LMDCF Everybody Loves Languages Corporation (PK)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

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FORM 6-K

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REPORT OF FOREIGN PRIVATE ISSUER

Pursuant to Rule 13a-16 or 15d-16 under

the Securities Exchange Act of 1934

 

For the month of March 31, 2014

 

Commission File Number 333-98397

 

Lingo Media Corporation

(Translation of registrant's name into English)

 

151 Bloor Street West, Suite 703, Toronto, Ontario Canada M5S 1S4

(Address of principal executive offices)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. Form 20-F ☒Form 40-F ☐

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐

 

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐

 

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

 

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934. Yes ☐No ☒

 

If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-________________.

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934 the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunder duly authorized.

 

	LINGO MEDIA CORPORATION
Date: May 27, 2014	By:	/s/ Michael Kraft
		Michael Kraft President and CEO

 

 

LINGO MEDIA CORPORATION

 

Condensed Consolidated Interim Financial Statements

 

For the three-month period ended March 31, 2014

 

  

LINGO MEDIA CORPORATION

Condensed Consolidated Interim Financial Statements

As at March 31, 2014

 

 

 

Notice to Reader

 

Management has compiled the Condensed Consolidated Interim Financial Statements of Lingo Media Corporation (“Lingo Media” or the “Company”) consisting of the Balance Sheets as at March 31, 2014 and the Statements of Comprehensive Income, Changes in Equity and Cash Flows for the three months then ended. All amounts are stated in Canadian Dollars. An accounting firm has not reviewed or audited these interim financial statements and management discussion and analysis thereon.

 

 

LINGO MEDIA CORPORATION

Condensed Consolidated Interim Financial Statements

As at March 31, 2014

 

 

Contents
Condensed Consolidated Interim Financial Statements	Page
Balance Sheets	4
Statements of Comprehensive Loss	5
Statements of Changes in Equity	6
Statements of Cash Flows	7
Notes to the Financial Statements	8-18

 

 

LINGO MEDIA CORPORATION

Condensed Consolidated Interim Balance Sheets

(Unaudited, expressed in Canadian Dollars, unless otherwise stated)

 

		Notes				March 31, 2014				December 31, 2013
ASSETS
Current Assets
Cash and cash equivalents						$	83,026			$	78,091
Accounts and grants receivable			5				887,813				1,003,440
Prepaid and other receivables							106,446				84,620
							1,077,285				1,166,151
Non-Current Assets
Property and equipment			6				32,221				31,926
Intangibles			7				900,970				876,895
Goodwill							139,618				139,618
TOTAL ASSETS						$	2,150,094			$	2,214,590
EQUITY AND LIABILITIES
Current Liabilities
Accounts payable							312,755				282,315
Accrued liabilities							613,563				601,843
Loans payable			8				891,545				819,545
TOTAL LIABILITIES							1,817,863				1,703,703
Equity
Share capital			9				18,102,347				18,102,347
Warrants			11				1,132,685				1,132,685
Share-based payment reserve							2,515,626				2,512,717
Accumulated other comprehensive income							(296,944	)			(168,245	)
Deficit							(21,121,483	)			(21,068,617	)
TOTAL EQUITY							332,231				510,887
TOTAL EQUITY AND LIABILITIES						$	2,150,094			$	2,214,590

 

 

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

 

These condensed consolidated interim financial statements are authorized for issue by the Board of Directors on May 27, 2014.

 

/s/ Michael Kraft		/s/ Martin Bernholtz
Director		Director

 

 

LINGO MEDIA CORPORATION

Condensed Consolidated Interim Statements of Comprehensive Income

For the three-months ended March 31, 2014, 2013 and 2012

(Unaudited, expressed in Canadian Dollars, unless otherwise stated)

 

		Notes				2014				2013				2012
Revenue						$	236,051			$	137,754			$	257,927
Expenses
Selling, general and administrative							215,512				310,918				607,546
Amortization - intangibles							128,843				92,573				99,562
Direct costs							59,932				40,691				71,472
Share-based payments							2,909				25,806				28,726
Depreciation – property and equipment			6				1,398				1,936				3,048
Total Expenses							408,594				471,924				810,354
Loss from Operations							(172,543	)			(334,170	)			(552,427	)
Net Finance Charges
Interest expense							46,374				67,934				28,575
Foreign exchange (gain) / loss							(174,806	)			(38,073	)			42,201
Loss Before Income Tax							(44,110	)			(364,031	)			(623,203	)
Income Tax Expense							8,755				12,992				13,019
Net Loss for the Period							(52,866	)			(377,023	)			(636,222	)
Other Comprehensive Income
Exchange differences on translating foreign operations gain / (loss)							(128,699	)			(21,928	)			7,601
Total Comprehensive Loss, Net of Tax						$	(181,565	)		$	(398,951	)		$	(628,621	)
Loss per Share
Basic and Diluted						$	(0.00	)		$	(0.02	)		$	(0.03	)
Weighted Average Number of Common Shares Outstanding
Basic and Diluted							21,391,013				20,899,177				20,011,494

 

 

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

 

 

LINGO MEDIA CORPORATION

Condensed Consolidated Interim Statements of Changes in Equity

For the three month ended March 31, 2014, 2013 and 2012

(Unaudited, expressed in Canadian Dollars, unless otherwise stated)

 

		Issued Share Capital								Share- Based Reserves				Warrants				Accumulated Other Comprehensive Income				Deficit				Total Equity
		No. of Shares				Amount
Balance as at December 31, 2012			20,899,177			$	18,014,347			$	2,450,791			$	1,132,685			$	(88,971	)		$	(21,091,560	)		$	417,292
Profit for the year			-				-				-				-				-				22,943				22,943
Other comprehensive income / (loss)			-				-				-				-				(79,274	)			-				(79,274	)
Issued share – as financing cost against loan payable			880,000				88,000				-				-				-				-				88,000
Share-based payments charged to operations			-				-				61,926				-				-				-				61,926
Balance as at December 31, 2013			21,799,177			$	18,102,347			$	2,512,717			$	1,132,685			$	(168,245	)		$	(21,068,617	)		$	510,887
Loss for the period			-																				(52,866	)			(52,866	)
Other comprehensive income / (loss)			-																(128,699	)							(128,699	)
Share-based payments charged to operations			-								2,909																2,909
Balance as at March 31, 2014			21,799,177			$	18,102,347			$	2,515,626			$	1,132,685			$	(296,944	)		$	(21,121,483	)		$	332,231

  

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

 

  

LINGO MEDIA CORPORATION

Condensed Consolidated Interim Statements of Cash Flows

For the three-months ended March 31, 2014, 2013 and 2012

(Unaudited, expressed in Canadian Dollars, unless otherwise stated)

 

		2014				2013				2012
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss for the Period		$	(52,866	)		$	(377,023	)		$	(636,222	)
Adjustments to Net Profit for Non-Cash Items:
Depreciation / amortization			130,241				94,509				102,610
Share-based payment			2,909				25,806				28,726
Unrealized foreign exchange gain / (loss)			(133,063	)			(22,054	)			18,810
Interest accretion			22,000				22,250				-
Operating Loss Before Working Capital Changes			(30,779	)			(256,512	)			(486,076	)
Working Capital Adjustments:
(Increase)/decrease in accounts and grants receivable			115,627				6,658				279,960
(Increase)/decrease in prepaid and other receivables			(21,826	)			29,100				(3,630	)
Increase/(decrease) in accounts payable			30,440				228,765				(22,255	)
Increase/(decrease) in accrued liabilities			11,719				77,622				(49,559	)
Cash Generated from / (used in) Operations			105,181				85,633				(281,560	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of intangibles			(148,873	)			(106,336	)			(25,924	)
Purchase of property and equipment			(1,373	)			-				-
Net Cash Flows Generated from / (used in) investing activities			(150,246	)			(106,336	)			(25,924	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loans			60,000				-				-
Repayment of loan payable			(10,000	)
Net Cash Flows Generated from / (used in) Financing Activities			50,000				-				-
NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS			4,935				(20,703	)			(307,484	)
Cash and Cash Equivalents at the Beginning of the Period			78,091				39,248				482,767
Cash and Cash Equivalents at the End of the Period		$	83,026			$	18,545			$	175,283

 

 

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

 

 

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

March 31, 2014

(Unaudited - See Notice to Reader)

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1.	CORPORATE INFORMATION

 

Lingo Media Corporation (“Lingo Media” or the “Company”) is a publicly listed company incorporated in Canada with limited liability under the legislation of the Province of Ontario and its shares are listed on the TSX Venture Exchange and inter-listed on the OTC Bulletin Board. The condensed consolidated interim financial statements of the Company for the period ended March 31, 2014 comprise the Company and its subsidiaries.

 

Lingo Media Corporation is an English as a Second Language (“ESL”) industry acquisition company in online and print-based education products and services. The Company is focused on English language learning (“ELL”) on an international scale through its four distinct business units: ELL Technologies Limited (“ELL Technologies”); ELL Technologies Ltd. (“ELL Canada”) Parlo Corporation (“Parlo”); Speak2Me Inc. (“Speak2Me”); and Lingo Learning Inc. (“Lingo Learning”). ELL Technologies is a globally-established ELL multi-media and online training company. Parlo is a fee-based online ELL training and assessment service. Speak2Me is a free-to-consumer advertising-based online ELL service in China. Lingo Learning is a print-based publisher of ELL programs.

 

The head office, principal address and registered and records office of the Company are located at 151 Bloor Street West, Suite 703, Toronto, Ontario, Canada, M5S 1S4.

 

2.	BASIS OF PREPRATION

 

2.1     Statement of compliance and going concern

 

These condensed consolidated interim financial statements are unaudited and have been prepared in accordance with IAS 34 “Interim Financial Reporting’ (“IAS 34”) using accounting policies consistent with the International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”) and Interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”).

 

These condensed consolidated interim financial statements have been prepared on a going concern basis, which contemplates the realization of assets and settlement of liabilities in the normal course of business. The Company has incurred significant losses recurring over the years. During the period ended March 31, 2014, the Company reported a net loss of $52,866 (2013 – net loss of $377,023). As at March 31, 2014, the Company had a working capital deficiency of $740,578 (March 31, 2013 - $1,022,013) and deficit of $21,121,483 (March 31, 2013 - $21,468,583). This raises significant doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon raising additional financing through share issuance, borrowing, sales contracts and distribution agreements. There are no assurances that the Company will be successful in achieving these goals.

 

The condensed consolidated interim financial statements for the period ended March 31, 2014 were approved and authorized for issue by the board of directors on May 27, 2014.

 

2.2     Basis of measurement

 

These condensed consolidated interim financial statements have been prepared on the historical cost basis. The comparative figures presented in these condensed consolidated interim financial statements are in accordance with IFRS.

 

2.3     Basis of consolidation

 

The condensed consolidated interim financial statements comprise the financial statements of the Company and the entities controlled by the Company (i.e. subsidiaries) as at March 31, 2014. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

 

Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date when such control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. All inter-group balances, transactions, unrealized gains and losses resulting from inter-group transactions and dividends are eliminated in full.

 

 

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

March 31, 2014

(Unaudited - See Notice to Reader)

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2.	BASIS OF PREPRATION (Cont’d)

 

2.4

Functional and presentation currency

 

The functional currency is the currency of the primary economic environment in which the entity operates and has been determined for each entity within the Group. These consolidated financial statements are presented in Canadian Dollars, which is the Company’s functional currency and presentation currency. The functional currency of Speak2Me Inc. is Chinese Renminbi (“RMB”) and the functional currency of its ELL Technologies subsidiary is the United States Dollar (“USD”).

 

The functional currency determinations were conducted through an analysis of the consideration factors identified in IAS 21, “The Effects of Changes in Foreign Exchange Rates”.

 

3.	SIGINFICANT ACCOUTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS

 

The preparation of the Company’s condensed consolidated interim financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies, reported amounts of assets, liabilities and contingent liabilities, revenues and expenses at the date of the consolidated financial statements and during the reporting period.

 

Estimates and assumptions are continuously evaluated and are based on management’s historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. However, actual outcomes can differ from these estimates. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and further periods if the review affects both current and future periods.

 

Information about critical judgements in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements is included in the following notes:

 

●

Determination of functional and presentation currency

●

Determination of the recoverability of the carrying value of intangible assets and goodwill

●

Determination of impairment loss

●

Recognition of government grant and grant receivable

●

Recognition of deferred tax assets

●

Valuation of share-based payments

●

Recognition of provisions and contingent liabilities

 

4.	SUMMARY OF SIGINFICANT ACCOUTING POLICIES

 

The accounting policies applied by the Company in these Condensed Consolidated Interim Financial Statements are the same as those applied by the Company in its Consolidated Financial Statements for the year ended December 31, 2013.

 

5.

ACCOUNTS AND GRANTS RECEIVABLE

 

Accounts and grants receivable consist of:

 

		March 31, 2014				December 31, 2013
Trade receivable		$	780,570			$	839,336
Grants receivable			107,243				164,104
		$	887,813			$	1,003,440

 

 

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

March 31, 2014

(Unaudited - See Notice to Reader)

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6.	PROPERTY AND EQUIPMENT

 

Cost, January 1, 2013		$	212,329
Additions			-
Effect of foreign exchange			3,270
Cost, December 31, 2013		$	215,599
Additions			1,373
Effect of foreign exchange			1,730
Cost, March 31, 2014		$	218,702
Accumulated depreciation, January 1, 2013		$	173,973
Charge for the year			7,624
Effect of foreign exchange			2,076
Accumulated depreciation, December 31, 2013		$	183,673
Charge for the period			1,398
Effect of foreign exchange			1,410
Accumulated depreciation, March 31, 2014		$	186,481
Net book value, January 1, 2013		$	38,356
Net book value, December 31, 2013		$	31,926
Net book value, March 31, 2014		$	32,221

 

7.	INTANGIBLES

 

		Software and web development				Content Platform				Customer Relationships				Total
Cost, December 31, 2012			6,792,163				1,477,112				130,000				8,399,275
Additions			106,366				-				-				106,366
Cost, March 31, 2013			6,898,529				1,477,112				130,000				8,505,541
Additions			325,345				-				-				325,345
Effect of foreign exchange			1,191				-				-				1,191
Cost, December 31, 2013			7,225,065				1,477,112				130,000				8,832,177
Additions			148,873				-				-				148,873
Effect of foreign exchange			5,288				-				-				5,288
Cost, March 31, 2014		$	7,379,226			$	1,477,112			$	130,000			$	8,986,338

 

 

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

March 31, 2014

(Unaudited - See Notice to Reader)

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7.	INTANGIBLES (Cont’d)

 

Accumulated depreciation, December 31, 2012			6,626,596				766,446				130,000				7,523,042
Charge for the period			19,729				72,844				-				92,573
Accumulated depreciation, March 31, 2013			6,646,325				839,290				130,000				7,615,615
Charge for the period			115,898				222,578				-				338,476
Effect of foreign exchange			1,191				-				-				1,191
Accumulated depreciation, December 31, 2013			6,763,414				1,061,868				130,000				7,955,282
Charge for the period			55,999				72,844				-				128,843
Effect of foreign exchange			1,243				-				-				1,243
Accumulated depreciation, March 31, 2014		$	6,820,656			$	1,134,712			$	130,000			$	8,085,368
Net book value, December 31, 2013		$	461,651			$	415,244				-			$	876,895
Net book value, March 31, 2014		$	558,570			$	342,400				-			$	900,970

 

The Company began commercial production and sale of its services and products during 2009 and started amortizing the cost of software and web development costs on a straight-line basis over the useful life of the assets which is estimated to be 3 years.

 

8.	LOANS PAYABLE

 

		March 31, 2014				December 31, 2013
Loans payable, interest bearing at 9% per annum with monthly interest payments, secured by a general security agreement and due on September 8, 2013(i)(ii)			880,000			$	880,000
Loan payable, interest bearing at 12% per annum with monthly interest payments, secured by accounts receivable and due on demand. Subsequent to the quarter end, this loan was repaid in full			50,000				-
Unamortized transaction costs			(38,455	)			(60,455	)
		$	891,545			$	819,545

 

(i)

On September 8, 2013, the Company extended the term of the loan originally advanced on September 8, 2010, and extended for a further one-year term on September 8, 2011, 2012 and 2013. As additional consideration for the extension of the loan, the Company issued to the lenders an aggregate of 880,000 (2012 - 356,000) common shares of Lingo Media. The common shares were issued based on 10 per cent of the value of the loan, divided by the market value per common share on the date of issuance.

 

(ii)

Included in loans payable are loans amounting to $480,000 (2012 – $535,000) to related parties as disclosed in Note 17.

 

9.	SHARE CAPITAL

 

a)

Authorized

 

Unlimited number of preference shares with no par value

Unlimited number of common shares with no par value

 

 

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

March 31, 2014

(Unaudited - See Notice to Reader)

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9.	SHARE CAPITAL (Cont’d)

 

b)

Common shares - Transactions: (Cont’d)

 

(i)

On March 4, 2011, the Company closed a non-brokered private placement financing of 2,500,000 units (each a "Unit") at $0.60 per Unit and an over-allotment of 1,158,668 Units for gross proceeds of $2,195,200 (the "Financing"). Each Unit is comprised of one common share (each a "Common Share") in the capital of the Company and one non-transferable common share purchase warrant (each a "Warrant"). Each Warrant entitles the holder to purchase one Common Share at an exercise price of $0.75 per share until September 4, 2012.

 

The Warrants are callable, at the option of Lingo Media, after July 5, 2011 in the event its Common Shares trade at or over $1.20 per share for 10 consecutive trading days. The number of Common Shares issuable pursuant to the Financing, if all Warrants are exercised, is 7,317,336 Common Shares for gross proceeds of $4,939,201.

 

In connection with the Financing, the Company paid 7% finder's fee payable in cash (the "Cash Finder's Fee") or Units (the "Finder's Units") to eligible persons (the "Finders"), along with finder's warrants ("Finder's Warrants") equal to 6% of the Units placed by the Finder in the Financing. Each Finder Unit entitles the holder to one Common Share and one Warrant.

 

Each Finder's Warrant entitles the holder to acquire one Common Share of Lingo at $0.60 until September 4, 2012. On closing, the Company issued 23,333 Finder's Units, 151,620 Finder's Warrants and paid a $92,135 Cash Finder's Fee to the Finders. The Loan lenders waived their right to be repaid $0.50 of every $1.00 raised by Lingo Media through this financing.

 

In the absence of a reliable measure of the services received, the services have been measured at the value of the finder’s warrants issued. The warrants were valued using the Black-Scholes pricing model using the following assumption: weighted average risk free interest rates of 1.78% weighted average expected dividend yields of NIL, the weighted average expected common stock price volatility (based on historical trading) of 83%, a forfeiture rate of zero, a stock price of $0.72, and a weighted average expected life of 1.5 years.

 

On February 21, 2014, the expiry date of the Warrants was extended to March 4, 2016

 

(ii)

On May 11, 2011, Lingo Media closed a non-brokered private placement financing of 1,875,000 units at $0.60 per Unit for gross proceeds of $1,125,000 (the "Second Financing"). Each Unit is comprised of one common share in the capital of the Company and one non-transferable common share purchase warrant. Each Warrant entitles the holder to purchase one Common Share at an exercise price of $0.75 per share until November 11, 2012. The Warrants are callable, at the option of Lingo Media, after September 11, 2011 in the event its Common Shares trade at or over $1.20 per share for 10 consecutive trading days.

 

In connection with the Second Financing, the Company agreed to pay a 7% Cash Finder’s Fee along with Finder's Warrants equal to 6% of the Units placed by the Finder in the Financing. Each Finder's Warrant entitles the holder to acquire one Common Share of Lingo at $0.60 until November 11, 2012. On closing, the Company issued 78,900 Finder's Warrants and paid a $55,230 Cash Finder's Fee to the Finders. The lenders waived their right to be repaid $0.50 of every $1.00 raised by Lingo Media through this Second Financing. At December 31, 2012, the Finder’s Warrants had expired.

 

In the absence of a reliable measure of the services received, the services have been measured at the value of the finder’s warrants issued. The warrants were valued using the Black-Scholes pricing model using the following assumption: weighted average risk free interest rates of 1.51% weighted average expected dividend yields of NIL, the weighted average expected common stock price volatility (based on historical trading) of 65%, a forfeiture rate of zero, a stock price of $0.80, and a weighted average expected life of 1.5 years.

 

On February 21, 2014, the expiry date of the Warrants was extended to May 11, 2016 with all other conditions remaining the same.

 

 

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

March 31, 2014

(Unaudited - See Notice to Reader)

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9.	SHARE CAPITAL (Cont’d)

 

b)

Common shares - Transactions: (Cont’d)

 

(iii)

On June 3, 2011, the Company issued 1,036,987 common shares (the "Payment Shares") as the second and final payment representing the US$763,729 (CAD$786,535) balance payable to SCP Partners, for the acquisition of ELL Technologies. This payment was made pursuant to the purchase agreement between Lingo Media and SCP Partners announced on May 13, 2010, whereby Lingo Media acquired all of issued and outstanding shares of ELL Technologies.

 

The Payment Shares are subject to a four month regulatory hold period from the date of issuance and are also subject to a 24 month lock-up and leak-out agreement whereby the Payment Shares will be held in escrow and released in a monthly leak-out of equal instalments of 43,208 shares released each month.

 

(iv)

On September 8, 2013, the Company extended the term of the $880,000 loan to September 8, 2014, originally advanced on September 8, 2010, and previously extended for a further one-year term on September 8, 2011 and 2012. As additional consideration for the extension of the loan, the Company respectively issued to the lenders an aggregate of 880,000 (2012 - 356,000) common shares of Lingo Media. The common shares were issued based on 10 per cent of the value of the loan, divided by a market price of $0.10 (2012 - $0.25) per common share. In the absence of a reliable measure of the services received, the services have been measured at the fair value of the common shares issued.

 

10.	SHARE-BASED PAYMENTS

 

In December 2011, the Company amended its stock option plan (the “2011 Plan“). The 2011 Plan was established to provide an incentive to employees, officers, directors and consultants of the Company and its subsidiaries.

 

The maximum number of shares which may be reserved for issuance under the 2011 Plan is limited to 4,108,635 common shares less the number of shares reserved for issuance pursuant to options granted under the 1996 Plan, the 2000 Plan, the 2005 Plan and the 2009 Plan, provided that the Board of Directors of the Company has the right, from time to time, to increase such number subject to the approval of the relevant exchange on which the shares are listed and the approval of the shareholders of the Company.

 

The maximum number of common shares that may be reserved for issuance to any one person under the 2011 Plan is 5% of the common shares outstanding at the time of the grant (calculated on a non-diluted basis) less the number of shares reserved for issuance to such person under any option to purchase common shares of the Company granted as a compensation or incentive mechanism.

 

The exercise price of each option cannot be less than the market price of the shares on the day immediately preceding the day of the grant less any permitted discount. The exercise period of the options granted cannot exceed 10 years. Options granted under the 2011 Plan do not have any required vesting provisions. The Board of Directors of the Company may, from time to time, amend or revise the terms of the 2011 Plan or may terminate it at any time. 

  

 

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

March 31, 2014

(Unaudited - See Notice to Reader)

---

 

10.	SHARE-BASED PAYMENTS (Cont’d)

 

The following summarizes the options outstanding:

 

		Number of Options				Weighted Average Exercise Price
Outstanding as at January 1, 2013			3,070,500			$	0.52
Forfeited			(5,000	)		$	0.81
Expired			(100,000	)		$	0.66
Outstanding as at March 31, 2013			2,965,500			$	0.51
Granted			25,000			$	0.20
Expired			(5,000	)			-
Forfeited			(202,250	)			-
Outstanding as at December 31, 2013			2,783,250			$	0.48
Forfeited			-				-
Expired			-				-
Outstanding as at March 31, 2014			2,783,250				-
Options exercisable as at March 31, 2013			1,931,968			$	0.63
Options exercisable as at December 31, 2013			2,033,004			$	0.55
Options exercisable as at March 31, 2014			2,265,255			$	0.54

 

The weighted average remaining contractual life for the stock options outstanding as at March 31, 2014 was 2.29 years (2013 – 3.26 years). The range of exercise prices for the stock options outstanding as at March 31, 2014 was $0.20 - $1.75 (2013 - $0.24 - $2.00). The weighted average grant-date fair value of options granted to employees, consultants and directors during the period has been estimated at $0.24 (2012 - $0.47) using the Black-Scholes option-pricing model. The estimated fair value of the options granted is expensed over the options vesting periods.

 

The vesting periods on the options granted in the past year are as follows, 550,000 stock options vested immediately upon issuance, 750,000 stock options will vest quarterly over 18 months, and 400,000 stock options will vest upon four consecutive quarters of Earnings before Interest, Tax, Depreciation and Amortization.

 

The pricing model assumes the weighted average risk free interest rates of 1.37% (2012 – 1.50%) weighted average expected dividend yields of NIL (2012 – NIL), the weighted average expected common stock price volatility (based on historical trading) of 82.64% (2012– 80%), a forfeiture rate of zero, a weighted average stock price of $0.22, a weighted average exercise price of $0.24, and a weighted average expected life of 4.73 years (2012 –5 years), which were estimated based on past experience with options and option contract specifics.

 

 

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

March 31, 2014

(Unaudited - See Notice to Reader)

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11.

Warrants

 

The following summarizes the warrants outstanding:

 

		Weighted Average Remaining Contractual Life (Years)			Series		Number of Warrants				Weighted Average Exercise Price
January 1, 2013								-
Extended			1.28		A			3,658,668				0.75
Extended			0.72		B			1,875,000				0.75
December 31, 2013								5,533,668				0.75
March 31, 2014								5,533,668

 

The following summarizes the compensation warrants outstanding:

 

		Weighted Average Remaining Contractual Life (Years)			Series		Number of Warrants				Weighted Average Exercise Price
January 1, 2012								230,520			Nil
Expired					2011			(151,620	)			0.60
Expired					2011			(78,900	)			0.60
December 31, 2013							Nil
March 31, 2014							Nil

 

12.	GOVERNMENT GRANTS

 

Included as a reduction of selling, general and administrative expenses are government grants of $90,833 (2013 - $3,875), relating to the Company's publishing and software projects. At the end of the period, $107,423 (March 31, 2013 - $Nil) is included in accounts and grants receivable.

 

During 2008, the Company was audited by a government agency and was assessed with a repayment amount of $115,075 related to a publishing grant. In 2010, the Company was reassessed with a reduction to the repayment of $100,000 which was recorded in accrued liabilities and this proposed audit assessment was appealed by the Company. In 2013, the appeal was approved and the liability was re-assessed and reduced to $16,263, which was paid and the difference of $87,737 was recorded as grant revenue during 2013.

 

One government grant for the print-based ELL segment is repayable in the event that the segment’s annual net income for each of the previous two years exceeds 15% of revenue. During the year, the conditions for the repayment of grants did not arise and no liability was recorded.

 

One grant, relating to the Company’s “Development of Comprehensive, Interactive Phonetic English Learning Solution” project, is repayable semi-annually at a royalty rate of 2.5% per year’s gross sales derived from this project until 100% of the grant is repaid.

 

 

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

March 31, 2014

(Unaudited - See Notice to Reader)

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13.	FINANCIAL INSTRUMENTS

 

Fair values

The carrying value of cash and accounts and grants receivable, approximates its fair value due to the liquidity of these instruments. The carrying value of accounts payables and accrued liabilities and loans payables approximates its fair value due to the requirement to extinguish the liabilities on demand.

 

Financial risk management objectives and policies

 

The financial risk arising from the Company’s operations are currency risk and liquidity risk. These risks arise from the normal course of operations and all transactions undertaken are to support the Group’s ability to continue as a going concern. The risks associated with these financial instruments and the policies on how to mitigate these risks.

 

Management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner. The Company’s Management oversees these risks. The Board of Directors reviews and agrees on policies for managing each of these risks.

 

Foreign currency risk

 

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company’s exposure to the risk of changes in foreign exchange rates relates primarily to the Company’s operating activities (when revenue or expense is denominated in a different currency from the Company’s functional currency) and the Company’s net investments in foreign subsidiaries. The Company operates internationally and is exposed to foreign exchange risk as certain expenditures are denominated in non-Canadian Dollar currencies.

A 10% strengthening of the US dollars against Canadian dollars would have increased the net equity by $63,684 (2013 - $6,486) due to reduction in the value of net liability balance. A 10% of weakening of the US dollar against Canadian dollar at March 31, 2014 would have had the equal but opposite effect. The significant financial instruments of the Company, their carrying values and the exposure to other denominated monetary assets and liabilities, as of March 31, 2014 are as follows:

 

		USD Denominated								China Denominated
		CAD				USD				CAD			RMB
Cash		$	50,447			$	45,641			$	3,586		¥	20,171
Accounts receivable		$	771,399			$	697,910			$	-		¥	-
Accounts payable		$	85,798			$	77,624			$	-		¥	-

 

Liquidity risk Liquidity risk

 

The Company manages its liquidity risk by preparing and monitoring forecasts of cash expenditures to ensure that it will have sufficient liquidity to meet liabilities when due. The Company’s accounts payable and accrued liabilities generally have maturities of less than 90 days. At March 31, 2014, the Company had cash of $83,026, accounts and grants receivable of $887,813 and prepaid and other receivables of $106,446 to settle current liabilities of $1,817,863.

 

Credit Risk

 

Credit risk refers to the risk that one party to a financial instrument will cause a financial loss for the counterparty by failing to discharge an obligation.   The Company is primarily exposed to credit risk through accounts receivable.   The maximum credit risk exposure is limited to the reported amounts of these financial assets. Credit risk is managed by ongoing review of the amount and aging of accounts receivable balances. As at March 31, 2014, the Company has outstanding receivables of $887,813.  An allowance for doubtful accounts is taken on accounts receivable if the account has not been collected after a predetermined period of time and is offset to other operating expenses.

 

 

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

March 31, 2014

(Unaudited - See Notice to Reader)

---

 

14.	CAPITAL MANAGEMENT

 

The Company’s primary objectives when managing capital are to (a) safeguard the Company’s ability to develop, market, distribute and sell English language learning products, and (b) provide a sound capital structure for raising capital at a reasonable cost for the funding of ongoing development of its products and new growth initiatives. The Board of Directors does not establish quantitative capital criteria for management, but rather relies on the expertise of the Company’s management to sustain future development of the business.

 

The Company includes equity, comprised of issued share capital, warrants, share-based payments reserve and deficit, in the definition of capital. The Company is dependent on cash flow from co-publishing and distribution agreements and external financing to fund its activities. In order to carry out planned development of its products and pay for administrative costs, the Company will spend its existing working capital and raise additional amounts as needed. Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable. There has been no change to the Company’s capital management in 2014 or 2013.

 

15.	SEGMENTED INFORMATION

 

The Company operates two distinct reportable business segments as follows:

 

Print-based English Language Learning: Lingo Learning is a print-based publisher of English school programs in China.

 

Online English Language Learning: ELL Technologies is a globally-established ELL multi-media and online training company. Parlo is a fee-based online English language training and assessment service. Speak2Me is a free-to-customer advertising-based online English learning service in China.

 

Segmented Information (Before Other Financial Items Below)

 

March 31, 2014		Online English Language Learning				Print-Based English Language Learning				Total
Revenue		$	179,928			$	56,123			$	236,051
Segment non-current assets			1,054,489				18,319				1,072,808
Segment assets			1,232,924				917,170				2,150,094
Segment liabilities			517,702				1,300,161				1,817,863
Segment income (loss)			(38,594	)			(139,795	)			(178,389	)
March 31, 2013
Revenue		$	56,327			$	81,427			$	137,754
Segment non-current assets			1,046,355				19,806				1,066,161
Segment assets			1,161,518				1,454,623				2,616,141
Segment liabilities			1,078,817				1,470,926				2,549,743
Segment income (loss)			(153,066	)			(168,290	)			(321,356	)

 

 

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

March 31, 2014

(Unaudited - See Notice to Reader)

---

 

15.	SEGMENTED INFORMATION (Cont’d)

 

Other Financial Items		2014				2013				2012
Print-Based English Language Learning segment income (loss)		$	(139,795	)		$	(168,290	)		$	(111,295	)
Online English Language Learning segment income (loss)			(38,594	)			(153,066	)			(425,425	)
Foreign exchange			174,806				38,073				(42,201	)
Interest expense			(46,374	)			(67,934	)			(28,575	)
Share-based payment			(2,909	)			(25,806	)			(28,726	)
Other comprehensive income (loss)			(128,699	)			(21,928	)			7,601
Total Comprehensive Loss		$	(181,565	)		$	(398,951	)		$	(628,621	)

 

Revenue by Geographic Region

		2014				2013				2012
China		$	56,123			$	81,532			$	76,271
Other			179,928				56,222				181,656
		$	236,051			$	137,754			$	257,927

 

Identifiable Assets by Geographic Region

		2014				2013				2012
Canada		$	2,117,969			$	2,563,425			$	2,296,400
China			32,125				52,716				81,066
		$	2,150,094			$	2,616,141			$	2,377,466

 

16.	SUPPLEMENTAL CASH FLOW INFORMATION

 

		2014				2013				2012
Income taxes and other taxes paid		$	-			$	12,992			$	13,019
Interest paid		$	24,374			$	30,551			$	19,870

 

17.	RELATED PARTY BALANCES AND TRANSACTIONS

 

During the period, the Company had the following transactions with related parties, made in the normal course of operations, and accounted for at an amount of consideration established and agreed to by the Company and related parties.

 

(a)

Key management compensation was $82,500 (2013 – $82,500) and is reflected as consulting fees paid to corporations owned by a director and officers of the Company, all of which is deferred and included in accounts payable.

 

(b)

At March 31, 2014, the Company had loans payable due to corporations controlled by directors and officers of the Company in the amount of $480,000 (2013 - $535,000) bearing interest at 9% per annum. Interest expense related to these loans is $7,338 (2013 - $9,653).

 

 

18

Exhibit 1

 

 

Trading Symbols (TSX-V: LM; OTC BB: LMDCF)   151 Bloor St West  Suite 703  Toronto, Ontario  Canada M5S 1S4 Tel : 416.927.7000 Fax : 416.927.1222 www.lingomedia.com

 

 

 

 

Lingo Media Corporation

 

Form 51 – 102 F1

 

Management Discussion & Analysis

 

First Quarter Ended March 31, 2014

 

May 27, 2014

 

 

MANAGEMENT DISCUSSION & ANALYSIS

FOR THE FIRST QUARTER ENDED MARCH 31, 2014

 

Notice to Reader

 

The following Management Discussion & Analysis ("MD&A") of Lingo Media Corporation’s (the "Company" or "Lingo Media") financial condition and results of operations, prepared as of May 27, 2014, should be read in conjunction with the Company's Condensed Consolidated Interim Financial Statements and accompanying notes for the three months ended March 31, 2014, which have been prepared in accordance with International Financial Reporting Standards are incorporated by reference herein and form an integral part of this MD&A.  All dollar amounts are in Canadian Dollars unless stated otherwise. These documents can be found on the SEDAR website www.sedar.com.

 

 

Our MD&A is intended to enable readers to gain an understanding of Lingo Media’s current results and financial position. To do so, we provide information and analysis comparing the results of operations and financial position for the current period to those of the preceding comparable three month period. We also provide analysis and commentary that we believe is required to assess the Company's future prospects. Accordingly, certain sections of this report contain forward-looking statements that are based on current plans and expectations. These forward-looking statements are affected by risks and uncertainties that are discussed in this document and that could have a material impact on future prospects. Readers are cautioned that actual results could vary.

 

Cautions Regarding Forward-Looking Statements

 

This MD&A contains certain forward-looking statements, which reflect management’s expectations regarding the Company’s results of operations, performance, growth, and business prospects and opportunities.

 

Statements about the Company’s future plans and intentions, results, levels of activity, performance, goals or achievements or other future events constitute forward-looking statements. Wherever possible, words such as "may," "will," "should," "could," "expect," "plan," "intend," "anticipate," "believe," "estimate," "predict," or "potential" or the negative or other variations of these words, or similar words or phrases, have been used to identify these forward-looking statements. These statements reflect management’s current beliefs and are based on information currently available to management as at the date hereof.

 

Forward-looking statements involve significant risk, uncertainties and assumptions. Many factors could cause actual results, performance or achievements to differ materially from the results discussed or implied in the forward-looking statements. These factors should be considered carefully and readers should not place undue reliance on the forward-looking statements. Although the forward-looking statements contained in this MD&A are based upon what management believes to be reasonable assumptions, the Company cannot assure readers that actual results will be consistent with these forward-looking statements. These forward-looking statements are made as of the date of this MD&A, and the Company assumes no obligation to update or revise them to reflect new events or circumstances, except as required by law. Many factors could cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, including: general economic and market segment conditions, competitor activity, product capability and acceptance, international risk and currency exchange rates and technology changes. More detailed assessment of the risks that could cause actual results to materially differ than current expectations is contained in the "Quantitative and Qualitative Disclosures of Market Risk" section of this MD&A.

 

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Lingo Media Corporation (TSX-V: LM; OTC BB: LMDCF) Management Discussion & Analysis

 

 

Summary Description of Lingo Media

 

Lingo Media is an ESL industry acquisition company that is Changing the way the world learns English, focused on English language learning ("ELL") on an international scale through its four subsidiaries: ELL Technologies Limited (“ELL Technologies”); ELL Technologies Ltd. (“ELL Canada); Parlo Corporation (“Parlo”); Speak2Me Inc. (“Speak2Me”); and Lingo Learning Inc. (Lingo Learning”). ELL Technologies is a globally-established ELL multi-media and online training company. Parlo is a fee-based online ELL training and assessment service. Speak2Me is a free-to-consumer advertising-based online ELL service in China. Lingo Learning is a print-based publisher of ELL programs.

 

As of March 31, 2014, the Company operated two distinct business segments as follows:

 

Print-Based English Language Learning

 

The Company continues to maintain its legacy business through its subsidiary Lingo Learning, a print-based publisher of English language learning programs in China since 2001. Lingo Learning has an established presence in China’s education market of over 300 million students. To date, it has co-published more than 475 million units from its library of program titles.

 

Online English Language Learning

 

(i) Training Model

 

ELL Technologies, acquired in 2010, offers over 1,700 hours of interactive learning through a number of product offerings that include Scholar, Business, Master and Kids, in addition to custom solutions. ELL Technologies is marketed in 12 countries through a network of distributors and earns its revenues from licensing and subscription fees.

 

To further leverage its Speak2Me lesson and technology platform, the Company acquired Parlo in 2009 to expand its online offerings to include fee-based spoken English training solutions for corporations, governments, and educational institutions. This fee-based training service incorporates a reporting platform in the form of a Learning Management System for HR administrators. Parlo’s spoken language learning platform has now been integrated into ELL Technologies.

 

(ii) Social Learning Model

 

Through its free-to-consumer www.Speak2Me.cn website, the Company operates an online English language learning service in China that includes a unique social learning infrastructure. This website incorporates its proven pedagogy with fun, interactive lesson modules to address the rapidly growing need for spoken English in China. Speak2Me's platform uses speech recognition technology to teach spoken English online through more than 350 targeted lessons that engage users in interactive conversations with a virtual instructor. The www.speak2me.cn website offers Conversational Advertising™ which allows an advertiser to embed its brand and message inside a lesson that engages a user for 2-3 minutes and also offer sponsorships.

 

Revenue Recognition Policy

 

Lingo Learning earns royalty revenues from its key customer, People’s Education Press and People’s Education & Audio Visual Press (collectively “PEP”), who is China’s State Ministry of Education’s publishing arm, on the following basis:

 

●	Finished Product Sales – PEP prints and sells Lingo Learning’s English language training programs to provincial distributors in China; and

 

●	Licensing Sales – PEP licenses Lingo Learning’s English language training programs to provincial publishers who then print and sell the programs to provincial distributors in China.

 

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Lingo Media Corporation (TSX-V: LM; OTC BB: LMDCF) Management Discussion & Analysis

 

 

Lingo Learning earns significantly higher royalties from Licensing Sales compared to Finished Product Sales.

 

In accordance with the co-publishing agreement between PEP and Lingo Learning, PEP pays to Lingo Learning a royalty on sales of textbooks and supplemental products called Finished Product Sales and PEP pays to Lingo Learning a percentage of their royalties earned on actual revenues called Licensing Sales. PEP provides Lingo Learning with sales reconciliations on a semi-annual basis, as their reporting systems are unable to provide quarterly sales information. Revenue is recognized upon the confirmation of such sales and when collectability is reasonably assured.

 

Royalty revenues from PEP’s audiovisual-based products are recognized upon the confirmation of sales, and when collectability is reasonably assured. Royalty revenues are not subject to right of return or product warranties. Revenues from the sale of products are recognized upon delivery and when the risk of ownership is transferred and collectability is reasonably assured.

 

ELL Technologies has now fully-integrated Parlo into its offerings, and it earns training revenue by developing and hosting online English language learning solutions for its customers, both off the shelf and customized solutions. Revenue is recognized upon delivery of the training courses to the end client through its distributor and when collectability is reasonably assured.

 

Overall Performance

 

Print-Based English Language Learning

 

Lingo Media earned royalty revenue of $56,123 for the period ended March 31, 2014 compared to $81,427 for 2013 from People’s Education & Audio Visual Press.

 

According to the Company’s current practice of recording revenues from PEP, Lingo Media recognizes no revenues from its print-based English language learning business in the first and third quarters as the sales from print-based products in China are reported semi-annually in second and fourth quarters.

 

Online English Language Learning

 

ELL Technologies earned revenue from its portfolio of products of $179,928 for the period ended March 31, 2014, compared to $56,327 for the same period in 2013. The Company launched its redesigned suite of products including Scholar, Business, Master and Kids and resumed its sales and marketing efforts.

 

Speak2Me’s revenue for the period ended March 31, 2014 was $Nil compared to $Nil for March 31, 2013. Speak2Me has plans to revise its product feature set and offerings with new technology applications in order to enhance user engagement and experience. Speak2Me will resume sales of online advertising and sponsorships with its relaunch.

 

Market Trends and Business Uncertainties

 

Lingo Media believes that the trends in English language learning in China are strong and continue to grow. Developing countries around the world, specifically in the Far East and Latin America are expanding their mandates for the teaching of English to students, young professionals and adults. Although the outlook for learning English in China, other Far East countries, and Latin America remains positive, there can be no assurance that this trend will continue or that the Company will benefit from this trend.

 

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Lingo Media Corporation (TSX-V: LM; OTC BB: LMDCF) Management Discussion & Analysis

 

 

General Financial Condition

 

Financial Highlights

 

As at March 31, 2014 Lingo Media had a working capital deficiency of $740,578 compared to a working capital deficiency of $1,022,014 as at March 31, 2013. Total comprehensive loss for the period ended March 31, 2014 was $181,565 compared to total comprehensive loss of $398,951 for the period ended March 31, 2013.

		2014				2013				2012
Revenue
Print-Based English Language Learning		$	56,123			$	81,427			$	74,160
Online English Language Learning			179,928				56,327				183,767
			236,051				137,754				257,927
Net Profit / (Loss) for the Period			(52,866	)			(377,023	)			(636,222	)
Total Comprehensive Loss			(181,565	)			(398,951	)			(628,621	)
Loss per Share, Basic and Diluted:		$	(0.00	)		$	(0.02	)		$	(0.03	)
Total Assets			2,150,094				2,616,141				2,377,466
Working Capital / (Deficit)			(740,578	)			(1,022,014	)			(349,626	)
Cash (Used)/Provided - Operations			105,181			$	85,633			$	(281,560	)

 

The Company had cash on hand as at March 31, 2014 of $83,026 (2013 - $18,545) and continues to rely on its revenues from its recurring royalty stream, its online English language learning services, and future equity and/or debt financings to fund its operations.

 

Results of Operations

 

Revenues from print-based English language learning for the period were $56,123 compared to $81,427 for the same period in 2013. Direct costs associated with publishing revenue are kept to a minimum and has been consistent throughout the years. The Company continues to maintain its relationship with PEP and is investing in the development of its existing and new programs and marketing activities to maintain and increase its royalty revenues. During the period, Lingo Media earned $179,928 in online English language learning revenue as compared to $56,327 in 2013. This revenue increase from online English Language Learning is a result of the resumption of sales and marketing efforts with the launch of its redesigned suite of products.

 

Selling, General and Administrative

 

Selling, general and administrative expenses decreased to $215,512 compared to $310,918 in 2013. This decrease was due to the additional grants of $90,833 as compared to $3,875 in 2013. Selling, general and administrative expenses for the two segments are segregated below.

 

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Lingo Media Corporation (TSX-V: LM; OTC BB: LMDCF) Management Discussion & Analysis

 

 

Print-Based English Language Learning

 

Selling, general and administrative cost for print-based publishing decreased from 2013 to 2014 primarily due to additional government grants recorded during the period. The following is a breakdown of selling, general and administrative costs directly related to print-based English language learning:

		2014				2013
Sales, marketing & administration		$	59,447			$	41,899
Consulting fees and salaries			81,575				79,346
Travel			8,692				5,793
Premises			27,838				24,542
Shareholder service			16,103				19,891
Professional fees			6,906				12,664
Less: Grants			(32,500	)			(3,875	)
		$	168,061			$	180,250

 

Online English Language Learning

 

Selling, general and administrative cost related to online English language learning was $47,451 for the period compared to $130,668 for the same period in 2013. Selling, general and administrative costs for this business unit decreased in 2014 as compared to 2013 primarily due to additional government grant recorded during the period. The Company launched its redesigned suite of products and resumed its sales and marketing efforts.

		2014				2013
Sales, marketing & administration		$	49,727			$	23,294
Consulting fees and salaries			29,107				73,058
Travel			4,339				4,636
Premises			9,805				14,498
Professional fees			12,806				16,182
Less: Grants			(58,333	)			-
		$	47,451			$	130,668

 

Net Loss

 

Total comprehensive loss for the Company was $(181,565) for the period ended March 31, 2014 as compared to $(398,951) in 2013. These losses can be attributed to the two operating segments and other financial costs as shown below:

 

Online ELL		2014				2013
Revenue		$	179,928			$	56,327
Expenses:
Direct costs			41,737				34,691
General & administrative			47,451				130,668
Amortization of property & equipment			491				867
Amortization of development costs			128,843				92,573
Income taxes and other taxes			-				290
			218,522				259,089
Segment Loss - Online ELL			(38,594	)			(202,762	)

 

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Lingo Media Corporation (TSX-V: LM; OTC BB: LMDCF) Management Discussion & Analysis

 

 

Print-Based ELL		2014				2013
Revenue			56,123				81,427
Expenses:
Direct costs			18,195				6,000
General & administrative			168,061				180,250
Amortization of property & equipment			907				1,069
Income taxes and other taxes			8,755				12,702
			195,918				200,021
Segment Loss – Print-Based			(139,795	)			(118,594	)
Other
Foreign exchange			174,806				(38,073	)
Interest and other financial expenses			(46,374	)			67,934
Stock-based compensation			(2,909	)			25,806
Other comprehensive income			(128,699	)			21,928
			(3,176	)			(77,595	)
Total Comprehensive Loss		$	(181,565	)		$	(398,951	)

 

Foreign Exchange

 

The Company recorded foreign exchange gain of $174,806 as compared to a gain of $38,072 in 2013, relating to the Company's currency risk through its activities denominated in foreign currencies as the Company is exposed to foreign exchange risk as a significant portion of its revenue and expenses are denominated in US Dollars, European Euros, and Chinese Renminbi.

 

Share-based Payments

 

The Company amortizes share-based payments with a corresponding increase to the contributed surplus account. During the period, the Company recorded an expense of $2,909 compared to $25,806 during 2013.

 

Net Loss for the Period

 

The Company reported a net loss of $52,866 for the period as compared to a net loss of $377,023 in 2013, an operational improvement of $324,157. This improvement is primarily attributed to increase in revenue of $98,297 and a reduction in selling, general and administrative expenses of $95,406.

 

Total Comprehensive Loss

 

The total comprehensive loss is calculated after the application of exchange differences on translating foreign operations gain / (loss). The Company reported a total comprehensive loss of $181,565 for the period ended March 31, 2014, as compared to a net comprehensive loss of $398,951 for same period in 2013. The loss per share for the period is $0.00 as compared to $0.02 in 2013.

 

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Lingo Media Corporation (TSX-V: LM; OTC BB: LMDCF) Management Discussion & Analysis

 

 

Summary of Quarterly Results

		Q2-13				Q3-13				Q4-13				Q1-14
Revenue		$	715,618			$	130,139			$	1,024,555			$	236,051
Income / (Loss) Before Taxes and Other Comp Income			155,240				(338,785	)			635,183				(44,110	)
Total Comprehensive Income / (Loss)			42,080				(323,227	)			446,766				(181,565	)
Income / (Loss) per Basic and Diluted Share		$	0.002			$	(0.015	)		$	0.020			$	(0.000	)
		Q2-12				Q3-12				Q4-12				Q1-13
Revenue		$	737,163			$	129,424			$	891,747			$	137,754
Income / (Loss) Before Taxes and Other Comp Income			(14,503	)			(733,011	)			(230,718	)			(364,031	)
Total Comprehensive Income / (Loss)			(84,676	)			(690,052	)			38,611				(398,951	)
Income / (Loss) per Basic and Diluted Share		$	(0.010	)		$	(0.030	)		$	0.002			$	(0.020	)

 

Liquidity and Capital Resources

 

As at March 31, 2014, the Company had cash of $83,026 compared to $18,545 for the same period in 2013. Accounts and grants receivable of $887,813 were outstanding at the end of the period compared to $1,440,304 in the first quarter of 2013. With 87% of the receivables from PEP and a 90 day collection cycle, the Company does not anticipate an effect on its liquidity. Total current assets amounted to $1,077,285 (2013 - $1,549,980) with current liabilities of $1,817,863 (2013 - $2,571,993) resulting in a working capital deficiency of $740,578 (2013 - working capital deficit of $1,022,014).   

 

The Company receives government grants based on certain eligibility criteria for international marketing support and publishing industry development in Canada. These government grants are recorded as a reduction of general and administrative expenses to offset direct costs funded by the grant. The Company receives these grants throughout the year from different agencies and government programs. Each grant is applied for separately based on the Company meeting certain eligibility requirements. The Company has relied on obtaining these grants for its operations and has been successful at securing them in the past, but it cannot be assured of obtaining these grants in the future.

 

The Company plans on raising additional working capital through an equity private placement financing or a debt financing, as the capital markets permit, in an effort to finance its growth plans and expansion into new international markets. The Company has been successful in raising sufficient working capital in the past.

 

The Company has incurred significant losses over the years. This raises significant doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon raising additional financing through the issuance of equity, debt financing, sales contracts and distribution agreements. The outcome of these matters is partially dependent on factors outside of the Company’s control.

 

Contractual Obligations

 

Future minimum lease payments under operating leases for premises and equipment are as follows:

2014		$	155,378
2015			194,932
2016			40,091

 

Off-Balance Sheet Arrangements

 

The Company has not entered into any off-balance sheet finance arrangements.

 

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Lingo Media Corporation (TSX-V: LM; OTC BB: LMDCF) Management Discussion & Analysis

 

 

Transactions with Related Parties

 

During the quarter, the Company had the following transactions with related parties, made in the normal course of operations, and accounted for at an amount of consideration established and agreed to by the Company and related parties.

 

Key management compensation was $82,500 (2013 – $82,500) and is reflected as consulting fees paid to corporations owned by a director and officers of the Company, all of which is deferred and included in accounts payable.

 

At March 31, 2014, the Company had loans payable due to corporations controlled by directors and officers of the Company in the amount of $480,000 (2013 - $535,000) bearing interest at 9% per annum. Interest expense related to these loans is $7,338 (2013 - $9,653).

 

Additional Disclosure 

 

Intangibles

 

		Software and web development				Content Platform				Customer Relationships				Total
Cost, December 31, 2012			6,792,163				1,477,112				130,000				8,399,275
Additions			106,366				-				-				106,366
Cost, March 31, 2013			6,898,529				1,477,112				130,000				8,505,641
Additions			325,345				-				-				325,345
Effect of foreign exchange			1,191				-				-				1,191
Cost, December 31, 2013		$	7,225,065			$	1,477,112			$	130,000				8,832,177
Additions			148,873				-				-				148,873
Effect of foreign exchange			5,288				-				-				5,288
Cost, March 31, 2014		$	7,379,226			$	1,477,112			$	130,000			$	8,986,338
Accumulated depreciation, December 31, 2012			6,626,596				766,446				130,000				7,523,042
Charge of the period			19,729				72,844				-				92,573
Accumulated depreciation, March 31, 2013			6,646,325				839,290				130,000				7,615,615
Charge of the period			115,898				222,578				-				338,476
Effect of foreign exchange			1,191				-				-				1,191
Accumulated depreciation, December 31, 2013			6,763,414				1,061,868				130,000				7,955,282
Charge for the period			55,999				72,844				-				128,843
Effect of foreign exchange			1,243				-				-				1,243
Accumulated depreciation, March 31, 2014		$	6,820,656			$	1,134,712			$	130,000			$	8,085,368
Net book value, December 31, 2013		$	461,651			$	415,244				-			$	876,895
Net book value, March 31, 2014		$	558,570			$	342,400				-			$	900,970

 

The Company began commercial production and sale of its services and products during 2009 and started amortizing the cost of software and web development costs on a straight-line basis over the useful life of the assets which is estimated to be 3 years.

 

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Lingo Media Corporation (TSX-V: LM; OTC BB: LMDCF) Management Discussion & Analysis

 

 

Property and Equipment

 

Cost, January 1, 2013		$	212,329
Additions			-
Effect of foreign exchange			3,270
Cost, December 31, 2013		$	215,599
Additions			1,373
Effect of foreign exchange			1,730
Cost, March 31, 2014		$	218,702

 

Accumulated depreciation, January 1, 2013		$	173,973
Charge for the year			7,624
Effect of foreign exchange			2,076
Accumulated depreciation, December 31, 2013		$	183,673
Charge for the period			1,398
Effect of foreign exchange			1,410
Accumulated depreciation, March 31, 2014		$	186,481
Net book value, January 1, 2013		$	38,356
Net book value, December 31, 2013		$	31,926
Net book value, March 31, 2014		$	32,221

 

Disclosure of Outstanding Share Data

 

As of May 27, 2014, the followings are outstanding:

 

Common Shares – 21,799,177

Warrants – 5,533,668

Stock Options – 2,783,250

 

Approval

 

The Directors of Lingo Media have approved the disclosure contained in this MD&A.

 

Additional Information

 

Additional information relating to the Company can be found on SEDAR at www.sedar.com.

 

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Lingo Media Corporation (TSX-V: LM; OTC BB: LMDCF) Management Discussion & Analysis

 

10

Exhibit 99.1

 

Form 52-109FV2
Certification of interim filings
venture issuer basic certificate

 

I, MICHAEL KRAFT, Chief Executive Officer of LINGO MEDIA CORPORATION certify the following:

 

1.	Review: I have reviewed the interim financial report and interim MD&A (together, the “Interim Filings”) of LINGO MEDIA CORPORATION (the “Issuer”) for the interim period ended MARCH 31, 2014.

 

2.

No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the Interim Filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.

 

3.

Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.

 

Date: May 27, 2014

 

signed “Michael Kraft”
/s/ Michael Kraft
Michael Kraft Chief Executive Officer

note to reader
In contrast to the certificate required for non-venture issuers under National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings (NI 52-109), this Venture Issuer Basic Certificate does not include representations relating to the establishment and maintenance of disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as defined in NI 52-109. In particular, the certifying officers filing this certificate are not making any representations relating to the establishment and maintenance of
i)	controls and other procedures designed to provide reasonable assurance that information required to be disclosed by the Issuer in its annual filings, Interim Filings or other reports filed or submitted under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
ii)	a process to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the Issuer's GAAP.
The Issuer's certifying officers are responsible for ensuring that processes are in place to provide them with sufficient knowledge to support the representations they are making in this certificate. Investors should be aware that inherent limitations on the ability of certifying officers of a venture Issuer to design and implement on a cost effective basis DC&P and ICFR as defined in NI 52-109 may result in additional risks to the quality, reliability, transparency and timeliness of interim and annual filings and other reports provided under securities legislation.

Exhibit 99.2

 

Form 52-109FV2
Certification of interim filings
venture issuer basic certificate

 

I, KHURRAM QURESHI, Chief Financial Officer of LINGO MEDIA CORPORATION certify the following:

 

1.	Review: I have reviewed the interim financial report and interim MD&A (together, the “Interim Filings”) of LINGO MEDIA CORPORATION (the “Issuer”) for the interim period ended MARCH 31, 2014.

 

2.

No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the Interim Filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.

 

3.

Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.

 

Date: May 27, 2014

 

signed “Khurram Qureshi”
/s/ Khurram Qureshi
Khurram Qureshi Chief Financial Officer

note to reader
In contrast to the certificate required for non-venture issuers under National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings (NI 52-109), this Venture Issuer Basic Certificate does not include representations relating to the establishment and maintenance of disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as defined in NI 52-109. In particular, the certifying officers filing this certificate are not making any representations relating to the establishment and maintenance of
i)	controls and other procedures designed to provide reasonable assurance that information required to be disclosed by the Issuer in its annual filings, Interim Filings or other reports filed or submitted under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
ii)	a process to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the Issuer's GAAP.
The Issuer's certifying officers are responsible for ensuring that processes are in place to provide them with sufficient knowledge to support the representations they are making in this certificate. Investors should be aware that inherent limitations on the ability of certifying officers of a venture Issuer to design and implement on a cost effective basis DC&P and ICFR as defined in NI 52-109 may result in additional risks to the quality, reliability, transparency and timeliness of interim and annual filings and other reports provided under securities legislation.