UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
Pursuant to Rule 13a-16 or 15d-16 under
the Securities Exchange Act of 1934
For the month of September 30, 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.
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LINGO MEDIA CORPORATION |
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Date: November 28, 2014 |
By: |
/s/ Michael Kraft |
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Michael Kraft
President and CEO |
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LINGO MEDIA CORPORATION
Condensed Consolidated Interim Financial Statements
For the nine-month period ended September 30, 2014
LINGO MEDIA CORPORATION
Condensed Consolidated Interim Financial Statements
As at September 30, 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 Sheet as at September 30, 2014 and the Statements of Comprehensive Income, Changes in Equity and Cash Flows for the nine 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 September 30, 2014
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Contents |
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| |
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Condensed Consolidated Interim Financial Statements |
Page |
| |
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Balance Sheet |
4 |
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Statements of Comprehensive Income |
5 |
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Statements of Changes in Equity |
6 |
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Statements of Cash Flows |
7 |
|
Notes to the Financial Statements |
8 - 19 |
LINGO MEDIA CORPORATION
Condensed Consolidated Interim Balance Sheet
As at September 30, 2014
(Unaudited, expressed in Canadian Dollars, unless otherwise stated)
| |
|
Notes |
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|
September 30,
2014 |
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|
December 31,
2013 |
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ASSETS |
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Current Assets |
|
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| |
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|
|
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Cash and cash equivalents |
|
|
|
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$ |
19,417 |
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|
$ |
78,091 |
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Accounts and grants receivable |
|
|
5 |
|
|
|
996,465 |
|
|
|
1,003,440 |
|
|
Prepaid and other receivables |
|
|
|
|
|
|
66,526 |
|
|
|
84,620 |
|
| |
|
|
|
|
|
|
1,082,408 |
|
|
|
1,166,151 |
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Non-Current Assets |
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| |
|
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|
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Property and equipment, net |
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|
6 |
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|
20,564 |
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|
31,926 |
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Intangibles, net |
|
|
7 |
|
|
|
846,614 |
|
|
|
876,895 |
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|
Goodwill |
|
|
|
|
|
|
139,618 |
|
|
|
139,618 |
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|
TOTAL ASSETS |
|
|
|
|
|
$ |
2,089,204 |
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|
$ |
2,214,590 |
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| |
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LIABILITIES AND EQUITY |
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| |
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Current Liabilities |
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| |
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Accounts payable |
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$ |
216,387 |
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|
282,315 |
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Accrued liabilities |
|
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|
682,559 |
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|
601,843 |
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Loans payable |
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8 |
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|
823,833 |
|
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|
819,545 |
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| |
|
|
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|
|
|
|
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|
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TOTAL LIABILITIES |
|
|
|
|
|
|
1,722,779 |
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|
1,703,703 |
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| |
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Equity |
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| |
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Share capital |
|
|
9 |
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|
18,162,347 |
|
|
|
18,102,347 |
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|
Warrants |
|
|
11 |
|
|
|
1,132,685 |
|
|
|
1,132,685 |
|
|
Share-based payment reserve |
|
|
|
|
|
|
2,544,945 |
|
|
|
2,512,717 |
|
|
Accumulated other comprehensive income |
|
|
|
|
|
|
(390,556 |
) |
|
|
(168,245 |
) |
|
Deficit |
|
|
|
|
|
|
(21,082,996 |
) |
|
|
(21,068,617 |
) |
|
TOTAL EQUITY |
|
|
|
|
|
|
366,425 |
|
|
|
510,887 |
|
| |
|
|
|
|
|
|
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TOTAL LIABILITIES AND EQUITY |
|
|
|
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|
$ |
2,089,204 |
|
|
$ |
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 issuance by the Board of Directors on November 28, 2014.
|
/s/ Michael Kraft |
|
/s/ Martin Bernholtz |
|
Director |
|
Director |
LINGO MEDIA CORPORATION
Condensed Consolidated Interim Statement of Comprehensive Income
For the nine-months ended September 30, 2014 and 2013
(Unaudited, expressed in Canadian Dollars, unless otherwise stated)
| |
|
Notes |
|
|
For the three months ended
September 30 |
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For the nine months ended
September 30 |
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| |
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2014 |
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|
2013 |
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|
2014 |
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2013 |
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| |
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Revenue |
|
|
|
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|
$ |
222,468 |
|
|
$ |
130,139 |
|
|
$ |
1,336,398 |
|
|
$ |
983,511 |
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| |
|
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|
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|
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|
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Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
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|
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Selling, general and administrative expenses |
|
|
|
|
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|
205,626 |
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|
219,791 |
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|
690,166 |
|
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|
849,729 |
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|
Share-based payment |
|
|
|
|
|
|
29,319 |
|
|
|
11,597 |
|
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|
32,228 |
|
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|
55,506 |
|
|
Direct costs |
|
|
|
|
|
|
67,245 |
|
|
|
36,852 |
|
|
|
177,579 |
|
|
|
123,683 |
|
|
Depreciation – property and equipment |
|
|
6 |
|
|
|
1,658 |
|
|
|
1,757 |
|
|
|
5,272 |
|
|
|
5,647 |
|
|
Amortization – intangibles |
|
|
7 |
|
|
|
154,377 |
|
|
|
116,652 |
|
|
|
429,539 |
|
|
|
313,621 |
|
|
Total Expenses |
|
|
|
|
|
|
458,225 |
|
|
|
386,649 |
|
|
|
1,334,784 |
|
|
|
1,348,186 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Profit / (Loss) from Operations |
|
|
|
|
|
|
(235,757 |
) |
|
|
(256,510 |
) |
|
|
1,614 |
|
|
|
(364,675 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Finance Charges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
|
|
|
|
43,619 |
|
|
|
56,646 |
|
|
|
136,975 |
|
|
|
179,948 |
|
|
Foreign exchange (gain) / loss |
|
|
|
|
|
|
(110,176 |
) |
|
|
25,629 |
|
|
|
(261,819 |
) |
|
|
(62,048 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit / (Loss) before Tax |
|
|
|
|
|
|
(169,200 |
) |
|
|
(338,785 |
) |
|
|
126,458 |
|
|
|
(482,575 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income and Other Tax Expense |
|
|
|
|
|
|
9,946 |
|
|
|
5,201 |
|
|
|
140,837 |
|
|
|
115,151 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Profit / (Loss) for the Period |
|
|
|
|
|
|
(179,146 |
) |
|
|
(343,986 |
) |
|
|
(14,379 |
) |
|
|
(597,726 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange differences on translating foreign operations gain / (loss) |
|
|
|
|
|
|
(76,513 |
) |
|
|
20,759 |
|
|
|
(222,311 |
) |
|
|
(17,371 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Comprehensive Loss, Net of Tax |
|
|
|
|
|
$ |
(255,659 |
) |
|
$ |
(323,227 |
) |
|
$ |
(236,690 |
) |
|
$ |
(615,097 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per Share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted |
|
|
|
|
|
$ |
(0.01 |
) |
|
$ |
(0.02 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.03 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Number of Common Shares Outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted |
|
|
|
|
|
|
21,925,844 |
|
|
|
21,192,510 |
|
|
|
21,815,341 |
|
|
|
20,920,635 |
|
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
LINGO MEDIA CORPORATION
Condensed Consolidated Interim Statement of Changes in Equity
For the nine-months ended September 30, 2014
(Unaudited, expressed in Canadian Dollars, unless otherwise stated)
| |
|
Issued share capital |
|
|
Share based payment reserve |
|
|
Warrants |
|
|
Accumulated other comprehensive income |
|
|
Deficit |
|
|
Total equity |
|
| |
|
Number of shares |
|
|
Amount |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at January 1, 2013 |
|
|
20,899,177 |
|
|
$ |
18,014,347 |
|
|
$ |
2,450,791 |
|
|
$ |
1,132,685 |
|
|
$ |
(88,971 |
) |
|
$ |
(21,091,560 |
) |
|
$ |
417,292 |
|
|
Income / (loss) for the period |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(597,726 |
) |
|
|
(597,726 |
) |
|
Issued shares – against loans payable |
|
|
880,000 |
|
|
|
88,000 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
88,000 |
|
|
Other comprehensive income / (loss) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(17,371 |
) |
|
|
- |
|
|
|
(17,371 |
) |
|
Share-based payments charged to operations |
|
|
- |
|
|
|
- |
|
|
|
55,506 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
55,506 |
|
|
Balance as at September 30, 2013 |
|
|
21,779,177 |
|
|
|
18,102,347 |
|
|
|
2,506,297 |
|
|
|
1,132,685 |
|
|
|
(106,342 |
) |
|
|
(21,689,286 |
) |
|
|
(54,299 |
) |
|
Income / (loss) for the period |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
620,669 |
|
|
|
620,669 |
|
|
Other comprehensive income / (loss) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(61,903 |
) |
|
|
- |
|
|
|
(61,903 |
) |
|
Share-based payments charged to operations |
|
|
- |
|
|
|
- |
|
|
|
6,420 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
6,420 |
|
|
Balance as at December 31, 2013 |
|
|
21,779,177 |
|
|
|
18,102,347 |
|
|
|
2,512,717 |
|
|
|
1,132,685 |
|
|
|
(168,245 |
) |
|
|
(21,068,617 |
) |
|
|
510,887 |
|
|
Income / (loss) for the period |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(14,379 |
) |
|
|
(14,379 |
) |
|
Issued shares – against loans payable |
|
|
600,000 |
|
|
|
60,000 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
60,000 |
|
|
Other comprehensive income / (loss) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(222,311 |
) |
|
|
- |
|
|
|
(222,311 |
) |
|
Share-based payments charged to operations |
|
|
- |
|
|
|
- |
|
|
|
32,228 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
32,228 |
|
|
Balance as at September 30, 2014 |
|
|
22,379,177 |
|
|
$ |
18,162,347 |
|
|
$ |
2,544,945 |
|
|
$ |
1,132,685 |
|
|
$ |
(390,556 |
) |
|
$ |
(21,082,996 |
) |
|
$ |
366,425 |
|
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
LINGO MEDIA CORPORATION
Condensed Consolidated Interim Statement of Cash Flows
For the nine-months ended September 30, 2014
(Unaudited, expressed in Canadian Dollars, unless otherwise stated)
| |
|
For the three months
ended September 30 |
|
|
For the nine months
ended September 30 |
|
| |
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
|
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income / (Loss) for the period |
|
$ |
(179,146 |
) |
|
$ |
(343,986 |
) |
|
$ |
(14,379 |
) |
|
$ |
(597,726 |
) |
|
Adjustments to Net Profit for Non Cash Items: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation / amortization |
|
|
156,035 |
|
|
|
118,410 |
|
|
|
434,811 |
|
|
|
319,268 |
|
|
Share-based payment |
|
|
29,319 |
|
|
|
11,597 |
|
|
|
32,228 |
|
|
|
55,506 |
|
|
Interest accretion |
|
|
20,288 |
|
|
|
22,431 |
|
|
|
64,288 |
|
|
|
66,931 |
|
|
Unrealized foreign exchange gain / (loss) |
|
|
(80,215 |
) |
|
|
21,836 |
|
|
|
(217,531 |
) |
|
|
(18,177 |
) |
|
Operating Loss before Working Capital Changes |
|
|
(53,719 |
) |
|
|
(169,712 |
) |
|
|
(299,417 |
) |
|
|
(174,198 |
) |
|
Working Capital Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Increase)/decrease in accounts receivable |
|
|
(101,131 |
) |
|
|
(7,180 |
) |
|
|
6,975 |
|
|
|
653,473 |
|
|
(Increase)/decrease in prepaid and other receivables |
|
|
15,739 |
|
|
|
18,522 |
|
|
|
18,094 |
|
|
|
53,479 |
|
|
Increase/(decrease) in accounts payable |
|
|
45,132 |
|
|
|
107,897 |
|
|
|
(65,928 |
) |
|
|
(63,280 |
) |
|
Increase/(decrease) in accrued liabilities |
|
|
119,369 |
|
|
|
46,812 |
|
|
|
80,716 |
|
|
|
187,904 |
|
|
Cash Generated from / (used in) Operations |
|
|
25,390 |
|
|
|
(3,661 |
) |
|
|
339,274 |
|
|
|
657,378 |
|
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of intangibles |
|
|
(150,510 |
) |
|
|
(126,522 |
) |
|
|
(394,671 |
) |
|
|
(358,757 |
) |
|
Purchase of property and equipment |
|
|
- |
|
|
|
- |
|
|
|
(3,277 |
) |
|
|
- |
|
|
Net Cash Flows Generated from / (used in) Investing Activities |
|
|
(150,510 |
) |
|
|
(126,522 |
) |
|
|
(397,948 |
) |
|
|
(358,757 |
) |
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital issued during the period |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Share issue costs |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Advances of loans payable |
|
|
- |
|
|
|
50,000 |
|
|
|
60,000 |
|
|
|
- |
|
|
Repayment of loan payable |
|
|
- |
|
|
|
- |
|
|
|
(60,000 |
) |
|
|
(325,000 |
) |
|
Net Cash Flows Generated from / (used in) Financing Activities |
|
|
- |
|
|
|
50,000 |
|
|
|
- |
|
|
|
(325,000 |
) |
|
NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS |
|
|
(125,120 |
) |
|
|
(80,183 |
) |
|
|
(58,674 |
) |
|
|
(26,379 |
) |
|
Cash and Cash Equivalents at the Beginning of the Period |
|
|
144,537 |
|
|
|
93,052 |
|
|
|
78,091 |
|
|
|
39,248 |
|
|
Cash and Cash Equivalents at the End of the Period |
|
$ |
19,417 |
|
|
$ |
12,869 |
|
|
$ |
19,417 |
|
|
$ |
12,869 |
|
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
LINGO MEDIA CORPORATION
Notes to Condensed Consolidated Interim Financial Statements
September 30, 2014
(Unaudited - See Notice to Reader)
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 as at and for the quarter ended September 30, 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.
| |
2.1 |
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 a working capital deficiency as at September 30, 2014 and has incurred significant losses recurring 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 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 September 30, 2014 (including comparatives) were approved and authorized for issue by the board of directors on November 28, 2014.
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 September 30, 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 Company 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.
LINGO MEDIA CORPORATION
Notes to Condensed Consolidated Interim Financial Statements
September 30, 2014
(Unaudited - See Notice to Reader)
All intercompany balances, transactions, unrealized gains and losses resulting from inter-company transactions and dividends are eliminated in full.
|
2. |
BASIS OF PREPARATION (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 Company. These consolidated financial statements are presented in Canadian Dollars, which is the Company’s functional currency and presentation currency. The functional currency of Speak2Me is Chinese Renminbi (“RMB”) and the functional currency of its ELL Technologies subsidiary is the United States Dollar (“US$”).
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 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:
| |
|
September 30, 2014 |
|
|
December 31, 2013 |
|
|
Trade receivable |
|
$ |
859,915 |
|
|
$ |
839,336 |
|
|
Grants receivable |
|
|
136,550 |
|
|
|
164,104 |
|
| |
|
$ |
996,465 |
|
|
$ |
1,003,440 |
|
LINGO MEDIA CORPORATION
Notes to Condensed Consolidated Interim Financial Statements
September 30, 2014
(Unaudited - See Notice to Reader)
|
6. |
PROPERTY AND EQUIPMENT |
|
Cost, January 1, 2013 |
|
$ |
212,329 |
|
|
Additions |
|
|
- |
|
|
Effect of foreign exchange |
|
|
3,270 |
|
|
Cost, December 31, 2013 |
|
$ |
215,599 |
|
|
Additions |
|
|
3,277 |
|
|
Disposal |
|
|
(53,494 |
) |
|
Effect of foreign exchange |
|
|
1,016 |
|
|
Cost, September 30, 2014 |
|
$ |
166,398 |
|
| |
|
|
|
|
|
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 |
|
|
5,272 |
|
|
Disposal |
|
|
(44,276 |
) |
|
Effect of foreign exchange |
|
|
1,165 |
|
|
Accumulated depreciation, September 30, 2013 |
|
$ |
145,834 |
|
| |
|
|
|
|
|
Net book value, Janaury 1, 2013 |
|
$ |
38,356 |
|
|
Net book value, December 31, 2013 |
|
$ |
31,926 |
|
|
Net book value, September 30, 2014 |
|
$ |
20,564 |
|
| |
|
Software and web development |
|
|
Content Platform |
|
|
Customer Relationships |
|
|
Total |
|
|
Cost, January 1, 2013 |
|
$ |
6,792,163 |
|
|
$ |
1,477,112 |
|
|
$ |
130,000 |
|
|
$ |
8,399,275 |
|
|
Additions |
|
|
358,757 |
|
|
|
- |
|
|
|
- |
|
|
|
358,757 |
|
|
Foreign exchange effect |
|
|
5,942 |
|
|
|
- |
|
|
|
- |
|
|
|
5,942 |
|
|
Cost, September 30, 2013 |
|
|
7,156,862 |
|
|
|
1,477,112 |
|
|
|
130,000 |
|
|
|
8,763,974 |
|
|
Additions |
|
|
72,954 |
|
|
|
- |
|
|
|
- |
|
|
|
72,954 |
|
|
Foreign exchange effect |
|
|
(4,751 |
) |
|
|
- |
|
|
|
- |
|
|
|
(4,751 |
) |
|
Cost, December 31, 2013 |
|
|
7,225,065 |
|
|
|
1,477,112 |
|
|
|
130,000 |
|
|
|
8,832,177 |
|
|
Additions |
|
|
394,671 |
|
|
|
- |
|
|
|
- |
|
|
|
394,671 |
|
|
Foreign exchange effect |
|
|
7,081 |
|
|
|
- |
|
|
|
- |
|
|
|
7,081 |
|
|
Cost, September 30, 2014 |
|
$ |
7,626,817 |
|
|
$ |
1,477,112 |
|
|
$ |
130,000 |
|
|
$ |
9,233,929 |
|
LINGO MEDIA CORPORATION
Notes to Condensed Consolidated Interim Financial Statements
September 30, 2014
(Unaudited - See Notice to Reader)
| |
|
Software and web development |
|
|
Content Platform |
|
|
Customer Relationships |
|
|
Total |
|
|
Accumulated depreciation, January 1, 2013 |
|
$ |
6,626,596 |
|
|
$ |
766,446 |
|
|
$ |
130,000 |
|
|
$ |
7,523,042 |
|
|
Charge for the period |
|
|
98,308 |
|
|
|
220,960 |
|
|
|
- |
|
|
|
319,268 |
|
|
Foreign exchange effect |
|
|
(472 |
) |
|
|
- |
|
|
|
- |
|
|
|
(472 |
) |
|
Accumulated depreciation, September 30, 2013 |
|
|
6,724,432 |
|
|
|
987,406 |
|
|
|
130,000 |
|
|
|
7,841,838 |
|
|
Charge for the period |
|
|
37,319 |
|
|
|
74,462 |
|
|
|
- |
|
|
|
111,781 |
|
|
Foreign exchange effect |
|
|
1,663 |
|
|
|
- |
|
|
|
- |
|
|
|
1,663 |
|
|
Accumulated depreciation, December 31, 2013 |
|
|
6,763,414 |
|
|
|
1,061,868 |
|
|
|
130,000 |
|
|
|
7,955,282 |
|
|
Charge for the period |
|
|
208,579 |
|
|
|
220,960 |
|
|
|
- |
|
|
|
429,539 |
|
|
Foreign exchange effect |
|
|
2,495 |
|
|
|
- |
|
|
|
- |
|
|
|
2,495 |
|
|
Accumulated depreciation, September 30, 2014 |
|
$ |
6,974,488 |
|
|
$ |
1,282,828 |
|
|
$ |
130,000 |
|
|
$ |
8,387,315 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value, Janaury 01, 2013 |
|
$ |
165,567 |
|
|
$ |
710,666 |
|
|
|
- |
|
|
$ |
876,233 |
|
|
Net book value, September 30, 2013 |
|
$ |
432,430 |
|
|
$ |
489,706 |
|
|
|
- |
|
|
$ |
922.136 |
|
|
Net book value, December 31, 2013 |
|
$ |
461,651 |
|
|
$ |
415,244 |
|
|
|
- |
|
|
$ |
876,895 |
|
|
Net book value, September 30, 2014 |
|
$ |
652,330 |
|
|
$ |
194,284 |
|
|
|
- |
|
|
$ |
846,614 |
|
| |
|
September 30,
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, 2015(i)(ii). |
|
$ |
880,000 |
|
|
$ |
880,000 |
|
|
Unamortized transaction costs |
|
|
(56,167 |
) |
|
|
(60,455 |
) |
| |
|
$ |
823,833 |
|
|
$ |
819,545 |
|
| |
(i) |
On August 27, 2014, 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, 2013, and 2014. As additional consideration for the extension of the loan, the Company issued to the lenders an aggregate of 600,000 (2013 - 880,000) common shares of Lingo Media. The common shares were valued at market price of $0.10 per share. |
| |
(ii) |
Included in loans payable are loans amounting to $480,000 (2013 – $485,000) to related parties as disclosed in Note 17. |
LINGO MEDIA CORPORATION
Notes to Condensed Consolidated Interim Financial Statements
September 30, 2014
(Unaudited - See Notice to Reader)
| |
a) |
Common shares - Authorized |
Unlimited number of preference shares with no par value
Unlimited number of common shares with no par value
| |
b) |
Common shares - Transactions: |
| |
(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 agreed to pay a 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. |
LINGO MEDIA CORPORATION
Notes to Condensed Consolidated Interim Financial Statements
September 30, 2014
(Unaudited - See Notice to Reader)
| |
(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. |
| 9. |
SHARE CAPITAL (Cont’d) |
| |
b) |
Common shares - Transactions: |
| |
(ii) |
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.
| |
(iii) |
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. |
| |
(iv) |
On August 27, 2014, the Company extended the term of the $880,000 loan to September 8, 2015, originally advanced on September 8, 2010, and previously 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 600,000 common shares of Lingo Media. The common shares were valued at market price of $0.10 per share. A reliable measure of the services received and been at the fair value of the common shares issued. |
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.
LINGO MEDIA CORPORATION
Notes to Condensed Consolidated Interim Financial Statements
September 30, 2014
(Unaudited - See Notice to Reader)
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.
|
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 |
|
|
Granted |
|
|
25,000 |
|
|
|
0.20 |
|
|
Expired |
|
|
(105,000 |
) |
|
|
0.86 |
|
|
Forfeited |
|
|
(19,000 |
) |
|
|
0.66 |
|
|
Outstanding as at September 30, 2013 |
|
|
2,971,500 |
|
|
$ |
0.52 |
|
|
Granted |
|
|
- |
|
|
|
- |
|
|
Expired |
|
|
- |
|
|
|
- |
|
|
Forfeited |
|
|
(188,250 |
) |
|
|
0.87 |
|
|
Outstanding as at December 31, 2013 |
|
|
2,783,250 |
|
|
$ |
0.48 |
|
|
Granted |
|
|
680,000 |
|
|
|
0.13 |
|
|
Expired |
|
|
(50,750 |
) |
|
|
1.75 |
|
|
Forfeited |
|
|
(5,000 |
) |
|
|
0.66 |
|
|
Outstanding as at September 30, 2014 |
|
|
3,407,500 |
|
|
|
0.39 |
|
| |
|
|
|
|
|
|
|
|
|
Options exercisable as at September 30, 2013 |
|
|
2,171,336 |
|
|
$ |
0.61 |
|
|
Options exercisable as at December 31, 2013 |
|
|
2,033,004 |
|
|
$ |
0.55 |
|
|
Options exercisable as at September 30, 2014 |
|
|
2,644,505 |
|
|
$ |
0.45 |
|
The weighted average remaining contractual life for the stock options outstanding as at September 30, 2014 was 2.05 years (2013 – 2.76 years). The range of exercise prices for the stock options outstanding as at September 30, 2014 was $0.13 - $1.70 (2013 - $0.20 - $1.75). The weighted average grant-date fair value of options granted to employees, consultants and directors during the period has been estimated at $0.0674 (2013 - $0.09) using the Black-Scholes option-pricing model. The estimated fair value of the options granted is expensed over the options vesting periods.
LINGO MEDIA CORPORATION
Notes to Condensed Consolidated Interim Financial Statements
September 30, 2014
(Unaudited - See Notice to Reader)
The vesting periods on the options granted are as follows, 435,000 stock options vested immediately upon issuance, 245,000 stock options will vest quarterly over 18 months.
The pricing model assumes the weighted average risk free interest rates of 1.35% (2013 – 0.98%) weighted average expected dividend yields of Nil (2013 – Nil), the weighted average expected common stock price volatility (based on historical trading) of 79% (2013– 94%), a forfeiture rate of zero, a weighted average stock price of $0.22, a weighted average exercise price of $0.13 and a weighted average expected life of 3 years (2013 –3.01 years), which were estimated based on past experience with options and option contract specifics.
The following summarizes the warrants outstanding:
| |
|
Weighted Average Remaining Contractual Life (Years) |
|
|
Series |
|
|
Number of Warrants |
|
|
Weighted Average
Exercise
Price |
|
|
January 1, 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Extended |
|
|
0.94 |
|
|
|
A |
|
|
|
3,658,668 |
|
|
|
0.75 |
|
|
Extended |
|
|
0.55 |
|
|
|
B |
|
|
|
1,875,000 |
|
|
|
0.75 |
|
|
December 31, 2013 |
|
|
|
|
|
|
|
|
|
|
5,533,668 |
|
|
|
0.75 |
|
|
September 30, 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, 2013 |
|
|
|
|
|
|
|
|
|
|
230,520 |
|
|
|
|
|
|
Expired |
|
|
- |
|
|
|
2011 |
|
|
|
(151,620 |
) |
|
|
0.60 |
|
|
Expired |
|
|
- |
|
|
|
2011 |
|
|
|
(78,900 |
) |
|
|
0.60 |
|
|
December 31, 2013 |
|
|
|
|
|
|
|
|
|
Nil |
|
|
|
|
|
|
September 30, 2014 |
|
|
|
|
|
|
|
|
|
Nil |
|
|
|
|
|
LINGO MEDIA CORPORATION
Notes to Condensed Consolidated Interim Financial Statements
September 30, 2014
(Unaudited - See Notice to Reader)
Included as a reduction of selling, general and administrative expenses are government grants of $194,884 (2013 - $190,813), relating to the Company's publishing and software projects. At the end of the period, $136,550 (2013 - $97,500) 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.
|
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 Company’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 $161,663 (2013 - $7,662) due to reduction in the value of net liability balance. A 10% of weakening of the US dollar against Canadian dollar at September 30, 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 September 30, 2014 are as follows:
| |
|
USD Denominated |
|
|
China Denominated |
|
| |
|
CAD |
|
|
USD |
|
|
CAD |
|
|
RMB |
|
|
Cash |
|
$ |
9,667 |
|
|
$ |
8,625 |
|
|
$ |
4,816 |
|
¥ |
|
26,376 |
|
|
Accounts receivable |
|
$ |
851,001 |
|
|
$ |
759,280 |
|
|
$ |
700 |
|
¥ |
|
3,833 |
|
|
Accounts payable |
|
$ |
44,033 |
|
|
$ |
39,287 |
|
|
$ |
1,848 |
|
¥ |
|
10,120 |
|
LINGO MEDIA CORPORATION
Notes to Condensed Consolidated Interim Financial Statements
September 30, 2014
(Unaudited - See Notice to Reader)
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 September 30, 2014, the Company had cash of $19,417, accounts and grants receivable of $996,465 and prepaid and other receivables of $66,526 to settle current liabilities of $1,705,929
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 September 30, 2014, the Company has outstanding receivables of $859,915. 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.
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.
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.
LINGO MEDIA CORPORATION
Notes to Condensed Consolidated Interim Financial Statements
September 30, 2014
(Unaudited - See Notice to Reader)
Segmented Information for Nine Months Ended September 30, 2014 (Before Other Financial Items Below)
| September 30, 2014 |
|
|
Online
English
Language
Learning |
|
|
|
Print-Based
English
Language
Learning |
|
|
|
Total |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
443,520 |
|
|
$ |
892,878 |
|
|
$ |
1,336,398 |
|
|
Segment non-current assets |
|
|
990,713 |
|
|
|
16,083 |
|
|
|
1,006,796 |
|
|
Segment assets |
|
|
1,116,223 |
|
|
|
972,981 |
|
|
|
2,089,204 |
|
|
Segment liabilities |
|
|
620,825 |
|
|
|
1,101,954 |
|
|
|
1,722,779 |
|
|
Segment Income (loss) |
|
|
(374,865 |
) |
|
|
267,870 |
|
|
|
(106,995 |
) |
| September 30, 2013 |
|
|
Online
English
Language
Learning |
|
|
|
Print-Based
English
Language
Learning |
|
|
|
Total |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
261,439 |
|
|
$ |
722,072 |
|
|
$ |
983,511 |
|
|
Segment non-current assets |
|
|
1,076,551 |
|
|
|
17,952 |
|
|
|
1,094,503 |
|
|
Segment assets |
|
|
1,171,413 |
|
|
|
796,200 |
|
|
|
1,967,613 |
|
|
Segment liabilities |
|
|
691,375 |
|
|
|
1,330,537 |
|
|
|
2,021,912 |
|
|
Segment Income (loss) |
|
|
(486,176 |
) |
|
|
61,855 |
|
|
|
(424,321 |
) |
|
Other Financial Items |
|
2014 |
|
|
2013 |
|
|
Print-Based English Language Learning segment income (loss) |
|
$ |
267,870 |
|
|
$ |
61,856 |
|
|
Online English Language Learning segment income (loss) |
|
|
(374,865 |
) |
|
|
(486,176 |
) |
|
Foreign exchange |
|
|
261,819 |
|
|
|
62,048 |
|
|
Interest expense |
|
|
(136,975 |
) |
|
|
(179,948 |
) |
|
Share-based payment |
|
|
(32,228 |
) |
|
|
(55,506 |
) |
|
Other comprehensive income (loss) |
|
|
(222,311 |
) |
|
|
(17,371 |
) |
|
Total Comprehensive Loss |
|
$ |
(236,690 |
) |
|
$ |
(615,097 |
) |
Revenue by Geographic Region
|
For the nine month period ended September 30 |
|
2014 |
|
|
2013 |
|
|
China |
|
$ |
1,042,138 |
|
|
$ |
723,875 |
|
|
Other |
|
|
294,260 |
|
|
|
259,636 |
|
| |
|
$ |
1,336,398 |
|
|
$ |
983,511 |
|
Identifiable Assets
|
As at September 30 |
|
2014 |
|
|
2013 |
|
|
Canada |
|
$ |
2,072,359 |
|
|
$ |
1,878,028 |
|
|
China |
|
|
16,845 |
|
|
|
89,585 |
|
| |
|
$ |
2,089,204 |
|
|
$ |
1,967,613 |
|
LINGO MEDIA CORPORATION
Notes to Condensed Consolidated Interim Financial Statements
September 30, 2014
(Unaudited - See Notice to Reader)
|
16. |
SUPPLEMENTAL CASH FLOW INFORMATION |
| |
|
2014 |
|
|
2013 |
|
|
Income taxes and other taxes paid |
|
$ |
140,837 |
|
|
$ |
115,151 |
|
|
Interest paid |
|
$ |
61,006 |
|
|
$ |
70,880 |
|
|
17. |
RELATED PARTY BALANCES AND TRANSACTIONS |
For the nine month period ended September 30, 2014, 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 $268,098 (2013 – $247,500) and is reflected as consulting fees to corporations owned by a director and officers of the Company. As of September 30, 2014, $423,076 of management compensation is deferred and included in current liabilities. |
| |
(b) |
At September 30, 2014, the Company had loans payable due to corporations controlled by directors and officers of the Company in the amount of $480,000 (2013 - $485,000). Interest expense related to these loans is $32,311 (2013 - $32,734). |
19
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
Third Quarter Ended September 30, 2014
November 28, 2014
MANAGEMENT DISCUSSION & ANALYSIS
FOR THE THIRD QUARTER ENDED SEPTEMBER 30, 2014
Notice to Reader
The following Management Discussion & Analysis ("MD&A") of Lingo Media Corporation (the "Company" or "Lingo Media") and its financial condition and results of operations, prepared as of November 28, 2014, should be read in conjunction with the Company's Condensed Consolidated Interim Financial Statements and accompanying notes for the nine months ended September 30, 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.
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 five 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 September 30, 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 522 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 features 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 offers sponsorships.
Recent Developments
As of September 30, 2013, Lingo Media had:
|
● |
signed a seven (7) year renewal agreement to co-publish and distribute the recently State Ministry of Education approved PEP Primary English and Starting Line programs with People’s Education Press and Peoples Education Electronic & Audiovisual Press, China’s MoE’s publishing arm |
|
● |
completed the redesign of the product user interface, learning management system and the multi-browser delivery system for desktops for ELL Technologies’ products including – Master and Scholar |
|
● |
resumed sales and marketing of ELL Technologies’ Master and Scholar products |
|
● |
continued the redesign of ELL Technologies’ Kids product |
At the Company’s Annual and General Meeting (“AGM”) held on August 28, 2014, shareholders re-elected Messrs. Jerry Grafstein, Martin Bernholtz, Michael Kraft, Mohamed El Ammawy, Scott Remborg and Tommy Weibing Gong as board directors.
The directors held a board meeting following the AGM and reappointed Michael Kraft as President & CEO, Khurram Qureshi as Chief Financial Officer and Gali Bar-Ziv as Chief Operating Officer.
On September 27th 2014,the Company announced that it had negotiated a one year extension to the term of the $880,000 loan financing (the "Loan") originally completed on September 8, 2010 with a one year term and extended for further one year terms on September 8, 2011, September 8, 2012, and September 8, 2013. The new maturity date of the Loan is September 8, 2015 and continues to bear interest at a rate of 9% per annum, payable monthly in arrears and is secured by a charge over all of the Company’s assets and properties. Lingo Media may elect to prepay the Loan in whole or in part at any time at its sole discretion without penalty. As additional consideration for the extension of the Loan by the lenders, the Company issued to the Lenders an aggregate of 600,000 common shares of Lingo Media which were subject to a four month statutory hold. The insider participation consisted of three directors who advanced an aggregate of $445,000 and one executive officer who advanced $35,000. It is expected that the Loan will be repaid from the Company's cash flow and any equity or debt financing completed by the Company during the new term of the Loan.
Revenue Recognition Policy
Lingo Learning earns royalty revenues from its key customers, People’s Education Press (“PEP”) and People’s Education Electronic Audio-Visual Press (“PEP AV”), China’s State Ministry of Education’s publishing arms, on the following basis:
People’s Education Press – Print-based Products
|
● |
Finished Product Sales (reported semi-annually only) – PEP prints and sells Lingo Learning’s English language training components to provincial distributors in China; and |
|
● |
Licensing Sales (reported semi-annually only) – PEP licenses Lingo Learning’s English language training components to provincial publishers who then print and sell the programs to provincial distributors in China. |
People’s Education Electronic Audio-Visual Press – Audio Visual-based Products
|
● |
Finished Product Sales (reported quarterly) – PEP AV manufactures and sells Lingo Learning’s English language training components to provincial distributors in China; and |
|
● |
Licensing Sales (reported quarterly) – PEP AV licenses Lingo Learning’s English language training components to provincial publishers who then manufacture and sell the programs to provincial distributors in China. |
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 AV are recognized quarterly 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.
Lingo Media Corporation (TSX-V: LM; OTC BB: LMDCF) Management Discussion & Analysis
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 $63,780 for the quarter ended September 30, 2014 compared to $20,590 for 2013 from People’s Education & Audio Visual Press, an increase of 210%.
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 $158,688 for the quarter ended September 30, 2014, compared to $109,549 for the same period in 2013, and increase of 45%. The Company launched its redesigned suite of products including Scholar, Business, Master and Kids and resumed its sales and marketing efforts September 2013.
Speak2Me’s revenue for the period ended September 30, 2014 was $Nil compared to $Nil for September 30, 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.
General Financial Condition
Financial Highlights
As at September 30, 2014 Lingo Media had working capital deficiency of $640,371 compared to a working capital deficiency of $1,148,803 as at September 30, 2013. Total comprehensive loss for the three months ended September 30, 2014 was $255,659 compared to total comprehensive loss of $323,227 for the three months ended September 30, 2013.
| |
|
2014 |
|
|
2013 |
|
|
2012 |
|
| Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
| Print-Based English Language Learning |
|
$ |
63,780 |
|
|
$ |
20,590 |
|
|
$ |
62,272 |
|
|
Online English Language Learning |
|
|
158,688 |
|
|
|
109,549 |
|
|
|
67,152 |
|
| |
|
|
222,468 |
|
|
|
130,139 |
|
|
|
129,424 |
|
|
Total Comprehensive Income / (Loss) |
|
|
(255,659 |
) |
|
|
(323,227 |
) |
|
|
(690,052 |
) |
|
Income / (Loss) per Share, Basic and Diluted: |
|
$ |
(0.01 |
) |
|
$ |
(0.02 |
) |
|
$ |
(0.03 |
) |
|
Total Assets |
|
|
2,089,204 |
|
|
|
1,967,613 |
|
|
|
2,334,446 |
|
|
Working Capital / (Deficit) |
|
|
(640,371 |
) |
|
|
(1,148,803 |
) |
|
|
(757,913 |
) |
|
Cash (Used)/Provided - Operations |
|
$ |
25,390 |
|
|
$ |
(3,661 |
) |
|
$ |
(376,710 |
) |
Lingo Media Corporation (TSX-V: LM; OTC BB: LMDCF) Management Discussion & Analysis
The Company had cash on hand as at September 30, 2014 of $19,417 (2013 - $12,869) 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
During the third quarter, revenues from print-based English language learning for the quarter were $63,780 compared to $20,590 for the same period in 2013, an increase of 210%. 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 $158,688 in online English language learning revenue as compared to $109,549 in 2013, and increase of 45%. 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
During the second quarter, selling, general and administrative expenses decreased to $205,626 compared to $219,791 in 2013. This decrease was due to the reduction in administration costs, consulting fees and salaries, and travel expenses in 2014. Selling, general and administrative expenses for the two segments are segregated below.
Print-Based English Language Learning
Selling, general and administrative cost for print-based publishing decreased from $109,900 in 2013 to $92,693 in 2014 primarily because of the reduction in administration costs, consulting fees and salaries, travel expenses and shareholder service expenses. The following is a breakdown of selling, general and administrative costs directly related to print-based English language learning:
| |
|
2014 |
|
|
2013 |
|
|
Sales, marketing & administration |
|
$ |
29,079 |
|
|
$ |
45,925 |
|
|
Consulting fees and salaries |
|
|
62,597 |
|
|
|
97,549 |
|
|
Travel |
|
|
11,097 |
|
|
|
22,274 |
|
|
Premises |
|
|
32,079 |
|
|
|
33,998 |
|
|
Shareholder service |
|
|
10,877 |
|
|
|
18,178 |
|
|
Professional fees |
|
|
18,514 |
|
|
|
10,067 |
|
| |
|
|
164,243 |
|
|
|
227,991 |
|
|
Less: Grants |
|
|
(71,550 |
) |
|
|
(118,091 |
) |
| |
|
$ |
92,693 |
|
|
$ |
109,900 |
|
Online English Language Learning
Selling, general and administrative cost related to online English language learning was $112,933 for the period compared to $109,891 for the same period in 2013. Selling, general and administrative costs for this business unit slightly increased in 2014. The Company launched its redesigned suite of products and resumed its sales and marketing efforts.
Lingo Media Corporation (TSX-V: LM; OTC BB: LMDCF) Management Discussion & Analysis
| |
|
2014 |
|
|
2013 |
|
|
Sales, marketing & administration |
|
$ |
29,508 |
|
|
$ |
36,333 |
|
|
Consulting fees and salaries |
|
|
50,860 |
|
|
|
53,115 |
|
|
Travel |
|
|
3,594 |
|
|
|
5,259 |
|
|
Premises |
|
|
8,742 |
|
|
|
5,630 |
|
|
Shareholder service |
|
|
- |
|
|
|
- |
|
|
Professional fees |
|
|
20,229 |
|
|
|
9,554 |
|
| |
|
$ |
112,933 |
|
|
$ |
109,891 |
|
| Total Selling, General and Administrative Expenses |
|
$ |
205,626 |
|
|
$ |
219,791 |
|
Total Comprehensive Income / (Loss)
Total comprehensive loss was $255,659 for the three-month period ended September 30, 2014 as compared to a loss of $323,227 in 2013. This loss can be attributed to the two operating segments and other financial costs as shown below:
|
Online English Language Learning |
|
2014 |
|
|
2013 |
|
|
Revenue |
|
$ |
158,688 |
|
|
$ |
109,549 |
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
Direct cost |
|
|
49,277 |
|
|
|
30,852 |
|
|
General & administrative |
|
|
112,933 |
|
|
|
109,891 |
|
|
Amortization of property & equipment |
|
|
662 |
|
|
|
704 |
|
|
Amortization of development costs |
|
|
154,377 |
|
|
|
116,652 |
|
|
Income taxes and other taxes |
|
|
- |
|
|
|
2,409 |
|
| |
|
|
317,249 |
|
|
|
260,508 |
|
|
Segment Loss - Online English Language Learning |
|
|
(158,561 |
) |
|
|
(150,959 |
) |
| |
|
|
|
|
|
|
|
|
|
Print-Based English Language Learning |
|
|
|
|
|
|
|
|
|
Revenue |
|
|
63,780 |
|
|
|
20,590 |
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
Direct cost |
|
|
17,968 |
|
|
|
6,000 |
|
|
General & administrative |
|
|
92,693 |
|
|
|
109,900 |
|
|
Amortization of property & equipment |
|
|
996 |
|
|
|
1,053 |
|
|
Income taxes and other taxes |
|
|
9,946 |
|
|
|
2,792 |
|
| |
|
|
121,603 |
|
|
|
119,745 |
|
|
Segment Loss – Print-Based English Language Learning |
|
|
(57,823 |
) |
|
|
(99,155 |
) |
|
Other |
|
|
|
|
|
|
|
|
|
Foreign exchange |
|
|
110,176 |
|
|
|
(25,629 |
) |
|
Interest and other financial expenses |
|
|
(43,619 |
) |
|
|
(56,646 |
) |
|
Stock-based compensation |
|
|
(29,319 |
) |
|
|
(11,597 |
) |
|
Other comprehensive income |
|
|
(76,513 |
) |
|
|
20,759 |
|
| |
|
|
(39,275 |
) |
|
|
(73,113 |
) |
|
Total Comprehensive Loss |
|
$ |
(255,659 |
) |
|
$ |
(323,227 |
) |
Lingo Media Corporation (TSX-V: LM; OTC BB: LMDCF) Management Discussion & Analysis
Foreign Exchange
The Company recorded foreign exchange gain of $110,176 as compared to a loss of $25,629 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 $29,319 compared to $11,597 during 2013.
Net Income (Loss) for the Period
The Company reported a net loss of $169,200 for the quarter as compared to a net loss of $338,785 in 2013, an operational improvement of $169,585. This improvement is primarily attributed to an increase in revenue of $92,329, a reduction in selling, general and administrative expenses of $14,165 and an increase in foreign exchange expense due to fluctuation in US Dollar vs. Canadian Dollar.
Summary of Quarterly Results
| |
|
Q4-13 |
|
|
Q1-14 |
|
|
Q2-14 |
|
|
Q3-14 |
|
|
Revenue |
|
$ |
1,024,555 |
|
|
$ |
236,051 |
|
|
$ |
877,879 |
|
|
$ |
222,468 |
|
|
Income / (Loss) Before Taxes and Other Comp Income |
|
|
635,183 |
|
|
|
(44,110 |
) |
|
|
339,769 |
|
|
|
(169,200 |
) |
|
Total Comprehensive Income / (Loss) |
|
|
446,766 |
|
|
|
(181,565 |
) |
|
|
200,534 |
|
|
|
(255,659 |
) |
|
Income / (Loss) per Basic and Diluted Share |
|
$ |
0.020 |
|
|
$ |
(0.000 |
) |
|
$ |
0.010 |
|
|
$ |
(0.010 |
) |
| |
|
Q4-12 |
|
|
Q1-13 |
|
|
Q2-13 |
|
|
Q3-13 |
|
|
Revenue |
|
$ |
891,747 |
|
|
$ |
137,754 |
|
|
$ |
715,618 |
|
|
$ |
130,139 |
|
|
Income / (Loss) Before Taxes and Other Comp Income |
|
|
(230,718 |
) |
|
|
(364,031 |
) |
|
|
155,240 |
|
|
|
(338,785 |
) |
|
Total Comprehensive Income/ (Loss) |
|
|
38,611 |
|
|
|
(398,951 |
) |
|
|
42,080 |
|
|
|
(323,227 |
) |
|
Income / (Loss) per Basic and Diluted Share |
|
$ |
0.002 |
|
|
$ |
(0.020 |
) |
|
$ |
0.002 |
|
|
$ |
(0.015 |
) |
Liquidity and Capital Resources
As at September 30, 2014, the Company had cash of $19,417 compared to $12,869 for the same period in 2013. Accounts and grants receivable of $996,465 were outstanding at the end of the period compared to $793,489 in the third quarter of 2013. With 90% of the receivables from PEP and a 90 to 180 day collection cycle, the Company does not anticipate an effect on its liquidity. Total current assets amounted to $1,082,408 (2013 - $873,109) with current liabilities of $1,722,779 (2013 - $2,021,912) resulting in a working capital deficiency of $640,371 (2013 - $1,148,803).
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.
Lingo Media Corporation (TSX-V: LM; OTC BB: LMDCF) Management Discussion & Analysis
The Company plans on raising additional equity through private placement financings, 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 |
|
$ |
52,005 |
|
| 2015 |
|
|
200,690 |
|
| 2016 |
|
|
43,741 |
|
| 2017 |
|
|
9,774 |
|
Off-Balance Sheet Arrangements
The Company has not entered into any off-balance sheet finance arrangements.
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 $87,679 (2013 – $85,215) 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 September 30, 2014, the Company had loans payable due to corporations controlled by directors and officers of the Company in the amount of $480,000 (2013 - $485,000) bearing interest at 9% per annum. Interest expense related to these loans is $10,889 (2013 - $10,102).
Additional Disclosure
Intangibles
| |
|
Software and web development |
|
|
Content Platform |
|
|
Customer Relationships |
|
|
Total |
|
|
Cost, January 1, 2013 |
|
$ |
6,792,163 |
|
|
$ |
1,477,112 |
|
|
$ |
130,000 |
|
|
$ |
8,399,275 |
|
|
Additions |
|
|
358,757 |
|
|
|
- |
|
|
|
- |
|
|
|
358,757 |
|
|
Foreign exchange effect |
|
|
5,942 |
|
|
|
- |
|
|
|
- |
|
|
|
5,942 |
|
|
Cost, September 30, 2013 |
|
|
7,156,862 |
|
|
|
1,477,112 |
|
|
|
130,000 |
|
|
|
8,763,974 |
|
|
Additions |
|
|
72,954 |
|
|
|
- |
|
|
|
- |
|
|
|
72,954 |
|
|
Foreign exchange effect |
|
|
(4,751 |
) |
|
|
- |
|
|
|
- |
|
|
|
(4,751 |
) |
|
Cost, December 31, 2013 |
|
|
7,225,065 |
|
|
|
1,477,112 |
|
|
|
130,000 |
|
|
|
8,832,177 |
|
|
Additions |
|
|
394,671 |
|
|
|
- |
|
|
|
- |
|
|
|
394,671 |
|
|
Foreign exchange effect |
|
|
7,081 |
|
|
|
- |
|
|
|
- |
|
|
|
7,081 |
|
|
Cost, September 30, 2014 |
|
$ |
7,626,817 |
|
|
$ |
1,477,112 |
|
|
$ |
130,000 |
|
|
$ |
9,233,929 |
|
Lingo Media Corporation (TSX-V: LM; OTC BB: LMDCF) Management Discussion & Analysis
| |
|
Software and web development |
|
|
Content Platform |
|
|
Customer Relationships |
|
|
Total |
|
|
Accumulated depreciation, January 1, 2013 |
|
$ |
6,626,596 |
|
|
$ |
766,446 |
|
|
$ |
130,000 |
|
|
$ |
7,523,042 |
|
|
Charge for the period |
|
|
98,308 |
|
|
|
220,960 |
|
|
|
- |
|
|
|
319,268 |
|
|
Foreign exchange effect |
|
|
(472 |
) |
|
|
- |
|
|
|
- |
|
|
|
(472 |
) |
|
Accumulated depreciation, September 30, 2013 |
|
|
6,724,432 |
|
|
|
987,406 |
|
|
|
130,000 |
|
|
|
7,841,838 |
|
|
Charge for the period |
|
|
37,319 |
|
|
|
74,462 |
|
|
|
- |
|
|
|
111,781 |
|
|
Foreign exchange effect |
|
|
1,663 |
|
|
|
- |
|
|
|
- |
|
|
|
1,663 |
|
|
Accumulated depreciation, December 31, 2013 |
|
|
6,763,414 |
|
|
|
1,061,868 |
|
|
|
130,000 |
|
|
|
7,955,282 |
|
|
Charge for the period |
|
|
208,579 |
|
|
|
220,960 |
|
|
|
- |
|
|
|
429,539 |
|
|
Foreign exchange effect |
|
|
(2,495 |
) |
|
|
- |
|
|
|
- |
|
|
|
(2,495 |
) |
|
Accumulated depreciation, September 30, 2014 |
|
$ |
6,974,488 |
|
|
$ |
1,282,828 |
|
|
$ |
130,000 |
|
|
$ |
8,387,315 |
|
|
Net book value, December 31, 2012 |
|
$ |
165,567 |
|
|
$ |
710,666 |
|
|
|
- |
|
|
$ |
876,233 |
|
|
Net book value, September 30, 2013 |
|
$ |
432,430 |
|
|
$ |
489,706 |
|
|
|
- |
|
|
$ |
922,136 |
|
|
Net book value, December 31, 2013 |
|
$ |
461,651 |
|
|
$ |
415,244 |
|
|
|
- |
|
|
$ |
876,895 |
|
|
Net book value, September 30, 2014 |
|
$ |
652,330 |
|
|
$ |
194,284 |
|
|
|
- |
|
|
$ |
846,614 |
|
Property and Equipment
|
Cost, January 1, 2013 |
|
$ |
212,329 |
|
|
Additions |
|
|
- |
|
|
Effect of foreign exchange |
|
|
3,270 |
|
|
Cost, December 31, 2013 |
|
$ |
215,599 |
|
|
Additions |
|
|
3,277 |
|
|
Disposal |
|
|
(53,494 |
) |
|
Effect of foreign exchange |
|
|
1,016 |
|
|
Cost, September 30, 2014 |
|
$ |
166,398 |
|
| |
|
|
|
|
|
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 |
|
|
5,272 |
|
|
Disposal |
|
|
(44,276 |
) |
|
Effect of foreign exchange |
|
|
1,165 |
|
|
Accumulated depreciation, September 30, 2014 |
|
$ |
145,834 |
|
| |
|
|
|
|
|
Net book value, January 01, 2013 |
|
$ |
38,356 |
|
|
Net book value, December 31, 2013 |
|
$ |
31,926 |
|
|
Net book value, September 30, 2014 |
|
$ |
20,564 |
|
Lingo Media Corporation (TSX-V: LM; OTC BB: LMDCF) Management Discussion & Analysis
Disclosure of Outstanding Share Data
As of November 28, 2014, the followings are outstanding:
Common Shares – 22,379,177
Warrants – 5,533,668
Stock Options – 3,407,500
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.
Lingo Media Corporation (TSX-V: LM; OTC BB: LMDCF) Management Discussion & Analysis
11
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 SEPTEMBER 30, 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. |
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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: November 28, 2014
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signed “Michael Kraft”
/s/ Michael Kraft
Michael Kraft
Chief Executive Officer |
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NOTE TO READER |
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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 |
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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 |
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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. |
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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:
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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 SEPTEMBER 30, 2014. |
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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. |
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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: November 28, 2014
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signed “Khurram Qureshi”
/s/ Khurram Qureshi
Khurram Qureshi
Chief Financial Officer |
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NOTE TO READER |
|
|
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| 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 |
|
|
|
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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. |
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