lingo_6k-063009.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 June 30, 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-________________.
 
1
 
SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934 the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunder duly authorized.
 
 
LINGO MEDIA CORPORATION
  
       
Date: August 31, 2009
By:
/s/ Michael Kraft
  
   
Michael Kraft
President and CEO
  
 
2
 
Consolidated Interim Financial Statements
 (Expressed in Canadian Dollars)

LINGO MEDIA CORPORATION
June 30, 2009 and 2008
(Unaudited – See Notice to Reader)
 
 
The Consolidated Interim Balance Sheets of Lingo Media Corporation as at June 30, 2009 and the Consolidated Interim Statements of Deficit, Operations and Cash Flows for the six months then ended have not been reviewed by the Company’s auditors. These financial statements are the responsibility of management and have been reviewed and approved by the Company’s Audit Committee.
 
3
 
LINGO MEDIA CORPORATION
Consolidated Interim Financial Statements
(Expressed in Canadian Dollars)
June 30, 2009 and 2008
(Unaudited)

 
Notice to Reader

 
Management has compiled the Interim Financial Statements of Lingo Media Corporation (“Lingo Media” or the “Company”) consisting of the Consolidated Interim Balance Sheets as at June 30, 2009 and the Interim Statements of Deficit, Operations, and Cash Flows for the six months then ended.  All amounts are stated in Canadian Dollars. An accounting firm has not reviewed or audited these Interim Financial Statements and Management Discussion and Analysis thereon
 
4
 
LINGO MEDIA CORPORATION
 Consolidated Interim Financial Statements
(Expressed in Canadian Dollars)
June 30, 2009 and 2008
(Unaudited – See Notice to Reader)
 
 
CONTENTS
 
Page
Consolidated Interim Financial Statements:
  
Balance Sheets
6
Statements of Deficit
7
Statements of Operations
8
Statements of Cash Flows
9
Notes to Financial Statements
10
 
5
 
LINGO MEDIA CORPORATION
Consolidated Interim Balance Sheets
(Expressed in Canadian Dollars)
June 30, 2009 and 2008
(Unaudited – See Notice to Reader)

   
June 30
2009
    
December 31
2008
  
Assets
            
             
Current assets:
            
Cash
   $ 1,136,182     $ 2,279,937  
Accounts and grants receivable (Note 3)
     645,985       642,543  
Prepaid and sundry assets
     169,707       160,161  
Current assets from discontinued operation (Note 6)
     3,286       34,608  
      1,955,160       3,117,249  
                 
Property and equipment, net
     76,436       64,839  
Development costs, net
     68,028       111,517  
Software & web development costs, net (Note 4)
     5,330,612       5,233,187  
    $ 7,430,237     $ 8,526,792  
                 
Liabilities and Shareholders' Equity                
                 
Current liabilities:
                
Accounts payable
     289,731       265,344  
Accrued liabilities
     245,923       321,466  
Unearned revenue
     135,883       -  
Current liabilities from discontinued operation (Note 6)
     255,000       734,601  
      926,537       1,321,411  
                 
Future income taxes
     564,997       564,997  
      1,491,534       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
     941,503       847,768  
Deficit
     (9,580,700 )     (8,785,284 )
      5,938,703       6,640,384  
                 
    $ 7,430,237     $ 8,526,792  
 
See accompanying notes to Consolidated Interim Financial Statements.
 
Approved on behalf of the Board:
 
/s/ Sanjay Joshi
  
 
  
 
Sanjay Joshi
        
Director        
         
         
/s/ Michael Kraft
  
 
  
 
Michael Kraft
        
 Director        

6
 
LINGO MEDIA CORPORATION
Consolidated Interim Statements of Deficit
(Expressed in Canadian Dollars)
June 30, 2009 and 2008
(Unaudited – See Notice to Reader)

   
Three months ended
    
Six months ended
   
June 30
2009
    
June 30
2008
    
June 30
2009
  
June 30
2008
  
Deficit, beginning of period
   $ (8,889,311 )   $ (5,355,994 )   $ (8,785,284 )   $ (5,355,994 )
                                 
Net loss for the period
     (691,389 )     (491,231 )     (795,416 )     (944,783 )
                                 
Deficit, end of period
     (9,580,700 )     (5,847,225 )     (9, 580,700 )     (5,847,225 )
 
See accompanying notes to Consolidated Interim Financial Statements.
 
7
 
LINGO MEDIA CORPORATION
Consolidated Interim Statements of Operations
(Expressed in Canadian Dollars)
June 30, 2009 and 2008
(Unaudited – See Notice to Reader)
 
   
Three months ended
    
Six months ended
  
   
June 30
2009
    
June 30
2008
    
June 30
2009
    
June 30
2008
  
             
(Restated see Note 6) 
              
(Restated see Note 6) 
  
Revenue
   $ 654,358     $ 393,709     $ 709,678     $ 393,709  
Direct costs
     80,638       50,625       80,638       50,625  
Margin
     573,720       343,084       629,040       343,084  
                                 
Expenses:
                                
General and administrative
     639,982       491,046       1,074,673       780,692  
Development costs write-down
     -       (28,184 )     -       -  
Amortization of property and equipment
     22,929       8,509       26,169       16,932  
Amortization of software & web development cost
     468,862       -       468,862       -  
Amortization of development cost
     -       23,526       22,229       47,458  
Interest and other financial expenses
     (349 )     39,484       313       39,484  
Stock-based compensation
     46,868       143,750       93,735       187,583  
      1,178,293       678,131       1,685,982       1,072,149  
                                 
Loss before the following:
     (604,573 )     (335,047 )     (1,056,942 )     (729,065 )
                                 
Income taxes and other taxes
     86,816       56,963       89,582       56,963  
Loss from continuing operations:
     (691,389 )     (392,010 )     (1,146,524 )     (786,028 )
                                 
Gain(Loss) - discontinued operation  (Note 6)
     -       (99,219 )     351,109       (158,755 )
                                 
Net loss for the period
   $ (691,389 )   $ (491,229 )   $ (795,416 )   $ (944,782 )
                                 
Loss per share from continued operation
   $ (0.06 )   $ (0.04 )   $ (0.09 )   $ (0.08 )
Earnings (loss) per share from discontinued operation
     -       (0.01 )     0.03       (0.02 )
                                 
Weighted average number of common shares outstanding
     12,457,607       9,583,637       12,457,607       9,583,637  
 
See accompanying notes to Consolidated Interim Financial Statements.
 
8
 
LINGO MEDIA CORPORATION
Consolidated Interim Statements of Cash Flow
(Expressed in Canadian Dollars)
June 30, 2009 and 2008
(Unaudited – See Notice to Reader)

   
Three months
    
Six months
  
   
June 30
2009
    
June 30
2008
   
June 30
2009
    
June 30
2008
  
         
(Restated see Note 6)
          
(Restated see Note 6)
  
Cash flows provided by (used in):
                        
Operations:
                        
Net loss from continuing operations for the period
   $ (691,389 )   $ (392,010 )   $ (1,146,524 )   $ (786,028 )
Items not affecting cash:
                                
Amortization of property and    equipment
     22,929       8,509       26,169       16,932  
Amortization of development costs
     -       23,526       22,229       47,458  
Amortization of software and web development costs
     468,862       -       468,862       -  
Stock-based compensation
     46,868       143,750       93,735       187,583  
Change in non-cash balances related to operations:
                                
Accounts and grants receivable
     60,363       (1,508 )     (3,441 )     423,913  
Inventory
     -       123,388       -       242  
Prepaid and sundry assets
     40,726       1,090       (9,546 )     (8,596 )
Accounts payable
     167,955       137,860       24,388       84,120  
Accrued liabilities
     (5,630 )     (120,534 )     (75,543 )     (15,083 )
Unearned revenue
     25,243       (159,755 )     135,883       -  
Cash provided by (used in) operating activities
     135,926       (235,683 )      (463,789 )      (49,459 ) 
                                 
Cash provided by (used in) discontinued operation
     -       (108,377 )      (97,171 )      (56,584 ) 
                         
Financing:
                        
Advances/loan payable
     -       210,522       -       210,522  
Issuance of capital stock
     -       3,018       -       3,018  
Increase (decrease) in advances from shareholders
     -       1,978       -       -  
Cash provided by financing activities
     -       215,518       -       213,540  
                                 
Investing:
                                
Expenditures on software & web development costs
     (284,414 )     57,835       (566,288 )     (329,887 )
Purchase of property and equipment
     (23,818 )     (147 )     (38,276 )     (8,033 )
Development costs
     21,769       (26,821 )     21,769       (27,774 )
Cash used in investing activities
     (286,463 )     30,866       (582,795 )     (365,694 )
                                 
Decrease in cash
     (150,537 )     (97,675 )     (1,143,754 )     (258,197 )
Cash, beginning of period
     1,286,720       216,606       2,279,937       377,127  
Cash, end of period
   $ 1,136,183     $ 118,931     $ 1,136,183     $ 118,931  
 
See accompanying notes to Consolidated Interim Financial Statements.
 
9
 
LINGO MEDIA CORPORATION
Notes to Consolidated Interim Financial Statements
(Expressed in Canadian Dollars)
June 30, 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 70.33% subsidiary A+ Child Development (Canada) Ltd. (“A+”), until it filed a proposal to its creditors (“Proposal”) (Note 6), specialized in distributing early childhood cognitive development programs.
 
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 June 30, 2009 and the results of operations and cash flows for the six months then ended.
 
3. Accounts and grants receivable:
 
Accounts and grants receivable consist of:
          
   
June 30
2009
    
December 31
 2008
Trade receivables
   $ 592,564     $ 615,501
Grants receivable
     53,421       27,042
    $ 645,985     $ 642,543
 
4. Software and web development costs:
 
Speak2Me began commercial production and sale of its programs and started to record amortization expense as of April 1, 2009.  The capitalized software and web development cost has an expected life of a minimum of three years and amortization are expensed evenly over the period.   The Company evaluates the carrying cost of the assets periodically and if the book value is higher than the carrying cost, an impairment expense would be recorded at such time.
           
   
June 30
2009
    
December 31
2008
Software and web development costs
   $ 5,797,743     $ 5,233,187
Accumulated amortization
     (467,131 )     -
Net software and web development costs
   $ 5,330,612     $ 5,233,187
 
10
 
LINGO MEDIA CORPORATION
Notes to Consolidated Interim Financial Statements
(Expressed in Canadian Dollars)
June 30, 2009 and 2008
(Unaudited – See Notice to Reader)
 
4. Software and web development costs (continued):
 
Speak2Me began commercial production and sale of products as of April 1, 2009 and started to record amortization expense.  The capitalized software and web development cost has an expected life of a minimum of three years and amortization are expensed evenly over the period.   The Company evaluates the carrying cost of the assets periodically and if the book value is higher than the carrying cost, an impairment expense would be recorded at such time.
 
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 & June 30, 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 & June 30, 2009
     2,314,286     $ 372,385     $ 3.85       1.65
 
All outstanding warrants are exercisable as of June 30, 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
Stock-based compensation
     46,867
Balance, June  30, 2009
   $ 941,503
 
11
 
LINGO MEDIA CORPORATION
Notes to Consolidated Interim Financial Statements
(Expressed in Canadian Dollars)
June 30, 2009 and 2008
(Unaudited – See Notice to Reader)
 
5. Capital stock and stock options (continued):
 
(d) Stock options:
 
   
June 30, 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
     577,250       1.75       290,000       1.21
Options exercised
     -       -       (18,202 )     1.11
Options expired/cancelled
     -       -       (155,416 )     1.13
                               
Outstanding, end of period
     1,210,370       1.38       633,120       1.04
Options exercisable, end of period
     580,620     $ 1.02       502,287     $ 0.99
 
The following table summarizes information about stock options outstanding at June 30, 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       2.91    
$
 0.73       328,082     $ 0.73
$
 1.01 - $1.33       155,157       1.55       1.23       146,824       1.24
$ 1.34 - $2.00       712,964       4.49       1.72       105,714       1.59
Total
       1,210,370         3.67     $ 1.38       580,620     $ 1.02
 
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”).  On March 23, 2009, the Proposal was approved by the creditors of A+ and 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.  Net loss for the six months ended June 30, 2008 was $158,755.  The Company continues to restructure its operations and plans to divest from the business either through a sale or closure of the business.
 
All comparative figures in the financial statements 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.
 
12
 
LINGO MEDIA CORPORATION
Notes to Consolidated Interim Financial Statements
(Expressed in Canadian Dollars)
June 30, 2009 and 2008
(Unaudited – See Notice to Reader)
 
6. Discontinued operations (continued):
             
   
June 30
2009
    
December 31
2008
  
Current assets of discontinued operation
            
Cash and short term investment
   $ 3,286     $ 34,608  
    $ 3,286     $ 34,608  
                 
Current liabilities of discontinued operation
                
Accounts payable
   $ 255,000     $ 653,615  
Bank loan
     -       80,986  
    $ 255,000     $ 734,601  
 
The statement of loss for the six months ended June 30 from discontinued operations is as follows:
             
   
June 30
2009
    
June 30
2008
  
Operating revenue
   $ -     $ 1,435,397  
Expenses
     (16,184 )     (1,594,152)  
Write-down of trade payables
     367,293       -  
Net gain / (loss) from discontinued operation
   $ 351,109     $ (158,755)  
 
7. Financial instruments and risk management:
 
(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 and expenses are denominated in U.S. Dollars, Chinese Renminbi ("RMB") and New Taiwanese Dollars (“NTW”).
 
There were no derivative instruments outstanding at June 30, 2009 and 2008.
 
(a)  Financial instruments:
 
The significant financial instruments of the Company, their carrying values and the exposure to U.S. Dollar, Chinese Renminbi and New Taiwan Dollar denominated monetary assets and liabilities, as of June 30, 2009 are as follows:
                 
   
US Denominated
    
China Denominated
    
Taiwan Denominated
   
CAD
    
USD
    
CAD
    
RMB
    
CAD
    
NTW
Cash
     733,712       630,879       125,575       737,801       191,698       5,407,557
Accounts receivable
     -       -       569,823       3,347,941       -       -
Accounts payable
     61,969       53,284       -       -       -       -
 
U.S. Dollars, Chinese Renminbi and New Taiwanese Dollars are converted on the prevailing period-end exchange rates.
 
13
 
LINGO MEDIA CORPORATION
Notes to Consolidated Interim Financial Statements
(Expressed in Canadian Dollars)
June 30, 2009 and 2008
(Unaudited – See Notice to Reader)
 
7. Financial instruments and risk management (continued):
 
(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.  
 
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 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 market in China.
                 
Six months ended June 30, 2009
  
Online English
 Language Learning
    
English
Language Learning
    
Total
Revenue
   $ 165,960     $ 543,718     $ 709,678
Cost of sales
     11,314       69,324       80,638
Margin
     154,646       474,394       629,040
Acquisition of property and equipment
     -       38,276       38,276
Segment assets
     5,932,107       1,498,130       7,430,237
Segment loss
   $ 981,549     $ 164,975     $ 1,146,524
 
14
 
LINGO MEDIA CORPORATION
Notes to Consolidated Interim Financial Statements
(Expressed in Canadian Dollars)
June 30, 2009 and 2008
(Unaudited – See Notice to Reader)
 
8. Segmented information (continued):
                 
Six months ended June 30, 2009
  
Online English Language
Learning
    
English
Language
Learning
    
Total
Revenue
   $ 165,960     $ 543,718     $ 709,678
Cost of sales
     11,314       69,324       80,638
Margin
   $ 154,646     $ 474,394     $ 629,040

                 
Six months ended June 30, 2008
  
Online English Language
Learning
    
English
Language
Learning
    
Total
Revenue
   $ -     $ 393,709     $ 393,709
Cost of sales
     -       50,626       50,626
Margin
   $ -     $ 343,083     $ 343,083
 
The Company's revenue by geographic region based on the region in which the customers are located is as follows:
           
   
June 30
2009
    
June 30
2008
Canada
   $ -     $ -
China
     709,678       393,709
    $ 709,678     $ 393,709

The majority of the Company’s identifiable assets as at June 30 are located as follows:
           
   
June 30
2009
    
June 30
2008
Canada   $ 7,053,075     $ 7,268,023
China
     377,162       392,846
    $ 7,430,237     $ 7,660,869
 
15
 
LINGO MEDIA CORPORATION
Notes to Consolidated Interim Financial Statements
(Expressed in Canadian Dollars)
June 30, 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:
             
   
June 30
2009
    
June 30
2008
  
Loss for the period - Canadian GAAP
   $ (795,416 )   $ (944,782)  
Impact of United States GAAP and adjustments:
                
Amortization of development costs
     22,229       47,458  
Software and web development costs
     197,331       (378,722)  
Loss for the period - United States GAAP
   $ (575,856 )   $ (1,276,046)  
 
The cumulative effect of these adjustments on the consolidated shareholders' equity of the Company is as follows:
             
   
June 30
2009
    
December 31
2008
  
Shareholders' equity - Canadian GAAP
   $ 5,938,703     $ 6,640,384  
Development costs
     (89,798 )     (111,517)  
Software & web development costs
     (5,330,612 )     (5,233,187)  
Shareholders' equity - United States GAAP
   $ 518,293     $ 1,295,680  
 
10. Comparative figures:
 
Certain comparative figures have been reclassified to conform with the financial statement presentation adopted in the current period.
 
 
16