royalty will be a minimum of $150,000. The agreement expires on December 31, 2010 and may be extended in increments of 5 years thereafter with the minimum annual royalty recalculated based on the average from the previous 5-year period.

On July 19, 2005, FT filed a Form SB-2 registration statement with the U.S, Securities and Exchange Commission offering up to 4,000,000 new common shares at a price of $0.50 per common share. The monies to be raised are intended for development of FT’s business, including call center operations, technology investment and working capital. The Company is not obligated to undertake any portion of the offering, and if the maximum offering is sold by FT the Company’s interest in FT will decrease from 50.4% to 40%. While the registration process is continuing, the Company cannot estimate when, or if, the Form SB-2 filed by FT will become effective and whether the offering will be sold by FT.

NOTE 4 - CAPITAL STOCK

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

(a) On April 5, 2005, the Company issued 275,000 shares of restricted common stock to a third party for $137,500 which was paid by $100,000 cash and a portfolio of China root-level (.cn) domain names which have been recorded at a value of $37,500.

(b) On May 16, 2005, the Company issued 160,000 shares of restricted common stock to four employees and two officers to satisfy bonuses payable of $76,800 as authorized by a resolution of the board of directors dated January 7, 2005.

(c) On June 22, 2005, the Company issued 2,000,000 shares of restricted common stock for $100,000 to two related parties pursuant to a share purchase warrant agreement dated June 28, 2002.

(d) During the year ended December 31, 2004, the Company issued 50,000 shares of restricted common stock of the Company to two employees in satisfaction of bonuses of $10,000 granted and recorded by DHI in 2003 and issued 580,000 shares of restricted common stock to an officer under an option agreement (see Stock Options below).

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.

Page - 25

COMMUNICATE.COM INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2005

(unaudited)

NOTE 4 - CAPITAL STOCK (cont’d)

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 July 2004 the officer exercised his option for $58,000, and accordingly, the Company issued 580,000 shares of restricted common stock.

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 was amortized to expense over the vesting period which ended July 24, 2004. 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.

A summary of the Company’s stock options as of September 30, 2005, and changes during the period ended is presented below:

	Number of options		Weighted average exercise price per share			Weighted average remaining contractual life (in years)
					$
Outstanding at December 31, 2003	580,000		0.10			0.56
Exercised July 22, 2004	(580,000	)	(0.10	)		(0.56	)
Exercisable at December 31, 2004	-		-			-

Exercisable at September 30, 2005	-		-			-

Share purchase warrants

On June 28, 2002, the Company issued 2,000,000 share purchase warrants entitling the holder to purchase one share of common stock at $0.05 for a period of two years in settlement of certain accounts payable of $122,500. The Company has accounted for these share purchase warrants in accordance with SFAS No. 123 by applying the fair value method using the Black-Scholes option pricing model assuming a dividend yield of 0%, a risk-free interest rate of 4%, an expected life of two years and an expected volatility of 201%. The fair value of these warrants was $85,100 which resulted in a gain on settlement of $37,400. Pursuant to extending the term of a promissory note issued by the holder of the share purchase warrants on May 19, 2003, the share purchase warrants expiration date was extended to June 28, 2005.

A summary of the Company’s stock purchase warrants as of September 30, 2005, and changes during the period ended is presented below:

	Number of Warrants		Weighted average exercise price per share		Weighted average remaining contractual life (in years)
			$
Outstanding at December 31, 2003	2,000,000		0.05		1.49

Balance at December 31, 2004	2,000,000		0.05		0.49
Exercised June 22, 2005	(2,000,000	)	(0.05	)	(0.49	)

Balance at September 30, 2005	-		-		-

Page - 26

COMMUNICATE.COM INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2005

(unaudited)

NOTE 5 - RELATED PARTY TRANSACTIONS

During the nine-month ended September 30, 2005 consulting fees totalling $189,000 (2004 - $180,000) were incurred and paid to three officers of the Company.

On May 16, 2005, two of the officers each received 50,000 restricted common shares in lieu of bonus payable of $20,000.

On June 22, 2005, 2,000,000 restricted common shares were issued to principals of Pacific Capital Markets Inc. who are parents of an officer and director of the Company pursuant to the exercise of warrants.

NOTE 6 - 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 from 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.

Fair values of financial instruments

The Company’s financial instruments include cash and cash equivalents, accounts receivable, and accounts payable and accrued liabilities. The fair values of these financial instruments approximate their carrying values. Refer to Note 11.

NOTE 7 - 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.

As at September 30, 2005 the Company and its subsidiaries have net operating loss carryforwards of approximately $3,500,000 that result in deferred tax assets. The majority of the loss carryforwards will expire, if not utilized, through 2025 with the majority expiring by 2006. The Company’s subsidiary DHI also has approximately $1,500,000 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.

Page - 27

COMMUNICATE.COM INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2005

(unaudited)

NOTE 8 - SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS

	Nine month period ended Sept. 30, 2005		Nine month period ended Sept. 30, 2004
Cash paid during the period for:
Interest	$	-	$	17,329
Income taxes	$	-	$	-

Refer to Note 4(a).

On January 7, 2004, 50,000 shares were issued in settlement of $10,000 of DHI’s bonus payable. (Refer to Note 4.)

On May 16, 2005, 160,000 shares were issued in settlement of $76,800 of DHI’s bonus payable. (Refer to Note 4.)

NOTE 9 - SEGMENTED INFORMATION

The Company’s operations are conducted in two business segments, Internet Commerce and Travel Services. Revenues, operating profits and net identifiable assets by business segments are as follows:

For the nine months ended September 30, 2005
	Internet Commerce		Travel Services			Total
		$		$			$
Revenue		2,527,125		518,915			3,046,040
Segment Profit		300,555		(90,120	)		210,435
Total Assets		2,969,836		110,974			3,080,810
Intangible Assets		1,536,378		3,300			1,539,678

For the nine months ended September 30, 2004
	Internet Commerce		Travel Services			Total
	$		$			$
Revenue		1,860,842		185,530			2,046,372
Segment Profit		345,309		(96,028	)		249,281

As at December 31, 2004		$		$			$
Total Assets		2,573,825		31,339			2,605,164
Intangible Assets		1,498,878		3,300			1,502,178

The reconciliation of the segment profit to net income as reported in the financial statements is as follows:

For the nine months ended September 30	2005	2004
	$	$
Segment Profit	210,435	249,281
Gain on Debt Settlement	69,000	-
Non-Controlling Interest	60,044	41,718
Dilution Gain in FrequentTraveller.com	26,272	12,353
Net Income	365,751	303,352

Page - 28

COMMUNICATE.COM INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2005

(unaudited)

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 approximate amount of $30,000, 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.

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. In September 2004, pursuant to an amendment between the parties to the July 3, 2003 agreement of sale, DHI agreed to substitute call.com in place of body.com. As of September 30, 2005, Manhattan Assets has paid $1,000,000 to DHI under the terms of the contract and the Company has paid $100,000 in commissions on the $1,000,000.

DHI retains a perpetual royalty right to each of the above noted 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 arising from the sale of products and services marketed on web pages hosted on the domain names, or $2,500, commencing January 2005. No value was recorded for the perpetual royalty upon sale or transfer of a domain name right as future royalty amounts are not readily determinable and collectability is not reasonably assured. DHI has waived the royalty receivable from Manhattan Assets until January 2006 while awaiting the development of the websites.

Page - 29

EX-31 2 ex31.htm EX 31 EX 31

CERTIFICATIONS

I, David M Jeffs, certify that:

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

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

Date: November 10, 2005

/s/ David M Jeffs

David M Jeffs, Director and CEO

CERTIFICATIONS

I, J Cameron Pan, certify that:

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

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

Date: November 10, 2005

/s/ J Cameron Pan

J Cameron Pan - CFO

EX-32 3 ex32.htm EX 32 EX 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(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

November 10, 2005

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 September 30, 2005 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

November 10, 2005