LMDCF Everybody Loves Languages Corporation (PK)

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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 March 31, 2015

 

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 28, 2015	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, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LINGO MEDIA CORPORATION

Condensed Consolidated Interim Financial Statements

As at March 31, 2015

 

 

 

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, 2015 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, 2015

 

 

Contents
Condensed Consolidated Interim Financial Statements	Page
Balance Sheets	4
Statements of Comprehensive Income	5
Statements of Changes in Equity	6
Statements of Cash Flows	7
Notes to the Financial Statements	8-19

 

 

LINGO MEDIA CORPORATION

Condensed Consolidated Interim Balance Sheets

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

 

		Notes				March 31, 2015				December 31, 2014
ASSETS
Current Assets
Cash and cash equivalents						$	87,615			$	477,001
Accounts and grants receivable		5					1,371,256				849,344
Prepaid and other receivables							119,741				85,071
							1,578,612				1,411,416
Non-Current Assets
Property and equipment		6					26,032				24,806
Intangibles		7					1,051,039				847,598
Goodwill							139,618				139,618
TOTAL ASSETS						$	2,795,301			$	2,423,438
EQUITY AND LIABILITIES
Current Liabilities
Accounts payable							155,417				150,634
Accrued liabilities							776,258				690,015
Loans payable		8					943,833				838,833
TOTAL LIABILITIES							1,875,508				1,679,482
Equity
Share capital		9					18,162,347				18,162,347
Share-based payment reserve		10					2,607,619				2,578,380
Warrants		11					1,393,202				1,393,202
Accumulated other comprehensive income							(283,683	)			(204,852	)
Deficit							(20,959,692	)			(21,185,121	)
TOTAL EQUITY							919,793				743,956
TOTAL EQUITY AND LIABILITIES						$	2,795,301			$	2,423,438

 

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 28, 2015.

 

/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, 2015, 2014 and 2013

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

 

		Notes				2015				2014				2013
Revenue						$	651,627			$	236,051			$	137,754
Expenses
Selling, general and administrative							260,184				215,512				310,918
Amortization - intangibles		7					180,041				128,843				92,573
Direct costs							59,279				59,932				40,691
Share-based payments							29,239				2,909				25,806
Depreciation – property and equipment		6					1,718				1,398				1,936
Total Expenses							530,461				408,594				471,924
Income / (Loss) from Operations							121,166				(172,543	)			(334,170	)
Net Finance Charges
Interest expense							48,329				46,374				67,934
Foreign exchange (gain) / loss							(159,743	)			(174,806	)			(38,073	)
Income / (Loss) Before Income Tax							232,580				(44,110	)			(364,031	)
Income Tax Expense							7,151				8,755				12,992
Net Profit / (Loss) for the Period							225,429				(52,866	)			(377,023	)
Other Comprehensive Income
Exchange differences on translating foreign operations gain / (loss)							(78,831	)			(128,699	)			(21,928	)
Total Comprehensive Income / (Loss), Net of Tax						$	146,598			$	(181,565	)		$	(398,951	)
Earnings / (Loss) per Share
Basic and Diluted						$	0.01			$	(0.00	)		$	(0.02	)
Weighted Average Number of Common Shares Outstanding
Basic and Diluted							22,134,245				21,391,013				20,899,177

 

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, 2015 and 2014

(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 January 1, 2014			21,779,177			$	18,102,347			$	2,512,717			$	1,132,685			$	(168,245	)		$	(21,068,617	)		$	510,887
Profit for the year																							144,013				144,013
Other comprehensive loss																			(36,607	)							(36,607	)
Warrants extension (Note 10 (b))															260,517								(260,517	)			-
Issued shares as financing cost against loans payable			600,000				60,000																				60,000
Share-based payments charged to operations											65,663																65,663
Balance as at December 31, 2014			22,379,177				18,162,347				2,578,380				1,393,202				(204,852	)			(21,185,121	)			743,956
Profit for the period																							225,429				225,429
Other comprehensive loss																			(78,831	)							(78,831	)
Share-based payments charged to operations											29,239																29,239
Balance as at March 31, 2015			22,379,177			$	18,162,347			$	2,607,619			$	1,393,202			$	(283,683	)		$	(20,959,692	)		$	919,793

 

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, 2015, 2014 and 2013

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

 

		2015				2014				2013
CASH FLOWS FROM OPERATING ACTIVITIES
Net Profit / (Loss) for the Period		$	225,429			$	(52,866	)		$	(377,023	)
Adjustments to Net Profit for Non-Cash Items:
Depreciation / amortization			181,760				130,241				94,509
Share-based payment			29,239				2,909				25,806
Unrealized foreign exchange gain / (loss)			(84,566	)			(133,063	)			(22,054	)
Interest accretion			15,000				22,000				22,250
Operating Profit / (Loss) Before Working Capital Changes			366,862				(30,779	)			(256,512	)
Working Capital Adjustments:
(Increase)/decrease in accounts and grants receivable			(521,912	)			115,627				6,658
(Increase)/decrease in prepaid and other receivables			(34,670	)			(21,826	)			29,100
Increase/(decrease) in accounts payable			4,783				30,440				228,765
Increase/(decrease) in accrued liabilities			86,243				11,719				77,622
Cash Generated from / (used in) Operations			(98,694	)			105,181				85,633
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of intangibles			(377,923	)			(148,873	)			(106,336	)
Purchase of property and equipment			(2,769	)			(1,373	)			-
Net Cash Flows Generated from / (used in) investing activities			(380,692	)			(150,246	)			(106,336	)
CASH FLOWS FROM FINANCING ACTIVITIES
Share capital issued during the period			-				60,000				-
Share issue costs			-				(10,000	)			-
Advances / (repayments) of loan payable			90,000				-				-
Net Cash Flows Generated from / (used in) Financing Activities			90,000				50,000				-
NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS			(389,386	)			4,935				(20,703	)
Cash and Cash Equivalents at the Beginning of the Period			477,001				78,091				39,248
Cash and Cash Equivalents at the End of the Period		$	87,615			$	83,026			$	18,545

 

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, 2015

(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 OTCQB Marketplace. The condensed consolidated interim financial statements of the Company for the period ended March 31, 2015 comprise the Company and its subsidiaries.

 

Lingo Media is an ESL EdTech industry acquisition company whose goal is to "Change the way the world learns English" by combining education with technology.  The company is focused on online and print-based technologies and solutions through its four distinct business units: Lingo Learning Inc. (“Lingo Learning”), ELL Technologies Ltd. (“ELL Technologies”); Speak2Me Inc. (“Speak2Me”) and Parlo Corporation (“Parlo”). Lingo Learning is a print-based publisher of English school programs in China. ELL Technologies is a globally-established English language learning multi-media and online training company. Speak2Me is a free-to-consumer advertising-based online English language learning service in China. Parlo is a fee-based online English language learning training and assessment service.

 

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 PREPARATION

 

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, 2015, the Company reported a net profit of $225,429 (2014 – net loss of $52,866). As at March 31, 2015, the Company had a working capital deficiency of $296,896 (March 31, 2014 - $740,578). The Company’s success depends on the continued profitable commercialization of its online English language learning technology programs. Given the fact that the Company has had an increase in revenue of $415,576, increase in net profit of $278,295 and the Company’s current operating and financial plans, management of the Company believes that it will have sufficient access to financial resources to fund the Company’s planned operations through fiscal 2015.

 

The condensed consolidated interim financial statements for the period ended March 31, 2015 were approved and authorized for issue by the board of directors on May 28, 2015.

 

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.

 

 

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

March 31, 2015

(Unaudited - See Notice to Reader)

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2.	BASIS OF PREPARATION (Cont’d)

 

2.3

Basis of consolidation

 

The consolidated financial statements comprise the financial statements of the Company and its wholly owned subsidiaries controlled by the Company (the “Group”) as at March 31, 2015. Control exists when the Company is exposed to, or has the rights to variable returns from its involvement with the entity and has the ability to affect these returns through its power over the entity.

 

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.

 

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 ELL Technologies is the United States Dollar (“USD”) and the functional currency of Speak2Me is Chinese Renminbi (“RMB”). All other subsidiaries’ functional currency is Canadian Dollar (“CAD”).

 

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 ACCOUNTING 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 and recognition of long-term revenue contracts
	●	Recognition of government grant and grant receivable
	●	Recognition of deferred tax assets
	●	Valuation of share-based payments
	●	Recognition of provisions and contingent liabilities
	●	Assessing whether material uncertainties exist that would cause doubt as to whether the Company could continue as a going concern.

 

 

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

March 31, 2015

(Unaudited - See Notice to Reader)

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4.	SUMMARY OF SIGINFICANT ACCOUNTING 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, 2014.

 

5.	ACCOUNTS AND GRANTS RECEIVABLE

 

Accounts and grants receivable consist of:

 

		March 31, 2015				December 31, 2014
Trade receivable		$	1,320,550			$	831,137
Grants receivable			50,707				18,207
		$	1,371,256			$	849,344

 

6.	PROPERTY AND EQUIPMENT

 

Cost, January 1, 2014		$	215,599
Additions			1,373
Effect of foreign exchange			1,730
Cost, March 31, 2014			218,702
Additions			8,163
Disposal			(41,551	)
Effect of foreign exchange			(11,635	)
Cost, December 31, 2014			173,679
Additions			2,769
Effect of foreign exchange			2,816
Cost, March 31, 2015		$	179,264
Accumulated depreciation, January 1, 2014		$	183,673
Charge for the period			1,398
Effect of foreign exchange			1,410
Accumulated depreciation, March 31, 2014			186,481
Charge for the period			5,988
Disposal			(33,778	)
Effect of foreign exchange			(9,818	)
Accumulated depreciation, December 31, 2014			148,873
Charge for the period			1,718
Effect of foreign exchange			2,641
Accumulated depreciation, March 31, 2015		$	153,232
Net book value, January 1, 2014		$	31,926
Net book value, December 31, 2014		$	24,806
Net book value, March 31, 2015		$	26,032

 

 

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

March 31, 2015

(Unaudited - See Notice to Reader)

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7.	INTANGIBLES

 

		Software and Web Development				Content Platform				Content Development				Total
Cost, January 1, 2014		$	7,225,065			$	1,477,112			$	-			$	8,702,177
Additions			148,873				-				-				148,873
Effect of foreign exchange			5,288				-				-				5,288
Cost, March 31, 2014			7,379,226				1,477,112				-				8,856,338
Additions			395,762				-				-				395,762
Effect of foreign exchange			6,623				-				-				6,623
Cost, December 31, 2014			7,781,611				1,477,112				-				9,258,723
Additions			234,843				-				143,080				377,923
Effect of foreign exchange			13,355				-				-				13,355
Cost, March 31, 2015		$	8,029,809			$	1,477,112			$	143,080			$	9,650,001
Accumulated depreciation, January 1, 2014			6,763,414				1,061,868				-				7,825,282
Charge for the period			55,999				295,422				-				351,421
Effect of foreign exchange			1,243				-				-				1,243
Accumulated depreciation, March 31, 2014			6,820,656				1,357,290				-				8,177,947
Charge for the period			231,436				-				-				231,436
Effect of foreign exchange			1,743				-				-				1,743
Accumulated depreciation, December 31, 2014			7,053,835				1,357,290				-				8,411,126
Charge for the period			105,407				72,844				1,790				180,041
Effect of foreign exchange			7,796				-				-				7,795
Accumulated depreciation, March 31, 2015		$	7,167,038			$	1,430,134			$	1,790			$	8,598,962
Net book value, December 31, 2014		$	727,776			$	119,822				-			$	847,598
Net book value, March 31, 2015		$	862,771			$	46,978			$	141,290			$	1,051,039

 

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.

 

 

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

March 31, 2015

(Unaudited - See Notice to Reader)

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8.	LOANS PAYABLE

 

		March 31, 2015				December 31, 2014
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			90,000				-
Unamortized transaction costs			(26,167	)			(41,167	)
		$	943,833			$	838,833

 

(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 issued based on 6.8 percent of the value of the loan (2013 – 10 percent), divided by the market value per common share on the date of issuance.

 

(ii)

Included in loans payable are loans amounting to $570,000 (2013 – $480,000) 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
	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.

 

On August 23, 2012, the expiry date of the Warrants was extended for additional 18 months to March 4, 2014 with all other conditions remaining the same. On February 21, 2014, the expiry date of the warrants was extended for an additional 2 years to March 4, 2016 with all other terms remaining consistent.

 

(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.

 

 

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

March 31, 2015

(Unaudited - See Notice to Reader)

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9.	SHARE CAPITAL (Cont’d)

 

b)

Common shares - Transactions: (Cont’d)

 

(ii)

On August 23, 2012, the expiry date of the Warrants from the Second Financing was extended for an additional 18 months to May 11, 2014 with all other conditions remaining the same. Additionally, on February 21, 2014, the warrants were extended for an additional 2 years to May 11, 2016 with all other terms remaining consistent.

 

(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 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 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. 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, 2015

(Unaudited - See Notice to Reader)

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10.       SHARE-BASED PAYMENTS (Cont’d)

 

The following summarizes the options outstanding:

 

		Number of Options				Weighted Average Exercise Price
Outstanding as at January 1, 2014			2,783,250			$	0.48
Granted			-				0.14
Forfeited			-				0.66
Expired			-				0.37
Outstanding as at March 31, 2014			2,783,250			$	0.35
Granted			1,590,000			$	0.14
Expired			(5,000	)			0.66
Forfeited			(600,750	)			0.37
Outstanding as at December 31, 2014			3,767,500			$	0.35
Forfeited			-				-
Expired			-				-
Outstanding as at March 31, 2015			3,767,500				0.35
Options exercisable as at March 31, 2014			2,265,255			$	0.54
Options exercisable as at December 31, 2014			2,461,166			$	0.45
Options exercisable as at March 31, 2015			2,637,832			$	0.43

 

The weighted average remaining contractual life for the stock options outstanding as at March 31, 2015 was 2.10 years (2014 – 2.29 years). The range of exercise prices for the stock options outstanding as at March 31, 2015 was $0.13 - $1.70 (2014 - $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 $0.07 (2014 - $0.24) 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 2014 are as follows, 435,000 (2013 – nil, 2012 – 550,000) stock options vested immediately upon issuance, 445,000 (2013 - 25,000, 2012 – 750,000) stock options will vest quarterly over 18 months, 410,000 stock options will vest quarterly over 12 months, and 300,000 (2013 – nil, 2012 – 400,000) stock options will vest upon achievements of certain milestones.

 

The pricing model assumes the weighted average risk free interest rates of 1.21% (2014 – 1.37%) weighted average expected dividend yields of Nil (2014 – Nil), the weighted average expected common stock price volatility (based on historical trading) of 79% (2014– 82.64%), a forfeiture rate of zero, a weighted average stock price of $0.14, a weighted average exercise price of $0.14, and a weighted average expected life of 3 years (2014 – 4.73 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, 2015

(Unaudited - See Notice to Reader)

---

 

11.

Warrants

 

The following summarizes the warrants outstanding:

 

		Weighted Average Remaining Contractual Life (Years)			Series		Number of Warrants				Weighted Average Exercise Price
Extended			0.93		A			3,658,668			$	0.75
Extended			1.12		B			1,875,000				0.75
December 31, 2014								5,533,668			$	0.75
March 31, 2015								5,533,668			$	0.75

 

The 3,658,668 warrants issued on March 4, 2011 and the 1,875,000 warrants issued on May 11, 2011 had an expiry date of March 4, 2014 and May 11, 2014 respectively. On February 14, 2014, the warrants were extended to March 4, 2016 and May 11, 2016 respectively.

 

12.	GOVERNMENT GRANTS

 

Included as a reduction of selling, general and administrative expenses are government grants of $32,500 (2014 - $90,833), relating to the Company's publishing and software projects. At the end of the period, $50,707 (March 31, 2014 - $107,423) is included in accounts and grants receivable.

 

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 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.

 

 

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

March 31, 2015

(Unaudited - See Notice to Reader)

---

 

13.	FINANCIAL INSTRUMENTS (Cont’d)

 

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 $130,560 (2014 - $63,684) due to reduction in the value of net liability balance. A 10% of weakening of the US dollar against Canadian dollar at March 31, 2015 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, 2015 are as follows:

 

		US Denominated				China Denominated				Euro Denominated
		USD				RMB				Euro
Cash			21,886				5,173				2,665
Accounts receivable			1,051,308				2,706				1,800
Accounts payable			33,686				-				-

 

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, 2015, the Company had cash of $87,615, accounts and grants receivable of $1,371,256 and prepaid and other receivables of $119,741 to settle current liabilities of $1,875,508.

 

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, 2015, the Company has outstanding receivables of $1,371,256. 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.

 

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.

 

 

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

March 31, 2015

(Unaudited - See Notice to Reader)

---

 

14.	CAPITAL MANAGEMENT (Cont’d)

 

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 2015 or 2014.

 

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, 2015		Online English Language Learning				Print-Based English Language Learning				Total
Revenue		$	606,381			$	45,246			$	651,627
Segmented non-current assets			1,193,773				22,916				1,216,689
Segmented assets			1,811,790				983,511				2,795,301
Segmented liabilities			579,027				1,296,481				1,875,508
Segmented income (loss)			293,134				(149,880	)			143,254
March 31, 2014
Revenue		$	179,928			$	56,123			$	236,051
Segmented non-current assets			1,054,489				18,319				1,072,808
Segmented assets			1,232,924				917,170				2,150,094
Segmented liabilities			517,702				1,300,161				1,817,863
Segmented income (loss)			(38,594	)			(139,795	)			(178,389	)
March 31, 2013
Revenue		$	56,327			$	81,427			$	137,754
Segmented non-current assets			1,046,355				19,806				1,066,161
Segmented assets			1,161,518				1,454,623				2,616,141
Segmented liabilities			1,078,817				1,470,926				2,549,743
Segmented income (loss)			(153,066	)			(168,290	)			(321,356	)

 

 

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

March 31, 2015

(Unaudited - See Notice to Reader)

---

 

15.	SEGMENTED INFORMATION (Cont’d)

 

Other Financial Items		2015				2014				2013
Online English Language Learning segmented income (loss)		$	293,134			$	(38,594	)		$	(153,066	)
Print-Based English Language Learning segmented income (loss)			(149,880	)			(139,795	)			(168,290	)
Foreign exchange			159,743				174,806				38,073
Interest expense			(48,329	)			(46,374	)			(67,934	)
Share-based payment			(29,239	)			(2,909	)			(25,806	)
Other comprehensive income (loss)			(78,831	)			(128,699	)			(21,928	)
Total Comprehensive Income (Loss)		$	146,598			$	(181,565	)		$	(398,951	)

 

Revenue by Geographic Region

		2015				2014				2013
China		$	106,054			$	56,123			$	81,532
Other			545,573				179,928				56,222
		$	651,627			$	236,051			$	137,754

 

Identifiable Assets by Geographic Region

		2015				2014				2013
Canada		$	2,786,395			$	2,117,969			$	2,563,425
China			8,906				32,125				52,716
		$	2,795,301			$	2,150,094			$	2,616,141

 

16.	SUPPLEMENTAL CASH FLOW INFORMATION

 

		2015				2014				2013
Income taxes and other taxes paid		$	7,151			$	-			$	12,992
Interest paid		$	23,178			$	24,374			$	30,551

 

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 $91,936 (2014 – $82,500) and is reflected as consulting fees paid to corporations owned by a director and officers of the Company, $82,500 is deferred and included in accounts payable.

 

(b)

At March 31, 2015, the Company had loans payable due to corporations controlled by directors and officers of the Company in the amount of $570,000 (2014 - $480,000) bearing interest at 9% per annum. Interest expense related to these loans is $10,981 (2014 - $7,338).

 

 

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

March 31, 2015

(Unaudited - See Notice to Reader)

---

 

18.	SUBSEQUENT EVENT

 

On April 17, 2015, the Company closed a non-brokered private placement financing of 5,000,000 units at $0.10 per unit for gross proceeds of $500,000. Each Unit is comprised of one common share in the capital of the Company and one common share purchase warrant. Each Warrant entitles the holder to purchase one Common Share at an exercise price of $0.125 per share until April 17, 2016. No finders’ fee was paid. One director participated in the private placement financing.

 

 

 

 

19

 

Exhibit 1

 

Trading Symbols (TSX-V: LM; OTCQB: 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, 2015

 

May 28, 2015

 

 

 

 

 

 

 

 

 

MANAGEMENT DISCUSSION & ANALYSIS

FOR THE FIRST QUARTER ENDED MARCH 31, 2015

 

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 28, 2015, should be read in conjunction with the Company's Condensed Consolidated Interim Financial Statements and accompanying notes for the three months ended March 31, 2015, 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; OTCQB: LMDCF) Management Discussion & Analysis

2

 

Summary Description of Lingo Media

 

Lingo Media (www.lingomedia.com) is an ESL EdTech industry acquisition company whose goal is to ‘Change the way the world learns English’ combining education with technology. The Company is focused on online and print-based technologies and solutions through its four subsidiaries: Lingo Learning Inc. (Lingo Learning”), ELL Technologies Ltd. (“ELL Technologies”); Speak2Me Inc. (“Speak2Me”) and Parlo Corporation (“Parlo”). Lingo Learning is a print-based publisher of English language training programs. ELL Technologies is a globally-established English language learning multi-media and online training company. Speak2Me is a free-to-consumer advertising-based online English language learning service in China. Parlo is a fee-based online English language training and assessment service. Lingo Media has formed successful relationships with key government and industry organizations, establishing a strong presence in China’s education market of more than 300 million students. The Company is extending its global reach, with an initial market expansion into Latin America and continues to expand its product offerings and technology applications.

 

As of March 31, 2015, 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 520 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

 

The Company operated an online English language learning service in China through www.Speak2Me.cn that includes a unique social learning infrastructure. The 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. Speak2Me technology and content has now been fully integrated into ELL Technologies.

 

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:

 

 

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

3

 

●	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.

 

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. Revenue from the sale of published and supplemental products is recognized upon delivery and when the risk of ownership is transferred and collectability is reasonably assured.

 

ELL Technologies has now fully-integrated Parlo and Speak2Me 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.

 

When the outcome of a contract cannot be reliably estimated, all contract related costs are expensed and revenues are recognized only to the extent that those costs are recoverable. When the uncertainties that prevented reliable estimation of the outcome of a contract no longer exist, contract revenue and expenses are recognized using the percentage of completion method. During the year ended December 31, 2014, the Company had one long-term contract, for which revenues of $230,000 were recognized based on the cost recovery method. During the first quarter of 2015, the Company recognized revenue of $391,512 based on the percentage completion method as and when the collectability was assured.

 

Overall Performance

 

Print-Based English Language Learning

 

Lingo Media earned royalty revenue of $45,246 for the period ended March 31, 2015 compared to $56,123 for 2014 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 $606,381 for the period ended March 31, 2015, compared to $179,928 for the same period in 2014, an increase of 237%. This increase in sales is due to the Company maximizing its sales efforts related to its ELL Technologies’ redesigned suite of products. Since 2012, the Company has completely redesigned the user interface, learning management system and the multi-browser delivery system for desktops and tablets for its ELL Technologies suite of products including Scholar, Master and Kids. The redesign has now been completed and full sales efforts have resumed, and recorded a 237% increase in revenue in first quarter as compared to the same period in 2014.

 

 

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

4

 

Speak2Me provides sponsored Conversational Advertising™ lessons on www.Speak2Me.cn. Revenue generated from Conversational Advertising™ for the period ended March 31, 2015 was $Nil (2014 - $Nil). Speak2Me is in the process of developing a new set of features and platform with plans to relaunch and at that time it will resume the sale of sponsorships and banner advertising. Currently, Speak2Me is now fully integrated in ELL Technologies product offerings.

 

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

 

As at March 31, 2015 Lingo Media had a working capital deficiency of $296,896 compared to a working capital deficiency of $740,578 as at March 31, 2014. Total comprehensive income for the period ended March 31, 2015 was $146,598 compared to total comprehensive loss of $(181,565) for the period ended March 31, 2014.

 

Financial Highlights

		2015				2014				2013
Revenue
Print-Based English Language Learning		$	45,246			$	56,123			$	81,427
Online English Language Learning			606,381				179,928				56,327
			651,627				236,051				137,754
Net Profit / (Loss) for the Period			225,429				(52,866	)			(377,023	)
Total Comprehensive Income / (Loss)			146,598				(181,565	)			(398,951	)
Gain / (Loss) per Share, Basic and Diluted:		$	0.01			$	(0.00	)		$	(0.02	)
Total Assets			2,795,301				2,150,094				2,616,141
Working Capital / (Deficit)			(296,896	)			(740,578	)			(1,022,014	)
Cash (Used)/Provided - Operations		$	(98,694	)		$	105,181			$	85,633

 

The Company had cash on hand as at March 31, 2015 of $87,615 (2014 - $83,026) 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 $45,246 compared to $56,123 for the same period in 2014. 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 $606,381 in online English language learning revenue as compared to $179,928 in 2014. This revenue increase from online English Language Learning is due to the fact that the Company had increased its sales efforts related to its ELL Technologies redesigned suite of products. The Company has completely redesigned the user interface, learning management system and the multi-browser delivery system for desktops and tablets for its ELL Technologies suite of products including Scholar, Master, and Kids. The product overhaul has been completed and full sales efforts have resumed in 2014and recorded a 237% increase in ELL revenue in the first quarter of 2015 as compared to the same period in 2014.

 

 

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

5

 

Selling, General and Administrative

 

Selling, general and administrative expenses were $260,184 compared to $215,512 in 2014. This increase was due to the additional grants of $58,333 was recorded in 2014. Selling, general and administrative expenses for the two segments are segregated below.

 

(i)	Print-Based English Language Learning

 

Selling, general and administrative cost for print-based publishing decreased from 2014 to 2015 primarily due to the reduction in administration expenses. The following is a breakdown of selling, general and administrative costs directly related to print-based English language learning:

		2015				2014
Sales, marketing & administration		$	28,586			$	59,447
Consulting fees and salaries			99,396				81,575
Travel			3,976				8,692
Premises			29,879				27,838
Shareholder service			23,299				16,103
Professional fees			14,280				6,906
Less: Grants			(32,500	)			(32,500	)
		$	166,916			$	168,061

 

(ii)	Online English Language Learning

 

Selling, general and administrative costs related to online English language learning was $93,268 for the period compared to $47,451 for the same period in 2014. Selling, general and administrative costs for this business unit increased in 2015 as compared to 2014, which included a government grant reducing selling, general and administrative costs recorded in 2014.

		2015				2014
Sales, marketing & administration		$	51,579			$	49,727
Consulting fees and salaries			20,571				29,107
Travel			1,719				4,339
Premises			12,000				9,805
Professional fees			7,399				12,806
Less: Grants			-				(58,333	)
		$	93,268			$	47,451

 

 

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

6

 

Net Income

 

Total comprehensive income for the Company was $146,598 for the period ended March 31, 2015 as compared to total comprehensive loss of $(181,565) in 2014. These incomes can be attributed to the two operating segments and other financial costs as shown below:

 

Online ELL		2015				2014
Revenue		$	606,381			$	179,928
Expenses:
Direct costs			38,804				41,737
General & administrative			93,268				47,451
Amortization of property & equipment			1,134				491
Amortization of development costs			180,041				128,843
Income taxes and other taxes			-				-
			313,247				218,522
Segmented Profit /(Loss) - Online ELL			293,134				(38,594	)
Print-Based ELL		2015				2014
Revenue			45,246				56,123
Expenses:
Direct costs			20,475				18,195
General & administrative			166,916				168,061
Amortization of property & equipment			584				907
Income taxes and other taxes			7,151				8,755
			195,126				195,918
Segmented Loss – Print-Based ELL			(149,880	)			(139,795	)
Other		2015				2014
Foreign exchange			159,743				174,806
Interest and other financial expenses			(48,329	)			(46,374	)
Share based payment			(29,239	)			(2,909	)
Other comprehensive income			(78,831	)			(128,699	)
			3,344				(3,176	)
Total Comprehensive Income / (Loss)		$	146,598			$	(181,565	)

 

Foreign Exchange

 

The Company recorded foreign exchange gain of $159,743 as compared to a gain of $174,806 in 2014, 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 $29,239 compared to $2,909 during 2014.

 

 

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

7

 

Net Profit / (Loss) for the Period

 

The Company reported a net profit of $225,429 for the period as compared to a net loss of $(52,866) in 2014, an operational improvement of $278,295. This improvement is primarily attributed to increase in revenue of $415,576.

 

Total Comprehensive Income / (Loss)

 

The total comprehensive income is calculated after the application of exchange differences on translating foreign operations gain/ (loss). The Company reported a total comprehensive income of $146,598 for the period ended March 31, 2015, as compared to a net comprehensive loss of $(181,565) for same period in 2014. The earning per share for the period is $0.01 as compared to loss per share of $(0.00) in 2014.

 

Summary of Quarterly Results

		Q2-14				Q3-14				Q4-14				Q1-15
Revenue		$	877,879			$	222,468			$	1,176,066			$	651,627
Income / (Loss) Before Taxes and Other Comp Income			339,769				(169,200	)			286,673				232,580
Total Comprehensive Income / (Loss)			200,534				(255,659	)			344,096				146,598
Income / (Loss) per Basic and Diluted Share			0.01				(0.01	)			0.01			$	0.01
		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	)		$	0.02			$	(0.00	)

 

Liquidity and Capital Resources

 

As at March 31, 2015, the Company had cash of $87,615 compared to $83,026 for the same period in 2014. Accounts and grants receivable of $1,371,256 were outstanding at the end of the period compared to $887,813 in the first quarter of 2014. With 59% 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 $1,578,612 (2014 - $1,077,285) with current liabilities of $1,875,508 (2014 - $1,817,863) resulting in a working capital deficiency of $296,896 (2014 - working capital deficit of $740,578).   

 

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, on an ongoing basis, 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. The Company’s success depends on the continued profitable commercialization of its online English language learning technology.  Given the fact that the Company has had an increase in revenue of $415,576, increase in net profit of $278,295, an increase in cash flows of $4,589, and the Company’s current operating and financial plans, management of the Company believes that it will have sufficient access to financial resources to fund the Company’s planned operations through fiscal 2015.

 

 

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

8

 

Financing Subsequent to Period End

 

On April 17, 2015, the Company closed a non-brokered private placement financing of 5,000,000 units at $0.10 per unit for gross proceeds of $500,000. Each Unit is comprised of one common share in the capital of the Company and one common share purchase warrant. Each Warrant entitles the holder to purchase one Common Share at an exercise price of $0.125 per share until April 17, 2016. No finders’ fee was paid. One director participated private placement financing.

 

Off-Balance Sheet Arrangements

 

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

 

Contractual Obligations

 

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

 

2015		$	162,821
2016			39,251
2017			-

 

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 $91,936 (2014 – $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, 2015, the Company had loans payable due to corporations controlled by directors and officers of the Company in the amount of $570,000 (2014 - $480,000) bearing interest at 9% per annum. Interest expense related to these loans is $10,981 (2014 - $7,338).

 

Additional Disclosure 

 

Intangibles

 

		Software and Web Development				Content Platform				Content Development				Total
Cost, January 1, 2014		$	7,225,065			$	1,477,112			$	-			$	8,702,177
Additions			148,873				-				-				148,873
Effect of foreign exchange			5,288				-				-				5,288
Cost, March 31, 2014			7,379,226				1,477,112				-				8,856,338
Additions			395,762				-				-				395,762
Effect of foreign exchange			6,623				-				-				6,623
Cost, December 31, 2014			7,781,611				1,477,112				-				9,258,723
Additions			234,843				-				143,080				377,923
Effect of foreign exchange			13,355				-				-				13,355
Cost, March 31, 2015		$	8,029,809			$	1,477,112			$	143,080			$	9,650,001

 

 

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

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		Software and Web Development				Content Platform				Content Development				Total
Accumulated depreciation, January 1, 2014		$	6,763,414			$	1,061,868			$	-			$	7,825,282
Charge for the period			55,999				295,422				-				351,421
Effect of foreign exchange			1,243				-				-				1,243
Accumulated depreciation, March 31, 2014			6,820,656				1,357,290				-				8,177,947
Charge of the period			231,436				-				-				231,436
Effect of foreign exchange			1,743				-				-				1,743
Accumulated depreciation, December 31, 2014			7,053,835				1,357,290				-				8,411,126
Charge for the period			105,407				72,844				1,790				180,041
Effect of foreign exchange			7,796				-				-				7,795
Accumulated depreciation, March 31, 2015		$	7,167,038			$	1,430,134			$	1,790			$	8,598,962
Net book value, December 31, 2014		$	727,776			$	119,822				-			$	847,598
Net book value, March 31, 2015		$	862,771			$	46,978			$	141,290			$	1,051,039

 

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.

 

Property and Equipment

 

Cost, January 1, 2014		$	215,599
Additions			1,373
Effect of foreign exchange			1,730
Cost, March 31, 2014			218,702
Additions			8,163
Disposal			(41,551	)
Effect of foreign exchange			(11,635	)
Cost, December 31, 2014			173,679
Additions			2,769
Effect of foreign exchange			2,816
Cost, March 31, 2015		$	179,264
Accumulated depreciation, January 1, 2014		$	183,673
Charge for the year			1,398
Effect of foreign exchange			1,410
Accumulated depreciation, March 31, 2014			186,481
Charge for the year			5,988
Disposal			(33,778	)
Effect of foreign exchange			(9,818	)
Accumulated depreciation, December 31, 2014			148,873
Charge for the period			1,718
Effect of foreign exchange			2,641
Accumulated depreciation, March 31, 2015		$	153,232
Net book value, January 1, 2014		$	31,926
Net book value, December 31, 2014		$	24,806
Net book value, March 31, 2015		$	26,032

 

 

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

10

 

Disclosure of Outstanding Share Data

 

As of May 28, 2015, the followings are outstanding:

 

Common Shares –	27,379,177
Warrants –	10,533,668
Stock Options –	3,767,500

 

Subsequent Event

 

On April 17, 2015, the Company closed a non-brokered private placement financing of 5,000,000 units at $0.10 per unit for gross proceeds of $500,000. Each Unit is comprised of one common share in the capital of the Company and one common share purchase warrant. Each Warrant entitles the holder to purchase one Common Share at an exercise price of $0.125 per share until April 17, 2016. No finders’ fee was paid. One director participated in the private placement financing.

 

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; OTCQB: 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 MARCH 31, 2015.

 

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 28, 2015

 

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, 2015.

 

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 28, 2015

 

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.