Annual and Transition Report (foreign Private Issuer) (20-f)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Annual Report

FORM 20-F

☐	REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

X	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2018

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐	SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report . . . . . . . . . . . . . . . . . . .

For the transition period from __________ to ________

Commission file number 333-98397

LINGO MEDIA CORPORATION

(FORMERLY LINGO MEDIA INC.)

(Exact name of Registrant as specified in its charter)

Ontario, Canada

(Jurisdiction of incorporation or organization)

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

(Address of principal executive offices)

Gali Ba r-Ziv , President & CEO

Tel: (416) 927-7000 x 3 3 Fa x : (416) 927-1222 Email: investor@lingomedia.com

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

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Shares	LM	TSX Venture Exchange
Common Shares	LMDCF	OTC Markets
Common Shares	LIMA	Frankfurt Stock Exchange

Securities to be registered pursuant to Section 12(b) of the Act:

None

Securities to be registered pursuant to Section 12(g) of the Act:

Common Shares, without par value

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report. 35,529,192

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act

Yes ___ No X

If this report is an annual transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes ___ No X

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File rerquiredd to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ___ No X

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer ___	Accelerated Filer ___	Non-accelerated filer X
		Emerging growth company ___

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ___

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP ____ International Financial Reporting Standards as issued by the International Accounting Standards Board X Other ____

If “Other” has been checked in response to the previous question mark, indicate by check mark which financial statement item the registrant has elected to follow: Item 17 Item 18 ___

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ___ No X

LINGO MEDIA CORPORATION

F ORM 20-F ANNUAL REPORT

TABLE OF CONTENTS

PART I

Item 1.	Identity of Directors, Senior Management and Advisors	4
Item 2.	Offer Statistics and Expected Timetable	4
Item 3.	Key Information	4
Item 4.	Information on the Company	12
Item 4A.	Unresolved Staff Comments	20
Item 5.	Operating and Financial Review and Prospects	20
Item 6.	Directors, Senior Management and Employees	29
Item 7.	Major Shareholders and Related Party Transactions	38
Item 8.	Financial Information	39
Item 9.	The Offer and Listing	48
Item 10.	Additional Information	43
Item 11.	Quantitative and Qualitative Disclosures about Market Risk	53
Item 12.	Description of Securities Other Than Equity Securities	55

PART II

Item 13.	Default, Dividend Arrearages and Delinquencies	55
Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds	55
Item 15.	Controls and Procedures	55
Item 16.	Reserved	57
Item 16A.	Audit Committee Financial Expert	57
Item 16B.	Code of Ethics	57
Item 16C.	Principal Accountant Fees and Services	58
Item 16D.	Exemptions from the Listing Standards for Audit Committees	58
Item 16E.	Purchase of Equity Security by the Issuer and Affiliated Purchasers	58
Item 16F.	Change in Registrant’s Certifying Accountant	58
Item 16G.	Corporate Governance	58
Item 16H.	Mine Safety Disclosure	58

PART III

Item 17.	Financial Statements	58
Item 18.	Financial Statements	59
Item 19.	Exhibits	59

Forward-Looking Statements

This Annual Report on Form 20-F 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 Annual Report 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 Annual Report, 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 sections entitled "Risk Factors", “Information on the Company” and “Operating and Financial Review and Prospects”.

PART I

ITEM 1. I dentity of Directors, Senior Management and Advisors

Not applicable

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

Lingo Media Corporation (“Lingo Media” or the “Company”) is a publicly listed company incorporated in Canada with limited liability under the legislation of the Province of Ontario and its shares are listed on the TSX Venture Exchange and inter-listed on the OTC Marketplace. The consolidated financial statements of the Company as at and for the year ended December 31, 2018 comprise the Company and its wholly owned subsidiaries: Lingo Learning Inc., ELL Technologies Ltd., Vizualize Technologies Corporation, ELL Technologies Limited, Speak2Me Inc., Parlo Corporation and Lingo Group Limited (the “Group”).

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 and records office of the Company is located at 151 Bloor Street West, Suite 703, Toronto, Ontario, Canada, M5S 1S4.

3 . A Selected Financial Data

The consolidated financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”).

The selected financial data should be read in conjunction with the consolidated financial statements and other financial information included elsewhere in the Annual Report.

The Company has not declared any dividends since incorporation and does not anticipate that it will do so in the foreseeable future. The present policy of the Company is to retain any future earnings for use in its operations and the expansion of its business.

The following data for the fiscal years ended December 31, 2018, 2017, 2016, 2015, and 2014 is derived from our consolidated financial statements prepared in accordance with IFRS as issued by the IASB and all are expressed in Canadian Dollars.

	Fiscal Year Ended December 31
	2018			201 7			201 6		201 5		201 4
Revenue	$	1,940,182		$	2,776,768		$	3,195,221	$	4,925,735	$	2,512,464
Profit/(Loss) from Operations		98,925			(5,839,868	)		434,319		2,601,824		523,736
Total Comprehensive Profit/(Loss)		(71,954	)		(6,262,792	)		124,420		2,374,699		107,406
Total Assets		1,302,004			1,534,072			7,176,192		5,232,951		2,423,438
Current Assets		1,248,840			1,503,383			3,709,077		2,858,710		1,411,416
Issued Share Capital		35,529,192			35,529,192			35,529,192		29,518,343		22,379,177
Weighted Average Number of Common Shares Outstanding		35,529,192			35,529,192			33,987,383		26,288,889		21,986,300
Total Equity		558,594			553,754			6,445,033		4,046,784		743,956
Dividends per Common Share	NIL			NIL			NIL		NIL		NIL
Earnings/(Loss) per Share
Basic	$	(0.00	)	$	(0.18	)	$	0.00	$	0.10	$	0.01
Diluted	$	(0.00	)	$	(0.18	)	$	0.00	$	0.09	$	0.01

3.A.3. Exchange Rates

In this Annual Report, unless otherwise specified, all dollar amounts are expressed in Canadian Dollars ($). The Government of Canada permits a floating exchange rate to determine the value of the Canadian Dollar against the U.S. Dollar (USD).

The table sets forth the rate of exchange for the Canadian Dollar at the end of the five most recent fiscal periods ended December 31 ^st , the average rates for the period and the range of high and low rates for the period. The data for each month during the previous twelve months is also provided.

Table No. 4

U.S. Dollar/Canadian Dollar

	Average		High		Low		Close
Mar-19		1.3368		1.3471		1.3128		1.3342
Feb-19		1.3206		1.3343		1.3066		1.3165
Jan-19		1.3301		1.3664		1.3116		1.3142
Dec-18		1.3432		1.3664		1.3157		1.3644
Nov-18		1.3200		1.3362		1.3047		1.3285
Oct-18		1.3010		1.3173		1.2780		1.3124
Sept-18		1.3037		1.3228		1.2882		1.2921
Aug-18		1.3041		1.3176		1.2885		1.3077
Jul-18		1.3130		1.3291		1.2983		1.3014
Jun-18		1.3129		1.3387		1.2857		1.3141
May-18		1.2873		1.3049		1.2727		1.2966
Apr-18		1.2733		1.2945		1.2524		1.2817

Fiscal Yr Ended December 31, 2018		1.2961		1.3642		1.2552		1.3644
Fiscal Yr Ended December 31, 2017		1.2986		1.3743		1.2128		1.2545
Fiscal Yr Ended December 31, 2016		1.3219		1.4691		1.2458		1.3433
Fiscal Yr Ended December 31, 2015		1.1048		1.1643		1.0614		1.1601
Fiscal Yr Ended December 31, 2014		1.0302		1.0697		0.9839		1.0636

3.B. Capitalization and Indebtedness

Not applicable

3.C. Reasons for the Offer and Use of Proceeds

Not applicable

3.D. Risk Factors

Financial risk management objectives and policies

The financial risk arising from the Company’s operations are currency risk, liquidity risk and credit 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 accounts receivable and the policies on how to mitigate these risks are as follows:

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 are as follows:

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 monetary assets and liabilities denominated in currencies other than the Canadian Dollar 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.

The Company has been exposed to this fluctuation and has not implemented a program against these foreign exchange fluctuations.

A 10% strengthening of the US Dollars against Canadian Dollars would have increased the net equity by approximately $63,030 (2017 - $67,000) due to reduction in the value of net liability balance. A 10% weakening of the US Dollar against Canadian Dollar at December 31, 2018 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 December 31, 2018 and 2017 are as follows:

	2018		2017
	USD		USD
Cash		14,741		122,319
Accounts receivable		660,704		518,999
Accounts payable		189,586		104,225
Accrued liabilities		23,882		-

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 December 31, 2018, the Company had cash of $233,843 (2017 - $327,434), accounts and grants receivable of $913,458 (2017 - $970,467) to settle current liabilities of $743,410 (2017 - $980,318).

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 December 31, 2018, the Company has outstanding receivables of $913,458 (2017 - $970,467). New impairment requirements use an 'expected credit loss' ('ECL') model to recognize an allowance. Impairment is measured using a 12-month ECL method unless the credit risk on a financial instrument has increased significantly since initial recognition in which case the lifetime ECL method is adopted. For receivables, a simplified approach to measuring expected credit losses using a lifetime expected loss allowance is available. The Company deposits its cash with high credit quality financial institutions, with the majority deposited within Canadian Tier 1 Banks.

Dependence on Major Customer

The Company had sales to a major customer in 2018 and 2017, a government agency of the People’s Republic of China. The total percentage of sales to this customer during the year was 80% (2017 – 59%, 2016 – 54%) and the total percentage of accounts receivable at December 31, 2018 was 89% (2017 – 84%, 2016 – 52%).

Market Trends and Business Uncertainties

Lingo Media believes that the global market trends in English language learning are strong and will continue to grow. Developing countries around the world, specifically in Latin America and Asia 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 currently a US$56.3 billion global market notes Ambient Insight.

GlobalEnglish forecasts the global eLearning market to grow to $37.6 billion by 2020, while experiencing exponential growth to reach $325 billion worldwide by 2025.

Markets and Markets forecasts the global EdTech market to grow from US$43.27 billion in 2015 to US$93.76 billion to 2019, or at a CAGR or 16.72%.

Latin American Region

The Inter-American Dialogue recently noted that while English language training programs exist in various forms throughout Latin American region, there are three key factors that these programs must address to be successful: ensuring continuity, developing a strong monitoring and evaluation framework that informs adaptation, and addressing the lack of sufficient quality teachers. Students attending English language training (“ELT”) classes in Latin America accounted for approximately 14 per cent of worldwide revenues, or US$321-million in 2017. Growth has been very rapid in the Latin American region and represents a particularly strong opportunity moving forward relative to other geographic regions.

Asia-Pacific Region

Technavio forecasts the English language training (ELT) market in China to be worth $75 billion by 2022, growing at a CAGR of 22%. The growth of the ELT market in China is driven by more people desiring to learn English, the adaptation of smartphones, increasing levels of disposable income, and the inherent advantages of online education. Technavio also notes that 49% of the growth in the global digital English language learning market will come from the Asia-Pacific region.

Lingo Media is positioned to take advantage of the market opportunity for English language training in Latin America and Asia, with its scalable digital language 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.

Competitive Markets

We operate in competitive and evolving markets locally, nationally and globally. These markets are subject to rapid technological change and changes in customer preferences and demand. There can be no assurance that we will be able to obtain market acceptance or compete for market share. We must be able to keep current with the rapidly changing technologies, to adapt our services to evolving industry standards and to improve the performance and reliability of our services. New technologies could enable competitive product offerings and adversely affect us and our failure to adapt to such changes could seriously harm our business.

Failure o f Delivery Infrastructure to Perform Consistently

Our success as a business depends, in part, on our ability to provide consistently high-quality online services to users via the delivery infrastructure. There is no guarantee that the Company’s delivery infrastructure and/or its software will not experience problems or other performance issues. If the delivery infrastructure or software fails or suffers performance problems, then it would likely affect the quality and interrupt the continuation of our services and significantly harm the business.

The Company’s delivery infrastructure is susceptible to natural or man-made disasters such as earthquakes, floods, fires, power loss and sabotage, as well as interruptions from technology malfunctions, computer viruses and hacker attacks. Other potential service interruptions may result from unanticipated demands on network infrastructure, increased traffic or problems in customer service. Significant disruptions in the delivery infrastructure could harm the Company’s goodwill and its brands and ultimately could significantly and negatively impact the amount of revenue it may earn from its service. Like all Internet transmissions, our services may be subject to interception and malicious attack. Pirates may be able to obtain or copy our products without paying fees. The delivery infrastructure is exposed to spam, viruses, worms, trojan horses, malware, spyware, denial of service or other attacks by hackers and other acts of malice. The Company uses security measures intended to make theft of its software more difficult. However, if the Company is required to upgrade or replace existing security technology, the cost of such security upgrades or replacements could have a material adverse effect on our financial condition, profitability and cash flows.

Limited Intellectual Property Protection

The Company relies on a combination of copyright and trademark laws, trade secrets, confidentiality procedures and contractual provisions to protect its proprietary rights. In addition, our success may depend, in part, on its ability to obtain patent protection and operate without infringing the rights of third parties. There can be no assurance that, once filed, the Company’s patent applications will be successful, that we will develop future proprietary products that are patentable, that any issued patents will provide us with any competitive advantages or will not be successfully challenged by any third parties or that the patents of others will not have an adverse effect on the ability of the Company to do business. In addition, there can be no assurance that others will not independently develop similar products, duplicate some or all of our products or, if patents are issued, design their products so as to circumvent the patent protection held by the Company. We protect our product documentation and other written materials under trade secret and copyright laws which afford only limited protection. Despite precautions taken by the Company, it may be possible for unauthorized third parties to copy aspects of our business and marketing plans or future strategic documents or to obtain and use information that we regard as proprietary. There can be no assurance that the Company’s means of protecting its proprietary rights will be adequate or that our competitors will not independently develop similar or superior technology. Litigation may be necessary in the future to enforce our intellectual property rights, to protect trade secrets or to determine the validity and scope of the propriety rights of others. Such litigation could result in substantial costs and diversion of resources, and there can be no guarantee of the ultimate success thereof.

Government Regulation and Licensing

The Company’s operations may be subject to Canadian and foreign provincial and/or state and federal regulations and licensing. There can be no assurance that we will be able to comply with the regulations or secure and maintain the required licensing for its operations. Government regulation and licensing could seriously impact our ability to achieve its financial and operational objectives. The Company is subject to local, provincial and/or state, federal, and international laws affecting companies conducting business on the Internet, including user privacy laws, laws giving special protection to children, regulations prohibiting unfair and deceptive trade practices and laws addressing issues such as freedom of expression, pricing and access charges, quality of products and services, taxation, advertising, intellectual property rights and information security. The restrictions imposed by and the costs of complying with, current and possible future laws and regulations related to its business could limit our growth and reduce client base and revenue.

Operating in Foreign Jurisdictions

The Company’s current and future development opportunities relate to geographical areas outside of Canada. There are a number of risks inherent in international business activities, including government policies concerning the import and export of goods and services, costs of localizing products and subcontractors in foreign countries, costs associated with the use of foreign agents, potentially adverse tax consequences, limits on repatriation of earnings, the burdens of complying with a wide variety of foreign laws, nationalization and possible social, labor, political and economic instability. There can be no assurance that such risks will not adversely affect the business, financial condition and results of operations. Furthermore, a portion of expenditures and revenues will be in currencies other than the Canadian Dollar. Foreign exchange exposure may change over time with changes in the geographic mix of its business activities. Foreign currencies may be unfavorably impacted by global developments, country-specific events and many other factors. As a result, future results may be adversely affected by significant foreign exchange fluctuations.

Economic Conditions

Unfavorable economic and market conditions could increase our financing costs, reduce demand for our products and services, limit access to capital markets and negatively impact any access to future credit facilities. Expenditures by educational institution, government and corporation tend to be cyclical, reflecting overall economic conditions as well as budgeting and purchasing patterns.

Working Capital

We may need to raise additional funds in order to finance our operations and growth strategy. The Company expects that corporate growth will be funded from cash flow equity and/or debt financing(s) to help generate any required capital. Insuring that capital is available to increase production; sales and marketing capacity; and to provide support materials and training in the market place and to expand is essential to success. There can be no assurance that financing will be available on terms favorable to us, or at all. If adequate funds are not available on acceptable terms, we may be forced to curtail or cease our operations. Even if we are able to continue our operations, the failure to obtain financing could have a substantial adverse effect on our business and financial results.

Uncertainty of Assumptions Underlying Business Plan

The Company’s business plan is based upon numerous assumptions that may later prove to be incorrect. The Company’s ability to adhere to its business plan will depend upon a variety of factors, many of which are beyond the Company’s control. Likewise, the Company’s management is not bound to follow its business plan, and may elect to adopt other strategies and courses of action based upon changes in circumstances and/or market conditions. The Company cannot assure that the actual results of the Company’s operations will materially conform to its business plan.

Success Dependent on Key Management Personnel

The success of the Company is highly dependent on the skills, experience and successful performance of the Company’s management team. The loss of such services could adversely affect development of the Company’s business, revenues, cash flows and profitability.

Managing Growth

The Company must expand its business to achieve greater profitability. Any further expansion of the Company’s business may strain its current managerial, financial, operational, and other resources. Success in managing this expansion and growth will depend, in part, upon the ability of senior management to manage growth effectively. Any failure to do so may lead to inefficiencies and redundancies, and result in reduced growth prospects. As a result, the Company’s profitability, if any, may be curtailed or eliminated.

Supply Failures

The Company relies on third parties for the timely supply of maintenance services. Although the Company actively manages these third-party relationships to ensure continuity of services on time and to its required specifications, some events beyond its control could result in the complete or partial failure of services or services not being delivered on time. Any such failure could negatively affect the Company’s operating results.

Our Public Trading Market is Highly Volatile

The Company's common shares trade on the TSX Venture Exchange under the symbol "LM", and had previously traded on the OTC Markets under the symbol “LMDCF” .

The market price of our common shares could fluctuate substantially due to:

■

Quarterly fluctuations in operating results;

■

Announcements of new products or services by us or our competitors;

■

Technological innovations by us or our competitors;

■

General market conditions or market conditions specific to our or our customer’s industries; or

■

Changes in earning estimates or recommendations by analysts.

Penny Stock Rules

Our common shares had previously been quoted on the OTC Marketplace; a quotation system for equity securities. It is a more limited trading market than the NASDAQ, and timely, accurate quotations of the price of our common shares may not always be available. You may expect trading volume to be low in such a market. Consequently, should trading resume on such market, the activity of only a few shares may affect the market and may result in wide swings in price and in volume.

Our common shares had been listed on the OTC Marketplace, and had been subject to the requirements of Rule 15(g)- 9, promulgated under the Securities Exchange Act. Under such rule, broker-dealers who recommend low-priced securities to persons other than established customers and accredited investors must satisfy special sales practice requirements, including a requirement that they make an individualized written suitability determination for the purchaser and receive the purchaser’s consent prior to the transaction. The Securities Enforcement Remedies and Penny Stock Reform Act of 1990 also requires additional disclosure in connection with any trade involving a stock defined as a penny stock. Generally, the Commission defines a penny stock as any equity security not traded on an exchange or quoted on NASDAQ that has a market price of less than $5.00 per share. The required penny stock disclosures include the delivery, prior to any transaction, of a disclosure schedule explaining the penny stock market and the risks associated with it. Such requirements could severely limit the market liquidity of the securities and the ability of purchasers to sell their securities in the secondary market.

The stock market has experienced significant price and volume fluctuations, and the market prices of companies, have been highly volatile. Investors may not be able to sell their shares at or above the then current price. In addition, our results of operations during future fiscal periods might fail to meet the expectations of stock market analysts and investors. This failure could lead the market price of our common shares to decline.

There is Uncertainty as to the Company’s Shareholders’ Ability to Enforce Civil Liabilities Both Within and Outside of the United States

The preponderance of our assets are located outside the United States and are held through companies incorporated under the laws of Canada, Hong Kong, China, and the United Kingdom and representative office in China. In addition, all of our directors and officers are nationals and/or residents of countries other than the United States. All or a substantial portion of the assets of these persons are located outside the United States. As a result, it may be difficult for shareholders to effect service of process within the United States upon these persons. In addition, investors may have difficulty enforcing, both in and outside the United States, judgments based upon the civil liability provisions of the securities laws of the United States or any State thereof.

ITEM 4. INFORMATION ON THE COMPANY

4.A. History and Development of the Company

Incorporation and Name Changes

The Company was incorporated under the name Alpha Publishing Inc. pursuant to the Business Corporations Act (Alberta) on April 22, 1996. The name was changed to Alpha Ventures Inc. on May 24, 1996. Pursuant to Articles of Continuance effective April 22, 1998, the Company was continued as an Ontario company under the provisions of the Business Corporations Act (Ontario) under the name, Alpha Communications Corp. The name was changed to Lingo Media Inc. on July 4, 2000, and changed to Lingo Media Corporation on October 16, 2007.

The Company currently has two active segments: Lingo Learning Inc. ("LLI") and ELL Technologies Ltd. (“ELL Technologies”)

Lingo Learning Inc. was incorporated pursuant to the Business Corporations Act (Ontario) on November 21, 1994 under the name Alpha Corporation. Alpha Corporation changed its name to Lingo Media Ltd. on August 25, 2000 and again on March 6, 2008 to Lingo Learning Inc.

ELL Technologies Limited was incorporated pursuant to the Companies Act of United Kingdom under the name The Q Group Limited. On April 29, 2010, the Company changed its name to ELL Technologies Limited.

ELL Technologies Ltd. was incorporated pursuant to the Business Corporations Act (Ontario) on February 23, 2012 under the name 2318041 Ontario Inc. 2318041 Ontario Inc. changed its name to ELL Technologies Ltd. on January 15, 2014.

Vizualize Technologies Corporation was incorporated pursuant to the Business Corporation Act (Ontario) on March 22, 2010.

Speak2Me Inc. was incorporated pursuant to the Business Corporations Act (Ontario) on February 22, 2007.

Parlo Corporation was incorporated pursuant to the Business Corporations Act (Ontario) on September 24, 2009.

The Company’s Executive Office is located at:

151 Bloor Street West

Suite 703

Toronto, Ontario, Canada M5S 1S4

Telephone: (416) 927-7000

Facsimile: (416) 927-1222

E-mail: investor@lingomedia.com

Website: www.lingomedia.com

The Company’s Beijing Representative Office is located at:

8 Xiao Yun Road, Suite 201, Unit 083A

Chao Yang District, Beijing China 100020

The Company's fiscal year ends on December 31st.

The Company's common shares trade on the TSX Venture Exchange under the symbol "LM", are quoted on the Frankfurt Stock Exchange under the symbol “LIMA” and the German securities code is (WKN) 121226, and had previously been on the OTC Market under the symbol “LMDCF”.

4.B. BUSINESS OVERVIEW

Background

Lingo Media (“Lingo Media,” the “Company,” “we” or” us”) is an EdTech company that is ‘Changing the way the world learns Languages’ through the combination of education with technology. The Company is focused on online and print-based technologies and solutions through its two subsidiaries: Lingo Learning Inc. (Lingo Learning”) and ELL Technologies Ltd. (“ELL Technologies”). 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 operating units include ELL Technologies and Lingo Learning. ELL Technologies is a web-based educational technology (“EdTech”) English language learning training and assessment company that creates innovative software-as-a-service e-learning solutions. Lingo Learning is a print-based publisher of English language learning textbook programs in China. The Company has formed successful relationships with key government and industry organizations, establishing a strong presence in China’s education market of more than 500 million students. Lingo Media 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 December 31, 2018, the Company operated two distinct business segments as follows:

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 671 million units from its library of program titles.

China Publishing

Lingo Media has spent 19 years developing English Language Learning (ELL), products, programs, and relationships in the Chinese market. Learning to communicate in English is seen as a top priority for Chinese school students and young adult learners. Along with learning how to use a PC, English skills are perceived as a key determinant of their future levels of prosperity. The Company’s ELL books, audio and CD-based programs are unique in that they have a special focus on the spoken language. In addition to developing learning materials, considerable resources have been expended on the development of relationships with leading Chinese publishers, both in the education and trade sectors, as well as in extensive marketing of Lingo Media’s programs.

The Company is capitalizing on its co-development approach in the Chinese market. Lingo Media sees its relationships with leading Chinese publishers; its Canadian and Chinese author teams; and its original custom-developed content as key factors in opening up the Chinese educational market. The Company has secured long-term publishing contracts for the Kindergarten to Grade 12 (K-12) and higher educational markets, which it anticipates will generate ongoing revenue streams from the sale of its programs.

Co-Publishing Partner in China

People's Education Press

People's Education Press (“PEP”) a division of China's State Ministry of Education, publishes more than 60% of educational materials for the Kindergarten to Grade 12 (“K-12”) market throughout China, for all subjects, including English Language Learning. PEP has a readership of more than 120 million students. Lingo Learning has two programs with PEP. These series target the elementary market of 100 million students: PEP Primary English (for Grades 3-6; Chinese students now begin learning English in Grade 3); and Starting Line (Grades 1-6); All series include the core textbooks in addition to supplemental activity books, audiocassettes, teacher resource books, and other materials.

Seasonality

The Company may experience some seasonal trends in the sale of its publications. For example, sales of educational published materials experience seasonal fluctuations with higher sales in the Spring (second calendar quarter) and Fall (fourth calendar quarter).

Online English Language Learning

ELL Technologies offers more than 2,000 hours of interactive learning through a number of product offerings that include Winnie’s World, English Academy, Campus , English for Success , Master and Business in addition to offering custom solutions. ELL Technologies is primarily marketed in Latin America through a network of distributors and earns its revenues from online and offline licensing fees from its suite of web-based language learning products and applications.

ELL Technologies had an extensive existing product line which required substantial revisions in the technology platform and user interface. Over the past five 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.

ELL Technologies’ high-tech, easy to implement eLearning Software-as-a-Service solutions have positioned the Company to provide learners of all ages and levels of English proficiency with a platform to further their language learning development. See our “Correlation Table”:

The horizontal axis contains our product information and correlates to the vertical axis which contains the ages and levels of proficiency that our solutions target.

Segmented Information (Before Other Financial Items Below)

The Company operates two distinct reportable business segments as follows:

License of intellectual property: Lingo Learning is a print-based publisher of English language learning textbook programs in China. It earns significantly higher royalties from Licensing Sales compared to Finished Product Sales.

Online and offline Language Learning: ELL Technologies is a global web-based educational technology (“EdTech”) language learning, training, and assessment company. The Company provides the right to access to hosted software over a contract term without the customer taking possession of the software. The Company also provides Offline licenses for the right to use perpetual language-learning.

Transactions between operating segments and reporting segment are recorded at the exchange amount and eliminated upon consolidation.

2018	Online English Language Learning			Print-Based English Language Learning		Head Office			Total
Segmented assets	$	141,238		$	1,087,463	$	73,303		$	1,302,004
Segmented liabilities		348,214			160,750		234,446			743,410
Segmented revenue - online		206,955			-		-			206,955
Segmented revenue – offline		8,012			-					8,012
Segmented revenue – royalty		38,701			1,686,514					1,725,215
Segmented direct costs		180,832			90,188		-			271,020
Segmented selling, general & administrative		348,436			64,580		787,750			1,200,766
Segmented other expense		10,918			196,079		905			207,902
Segmented profit (loss)		(475,131	)		1,335,666		(788,655	)		71,879

201 7	Online English Language Learning			Print-Based English Language Learning		Head Office			Total
Segmented assets	$	189,200		$	1,257,239	$	87,633		$	1,534,072
Segmented liabilities		228,418			164,294		587,606			980,318
Segmented revenue		1,088,197			1,688,571		-			2,776,768
Segmented direct costs		134,695			90,923		-			225,618
Segmented selling, general & administrative		455,915			97,404		814,834			1,368,153
Segmented intangible amortization		1,051,928			-		-			1,051,928
Segmented other expense		1,074			182,461		1,131			184,666
Segmented impairment		2,087,700			-					2,087,700
Segmented profit (loss)		(6,148,195	)		1,317,783		(815,965	)		(5,646,377	)

2 01 6	Online English Language Learning		Print-Based English Language Learning		Head Office			Total
Segmented assets	$	4,521,560	$	1,675,740	$	978,892		$	7,176,192
Segmented liabilities		206,784		198,315		326,059			731,158
Segmented revenue		1,456,421		1,738,800		-			3,195,221
Segmented direct costs		167,597		217,787		-			385,384
Segmented selling, general & administrative		168,161		295,549		901,025			1,364,735
Segmented intangible amortization		1,003,485		-		-			1,003,485
Segmented other expense		806		192,658		1,539			195,003
Segmented profit		116,372		1,032,806		(902,564	)		246,614
Segmented intangible addition		1,798,687		-		-			1,798,687

2 01 5	Online English Language Learning		Print-Based English Language Learning		Head Office			Total
Segmented assets	$	3,503,171	$	1,306,848	$	422,932		$	5,232,951
Segmented liabilities		158,399		96,536		931,232			1,186,167
Segmented revenue		2,954,614		1,971,121		-			4,925,735
Segmented direct costs		276,049		106,822		-			382,871
Segmented selling, general & administrative		273,078		68,248		718,377			1,059,703
Segmented intangible amortization		721,720		-		-			721,720
Segmented other expense		2,187		315,161		1,520			318,868
Segmented profit		1,681,580		1,480,891		(719,897	)		2,442,574
Segmented intangible addition		2,071,440		-		-			2,071,440

2 01 4	Online English Language Learning			Print-Based English Language Learning		Head Office			Total
Segmented assets	$	928,893		$	975,891	$	518,654		$	2,423,438
Segmented liabilities		234,160			82,097		1,363,225			1,679,482
Segmented revenue		831,650			1,680,814		-			2,512,464
Segmented direct costs		286,945			95,649		-			382,594
Segmented selling, general & administrative		148,974			164,567		636,688			950,229
Segmented intangible amortization		582,857			-		-			582,857
Segmented other expense		3,339			272,246		920			276,505
Segmented profit		(190,466	)		1,148,352		(637,607	)		320,279
Segmented intangible addition		544,635			-		-			544,635

Other Financial Items	2018			2017			2016			2015			2014
Print-Based English Language Learning segmented income	$	1,335,666		$	1,317,783		$	1,032,806		$	1,480,891		$	1,148,352
Online English Language Learning segmented income (loss)		(475,131	)		(6,148,195	)		116,372			1,681,580			(190,466	)
Head Office		(788,655	)		(815,965	)		(902,564	)		(719,897	)		(637,607	)
Foreign exchange gain (loss)		38,351			(189,783	)		(146,599	)		399,314			106,437
Interest and other financial		(51,898	)		(53,709	)		(35,768	)		(158,792	)		(217,040	)
Share-based payments		(162,489	)		(371,513	)		-			(151,038	)		(65,663	)
Other comprehensive loss		32,202			(1,410	)		60,173			(157,358	)		(36,607	)
Total Comprehensive Income /( Loss )	$	(71,954	)	$	(6,262,792	)	$	124,420		$	2,374,699		$	107,406

Revenue by Geographic Region

	2018		2017		2016		2015		2014
Latin America	$	187,008	$	997,661	$	821,762	$	2,660,535	$	424,892
China		1,702,249		1,712,079		2,252,170		2,069,253		1,822,660
Other		50,925		67,028		121,289		195,947		264,912
	$	1,940,182	$	2,776,768	$	3,195,221	$	4,925,735	$	2,512,464

Identifiable Non-Current Assets by Geographic Region

	2018		2017		2016		2015		2014
Canada	$	52,131	$	29,804	$	3,467,115	$	2,374,241	$	1,004,424
China		1,033		885		-		-		7,598
	$	53,164	$	30,689	$	3,467,115	$	2,374,241	$	1,012,022

Intangibles	Software and Web Development			Content Platform		Content Development		Total
Cost, January 1, 2014	$	7,225,065		$	1,477,112	$	-	$	8,702,177
Additions		544,635			-		-		544,635
Effect of foreign exchange		11,911			-		-		11,911
Cost, December 31, 2014		7,781,611			1,477,112		-		9,258,723
Additions		782,945			-		1,288,495		2,071,440
Effect of foreign exchange		66,450			-		-		66,450
Cost, December 31, 2015		8,631,006			1,477,112		1,288,495		11,396,613
Additions		613,163			-		1,185,525		1,798,687
Effect of foreign exchange		(5,081	)		-		-		(5,081	)
Cost, December 31, 2016		9,239,088			1,477,112		2,474,020		13,190,219
Cost, December 31, 2017 and 2018	$	9,239,088		$	1,477,112	$	2,474,020	$	13,190,219

Intangibles	Software and Web Development		Content Platform		Content Development		Total
Accumulated depreciation, January 1, 2014	$	6,763,414	$	1,061,868	$	-	$	7,955,282
Charge for the year		287,435		295,422		-		582,857
Effect of foreign exchange		2,986		-		-		2,986
Accumulated depreciation, December 31, 2014		7,053,835		1,357,290		-		8,411,125

Intangibles	Software and Web Development			Content Platform		Content Development		Total
Charge for the year	$	510,366		$	119,822	$	91,532	$	721,720
Effect of foreign exchange		58,024			-		-		58,024
Accumulated depreciation, December 31, 2015		7,622,225			1,477,112		91,532		9,190,869
Charge for the year		611,865			-		391,620		1,003,485
Effect of foreign exchange		(4,144	)		-		-		(4,144	)
Accumulated depreciation, December 31, 2016		8,229,946			1,477,112		483,152		10,190,210
Charge for the year		557,124			-		494,804		1,051,928
Impairment		452,018			-		1,496,064		1,948,082
Accumulated depreciation, December 31, 2017 and 2018	$	9,239,088		$	1,477,112	$	2,474,020	$	13,190,219
Net book value, December 31, 2014	$	727,776		$	119,822	$	-	$	847,598
Net book value, December 31, 2015	$	1,008,781		$	-	$	1,196,963	$	2,205,744
Net book value, December 31, 2016	$	1,009,142		$	-	$	1,990,867	$	3,000,009
Net book value, December 31, 2017 and 2018	$	-		$	-	$	-	$	-

4.C. Organization Structure

See 4.A. “History and Development of the Company” for more information.

Name of subsidiary	Principal activity	Place of incorporation	Proportion of ownership interest and voting rights held
		and operation	December 31, 2018	December 31, 2017	December 31, 2016
Lingo Learning Inc.	Developer and publisher of English language learning print and audio-based products	Canada	100%	100%	100%
ELL Technologies Ltd.	English language learning multi-media & online training service	Canada	100%	100%	100%
ELL Technologies Limited	English language learning multi-media & online training service	U.K.	100%	100%	100%
Speak2Me Inc.	Free English language learning online service	Canada	100%	100%	100%
Parlo Corporation	Fee-based online English language learning training and assessment service	Canada	100%	100%	100%

4.D. Property and Equipment

The Company’s executive offices are located in rented premises of approximately 4,270 sq. ft. at 151 Bloor Street West, Suite 703, Toronto, Ontario, M5S 1S4 Canada. The Company began occupying these facilities, through its subsidiary Lingo Learning Inc. in March 2006.

The Company’s Beijing representative offices are located in rented premises of approximately 2,174 sq. ft. at 6 Chao Wai Street, Vantone Center, Tower A, Suite 401, Chaoyang District, Beijing, China 100020

The Company has office equipment, furniture and computer equipment located in these offices and for the fiscal years ended December 31, 2018, 2017, 2016, 2015, and 2014, they have a net carrying value of $53,164, $30,689, $27,488, $28,879, and $24,806, respectively.

ITEM 4A. UNRESOLVED STAFF COMMENTS

None.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following discussion for the fiscal years ended December 31, 2018, December 31, 2017, and December 31, 2016 should be read in conjunction with the consolidated financial statements of the Company and the notes thereon.

The following discussion contains forward-looking statements that are subject to significant risks and uncertainties. Readers should carefully review the risk factors described herein and in other documents the Company files from time to time with the Securities and Exchange Commission.

5.A Operating Results

On January 1, 2018, the Company adopted the new rules IFRS 15, Revenue Recognition from Contracts with Customers (“IFRS 15”) retrospectively with the cumulative effect of initially applying the rules recognized at the date of initial application.

The following table summarize the impacts of adopting IFRS 15 on operating results.

December 31, 2018	As reported			Adjustments			Amounts without adoption of IFRS 15
Assets
Prepaid and other receivables	$	101,539		$	25,610		$	75,929
Total Assets		1,302,004			25,610			1,276,394

Liabilities
Contract liabilities		217,259			217,259			-
Total Liabilities		743,410			217,259			526,151

Equity
Deficit		(25,040,050	)		(191,649	)		(24,848,402	)
Total equity		558,594			(191,649	)		750,243

Total equity and liabilities		1,302,004			25,610			1,276,394

Impact on the consolidated statement of comprehensive income (loss)

For the year ended December 31, 2018	As reported			Adjustments			Amounts without adoption of IFRS 15
Revenue	$	1,940,182		$	(126,400	)	$	2,066,582
Direct costs		271,020			(20,445	)		291,465
Net Profit / (Loss) for the Year		(104,156	)		105,955			1,799
Total Comprehensive Income (Loss)		(71,954	)		105,955			34,001

Fiscal Year Ended December 31, 201 8 vs. Fiscal Year Ended December 31, 201 7

Revenues from Print-Based English language learning for the period were $1,686,514 compared to $1,688,571 in 2017 as a result of foreign exchange fluctuations in the Chinese RMB and Canadian Dollar vs. the US Dollar. Direct costs associated with publishing revenue are relatively modest and have 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 Costs

Selling, general and administrative expenses were $1,200,766 compared to $1,368,153 in 2017. 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 $97,404 in 2017 to $64,580 in 2018 due to the increase in government grants and general admin expense recovery. The following is a breakdown of selling, general and administrative costs directly related to print-based English language learning:

For the Year Ended December 31	2018			2017
Sales, marketing & administration	$	72,154		$	38,022
General admin expense recovery		(82,464	)		(9,673	)
Consulting fees & salaries		246,783			167,708
Travel		48,465			37,951
Premises		11,577			83,550
Professional fees		10,878			12,259
Less: Grants		(242,813	)		(232,413	)
	$	64,580		$	97,404

(ii) Online English Language Learning

Selling, general and administrative costs related to online English language learning was $348,436 for the year compared to $455,915 in 2017. Selling, general and administrative costs for this operating unit decreased in 2018 as compared to 2017, which is the result of managing expenses.

For the Year Ended December 31	2018		2017
Sales, marketing & administration	$	120,629	$	189,698
Consulting fees and salaries		146,202		165,940
Travel		18,593		36,759
Premises		48,000		48,000
Professional fees		15,012		15,518
	$	348,436	$	455,915

(iii)

Head Office

Selling, general and administrative costs related to head office was $787,750 for the year compared to $814,834 in 2017. Selling, general and administrative costs for this reporting unit decreased in 2018 as compared to 2017, which is the result of decrease on expenditures related to shares holder services and professional fees.

For the Year Ended December 31	201 8		2017
Sales, marketing & administration	$	117,538	$	57,230
Consulting fees & salaries		481,574		354,112
Travel		9,322		11,861
Shareholder services		76,240		137,517
Professional fees		103,076		254,114
	$	787,750	$	814,834
Total Selling and Administrative Expenses	$	1,200,766	$	1,368,153

Government Grants

Included as a reduction of selling, general and administrative expenses are government grants of $242,813 (2017 - $232,413), relating to the Company’s publishing and software projects. At the end of the year, $nil (2017 - $22,556) is included in accounts and grants receivable.

The government grant for the print-based English language learning segment is repayable in the event that the segment’s annual net income before tax for the current year and the previous two years exceeds 15% of revenue. During 2018 and 2017, the conditions for the repayment of grants did not arise and no liability was recorded.

Segment ed Information

Total comprehensive loss for the Company was $71,954 for the year ended December 31, 2018 as compared to total comprehensive loss $6,262,792 in 2017. Total comprehensive loss can be attributed to the two operating segments as shown below:

Online English Language Learning (“ELL”)	2018			2017
Revenue	$	253,668		$	1,088,197
Expenses:
Direct costs		180,832			134,695
General & administrative		348,436			455,915
Bad debt expense		(293,379	)		732,254
Amortization of property & equipment		1,605			894
Amortization of development costs		-			1,051,928
Development costs		481,992			2,692,009
Loss on acquisition		-			80,818
Impairment loss – goodwill		-			139,618
Impairment – intangible assets		-			1,948,081
Income taxes and other taxes		9,313			180
		728,799			7,236,392
Segmented Loss – Online ELL		(475,131	)		(6,148,195	)

Print-Based English Language Learning
Revenue		1,686,514			1,688,571
Expenses:
Direct costs		90,188			90,923
Selling, general & administrative		64,580			97,404
Amortization of property & equipment		15,859			4,619
Income taxes and other taxes		180,221			177,842
		350,848			370,788
Segmented Profit – Print-Based ELL		1,335,666			1,317,783
H ead Office
Expenses:
General & administrative		787,750			814,834
Amortization of property & equipment		905			1,131
		788,655			815,965
Total Segmented Profit (Loss)	$	71,880		$	( 5,646,377	)
Other
Foreign exchange		38,351			(189,783	)
Interest and other financial expenses		(51,898	)		(53,709	)
Share-based payment		(162,489	)		(371,513	)
Other comprehensive income (loss)		32,202			(1,410	)
		(143,834	)		(616,415	)
Total Comprehensive Loss	$	(71,954	)	$	(6,262,792	)

Share-Based Payments

The Company amortizes share-based payments with a corresponding increase to the contributed surplus account. During the year, the Company recorded an expense of $162,489 compared to $371,513 in 2017.

Foreign Exchange

The Company recorded foreign exchange gain of $38,351 as compared to foreign exchange loss of $189,783 in 2017, 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 Chinese Renminbi and US Dollars.

Income Tax Expense

The Company recorded a tax expense of $189,534 for the year ended December 31, 2018 compared to a tax expense of $178,022 in 2017. This tax is a withholding tax paid on revenues earned in China and repatriated outside of China.

Net Profit (Loss) for the Year

The Company reported a net loss of $104,156 for the year as compared to $6,261,382 in 2017. The loss per share is $0.00.

Fiscal Year Ended December 31, 201 7 vs. Fiscal Year Ended December 31, 201 6

Revenues from print-based English language learning for the year ended December 31, 2017 were $1,688,571 compared to $1,738,800 for fiscal 2016, a decrease of 3%. This decrease is due to foreign exchange fluctuation, a decrease in both the Chinese RMB and the Canadian Dollar vs. the US Dollar.

Direct costs associated with publishing revenue are relatively modest and have been consistent throughout the years. The Company continues to maintain its relationship with Peoples’ Education Press and is investing in the development of its existing and new programs and marketing activities to maintain and increase its royalty revenues.

In 2017, Lingo Media generated $1,088,197 in online English language learning revenue as compared to $1,456,421 in 2016, a decrease of 25%. The decrease in revenue is a result of extended sales cycles in securing contracts and time shifting of the sales pipeline.

Selling, General and Administrative Costs

Selling, general and administrative expenses were $1,368,153 in fiscal 2017 compared to $1,364,735 for fiscal 2016. Selling, general and administrative expenses for the operating and reporting segments are segregated below.

(i) Print-Based English Language Learning

Selling, general and administrative cost for print-based publishing decreased from $295,549 in 2016 to $97,404 in 2017 due to the decreases in sales, marketing and administration, travel, and rent. The following is a breakdown of selling, general and administrative costs directly related to print-based English language learning:

For the Year Ended December 31	201 7			2016
Sales, marketing & administration	$	38,022		$	185,177
General admin expense recovery		(9,673	)		-
Consulting fees & salaries		167,708			149,081
Travel		37,951			55,069
Premises		83,550			126,632
Professional fees		12,259			9,283
Less: Grants		(232,413	)		(229,694	)
	$	97,404		$	295,549

ii) Online English Language Learning

Selling, general and administrative costs related to online English language learning was $455,915 for the year compared to $168,161 in 2016. Selling, general and administrative costs for this operating unit increased in 2017 as compared to 2016, which included the increase of sales, marketing and administrative expenses, and consulting fees.

For the Year Ended December 31	201 7		2016
Sales, marketing & administration	$	189,698	$	28,722
Consulting fees and salaries		165,940		56,988
Travel		36,759		35,791
Premises		48,000		48,000
Professional fees		15,518		(1,340	)
	$	455,915	$	168,161

iii) Head Office

Selling, general and administrative costs related to head office was $814,834 for the year compared to $901,025 in 2016. Selling, general and administrative costs for this reporting unit decreased in 2017 as compared to 2016, which is the result of decrease on expenditures related to marketing, consulting fees, and shareholder services.

For the Year Ended December 31	2 017		2016
Sales, marketing & administration	$	57,230	$	175,744
General and admin expense recovery		-		(175,131	)
Consulting fees & salaries		354,112		457,841
Travel		11,861		48,542
Shareholder services		137,517		292,035
Professional fees		254,114		101,995
	$	814,834	$	901,025
Total Selling and Administrative Expenses	$	1,368,153	$	1,364,736

Government Grants

Lingo Media makes applications to the Canadian government for various types of grants to support its publishing and international marketing activities. Each year, the amount of any grant may vary depending on certain eligibility criteria (including prior year revenues) and the monies available to and the number of eligible candidates. These government grants are recorded as a reduction of general and administrative expenses to offset direct costs funded by the grant. During 2017, the Company recorded $232,413 of such grants.

One government grant for the print-based English language learning segment is repayable in the event that the segment’s annual net income before tax for the current year and the previous two years exceeds 15% of revenue. During 2017 and 2016, 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. No royalty was paid in 2017, 2016 or 2015 as no sales were generated from this project.

Segment ed Information

Total comprehensive loss for the Company was $6,262,792 for the year ended December 31, 2017 as compared to a total comprehensive income of $124,420 in 2016. Total comprehensive loss can be attributed to the business segments as shown below:

Online English Language Learning	2017			2016
Revenue	$	1,088,197		$	1,456,421
Expenses:
Direct costs		134,695			167,597
General & administrative		455,915			168,161
Bad debt expense		732,254			-
Amortization of property & equipment		894			-
Amortization of development costs		1,051,928			1,003,485
Development costs		2,692,009			-
Loss on acquisition		80,818			-
Impairment loss – goodwill		139,618			-
Impairment – intangible assets		1,948,081			-
Income taxes and other taxes		180			806
		7,236,392			1,340,049
Segmented Loss - Online ELL	$	(6,148,195	)	$	116,372

Print-Based English Language Learning
Revenue	$	1,688,571		$	1,738,800
Expenses:
Direct costs		90,923			217,787
Selling, general & administrative		97,404			295,549
Amortization of property & equipment		4,619			5,758
Income taxes and other taxes		177,842			186,900
	$	370,788		$	705,994
Segmented Income – Print-Based ELL	$	1,317,783		$	1,032,806

H ead Office
Expenses:
General & administrative	$	814,834		$	901,025
Amortization of property & equipment		1,131			1,539
		815,965			902,564
Total Segmented Profit (Loss)	$	(5,646,377	)	$	246,614

Other
Foreign exchange	$	(189,783	)	$	(146,599	)
Interest and other financial expenses		(53,709	)		(35,768	)
Share-based compensation		(371,513	)		-
Other comprehensive loss		(1,410	)		60,173
		(616,415	)		(122,194	)
Total Comprehensive Income (Loss)	$	(6,262,792	)	$	124,420

Share-Based Payments

The Company amortizes share-based payments with a corresponding increase to the contributed surplus account. During 2017, the Company recorded an expense of $371,513 compared to $Nil in 2016.

Foreign Exchange

The Company recorded foreign exchange loss of $189,783 as compared to $146,599 in 2016, 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 Chinese Renminbi and US Dollars.

Income Tax Expense

The Company recorded a tax expense of $178,022 for the year ended December 31, 2017 compared to a tax expense of $187,705 in 2016. This tax is a withholding tax paid on revenues earned in China and repatriated outside of China.

Net Profit for the Year

The Company reported a net loss of $6,261,382 for the year as compared to $64,247 in 2016. The loss per share is $0.18 per share and is primarily due to an impairment of intangible assets and goodwill of $2,087,700 and development costs of $2,692,009 in addition to recording an allowance for bad debts of $732,254. The impairment arose primarily as a result of weakened market conditions in the online English Language Learning segment.

5. B Liquidity and Capital Resources

Financial information for the years ended December 31, 2018, 2017 and 2016 was prepared in accordance with IFRS as issued by the IASB.

As at December 31, 2018, the Company had cash of $233,843 compared to $327,434 in 2017. Accounts and grants receivable of $913,458 were outstanding at the end of the year compared to $970,467 in 2017. With 89% of the receivables from PEP and the balance due from ELL Technologies’ customers, the Company does not anticipate an effect on its liquidity. Total current assets amounted to $1,248,840 (2017 - $1,503,383) with current liabilities of $743,410 (2017 - $980,318) resulting in working capital of $505,430 (2017 - $523,065).

Lingo Learning 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 Lingo Learning 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 has access to working capital through equity financings or debt financings, if required to finance its growth plans and expansion into new international markets. The Company has been successful in raising sufficient working capital in the past.

5. C Research and Development

During the years ended December 31, 2018, 2017 and 2016, respectively, the Company expended $Nil, $Nil, and $1,798,687 on intangibles, under the categories of “software and web development costs” and “content platform”. The expenditures in 2016 were primarily directed at developing the ELL Technologies products for the international market.

5. D Trend Information

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 Latin America and Asia are expanding their mandates for the teaching of English amongst students, young professionals and adults.

5.E Off-Balance Sheet Arrangements

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

5.F Tabular disclosure of contractual obligations

The Company has future minimum lease payments under operating leases for premises and equipment as follows:

2019			225,471
2020			219,036
2021			38,306

The rent expense associated with operating lease for premise and equipment is recognized on a straight-line basis.

5.G. Safe Harbor

Portions of this Annual Report on Form 20-F may include "forward-looking statements" within the meaning of securities laws. These statements are made in reliance upon Sections 21E and 27A of the Securities Exchange Act of 1934, which involve known and unknown risks, uncertainties or other factors that could cause actual results to differ materially from the results, performance, or expectations implied by these forward-looking statements. These statements are based on management's current expectations and involve certain risks and uncertainties. Actual results may vary materially from management's expectations and projections and thus readers should not place undue reliance on forward-looking statements . The Company has tried to identify these forward-looking statements by using words such as "may," "should," "expect," "hope," "anticipate," "believe," "intend," "plan," "estimate" and similar expressions. The Company’s expectations, among other things, are dependent upon general economic conditions, the continued and growth in demand for its products, retention of its key management and operating personnel, its need for and availability of additional capital as well as other uncontrollable or unknown factors. No assurance can be given that the actual results will be consistent with the forward-looking statements. Except as otherwise required by US Federal securities laws, the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason . See also under “Forward Looking Statements” above.

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

6.A. Directors and Senior Management

Table No. 6

Directors and Senior Management

December 31, 2018

Name	Position	Age	Date of Election/ Appointment
Michael P. Kraft	Chairman/Director	56	November 1996/December 2018
Khurram Qureshi	CFO/Secretary/Treasurer	56	April 1997/December 2011
Gali Bar-Ziv	President /CEO	47	June 2009//December 2018
Jerry Grafstein	Director	84	September 2010
Tommy Weibing Gong	Director	51	September 2010
Martin Bernholtz	Director	56	August 2013
Robert Martellacci	Director	57	December 8, 2017

Michael P. Kraft is the Founder, Chairman and a Director of Lingo Media and has been since its inception in 1996. He is also the President of MPK Inc. a management services and consulting business providing strategic planning, business development and corporate development since 1989. Mr. Kraft is the Chairman of Buckingham Group Limited, a small privately-owned merchant bank that has played a significant role in the capital formation strategy and financing as a principal of various emerging and growth enterprises and participated in financing these companies to become viable entities within their field. He is also a Co-Founder and Chairman of WeedMD Inc., the Founder of Internet of Things Inc., and Co-Founder & Chairman of Lingo Media Corporation.

Khurram R. Qureshi was the Chief Financial Officer of the Company from 1997 to July 2009, and was reappointed as such in December 2011. Mr. Qureshi received a Bachelor of Administrative Studies from York University in 1987 and received the Chartered Accountant designation in 1990. Mr. Qureshi is also a partner at CQK Chartered Accountants LLP.

Gali Bar-Ziv is the President and Chief Executive Officer of Lingo Media. Mr. Bar-Ziv brings more than 15 years of management and entrepreneurial experience, including financing, mergers and acquisitions, strategic planning, channel development and corporate development with extensive international experience in Israel, China and Latin America. Mr. Bar-Ziv profitably grew a sale, marketing and distribution start-up to sales growth of more than 700% year over year. He also successfully turned around the largest service division of a $300 million financial services company while at Fairfax Financial. Mr. Bar-Ziv holds a Bachelor of Law (LL.B) degree from the University of London and an MBA in Strategic and Entrepreneurial studies from the Schulich School of Business in Toronto.

The Hon. Jerry S. Grafstein, Q.C., holds degrees from the University of Western Ontario and the University of Toronto and has taught the Bar Admission Course at Osgoode Hall. Mr. Grafstein serves as counsel emeritus at Minden Gross LLP in Toronto and practices corporate finance and communication law. Mr. Grafstein devotes most of his business time to technology start-ups in Canada, the U.S. and Latin America. Mr. Grafstein has wide-ranging legal and business experience in all aspects of media. He was a co-founder of a range of media companies, focusing on broadcasting, cable, communications, film production and public enterprises in Canada, the U.S., the U.K., and South America. Mr. Grafstein recently co-founded online news sites from Canada, the U.S., the U.K., Brazil, China, Russia, Africa, Europe and the Mideast. In addition to his media experience, Mr. Grafstein advised several key government ministries, including Transportation, External Affairs, Consumer and Corporate Affairs and Justice. He was appointed to the Senate of Canada in 1984 by then Prime Minister Pierre Elliott Trudeau and served on all Senate Committees, including: Foreign Affairs; Legal and Constitutional Affairs; and (as Chairman) Senate Banking, Trade and Commerce. While in the Senate, Mr. Grafstein was a long serving Co-Chair of the Canada-United States Inter-Parliamentary Group, and a long serving senior officer of the Organization for Security and Co-Operation in Europe Parliamentary Assembly (OSCE PA). He retired from the Senate on January 1, 2010.

Tommy Weibing Gong holds an Engineering degree from Huazhong University of Science and Technology in China, and IT certifications through his North American education and started his IT career in 1996 in Silicon Valley. He is Founder of Polar Bear Energy Inc., a business in the Cleantech and Greentech sector. Mr. Gong is now a leading commercial property developer in Shanghai. He serves as Chairman of Shanghai Green Town Plaza Real Estate Development Co., Ltd, Shanghai Zhetie Green Town Real Estate Development Co., Ltd, Zysteq North America Corporation, Shanghai Tommy Real Estate Development Co., Ltd, Shanghai Tommy & Jane Property Investment and Management Co., Ltd., and Canada & China Real Estate Management Co., Ltd. Mr. Gong was appointed as Economy Advisor by Shanghai Yangpu District Government in 2010. He is the recipient of “2009: China’s Top 10 Intelligent and Financial Person”; “2010: Person of the Year in Overseas Business”, “2013: China’s Top 10 Outstanding Business Leaders”.

Martin Bernholtz, BBA, CA is the Chief Financial Officer of Kerbel Group Inc. since 1988, an integrated construction and land development company. In this capacity, he is responsible for strategy, finance, accounting, taxation and personnel. Mr. Bernholtz has considerable sophisticated business experience in real estate, finance and public markets. He graduated with a Bachelor degree in Business Administration from York University in 1981 and became a Chartered Accountant in 1984. While in practice at Laventhol & Horwath and at BDO Dunwoody, Mr. Berholtz gained considerable experience in the business valuation and litigation support areas. He is a director of several TSX Venture Exchange listed companies including Covalon Technologies Limited, Selectcore Limited, Titan Medical Devices Inc., Continental Precious Metals Inc., KGIC Inc., Imex Systems Inc., and NanoStruck Technologies Inc. listed on Canadian Securities Exchange.

Robert Martellacci is founder and President, MindShare Learning Technology since 2002 and President and Co-Founder, C21 Canada—Canadians for 21st Century Learning & Innovation. He has over 25 years of expertise in the learning and technology field as an administrator at York University & Country Manager, TLC Canada School Division and MLS. Mr. Martellacci served on the President’s Task Force on the College System at York University. His board appointments include: Past Chair, Canadian eLearning Enterprise Alliance and board member York University Institute on Learning Technology. Mr. Martellacci was also appointed to the ICTC Task Force on Driving Change Education and Skills DigitalTalent2020. Mr. Martellacci was awarded the 2016 Chair’s Global Best Partnership Award for outstanding work nationally and internationally for taking a leadership role in forging strategic partnerships between industry and education. He is also founder and CEO of MindShare WorkSpace, a coworking/innovation space on a mission to redefine the future of work and learning. Mr. Martellacci is a graduate of Pepperdine University with a Master’s degree in Educational Technology.

The Directors have served in their respective capacities since their election and/or appointment and will serve until the next Annual General Meeting or until a successor is duly elected, unless the office is vacated in accordance with the Articles/By-Laws of the Company.

The Senior Management serves at the pleasure of the Board of Directors with management service contracts but without term of office, except as disclosed herein.

No Director and/or Executive Officer has been the subject of any order, judgment, or decree of any governmental agency or administrator or of any court or competent jurisdiction, revoking or suspending for cause any license, permit or other authority of such person or of any corporation of which he is a Director and/or Executive Officer, to engage in the securities business or in the sale of a particular security or temporarily or permanently restraining or enjoining any such person or any corporation of which he is an officer or director from engaging in or continuing any conduct, practice, or employment in connection with the purchase or sale of securities, or convicting such person of any felony or misdemeanor involving a security or any aspect of the securities business or of theft or of any felony.

There are no arrangements or understandings between any two or more Directors or Executive Officers, pursuant to which he was selected as a Director or Executive Officer. There are no family relationships between any two or more Directors or Executive Officers.

6.B. Compensation

The table below sets forth information concerning the compensation paid, during each of the last three fiscal years (as applicable), to the Company’s Chief Executive Officer, Chief Financial Officer, and other Executive Officers of the Company and its subsidiaries who received total remuneration, determined on the basis of base salary and bonuses in excess of $100,000 during the last three fiscal years ended December 31 (the “Named Executive Officers”).

Summary Compensation Table

Non-equity

incentive plan

compensation

Name and principal

position

Year

Salary

($)

Share-based

awards

($)

Option-based

awards

($) ⁽²⁾

Annual

incentive

plans

Long-

term

incentive

plans ⁽³⁾

Pension

Value

($)

All other

compensation

($) ⁽¹⁾

Total

compensation

($)

Michael P. Kraft

2018

115,500

Nil

23,916

139,416

Chairman, and Director

2017

120,000

Nil

100,000

Nil

25,854

245,854

2016

120,000

Nil

134,198

254,198

Gali Bar-Ziv

2018

153,000

Nil

21,308

174,308

President,

2017

150,000

Nil

100,000

Nil

37,844

287,844

Chief Executive Officer

2016

150,000

Nil

42,898

192,898

Khurram Qureshi

2018

60,000

Nil

18,999

78,999

Chief Financial Officer

2017

60,000

Nil

50,000

Nil

110,000

2016

60,000

Nil

7,500

67,500

Notes:

(1)	Perquisites and other personal benefits, securities or property that do not in the aggregate exceed the lesser of $10,000 and 10% of the total of the annual salary and bonus for any NEO for the financial year, if any, are not disclosed.

(2)

The weighted average grant date fair value was calculated in accordance with the Black-Scholes model using the common share price on the date of grant, with the key valuation assumptions being stock-price volatility of 79%, risk free interest rate of 1.35%, no dividend yields, and expected life of 5 years.

(3)

" LTIP " or " long term incentive plan " means any plan which provides compensation intended to serve as incentive for performance to occur over a period longer than one financial year, but does not include option or stock appreciation right plans or plans for compensation through restricted shares or restricted share units.

Management Agreements

Michael P. Kraft

The Company entered into a consulting agreement (the " Kraft Consulting Agreement ") dated as of October 18, 2007 with MPK Inc. pursuant to which the Company engaged MPK Inc. to provide the services of Michael P. Kraft (the " Consultant ") to be the President & Chief Executive Officer of the Company. MPK Inc. is a corporation wholly-owned and controlled by Michael P. Kraft.

The Kraft Consulting Agreement provides for an initial term of twenty-four (24) months to begin on January 1, 2008 and was renewed in September 2009, 2011, 2013, 2015 and 2017. (The Kraft Consulting Agreement and Amendment provide that the Company pay MPK Inc. an aggregate of $38,000 plus applicable HST for the Applicable Period. In consideration of the Consultant agreeing to a reduction of consulting fees from $180,000 to $150,000. A further reduction was taken in 2013, from $150,000 to $38,000. The Company agrees to pay the Consultant a cash bonus in the amount of $100,000 upon completion of a merger or acquisition as approved by the board of directors or if the Company’s market capitalization increases from approximately $3,000,000 to $6,000,000.) Beginning on January 1, 2014, the Kraft Consulting Agreement resumed to $150,000 per year. An amendment was entered into whereby the monthly consulting fees were reduced from $12,500 to $10,000 as of June 1, 2015. In addition to providing an allowance for a health plan, the Kraft Consulting Agreement also provides for an automobile allowance of up to $1,500 per month. A further amendment was entered into whereby the monthly consulting fees were reduced from $10,000 to $5,500 as of December 1, 2018.

Gali Bar-Ziv

The Company entered into a consulting agreement (the " Bar-Ziv Consulting Agreement ") dated as of June 1, 2009 with Busy Babies Inc. pursuant to which the Company engaged Busy Babies Inc. to provide the services of Gali Bar-Ziv (the " Consultant ") to be the Chief Operating Officer of the Company. Busy Babies Inc. is a corporation wholly-owned and controlled by Gali Bar-Ziv.

The Bar-Ziv Consulting Agreement provided for an initial term of twelve (12) months to begin on June 1, 2009 and automatic renewals for a further one (1) year unless terminated pursuant to the terms thereof. The Bar-Ziv Consulting Agreement, as amended, provides that the Company pay Busy Babies Inc. an aggregate of $186,000 plus applicable HST per annum. The Company has also agreed to enable the Consultant to participate in a bonus program based upon agreed-to KPIs. The Bar-Ziv Consulting Agreement also provides for an allowance for mobile phone and parking allowance.

Khurram Qureshi

The Corporation has entered into a consulting agreement (the “Qureshi Consulting Agreement”) dated as of August 1, 2011 with CQK Chartered Accountants LLP (“CQK”), to provide the services of Khurram Qureshi as Chief Financial Officer of the Corporation. CQK Chartered Accountants LLP is a partnership where Mr. Qureshi is a senior partner.

The Qureshi Consulting Agreement provided for an initial term of 12 months to begin on August 1, 2011, and automatically renews for subsequent one-year terms unless terminated in accordance with its terms. The Corporation pays to CQK a base consulting fee of $5,000 per month, plus applicable HST. Mr. Qureshi is eligible for reimbursement for certain expenses properly incurred in connection with the Corporation’s business. Mr. Qureshi is eligible to receive annual incentive bonuses and grants stock of options pursuant to the Option Plan from time to time, in each case at the discretion of the Board. The Qureshi Consulting Agreement also provides that the Corporation will provide to Mr. Qureshi extended health benefits.

Stock Options

The Company grants stock options to Directors, Senior Management, employees and consultants; refer to ITEM #6.E., "Share Ownership, Stock Options”.

Director Compensation

The non-management directors of the Company are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of the Board of Directors. The Board of Directors may award special remuneration to any Director undertaking any special services on behalf of the Company other than services ordinarily required of a Director. Other than indicated below no Director received any compensation for his services as a Director, including committee participation and/or special assignments.

Change of Control Remuneration

Michael P. Kraft

The Consultant may terminate the Kraft Consulting Agreement upon ninety (90) days written notice to the Company and the Company shall pay to the Consultant, all amounts due and owing up to the effective date of termination. The Consultant may also terminate the Kraft Consulting Agreement for the following reasons: (i) a material change in the position, duties and responsibilities of the Consultant; (ii) the Consultant ceases to be the most senior officer of the Company; (iii) any material reduction in the compensation payable to the Consultant in accordance with the terms of the Kraft Consulting Agreement; and (iv) the Company's head office being located more than 50 kilometres from its current location and the Consultant's current residence (" Good Cause "). If the Consultant terminates the Kraft Consulting Agreement for Good Cause the Company shall pay to the Consultant, all amounts due and owing up to the effective date of termination and a settlement amount equal to eighteen (18) months of compensation at the rate of compensation payable to the Consultant immediately prior to the effective date of termination.

The Kraft Consulting Agreement may be terminated by the Company by giving written notice to the Consultant and the Company shall pay to the Consultant, all amounts due and owing up to the effective date of termination and a settlement amount equal to eighteen (18) months of compensation at the rate of compensation payable to the Consultant immediately prior to the effective date of termination.

In the event of a change of control, the Consultant may, for a period of six (6) months after the effective date of any such change of control, elect to terminate the Kraft Consulting Agreement with the Company upon eight weeks’ notice and the Company shall pay to the Consultant, all amounts due and owing up to the effective date of termination and a settlement amount equal to eighteen (18) months of compensation at the rate of compensation payable to the Consultant immediately prior to the effective date of termination by voluntary resignation. In the event of a change of control and if the Company terminates the Consultant without cause, the settlement amount shall be equal to twenty-four (24) months of compensation at the rate of compensation payable to the Consultant immediately prior to the effective date of termination.

The Consultant is subject to an 18 month non-compete period following the termination of the Kraft Consulting Agreement.

Gali Bar-Ziv

The Consultant may terminate the Bar-Ziv Consulting Agreement upon ninety (90) days written notice to the Company and the Company shall pay to the Consultant, all amounts due and owing up to the effective date of termination. The Consultant may also terminate the Bar-Ziv Consulting Agreement for the following reasons: (i) a material change in the position, duties and responsibilities of the Consultant; (ii) the Consultant ceases to be a senior officer of the Company; (iii) any material reduction in the compensation payable to the Consultant in accordance with the terms of the Bar-Ziv Consulting Agreement; and (iv) the Company's head office being located more than 50 kilometres from its current location and the Consultant's current residence (" Good Cause "). If the Consultant terminates the Bar-Ziv Consulting Agreement for Good Cause the Company shall pay to the Consultant, all amounts due and owing up to the effective date of termination as well as a settlement amount.

The Bar-Ziv Consulting Agreement may be terminated by the Company by giving written notice to the Consultant and the Company shall pay to the Consultant, all amounts due and owing up to the effective date of termination and a settlement amount equal to nine (9) months of compensation at the rate of compensation payable to the Consultant immediately prior to the effective date of termination.

The Consultant is subject to a nine month non-compete period following the termination of the Bar-Ziv Consulting Agreement.

Khurram Qureshi

Mr. Qureshi may terminate the Qureshi Consulting Agreement upon 90 days’ written notice to the Corporation and the Corporation shall pay to CQK Chartered Accountants LLP all amounts due and owing up to the effective date of termination. The Corporation shall pay to CQK Chartered Accountants LLP all amounts due and owing up to the effective date of termination, and a settlement amount equal to three months’ compensation at the rate of compensation payable within 30 days of the termination date.

The Corporation may terminate the Qureshi Consulting Agreement for convenience by giving written notice to CQK Chartered Accountants LLP and payment by the Corporation of all amounts due and owing up to the effective date of termination plus a settlement amount equal to three months’ compensation at the rate of compensation payable to CQK Chartered Accountants LLP within 30 days of the termination date.

Other Compensation

Except as set forth above under “Summary Compensation Table”, no Executive Officer/Director received “other compensation” in excess of the lesser of US$10,000 or 10% of such officer's cash compensation, and all Executive Officers/Directors as a group did not receive other compensation which exceeded US$10,000 times the number of persons in the group or 10% of the compensation.

Bonus/Profit Sharing/Non-Cash Compensation

Except for the stock option program discussed in ITEM #6.E, the Company also agreed to enable Gali Bar-Ziv to participate in the Company’s sales commission program, pursuant to which Mr. Bar-Ziv is to receive 7% of net revenue for business initiative, 2% of net revenue for direct influence, other discretionary bonus by the board if applicable. Effective December 1, 2018, Bar-Ziv’s was amended to provide bonus compensation based upon agreed-to KPIs.

Pension/Retirement Benefits

No funds were set aside or accrued by the Company during fiscal 2017 to provide pension, retirement or similar benefits for Directors or Executive Officers.

6.C. Board Practices

6.C.1. Terms of Office.

The Senior Management serves at the pleasure of the Board of Directors with management service contracts but without term of office, except as disclosed herein.

6.C.2. Termination benefits

Not applicable

6.C.3. Board of Director Committees.

The Company has established an Audit Committee, Compensation Committee and Corporate Governance and Nominating Committee in compliance with the Guidelines.

The Audit Committee assists the Board in its oversight of: (i) the integrity of the financial reporting of the Company; (ii) the independence and performance of the Company's external auditors; and (iii) the Company's compliance with legal and regulatory requirements. The members of the Audit Committee during the past fiscal year were Martin Bernholtz (Chairman), Tommy Weibing Gong, and Michael Kraft, Messrs. Bernholtz and Gong being independent as defined in the Guidelines. Following the 2017 shareholder meeting, the Committee was comprised of Martin Bernholtz (Chairman), Robert Martellacci, and Michael Kraft, with Messrs. Bernholtz and Martellacci being independent as defined in the Guidelines.

The Compensation Committee assists the Board in fulfilling its obligations relating to human resource and compensation matters of the Company and its subsidiaries and to establish a plan for the continuity and development of senior management. The members of the Compensation Committee during the past fiscal year were Martin Bernholtz (Chairman), Jerry Grafstein, and Tommy Weibing Gong, all being independent as defined in the Guidelines. Following the 2017 shareholder meeting, the Committee was comprised of Jerry Grafstein (Chairman), Martin Bernholtz, and Robert Martellacci, all being independent as defined in the Guidelines.

The Corporate Governance and Nominating Committee assists the Board by: (i) developing, reviewing and planning the Company's approach to corporate governance issues, including developing a set of corporate governance principles and guidelines specifically applicable to the Company; (ii) identifying and recommending to the Board potential new nominees to the Board; (iii) monitoring management's succession plan for the Chief Executive Officer (the " CEO ") and other senior management; and (iv) overseeing enforcement of and compliance with the Company's proposed Code of Business Conduct. The members of the Corporate Governance Committee during the past fiscal year were Messrs. Grafstein (Chairman), Bernholtz and Kraft, Messrs. Grafstein and Bernholtz being independent directors as defined in the Guidelines. Following the 2017 shareholder meeting, the Committee was comprised of Grafstein (Chairman), Bernholtz, and Tommy Gong all being independent as defined in the Guidelines.

6.E. Share Ownership

Table No. 7 lists, as of April 30, 2019, Directors and Executive Officers who beneficially own the Company's voting securities and the amount of the Company's voting securities owned by the Directors and Executive Officers as a group. Table No. 7 includes all persons/companies where the Company is aware that they have 5% or greater beneficial interest in the Company’s securities.

Table No. 7

Shareholdings of Directors and Executive Officers

Shareholdings of 5% Shareholders

Title of Class	Name of Beneficial Owner	Amount and Nature of Beneficial Ownership ⁽¹⁾			Percent of Class
Common	Michael P. Kraft ⁽²⁾ ⁽³⁾		2,376,012	⁽⁵⁾		6.69	%
Common	Khurram Qureshi		392,606	⁽⁶⁾		1.11	%
Common	Gali Bar-Ziv		242,864	⁽⁷⁾		0.68	%
Common	Martin Bernholtz ⁽²⁾ ⁽³⁾ ⁽ ⁴ ⁾		250,000	⁽⁸⁾		0.07	%
Common	Tommy Gong ⁽ ⁴ ⁾		[nil]	⁽⁹⁾		0.00	%
Common	Jerry Grafstein ⁽³⁾⁽⁴⁾		900,000	⁽¹⁰⁾		2.53	%
Common	Robert Martellacci ⁽²⁾⁽³⁾		[nil]	⁽¹¹⁾		0.00	%
Common	Global Telecom Holding SAE		2,857,143			8.04	%
As a group (8 parties)			6,793,625			19.12	%

* Less than 1%.

	(1)	The information as to voting securities beneficially owned, controlled or directed, not being within the knowledge of the Company, has been furnished by the respective individuals.
	(2)	Member of the Audit Committee.
	(3)	Member of the Compensation Committee.
	(4)	Member of the Corporate Governance and Nominating Committee.
	(5)	Of such shares, 95,636 are held in Mr. Kraft's RRSP and 2,280,376 are held by Buckingham Group Limited, a company controlled by Mr. Kraft. Mr. Kraft also holds options and to purchase up to an additional 1,000,000 common shares of the Company.
	(6)	Of such shares, 38,606 are held in Mr. Qureshi’s RRSP. Mr. Qureshi also holds options to purchase up to 500,000 common shares of the Company.
	(7)	Of such shares, 2,000 are held in Mr. Bar-Ziv's RRSP, and 240,864 are held by Busy Babies Inc., a company controlled by Mr. Bar-Ziv. Mr. Bar-Ziv also holds options to purchase up to an additional 1,000,000 common shares of the Company.
	(8)	Of such shares, 120,000 are held by Accretive Capital Corp, a company controlled by Mr. Bernholtz. Mr. Bernholtz also holds options to purchase up to an additional 470,000 common shares of the Company.
	(9)	Tommy Gong holds options to purchase up to 290,000 common shares of the Company.
	(10)	Of such shares, 900,000 are held by New Court Corporation, a company controlled by Mr. Grafstein. New Court Corporation also holds options to purchase up to an additional 450,000 common shares of the Company.
	(11)	Robert Martellacci holds options to purchase up to 80,000 common shares of the Company.

Stock Options

TSX Venture Exchange Rules and Policies

Incentive options granted by the Company are made in accordance with the rules and policies of the TSX Venture Exchange ("TSX VEN"), including the number of common shares under option, the exercise price and expiration date of such options, and any amendments thereto.

Such terms and conditions, including the pricing of the options, expiration and the eligibility of personnel for such stock options; are described below. The TSX VEN policy in respect of incentive stock options provides that shareholder approval is not required if the aggregate number of common shares that may be reserved for issuance pursuant to incentive stock options does not exceed 10% of the issued common shares of the Company, 5% to any one individual and 2% to any consultant at the time of granting.

Shareholder approval of the grant of incentive stock options is required pursuant to the rules of the TSX VEN where the grant will result in the Company having options outstanding which, in aggregate, are exercisable to acquire over 10% (to a maximum of 20%) of the outstanding common shares of the Company. In addition, disinterested shareholders (all shareholders excluding insiders and associates of insiders) approval is required pursuant to the rules of the TSX VEN where:

(a) grant of incentive stock options could result at any time in:

(i)

the Company having options outstanding to insiders which, in aggregate, are exercisable to acquire over 20% of the outstanding common shares of the Company; or

(ii)

the issuance to insiders, within a one-year period, of common shares which, in aggregate, exceed 10% of the outstanding common shares of the Company; or

(iii)

the issuance to any one insider and such insider's associates, within a one-year period, of common shares which, in aggregate, exceed 5% of the outstanding common shares of the Company; or

(iv)

the issuance to any consultant of common shares which, in aggregate, exceed 2% of the outstanding common shares of the Company; or

(b) the Company is proposing to decrease the exercise price of stock options held by any insiders.

Company Stock Option Plan

The Board has approved an amended stock option plan (the " Stock Option Plan ") on November 3, 2017 whereby options may be granted to directors, officers, employees, consultants of the Company and its subsidiaries. The number of shares which may be reserved for issuance under the Stock Option Plan is limited to 7,105,838 common shares, representing approximately 20% of the issued and outstanding common shares of the Company as at November 3, 2017.

The maximum number of common shares which may be reserved for issuance in a 12 month period to any one individual under the Stock Option Plan, shall not, in the aggregate, exceed 5% of the issued and outstanding common shares of the Company at the time of grant. The maximum number of common shares which may be reserved for issuance in a 12 month period to any consultants and persons engaged in investor relations activities for the Company, shall not, in the aggregate, exceed 2% of the issued and outstanding common shares at the time of grant. Any common shares subject to a prior option granted under the Stock Option Plan which for any reason are cancelled or terminated prior to exercise will be available for a subsequent grant under the Stock Option Plan.

The option price of any common shares cannot be less than the closing price of the shares on the day immediately preceding the day upon which the option is granted less any permitted discount. Options may be granted under the Stock Option Plan to be exercisable for a maximum period of ten years, subject to earlier termination, upon the termination of the optionee’s employment, upon the optionee ceasing to be an employee, officer, director or consultant of the Company or any of its subsidiaries, as applicable, or upon the optionee retiring, becoming permanently disabled or dying. The options under the Stock Option Plan are non-transferable. The Stock Option Plan contains provisions for adjustment in the number of shares issuable thereunder in the event of a subdivision, consolidation, reclassification or change of the common shares, a merger or other relevant changes in the Company’s capitalization.

As of the date hereof, options to purchase an aggregate of 7,704,000 common shares are outstanding under the Stock Option Plan.

The names and titles of the Directors/Executive Officers of the Company to whom outstanding stock options have been granted and the number of common shares subject to such options are set forth in the Table below as of April 30, 2019, as well as the number of options granted to Directors and officers as a group.

Stock Options Outstanding

Expressed in Canadian Dollars

Number of securities

underlying unexercised

Option exercise

price (C$)

Option

expiration date

Jerry Grafstein

Director

50,000

0.07

Novembre 20, 2021

Martin Bernholtz

Director

50,000

0.07

Novembre 20, 2021

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

7.A. Major Shareholders

7.A.1.a. Holdings By Major Shareholders

Refer to ITEM #6.E.

7.A.1.b. Significant Changes in Major Shareholders’ Holdings

None.

7.A.1.c. Different Voting Rights

None.

7.A.2. Canadian Share Ownership

As of April 30, 2019, the Company’s registered shareholders’ list showed 35,529,192 common shares outstanding with 29 registered shareholders, with 34,939,458 shares owned by 19 shareholders residing in Canada, 425,576 shares owned by 5 registered shareholders in US and 164,158 shares owned by 5 foreign registered shareholders.

7.A.3. Control of Company .

The Company is a publicly owned Canadian corporation, the shares of which are owned by U.S. residents, Canadian residents and other foreign residents. The Company is not controlled by any foreign government or other person(s).

7.A.4. Change in Control

None.

7.B. Related Party Transactions

During the 2018 fiscal year, 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. The Company charged $165,726 (2017 - $52,001, 2016 - $33,020) to four corporations with directors in common for rent, administration, office charges and telecommunications.

b. Key management compensation was $360,672 (2017 – $360,023, 2016 – $480,577) and is reflected as consulting fees and commissions paid to corporations owned by a director and officers of the Company, of which, $17,065 (2017 - $3,121, 2016 - $nil) is unpaid and included in accounts payable and accrued liabilities. Options granted to key management was $ nil ($2017 - $508,000, 2016 - $nil).

c. At the year end, the Company had fully repaid unsecured loans bearing interest at 12% per annum due to related parties of the Company (2017 - $150,000, 2016 - $50,000). Throughout the year, $420,000 was advanced to the company and $720,000 was repaid to related parties. Interest expense related to the loans is $42,133 (2017 - $4,586, 2016 - $351). Options granted to related paries during the year have a fair value of $25,988 (2017 - $ nil, 2016 - $ nil).

Other than as disclosed above, there have been no transactions since December 31, 2018 or proposed transactions, which have materially affected or will materially affect the Company in which any director, executive officer, or beneficial holder of more than 10% of the outstanding common stock, or any of their respective relatives, spouses, associates or affiliates has had or will have any direct or material indirect interest. Management believes the transactions referenced above were on terms at least as favorable to the Company as the Company could have obtained from unaffiliated parties.

ITEM 8. FINANCIAL INFORMATION

8.A. 1-6 Consolidated Statements and Other Financial Information

The Company's financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”).

The financial statements as required under ITEM #18 are attached hereto and found immediately following the text of this Annual Report. The audit reports of RSM Canada LLP are included herein immediately preceding the financial statements and schedules.

Audited Financial Statements for Fiscal 2018 and Fiscal 2017

8.A.7. Legal/Arbitration Proceedings

The Directors and the management of the Company do not know of any material, active or pending, legal proceedings against them; nor is the Company involved as a plaintiff in any material proceeding or pending litigation. The Directors and the management of the Company know of no active or pending proceedings against anyone that might materially adversely affect an interest of the Company.

8.A.8 Company Policy on Dividend Distribution

The Company does not intend to pay dividends in cash or in kind in the foreseeable future. The Company expects to retain any earnings to finance the further growth of the Company. The directors of the Company will determine if and when dividends should be declared and paid in the future based upon the earnings and financial conditions of the Company at the relevant time and such other factors as the directors may deem relevant. All of the Common Shares of the Company are entitled to an equal share in any dividends declared and paid.

8.B. Significant Changes

None.

ITEM 9. THE OFFER AND LISTING

9.A.1-3. Not applicable

9.A.4. Common Share Trading Information

The Company's common shares began trading on the Alberta Stock Exchange in Calgary, Alberta, Canada under its former name Alpha Ventures Inc. in November 1996. The Alberta Stock Exchange was absorbed by the Canadian Venture Exchange, which in turn was absorbed by the TSX Venture Exchange (“Exchange”). The Company’s listing was automatically transferred from the Alberta Stock Exchange to the Exchange as a Tier 2 company. The current stock symbol on the Exchange is “LM”. The CUSIP number is 5357441065.

The Exchange currently classifies Issuers into different tiers based on standards, including historical financial performance, stage of development and financial resources of the Issuer at the time of listing. Specific Minimum Listing Requirements for each industry segment in each of Tier 1, Tier 2 and Tier 3 have also been established by the Exchange.

Policy 2.1 of the Exchange outlines the Minimum Listing Requirements for each industry segment in Tier 1 and Tier 2. Under this policy, Lingo Media Corporation is a Tier 2 Issuer in the industry segment category of Junior Industrial. Each industry segment is further divided into categories. Quantitative minimum requirements for listing for the industry segment Junior Industrial and Tier 2 are provided in Section 4.3 of Exchange Policy 2.1.

Similarly, Policy 2.5 of the Exchange sets out the minimum standards to be met by Issuers to continue to qualify for listing in each Tier, referred to as Tier Maintenance Requirements (“TMR”). A Tier 2 Issuer which fails to meet one of the Tier 2 TMR will not automatically be suspended or designated as “Inactive”. Rather, the Exchange will provide notice of failure to meet one of the Tier 2 TMR and will allow the Issuer 6 months from the date of notice to meet the requirement, failing which the Exchange may designate the Issuer as Inactive. If a Tier 2 Issuer fails to meet more than one Tier 2 TMR, notice will be given to the Issuer by the Exchange and if the requirements are not met within 90 days of the notice, the Exchange will designate the Issuer as Inactive and apply the restrictions on Inactive Issuers retroactively. An Inactive Issuer may continue to trade on Tier 2 of the Exchange for 18 months from the date it is designated as Inactive. If the Issuer does not meet all of the applicable Tier 2 TMR within that 18 month period, its listed shares may be suspended from trading by the Exchange.

To maintain a listing as an active Tier 2 Issuer, an Issuer must meet all Tier 2 TMR for its industry segment as set out in Section 4 of the Exchange Policy 2.5.

Table No. 9 lists the volume of trading and high, low and closing sales prices on the TSX Venture Exchange for the Company's common shares for: the last 12 months, the last twelve fiscal quarters; and the last five fiscal years.

Table No. 9

TSX Venture Exchange

Common Shares Trading Activity

Period			Sales -- Canadian Dollars
Ended	Volume		High		Low		Close
Monthly
March 2019		1,109,400		0.17		0.09		0.15
February 2019		2,915,200		0.10		0.07		0.09
January 2019		222,500		0.08		0.06		0.07
December 2018		934,300		0.08		0.06		0.08
November 2018		859,900		0.11		0.06		0.08
October 2018		256,600		0.12		0.10		0.10
September 2018		930,000		0.15		0.08		0.11
August 2018		572,200		0.11		0.05		0.11
July 2018		158,200		0.11		0.07		0.10
June 2018		287,500		0.11		0.09		0.11
May 2018		538,300		0.12		0.09		0.10
April 2018		319,500		0.13		0.12		0.12

Yearly
12/31/2018		2,810,600		0.19		0.05		0.08
12/31/2017		20,076,100		0.39		0.16		0.17
12/31/2016		35,450,000		1.19		0.185		0.225
12/31/2015		26,356,600		0.94		0.1		0.93
12/31/2014		1,887,900		0.25		0.07		0.11

Quarterly
3/31/2019		4,244,100		0.17		0.06		0.1574
12/31/2018		1,765,400		0.17		0.06		0.08
9/30/2018		1,450,900		0.15		0.05		0.11
6/30/2018		1,485,800		0.13		0.09		0.11
3/31/2018		1,108,500		0.18		0.12		0.13
12/31/2017		3,439,800		0.33		0.16		0.17
9/30/2017		1,064,600		0.33		0.27		0.33
6/30/2017		8,629,800		0.38		0.22		0.27
3/31/2017		6,940,000		0.395		0.19		0.375
12/31/2016		10,530,000		0.54		0.185		0.225
9/30/2016		6,080,000		0.66		0.38		0.54
6/30/2016		13,850,000		1.19		0.45		0.57

The Company's shares became quoted for trading on the OTC Market on January 22, 2014. OTC Markets halted trading in the Company’s shares on August 29, 2017 because of a regulatory trading halt placed by the TSX Venture Exchange. While the TSX Venture Exchange has released its regulatory halt of trading, the trading halt on OTC Markets has not yet been lifted, although limited trading continues.

Table No.10 lists the volume of trading and high, low and closing sales prices on the OTC Market for the Company's common shares for the last 12 months, the last twelve fiscal quarters; and the last five fiscal years.

Table No. 10

OTC Market s

Common Shares Trading Activity

Period			Sales -- US Dollars
Ended	Volume		High		Low		Close
Monthly
March 2019		5,300		0.09		0.06		0.08
February 2019		5,600		0.06		0.05		0.06
January 2019		1,700		0.05		0.05		0.05
December 2018		300		0.05		0.05		0.05
November 2018		100		0.07		0.05		0.05
October 2018		15,300		0.09		0.05		0.07
September 2018		-		0.05		0.05		0.05
August 2018		30,000		0.08		0.05		0.05
July 2018		20,000		0.10		0.08		0.08
June 2018		-		0.10		0.10		0.10
May 2018		2,000		0.10		0.10		0.10
April 2018		74,600		0.10		0.09		0.10

Yearly
12/31/2018		142,900		0.13		0.05		0.05
12/31/2017		854,134		0.29		0.13		0.13
12/31/2016		52,730		0.76		0.13		0.25
12/31/2015		1,551,800		0.67		0.09		0.67
12/31/2014		18,400		0.12		0.08		0.12

Quarterly
3/31/2019		10,900		0.09		0.05		0.08
12/31/2018		65,600		0.09		0.05		0.05
9/30/2018		50,000		0.10		0.05		0.05
6/30/2018		76,600		0.10		0.10		0.10
3/31/2018		714		0.13		0.09		0.09
12/31/2017		130,100		0.24		0.13		0.13
9/30/2017		145,500		0.26		0.21		0.24
6/30/2017		306,754		0.28		0.16		0.26
3/31/2017		-		0.258		0.129		0.253
12/31/2016		47,730		0.34		0.126		0.141
9/30/2016		-		0.409		0.239		0.314
6/30/2016		5,000		0.759		0.367		0.367

The Company's common shares became quoted for trading on the Berlin-Bremen Stock Exchange on August 20, 2003. No trades of the Company's common shares have taken place on the Berlin-Bremen Stock Exchange to this date.

9.A.5. Common Share Description

Not Applicable

9.C. Stock Exchanges Identified

The common shares trade on the TSX Venture Exchange, OTC Market and are quoted for trading on the Berlin-Bremen Stock Exchange.

9.B, D-F. Not applicable

ITEM 10. ADDITIONAL INFORMATION

10.A. Share Capital

Not Applicable

10.B. Memorandum and Articles of Association

Objects and Purposes

The Company’s corporation number as assigned by the Ontario Ministry of Consumer and Commercial Relations is 4020-1165. The Company’s Articles of Incorporation do not contain the Company’s purpose or its objectives, as neither is required under the laws of Ontario.

Disclosure of Interest of Directors

No director of the Company is permitted to vote on any resolution to approve a material contract or transaction in which such director has a material interest.

Subject to the Articles of Incorporation and any unanimous shareholder agreement, the board may fix their remuneration.

Borrowing Powers of Directors, By - Laws - Section 3.10

The board of directors may from time to time:

(i)	borrow money upon the credit of the Corporation;

(ii)	issue, reissue, sell or pledge debt obligations of the Corporation;

(iii)

subject to the Business Corporations Act (Ontario), give a guarantee on behalf of the Corporation to secure performance of an obligation of any person; and

(iv)	mortgage, hypothecate, pledge or otherwise create a security interest in all or any property of the Corporation, owned or subsequently acquired, to secure any debt obligations of the Corporation.

Delegation of Power to Borrow, Bylaws – Section 3.11

The board may by resolution delegate all or any of the powers conferred on them by paragraphs (i) and (iii) of section 3.10 of the bylaws, to any one or more of the directors, the Managing Director, the executive committee, the Chairman of the Board (if any), the President, any Vice-President, the Secretary, the Treasurer, any Assistant Secretary, any Assistant Treasurer or the General Manager.

Director Qualification and Retirement

Neither the Articles of Incorporation nor the Bylaws of the Company discuss the retirement or non-retirement of directors under an age limit requirement, and there is no number of shares required for director qualification.

Description of Rights, Preferences and Restrictions

Attaching to Each Class of Shares

a)	Class/Number of Shares . The Company’s Articles of Incorporation provide that: the Corporation is authorized to issue two classes of shares, namely an unlimited number of Preferred Shares without nominal or par value (“Preferred Shares”) and an unlimited number of Common Shares (“Common Shares”).

b)	Common Shares . The holders of Common Shares shall be entitled:

to vote at all meetings of shareholders, except meetings at which only holders of a specified class of shares are entitled to vote, and on every poll taken at every such meeting, or adjourned meeting, every holder of Common Shares shall be entitled to one vote in respect of each Common Share held; and

subject to the rights of the holders of Preferred Shares, to receive the remaining property of the Corporation upon a dissolution; and

subject to the rights of the holders of Preferred Shares, to receive all other dividends declared by the Corporation.

c)	Preferred Shares . The Preferred Shares as a class shall carry and be subject to the following rights, privileges, restrictions and conditions:

Directors’ Rights to Issue in One or More Series.

The Preferred Shares may at any time or from time to time be issued in one or more series, each series to consist of such number of shares as may before the issue thereof be determined by the Directors by resolution; the Directors of the Company may (subject as hereinafter provided) by resolution fix, from time to time before the issued thereof, the designation, rights, privileges, restrictions and conditions attaching to the shares of such series including, without limiting the generality of the foregoing (1) the issue price, (2) the rate, amount or method of calculation of dividends and whether the same are subject to change of dividends and whether the same are subject to change or adjustment, (3) whether such dividends shall be cumulative, non-cumulative or partly cumulative, (4) the dates, manner and currencies of payments of dividends and the dates from which dividends shall accrue, (5) the redemption and/or purchase prices and terms and conditions of redemption and/or purchase, with or without provision for sinking or similar funds, (6) conversion and/or exchange and/or classification rights, (7) the voting rights if any, and/or (8) other provisions, the whole subject to the following provisions, and to the issue of Certificate(s) of Amendment setting forth such designations, rights, privileges, restrictions and conditions attaching to the shares of each series.

Ranking of Preferred Shares.

The Preferred Shares shall be entitled to preference over the Common Shares of the Corporation and over any other shares ranking junior to the Preferred Shares with respect to payment of dividends and distribution of assets in the event of liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary, or any other distribution of the assets of the Corporation among its shareholders for the purpose of winding up its affairs and may also be given such other preferences not inconsistent with paragraphs (1) and (2) hereof over the Common Shares of the Corporation and over any other shares ranking junior to the Preferred Shares as may be determined in the case of each series of Preferred Shares authorized to be issued.

Amendment with Approval of Holders of Preferred Shares.

The rights, privileges, restrictions and conditions attaching to the Preferred Shares as a class may be repealed, altered, modified, amended or amplified by Certificate(s) of Amendment, but in each case with the approval of the holders of Preferred Shares (only as a class but not as individual series) given as hereinafter specified.

Approval of Holders of Preferred Shares.

Subject to the Provisions of the Business Corporations Act, any consent or approval given by the holders of Preferred Shares as a class shall be deemed to have been sufficiently given if it shall have been given in writing by the holders of at least sixty-six and two-thirds percent (66² ^/ ³%) of the outstanding Preferred Shares or by a resolution passed at a meeting of holders of Preferred Shares duly called and held upon not less than fifteen days’ notice at which the holders of at least a majority of the outstanding Preferred Shares are present or are represented by proxy and carried by the affirmative vote of not less than sixty-six and two-thirds percent of the votes cast at such meetings, in addition to any other consent or approval required by the Business Corporation Act. If at any such meeting the holders of a majority of the outstanding Preferred Shares are not present or represented by proxy within one-half hour after the time appointed for such meeting, then the meeting shall be adjourned to such date not less than fifteen days thereafter and to such time and place as may be designated by the Chairman, and not less than ten days’ written notice shall be given of such adjourned meeting. At such adjourned meeting, the holders of the Preferred Shares present or represented by proxy may transact the business for which the meeting was originally convened and a resolution passed by the affirmative vote of not less than sixty-six and two-thirds percent of the votes cast at such meeting shall constitute the consent or approval of the holders of Preferred Shares. On every poll taken at every meeting, every holder of Preferred Shares shall be entitled to one vote in respect of each share held. Subject to the foregoing, the formalities to be observed in respect of the giving or waiving of notice of any such meeting and the conduct thereof shall be those from time to time prescribed in the Bylaws of the Corporation with respect to meetings of shareholders. Any consent or approval given by the holders of Preferred Shares or a series as a class shall be deemed to have been sufficiently given if in the same manner as provided herein regarding holders of Preferred Shares as a class.

Dividend Rights . The Company’s Bylaws provide that holders of common shares shall be entitled to receive dividends and the Company shall pay dividends thereon, as and when declared by the board of directors of the Company out of moneys properly applicable to the payment of dividends, in such amount and in such form as the board of directors may from time to time determine and all dividends which the directors may declare on the common shares shall be declared and paid in equal amounts per share on all common shares at the time outstanding, subject to the prior rights of any shares ranking senior to the common shares with respect to priority in the payment of dividends.

e)	Voting Rights . Neither the Company’s Bylaws nor its Articles of Incorporation provide for the election or re-election of directors at staggered intervals.

f)	Redemption Provisions . The Company may purchase any of its issued common shares subject to the provisions of the Ontario Business Corporations Act.

g)	Sinking Fund Provisions . Neither the Company’s Articles of Incorporation nor its Bylaws contain sinking fund provisions.

h)	Liability to Further Capital Calls by the Company . Neither the Company’s Articles of Incorporation nor its Bylaws contain provisions allowing the Company to make further capital calls with respect to any shareholder of the Company.

i)	Discriminatory Provisions Based on Substantial Owne rship. Neither the Company’s Articles of Incorporation nor its Bylaws contain provisions that discriminate against any existing or prospective holders of securities as a result of such shareholder owning a substantial number of shares.

Miscellaneous Provisions . Neither the Articles of Incorporation nor the Bylaws of the Company address the process by which the rights of holders of stock may be changed. The general provisions of the Ontario Business Corporations Act apply to this process, and require shareholder meetings and independent voting for such changes.

A meeting of shareholders may be called at any time by resolution or by the Chairman of the Board or by the President and the Secretary shall cause notice of a meeting of shareholders to be given when directed so to do by resolution of the board or by the Chairman or the Board or the President.

The board shall call an annual meeting of the shareholders not later than eighteen (18) months after the Corporation comes into existence and subsequently not later than fifteen (15) months after holding the last preceding annual meeting.

A special meeting of shareholders may be called at any time and may be held in conjunction with an annual meeting of shareholders.

Meeting of shareholders shall be held at the place within Canada determined by the board from time to time. Notwithstanding the above subsection, a meeting of shareholders may be held outside Canada if all the shareholders entitled to vote at that meeting so agree, and a shareholder who attends a meeting of shareholders held outside Canada is deemed to have so agreed except when he attends the meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully held.

Neither the Articles of Incorporation nor the Bylaws of the Company discuss limitations on the rights to own securities or exercise voting rights thereon.

Although not expressly enumerated in the Articles, pursuant to Canadian regulations, shareholder ownership must be disclosed by any shareholder who owns more than 10% of the Company’s common stock.

There is no provision of the Company’s Articles of Incorporation or Bylaws that would delay, defer or prevent a change in control of the Company, and that would operate only with respect to a merger, acquisition, or corporate restructuring involving the Company (or any of its subsidiaries). The Company’s Bylaws do not contain a provision indicating the ownership threshold above which shareholder ownership must be disclosed. With respect to the matters discussed in this Item 10B, the law applicable to the Company is not significantly different from United States law. Neither the Articles of Incorporation nor Bylaws contain provisions governing changes in capital that are more stringent than the conditions required by law.

The Ontario Business Corporations Act contains provisions that require a "special resolution" for effecting certain corporate actions. Such a "special resolution" requires a three-quarters vote of shareholders rather than a simple majority for passage. The principle corporate actions for which the Company would require a "special resolution" include:

Changing its name;

Changing the place where its registered office is situated;

Adding, changing or removing any restriction on the business or businesses that the corporation may carry on;

Certain reorganizations of the corporation and alterations of share capital;

Increasing or decreasing the number of directors or the minimum or maximum number of directors;

Any amendment to its articles regarding constraining the issue or transfer of shares to persons who are not resident Canadians; and

Dissolution of the corporation.

10.C. Material Contracts

Not Applicable

10.D. Exchange Controls

Except as discussed in ITEM #10.E., the Company is unaware of any Canadian federal or provincial laws, decrees, or regulations that restrict the export or import of capital, including foreign exchange controls, or that affect the remittance of dividends, interest or other payments to non-Canadian holders of the common shares. The Company is unaware of any limitations on the right of non-Canadian owners to hold or vote the common shares imposed by Canadian federal or provincial law or by the charter or other constituent documents of the Company.

10.E. Taxation

A brief description of provisions of the tax treaty between Canada and the United States is included below, together with a brief outline of certain taxes, including withholding provisions, to which United States security holders are subject under existing laws and regulations of Canada. The consequences, if any, of provincial, state and local taxes are not considered.

Security holders should seek the advice of their own tax advisors, tax counsel or accountants with respect to the applicability or effect on their own individual circumstances of the matters referred to herein and of any provincial, state or local taxes.

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the US Internal Revenue Service, please be advised that any information on U.S. federal taxation contained in this report (including any exhibit hereto) is not intended or written to be used or relied upon, and cannot be used or relied upon, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

Material Canadian Federal Income Tax Consequences

The discussion under this heading relates to the principal Canadian federal income tax consequences of acquiring, holding and disposing of shares of common stock of the Company for a shareholder of the Company who is not a resident of Canada but is a resident of the United States and who will acquire and hold shares of common stock of the Company as capital property for the purposes of the Income Tax Act (Canada) (the “Canadian Tax Act”). This summary does not apply to a shareholder who carries on business in Canada through a “permanent establishment” situated in Canada or performs independent personal services in Canada through a fixed base in Canada if the shareholder’s holding in the Company is effectively connected with such permanent establishment or fixed base. This information is based on the provisions of the Canadian Tax Act and the regulations thereunder and on an understanding of the administrative practices of Canada Revenue Agency, and takes into account all specific proposals to amend the Canadian Tax Act or regulations made by the Minister of Finance of Canada as of the date hereof. This discussion is not a substitute for independent advice from a shareholder’s own Canadian and U.S. tax advisors.

The provisions of the Canadian Tax Act are subject to income tax treaties to which Canada is a party, including the Canada-United States Income Tax Convention (1980), as amended (the “Convention”).

Dividends on Common Shares and Other Income. Under the Canadian Tax Act, a non-resident of Canada is subject to Canadian withholding tax at the rate of 25 percent on dividends paid or deemed to have been paid to him or her by a corporation resident in Canada. The Convention limits the rate to 15 percent if the shareholder is a resident of the United States and the dividends are beneficially owned by and paid to such shareholder, and to 5 percent if the shareholder is also a corporation that beneficially owns at least 10 percent of the voting stock of the payor-corporation.

The amount of a stock dividend (for tax purposes) would be equal to the amount by which the paid up or stated capital of the Company had increased because of the payment of such dividend. The Company will furnish additional tax information to shareholders in the event of such a dividend. Interest paid or deemed to be paid on the Company’s debt securities held by non-Canadian residents may also be subject to Canadian withholding tax, depending upon the terms and provisions of such securities and any applicable tax treaty.

The Convention exempts from Canadian income tax dividends paid to a religious, scientific, literary, educational or charitable organization or to an organization constituted and operated exclusively to administer a pension, retirement or employee benefit fund or plan, if the organization is a resident of the United States and is exempt from income tax under the laws of the United States.

Dispositions of Common Shares. Under the Canadian Tax Act, a taxpayer’s capital gain or capital loss from a disposition of a share of common stock of the Company is the amount, if any, by which his or her proceeds of disposition exceed (or are exceeded by, respectively) the aggregate of his or her adjusted cost base of the share and reasonable expenses of disposition. One-half of a capital gain (the “taxable capital gain”) is included in income, and one-half of a capital loss in a year (the “allowable capital loss”) is deductible from taxable capital gains realized in the same year. The amount by which a shareholder’s allowable capital loss exceeds the taxable capital gain in a year may be deducted from a taxable capital gain realized by the shareholder in the three previous or any subsequent year, subject to adjustment when the capital gains inclusion rate in the year of disposition differs from the inclusion rate in the year the deduction is claimed.

If a share of common stock of the Company is disposed of to the Company other than in the open market in the manner in which shares would normally be purchased by the public, the proceeds of disposition will, in general terms, be considered as limited to the paid-up capital of the share and the balance of the price paid will be deemed to be a dividend. In the case of a shareholder that is a corporation, the amount of any capital loss otherwise determined may be reduced by the amount of dividends previously received in respect of the shares disposed of, unless the corporation owned the shares for at least 365 days prior to sustaining the loss and (together with corporations, persons and other entities, with whom the corporation was not dealing at arm’s length) did not own more than five percent of the shares of any class of the corporation from which the dividend was received. These loss limitation rules may also apply where a corporation is a member of a partnership or a beneficiary of a trust that owned the shares disposed of.

Under the Canadian Tax Act, a non-resident of Canada is subject to Canadian tax on taxable capital gains, and may deduct allowable capital losses, realized on a disposition of “taxable Canadian property.” Shares of common stock of the Company will constitute taxable Canadian property of a shareholder at a particular time if the shareholder used the shares in carrying on business in Canada, or if at any time in the five years immediately preceding the disposition 25 percent or more of the issued shares of any class or series in the capital stock of the Company belonged to one or more persons in a group comprising the shareholder and persons with whom the shareholder did not deal at arm’s length.

The Convention relieves United States residents from liability for Canadian tax on capital gains derived on a disposition of shares unless (a) the value of the shares is derived principally from “real property” in Canada, including the right to explore for or exploit natural resources and rights to amounts computed by reference to production, (b) the shareholder was resident in Canada for 120 months during any period of 20 consecutive years preceding, and at any time during the 10 years immediately preceding, the disposition and the shares were owned by him when he or she ceased to be resident in Canada, or (c) the shares formed part of the business property of a “permanent establishment” that the holder has or had in Canada within the 12 months preceding the disposition.

Material United States Federal Income Tax Considerations

The following discussion is based upon the sections of the Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations, published Internal Revenue Service ("IRS") rulings, published administrative positions of the IRS and court decisions that are currently applicable. This discussion does not consider the potential effects, both adverse and beneficial, of any recently proposed legislation that, if enacted, could be applied, possibly on a retroactive basis, at any time. Holders and prospective holders of shares of the Company should consult their own tax advisors about the Federal; state, local and foreign tax consequences of purchasing, owning and disposing of shares of the Company.

U.S. Holders . As used herein, a "U.S. Holder" includes a holder of shares of the Company who is a citizen or resident of the United States, a corporation created or organized in or under the laws of the United States or of any political subdivision thereof, any entity that is taxable as a corporation for U.S. tax purposes and any other person or entity whose ownership of shares of the Company is effectively connected with the conduct of a trade or business in the United States. A U.S. Holder does not include persons subject to special provisions of Federal income tax law, such as tax exempt organizations, qualified retirement plans, financial institutions, insurance companies, real estate investment trusts, regulated investment companies, broker-dealers, nonresident alien individuals or foreign corporations whose ownership of shares of the Company is not effectively connected with conduct of trade or business in the United States, shareholders who acquired their stock through the exercise of employee stock options or otherwise as compensation and shareholders who hold their stock as ordinary assets and not as capital assets.

Distributions on Shares of the Company . U.S. Holders receiving dividend distributions (including constructive dividends) with respect to shares of the Company are required to include in gross income for United States Federal income tax purposes the gross amount of such distributions to the extent that the Company has current or accumulated earnings and profits as defined under U.S. Federal tax law, without reduction for any Canadian income tax withheld from such distributions. Such Canadian tax withheld may be credited against the U.S. Holder's United States Federal income tax liability or, alternatively, may be deducted in computing the U.S. Holder's United States Federal taxable income by those who itemize deductions. (See discussion that is more detailed at "Foreign Tax Credit" below). To the extent that distributions exceed current or accumulated earnings and profits of the Company, they will be treated first as a return of capital up to the U.S. Holder's adjusted basis in the shares and thereafter as gain from the sale or exchange of the shares. Preferential tax rates for net capital gains are applicable to a U.S. Holder that is an individual, estate or trust. There are currently no preferential tax rates for long-term capital gains for a U.S. Holder that is a corporation.

Dividends paid on the shares of the Company are not expected to be eligible for the dividends received deduction provided to corporations receiving dividends from certain United States corporations. A U.S. Holder that is a corporation may be entitled to a 70% deduction of the United States source portion of dividends received from the Company (unless the Company qualifies as a "foreign personal holding company" or a "passive foreign investment company", as defined below) if such U.S. Holder owns shares representing at least 10% of the voting power and value of the Company.

In the case of foreign currency received as a dividend that is not converted by the recipient into U.S. Dollars on the date of receipt, a U.S. Holder will have a tax basis in the foreign currency equal to its U.S. Dollar value on the date of receipt. Any gain or loss recognized upon a subsequent sale or other disposition of the foreign currency, including the exchange for U.S. Dollars, will be ordinary income or loss. However, for tax years after 1997, an individual whose realized foreign exchange gain does not exceed U.S. $200 will not recognize that gain, to the extent that there are not expenses associated with the transaction that meet the requirement for deductibility as a trade or business expense (other than travel expenses in connection with a business trip or as an expense for the production of income).

Foreign Tax Credit. A U.S. Holder who pays (or has withheld from distributions) Canadian income tax with respect to the ownership of shares of the Company may be entitled, at the option of the U.S. Holder, to either a deduction or a tax credit for such foreign tax paid or withheld. It will be more advantageous to claim a credit because a credit reduces United States Federal income taxes on a dollar-for-dollar basis, while a deduction merely reduces the taxpayer's income subject to tax. This election is made on a year-by-year basis and applies to all foreign taxes paid by (or withheld from) the U.S. Holder during that year. There are significant and complex limitations that apply to the credit, among which is the general limitation that the credit cannot exceed the proportionate share of the U.S. Holder's United States Federal income tax liability that the U.S. Holder's foreign source income bears to his or its worldwide taxable income. In the determination of the application of this limitation, the various items of income and deduction must be classified into foreign and domestic sources. Complex rules govern this classification process. There are further limitations on the foreign tax credit for certain types of income such as "passive income", "high withholding tax interest", "financial services income", and "shipping income". The availability of the foreign tax credit and the application of the limitations on the credit are fact specific and holders and prospective holders of shares of the Company should consult their own tax advisors regarding their individual circumstances.

In the case of certain U.S. Holders that are corporations (other than corporations subject to Subchapter S of the Code), owning 10% or more of the Company's Common Shares, a portion of the qualifying Canadian income tax paid by the Company will also be available as a foreign tax credit for U.S. federal income tax purposes, at the election of the U.S. Holder.

Disposition of Shares of the Company. A U.S. Holder will recognize a gain or loss upon the sale of shares of the Company equal to the difference, if any, between (i) the amount of cash plus the fair market value of any property received, and (ii) the shareholder's tax basis in the shares of the Company. This gain or loss will be a capital gain or loss if the shares are a capital asset in the hands of the U.S. Holder, and will be a short-term or long-term capital gain or loss depending upon the holding period of the U.S. Holder. Gains and losses are netted and combined according to special rules in arriving at the overall capital gain or loss for a particular tax year. Deductions for net capital losses are subject to significant limitations. Corporate capital losses (other than losses of corporations electing under Subchapter S or the Code) are deductible to the extent of capital gains. Non-corporate taxpayers may deduct net capital losses, whether short-term or long-term, up to U.S. $3,000 a year (U.S. $1,500 in the case of a married individual filing separately). For U.S. Holders that are individuals, any unused portion of such net capital loss may be carried over to be used in later tax years until such net capital loss is thereby exhausted. For U.S. Holders that are corporations (other than corporations subject to Subchapter S of the Code), an unused net capital loss may be carried back three years from the loss year and carried forward five years from the loss year to be offset against capital gains until such net capital loss is thereby exhausted.

Other Considerations

In the following circumstances, the above sections of this discussion may not describe the United States Federal income tax consequences resulting from the holding and disposition of shares of the Company:

Foreign Personal Holding Company. If at any time during a taxable year more than 50% of the total combined voting power or the total value of the Company's outstanding shares is owned, directly or indirectly, by five or fewer individuals who are citizens or residents of the United States and 60% (50% in subsequent years) or more of the Company's gross income for such year was derived from certain passive sources (e.g., from dividends received from its subsidiaries), the Company would be treated as a "foreign personal holding company". In that event, U.S. Holders that hold shares of the Company (on the earlier of the last day of the Company's tax year or the last date on which the Company was a foreign personal holding company) would be required to include in gross income for such year their allowable portions of such passive income to the extent the Company does not actually distribute such income.

Foreign Investment Company. If 50% or more of the combined voting power or total value of the Company's outstanding shares are held, directly or indirectly, by citizens or residents of the United States, United States domestic partnerships or corporations, or estates or trusts other than foreign estates or trusts (as defined by the Code Section 7701 (a)(31)), and the Company is found to be engaged primarily in the business of investing, reinvesting, or trading in securities, commodities, or any interest, it is possible that the Company might be treated as a "foreign investment company" as defined in Section 1246 of the Code, causing all or part of any gain realized by a U.S. Holder selling or exchanging shares of the Company to be treated as ordinary income rather than capital gain.

Passive Foreign Investment Company. As a foreign corporation with U.S. Holders, the Company will be treated as a passive foreign investment company ("PFIC"), as defined in Section 1297 of the Code, if 75% or more of its gross income in a taxable year is passive income, or the average percentage of the Company’s assets (by value) during the taxable year which produce passive income or which are held for production of same is at least 50%. Passive income is defined to include gross income in the nature of dividends, interest, royalties, rents and annuities; excess of gains over losses from certain transactions in any commodities not arising inter alia from a PFIC whose business is actively involved in such commodities; certain foreign currency gains; and other similar types of income. Foreign mining companies that are in the exploration stage may have little or no income from operations and/or may hold substantial cash and short-term securities that pay interest and dividends while awaiting expenditure in connection with the business. Given the complexities of determining what expenditures may be deductible and of how assets held for production of active income should be valued, the Company, based on advice from its professional advisers, cannot conclude whether it is a PFIC.

It is not the intention of the Company to be considered a PFIC and the Company does not consider this to be a material risk. In the event that it were to become classified as a PFIC, the following should be taken into consideration. U.S. Holders owning shares of a PFIC are subject to a special tax and to an interest charge based on the value of deferral of U.S. tax attributable to undistributed earnings of a PFIC for the period during which the shares of the PFIC are owned. This special tax would apply to any gain realized on the disposition of shares of a PFIC. In addition, the gain is subject to U.S. federal income tax as ordinary income, taxed at top marginal rates, rather than as capital gain income. The special tax would also be payable on receipt of excess distributions (any distributions received in the current year that are in excess of 125% of the average distributions received during the 3 preceding years or, if shorter, the shareholder's holding period). If, however, the U.S. Holder makes a timely election to treat a PFIC as a qualified electing fund ("QEF") with respect to such shareholder's interest and the Company provides an annual information statement, the above-described rules will not apply. The Company will provide such an information statement upon request from a U.S. Holder for current and prior taxable years. Instead, the electing U.S. Holder would include annually in his gross income his pro rata share of the PFIC's ordinary earnings and any net capital gain regardless of whether such income or gain was actually distributed. A U.S. Holder of a PFIC treated as a QEF can, however, further elect to defer the payment of United States Federal income tax on such income and gain inclusions, with tax payments ultimately requiring payment of an interest factor. In addition, with a timely QEF election, the electing U.S. Holder will obtain capital gain treatment on the gain realized on disposition of such U.S. Holder’s interest in the PFIC. Special rules apply to U.S. Holders who own their interests in a PFIC through intermediate entities or persons.

Effective for tax years of U.S. Holders beginning after December 31, 1997, U.S. Holders who hold, actually or constructively, marketable stock of a foreign corporation that qualifies as a PFIC may elect to mark such stock to the market (a “mark-to-market election”). If such an election is made, such U.S. Holder will not be subject to the special taxation rules of PFIC described above for the taxable years for which the mark-to-market election is made. A U.S. Holder who makes such an election will include in income for the taxable year an amount equal to the excess, if any, of the fair market value of the shares of the Company as of the close of such tax year over such U.S. Holder's adjusted basis in such shares. In addition, the U.S. Holder is allowed a deduction for the lesser of (i) the excess, if any, of such U.S. Holder's adjusted tax basis in the shares over the fair market value of such shares as of the close of the tax year, or (ii) the excess, if any of (A) the mark-to-market gains for the shares in the Company included by such U.S. Holder for prior tax years, including any amount which would have been included for any prior year but for Section 1291 interest on tax deferral rules discussed above with respect to a U.S. Holder, who has not made a timely QEF election during the year in which he holds (or is deemed to have held) shares in the Company and the Company is a PFIC (“Non-Electing U.S. Holder”), over (B) the mark-to-market losses for shares that were allowed as deductions for prior tax years. A U.S. Holder's adjusted tax basis in the shares of the Company will be increased or decreased to reflect the amount included or deducted as a result of mark-to-market election. A mark-to-market election will apply to the tax year for which the election is made and to all later tax years, unless the PFIC stock ceases to be marketable or the IRS consents to the revocation of the election.

The IRS has issued proposed regulations that would treat as taxable certain transfers of PFIC stock by a Non-Electing U.S. Holder that are not otherwise taxed, such as gifts, exchanges pursuant to corporate reorganizations, and transfers at death. In such cases, the basis of the Company's shares in the hands of the transferee and the basis of any property received in the exchange for those shares would be increased by the amount of gain recognized. A U.S. Holder who has made a timely QEF election (as discussed herein) will not be taxed on certain transfers of PFIC stock, such as gifts, exchanges pursuant to corporate reorganizations, and transfers at death. The transferee's basis in this case will depend on the manner of the transfer. The specific tax effect to the U.S. Holder and the transferee may vary based on the manner in which the shares of the Company are transferred. Each U.S. Holder should consult a tax advisor with respect to how the PFIC rules affect their tax situation.

The PFIC and QEF election rules are complex. U.S. Holders should consult a tax advisor regarding the availability and procedure for making the QEF election as well as the applicable method for recognizing gains or earnings and profits under the foregoing rules.

Controlled Foreign Corporation. If more than 50% of the voting power of all classes of stock or the total value of the stock of the Company is owned, directly or indirectly, by citizens or residents of the United States, United States domestic partnerships and corporations or estates or trusts other than foreign estates or trusts, each of whom own 10% or more of the total combined voting power of all classes of stock of the Company ("United States shareholder"), the Company could be treated as a "controlled foreign corporation" under Subpart F of the Code. This classification would effect many complex results including the required inclusion by such United States shareholders in income of their pro rata share of "Subpart F income" (as specially defined by the Code) of the Company. Subpart F requires current inclusions in the income of United States shareholders to the extent of a controlled foreign corporation's accumulated earnings invested in "excess passive" assets (as defined by the Code). In addition, under Section 1248 of the Code, a gain from the sale or exchange of shares by a U.S. Holder who is or was a United States shareholder at any time during the five year period ending with the sale or exchange is treated as ordinary dividend income to the extent of earnings and profits of the Company attributable to the stock sold or exchanged. Because of the complexity of Subpart F, and because it is not clear that Subpart F would apply to the U.S. Holders of shares of the Company, a more detailed review of these rules is outside of the scope of this discussion.

If the Company is both a PFIC and controlled foreign corporation, the company will not be treated as a PFIC with respect to United States shareholders of the controlled foreign corporation. This rule will be effective for taxable years of the Company ending with or within such taxable years of United States shareholders.

Summary

Management believes this discussion covers all material tax consequences. Nevertheless, this is not intended to be, nor should it be construed to be, legal or tax advice to any holder of common shares of the Company Holders and prospective holders are encouraged to consult their own tax advisers with respect to their particular circumstances .

10. H . D ocuments on Display

Documents responsive to this item may be obtained by request from the Company at its principal executive offices and from SEDAR, www.sedar.com

10. I . Subsidiary Information

Not applicable

Item 11 . Quantitative and Qualitative Disclosures About Market Risk

Foreign Currency Risk

The Company operates internationally and is exposed to foreign exchange risk as certain expenditures are denominated in non-Canadian Dollar currencies.

The Company has been exposed to this fluctuation and has not implemented a program against these foreign exchange fluctuations.

A 10% strengthening of the US Dollars against Canadian Dollars would have increased the net equity by approximately $233,843 (2017 - $67,000) due to reduction in the value of net liability balance. A 10% of weakening of the US Dollar against Canadian Dollar at December 31, 2018 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 December 31, 2018 and 2017 are as follows:

	2018		2017
	USD		USD
Cash		14,741		122,319
Accounts receivable		660,704		518,999
Accounts payable		189,586		104,225
Accrued liabilities		23,882		-

The Company operates one segment of its business in China, and a substantial portion of our operating expenses are in Canadian dollars, whereas our revenue from co-publishing agreements are primarily in Renminbi which is first converted to US dollars then to Canadian dollars.

A significant adverse change in foreign currency exchange rates between the Canadian dollars relative to US dollars or Renminbi to US dollars could have a material effect on our consolidated results of operations, financial position or cash flows. We have not hedged exposures denominated in foreign currencies, as they are not material at this time.

	RMB		USD		USD		USD		USD
			At 12/31/2018		+0.05		+0.10		+0.15
Year-end Exchange Rate For 1 RMB to USD				0.1454		0.1527		0.1599		0.1672
Annual Revenue from China		8,540,392		1,241,773		1,303,862		1,365,950		1,428,039
Accounts Receivable		4,079,693		593,187		622,847		652,506		682,165

	USD		CAD		CAD		CAD		CAD
			Year 2018		+0.05		+0.10		+0.15
Average Annual Exchange Rate for 1 USD to CAD				1.2962		1.3610		1.4258		1.4461
Annual Revenue from China		1,274,011		1,651,373		1,733,941		1,816,510		1,899,079

	USD		CAD		CAD		CAD		CAD
			At 12/31/2018		+0.05		+0.10		+0.15
Year-end Exchange Rate for 1 USD to CAD				1.3644		1.4326		1.8008		2.2372
Cash		14,741		20,113		27,373		28,677		32,979
Accounts Receivable		660,704		901,465		1,226,902		1,285,326		1,478,125
Accounts Payable		23,882		32,585		44,348		46,460		53,429

Item 12 . Description of Securities Other than Equity Securities

None

PART II

Item 13. Defaults, Dividend Arrearages and Delinquencies

None

Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds

None

ITEM 15 . CONTROLS AND PROCEDURES

15.A. Evaluation of Controls and Procedures

As of the end of the period covered by this report (“Date of Evaluation”), an evaluation was carried out under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15 (e) and 15d-15(e) enacted under the Securities Exchange Act of 1934 (“1934 Act”). Based on that evaluation, the CEO and CFO have concluded that the Company’s disclosure controls and procedures were not effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the 1934 Act is effective at the reasonable assurance level. Additionally, the CEO and CFO have concluded that the Company’s disclosure controls and procedures were not effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the 1934 Act is accumulated and communicated to Company management, including such CEO and CFO, to allow timely decisions regarding required disclosure. The material weakness in such disclosure controls and procedures was identified that the revenue was not tracked based on performance obligations. This resulted in early recognition of revenue. The material change to such disclosure controls and procedures was made, and the revenue was adjusted accordingly.

15.B. Management’s Report on Internal Control Over Financial Reporting

Management of the Company is responsible for establishing and maintaining effective internal control over financial reporting. Internal control over financial reporting is defined as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers, or persons performing similar functions, and affected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with International Financial Reporting Standards (“IFRS”) and includes those policies and procedures that:

. pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company:

. provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS, and that receipts and expenditures of the Company are being made only in accordance with the authorizations of management and directors of the Company; and

. provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2018 based on the criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management concluded that, as of December 31, 2018 the Company’s internal control over financial reporting was not effective. The controls have been implemented to ensure the financial report is effective at the reasonable assurance level.

The Annual Report on Form 20-F/A filed with the Commission on December 28, 2018 contained a typographical error in its version of the preceding paragraph. The paragraph should have read as follows: “Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2017 based on the criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management concluded that, as of December 31, 2017 the Company’s internal control over financial reporting is effective at the reasonable assurance level.”

The effectiveness of any system of internal control over financial reporting, including the Company’s, is subject to inherent limitations, including the exercise of judgment in designing, implementing, operating, and evaluating the controls and procedures, and the inability to eliminate misconduct completely. Accordingly, in designing and evaluating the disclosure controls and procedures, Management recognizes that any system of internal control over financial reporting, including the Company’s, no matter how well designed and operated, can only provide reasonable, and not absolute, assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that Management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. Because of the inherent limitations of internal control over financial reporting, including miscommunication, the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be fully preventable or detectable on a timely basis. Also, projections of any evaluation of effectiveness of the internal control over financial reporting to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The Company intends to continue to monitor its internal controls and upgrade same as necessary or appropriate for its business, but cannot insure that such improvements will be sufficient to provide the Company with effective internal control over financial reporting.

15.C Attestation report of the registered public accounting firm

Not applicable, no auditor assessment is required.

15.D Changes in internal control over financial reporting

There is no change in the internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of 17 CFR 240. 13a-15 or 240.15d-15 that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materialy affect the internal control over financial reporting.

Recent Accounting Pronouncements

The following pronouncements issued by the IASB and interpretations published by IFRIC will become effective for annual periods beginning on or after January 1, 2019

Effective for P eriods B egin ning on or after January 1, 2019

IFRS 16, Leases replaces IAS 17, Leases and related interpretations. The core principle is that a lessee recognizes assets and liabilities for all leases with a lease term of more than 12 months. A lessee is required to recognize a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments. Assets and liabilities arising from a lease are initially measured on a present value basis. The measurement includes non-cancellable lease payments (including inflation-linked payments), and also includes payments to be made in optional periods if the lessee is reasonably certain to exercise an option to extend the lease, or not to exercise an option to terminate the lease. The new standard is intended to provide a faithful representation of leasing transactions, in particular those that do not currently require the lessees to recognize an asset and liability arising from an operating lease. IFRS 16 is effective for annual periods beginning on January 1, 2019, with early adoption permitted for entities that would also apply IFRS 15, Revenue from Contracts with Customers.

On January 1, 2019, the Company will adopt IFRS 16 on a limited retrospective basis which is to restrospectively restate the existing operating leases. The right-of-use assets and lease liabilities will be recognized. The depreciation will be recorded on a straight-line basis. In the statement of cash flow, the total amount of cash paid into principal and related the interest will be presented within financing activities. Currently, such expenses are recorded on straight-line basis and are included in “Lease expense”.

ITEM 16. RESERVED

ITEM 16A. AUDIT COMMITTE E FINANCIAL EXPERT

During the past fiscal year, the members of the audit committee (the " Audit Committee ") were Martin Bernholtz (" Chairman "), Tommy Weibing Gong and Michael Kraft, of whom Martin Bernholtz and Tommy Gong are independent. Martin Bernholtz is an audit committee financial expert and was succeeded as Chairman in August 2013. Each member of the Audit Committee is financially literate as defined by MI 52-110.

A member of the Audit Committee is independent if the member has no direct or indirect material relationship with the Company. A material relationship means a relationship which could, in the view of the Board, reasonably interfere with the exercise of a member's independent judgment.

A member of the Audit Committee is considered financially literate if he or she has the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the Company. Each has acquired these attributes through relevant experience serving as directors and/or audit committee members of various other private and public companies.

ITEM 16B. CODE OF ETHICS

The Company has adopted a “Code of Conduct”, the text of such code is available through its internet website, www.lingomedia.com .

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Nature of Services	Fees Paid to Auditor Year-ended December 31, 2018		Fees Paid to Auditor Year-ended December 31, 2017		Fees Paid to Auditor Year-ended December 31, 2016
Audit Fees (1)		86,294		85,818	$	84,370
Audit-Related Fees (2)		8,050		17,336		7,800
Tax Fees (3)		4,029		4,500		9,414
All Other Fees (4)		Nil		Nil		Nil
Total		98,374		107,653	$	101,584

Notes:

(1)

" Audit Fees " include fees necessary to perform the annual audit and any quarterly reviews of the Company's financial statements

(2)

" Audit-Related Fees " include services that are traditionally performed by the auditor. These audit-related services include employee benefit audits, due diligence assistance, accounting consultations on proposed transactions, internal control reviews and audit or attest services not required by legislation or regulation.

(3)

" Tax Fees " include fees for all tax services other than those included in "Audit Fees" and "Audit-Related Fees". This category includes fees for tax compliance, tax planning and tax advice. Tax planning and tax advice includes assistance with tax audits and appeals, tax advice related to mergers and acquisitions, and requests for rulings or technical advice from tax authorities

(4)

" All Other Fees " include all other non-audit services

ITEM 16D. NOT APPLICABLE

ITEM 16E. N OT APPLICABLE

ITEM 16F. NOT APPLICABLE

ITEM 16G. NOT APPLICABLE

ITEM 16H. NOT APPLICABLE

PART III

ITEM 17. FINANCIAL STATEMENTS

The Company has elected to provide financial statements pursuant to ITEM #18.

ITEM 1 8 . FINANCIAL STATEMENTS

The Company's financial statements are stated in Canadian Dollars (CAD) and are prepared in accordance with with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”).

The financial statements as required under ITEM #18 are attached hereto as exhibits. The audit reports of RSM Canada LLP are included herein immediately preceding the financial statements and schedules.

Audited Financial Statements

Auditor's Report, dated April 30, 2019

Consolidated Balance Sheets at December 31, 2018 and December 31, 2017

Consolidated Statements of Comprehensive Income

for the years ended December 31, 2018, 2017, and 2016

Consolidated Statements of Changes in Equity

for the years ended December 31, 2018, 2017, and 2016

Consolidated Statements of Cash Flows

for the years ended December 31, 2018, 2017, and 2016

Notes to Financial Statements

ITEM 19. EXHIBITS

1.1 Articles of Amendment. Certificates of Incorporation, By-Laws/Articles, incorporated by reference from the Lingo Media Inc. F-1 Registration Statement filed August 20, 2002.

Amended By-Laws of the Company incorporated by reference from the Lingo Media Corporation Form 20-F/A filed February 17, 2012.

12.1. Certificate of the CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

12.2. Certificate of the CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

13.1 Certificate of the CEO and CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

SIGNATURES

The registrant hereby certifies that it meets all the requirements for filing on Form 20-F and that it has duly caused this annual report to be signed on its behalf.

	LINGO MEDIA CORPORATION

	By:	/s/ Gali Bar-Ziv

	Gali Bar-Ziv
	President and Chief Executive Officer

	By:	/s/ Khurram Qureshi

	Khurram R. Qureshi Chief Financial Officer
	May 15, 2019

LINGO MEDIA CORPORATION

Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

Management’s Responsibility

To the Shareholders of

Lingo Media Corporation

Management is responsible for the preparation and presentation of the accompanying consolidated financial statements, including responsibility for significant accounting judgments and estimates in accordance with International Financial Reporting Standards and ensuring that all information in the Management Discussion & Analysis is consistent with the statements. This responsibility includes selecting appropriate accounting principles and methods, and making decisions affecting the measurement of transactions in which objective judgment is required.

In discharging its responsibilities for the integrity and fairness of the consolidated financial statements, management designs and maintains the necessary accounting systems and related internal controls to provide reasonable assurance that transactions are authorized, assets are safeguarded and financial records are properly maintained to provide reliable information for the preparation of financial statements.

The Board of Directors and the Audit Committee include some Directors who are neither management nor employees of the Company. The Board is responsible for overseeing management in the performance of its financial reporting responsibilities, and for approving the financial information included in the annual report. The Audit Committee has the responsibility of meeting with management and external auditors to discuss the internal controls over the financial reporting process, auditing matters and financial reporting issues. The Audit Committee is also responsible for recommending the appointment of the Company’s external auditors.

RSM Canada LLP, an independent firm of Chartered Professional Accountants, is appointed by the Audit Committee of the Board to audit the consolidated financial statements and report directly to them; their report follows. The external auditors have full and free access to, and meet periodically and separately with, both the Audit Committee and management to discuss their audit findings.

April 30, 2019

/s/ Gali Bar-Ziv		/s/ Khurram Qureshi
President & CEO		Chief Financial Officer

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of Lingo Media Corporation

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated statement balance sheets of Lingo Media Corporation and its subsidiaries, (collectively, the Company), as of December 31, 2018 and 2017, and the related consolidated statements of comprehensive income (loss), changes in equity and cash flows for each of the three years in the period ended December 31, 2018, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and their financial performance and their cash flows for each of the three years in the period ended December 31, 2018, in conformity with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Chartered Professional Accountants

Licensed Public Accountants

April 30, 2019

Toronto, Ontario

We have served as the Company’s auditor since 2008.

LINGO MEDIA CORPORATION

Consolidated Financial Statements

As at December 31, 2018 and December 31, 2017

Contents

Consolidated Financial Statements	Page

Consolidated Balance Sheets	5
Consolidated Statements of Comprehensive Income (Loss)	6
Consolidated Statements of Changes in Equity	7
Consolidated Statements of Cash Flows	8
Notes to Consolidated Financial Statements	9 – 31

LINGO MEDIA CORPORATION

Consolidated Balance Sheets

(Expressed in Canadian Dollars, unless otherwise stated)

As at December 31, 2018 and December 31, 2017

	Notes		December 31, 201 8			December 31, 201 7
ASSETS

Current Assets

Cash			$	233,843		$	327,434
Accounts and grants receivable		6		913,458			970,467
Prepaid and other receivables				101,539			205,482
				1,248,840			1,503,383
Non-Current Assets
Property and equipment		7		53,164			30,689
TOTAL ASSETS			$	1,302,004		$	1,534,072

LIABILITIES AND EQUITY

Current Liabilities

Accounts payable			$	312,034		$	488,636
Accrued liabilities				167,558			155,156
Contract liability		11		217,259			-
Lease inducement				46,559			36,526
Loans payable		12		-			300,000
				743,410			980,318
Equity

Share capital		13		21,914,722			21,914,722
Share-based payment reserve		14		3,955,167			3,792,678
Accumulated other comprehensive income				(271,245	)		(303,447	)
Deficit				(25,040,050	)		(24,850,199	)
TOTAL EQUITY				558,594			553,754
TOTAL LIABILITIES AND EQUITY			$	1,302,004		$	1,534,072
Commitments and contingency		22

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

These consolidated financial statements are authorized for issue by the Board of Directors on April 30, 2019.

/s/ Gali Bar-Ziv		/s/ Martin Bernholtz
Director		Director

LINGO MEDIA CORPORATION

Consolidated Statements of Comprehensive Income (Loss)

For the years ended December 31, 2018, 2017 and 2016

(Expressed in Canadian Dollars, unless otherwise stated)

	Notes		201 8			201 7			201 6
Revenue		21	$	1,940,182		$	2,776,768		$	3,195,221
Expenses
Selling, general and administrative				1,200,766			1,368,153			1,364,736
Amortization – intangibles				-			1,051,928			1,003,485
Bad debt (recovery)				(293,379	)		732,254			-
Direct costs				271,020			225,618			385,384
Development costs				481,992			2,692,009			-
Share-based payments		14		162,489			371,513			-
Loss on acquisition		10		-			80,818			-
Impairment loss – goodwill				-			139,618			-
Impairment loss – intangible assets				-			1,948,082			-
Depreciation – property and equipment		7		18,369			6,644			7,297
Total Expenses				1,841,257			8,616,636			2,760,902
In come /(Loss) from Operations				98,925			(5,839,869	)		434,319
Net Finance Charges
Interest expense				51,898			53,709			35,768
Foreign exchange loss (gain)				(38,351	)		189,783			146,599
Profit / (Loss) Before Income Tax				85,378			(6,083,360	)		251,952

Income tax expense		16		189,534			178,022			187,705
Net Profit / (Loss) for the Year				(104,156	)		(6,261,382	)	$	64,247
Other Comprehensive Income

Items that may be subsequently transferred to net profit (loss). Exchange gain (loss) on translating foreign operations				32,202			(1,410	)		60,173
Total Comprehensive Income (Loss)			$	(71,954	)	$	(6,262,792	)	$	124,420
Earnings (Loss) per Share
Basic		15	$	(0.00	)	$	(0.18	)	$	0.00
Diluted		15	$	(0.00	)	$	(0.18	)	$	0.00
Weighted Average Number of Common Shares Outstanding
Basic		15		35,529,192			35,529,192			33,987,383
Diluted		15		35,529,192			35,529,192			34,951,693

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

LINGO MEDIA CORPORATION

Consolidated Statements of Changes in Equity

For the years ended December 31, 2018, 2017 and 2016

(Expressed in Canadian Dollars, unless otherwise stated)

	Issued Share Capital (Note 1 3 )				Share-Based Payment Reserve			Warrants			Accumulated Other Comprehensive Income			Deficit			Total Equity
	Number of common shares		Amount
Balance as at J anuary 1 , 201 6		29,518,343	$	18,927,388	$	2,695,038		$	1,439,632		$	(362,210	)	$	(18,653,064	)	$	4,046,784
Profit for the year		-		-		-			-			-			64,247			64,247
Other comprehensive gain		-		-		-			-			60,173			-			60,173
Warrants exercise (note 13 (d))		5,711,683		2,904,840		-			(683,578	)		-			-			2,221,262
Expired warrant		-		-		756,054			(756,054	)		-			-			-
Stock option exercise (note 13 (c))		299,166		82,494		(29,927	)		-			-			-			52,567
Balance as at December 31, 2 01 6		35,529,192	$	21,914,722	$	3,421,165		$	-		$	(302,037	)	$	(18,588,817	)	$	6,445,033
Loss for the year		-		-		-			-			-			(6,261,382	)		(6,261,382	)
Other comprehensive loss		-		-		-			-			(1,410	)		-			(1,410	)
Share-based payments charged to operations		-		-		371,513			-			-			-			371,513
Balance as at December 31, 201 7		35,529,192	$	21,914,722	$	3,792,678		$	-		$	(303,447	)	$	(24,850,199	)	$	553,754
Contract adjustment for 2017 (note 4.1)		-		-		-			-			-			(85,695	)		(85,695	)
Loss for the year		-		-		-			-			-			(104,156	)		(104,156	)
Other comprehensive gain		-		-		-			-			32,202			-			32,202
Share-based payments charged to operations		-		-		162,489			-			-			-			162,489
Balance as at December 31, 201 8		35,529,192	$	21,914,722	$	3,955,167		$	-		$	(271,245	)	$	(25,040,050	)	$	558,594

No preference shares were issued at December 31, 2018, 2017 and 2016.

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

LINGO MEDIA CORPORATION

Consolidated Statements of Cash Flows

For the years ended December 31, 2018, 2017 and 2016

(Expressed in Canadian Dollars, unless otherwise stated)

	201 8			201 7			201 6
CASH FLOWS FROM OPERATING ACTIVITIES
Net Profit (Loss) for the Year	$	(104,156	)	$	(6,261,382	)	$	64,247
Adjustments to Net Profit (Loss) for Non-Cash Items:
Amortization – intangibles		-			1,051,928			1,003,485
Share-based payments		162,489			371,513			-
Unrealized foreign exchange loss (gain)		32,378			(1,410	)		61,166
Lease inducement		(23,147	)		(21,147	)		57,673
Bad debt		-			732,254			-
Long term deposit		-			300,000			-
Depreciation - property and equipment		18,369			6,644			7,297
Loss on asset acquisition		-			80,819			-
Impairment loss – intangible assets		-			1,948,082			-
Impairment loss – goodwill		-			139,618			-
Loss on disposition of property and equipment		-			-			2,670
Operating Profit (Loss) before Working Capital Changes		85,933			(1,653,081	)		1,196,538
Working Capital Adjustments:
Accounts and grants receivable		57,008			1,429,133			(1,083,394	)
Prepaid and other receivables		103,943			374,364			(91,692	)
Accounts payable		(176,602	)		28,867			22,777
Accrued liabilities		12,402			(94,580	)		(105,458	)
Contract liability		131,564			-			-
Cash Generated from (Used in) Operating Activities		214,248			84,702			(61,229	)
CASH FLOWS FROM INVESTING ACTIVITIES
Long-term deposit		-			-			(300,000	)
Cash (net) paid for acquisition		-			9,355			-
Expenditures on software, web development and content development costs		-			-			(1,798,687	)
Purchase of property and equipment		(7,839	)		(926	)		(8,632	)
Cash Used in Investing Activities		(7,839	)		8,429			(2,107,319	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from stock option exercise		-			-			52,567
Proceeds from warrant exercise		-			-			2,221,262
Proceeds from loans		420,000			1,460,000			150,000
Repayment of loans		(720,000	)		(1,310,000	)		(580,000	)
Cash Generated from Financing Activities		(300,000	)		150,000			1,843,829
NET INCREASE (DECREASE) IN CASH		(93,591	)		243,131			(324,719	)
Cash at the Beginning of the Year		327,434			84,303			409,022
Cash at the End of the Year	$	233,843		$	327,434		$	84,303

Supplemental cash flow information in Note 23

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

LINGO MED I A CORPO R A TION

Notes to Consolidated Financial Statements

December 31, 2018, 2017 and 2016

(Expressed in Canadian Dollars, unless otherwise stated)

1.	CORPORATE INFORMATION

Lingo Media Corporation (“Lingo Media” or the “Company”) is a publicly listed company incorporated in Canada with limited liability under the legislation of the Province of Ontario and its shares are listed on the TSX Venture Exchange and inter-listed on the OTC Marketplace. The consolidated financial statements of the Company as at and for the year ended December 31, 2018 comprise the Company and its wholly-owned subsidiaries: Lingo Learning Inc., Lingo Group Limited ELL Technologies Ltd., ELL Technologies Limited, Vizualize Technologies Corporation, , Speak2Me Inc., and Parlo Corporation (the “Group”).

Lingo Media is an EdTech company that is ‘ Changing the way the world learns English ’. The Group 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 and records 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

These consolidated financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations of the IFRS Interpretations Committee (“IFRIC”). These consolidated financial statements were authorized by the Board of Directors on April 30, 2019.

2.2

Basis of measurement

These consolidated financial statements have been prepared on the historical cost basis except as provided in note 4. The comparative figures presented in these consolidated financial statements are in accordance with the same accounting policies.

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”). 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. The functional currency of ELL Technologies Limited and Lingo Group Limited are 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”.

LINGO MED I A CORPO R A TION

Notes to Consolidated Financial Statements

December 31, 2018, 2017 and 2016

(Expressed in Canadian Dollars, unless otherwise stated)

3.	SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS

The preparation of the Company’s consolidated financial statements in conformity with IFRS requires management to make judgements, 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 and estimates 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 currency

●

Determination of expected credit loss

●

Recognition of internally developed intangibles

●

Recognition of government grant and grant receivable

●

Recognition of deferred tax assets

●

Valuation of share-based payments

4.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

4.1

Revenue recognition

Recently Adopted

IFRS 15, Revenue Recognition from Contracts with Customers (“IFRS 15”)

On January 1, 2018, the Company adopted the new rules under IFRS 15 retrospectively with the cumulative effect of initially applying the rules recognized at the date of initial application. Under IFRS 15, revenue is recognized at an amount that reflects the expected consideration receivable in exchange for transferring goods or services to a customer, applying the following five steps:

Identify the contract with a customer;

Identify the performance obligations in the contract;

Determine the transaction price;

Allocate the transaction price to the performance obligations in the contract; and

Recognize revenue when (or as) the entity satisfies a performance obligation.

The new standard also provides guidance relating to principal versus agent relationships, licenses of intellectual property, contract costs and the measurement and recognition of gains and losses on the sale of certain non-financial assets such as property and equipment. Additional disclosures are also required under the new standard.

LINGO MED I A CORPO R A TION

Notes to Consolidated Financial Statements

December 31, 2018, 2017 and 2016

(Expressed in Canadian Dollars, unless otherwise stated)

4.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

4.1

Revenue recognition (Cont’d)

The Company completed a detailed assessment of its customer contracts as at January 1, 2018 and determined that there was no material impact to amounts previously reported in financial statements prepared in accordance with previous IFRS on revenue recognition, including IAS 18 and IFRIC 13. In applying the new rules, the Company elected to utilize the following practical expedients: completed contracts that begin and end within the same annual reporting period and those completed before January 1, 2018 are not restated; significant financing components on contracts which the timing of the good or service provided falls within one year of the collection of payments; and costs of obtaining a contract that would be amortized within one year or less are immediately expensed.

Revenue recognition

Revenue is recognized upon transfer of control of promised goods or services to customers in an amount that reflects the consideration we expect to receive in exchange for those goods or services. The Company enters into contracts that can include various combinations of goods and services, which are generally capable of being distinct and accounted for as separate performance obligations. A product or service is distinct if the customer can benefit from it on its own or together with other readily available resources and the promise to transfer the good or service is separately identifiable from other promises in the contractual arrangement with the customer. Non-distinct goods and services are combined with other goods or services until they are distinct as a bundle and therefore form a single performance obligation.

The consideration (including any discounts) is allocated between separate goods and services in a bundle on a relative basis based on their standalone selling prices (“SSP”). Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities. In addition to these general policies, the specific revenue recognition policies for each major category of revenue are included below.

License of intellectual property

Royalty revenues primarily consist of revenues received from the license of intellectual property for print-based and audiovisual learning products. Royalty revenues are recognized based on the confirmation of sales by the Company’s co-publishing partners, and when the underlying sale occurs. Training and support services provided for royalty contracts are delivered in advance of the underlying sale occurring, and, as such, royalty revenue is recognized when the underlying sale occurs, being the later of the satisfaction of the performance obligation and the underlying sale. Royalty revenues are not subject to right of return or product warranties. Royalty revenues are earned by Print-Based English Language segment and relate to long-term contracts.

Online based licenses

Online based licensing revenue is generated from contracts with customers. The Company provides the right to access to hosted software over a contract term without the customer taking possession of the software. Revenue recognition commences on the date an executed contract exists and the customer has the right to access to the hosted software. Online based licensing revenues are generated by Online Language Learning segment and relate to short-term contracts.

LINGO MED I A CORPO R A TION

Notes to Consolidated Financial Statements

December 31, 2018, 2017 and 2016

(Expressed in Canadian Dollars, unless otherwise stated)

4.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

4.1

Revenue recognition (Cont’d)

Offline licenses

Offline licensing revenue is generated from contracts with customers. Offline licenses provides the right to use perpetual language-learning software and is recognized at the point in time when the software is made available to the customer. When providing offline licenses, the customer can direct the use of, and obtain substantially all of the remaining benefits from, the license at the point in time at which the license is made available to the customer and the right to use the software has commenced. Offline license revenues are generated by Online English Language Learning segment and relate to short-term contracts.

Costs to Obtain a Contract with a Customer

The Company recognizes an asset for the incremental costs of obtaining a contract with a customer if the Company expects the costs to be recoverable. The Company has determined that sales commissions meet the requirements to be capitalized. These capitalized costs are amortized consistent with the pattern of transfer to the customer for the goods and services to which the asset relates. Amortization of the asset is included in cost of sales in the consolidated statements of operations. Applying the practical expedient, the Company recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that we otherwise would have recognized is one year or less.

Contract Assets and Liabilities

Significant Judgments

The Company distributes its products and services both directly to the end customer and indirectly through resellers. The Company evaluates each of its reseller relationships to determine whether it is the principal (where revenue is recognized at the gross amount) or agent (where revenue is recognized net of the reseller commission). In making this determination, the Company evaluates a variety of factors including the amount of control the Company is able to exercise over the transactions. The Company concluded that it acts as principal in all contracts with customers. The recognition of revenue requires judgement in the assessment of performance obligations within a contract and the assessment of recognizing at a point in time or over a period of time.

LINGO MED I A CORPO R A TION

Notes to Consolidated Financial Statements

December 31, 2018, 2017 and 2016

(Expressed in Canadian Dollars, unless otherwise stated)

4.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

4.1

Revenue recognition (Cont’d)

The following table summarize the impacts of adopting IFRS 15 on the consolidated balance sheet as December 31, 2018 and the statement of comprehensive income (loss) for the year then ended for each of the line items affected. There was no material impact on the consolidated statement of cash flows for the year ended December 31, 2018.

December 31, 2018	Note		As reported			Adjustments			Amounts without adoption of IFRS 15
Assets
Prepaid and other receivables			$	101,539		$	25,610		$	75,929
Total Assets				1,302,004			25,610			1,276,394

Liabilities
Contract liabilities		11		217,259			217,259			-
Total Liabilities				743,410			217,259			526,151

Equity
Deficit				(25,040,050	)		(191,649	)		(24,848,402	)
Total equity				558,594			(191,649	)		750,243

Total equity and liabilities				1,302,004			25,610			1,276,394

Impact on the consolidated statement of comprehensive income (loss)

For the year ended December 31, 2018	Note	As reported			Adjustments			Amounts without adoption of IFRS 15
Revenue		$	1,940,182		$	(126,400	)	$	2,066,582
Direct costs			271,020			(20,445	)		291,465
Net Profit / (Loss) for the Year			(104,156	)		105,955			1,799
Total Comprehensive Income (Loss)			(71,954	)		105,955			34,001

4.2

Comprehensive income (loss)

Comprehensive income (loss) measures net profit for the period plus other comprehensive income. Other comprehensive income (loss) consists of changes in equity, such as changes to foreign currency translation adjustments of foreign operations during the period. Amounts reported as other comprehensive income are accumulated in a separate component of shareholders’ equity as accumulated other comprehensive income.

4.3

Property and equipment

Property and equipment are initially recorded at cost. Depreciation is provided using methods outlined below at rates intended to depreciate the cost of assets over their estimated useful lives.

Method	Rate

Computer and office equipment	Declining balance 20 %
Leasehold improvement	Straight line over the term of the lease

LINGO MED I A CORPO R A TION

Notes to Consolidated Financial Statements

December 31, 2018, 2017 and 2016

(Expressed in Canadian Dollars, unless otherwise stated)

4.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

4.4

Software and web development costs

The Company capitalizes all costs related to the development of its fee-based English Language Learning products and services when the feasibility and profitability of the project can be reasonably considered certain. Expenditure on development activities, whereby research findings are applied to a plan or design for the production of new or substantially improved products and processes, is capitalized if the product or process is technically and commercially feasible and the Group has sufficient resources to complete development. The expenditure capitalized includes the cost of material, and direct labour. Other development expenditure is recognized in the statement of comprehensive income (loss) as an expense as incurred.

4.5

Content development costs

The Company capitalizes all costs related to content development of its fee-based English Language Learning products and services when the feasibility and profitability of the project can be reasonably considered certain. Expenditure on content development activities, whereby research findings are applied to a plan or design for the production of new or substantially improved products and processes, is capitalized if the product or process is technically and commercially feasible and the Group has sufficient resources to complete development. The expenditure capitalized includes the cost of material, and direct labour. Other development expenditure is recognized in the statement of comprehensive income (loss) as an expense as incurred.

4.6

Government grants

The Company receives government grants based on certain eligibility criteria for book publishing industry development in Canada. These government grants are recognized quarterly and are recorded as a reduction of general and administrative expenses to offset direct costs funded by the grant during the period in which the criteria to receive the grant is met. The Company records a liability for the repayment of the grants and a charge to operations in the period in which conditions arise that will cause the government grants to be repayable.

4.7

Current and deferred income taxes

Income tax on the profit or loss for the periods presented comprises current and deferred tax. Income tax is recognized in profit or loss except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity. Current tax expense is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at period end, adjusted for amendments to tax payable with regards to previous years.

Deferred taxation is recognized using the liability method on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.

However, the deferred taxation is not recognized if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred taxation is determined using tax rates (and laws) that have been enacted or substantially enacted by the reporting date and are expected to apply when the related deferred tax asset is realized or the deferred tax liability is settled.

A deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

LINGO MED I A CORPO R A TION

Notes to Consolidated Financial Statements

December 31, 2018, 2017 and 2016

(Expressed in Canadian Dollars, unless otherwise stated)

4.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

4.7

Current and deferred income taxes (Cont’d)

Deferred income tax is provided on temporary differences arising on investments in subsidiaries, associates and joint ventures, except where the timing of the reversal of the temporary difference is controlled by the Company and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to offset current income tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

4.8

Foreign currency translation

Foreign currency transactions are initially recorded in the functional currency at the transaction date exchange rate. At the balance sheet date, monetary assets and liabilities denominated in a foreign currency are translated into the functional currency at the reporting date exchange rate. Foreign exchange gains and losses resulting from the settlement of such transactions and from the remeasurement of monetary items at year-end exchange rates are recognized in the income statement. Non-monetary items measured at historical cost are translated using the historical exchange rate. Non-monetary items measured at fair value are translated using the exchange rates at the date when fair value was determined.

Financial statements of subsidiaries, affiliates and joint ventures for which the functional currency is not the Canadian Dollar are translated into the Canadian Dollar as follows: all asset and liability accounts are translated at the balance sheet exchange rate and all earnings and expense accounts and cash flow statement items are translated at average exchange rates for the period. The resulting translation gains and losses are recorded as foreign currency translation adjustments in other comprehensive income (loss) and recorded in accumulated other comprehensive income in equity. On disposal of a foreign operation the cumulative translation differences recognized in equity are reclassified to the statement of comprehensive income (loss) and recognized as part of the gain or loss on disposal. Goodwill and fair value adjustments arising on the acquisition of a foreign entity have been treated as assets and liabilities of the foreign entity and translated into Canadian Dollars at the balance sheet rate.

Foreign exchange gains or losses arising from a monetary item receivable from or payable to a foreign operation, the settlement of which is neither planned nor likely to occur in the foreseeable future and which in substance is considered to form part of the net investment in the foreign operation, are recognized in other comprehensive income (loss).

4.9

Earnings (loss) per share

Earnings (loss) per share is computed by dividing the earnings (loss) for the year by the weighted average number of common shares outstanding during the year, including contingently issuable shares which are included when the conditions necessary for issuance have been met. Diluted earnings per share is calculated in a similar manner, except that the weighted average number of common shares outstanding is increased to include potentially issuable common shares from the assumed exercise of common share purchase options and warrants, if dilutive.

4.10

Share-based compensation plan

The share-based compensation plan allows the Company executives, management, employees and consultants to acquire shares of the Company. The fair value of share-based payment awards granted is recognized as management, employee or consultant expense with a corresponding increase in equity. An individual is classified as an employee when the individual is an employee for legal or tax purposes (direct employee) or provides services similar to those performed by a direct employee.

LINGO MED I A CORPO R A TION

Notes to Consolidated Financial Statements

December 31, 2018, 2017 and 2016

(Expressed in Canadian Dollars, unless otherwise stated)

4.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

4.10

Share-based compensation plan (Cont’d)

Each tranche in an award is considered a separate award with its own vesting period and grant date fair value. The fair value is measured at grant date and each tranche is recognized on a graded vesting basis over the period during which the share purchase options vest. The fair value of the share-based payment awards granted is measured using the Black-Scholes option pricing model taking into account the terms and conditions upon which the awards were granted. At each financial position reporting date, the amount recognized as an expense is adjusted to reflect the actual number of awards, for which the related service and non-market vesting conditions are expected to be met.

For equity-settled share-based payment transactions with consultants, the Company measures the goods or services received, and the corresponding increase in equity, directly, at the fair value of the goods or services received, unless that fair value cannot be estimated reliably, in which cases, the Company measures their value, and the corresponding increase in equity, indirectly, by reference to the fair value of the equity instruments granted.

4.11

Financial instruments

The Company has adopted IFRS 9 using modified retrospective approach from January 1, 2018. The standard introduced new classification and measurement models for financial assets.

A financial asset shall be measured at amortized cost if it is held with the objective of holding assets in order to collect contractual cash flows which arise on specified dates and that are solely principal and interest.

A debt investment shall be measured at fair value through other comprehensive income if it is held with the objective of holding assets in order to collect contractual cash flows which arise on specified dates that are solely principal and interest as well as selling the asset on the basis of its fair value.

All other financial assets are classified and measured at fair value through profit or loss (“FVPL”)unless the Company makes an irrevocable election on initial recognition to present gains and losses on equity instruments (that are not held-for-trading or contingent consideration recognized in a business combination) in other comprehensive income (“OCI”).

Despite these requirements, a financial asset may be irrevocably designated as measured at fair value through profit or loss to reduce the effect of, or eliminate, an accounting mismatch. For financial liabilities designated at fair value through profit or loss, the standard requires the portion of the change in fair value that relates to the entity's own credit risk to be presented in OCI (unless it would create an accounting mismatch).

New simpler hedge accounting requirements are intended to more closely align the accounting treatment with the risk management activities of the entity.

New impairment requirements use an “expected credit loss” (“ECL”) model to recognize an allowance. Impairment is measured using a 12-month ECL method unless the credit risk on a financial instrument has increased significantly since initial recognition in which case the lifetime ECL method is adopted.

For receivables, a simplified approach to measuring expected credit losses using a lifetime expected loss allowance is available. The investment classifications “Available-for-sale financial assets” and “Held-to-maturity investments” are no longer used and “Financial assets at fair value through other comprehensive income” was introduced. There were no investments held in these categories as at December 31, 2017.

LINGO MED I A CORPO R A TION

Notes to Consolidated Financial Statements

December 31, 2018, 2017 and 2016

(Expressed in Canadian Dollars, unless otherwise stated)

4.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

4.11

Financial instruments (Cont’d)

The Company completed a detailed assessment of its financial assets and liabilities as at January 1, 2018. The following table shows the original classification under IAS 39 and the new classification under IFRS 9:

	Original Classifcation (IAS 39)	New Classification (IFRS 9)
Financial assets
Cash	FVTPL	Amortized cost
Accounts receivable	Loans and receivables	Amortized cost
Financial liabilities
Accounts payable	Other financial liabilities	Amortized cost
Accrued liabilities	Other financial liabilities	Amortized cost

The adoption of IFRS 9 by the Company had no impact on the consolidated financial statements.

Trade and other receivables

Trade receivables are initially recognized at fair value and subsequently measured at amortized cost using the effective interest method, less any allowance for expected credit losses. Trade receivables are generally due for settlement within 60 days. The Company has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue.

Other receivables are recognized at amortized cost, less any allowance for expected credit losses.

4.12

Impairment of long-lived assets

The Company’s property and equipment and intangibles with finite lives are reviewed for an indication of impairment at each balance sheet date. The Company’s intangible assets that have an indefinite life or are not ready for use are not subject to amortization and are tested annually for impairment. Goodwill is reviewed for impairment annually or at any time if an indicator of impairment exists. If indication of impairment exists, the asset’s recoverable amount is estimated. The recoverable amount is the greater of the asset’s fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

An impairment loss is recognized when the carrying amount of an asset, or its cash-generating unit, exceeds its recoverable amount. A cash-generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. Impairment losses are recognized in profit and loss for the period.

An impairment loss, other than goodwill impairment, is reversed if there is an indication that there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

LINGO MED I A CORPO R A TION

Notes to Consolidated Financial Statements

December 31, 2018, 2017 and 2016

(Expressed in Canadian Dollars, unless otherwise stated)

4.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

4.12

Impairment of long-lived assets

Goodwill represented the excess of the cost of an acquisition over the fair value of the Company’s share of identifiable net assets of the acquired subsidiary at the date of acquisition. Goodwill was carried at cost less accumulated impairment losses. Goodwill was allocated to each cash generating unit (“CGU”) or group of CGUs that are expected to benefit from the related business combination. A group of CGUs represents the lowest level within the entity at which the goodwill is monitored for internal management purposes, which is not higher than an operating segment.

An impairment loss recognized for goodwill is not reversed in subsequent periods. On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. Determining whether goodwill is impaired requires an estimation of the higher of fair value less costs of disposal and value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation requires the management to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value.

4.13

Leases

Leases are classified as either finance or operating. Leases that transfer substantially all of the risks and benefits of ownership of the leased asset to the Company are classified as finance leases. Finance leases are capitalized at the lease’s commencement at the lower of fair value of the leased asset and the present value of the minimum lease payments. Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Rental payments, net of any incentives received from the lessor, are charged to earnings on a straight-line basis over the period of the lease.

4.14

Warrants

From time to time, the Company may issue warrants as a means of raising capital. The Company values warrants using the Black-Scholes pricing model. Any transaction costs arising on the issue of warrants are recognized in equity as a reduction of the proceeds from warrants. In the event that warrants are exercised, the fair value of the warrants issued is reclassified from warrants to share capital. In the event that warrants expire unexercised, their value is transferred from warrants to share-based payment reserve.

5.	RECENT ACCOUNTING PRONOUNCEMENTS

The following pronouncements issued by the IASB and interpretations published by IFRIC became effective for annual periods beginning on or after January 1, 2019.

Effective for periods beginning on or after January 1, 2019

LINGO MED I A CORPO R A TION

Notes to Consolidated Financial Statements

December 31, 2018, 2017 and 2016

(Expressed in Canadian Dollars, unless otherwise stated)

5.	RECENT ACCOUNTING PRONOUNCEMENTS (Cont’d)

The Company has not yet completed its evaluations of the effect of adopting the above standards and the impact it may have on its consolidated financial statements.

6.	ACCOUNTS AND GRANTS RECEIVABLE

	December 31, 201 8		December 31, 2017
Trade receivable	$	913,458	$	947,911
Government grants receivable (Note 17)		-		22,556
	$	913,458	$	970,467

As at December 31, 2018, the Company had accounts receivable of $148,500 (2017 - $252,093) greater than 30 days overdue and not impaired.

7.	PROPERTY AND EQUIPMENT

	Computer and office equipment			Leasehold Improvements		Total
Cost, January 1 , 2017	$	80,713		$	-	$	80,713
Additions		9,923			-		9,923
Effect of foreign exchange		(849	)		-		(849	)
Cost, December 31, 201 7	$	89,787		$	-	$	89,787
Additions		7,839			33,180		41,019
Effect of foreign exchange		249			-		249
Cost, December 31, 201 8	$	97,875		$	33,180	$	131,055

Accumulated depreciation, January 1, 201 7	$	53,225		$	-	$	53,225
Charge for the year		6,644			-		6,644
Effect of foreign exchange		(771	)		-		(771	)
Accumulated depreciation, December 31, 201 7	$	59,098		$	-	$	59,098
Charge for the year		6,756			11,613		18,369
Effect of foreign exchange		424			-		424
Accumulated depreciation, December 31, 201 8	$	66,278		$	11,613	$	77,891

Net book value, December 31, 201 7	$	30,689		$	-	$	30,689
Net book value, December 31, 201 8	$	31,597		$	21,567	$	53,164

8.	INTANGIBLES

	Software and Web Development			Content Platform		Content Development		Total
Cost, January 1, 2016	$	8,631,006		$	1,477,112	$	1,288,495	$	11,396,613
Additions		613,162			-		1,185,525		1,798,687
Effect of foreign exchange		(5,081	)		-		-		(5,081	)
Cost, December 31, 2016		9,239,087			1,477,112		2,474,020		13,190,219
Cost, December 31, 2017	$	9,239,087		$	1,477,112	$	2,474,020	$	13,190,219

LINGO MED I A CORPO R A TION

Notes to Consolidated Financial Statements

December 31, 2018, 2017 and 2016

(Expressed in Canadian Dollars, unless otherwise stated)

8.	INTANGIBLES (Cont ’ d)

Accumulated amortization January 1, 2016	$	7,622,225		$	1,477,112	$	91,532	$	9,190,869
Charge for the year		611,865			-		391,620		1,003,485
Effect of foreign exchange		(4,144	)		-		-		(4,144	)
Accumulated amortization December 31, 2016		8,229,946			1,477,112		483,152		10,190,210
Charge for the year		557,124			-		494,804		1,051,928
Impairment		452,018			-		1,496,064		1,948,082
Accumulated amortization and impairment December 31, 2017	$	9,239,088		$	1,477,112	$	2,474,020	$	13,190,219

Net book value, December 31, 2016	$	1,009,142		$	-	$	1,990,868	$	3,000,009
Net book value, December 31, 2017 and 2018	$	-		$	-	$	-	$	-

The Company began commercial production and sale of its services and products during 2009. In 2017, the Company continued to focus on the redesign and upgrade of its ELL Technologies’ suite of products and invested $Nil (2016 - $1,798,687). The ELL Technologies’ suite of products includes five different products, each designed to suit the needs of different demographic groups. Although the full suite of product is not yet complete, the Company has started the commercial production and sale of three of these five products.

The Company previously capitalized all development costs related to its software web development, content platform, and content development through to December 31, 2016. During the year ended December 31, 2017, there was uncertainty with respect to feasibility and profitability of the projects due to sales not achieving forecast levels and a resulting decline in expected future cash flows from their intended use. Consequently, the benefit of these development costs may not be realized as soon as previously expected and, as such, the costs incurred during the year ended December 31, 2017 were expensed rather than capitalized as they did not meet the criteria for capitalization. Furthermore, management carried out an impairment test for the unamortized development costs as at December 31, 2017. The recoverable amount of the CGU that included these development costs was tested for impairment as discussed in Note 9 – Goodwill.

9.	GOODWILL

On May 13, 2010, the Company acquired all issued and outstanding shares of ELL Technologies Limited for an aggregate purchase price of $1,385,000. The transaction price was allocated to various assets including goodwill of $139,618.

The recoverable amount of each CGU is based on a value in use computation. The cash flow forecasts employed for this computation are extracted from a budget document approved by the Board of Directors, and specifically exclude incremental profits and other cash flows stemming from future acquisitions. The 2017 forecast cash flows are projected forward for five years using the same assumptions as those applied in the 2017 budget. A growth rate of 7% was used in the five year projected cash flow in 2017 (2016 – 8%) and a terminal value reflecting inflation of 2% (but no other growth) is applied to the year five cash flows. A present value of the future cash flows is calculated using a before-tax discount rate of 14.9% (2016 – 14.9%).

LINGO MED I A CORPO R A TION

Notes to Consolidated Financial Statements

December 31, 2018, 2017 and 2016

(Expressed in Canadian Dollars, unless otherwise stated)

9.	GOODWILL (Cont’d)

As a result of the Company’s annual impairment test, it was determined that impairment existed for the goodwill ascribed to the ELL Technologies CGU in 2017. The impairment arose primarily as a result of the weakened market conditions on the forecast of the ELL Technologies CGU. This created a goodwill impairment loss of $139,618 in 2017 (2016 - $nil) and an intangible asset (see note 8) impairment loss of $1,948,082 (2016 - $nil). The key assumption applied to determine the value in use were the updated cash flows. Based on this analysis, the Company determined that as of December 31, 2017, the recoverable amount of the ELL Technologies goodwill and intangible assets was less than their carrying value and as a result were fully impaired.

10.

ACQUISITION

During 2017, the Company acquired all issued and outstanding shares of Vizualize Technologies Corporation, a company that provided services to the Company. The aggregate purchase price was $100 less assumed net liabilities of $80,918. The acquisition was accounted for as an acquisition of a group of assets and liabilities. The Company recorded a loss on acquisition of $80,818.

11.

CONTRACT LIABILIT IES

The following table presents changes in the contract liabilities balance:

Balance, December 31, 2017	$	-
Adjustment on initial application of IFRS 15		90,860
Adjusted balance, January 1, 2018		90,860

Amounts invoices and revenue deferred as at December 31, 2018		207,073
Recognition of deferred revenue included in the adjusted balance at the beginning of the period		(80,673	)
Balance, December 31, 2018 (note 4.1)	$	217,259

12.

LOANS PAYABLE

	December 31, 20 18		December 31, 201 7
Loans payable, interest bearing at 12% per annum with monthly interest payments, due on demand (note 24)	$	-	$	300,000
	$	-	$	300,000

13.

SHARE CAPITAL

Authorized

Unlimited number of preference shares with no par value

Unlimited number of common shares with no par value

LINGO MED I A CORPO R A TION

Notes to Consolidated Financial Statements

December 31, 2018, 2017 and 2016

(Expressed in Canadian Dollars, unless otherwise stated)

13.

SHARE CAPITAL (Cont’d)

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. During 2016, 600,000 warrants were exercised for $450,000, and the remaining expired on March 4, 2016.

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

		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. During 2016, 1,811,683 warrants were exercised for $1,358,762, and the remaining expired on May 11, 2016.

(iii)

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. During 2016, 3,300,000 warrants were exercised for $412,500, and the remaining expired on April 17, 2016.

Stock options exercise

In 2016, 299,166 stock options were exercised. Each stock option entitled the holder to one common share of the Company at an exercise price of $0.13, $0.14, $0.24 and $0.66 for the gross proceeds of $52,567. These options had a grant date fair value of $0.0674, $0.0721, $0.1443 and $0.5174 respectively. The weighted average exercise price on the date of exercise of these options was $0.18.

Warrants exercise

In 2016, 5,711,683 warrants were exercised. Each warrant entitled the holder to one common share of the Company at an exercise price of $0.125 and $0.75 for the gross proceeds of $2,221,262. These warrants had a grant date fair value of $0.014, $0.241 and $0.272. The weighted average exercise price on the date of exercise of these warrants was $0.39.

LINGO MED I A CORPO R A TION

Notes to Consolidated Financial Statements

December 31, 2018, 2017 and 2016

(Expressed in Canadian Dollars, unless otherwise stated)

14.

SHARE-BASED PAYMENTS

In December 2017, the Company amended its stock option plan (the “2017 Plan”). The 2017 Plan was established to provide an incentive to management (officers), employees, directors and consultants of the Company and its subsidiaries. The maximum number of shares which may be reserved for issuance under the 2017 Plan is limited to 7,105,838 common shares less the number of shares reserved for issuance pursuant to options granted under the 1996 Plan, the 2000 Plan, the 2005 Plan, the 2009 Plan, and the 2011 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 2017 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 2017 Plan do not have any required vesting provisions. However, the Board of Directors of the Company may, from time to time, amend or revise the terms of the 2017 Plan or may terminate it at any time. The following summarizes the options outstanding:

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contract Life (Years)
Outstanding as at January 1, 201 6		3,602,501		$	0.33		1.35
Granted		700,000			0.69		0.64
Expired		(957,500	)		0.81		0.60
Forfeited		(1,000,000	)		0.66		0.53
Exercised		(299,166	)		0.18		-
Outstanding as at January 1, 201 7		2,045,835		$	0.18		0.86
Granted		4,012,000			0.21		2.76
Expired		(2,049,085	)		0.18		-
Forfeited		(9,750	)		0.24		2.34
Outstanding as at January 1, 201 8		3,999,000		$	0.21		2.77
Granted		2,920,000			0.07		2.89
Expired		(25,000	)		0.23		-
Forfeited		(90,000	)		0.23		-
Outstanding as at December 31, 201 8		6,804,000		$	0.19		2.26

Options exercisable as at December 31, 201 6	1,820,835	$	0.19
Options exercisable as at December 31, 201 7	2,577,000	$	0.21
Options exercisable as at December 31, 201 8	4,566,000	$	0.19

The weighted average remaining contractual life for the stock options outstanding as at December 31, 2018 was 2.26 years (2017 – 2.77 years, 2016 – 0.86 years). The range of exercise prices for the stock options outstanding as at December 31, 2018 was $0.07 - $0.23 (2017 - $0.20 - $0.23, 2016 - $0.14 - $0.24). The weighted average grant-date fair value of options granted to management, employees, directors and consultants during 2018 has been estimated at $0.0436 (2017 - $0.12, 2016 - $0.26) using the Black-Scholes option-pricing model.

LINGO MED I A CORPO R A TION

Notes to Consolidated Financial Statements

December 31, 2018, 2017 and 2016

(Expressed in Canadian Dollars, unless otherwise stated)

14.

SHARE-BASED PAYMENTS (Cont’d)

The vesting periods on the options granted on December 20, 2018 are as follows, 25% vest on November 20, 2018, the remaining vest quarterly over 9 months, commencing three months after grant date. In 2017, 1,995,000 options were vested immediately upon issuance, 185,000 stock options will vest upon achievements of non-market conditions, 1,832,000 stock options were vesting quarterly over 3 years, commencing three months after grant date. In 2016, the options vested nine months after grant date.

The pricing model assumes the weighted average risk free interest rates of 2.19% (2017 – 1.39%, 2016 – 0.44%) weighted average expected dividend yields of nil (2017 – nil, 2016 – nil), the weighted average expected common stock price volatility (based on historical trading) of 98% (2017 – 97%, 2016 – 107%), a forfeiture rate of 0% (2017 – 0%, 2016 – 0%), a weighted average stock price of $0.07 (2017 - $0.20, 2016 - $0.70), a weighted average exercise price of $0.07 (2017 - $0.21, 2016 - $0.69), and a weighted average expected life of years 3 (2017 – 3 years, 2016 – 1.57 years), which were estimated based on past experience with options and option contract specifics.

15.

EARNINGS (LOSS) PER SHARE

The income and weighted average number of common shares used in the calculation of basic and diluted income (loss) per share for the years ended December 31, 2018, 2017, and 2016 were as follows:

	201 8		2017			2016
Weighted average number of common shares used as the denominator in calculating basic earnings per share		35,529,192		35,529,192			33,987,383
Adjustments for calculation of diluted earnings per share:
Options		-		-			814,609
Warrants		-		-			149,701
Weighted average number of common shares and potential common shares used as the denominator in calculating diluted earnings per share		35,529,192		35,529,192			34,951,693
Basic earnings (loss) per share	$	0.00	$	(0.18	)	$	0.00
Diluted earnings (loss) per share	$	0.00	$	(0.18	)	$	0.00

16.

INCOME TAXES

The provision for income taxes reflects an effective income tax rate, which differs from the Canadian corporate income tax rate as follows:

	201 8			2017			2016

Combined basic Canadian federal and provincial income tax rate		26.5	%		26.50	%		26.50	%
Effective income tax taxes	$	(27,602	)	$	(1,659,267	)	$	17,025
Increase (decrease) resulting from change in the deferred tax assets not recognized		1,839,000			1,302,000			424,000
Withholding tax		189,534			178,022			186,832
Non-deductible items		46,369			676,242			62,601
Change in prior year estimates		(1,576,767	)		(318,975	)		(502,753	)
	$	189,534		$	178,022		$	187,705

LINGO MED I A CORPO R A TION

Notes to Consolidated Financial Statements

December 31, 2018, 2017 and 2016

(Expressed in Canadian Dollars, unless otherwise stated)

1 6.	INCOME TAXES (Cont’d)

The tax effect of temporary differences representing deferred tax assets is as follows:

	201 8			2017
Deferred tax assets:
Loss carry forwards	$	8,146,000		$	6,307,000
		8,146,000			6,307,000
Deferred tax assets not recognized		(8,145,000	)		(6,306,000	)
Deferred tax assets recognized		1,000			1,000
Property and equipment		(1,000	)		(1,000	)
Net deferred tax assets	$	-		$	-

Deferred tax assets and liabilities will be impacted by changes in tax laws and rates. The effects of these changes are not currently determinable. In assessing whether the deferred tax assets are realizable, management considers whether it is probable that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of taxable income during the years in which those temporary differences become deductible.

Management considers projected taxable income, uncertainties related to the industry in which the Company operates and tax planning strategies in making this assessment. The Company has not recognized any benefit for these losses.

At December 31, 2018, the Company has non-capital losses available for carry forward for Canadian income tax purposes amounting to approximately $25,312,000. These losses expire in the following fiscal years:

2026	$	233,000
2027		788,000
2028		2,163,000
2029		2,991,000
2030		4,356,000
2031		4,646,000
2032		1,188,000
2033		806,000
2034		436,000
2035		54,000
2036		420,000
2037		7,070,000
2038		161,000
	$	25,312,000

The Company has capital loss of $1,334,000 available in Canada. The Company also has capital losses of $4,662,000 available and trade losses of approximately $2,345,000 available for use in the United Kingdom.

LINGO MED I A CORPO R A TION

Notes to Consolidated Financial Statements

December 31, 2018, 2017 and 2016

(Expressed in Canadian Dollars, unless otherwise stated)

17.

GOVERNMENT GRANTS

Included as a reduction of selling, general and administrative expenses are government grants of $242,813 (2017 - $232,413, 2016 - $229,694), relating to the Company's publishing and software projects. At the end of the year, $nil (2017 - $22,556, 2016 - $21,847) 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 before tax for the current year and the previous two years exceeds 15% of revenue. During 2018 and 2017, 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. No royalty was paid in 2018, 2017 or 2016 as no sales were generated from this project.

18.

FINANCIAL INSTRUMENTS

Fair values

The carrying value of cash and accounts and grants receivable, approximates their fair value due to the liquidity of these instruments. The carrying values of accounts payables and accrued liabilities and loans payables approximate their fair value due to the requirement to extinguish the liabilities on demand or payable within a year.

Financial risk management objectives and policies

The financial risk arising from the Company’s operations are currency risk, liquidity risk and credit 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 are as follows:

Foreign currency risk

The Company operates internationally and is exposed to foreign exchange risk as certain expenditures are denominated in non-Canadian Dollar currencies.

The Company has been exposed to this fluctuation and has not implemented a program against these foreign exchange fluctuations.

LINGO MED I A CORPO R A TION

Notes to Consolidated Financial Statements

December 31, 2018, 2017 and 2016

(Expressed in Canadian Dollars, unless otherwise stated)

1 8 .

FINANCIAL INSTRUMENTS (Cont’d)

Foreign currency risk (Cont’d)

A 10% strengthening of the US Dollars against Canadian Dollars would have increased the net equity by approximately $63,030 (2017 - $67,000) due to reduction in the value of net liability balance. A 10% of weakening of the US Dollar against Canadian Dollar at December 31, 2018 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 December 31, 2018 are as follows:

	2018		2017
	USD		USD
Cash		14,741		122,319
Accounts receivable		660,704		518,999
Accounts payable		189,586		104,225
Accrued liabilities		23,882		-

Liquidity Risk

Credit Risk

19.

MAJOR CUSTOMER

20.

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 MED I A CORPO R A TION

Notes to Consolidated Financial Statements

December 31, 2018, 2017 and 2016

(Expressed in Canadian Dollars, unless otherwise stated)

20.

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 licensing 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 from the approach used in 2017 or 2016.

21.

SEGMENTED INFORMATION

The Company operates two distinct reportable business segments as follows:

Transactions between operating segments and reporting segement are recorded at the exchange amount and eliminated upon consolidation.

2018	Online English Language Learning			Print-Based English Language Learning		Head Office			Total
Segmented assets	$	141,238		$	1,087,463	$	73,303		$	1,302,004
Segmented liabilities		348,214			160,750		234,446			743,410
Segmented revenue - online		206,955			-		-			206,955
Segmented revenue – offline		8,012			-					8,012
Segmented revenue – royalty		38,701			1,686,514					1,725,215
Segmented direct costs		180,832			90,188		-			271,020
Segmented selling, general & administrative		348,436			64,580		787,750			1,200,766
Segmented intangible amortization		-			-		-			-
Segmented other expense		10,918			196,079		905			207,902
Segmented impairment		-			-		-			-
Segmented profit (loss)		(475,131	)		1,335,666		(788,655	)		71,879

LINGO MED I A CORPO R A TION

Notes to Consolidated Financial Statements

December 31, 2018, 2017 and 2016

(Expressed in Canadian Dollars, unless otherwise stated)

21.

SEGMENTED INFORMATION (Cont’d)

201 7	Online English Language Learning			Print-Based English Language Learning		Head Office			Total
Segmented assets	$	189,200		$	1,257,239	$	87,633		$	1,534,072
Segmented liabilities		228,418			164,294		587,606			980,318
Segmented revenue		1,088,197			1,688,571		-			2,776,768
Segmented direct costs		134,695			90,923		-			225,618
Segmented selling, general & administrative		455,915			97,404		814,834			1,368,153
Segmented intangible amortization		1,051,928			-		-			1,051,928
Segmented other expense		1,074			182,461		1,131			184,666
Segmented impairment		2,087,700			-					2,087,700
Segmented profit (loss)		(6,148,195	)		1,317,783		(815,965	)		(5,646,377	)

2 01 6	Online English Language Learning		Print-Based English Language Learning		Head Office			Total
Segmented assets	$	4,521,560	$	1,675,740	$	978,892		$	7,176,192
Segmented liabilities		206,784		198,315		326,059			731,158
Segmented revenue		1,456,421		1,738,800		-			3,195,221
Segmented direct costs		167,597		217,787		-			385,384
Segmented selling, general & administrative		168,161		295,549		901,025			1,364,735
Segmented intangible amortization		1,003,485		-		-			1,003,485
Segmented other expense		806		192,658		1,539			195,003
Segmented profit		116,372		1,032,806		(902,564	)		246,614
Segmented intangible addition		1,798,687		-		-			1,798,687

Other Financial Items	201 8			2017			2016
Print-Based English Language Learning segment income	$	1,335,666		$	1,317,783		$	1,032,806
Online English Language Learning segment income (loss)		(475,131	)		(6,148,195	)		116,372
Head Office		(788,655	)		(815,965	)		(902,564	)
Foreign exchange gain (loss)		38,351			(189,783	)		(146,599	)
Interest and other financial		(51,898	)		(53,709	)		(35,768	)
Share-based payments		(162,489	)		(371,513	)		-
Other comprehensive income (loss)		32,202			(1,410	)		60,173
Total Comprehensive Income (Loss)	$	(71,954	)	$	(6,262,792	)	$	124,420

LINGO MED I A CORPO R A TION

Notes to Consolidated Financial Statements

December 31, 2018, 2017 and 2016

(Expressed in Canadian Dollars, unless otherwise stated)

2 1 .

SEGMENTED INFORMATION (Cont’d)

Revenue by Geographic Region

	201 8		2017		2016
Latin America	$	187,008	$	997,661	$	821,762
China		1,702,249		1,712,079		2,252,170
Other		50,925		67,028		121,289
	$	1,940,182	$	2,776,768	$	3,195,221

Identifiable Non-Current Assets by Geographic Region

	201 8		2017		2016
Canada	$	52,131	$	29,804	$	3,467,115
China		1,033		885		-
	$	53,164	$	30,689	$	3,467,115

22.

COMMITMENTS AND CONTINGENCY

The Company has future minimum lease payments under operating leases for premises and equipment as follows:

2019	$	225,471
2020		219,036
2021		38,306

The rent expense associated with operating leases for premise and equipment is recognized on a straight-line basis.

23.

SUPPLEMENTAL CASH FLOW INFORMATION

	201 8		2017		2016
Income taxes and other taxes paid	$	189,534	$	178,022	$	187,705
Interest paid	$	51,898	$	41,650	$	25,103

24.

RELATED PARTY BALANCES AND TRANSACTIONS

During the year, 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.

The Company charged $165,726 (2017 - $52,001, 2016 - $33,020) to four corporations with directors in common for rent, administration, office charges and telecommunications.

Key management compensation was $360,672 (2017 – $360,023, 2016 – $480,577) and is reflected as consulting fees and commissions paid to corporations owned by a director and officers of the Company, of which, $17,065 (2017 - $3,121, 2016 - $nil) is unpaid and included in accounts payable and accrued liabilities. Options granted to key management was $ nil ($2017 - $508,000, 2016 - $nil).

LINGO MED I A CORPO R A TION

Notes to Consolidated Financial Statements

December 31, 2018, 2017 and 2016

(Expressed in Canadian Dollars, unless otherwise stated)

2 4 .

RELATED PARTY BALANCES AND TRANSACTIONS (Cont ’ d)

At the year end, the Company had fully repaid unsecured loans bearing interest at 12% per annum due to related parties of the Company (2017 - $150,000, 2016 - $50,000). Throughtout the year, $420,000 was advanced to the company and $720,000 was repaid to related parties. Interest expense related to the loans is $42,133 (2017 - $4,586, 2016 - $351). Options granted to related paries during the year have a fair value of $25,988 (2017 - $ nil, 2016 - $ nil).

Trading Symbols (TSX-V: LM; OTC: 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

For the Year Ended December 31, 201 8

April 30 , 201 9

MANAGEMENT DISCUSSION & ANALYSIS

FOR THE YEAR ENDED DECEMBER 31 , 201 8

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 April 30 , 201 9 , should be read in conjunction with the Company's Condensed Consolidated Interim Financial Statements and accompanying N otes for the years ended December 31, 201 8 and 201 7 , 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 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 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 and intentions, results, levels of activity, performance, goals or achievements or other future events constitute forward-looking statements. Wherever possible, words such as "may," "will," "should," "could," "expect," "plan," "intend," "anticipate," "believe," "estimate," "predict," or "potential" or the negative or other variations of these words, or similar words or phrases, have been used to identify these forward-looking statements. These statements reflect management’s current beliefs and are based on information currently available to management as at the date hereof.

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

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

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 Languages ’ through the combination of education with technology. The Company is focused on online and print-based technologies and solutions through its two subsidiaries: Lingo Learning Inc. (Lingo Learning”) and ELL Technologies Ltd. (“ELL Technologies”). 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 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. The Company has formed successful relationships with key government and industry organizations, establishing a strong presence in China’s education market. Lingo Media is extending its global reach, beyond its initial market expansion into Latin America and continues to expand its product offerings and technology applications.

The Company continues 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.

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

Operational & Corporate Highlights

●	Online English Language Learning:

✔

completed the development of a Learning Access Point ( ELL LAP )

✔

completed the development of an online Spanish course

✔

entered into a commercial alliance agreement with iTEP International LLC, the developer of the International Test of English Proficiency, to provide bundled product and online English language learning testing solutions

✔

completed the first installation of the ELL LAP under the strategic alliance with HP Inc. at the Universidad Autonoma de Chiapas in Mexico

✔

closed initial sales contracts with Gale, a part of Cengage Learning, with universities in Thailand & Japan, expanding our reach into Asia

✔

closed sales contract with municipality of Floridablanca and with Unidades Technologicas de Santander, both in Colombia through distribution partner, e-Training SAS

✔

closed sales contract and entered into a strategic partnership with Focus Your Mind, a network of training centers in Latin America with 32 centres and 120,000 students

✔

entered into a distribution agreement with WARP Worldwide to market, distribute, and sell ELL Technologies’ full product suite of English language learning products and programs in China

✔

initiated the development of a teacher methodology program

✔

completed the development and launched a new learning management system (LMS), including migration of courses into the new platform

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

●	Print-Based English Language Learning:

✔

expanded the existing market for PEP Primary English program into three additional provinces in China

Our strategy continues 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. Our signing of the commercial agreement with iTEP International LLC is a testament to our commitment to this approach, as well as further validation of the ability of our program suite and course offerings to efficiently and effectively improve learning outcomes. We believe that these online subscription formats provide customers with an overall greater 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. Furthermore, our ability to configure our extensive library of lessons enables us to offer a more customizable solution to our clients without incurring the costs associated with a customized solution.

Online English Language Learning

ELL Technologies offers more than 2,000 hours of interactive learning through a number of product offerings that include Winnie’s World, English Academy, Campus , English for Success , Master and Business in addition to offering custom solutions. ELL Technologies is primarily marketed in Latin America through a network of distributors and earns its revenues from oline and offline licensing fees from its suite of web-based language learning products and applications.

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

The horizontal axis contains our product information and correlates to the vertical axis which contains the ages and levels of proficiency that our solutions target.

All products have been designed for our proprietary learning management system enabling ELL Technologies to market and sell to academic institutions and governments. Educators who license the platform are able to easily create, convert, edit, and arrange lessons and courses as they see fit.

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.

Summary of our 2018 product development achievements:

●

completed the development of a Learning Access Point (ELL LAP)

●

completed the development of an online Spanish course

●

launched a new Learning Management System (LMS)

●

added 250 hours of online learning to Campus

●

developed and launched virtual machine installation package to be installed in areas with limited internet service

Print-Based English Language Learning

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

Recently Adopted

IFRS 15, Revenue Recognition from Contracts with Customers (“IFRS 15”)

1.	Identify the contract with a customer;

2.	Identify the performance obligations in the contract;

3.	Determine the transaction price;

4.	Allocate the transaction price to the performance obligations in the contract; and

5.	Recognize revenue when (or as) the entity satisfies a performance obligation.

Revenue recognition

License of intellectual property

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

Online based licenses

Offline licenses

Costs to Obtain a Contract with a Customer

Contract Assets and Liabilities

The payment terms and conditions in our customer contracts may vary from the timing of revenue recognition. In some cases, customers pay in advance of delivery of products or services; in other cases, payment is due as services are performed. Timing differences between revenue recognition and invoicing primarily results in contract liabilities. Contract liabilities relate to the advance consideration received from customers and is presented as contract liabilities. Contract liabilities results from customer payments in advance of our satisfaction of the associated performance obligations. Contract liabilities are relieved as revenue is recognized. Contract assets and contract liabilities are reported on a contract-by-contract basis at the end of each reporting period.

Significant Judgments

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

December 31, 2018	Note	As reported			Adjustments			Amounts without adoption of IFRS 15
Assets
Prepaid and other receivables		$	101,539		$	25,610		$	75,929
Total Assets			1,302,004			25,610			1,276,394

Liabilities
Contract liability	11		217,259			217,259			-
Total Liabilities			743,410			217,259			526,151

Equity
Retained earnings			(25,040,050	)		(191,649	)		(24,848,402	)
Total equity			558,594			(191,649	)		750,243

Total equity and liabilities			1,302,004			25,610			1,276,394

Impact on the consolidated statement of comprehensive income (loss)

	Note	As reported			Adjustments			Amounts without adoption of IFRS 15
Impact on the consolidated statement of comprehensive income (loss)		$	1,940,182		$	(126,400	)	$	2,066,582
Impact on the consolidated statement of comprehensive income (loss)			271,020			(20,445	)		291,465
Net Profit / (Loss) for the Year			(104,156	)		105,955			1,799
Total Comprehensive Income (Loss)			(71,954	)		105,955			34,001

Financial instruments

The Company has adopted IFRS 9 using modified retrospective approach from January 1, 2018. The standard introduced new classification and measurement models for financial assets.

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

New simpler hedge accounting requirements are intended to more closely align the accounting treatment with the risk management activities of the entity.

	Original Classifcation (IAS 39)	New Classification (IFRS 9)
Financial assets
Cash	FVTPL	Amortized cost
Accounts receivable	Loans and receivables	Amortized cost
Financial liabilities
Accounts payable	Other financial liabilities	Amortized cost
Accrued liabilities	Other financial liabilities	Amortized cost

The adoption of IFRS 9 by the Company had no impact on the consolidated financial statements.

Trade and other receivables

Other receivables are recognized at amortized cost, less any allowance for expected credit losses.

Overall Performance

During 2018, Lingo Media recorded revenues of $1,940,182 as compared to $2,776,768 in 2017, a decrease of 30%. Net loss was $104,156 as compared to $6,261,382 in 2017 resulting in a $0.00 loss per share as compared to $0.18 loss per share in 2017. Total comprehensive loss was $71,954 as compared to total comprehensive loss of $6,262,792 in 2017. The Company recorded selling general and administrative costs were $1,200,766, compared to $1,368,153 in 2017. Share-based payments of $162,489 was recorded in 2018 as compared to $371,513 in 2017. In addition, cash generated in operations in 2018 was $214,248 as compared to $84,702 in 2017.

Online English Language Learning

ELL Technologies earned revenue from its portfolio of products of $253,668 for the year, compared to $1,088,197 in 2017. The decrease in revenue is a result of extended sales cycles in securing contracts and time shifting of the sales pipeline.

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

Print-Based English Language Learning

Lingo Media earned royalty revenue of $1,686,514 in 2018 compared to $1,688,571 in 2017 from People’s Education Press and People’s Education & Audio Visual Press.

Market Trends and Business Uncertainties

The British Council suggests that there are 1.6 Billion people learning English globally. English language learning products and services are currently a US$56.3 Billion global market notes Ambient Insight.

GlobalEnglish forecasts the global eLearning market to grow to $37.6 Billion by 2020, while experiencing exponential growth to reach $325 Billion worldwide by 2025.

Markets and Markets forecasts the global EdTech market to grow from US$43.27 Billion in 2015 to US$93.76 Billion to 2019, or at a CAGR or 16.72%.

Latin American Region

Asia-Pacific Region

Technavio forecasts the English language training (ELT) market in China to be worth $75 Billion by 2022, growing at a CAGR of 22%. The growth of the ELT market in China is driven by more people desiring to learn English, the adaptation of smartphones, increasing levels of disposable income, and the inherent advantages of online education. Technavio also notes that 49% of the growth in the global digital English language learning market will come from the Asia-Pacific region.

General Financial Condition

As at December 31, 2018 Lingo Media had working capital of $505,430 compared to working capital of $523,065 as at December 31, 2017. Net loss for the year ended December 31, 2018 was $104,156 compared to net loss of $6,261,382 for the year ended December 31, 2017.

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

Financial Highlights

For the Year Ended December 31	20 18			201 7			2016
Revenue
Print-Based English Language Learning	$	1,686,514		$	1,688,571		$	1,738,800
Online English Language Learning		253,668			1,088,197			1,456,421
		1,940,182			2,776,768			3,195,221
Net Profit (Loss) for the Year		(104,156	)		(6,261,382	)		64,247
Earnings per Share
Basic	$	(0.00	)	$	(0.18	)	$	0.00
Fully Diluted	$	(0.00	)	$	(0.18	)	$	0.00
Total Assets		1,302,004			1,534,072			7,176,192
Working Capital / (Deficit)		505,430			523,065			2,977,918
Cash Provided (used) – Operations		214,248			84,702			(61,229	)

The Company had cash on hand as at December 31, 2018 of $233,843 (2017 - $327,434) and accounts receivable of $913,458 (2017 - $970,467) to settle its current liabilities of $743,410 (2017 - $980,318) leaving a working capital balance of $505,430 (2017 - $523,065).

Results of Operations

During the year, Lingo Media earned $253,668 in online licensing sales revenue as compared to $1,088,197 in 2017, a decrease of 77%. The decrease in revenue is a result of extended sales cycles in securing contracts and time shifting of the sales pipeline.

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

Selling, General and Administrative

Selling, general and administrative expenses were $1,200,766 compared to $1,368,153 in 2017. Selling, general and administrative expenses for the three segments are segregated below.

(i)

Print-Based English Language Learning

For the Year Ended December 31	201 8			201 7
Sales, marketing & administration	$	72,154		$	38,022
General admin expense recovery		(82,464	)		(9,673	)
Consulting fees & salaries		246,783			167,708
Travel		48,465			37,951
Premises		11,577			83,550
Professional fees		10,878			12,259
Less: Grants		(242,813	)		(232,413	)
	$	64,580		$	97,404

(ii)

Online English Language Learning

For the Year Ended December 31	201 8		201 7
Sales, marketing & administration	$	120,629	$	189,698
Consulting fees & salaries		146,202		165,940
Travel		18,593		36,759
Premises		48,000		48,000
Professional fees		15,012		15,518
	$	348,436	$	455,915

(iii)

Head Office

For the Year Ended December 31	201 8		201 7
Sales, marketing & administration	$	117,538	$	57,230
Consulting fees & salaries		481,574		354,112
Travel		9,322		11,861
Shareholder services		76,240		137,517
Professional fees		103,076		254,114
	$	787,750	$	814,834
Total Selling and Ad ministrative Expenses	$	1, 200,766	$	1 , 368,153

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

Net Income (Loss)

Total comprehensive loss for the Company was $71,954 for the year ended December 31, 2018 as compared to total comprehensive loss $6,262,793 in 2017. Total comprehensive loss can be attributed to the two operating segments and head office as a reporting segement as shown below:

Online ELL	201 8			201 7
Revenue	$	253,668		$	1,088,197
Expenses:
Direct costs		180,832			134,695
General & administrative		348,436			455,915
Bad debt expense		(293,379	)		732,254
Amortization of property & equipment		1,605			894
Amortization of development costs		-			1,051,928
Development costs		481,992			2,692,009
Loss on acquisition		-			80,818
Impairment loss - goodwill		-			139,618
Impairment – intangible assets		-			1,948,081
Income taxes and other taxes		9,313			180
		728,799			7,236,392
Segmented Profit /(Loss) - Online ELL		(475,131	)		(6,148,195	)
Print-Based ELL
Revenue		1,686,514			1,688,571
Expenses:
Direct costs		90,188			90,923
General & administrative		64,580			97,404
Amortization of property & equipment		15,859			4,619
Income taxes and other taxes		180,221			177,842
		350,848			370,788
Segmented Profit – Print-Based ELL		1,335,666			1,317,783

H ead Office
Expenses:
General & administrative		787,750			814,834
Amortization of property & equipment		905			1,131
		788,655			815,965
Total Segmented Profit (Loss)	$	71,880		$	(5,646,377	)

Other
Foreign exchange		38,351			(189,783	)
Interest and other financial expenses		(51,898	)		(53,709	)
Share-based payment		(162,489	)		(371,513	)
Other comprehensive income		32,202			(1,410	)
		(143,834	)		(616,415	)
Total Comprehensive Loss	$	(71,954	)	$	(6,262,792	)

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

Foreign Exchange

S hare - B a sed Payments

The Company amortizes share-based payments with a corresponding increase to the contributed surplus account. During the year, the Company recorded an expense of $162,489 compared to $371,513 in 2017.

Net Loss for the Year

The Company reported a net loss of $104,156 for the year as compared to $6,261,382 in 2017. The loss per share is $0.00.

Total Comprehensive 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 loss of $71,954 for the year ended December 31, 2018, as compared to a comprehensive loss of $6,262,792 in 2017.

Summary of Quarterly Results

	Q1 – 18			Q2 – 18		Q3 – 18			Q4 – 18
Revenue	$	80,335		$	960,159	$	186,518		$	713,170
Income / (Loss) Before Taxes and Other Comprehensive Income		(536,836	)		613,867		(145,813	)		167,707
Total Comprehensive Income / (Loss)		(544,311	)		478,062		(160,765	)		155,060
Income / (Loss) per Share (Basic)	$	(0.02	)	$	0.00	$	(0.00	)	$	0.00
	Q1 – 17			Q2 – 17		Q3 – 17			Q4 – 17
Revenue	$	597,977		$	1,068,915	$	354,914		$	754,962
Income / (Loss) Before Taxes and Other Comprehensive Income		9,864			43,122		(473,026	)		(5,663,320	)
Total Comprehensive Income / (Loss)		3,727			42,392		(475,632	)		(5,833,279	)
Income / (Loss) per Share (Basic)	$	0.00		$	0.00	$	(0.013	)	$	(0.18	)

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:

Lingo Learning earns significantly higher royalties from Licensing Sales compared to Finished Product Sales. People’s Education Press provides Lingo Learning with sales reconciliations on a semi-annual basis. People’s Education & Audio Visual Press provides Lingo Learning with sales reconciliations on a quarterly. Revenue from royalty and licensing sales is recognized based on confirmation of finished products produced by the Company’s co-publishing partners and when collectability is reasonably assured. Royalty revenue from audiovisual products is recognized based on the confirmation of sales by its co-publishing partners, and when collectability is reasonably assured. Royalty revenues are not subject to right of return or product warranties. This revenue recognition policy causes an impact of higher revenues in the second and the fourth quarter of the year and lower revenues in the first and the third quarter.

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

Fourth Quarter 2018

In the fourth quarter, the Company earned revenue of $713,170 in 2018 as compared to $754,962 same period in 2017, a decrease of 5% due to foreign exchange fluctuations. In Q4, the Company records royalty revenues as discussed above. The Company recorded a total comprehensive income of $155,060 in the fourth quarter as compared to a loss of $5,833,279 in the same period of 2017. The improvement in profitability was primarily a significant loss in Q4 2017 due to an impairment loss of intangible assets.

Liquidity and Capital Resources

Lingo Media has access to working capital through equity financings or debt financings, if and as required to finance its growth plans. The Company has been successful in raising sufficient working capital in the past.

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:

2019			225,471
2020			219,036
2021			38,306

Transactions with Related Parties

The Company’s key management includes Michael Kraft, Chairman, Gali Bar-Ziv, President & CEO, Khurram Qureshi, CFO in addition to the Board of Directors.

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.

The Company charged $165,726 (2017 - $52,001, 2016 - $33,020) to three corporations with directors in common for rent, administration, office charges and telecommunications.

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

Key management compensation was $360,672 (2017 – $360,023, 2016 – $480,577) and is reflected as consulting fees and commissions paid to corporations owned by officers of the Company, of which, $17,065 (2017 - $3,121, 2016 - $nil) is unpaid and included in accounts payable and accrued liabilities. Options granted to key management was $ nil ($2017 - $508,000, 2016 - $nil).

Additional Disclosure

PROPERTY AND EQUIPMENT

	Computer and office equipment			Leasehold Improvements		Total
Cost, January 1 , 2017	$	80,713		$	-	$	80,713
Additions		9,923			-		9,923
Effect of foreign exchange		(849	)		-		(849	)
Cost, December 31, 201 7	$	89,787		$	-	$	89,787
Additions		7,839			33,180		41,019
Effect of foreign exchange		249			-		249
Cost, December 31, 201 8	$	97,875		$	33,180	$	131,055
Accumulated depreciation, January 1, 201 7	$	53,225		$	-	$	53,225
Charge for the year		6,644			-		6,644
Effect of foreign exchange		(771	)		-		(771	)
Accumulated depreciation, December 31, 201 7	$	59,098		$	-	$	59,098
Charge for the year		6,756			11,613		18,369
Effect of foreign exchange		424			-		424
Accumulated depreciation, December 31, 201 8	$	66,278		$	11,613	$	77,891
Net book value, December 31, 201 7	$	30,689		$	-	$	30,689
Net book value, December 31, 201 8	$	31,597		$	21,567	$	53,164

Disclosure of Outstanding Share Data

As of April 30, 2019, the followings are outstanding:

Common Shares	–	35,529,192
Warrants	–	Nil
Stock Options	–	6,804,000

Approval

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

Additional Information

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

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

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