LMDCF Everybody Loves Languages Corporation (PK)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

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FORM 6-K

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REPORT OF FOREIGN PRIVATE ISSUER

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

the Securities Exchange Act of 1934

 

For the period ending June 30, 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: August 26, 2015	By:	/s/Michael Kraft
		Michael Kraft President and CEO

  

 

LINGO MEDIA CORPORATION

 

Condensed Consolidated Interim Financial Statements

 

For the six-month period ended June 30, 2015

 

 

LINGO MEDIA CORPORATION

Condensed Consolidated Interim Financial Statements

As at June 30, 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 June 30, 2015 and the Statements of Comprehensive Income, Changes in Equity and Cash Flows for the six 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 June 30, 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				June 30, 2015				December 31, 2014
ASSETS
Current Assets
Cash and cash equivalents						$	142,328			$	477,001
Accounts and grants receivable			5				1,790,758				849,344
Prepaid and other receivables							402,813				85,071
							2,335,899				1,411,416
Non-Current Assets
Property and equipment			6				33,378				24,806
Intangibles			7				1,359,101				847,598
Goodwill							139,618				139,618
TOTAL ASSETS						$	3,867,996			$	2,423,438
EQUITY AND LIABILITIES
Current Liabilities
Accounts payable						$	240,706			$	150,634
Accrued liabilities							338,534				690,015
Loans payable			8				868,833				838,833
TOTAL LIABILITIES							1,448,073				1,679,482
Equity
Share capital			9				18,592,117				18,162,347
Share-based payment reserve			10				2,614,197				2,578,380
Warrants			11				1,463,432				1,393,202
Accumulated other comprehensive income							(269,234	)			(204,852	)
Deficit							(19,980,589	)			(21,185,121	)
TOTAL EQUITY							2,419,923				743,956
TOTAL EQUITY AND LIABILITIES						$	3,867,996			$	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 August 26, 2015.

 

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

  

 

LINGO MEDIA CORPORATION

Condensed Consolidated Interim Statements of Comprehensive Income

For the six-months ended June, 2015 and 2014

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

 

		Notes				For the three months ended June 30								For the six months ended June 30
						2015				2014				2015				2014
Revenue						$	1,794,659			$	877,879			$	2,446,286			$	1,113,930
Expenses
Selling, general and administrative expenses							321,442				269,028				581,626				484,540
Amortization – intangibles			7				174,389				146,319				354,430				275,162
Direct costs							101,127				50,402				160,406				110,334
Share-based payment							6,578				-				35,817				2,909
Depreciation – property and equipment			6				2,178				2,216				3,896				3,614
Total Expenses							605,714				467,965				1,136,175				876,559
Profit from Operations							1,188,945				409,914				1,310,111				237,371
Net Finance Charges
Interest expense							46,160				46,982				94,489				93,356
Foreign exchange (gain) / loss							27,110				23,163				(132,633	)			(151,643	)
Profit before Tax							1,115,675				339,769				1,348,255				295,658
Income and other tax expense							136,572				122,136				143,723				130,891
Net Profit for the Period							979,103				217,633				1,204,532				164,767
Other Comprehensive Income
Exchange differences on translating foreign operations gain / (loss)							14,449				(17,099	)			(64,382	)			(145,798	)
Total Comprehensive Income						$	993,552			$	200,534			$	1,140,150			$	18,969
Income per Share
Basic and Diluted						$	0.04			$	0.01			$	0.05			$	0.00
Weighted Number of Common Shares Outstanding
Basic and Diluted							25,890,288				21,779,177				23,297,533				21,779,177

 

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 six-months ended June 30, 2015

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

 

		Issued share capital								Share-based								Accumulated other
		Number of shares				Amount				payment reserve				Warrants				comprehensive income				Deficit				Total equity
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 period			-				-				-				-				-				164,767				164,767
Share-based payments charged to operations			-				-				2,909				-				-				-				2,909
Other comprehensive Loss			-				-				-				-				(145,798	)			-				(145,798	)
Balance as at June 30, 2014			21,779,177			$	18,102,347			$	2,515,626			$	1,132,685			$	(314,043	)		$	(20,903,850	)		$	532,765
Loss for the period			-				-				-				-				-				(20,754	)			(20,754	)
Share-based payments charged to operations			-				-				62,754				-				-				-				62,754
Issued shares – bonus share			600,000				60,000				-				-				-				-				60,000
Warrants extension			-				-				-				260,517				-				(260,517	)			-
Other comprehensive Income			-				-				-				-				109,191				-				109,191
Balance as at January 1, 2015			22,379,177			$	18,162,347			$	2,578,380			$	1,393,202			$	(204,852	)		$	(21,185,121	)		$	743,956
Profit for the period			-				-				-				-				-				1,204,532				1,204,532
Share-based payments charged to operations			-				-				35,817				-				-				-				35,817
Private placement			5,000,000				500,000				-				-				-				-				500,000
Warrants issuance			-				(70,230	)			-				70,230				-				-				-
Other comprehensive Loss			-				-				-				-				(64,382	)			-				(64,382	)
Balance as at June 30, 2015			27,379,177			$	18,592,117			$	2,614,197			$	1,463,432			$	(269,234	)		$	(19,980,589	)		$	2,419,923

 

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 six-months ended June 30, 2015 and 2014 

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

 

		For the three months ended June 30								For the six months ended June 30
		2015				2014				2015				2014
CASH FLOWS FROM OPERATING ACTIVITIES
Income for the period		$	979,103			$	217,633			$	1,204,532			$	164,766
Adjustments to Net Profit for Non-Cash Items:
Depreciation / amortization			176,566				148,535				358,326				278,776
Share-based payment			6,578				-				35,817				2,909
Interest accretion			15,000				22,000				30,000				44,000
Unrealized foreign exchange gain			16,526				(4,254	)			(68,040	)			(137,315	)
Operating Income before Working Capital Changes			1,193,773				383,914				1,560,635				353,136
Working Capital Adjustments:
(Increase)/decrease in accounts and grants receivable			(419,502	)			(7,521	)			(941,414	)			108,106
(Increase)/decrease in prepaid and other receivables			(283,072	)			24,181				(317,742	)			2,355
Increase/(decrease) in accounts payable			85,289				(141,500	)			90,072				(111,060	)
Increase/(decrease) in accrued liabilities			(437,724	)			(50,372	)			(351,481	)			(38,653	)
Cash Generated from Operations			138,764				208,702				40,070				313,884
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in intangibles			(483,539	)			(95,288	)			(861,462	)			(244,161	)
Purchase of property and equipment			(10,512	)			(1,903	)			(13,281	)			(3,277	)
Net Cash Flows Generated from / (used in) Investing Activities			(494,051	)			(97,191	)			(874,743	)			(247,438	)
CASH FLOWS FROM FINANCING ACTIVITIES
Share capital issued during the period			500,000				-				500,000				-
Advances of loans payable			-				-				90,000				60,000
Repayment of loans payable			(90,000	)			(50,000	)			(90,000	)			(60,000	)
Net Cash Flows Generated from / (used in) Financing Activities			410,000				(50,000	)			500,000				-
NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS			54,713				61,511				(334,673	)			66,446
Cash and Cash Equivalents, Beginning of the Period			87,615				83,026				477,001				78,091
Cash and Cash Equivalents, End of the Period		$	142,328			$	144,537			$	142,328			$	144,537

 

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

 

 

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

June 30, 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 June 30, 2015 comprised the Company and its subsidiaries.

 

Lingo Media is an EdTech company that is ‘Changing the way the world learns English’.  The Company provides online and print-based solutions through its two distinct business units: ELL Technologies Ltd. (“ELL Technologies”) and Lingo Learning Inc. (“Lingo Learning”). ELL Technologies is a global English language learning multi-media and online training company. Lingo Learning is a print-based publisher of English language learning school programs in China.

 

The head office, principal address and registered office of the Company is 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 June 30, 2015, the Company reported a net profit of $1, 204,532 (2014 – net profit of $164,767). As at June 30, 2015, the Company had working capital of $887,826 (June 30, 2014 - deficiency of $475,856). The Company’s ongoing 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 $1,332,356, an increase in net profit of $1,039,765 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 June 30, 2015 were approved and authorized for issuance by the board of directors on August 26, 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

June 30, 2015

(Unaudited - See Notice to Reader)

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2.	BASIS OF PREPRATION (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 June 30, 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”). 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.	SIGNIFICANT 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

June 30, 2015

(Unaudited - See Notice to Reader)

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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, 2014.

 

5.	ACCOUNTS AND GRANTS RECEIVABLE

 

Accounts and grants receivable consist of:

 

		June 30, 2015				December 31, 2014
Trade receivable		$	1,673,551			$	831,137
Grants receivable			117,207				18,207
		$	1,790,758			$	849,344

 

6.	PROPERTY AND EQUIPMENT

 

Cost, January 1, 2014		$	215,599
Additions			3,277
Disposal			(53,494	)
Effect of foreign exchange			(368	)
Cost, June 30, 2014			165,014
Additions			6,259
Effect of foreign exchange			2,406
Cost, December 31, 2014			173,679
Additions			13,281
Disposal			(5,000	)
Effect of foreign exchange			2,272
Cost, June 30, 2015		$	184,232
Accumulated depreciation, January 1, 2014		$	183,673
Charge for the period			3,614
Disposal			(44,276	)
Effect of foreign exchange			(123	)
Accumulated depreciation, June 30, 2014			142,888
Charge for the period			3,772
Effect of foreign exchange			(2,213	)
Accumulated depreciation, December 31, 2014			148,873
Charge for the period			3,896
Effect of foreign exchange			(1,915	)
Accumulated depreciation, June 30, 2015		$	150,854
Net book value, January 1, 2014		$	31,926
Net book value, December 31, 2014		$	24,806
Net book value, June 30, 2015		$	33,378

  

 

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

June 30, 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			244,161				-				-				244,161
Effect of foreign exchange			514				-				-				514
Cost, June 30, 2014			7,469,740				1,477,112				-				8,946,852
Additions			300,474				-				-				300,474
Effect of foreign exchange			11,397				-				-				11,397
Cost, December 31, 2014			7,781,611				1,477,112				-				9,258,723
Additions			406,055				-				455,407				861,462
Effect of foreign exchange			13,355				-				-				13,355
Cost, June 30, 2015		$	8,201,021			$	1,477,112			$	455,407			$	10,133,540
Accumulated depreciation, January 1, 2014		$	6,763,414			$	1,061,868			$	-			$	7,825,282
Charge for the period			128,665				146,498				-				275,163
Effect of foreign exchange			(468	)			-				-				(468	)
Accumulated depreciation, June 30, 2014			6,891,611				1,208,366				-				8,099,977
Charge for the period			158,770				148,924				-				307,694
Effect of foreign exchange			3,454				-				-				3,454
Accumulated depreciation, December 31, 2014			7,053,835				1,357,290				-				8,411,125
Charge for the period			221,071				119,822				13,537				354,430
Effect of foreign exchange			8,884				-				-				8,884
Accumulated depreciation, June 30, 2015		$	7,283,790			$	1,477,112			$	13,537			$	8,774,439
Net book value, December 31, 2014		$	727,776			$	119,822			$	-			$	847,598
Net book value, June 30, 2015		$	917,231			$	-			$	441,870			$	1,359,101

 

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

June 30, 2015

(Unaudited - See Notice to Reader)

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8.	LOANS PAYABLE

 

		June 30, 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							-
Unamortized transaction costs			(11,167	)			(41,167	)
		$	868,833			$	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 $480,000 (2014 – $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

June 30, 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.

 

(v)

On April 17, 2015, Lingo Media 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. The securities issued pursuant to the Financing will be subject to a 4 month regulatory hold period commencing from April 17, 2015. One director of the Company participated in the private placement and subscribed to 400,000 Units for a total price of $40,000.

 

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.

 

 

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

June 30, 2015

(Unaudited - See Notice to Reader)

---

 

10.	SHARE-BASED PAYMENTS (Cont’d)

 

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. 

 

The following summarizes the options outstanding:

 

		Number of Options				Weighted Average Exercise Price
Outstanding as at January 1, 2014			2,783,250			$	0.48
Expired			(50,750	)			1.75
Outstanding as at June 30, 2014			2,732,500			$	0.46
Granted			1,590,000			$	0.14
Expired			(550,000	)			0.37
Forfeited			(5,000	)			0.66
Outstanding as at December 31, 2014			3,767,500			$	0.35
Forfeited			-				-
Expired			(25,000	)			0.20
Outstanding as at June 30, 2015			3,742,500				0.35
Options exercisable as at June 30, 2014			2,214,505			$	0.51
Options exercisable as at December 31, 2014			2,461,166			$	0.45
Options exercisable as at June 30, 2015			2,789,498			$	0.41

 

The weighted average remaining contractual life for the stock options outstanding as at June 30, 2015 was 2.11 years (2014 – 2.08 years). The range of exercise prices for the stock options outstanding as at June, 2015 was $0.13 - $1.70 (2014 – $0.20 - $1.70). The weighted average grant-date fair value of options granted to employees, consultants and directors was $0.07 (2014 – $0.13) 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 assumed 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

June 30, 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			0.68		A			3,658,668			$	0.75
Extended			0.87		B			1,875,000				0.75
December 31, 2014								5,533,668			$	0.75
Issued			0.80					5,000,000				0.125
June 30, 2015								10,533,668			$	0.45

 

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.

 

The 5,000,000 warrants issued on April 17, 2015 has an expiry date of April 17, 2016. (Note 9 (v))

 

12.	GOVERNMENT GRANTS

 

Included as a reduction of selling, general and administrative expenses are government grants of $105,746 (2014 - $123,333), relating to the Company's publishing projects. At the end of the period, $117,207 (June 30, 2014 - $139,743) is included in accounts and grants receivable.

 

One government grant for the Print-Based English language learning 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.

 

 

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

June 30, 2015

(Unaudited - See Notice to Reader)

---

 

13.	FINANCIAL INSTRUMENTS (Cont’d)

 

Financial risk management objectives and policies (Cont’d)

 

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 $171,477 (2014 - $122,665) due to reduction in the value of net liability balance. A 10% of weakening of the US dollar against Canadian dollar at June 30, 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 June 30, 2015 are as follows:

 

		US Denominated				China Denominated				Euro Denominated
		USD				RMB				Euro
Cash			77,238				54,938				5,935
Accounts receivable			1,339,641				7,534				1,800
Accounts payable			34,673				-				-

 

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 June 30, 2015, the Company had cash of $142,328, accounts and grants receivable of $1, 790,758 and prepaid and other receivables of $402,813 to settle current liabilities of $1,448,073.

 

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 June 30, 2015, the Company has outstanding receivables of $1,790,758. An allowance for doubtful accounts is taken on accounts receivable if the account has not been collected after a predetermined period of time and is offset to other operating expenses.

 

 

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

June 30, 2015

(Unaudited - See Notice to Reader)

---

 

14.	CAPITAL MANAGEMENT

 

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

 

The Company includes equity, comprised of issued share capital, warrants, share-based payments reserve and deficit, in the definition of capital. The Company is dependent on cash flow from its textbook royalties co-publishing agreements, from its licensing sales distribution agreements and from 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 textbook programs in China.

 

Online English Language Learning: ELL Technologies is a global English language learning online training and assessment company creating new learning platforms.

 

Segmented Information (Before Other Financial Items Below)

 

June 30, 2015		Online English Language Learning				Print-Based English Language Learning				Total
Revenue		$	1,525,791			$	920,495			$	2,446,286
Segmented non-current assets			1,505,780				26,315				1,532,095
Segmented assets			2,753,417				1,114,579				3,867,996
Segmented liabilities			762,020				686,053				1,448,073
Segmented income (loss)			788,334				413,871				1,202,205
June 30, 2014
Revenue		$	284,832			$	829,098			$	1,113,930
Segmented non-current assets			991,685				16,935				1,008,620
Segmented assets			1,181,745				949,011				2,130,756
Segmented liabilities			542,046				1,055,946				1,597,992
Segmented income (loss)			(216,304	)			325,693				109,389

  

 

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

June 30, 2015

(Unaudited - See Notice to Reader)

---

 

15.	SEGMENTED INFORMATION (Cont’d)

 

Other Financial Items

		2015				2014
Online English Language Learning segmented income (loss)		$	793,533			$	325,693
Print-Based English Language Learning segmented income (loss)			442,005				(216,304	)
Foreign exchange			132,633				151,643
Interest expense			(94,489	)			(93,356	)
Share-based payment			(35,817	)			(2,909	)
Other comprehensive income (loss)			(64,382	)			(145,798	)
Total Comprehensive Income (Loss)		$	1,173,484			$	18,969

 

Revenue by Geographic Region

		2015				2014
Latin America		$	1,340,399			$	39,240
China			1,043,794				917,160
Other			62,093				157,530
		$	2,446,286			$	1,113,930

 

Identifiable Assets by Geographic Region

		2015				2014
Canada		$	3,851,865			$	2,105,728
China			16,131				25,028
		$	3,867,996			$	2,130,756

 

16.	SUPPLEMENTAL CASH FLOW INFORMATION

 

		2015				2014
Income taxes and other taxes paid		$	143,723			$	1,448
Interest paid		$	58,892			$	42,441

 

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 $235,191 (2014 – $180,419) and is reflected as consulting fees and commissions paid to corporations owned by a director and officers of the Company, $60,833 is deferred and included in accounts payable.

  

 

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

June 30, 2015

(Unaudited - See Notice to Reader)

---

 

17.	RELATED PARTY BALANCES AND TRANSACTIONS (Cont’d)

 

(b)

On April 17, 2015, Lingo Media closed a non-brokered private placement financing of 5,000,000 units at $0.10 per Unit for gross proceeds of $500,000. One director of the Company participated in the private placement and subscribed to 400,000 Units for a total price of $40,000.

 

(c)

At June 30, 2015, the Company had loans payable due to corporations controlled by directors and officers of the Company in the amount of $480,000 (2014 - $480,000) bearing interest at 9% per annum. Interest expense related to these loans for the six month period ending June 30, 2015 is $22,415 (2014 - $21,422).

 

 

 

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

 

Second Quarter Ended June 30, 2015

 

August 26, 2015

  

  

MANAGEMENT DISCUSSION & ANALYSIS

FOR THE SECOND QUARTER ENDED JUNE 30, 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 August 26, 2015, should be read in conjunction with the Company's Condensed Consolidated Interim Financial Statements and accompanying Notes for the three months ended June 30, 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 (“Lingo Media,” the “Company,” “we” or ”us”) is an EdTech company that is ‘Changing the way the world learns English’ through the combination of education with technology. Through its two distinct business units, Lingo Media develops, markets and supports a suite of English language learning solutions consisting of web-based software licensing subscriptions, online and professional services, audio practice tools and multi-platform applications. The Company continues to operate its legacy textbook publishing business from which it collects recurring royalty revenues.

 

Lingo Media’s two distinct business units include ELL Technologies and Lingo Learning. ELL Technologies is a global web-based educational technology (“EdTech”) English language learning training and assessment company that creates innovative Software-as-a-Service eLearning solutions Lingo Learning is a print-based publisher of English language learning textbook programs in China. 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.

 

Lingo Media has undertaken a business transition which began to gather momentum during the second quarter of 2015. Lingo Media has continued to invest in language learning and leverage its industry expertise to expand into more scalable education-technology. Recent product initiatives have allowed us to expand the breadth of our language learning product offerings, and reinforced the belief that the web-based EdTech learning segment continues to present a significant opportunity for long-term value creation. Customers in this market have demands that recur each year, creating a higher likelihood of return business and predictable revenue opportunity. This demand profile also fits well with our suite of products and increasingly recognizable ELL Technologies brand.

 

Lingo Media continues to focus on software and content development to address market needs within the government, academic and corporate sectors.

 

Operational Highlights 

 

●	Print-Based English Language Learning:

 

☑

launched primary-level, PEP Primary English program into additional provinces in China

 

●	Online English Language Learning:

 

☑

completed the development of two leading-edge technology tools, Lesson Builder and Course Builder enabling educators to easily create, convert, edit, and arrange online lessons and courses

 

☑

significantly expanded our digital English language learning library by entering a licensing agreement with Editions Grand Duc to digitize and globally distribute the best-selling general English program in Canada, Connecting Doors

 

☑

completed digitization of Connecting Doors content, released as a Software-as-a-Service platform where it will generate licensing and maintenance fees under the brand Campus for young adults from junior middle school through to undergraduates (ages 13 and up) and can extend to adult learners

 

☑

advanced the development of English Academy, a new ELL Technologies’ program for the primary school market for 8 – 12 years old, which will complete our suite of products for K-12.

 

☑

continued the development of ELL Technologies’ Freddy’s World, for the early childhood education market and Winnie’s World, for the pre-kindergarten and kindergarten market

 

☑

supported existing software sales contracts in China and Europe

 

☑

secured new software licensing contracts for ELL Technologies’ programs in Colombia, Mexico and Peru

  

 

 

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

3

 

  

Over the last two quarters, our strategy has been to transition more and more of our business to online subscriptions and digital downloads that enable learners to bring your own device (“BYOD”) and beyond paper-based textbook publishing. We believe that these online subscription formats provide customers with an overall better learning experience, the flexibility to use our products on multiple platforms (i.e., beyond desktops to tablets and mobile extensions), and is a more economical and relevant way for us to deliver our products to customers.

 

As a result of strategic reorganization and realignment of the business, as of June 30, 2015, we integrated Speak2Me Inc., Parlo Corp. and ELL Technologies Ltd. into one segment, ELL Technologies Ltd., and now operate only two segments. Our web-based online English language learning division is ELL Technologies Ltd. (“ELL Technologies”) and our print-based English language learning textbook publishing division is Lingo Learning Inc. (“Lingo Learning”).

 

Online English Language Learning

 

ELL Technologies, acquired in 2010, now offers over 2,000 hours of interactive learning through a number of product offerings that include Winnie’s World, English Academy, Scholar, Campus, Master and Business, in addition to custom solutions. ELL Technologies is marketed in 14 countries through a network of distributors and earns its revenues from licensing and subscription fees from its suite of web-based EdTech language learning products and applications.

 

 

At the time of the acquisition, ELL Technologies had an extensive existing product line which required substantial revisions in the technology platform and user interface. Over the past few years, our development team has engineered an eLearning platform and has been introducing new products to the market since the beginning of 2015, integrating cutting-edge technologies, solutions, content and pedagogy.

 

 

 

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

4

 

 

ELL Technologies’ high-tech, easy to implement eLearning Software-as-a-Service solutions have positioned the Company to teach the world English. As a result of ongoing investment into product development, we are able to provide learners of all ages and levels of English proficiency with a platform to further their language learning development. See our “Correlation Table” below:

 

 

 

 

The horizontal axis contains our product line and correlates to the vertical axis which contains the ages and levels of proficiency that the product has been designed for. To summarize our 2015 product development achievements to date, we have:

 

	●	Completed the redesign of Scholar, Master and Business
	●	Released a new product, Campus
	●	Advanced development of English Academy
	●	Advanced redesign of Winnie’s World

  

All of our products have been designed for our proprietary learning management system which completes the suite of products and allows ELL Technologies to market and sell to academic institutions, governments and corporations. Educators who license the platform will be able to easily create, convert, edit, and arrange lessons and courses as they see fit. ELL Technologies retains all rights to user generated content to continuously expand its digital library.

 

Formative assessments and data gathering functionality allows us to adapt and improve content. Based on that data, we are able to program iterations to address specific problem areas and to make learning more accessible, efficient and measurable. Built for learners, by learners, we empower educators and allow them to easily transition from pure classroom paper-based teaching to the online world.

 

Print-Based English Language Learning

 

The Company continues to maintain its legacy textbook publishing business through 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 510 million units from its library of program titles.

 

 

 

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

5

  

 

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 are China’s State Ministry of Education’s publishing arm, on the following basis:

 

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

 

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

  

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

 

In accordance with the co-publishing agreements between PEP and Lingo Learning, PEP pays to Lingo Learning a royalty on sales of textbooks and supplemental products called Finished Product Sales. In addition, 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 not able 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 quarterly 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 online 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 second quarter of 2015, the Company recognized revenue of $741,540 based on the percentage completion method as and when the collectability was assured.

 

Overall Performance

 

For the second quarter ended June 30, 2015, Lingo Media earned revenue of $1,794,659 as compared to $877,879, recording a 104% increase. As a result of the increased revenue, the Company recorded a net profit for the period of $979,103 as compared to $217,633, an increase of 350%. The increase in revenue and net profit are primarily attributed to company’s sales and marketing efforts in Online English Language Learning segment of its business.

 

Online English Language Learning

 

ELL Technologies earned revenue from its portfolio of products of $919,410 for the quarter ended June 30, 2015, compared to $104,904 for the same period in 2014, an increase of 776%. 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 Winnie’s World, English Academy, Scholar, Campus Master and Business. The redesign has now been completed and full sales efforts have resumed and recorded a 776% increase in revenue in the 2015 second quarter as compared to the same period in 2014.

 

 

 

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

6

 

 

Print-Based English Language Learning

 

Lingo Media earned royalty revenue of $875,249 for the three months period ended June 30, 2015 compared to $772,975 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 the second and fourth quarters.

 

Market Trends and Business Uncertainties

 

Lingo Media believes that the global market trends in English language learning are strong and will continue to grow at a rapid pace. Developing countries around the world, specifically in Asia and Latin America are expanding their mandates for the teaching of English amongst students, young professionals and adults.

 

The British Council suggests that there are 1.6 Billion people learning English globally. English language learning products and services are a US$56.3 Billion global market notes Ambient Insight, who also forecasts digital English learning expenditures to account for US$3.1 Billion by 2018.

 

GSV Advisors forecasts digital English learning product expenditures to be US$2.5 Billion (or 7.3%) of the global market by 2016, with Latin America representing approximately US$260.9 Million of that figure. Students attending English language training (“ELT”) classes in Latin America accounted for approximately 14 per cent of worldwide revenues, or US$321-million in 2013. Growth has been very rapid in the region, and represents a particularly strong opportunity moving forward relative to other geographic regions. The remaining market for ELT is largely concentrated in Europe, the Middle East and Africa (45 per cent of revenues or US$1.04-billion) and the Asia Pacific region (35 per cent of revenues or US$825-million).

 

Lingo Media is uniquely positioned to take advantage of the market opportunity for teaching English in Latin America, China and other countries in Asia, with its scalable web-based learning technology and solutions. Although the market outlook 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 June 30, 2015 Lingo Media had working capital of $887,826 compared to a working capital deficiency of $(475,856) as at June 30, 2014. Total comprehensive income for the period ended June 30, 2015 was $993,552 compared to total comprehensive income of $200,534 for the period ended June 30, 2014.

 

Financial Highlights

 

		2015				2014
Revenue
Print-Based English Language Learning		$	875,249			$	772,975
Online English Language Learning			919,410				104,904
			1,794,659				877,879
Net Profit for the Period			979,103				217,633
Total Comprehensive Income			993,552				200,534
Profit per Share, Basic and Diluted:		$	0.04			$	0.01
Total Assets			3,867,996				2,130,756
Working Capital / (Deficit)			887,826				(475,856	)
Cash Provided – Operations		$	138,764			$	208,702

  

 

 

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

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The Company had cash on hand as at June 30, 2015 of $142,328 (2014 - $144,537) and continues to rely on its revenues from its recurring textbook royalties, its online licensing sales, and future equity and/or debt financings to fund its operations.

 

Results of Operations

 

During the period, Lingo Media earned $919,410 in online licensing sales revenue as compared to $104,904 in 2014. This revenue increase from online English Language Learning is due to the fact that the Company has resumed 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 Winnie’s World, English Academy, Scholar, Campus Master and Business. The product overhaul has been completed and full sales efforts have resumed in 2015 and recorded a 776% increase in online English language learning revenue in the second quarter of 2015 as compared to the same period in 2014.

 

Revenues from Print-Based English language learning for the period were $875,249 compared to $772,975 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.

 

Selling, General and Administrative

 

Selling, general and administrative expenses were $321,442 compared to $103,362 in 2014. This increase was due to the increase of consulting fees & salaries in 2015. 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 $165,666 in the second quarter of 2014 to $154,161 in the second quarter of 2015 due to a small reduction in sales, marketing & administration expenses and increased government grants. The following is a breakdown of selling, general and administrative costs directly related to print-based English language learning:

 

		2015				2014
Sales, marketing & administration		$	18,521			$	42,119
Consulting fees & salaries			144,247				77,652
Travel			28,793				22,226
Premises			18,703				25,793
Shareholder service			10,070				7,601
Professional fees			7,073				22,775
Less: Grants			(73,246	)			(32,500	)
		$	154,161			$	165,666

 

(ii)	Online English Language Learning

 

Selling, general and administrative costs related to online English language learning was $167,281 for the period compared to $103,362 for the same period in 2014. Selling, general and administrative costs for this business unit increased in 2015 as compared to 2014, which included an increase of sales, marketing and administration expenditures and shareholder services.

 

 

 

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		2015				2014
Sales, marketing & administration		$	65,996			$	25,061
Consulting fees and salaries			12,152				44,182
Travel			633				1,690
Premises			12,000				9,805
Shareholder services			54,046				-
Professional fees			22,454				22,624
Less: Grants			-				-
		$	167,281			$	103,362
Total Selling and Administrative Expenses		$	321,442			$	269,028

    

Net Income

 

Total comprehensive income for the Company was $993,552 for the quarter ended June 30, 2015 as compared to total comprehensive income of $200,534 in 2014. Total comprehensive income can be attributed to the two operating segments as shown below:

 

		2015				2014
Online ELL
Revenue		$	919,410			$	104,904
Expenses:
Direct costs			80,835				31,808
General & administrative			167,281				103,362
Amortization of property & equipment			1,672				1,125
Amortization of development costs			174,389				146,319
Income taxes and other taxes			33				-
			424,210				282,614
Segmented Profit /(Loss) - Online ELL			495,200				(177,710	)
Print-Based ELL
Revenue			875,249				772,975
Expenses:
Direct costs			20,292				18,594
General & administrative			154,161				165,666
Amortization of property & equipment			506				1,091
Income taxes and other taxes			136,539				122,136
			311,498				307,487
Segmented Profit – Print-Based ELL			563,751				465,488
Other
Foreign exchange			(27,110	)			(23,163	)
Interest and other financial expenses			(46,160	)			(46,982	)
Share-based payment			(6,578	)			-
Other comprehensive income			14,449				(17,099	)
			(65,399	)			(87,244	)
Total Comprehensive Income		$	993,552			$	200,534

  

 

 

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Foreign Exchange

 

The Company recorded foreign exchange loss of $27,110 as compared to a loss of $23,163 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 $6,578 compared to $Nil during 2014.

 

Net Profit for the Period

 

The Company reported a net profit of $979,103 for the period as compared to a net profit of $217,633 in 2014, an operational improvement of $761,470. This improvement is primarily attributed to increase in revenue of $916,780.

 

Total Comprehensive Income

 

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 $993,552 for the quarter ended June 30, 2015, as compared to a total comprehensive income of $200,534 for same quarter in 2014. The earning per share for the quarter is $0.04 as compared to income per share of $0.01 in 2014.

 

Summary of Quarterly Results

 

		Q3-14				Q4-14				Q1-15				Q2-15
Revenue		$	222,468			$	1,176,066			$	651,627			$	1,794,659
Income / (Loss) Before Taxes and Other Comp Income			(169,200	)			286,673				232,580				1,115,675
Total Comprehensive Income / (Loss)			(255,659	)			344,096				146,598				993,552
Income / (Loss) per Basic and Diluted Share			(0.01	)			0.01			$	0.01			$	0.04

		Q3-13				Q4-13				Q1-14				Q2-14
Revenue		$	130,139			$	1,024,555			$	236,051			$	877,879
Income / (Loss) Before Taxes and Other Comp Income			(338,785	)			635,183				(44,110	)			339,769
Total Comprehensive Income / (Loss)			(323,227	)			446,766				(181,565	)			200,534
Income / (Loss) per Basic and Diluted Share		$	(0.015	)		$	0.02			$	(0.00	)			0.01

 

Liquidity and Capital Resources

 

As at June 30, 2015, the Company had cash of $142,328 compared to $144,537 for the same period in 2014. Accounts and grants receivable of $1,790,758 were outstanding at the end of the period compared to $895,334 in the second quarter of 2014. With 47% 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 $2,335,899 (2014 - $1,122,136) with current liabilities of $1,448,073 (2014 - $1,597,992) resulting in working capital of $887,826 (2014 - working capital deficit of $475,856).   

 

The Company receives government grants based on certain eligibility criteria for publishing industry development in Canada and for international marketing support. These government grants are recorded as a reduction of general and administrative expenses to offset direct expenditure funded by the grant. The Company receives these grants throughout the year. The grant is applied 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; OTCQB: LMDCF) Management Discussion & Analysis

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

 

The Company has incurred significant losses over the years. 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 $916,780, increase in net profit of $761,470, 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.

 

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. One director of the Company participated in the private placement and subscribed to 400,000 Units for a total price of $40,000

 

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		$	98,853
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 $235,191 (2014 – $180,419) and is reflected as consulting fees paid to corporations owned by a director and officers of the Company, $60,833 is deferred and included in accounts payable.

 

At June 30, 2015, the Company had loans payable due to corporations controlled by directors and officers of the Company in the amount of $480,000 (2014 - $480,000) bearing interest at 9% per annum. Interest expense related to these loans is $22,415 (2014 - $21,422.46).

 

On April 17, 2015, Lingo Media closed a non-brokered private placement financing of 5,000,000 units at $0.10 per Unit for gross proceeds of $500,000. One director of the Company participated in the private placement and subscribed to 400,000 Units for a total price of $40,000.

 

 

 

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

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Additional Disclosure 

 

Intangibles

 

		Software & Web Development				Content Platform				Content Development				Total
Cost, January 1, 2014		$	7,225,065			$	1,477,112			$	-			$	8,702,177
Additions			244,161				-				-				244,161
Effect of foreign exchange			514				-				-				514
Cost, June 30, 2014			7,469,740				1,477,112				-				8,946,852
Additions			300,474				-				-				300,474
Effect of foreign exchange			11,397				-				-				11,397
Cost, December 31, 2014			7,781,611				1,477,112				-				9,258,723
Additions			406,055				-				455,407				861,462
Effect of foreign exchange			13,355				-				-				13,355
Cost, June 30, 2015		$	8,201,021			$	1,477,112			$	455,407			$	10,133,540

 

		Software & Web Development				Content Platform				Content D evelopment				Total
Accumulated depreciation, January 1, 2014		$	6,763,414			$	1,061,868			$	-			$	7,825,282
Charge for the period			128,665				146,498				-				275,163
Effect of foreign exchange			(468	)			-				-				(468	)
Accumulated depreciation, June 30, 2014			6,891,611				1,208,366				-				8,099,977
Charge for the period			158,770				148,924				-				307,694
Effect of foreign exchange			3,454				-				-				3,454
Accumulated depreciation, December 31, 2014			7,053,835				1,357,290				-				8,411,125
Charge for the period			221,071				119,822				13,537				354,430
Effect of foreign exchange			8,884				-				-				8,884
Accumulated depreciation, June 30, 2015		$	7,283,790			$	1,477,112			$	13,537				8,774,438
Net book value, December 31, 2014		$	727,776			$	119,822				-			$	847,598
Net book value, June 30, 2015		$	917,231			$	-			$	441,870			$	1,359,101

 

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

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Property and Equipment

 

Cost, January 1, 2014		$	215,599
Additions			3,277
Disposal			(53,494	)
Effect of foreign exchange			(368	)
Cost, June 30, 2014			165,014
Additions			6,259
Effect of foreign exchange			2,406
Cost, December 31, 2014			173,679
Additions			13,281
Disposal			(5,000	)
Effect of foreign exchange			2,272
Cost, June 30, 2015		$	184,232
Accumulated depreciation, January 1, 2014		$	183,673
Charge for the period			3,614
Disposal			(44,276	)
Effect of foreign exchange			(123	)
Accumulated depreciation, June 30, 2014			142,888
Charge for the period			3,772
Effect of foreign exchange			(2,213	)
Accumulated depreciation, December 31, 2014			148,873
Charge for the period			3,896
Effect of foreign exchange			(1,915	)
Accumulated depreciation, June 30, 2015		$	150,854
Net book value, January 1, 2014		$	31,926
Net book value, December 31, 2014		$	24,806
Net book value, June 30, 2015		$	33,378

 

Disclosure of Outstanding Share Data

 

As of August 26, 2015, the followings are outstanding:

 

	Common Shares	–	27,379,177
	Warrants	–	10,533,668
	Stock Options	–	3,742,500

 

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; OTCQB: LMDCF) Management Discussion & Analysis

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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 JUNE 30, 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: August 26, 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 JUNE 30, 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: August 26, 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.