LMDCF Everybody Loves Languages Corporation (PK)

SIGNATURE

 

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

 

 

 

 

 

 

LINGO MEDIA CORPORATION

 

Condensed Consolidated Interim Financial Statements

 

For the nine-month period ended September 30, 2021

 

 

 

 

LINGO MEDIA CORPORATION

Condensed Consolidated Interim Financial Statements

As at September 30, 2021

 

 

 

NOTICE OF NO AUDITOR REVIEW OF INTERIM FINANCIAL STATEMENTS

 

The accompanying unaudited condensed consolidated interim financial statements of Lingo Media Corporation have been prepared by and are the responsibility of the Company's management.  These unaudited condensed consolidated interim financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS") and reflect Management’s best estimates and judgements based on information currently available.  The Company's independent auditor has not performed a review of these financial statements in accordance with standards established for a review of interim financial statements by an entity's auditor.

 

 

LINGO MEDIA CORPORATION

Condensed Consolidated Interim Financial Statements

As at September 30, 2021

 

 

 

 

 

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

 

These condensed consolidated interim financial statements are authorized for issue by the Board of Directors on November 24, 2020.

 

 

 

 

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

 

 

 

No preference shares were issued as of September 30, 2021.

 

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

 

 

 

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

 

 

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

For the period ended September 30, 2021

(Unaudited - See Notice to Reader)

 

 

Lingo Media Corporation (“Lingo Media” or the “Company”) is a publicly listed company incorporated in Canada with limited liability under the legislation of the Province of Ontario and its shares are listed on the TSX Venture Exchange under the symbol “LM” and inter-listed on the OTC Markets under the symbol “LMDCF” and Frankfurt Stock Exchange under the symbol “LIMA”. The condensed consolidated interim financial statements of the Company as at and for the period ended September 30, 2021 comprise the Company and its wholly-owned subsidiaries: Lingo Learning Inc., ELL Technologies Ltd., Lingo Group Limited., ELL Technologies Limited, Vizualize Technologies Corporation, Speak2Me Inc., and Parlo Corporation (the “Group”).

 

Lingo Media is an EdTech company that is ‘Building a multilingual world’ through innovative online and print-based technologies and solutions. 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 provides online training and assessment for language learning. Lingo Learning is a print-based publisher of English language learning school programs in China.

 

The head office, principal address and registered office of the Company is located at 151 Bloor Street West, Suite 609, Toronto, Ontario, Canada, M5S 1S4.

 

 

 

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

 

The condensed consolidated interim financial statements for the period ended September 30, 2021 were approved and authorized by the Board of Directors on November 24, 2020.

 

 

These condensed consolidated interim 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.

 

 

The condensed consolidated interim financial statements comprise the financial statements of the Company and its wholly owned subsidiaries controlled by the Company (the “Group”) as at September 30, 2021. 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.

 

 

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

For the period ended September 30, 2021

(Unaudited - See Notice to Reader)

 

 

 

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”.

 

 

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

 

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

 

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

 

 

 

 

 

 

 

 

The accounting policies applied by the Company in these Condensed Consolidated Interim Financial Statements are the same as those applied by the Company in its Consolidated Financial Statements for the year ended December 31, 2020.

 

 

 

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

For the period ended September 30, 2021

(Unaudited - See Notice to Reader)

 

 

As at September 30, 2021, the Company had accounts receivable of $69,179 (2020- $200,726) greater than 30 days overdue and not impaired.

 

 

 

The Company has one office facility under lease. The lease term is 5 years from 2016, with an option to renew the lease for another 5 year term after that date. The Company did not renew the lease on expiry and the lease was expired on February 28, 2021.

 

Non-cancellable lease rentals are payable as follows:

 

 

 

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

For the period ended September 30, 2021

(Unaudited - See Notice to Reader)

 

 

The Company subleased Suite 609 at 151 Bloor Street West, Toronto Ontario. It also has equipment leases and office lease in Beijing which it has determined are not recognized as right of use assets or lease liabilities as they are short-term lease and low dollar value. The Beijing office lease expense for the period is $7,119.

 

The Company’s lease obligation and movements therein during the period ended September 30, 2021:

 

 

The Company’s right-of-use assets and movements therein during the period ended September 30, 2021:

 

 

 

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

For the period ended September 30, 2021

(Unaudited - See Notice to Reader)

 

 

 

In 2020, the Company received loans of $100,000 through Canadian Emergency Business Account Program (“CEBA Loan”), which provides financial relief for Canadian small business during the COVID-19 pandemic. The CEBA loan has an initial term date on December 31, 2021 (the “Initial Term Date”) and may be extended to December 31, 2025. The CEBA Loan is non-revolving, with an interest rate being 0% per annum prior to the initial Term Date. Repayment of principal is not required before December 31, 2022. The loan payments can be made at any time without fees or penalties. Repaying the balance of the CEBA loan on or before December 31, 2022 will result in a loan forgiveness of $30,000. During the period, the Company received $20,000 additional CEBA loan and loan forgiveness $10,000 has been recorded as a reduction of general and administrative expense.

 

 

Authorized

 

Unlimited number of preference shares with no par value

 

Unlimited number of common shares with no par value

 

 

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 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.

 

 

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

For the period ended September 30, 2021

(Unaudited - See Notice to Reader)

 

 

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:

 

 

The weighted average remaining contractual life for the stock options outstanding as at September 30, 2021 was 0.29 years (2020 – 0.9 years, 2010 –1.77 years). The range of exercise prices for the stock options outstanding as at September 30, 2021 was $0.05 - $0.13 (2020- $0.05 - $0.23 , 2019 - $$0.07-$0.23). The weighted average grant-date fair value of options granted to management, employees, directors and consultants in February 2020 was estimated at $0.0355 (2020 - $0.0355, 2019 - $0.0519) using the Black-Scholes option-pricing model. The estimated fair value of the options granted is expensed immediately.

 

The pricing model assumes the weighted average risk free interest rates of 1.37% (2010 – 1.37%, 2019 – 2.19%) weighted average expected dividend yields of nil (2020 – nil, 2019 – nil), the weighted average expected common stock price volatility (based on historical trading) of 123% (2020 – 123%, 2019 – 105%), a forfeiture rate of 0% (2020 – 0%, 2019 – 0%), a weighted average stock price of $0.05 (2020 - $0.20, 2019 - $0.07), a weighted average exercise price of $0.05 (2020 - $0.05, 2019 - $0.07), and a weighted average expected life of 3 years (2020 – 2.85 years, 2019 – 2.85 years), which were estimated based on past experience with options and option contract specifics.

 

 

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

For the period ended September 30, 2021

(Unaudited - See Notice to Reader)

 

 

Income tax expense is accrued upon recognition of revenue and is withheld at source on remittances from China.

 

 

Government Grants

 

Included as a reduction of selling, general and administrative expenses are government grants of $168,721 (2020 -$279,017), relating to the Company’s publishing projects. At the end of the period, $165,000 ( 2020 - $ Nil ) is included in accounts and grants receivable.

 

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

 

Canada Emergency Wage Subsidy

 

The Canada Emergency Wage Subsidy (“CEWS”) was announced on March 27, 2020. Effective April 11, 2020, the CEWS came into force providing a wage subsidy to eligible Canadian employers to enable them to continue to pay their Canadian employees through their own payroll. Due to the negative impact of COVID-19, the Company applied CEWS and recorded $14,637 was received during the period to reduce General and Administrative Expense.

 

Technation Canada – Career Ready Program

 

Career Ready Program is part of the Government of Canada’s Student Work Placement Program. It supports businesses by financing their decision to hire a student for a work-term placement. This in turn creates a rewarding opportunity for the student to apply their learning in real-world setting and puts them on a path to a bright career. During the period, the Company receive $7,500 from the program. It has been recorded as a reduction of General and Administrative Expense.

 

 

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:

 

 

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

For the period ended September 30, 2021

(Unaudited - See Notice to Reader)

 

 

 

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 Dollar against the Canadian Dollar would have increased the net equity approximately by $97,025 (2020 ‑ $79,357) due to reduction in the value of net liability balance. A 10% of weakening of the US Dollar against the Canadian Dollar at September 30, 2021 would have had the equal but opposite effect. The significant financial instruments of the Company, their carrying values and the exposure to other denominated monetary assets and liabilities, as of September 30, 2021 are as follows:

 

 

 

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. On September 30, 2021, the Company had cash of $1,184,547, accounts and grants receivable of $1,013,424 and prepaid and other receivables of $113,605 to settle current liabilities of $424,211.

 

 

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 of September 30, 2021, the Company has outstanding trade receivables of $848,424 (2020 - $249,383). 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.

 

 

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

For the period ended September 30, 2021

(Unaudited - See Notice to Reader)

 

 

The Company had sales to a major customer in the period ended on September 30, 2021 and on September 30, 2020, a government agency of the People’s Republic of China. The total percentage of sales to this customer during the period was 68% (2020 – 79%) and the total percentage of accounts receivable on September 30, 2021 was 97% (2020 – 86%).

 

 

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

 

The Company includes equity, comprised of issued share capital, warrants, share-based payments reserve and deficit, in the definition of capital. The Company is dependent on cash flow from co-publishing and distribution agreements and external financing to fund its activities. In order to carry out planned development of its products and pay for administrative costs, the Company will spend its existing working capital and raise additional amounts as needed. Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable. There has been no change to the Company’s capital management from the approach used in 2021 or in 2020.

 

 

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.

 

 

 

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

For the period ended September 30, 2021

(Unaudited - See Notice to Reader)

 

 

 

 

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

For the period ended September 30, 2021

(Unaudited - See Notice to Reader)

 

 

 

 

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

 

 

 

 

 

Since December 31, 2019, the outbreak of the novel strain of coronavirus, specifically identified as “COVID-19,” has resulted in governments worldwide enacting emergency measures to combat the spread of the virus. These measures, which include the implementation of travel bans, self-imposed quarantine periods and social distancing, have caused material disruption to businesses globally resulting in an economic slowdown. Global equity markets have experienced significant volatility and weakness. Governments and central banks have reacted with significant monetary and fiscal interventions designed to stabilize economic conditions.

 

The extent to which COVID-19 and any other pandemic or public health crisis impacts the Company’s business, affairs, operations, financial condition, liquidity, availability of credit and results of operations will depend on future developments that are highly uncertain and cannot be predicted with any meaningful precision, including new information which may emerge concerning the severity of the COVID-19 virus and the actions required to contain the COVID-19 virus or remedy its impact, among others. The duration and impact of the COVID-19 outbreak is unknown at this time, as is the efficacy of the government and central bank interventions. It is not possible to reliably estimate the length and severity of these developments and the impact on the financial results and condition of the Company and its operating subsidiaries in future periods.

 

 

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

For the period ended September 30, 2021

(Unaudited - See Notice to Reader)

 

 

Lingo Media has taken measures to protect its management, employees and contractors and has advised them to work from home and maintain a safe environment to ensure they are healthy and have minimal exposure to the risk of infection. In addition, the company is eligible and has applied for certain government subsidies, additional grants and interest-free loans, which will be reflected in the subsequent period financial statements.

 

The Company has contacted all the parties it is working with to ensure they are all working in a safe environment. A number of such parties have had an impact on their operations and ability to collaborate, while, a large number have identified multiple new business opportunities due to COVID-19 and the stay at home order of students in many countries. Lingo Media is offering e-learning solutions which fit the challenges schools and universities are facing by providing online language learning solutions. In addition, the Company has designed a number of programs to ensure its clients can easily deploy its suite of products that are well suited for a quarantined environment.