lingo_6k-033109.htm
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 6-K
 
REPORT OF FOREIGN PRIVATE ISSUER
Pursuant to Rule 13a-16 or 15d-16 under
the Securities Exchange Act of 1934
 
For the month of March 31, 2009
 
Commission File Number 333-98397
 
Lingo Media Corporation
(Translation of registrant's name into English)
 
151 Bloor Street West, Suite 703, Toronto, Ontario Canada M5S 1S4
(Address of principal executive offices)
 
 
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. Form 20-F x Form 40-F o
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): o
 
Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): o
 
Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.
 
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934. Yes o No x
 
If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-________________.
 
SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934 the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunder duly authorized.
 
 
LINGO MEDIA CORPORATION
  
       
Date: May 29, 2009
By:
/s/ Michael Kraft
  
   
Michael Kraft
President and CEO
  
 
1
 
Interim Consolidated Financial Statements
(Expressed in Canadian dollars)
 
LINGO MEDIA CORPORATION
March 31, 2009 and 2008
(Unaudited – See Notice to Reader)
 
 
 
 
 
The Consolidated Interim Balance Sheet of Lingo Media Corporation as at March 31, 2009 and the Consolidated Interim Statements of Operations, Deficit and Cash Flows for the three months then ended have not been reviewed by the Company’s auditors. These financial statements are the responsibility of the management and have been reviewed and approved by the Company’s Audit Committee.
 
2
 
LINGO MEDIA CORPORATION
Interim Consolidated Financial Statements
(Expressed in Canadian dollars)
March 31, 2009 and 2008
(Unaudited – See Notice to Reader)




Notice to Reader

Management has compiled the interim financial statements of Lingo Media Corporation (“Lingo Media” or the “Company”) consisting of the Interim Consolidated Balance Sheet as at March 31, 2009 and the Interim Statements of Deficit, Operations, and Cash Flows for the three months then ended.  All amounts are stated in Canadian dollars. An accounting firm has not reviewed or audited these interim financial statements and management discussion and analysis thereon.
 
3
 
LINGO MEDIA CORPORATION
Interim Consolidated Financial Statements
(Expressed in Canadian dollars)
March 31, 2009 and 2008
(Unaudited – See Notice to Reader)
 
CONTENTS
 
 
Page
Interim Consolidated Financial Statements:
  
Balance Sheets
5
Statement of Deficit
6
Statement of Operations
7
Statement of Cash Flows
8
Notes to Financial Statements
9
 
4
 
LINGO MEDIA CORPORATION
Consolidated Interim Balance Sheets
(Expressed in Canadian dollars)
March 31, 2009 and 2008
(Unaudited – See Notice to Reader)

 
   
March 31,
2009
    
December 31,
2008
  
Assets
            
             
Current assets:
            
Cash
   $ 1,286,720     $ 2,279,937  
Accounts and grants receivable (note 3)
     706,347       642,543  
Prepaid and sundry assets
     210,433       160,161  
Current assets from discontinued operation (note 6)
     33,286       34,608  
      2,236,786       3,117,249  
                 
Property and equipment, net
     75,548       64,839  
Development costs, net
     89,798       111,517  
Software & web development costs, net (note 4)
     5,515,060       5,233,187  
    $ 7,917,192     $ 8,526,792  
                 
Liabilities and Shareholders' Equity                
                 
Current liabilities:
                
Accounts payable
     121,776       265,344  
Accrued liabilities
     251,553       321,466  
Unearned revenue
     110,640       -  
Current liabilities from discontinued operation (note 6)
     285,000       734,601  
      768,969       1,321,411  
                 
Future income taxes
     564,997       564,997  
      1,333,966       1,886,408  
                 
Shareholders' equity:
                
Capital stock (note 5 (a))
     14,205,515       14,205,515  
Warrants (note 5 (b))
     372,385       372,385  
Contributed surplus
     894,636       847,768  
Deficit
     (8,889,310 )     (8,785,284 )
      6,583,226       6,640,384  
                 
    $ 7,917,192     $ 8,526,792  
 
See accompanying notes to interim consolidated financial statements.
 
Approved on behalf of the Board:
 
/s/ Michael Kraft
    
 
  
Michael Kraft
Director
    
 
  
         
/s/ Sanjay Joshi
    
 
  
Sanjay Joshi
Director
    
 
  
 
5
 
LINGO MEDIA CORPORATION
Consolidated Interim Statements of Deficit
(Expressed in Canadian dollars)
For Three Months Ended, March 31, 2009 and 2008
(Unaudited – See Notice to Reader)
 
 
   
March 31,
2009
    
March 31,
2008
  
                 
Deficit, beginning of period
   $ (8,785,284 )   $ (4,902,442 )
                 
Net loss for the period
     (104,026 )     (453,553 )
                 
Deficit, end of period
     (8,889,310 )     (5,355,995 )
 
See accompanying notes to interim consolidated financial statements.
 
6
 
LINGO MEDIA CORPORATION
Consolidated Interim Statements of Operations
(Expressed in Canadian dollars)
For Three Months Ended, March 31, 2009, 2008 and 2007
(Unaudited – See Notice to Reader)
 
 
   
March 31,
2009
    
March 31,
2008
(Restated see
Note 6)
    
March 31,
2007
(Restated see
Note 6)
  
Revenue
   $ 55,320     $ -     $ 795  
Direct costs
     -       -       -  
Margin
     55,320       -       795  
                         
Expenses:
                        
General and administrative
     434,691       289,646       155,589  
Inventory write-down
     -       -       36,279  
Development costs write-down
     -       28,184       -  
Amortization of property and equipment
     3,239       8,423       2,864  
Amortization of development cost
     22,229       23,932       16,598  
Interest and other financial expenses
     662       -       10,494  
Stock-based compensation
     46,868       43,833       17,154  
      507,689       394,018       238,978  
                         
Loss before the following:
     (452,369 )     (394,018 )     (238,183 )
                         
Income taxes and other taxes
     2,766       -       -  
                         
Loss from continuing operations:
     (455,135 )     (394,018 )     (238,183 )
                         
Gain (Loss) from discontinued operation  (Note 6)
     351,109       (59,535 )     (71,194 )
                         
Net loss for the period
   $ (104,026 )     (453,553 )   $ (309,377 )
                         
Loss per share from continued operation
   $ (0.04 )   $ (0.04 )   $ (0.05 )
Earnings (loss) per share from discontinued operation
     0.03       (0.01 )     (0.02 )
                         
Weighted average number of
                        
common shares outstanding
     12,457,607       9,583,637       4,227,277  
 
See accompanying notes to interim consolidated financial statements.
 
7
 
LINGO MEDIA CORPORATION
Consolidated Interim Statements of Cash Flow
(Expressed in Canadian dollars)
For Three Months Ended, March 31, 2009, 2008 and 2007
(Unaudited – See Notice to Reader)
 
 
   
March 31,
2009
    
March 31,
2008
(Restated see
Note 6)
    
March 31,
2007
(Restated see
Note 6)
  
Cash flows provided by (used in):
                  
Operations:
                  
Net loss from continuing operations for the period
   $ (455,135 )   $ (394,018 )   $ (238,183 )
Items not affecting cash:
                        
Amortization of property and equipment
     3,239       8,423       2,864  
Amortization of development costs
     22,229       23,932       16,598  
Stock-based compensation
     46,868       43,833       17,154  
Change in non-cash balances related to operations:
                        
Accounts and grants receivable
     (63,804 )     425,421       41,531  
Inventory
     -       (123,146 )     118  
Prepaid and sundry assets
     (50,272 )     (9,686 )     (9,161 )
Accounts payable
     (143,566 )     (53,740 )     38,841  
Accrued liabilities
     (69,913 )     105,450       (57,249 )
Unearned revenue
     110,640       159,755       177,778  
Cash provided by (used in) operating activities
     (599,714 )     186,224       (9,709 )
                         
Cash provided by (used in) discontinued operation
     (97,171 )     51,793       (122,171 )
                         
Financing:
                        
Increase in bank loans
     -       -       6,701  
Issuance of capital stock
     -       -       5,000  
Increase (decrease) in advances from shareholders
     -       (1,978 )     47,230  
Cash provided by financing activities
     -       (1,978 )     58,931  
Investing:
                        
Expenditures on software & web development costs
     (281,873 )     (387,722 )     -  
Purchase of property and equipment
     (14,458 )     (7,886 )     1,380  
Development costs
     -       (953 )     (23,327 )
Cash used in investing activities
     (296,331 )     (396,560 )     (21,947 )
                         
Decrease in cash
     (993,217 )     (160,522 )     (94,896 )
Cash, beginning of period
     2,279,937       377,127       94,896  
Cash, end of period
   $ 1,286,720     $ 216,605       -  
 
See accompanying notes to interim consolidated financial statements.
 
8
 
LINGO MEDIA CORPORATION
Notes to Consolidated Interim Financial Statements
(Expressed in Canadian dollars)
March 31, 2009 and 2008
(Unaudited – See Notice to Reader)
 
 
1. Nature of Operations:
 
Lingo Media Corporation (“Lingo Media” or the “Company”) is a diversified online and print education product and services company. Speak2Me Inc. (“Speak2Me”), a subsidiary acquired during 2007, is a new media company focused on interactive learning in China through its Internet-based English language web learning portal. Lingo Learning Inc. (formerly Lingo Media Ltd.), a subsidiary of Lingo Media, is a print-based publisher of English language learning programs in China.  In Canada, Lingo Media through its subsidiary A+ Child Development (Canada) Ltd. (“A+”), until filing for a proposal to creditors (“Proposal”) (note 6) specialized in early childhood cognitive development programs which published and distributed educational materials along with its proprietary curriculum.

2. Significant accounting policies:
 
(a) Basis of presentation:
 
The disclosures contained in these interim consolidated financial statements do not include all the requirements of Canadian generally accepted accounting principles (GAAP) for annual financial statements. The interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2008.
 
The interim consolidated financial statements reflect all adjustments, consisting only of normal recurring accruals, which are, in the opinion of management, necessary to present fairly the financial position of the Company as of March 31, 2009 and the results of operations and cash flows for the three months then ended.
 
3. Accounts and grants receivable:
 
Accounts and grants receivable consist of:
 
   
March 31,
2009
    
December 31,
2008
Trade receivables   $ 683,683     $ 615,501
Grants receivable
     22,664       27,042
    $ 706,347     $ 642,543
 
4. Software and web development costs:
 
In October 2007, the Company acquired Speak2Me, a new media company that develops software combining speech recognition and animation technology for the teaching and practice of spoken English. All costs associated with development of the Speak2Me software and its contents are capitalized as Software and web development in accordance with Section 3450 (“Research and Development Cost”), of the CICA Handbook.
 
   
March 31,
2009
    
December 31,
2008
Cost
   $ 5,515,060     $ 5,233,187
 
No amortization has been recorded as the Company has yet to begin commercial production and sale of product.
 
9
 
LINGO MEDIA CORPORATION
Notes to Consolidated Interim Financial Statements
(Expressed in Canadian dollars)
March 31, 2009 and 2008
(Unaudited – See Notice to Reader)
 
 
5. Capital stock and stock options:
 
(a) Authorized:
 
Unlimited preference shares, no par value
 
Unlimited common shares, no par value
 
The following details the changes in issued and outstanding common shares:

   
Common Shares
   
Number
    
Amount
Balance, January 1, 2008
     9,582,262     $ 10,174,453
Issued:
              
Private placement
     2,857,143       4,718,645
Options exercised
     18,202       38,821
Less: Share issue costs
     -       (726,404)
Balance, December 31, 2008 & March 31, 2009
     12,457,607     $ 14,205,515
 
(b) Warrants:
 
   
Warrants
   
Number
    
Amount
    
Weighted Avg. Price
    
Weighted Avg. Life
Balance, January 1, 2008
     387,500     $ 161,254     $ 6.00       1.0
Issued:
                              
Warrants issued with private placement
     2,142,858       281,357     $ 4.00       2.0
Warrants issued with private placement
     171,428       91,028     $ 2.00       1.0
Less: Expired warrants
     (387,500 )     (161,254 )   $ 6.00       1.0
Balance, December 31, 2008 & March 31, 2009
     2,314,286     $ 372,385     $ 3.85       1.9

All outstanding warrants are exercisable as of March 31, 2009.
 
(c) Contributed Surplus:
     
Balance, January 1, 2008   $ 452,411
Stock-based compensation     252,791
Options exercised     (18,688)
Warrants expired     161,254
Balance, December 31, 2008
     847,768
Stock-based compensation
     46,868
Balance, March 31, 2009
   $ 894,636
 
(d) Stock options:
           
    March 31, 2009      December 31, 2008
   
Number of
shares
     Weighted average exercise price     Number of
 shares
    
Weighted average
exercise price
Options outstanding, beginning of year
     633,120       1.04       516,738     $ 0.98
Options granted
     -       -       290,000       1.21
Options exercised
     -       -       (18,202 )     1.11
Options expired/canceled
     -       -       (155,416 )     1.13
                               
Outstanding, end of period
     633,120       1.04       633,120       1.04
Options exercisable, end of period
     541,453     $ 1.00       502,287     $ 0.99
 
10
 
LINGO MEDIA CORPORATION
Notes to Consolidated Interim Financial Statements
(Expressed in Canadian dollars)
March 31, 2009 and 2008
(Unaudited – See Notice to Reader)
 
 
5. Capital stock and stock options (continued):
 
The following table summarizes information about stock options outstanding at March 31, 2009:
                   
           
Options outstanding
    
Options exercisable
Range of
exercise prices
    
Number
outstanding
    
Weighted
average remaining
contractual life
    
Weighted average
exercise price
    
Number
outstanding
    
Weighted average
 exercise price
$ 0.70 - $1.00       342,249       4.67     $ 0.73       313,916     $ 0.73
$ 1.01 - $1.33       155,157       1.66       1.23       138,490       1.25
$ 1.34 - $2.00       135,714       2.18       1.62       89,047       1.57
Total
       633,120       3.40       1.04       541,453       1.00
 
6. Discontinued operations
 
On December 23, 2008, A+, the Company’s 70.33% owned subsidiary, filed a Notice of Intent to make Proposal under the Bankruptcy and Insolvency Act (“Proposal”).  The Company wrote-down the carrying value of its 70.33% investment in A+, resulting in a charge of $1,571,369 (2007 - $292,848, 2006 - $57,906) to earnings, included in the write-down was $274,852 in future income tax assets related to its A+ subsidiary.
 
On March 23, 2009, the Proposal was approved by the creditors of A+.  The Company wrote-down the carrying value of its trade payables to the amount of the Proposal, resulting in a one time gain of $368,615 to discontinued operations.
 
All comparative figures have been adjusted to exclude results from discontinued operations.
 
The net assets of A+ were presented as assets and liabilities of the discontinued operations at their carrying value. The following table shows the major categories of assets and liabilities of the discontinued operations.
           
   
March 31,
2009
    
December 31,
2008
Current assets of discontinued operation
          
Cash and short term investment
   $ 33,286     $ 34,608
    $ 33,286     $ 276,021
               
Current liabilities of discontinued operation
              
Accounts payable
   $ 285,000     $ 653,615
Bank loan
     -       80,986
    $ 285,000     $ 734,601
 
The statement of loss for the three months period ended March 31 from discontinued operations is as follows:
                 
   
2009
    
2008
    
2007
Operating revenue
   $ -     $ 671,793     $ 666,946
Expenses
     1,322       731,328       738,140
Write-down of trade payables
     368,615       -        
Net gain / (loss) from discontinued operation
   $ 351,109     $ (59,535)     $ (71,194)
 
11
 
LINGO MEDIA CORPORATION
Notes to Consolidated Interim Financial Statements
(Expressed in Canadian dollars)
March 31, 2009 and 2008
(Unaudited – See Notice to Reader)
 
 
7. Financial instruments and risk management:
 
The Company as part of its operations carries a number of financial instruments.  It is management's opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments except as otherwise disclosed.
 
 (a) Currency risk:
 
The Company is subject to currency risk through its activities outside of Canada.  Unfavourable changes in the exchange rate may affect the operating results of the Company.  The Company is also exposed to currency risk as a substantial amount of its revenue is denominated in U.S. dollars, Chinese Renminbi ("RMB") and New Taiwanese dollars (“NTW”).
 
There were no derivative instruments outstanding at March 31, 2009 and 2008.
 
(b) Financial Instruments:
 
The significant financial instruments of the Company, their carrying values and the exposure to U.S. dollar denominated monetary assets and liabilities, as of March 31, 2009 are as follows:
                 
   
US Denominated
    
China Denominated
    
Taiwan Denominated
   
CAD
    
USD
    
CAD
    
RMB
    
CAD
    
NTW
Cash
     268,528       212,898       141,098       765,175       51,347       1,381,421
Accounts receivable
     -       -       611,697       3,317,233       -       -
Accounts payable
     6,380       5,058       -       -       -       -
 
U.S. dollars, Chinese Renminbi and New Taiwanese dollars are converted on the prevailing period-end exchange rates.
 
(c) Fair market values:
 
The carrying values of cash, short-term investment, accounts and grants receivable, accounts payable, accrued liabilities, bank loans and loans payable approximate their fair values due to the relatively short periods to maturity.
 
(d) Concentration of risk:
 
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and accounts receivable.  Cash and short-term investment consist of deposits with major financial institutions.  With respect to accounts receivable, the Company performs periodic credit evaluations of the financial condition of its customers and typically does not require collateral from them.  Management assesses the need for allowances for potential credit losses by considering the credit risk of specific customers, historical trends and other information.
 
(d) Interest rate risk:
 
The Company manages its exposure to interest rate risk through floating rate borrowings. The floating rate debt is subject to interest rate cash flow risk, as the required cash flows to service the debt will fluctuate as a result of changes in market rates.  
 
12
 
LINGO MEDIA CORPORATION
Notes to Consolidated Interim Financial Statements
(Expressed in Canadian dollars)
March 31, 2009 and 2008
(Unaudited – See Notice to Reader)
 
 
8. Segmented information:
 
The Company operates two distinct reportable business segments as follows.
 
Online English Language Learning: The Company offers a groundbreaking online service using robust speech recognition technology acquired through its acquisition of Speak2Me Inc. in October 2007.
 
Print-based English Language Learning: The Company develops, publishes, distributes and licenses book, audio/video cassette, CD-based product and supplemental product for English language learning for the educational school markets in China.
                 
   
Online English
Language
Learning
    
English
Language
Learning
    
Total
Revenue
   $ 55,320     $ -     $ 55,320
Cost of sales
     -       -       -
Margin
     55,320       -       55,320
Acquisition of property and equipment
     14,458       -       14,458
Segment Assets
     5,814,560       2,060,663       7,875,223
Segment loss
   $ 79,071     $ 376,064       455,135
 
                 
March 31, 2009
  
Online English
Language
Learning
    
English
Language
Learning
    
Total
Revenue
   $ 55,320     $ -     $ 55,320
Cost of sales
     -       -       -
Margin
   $ 55,320     $ -     $ 55,320

                 
March 31, 2008
  
Online English
Language
Learning
    
English
Language
Learning
    
Total
Revenue
     -       -       -
Cost of sales
     -       -       -
Margin
     -       -       -
 
The Company's revenue by geographic region based on the region in which the customers are located is as follows:
           
   
March 31,
2009
    
March 31,
2008
Canada
   $ -     $ -
China     55,320       -
    $ 55,320     $ -

The majority of the Company’s identifiable assets as at March 31, 2009 are located as follows:
 
   
March 31,
2009
    
March 31,
2008
  
Canada   $ 6,986,344     $ 7,183,922  
China
     930,848       477,891  
    $ 7,917,192     $ 7,661,813  
 
13
 
LINGO MEDIA CORPORATION
Notes to Consolidated Interim Financial Statements
(Expressed in Canadian dollars)
March 31, 2009 and 2008
(Unaudited – See Notice to Reader)
 
 
9. Reconciliation of Canadian and United States generally accepted accounting principles:
 
These interim consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles. Except as set out below, these financial statements also comply, in all material aspects, with the United States generally accepted accounting principles.
 
The following tables reconcile results as reported under Canadian GAAP with those that would have been reported under United States GAAP.
 
Statements of Operations:
   
March 31,
2009
    
March 31,
2008
Loss for the period - Canadian GAAP
   $ (104,026 )   $ (453,553)
Impact of United States GAAP and adjustments:
              
Amortization of development costs
     22,229       -
Software and web development costs
     (281,873 )     (378,722)
Loss for the period - United States GAAP
   $ (372,353 )   $ (808,343)
 
The cumulative effect of these adjustments on the consolidated shareholders' equity of the Company is as follows:
   
March 31,
2009
    
December 31,
2008
Shareholders' equity - Canadian GAAP
   $ 6,583,226     $ 6,640,384
Development costs
     (89,798 )     (111,517)
Software & web development costs
     (5,515,060 )     (5,233,187)
Shareholders' equity - United States GAAP
   $ 978,368     $ 1,295,680
 
10. Comparative figures:
 
Certain comparative figures have been reclassified to conform with the financial statement presentation adopted in the current period.
 
 
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