Edgar Filing: LINGO MEDIA CORP

lingo_20fa-123108.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Annual Report

FORM 20-F/A

o 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

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

For the transition period from __________ to ________

Commission file number _______

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, #703, Toronto, Ontario, Canada M5S 1S4

(Address of principal executive offices)

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. 12,457,607

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 12 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 ninety days. Yes x No o

Indicate by check mark which financial statement item the registrant has elected to follow: Item 17 x Item 18 o

EXPLANATORY NOTE

Lingo Media Corporation is filing this 20-F/A for the year ended December 31, 2008 for the sole purpose of including the Auditors’ Report from Meyers, Norris, Penny LLP dated April 20, 2008 with respect to the balance sheet of Lingo Media Corporation as of December 31, 2007 and the statements of operations, deficit and cash flows for the year then ended. No other changes, material or otherwise, have been made.

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LINGO MEDIA CORPORATION

FORM 20-F ANNUAL REPORT

TABLE OF CONTENTS

		Page
PART I
Item 1.	Identity of Directors, Senior Management and Advisors	3
Item 2.	Offer Statistics and Expected Timetable	3
Item 3.	Key Information	3
Item 4.	Information on the Company	14
Item 5.	Operating and Financial Review and Reports	23
Item 6.	Directors, Senior Management and Employees	38
Item 7.	Major Shareholders and Related Party Transactions	46
Item 8.	Financial Information	48
Item 9.	The Offer and Listing	49
Item 10.	Additional Information	52
Item 11.	Quantitative and Qualitative Disclosures About Market Risk	61
Item 12.	Description of Securities Other Than Equity Securities	61

PART II
Item 13.	Default, Dividend Arrearages and Delinquencies	62
Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds	62
Item 15.	Controls and Procedures	62
Item 16.	Reserved	63

PART III
Item 17.	Financial Statements	64
Item 18.	Financial Statements	64
Item 19.	Exhibits	64

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Forward-Looking Statements

Included in this annual report are various forward-looking statements that can be identified by the use of forward looking terminology such as "may", "will", "expect", "anticipate", "estimate", "continue", "believe", or other similar words. We have made forward-looking statements with respect to the following, among others:

-	the Company’s goals and strategies;

-	the Company’s ability to obtain licenses/permits to operate in China and Canada;

-	the importance and expected growth of English language learning in China;

-	the importance and expected growth of early childhood development in Canada;

-	the Company’s revenues;

-	the Company’s potential profitability; and

-	the Company’s need for external capital.

These statements are forward-looking and reflect our current expectations. They are subject to a number of risks and uncertainties, including but not limited to, changes in the economic and political environment in China. In light of the many risks and uncertainties surrounding China and the early childhood market in Canada prospective purchasers of our shares should keep in mind that we cannot guarantee that the forward-looking statements described in this annual report will transpire.

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

Not applicable

Item 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

3.A.2. Selected Financial Data

Our financial statements are reported in Canadian Dollars and presented in accordance with Canadian generally accepted accounting principles and reconciled to U.S. generally accepted accounting principles (“GAAP”) in the footnotes, for the fiscal years ended December 31, 2008, December 31, 2007, December 31, 2006, December 31, 2005 and December 31, 2004. The financial statements for the fiscal years ended December 31, 2004 to December 31, 2006 have been audited by Mintz & Partners LLP. Meyers, Norris, Penny LLP audited December 31, 2007 financial statements and Collins Barrow Toronto LLP audited December 31, 2008 financial statements.

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

Lingo Media Corporation (the “Company” or “Lingo Media”) 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.

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Table No. 3

Selected Financial Data

Expressed in Canadian Dollars

(CDN$ in 000’s, except per share data)

	Year			Year			Year			Year			Year
	Ended			Ended			Ended			Ended			Ended
	12/31/08			12/31/07			12/31/06			12/31/05			12/31/04

Revenue from continuing operations	$	969		$	880		$	894		$	906		$	590
Gross Profit from continuing operations	$	843		$	766		$	761		$	783		$	495
Net Loss from continuing operations	$	(2,311	)	$	(632	)	$	(691	)	$	(726	)	$	(795	)

Revenue from discontinued operations	$	2576		$	3125		$	680		$	-		$	-
Net Loss from discontinuing operations	$	(1571	)	$	(292	)	$	(58	)	$	-		$	-

(Loss) per Share from continuing operations	$	(0.22	)	$	(0.11	)	$	(0.17	)	$	(0.03	)	$	(0.04	)
(Loss) per Share from discontinuing operations	$	(0.15	)	$	(0.05	)	$	(0.01	)	$	-		$	-

Dividends per Share	$	0.00		$	0.00		$	0.00		$	0.00		$	0.00

Weighted Avg. Shares	$	10,427		$	5,656		$	4,060		$	3,530		$	3,232
Period-end Shares
outstanding	$	12,458		$	9,582		$	4,694		$	4,125		$	3,444

Working Capital	$	1,796		$	208		$	(347	)	$	278		$	271
Long-Term Debt/Loans Payable		-			203			348			-			-
Shareholders’ Equity	$	6,640		$	5,886		$	1,376		$	1,088		$	938
Total Assets	$	8,527		$	8,162		$	2,884		$	1,611		$	1,798
US GAAP income (Loss)	$	(4,697	)	$	(5,178	)	$	(633	)	$	(710	)	$	(427	)
US GAAP Basic Loss per Share	$	(0.45	)	$	(0.92	)	$	(0.16	)	$	(0.17	)	$	(0.12	)

US GAAP Equity	$	1,296		$	1,355		$	1,098		$	625		$	482
US GAAP Total Assets	$	3,182		$	3,631		$	2,606		$	1,391		$	1,212

(1)	Cumulative Net Loss since incorporation under US GAAP has been ($14,373,238).
(2)	a) Under US GAAP, development costs of new businesses are expensed as incurred: 2008-($218,795), 2007-$nil, 2006-$nil, 2005-$nil and 2004-$nil.
	b) Under US GAAP, development costs amortized under Canadian GAAP would be reversed tocalculate Loss per Share: 2008 – $128,478, 2007 – $99,805, 2006 – $156,648, 2005 – $133,290 and 2004-$346,124.
	c) Under US GAAP, software and web development costs are expensed as incurred: 2008-$880,846, 2007-$4,352,341, 2006-$nil, 2005-$nil and 2004-$nil.

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3.A.3. Exchange Rates

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

The table sets forth the rate of exchange for the Canadian Dollar at the end of the five most recent fiscal periods ended December 31st, 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.

For purposes of this table, the rate of exchange means the noon buying rate in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York. The table sets forth the number of Canadian Dollars required under that formula to buy one U.S. Dollar. The average rate means the average of the exchange rates on the last day of each month during the period.

Table No. 4

U.S. Dollar/Canadian Dollar

	Average	High	Low	Close

April 2009	1.23	1.27	1.20	1.21
March 2009	1.26	1.30	1.22	1.25
February 2009	1.24	1.27	1.21	1.26
January 2009	1.22	1.28	1.18	1.23
December 2008	1.23	1.30	1.18	1.22
November 2008	1.22	1.30	1.15	1.24
October 2008	1.17	1.30	1.04	1.21
September 2008	1.06	1.08	1.03	1.04
August 2008	1.05	1.07	1.02	1.06
July 2008	1.01	1.03	1.00	1.02
June 2008	1.01	1.03	0.99	1.01
May 2008	1.00	1.02	0.98	0.99

Fiscal Year Ended Dec. 31, 2008	1.07	1.30	0.97	1.22
Fiscal Year Ended Dec. 31, 2007	1.07	1.19	0.91	0.98
Fiscal Year Ended Dec. 31, 2006	1.13	1.16	1.11	1.12
Fiscal Year Ended Dec. 31, 2005	1.21	1.27	1.15	1.17
Fiscal Year Ended Dec. 31, 2004	1.30	1.39	1.17	1.21

3.B. Capitalization and Indebtedness

Not applicable

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3.D. Risk Factors

The Company is subject to a number of risks and uncertainties.

Lingo Media is a diversified online and print education product and services company. Speak2Me Inc. (“Speak2Me”), a subsidiary acquired in 2007, is a new media company focused on interactive advertising in China through its Internet-based English language learning platform. In China, Lingo Media continues to expand its legacy business via its wholly-owned subsidiary Lingo Learning Inc. (“Lingo Learning”), a print-based publisher of English language learning programs. In Canada, Lingo Media through its 70.33% subsidiary A+ Child Development (Canada) Ltd. (“A+”) specialized in early childhood cognitive development programs which distributed educational materials along with its proprietary curriculum. In December 2008, A+ filed a Notice of Intention to Make a Proposal under the Bankruptcy and Insolvency Act.

As of December 31, 2008, the Company operated two distinct business segments as follows:

Online English Language Learning

The Company offers an online English language learning community in China through its acquisition of Speak2Me. Speak2Me incorporates Lingo Media’s proven pedagogy with fun, interactive lesson modules to address the rapidly growing need for spoken English worldwide. Speak2Me’s groundbreaking service uses speech recognition technology to teach spoken English online through more than 350 targeted lessons that engage users in interactive conversations with a virtual teacher. A unique social-networking infrastructure that allows students to form study groups and offers contests, prizes and other incentives, creates a learning environment that engenders co-operation and competition, just as in a conventional classroom. Speak2Me’s patent-pending Conversational Advertising™ platform allows Speak2Me to provide its innovative offering to end-users at no cost. In addition, Speak2Me offers premium content development services and custom training modules to support businesses and institutions that require English language training for their personnel.

Print-Based English Language Learning

The Company continues to expand its publishing business via its subsidiary Lingo Learning Inc. (“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 200 million students. To date, it has co-published 278 million units from its library of more than 340 program titles in China.

The Company derives its revenue from doing business in China. If any of the following risks occur, our business, results of operations and financial condition would likely suffer. In any such events, the market price of our common stock could decline and you may lose all or part of your investment in our shares of common stock.

Risk Factors Associated with Speak2Me’s Online English Language Learning Business

Early Stage of Development

Speak2Me is at an early stage of development in its business. There can be no assurance that Speak2Me's business will be profitable. There can be no assurance that Speak2Me will be able to generate sufficient activity to be profitable in the future and Speak2Me's limited operating history makes an evaluation of its prospects difficult.

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Competitive Markets

Speak2Me operates in competitive and evolving markets. These markets are subject to rapid technological change and changes in customer preferences and demand. There can be no assurance that Speak2Me will be able to obtain market acceptance or compete for market share. Speak2Me must be able to keep current with the rapidly changing technologies, to adapt its services to evolving industry standards and to improve the performance and reliability of its services. New technologies could enable competitive product offerings and adversely affect Speak2Me and its failure to adapt to such changes could seriously harm its business.

Uncertain Economic Conditions

Unfavourable economic and market conditions could increase Speak2Me's financing costs, reduce demand for its products and services, limit access to capital markets and negatively impact any access to future credit facilities for Speak2Me. Expenditures by advertisers tend to be cyclical, reflecting overall economic conditions as well as budgeting and buying patterns.

We Will Need Additional Financing

Speak2Me will require additional funds for sales and marketing. Failure to obtain additional financing will result in significant delays in developing new products and markets. If Speak2Me is unsuccessful in raising the additional financing called for in its Business Plan, Speak2Me is confident it can continue operations with a series of smaller financings, but would be forced to scale back its sales and expansion plans.

We Are Dependent on Key Personnel

Speak2Me is dependent upon the efforts, performance and commitment of its senior officers and directors, who are responsible for the future development of Speak2Me's business. Shareholders and investors will be relying upon the business judgment, expertise and integrity of Speak2Me's management and directors. To the extent that the services of any senior officers or directors would be unavailable for any reason, a disruption to the operations of Speak2Me could result, and other persons would be required to manage and operate Speak2Me. Speak2Me's future success will also depend in large part upon its ability to attract and retain highly skilled personnel. There can be no assurance that Speak2Me will be successful in attracting and retaining such personnel.

Advertisers May Not Place Advertising in an Educational Context

Speak2Me’s market research indicates that potential advertisers and its target demographic is receptive to the placement of corporate advertising in the context of a website devoted to education. However, Speak2Me is aware of the risk of political change in any country in which it is operating which may mean the local government regulators may no longer be willing to accept corporate advertising within its student network.

Parents and Students May Not Be Willing to Pay for Online Services

Offline English Language Learning instruction is a growing industry, but attempts to attract large numbers of paying students to subscription-based online English Language Learning services have largely failed. Given that online consumption patterns in China are largely following trends already established in the West, and given that few industries and companies in the international markets have been able to establish thriving subscription-supported online services, a pure subscription model is unlikely to succeed in China.

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Low Growth of Internet Advertising

Speak2Me is aware that the level of Internet advertising is currently low, especially in Asia and Latin American countries compared to the West. Speak2Me's forecast profitability is highly dependent on the assumption that Internet advertising will grow rapidly. The market for Internet advertising, content and services is intensely competitive and rapidly evolving. Speak2Me expects that competition will continue to increase, including in its target market in China. It is not difficult to enter this market, and current and new competitors, including companies in traditional media, can launch Internet sites rapidly.

Speak2Me May Not Generate Online Advertising/Sponsorship Revenue

Speak2Me’s future success depends in part on its ability to establish, increase and sustain online advertising/sponsorship revenue, and therefore market and advertiser acceptance of Speak2Me's services will be important to the success of Speak2Me’s business. Speak2Me’s ability to generate advertising revenue will be directly affected by the number of users of its service. Speak2Me’s ability to generate advertising revenue will also depend on several other factors, including the level and type of market penetration of Speak2Me’s service, broadening its relationships with advertisers, its user base being attractive to advertisers, its ability to derive better demographic and other information from users, competition for advertising funds from other media and changes in the advertising industry and economy generally. Speak2Me’s expense levels are based in part on expectations of future revenue. Speak2Me may be unable to adjust spending quickly enough to compensate for any unexpected revenue shortfall. Speak2Me anticipates that some of its advertising customers will not allow Speak2Me to place their advertisements next to other advertisements. Speak2Me may not always be successful at accommodating these orders. In such situations, inability to fulfill competing orders might cause Speak2Me to lose a potentially significant amount of revenue, particularly if the customer that cannot be accommodated chooses not to advertise with Speak2Me.

We Must Maintain User Relationships

The ability of Speak2Me to attract and maintain users requires that it provide a competitive offering of products and services that meet the needs and expectations of its users. Speak2Me's ability to satisfy the needs or demands of its users may be adversely affected by factors such as the inability or failure to identify changing client needs or expectations or the inability to adapt in a timely and cost-effective manner to innovative products and services offered by competitors. In addition, Speak2Me must continue to attract and retain users to compete successfully for advertising revenue. Speak2Me cannot be sure that it will compete successfully with current or future competitors in sustaining or growing Speak2Me’s web site traffic levels and user levels. If Speak2Me fails to attract and retain more users, Speak2Me’s market share, brand acceptance and revenue would not scale, which would have a material adverse effect on Speak2Me’s business, financial condition and results of operations.

We Must Create Content and Services Accepted by Users

Speak2Me’s success is dependent upon its ability to deliver original and compelling content and services for its online English language instruction software that attract and retain users in its target market. Speak2Me’s ability to successfully develop and produce content and services is subject to numerous uncertainties, including the ability to:

·	Anticipate and successfully respond to rapidly changing consumer tastes and preferences;

·	Fund new content development;

·	Attract and retain qualified editors, writers, producers, and technical personnel;

·	Build brand loyalty among users; and

·	Build a sense of community among users and encourage use of the interactive features on Speak2Me’s website.

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We Must Provide Delivery Infrastructure to Perform Consistently

Speak2Me’s success as a business depends, in part, on its ability to provide consistently high quality online services to users via the Speak2Me Delivery Infrastructure. There is no guarantee that the Speak2Me Delivery Infrastructure and/or Speak2Me’s software will not experience problems or other performance issues. If the Speak2Me Delivery Infrastructure or software fails or suffers performance problems, then it would likely affect the quality and interrupt the continuation of Speak2Me’s service and significantly harm Speak2Me’s business.

Speak2Me’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 Speak2Me Delivery Infrastructure could harm Speak2Me’s goodwill and the Speak2Me brand and ultimately could significantly and negatively impact the amount of revenue it may earn from its service. Like all Internet transmissions, Speak2Me’s services may be subject to interception and malicious attack. Pirates may be able to obtain or copy Speak2Me’s products without paying fees to Speak2Me. The Speak2Me Delivery Infrastructure is exposed to spam, viruses, worms, spyware, denial of service or other attacks by hackers and other acts of malice. Speak2Me uses security measures intended to make theft of its software more difficult. However, if Speak2Me is required to upgrade or replace existing security technology, the cost of such security upgrades or replacements could have a material adverse effect on Speak2Me’s financial condition, profitability and cash flows.

We Have Limited Intellectual Property Protection

Speak2Me relies on a combination of copyright and trademark laws, trade secrets, confidentiality procedures and contractual provisions to protect its proprietary rights. In addition, Speak2Me’s 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, Speak2Me’s patent applications will be successful, that Speak2Me will develop future proprietary products that are patentable, that any issued patents will provide Speak2Me 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 Speak2Me to do business. In addition, there can be no assurance that others will not independently develop similar products, duplicate some or all of Speak2Me’s products or, if patents are issued to Speak2Me, design their products so as to circumvent the patent protection held by Speak2Me. Speak2Me will seek to protect its product documentation and other written materials under trade secret and copyright laws which afford only limited protection. Despite precautions taken by Speak2Me, it may be possible for unauthorized third parties to copy aspects of Speak2Me’s business and marketing plans or future strategic documents or to obtain and use information that Speak2Me regards as proprietary. There can be no assurance that Speak2Me’s means of protecting its proprietary rights will be adequate or that Speak2Me’s competitors will not independently develop similar or superior technology. Litigation may be necessary in the future to enforce Speak2Me’s intellectual property rights, to protect Speak2Me’s 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.

Government Regulation and Licensing

The operations of Speak2Me may be subject to Canadian and foreign provincial and/or state and federal regulations and licensing. There can be no assurance that Speak2Me 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 Speak2Me's ability to achieve its financial and operational objectives. Speak2Me 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 Speak2Me’s growth and reduce its client base and revenue.

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Operating in Foreign Jurisdictions May Create Risks

Speak2Me’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, labour, political and economic instability. There can be no assurance that such risks will not adversely affect Speak2Me’s business, financial condition and results of operations. Furthermore, a portion of Speak2Me’s expenditures and revenues will be in currencies other than the Canadian dollar. Speak2Me’s foreign exchange exposure may change over time with changes in the geographic mix of its business activities. Foreign currencies may be unfavourably impacted by global developments, country-specific events and many other factors. As a result, Speak2Me’s future results may be adversely affected by significant foreign exchange fluctuations.

Risks Associated with Print-Based English Language Learning

Risk of Failing to Achieve Market Acceptance

Although the Company has contracts with People Education Press (“PEP”) in Beijing for English Language Learning materials, there can be no assurance that the State Ministry of Education in China will continue to accept the educational publications produced by the Company.

We Have Limited Experience in China

The Company has limited experience in providing traditional educational publishing in China. Although the Company has retained the services of Canadian, US, British and Chinese educators to assist the Company with these endeavors, there can be no assurance that the Company will be able to attract and retain qualified personnel with relevant experience for the continued management and development of its business.

Political and Economic Policies of the Chinese Government

The growth of the Company’s business is dependent on government budgetary policy, particularly the allocation of funds to sustain the growth of the English language learning and training programs in China. The Company’s customers in China, excluding Renzhen Group, are directly or indirectly owned or controlled by the Chinese government. Accordingly, their business strategies, capital expenditure budgets and spending plans are largely decided in accordance with government policies, which, in turn, are determined on a centralized basis at the highest level by the State Planning Commission of China. As a result, the growth of our business is heavily dependent on government policies for English language learning and training. Despite the high priority currently accorded by the government to this area, and a high level of funding allocated by the government to this sector, insufficient government allocation of funds to sustain its growth in the future could reduce the demand for our products and services and have a material adverse effect on our ability to grow our business.

Since the establishment of the People’s Republic of China (“PRC”) in 1949, the Communist Party has been the governing political party in China. The highest bodies of leadership are the Politburo of the Communist Party, the Central Committee and the National People's Congress. The State Council, which is the highest institution of government administration, reports to the National People's Congress and has under its supervision various commissions, agencies and ministries, including Ministry of Commerce of the PRC “MOFCOM”. Since the late 1970s, the Chinese government has been reforming the Chinese economic system. Reforms have included decollectivization of farms; legalization of interregional and international trade by individuals and businesses; legalization of markets in most goods and services; elimination of price controls; and privatization of some state-owned productive assets. Reforms began in the farming sector and rural industry, and were later implemented in various service industries. In the last five years, China has also begun dismantling large state monopolies in heavy industry. Although the Company believes that economic reform and the macroeconomic measures adopted by the Chinese government have had and will continue to have a positive effect on the economic development in China, there can be no assurance that the economic reform strategy will not from time to time be modified or revised. Such modifications or revisions, if any, could have a material adverse effect on the overall economic growth of China and investment in the English language learning and training sectors in China. Such developments could reduce, perhaps significantly, the demand for our products and services. There is no guarantee that the Chinese government will not impose other economic or regulatory controls that would have a material adverse effect on our business. Furthermore, changes in political, economic and social conditions in China, adjustments in policies of the Chinese government or changes in laws and regulations could adversely affect our industry in general and our competitive position in particular. Changes in government policies might include increased restrictions on the nature of business activities that foreign-owned enterprises may perform or additional tax/fee/license requirements for foreign-owned enterprises; increased restrictions on the publishing industry, including restrictions on the nature of business activities that publishers may perform; additional tax/fee/license requirements; requirements to publish or not to publish certain content; and direct state supervision or control of publisher's activities; and more intensive approval requirements for educational materials.

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Highly Competitive Market

The educational publishing market in China is rapidly changing. Competitors to the Company’s strategic co-publishing partners in the market mainly include provincial and municipal educational publishing companies such as Hebei Education Press and Shanghai Foreign Language Educational Press. In addition, there are many large multinational educational publishing companies with substantial, existing publishing operations in Asian markets including China, that have significantly greater financial, technological, marketing and human resources who have entered the English language learning and training market in China, which could hurt the Company’s future prospects and erode its market share.

Most of our competitors have greater financial, technical and human resources than us, may be able to respond more quickly to new and emerging technologies and changes in customer requirements or devote greater resources to the development, promotion and sale of new products or services. It is possible that competition in the form of new competitors or alliances, joint ventures or consolidation among existing competitors may decrease our market share. Increased competition could result in fewer customer engagements, reduced gross margins and loss of market share, any one of which could materially and adversely affect our revenues and overall financial condition.

Economic Risks Associated with Doing Business in China

The Chinese economy has experienced uneven growth across geographic and economic sectors. The current economic situation may adversely affect our profitability over time as expenditures for English language training products may decrease due to the results of slowing domestic demand and deflation. In addition, the Chinese government may implement changes in fiscal policy that could increase our costs of operating our business in China or slow demand for our products. We cannot predict what effects changes in Chinese government policies may have on our business or results of operations.

Currency Exchange Risk

Our reporting currency is the Canadian Dollar. However, substantially all revenues from China activities are denominated in United States Dollars. In July 2005, the Chinese government announced that the Yuan would no longer be pegged to the United States Dollar, but would float against a basket of currencies. China's currency had been pegged at 8.28 against the United States Dollar for a decade, but the adjustment allowed it to float against a number of currencies including the US dollar, the Euro, the Japanese Yen, the South Korean Won, the UK Pound, the Thai Baht and the Russian Rouble. Since that time, the Yuan has traded below the pegged rate.

If the Yuan were no longer pegged to the basket of currencies, rate fluctuations may have a material impact on the Company’s consolidated financial reporting. The Company’s accounts receivable from China will decline in value if the Yuan depreciates relative to the Canadian and United States Dollar. Any such depreciation could adversely affect the market price of our common stock. Very limited hedging transactions are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions in the future, the availability and effectiveness of these hedges may be limited and we may not be able to successfully hedge our exposure at all. In addition, our currency exchange losses may be magnified by Chinese exchange control regulations that may restrict our and our Chinese partners’ ability to convert Renminbi into United States Dollars.

We Must Manage Our Growth

As the Company endeavors to increase its sales and develop new lines of business, it will be subject to a number of risks associated with the management of such growth. These risks include increased responsibilities for existing personnel, the need to hire additional qualified personnel and, in general, higher levels of operating expenses. In order to manage current operations and any future growth effectively, the Company will need to continue to implement and improve it’s operational, financial and management information systems and to hire, train, motivate, manage and retain qualified employees. In particular, it will need to ensure that adequate mechanisms are in place to address potential growth from the largely untapped Chinese marketplace and to ensure that the Company has hired, trained and retained employees that are familiar with that marketplace. There can be no assurance that the Company will be able to manage such growth effectively, that its management, personnel or systems will be adequate to support the Company’s operations or that the Company will be able to achieve the increased levels of revenue commensurate with the increased levels of operating expenses associated with this growth. In the event the Company is unable to manage its growth effectively due to expenses exceeding sales, the timing of expenses becoming due or other reasons, the Company may be forced to reduce or curtail operations.

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We Have a Concentrated Customer Base

We have derived and believe that we will continue to derive a significant portion of our revenues from one large customer. In 2005, 2006, 2007 and 2008, one customer accounted for 98%, 100%, 100% and 100% of the Company’s revenues respectively. The loss, cancellation or deferral of the large contract with this large customer would have a material adverse effect on our revenues from China. In addition, there can be no assurance that we will bring in any new significant customers in China.

Other Risk Factors

Dependence on Michael P. Kraft, the Company’s Chief Executive Officer

The Company’s future success is dependent on the success and ability of its key management and product development teams. The Company has obtained key man insurance on its senior executive in the amount of $1,000,000. The loss of key personnel or the inability to attract and retain highly qualified personnel, consultants or advisors, could adversely affect the Company’s business. The Company faces competition for such personnel from other companies and organizations. There can be no assurance that the Company will be successful in hiring or retaining qualified personnel. The inability of the Company to retain and attract the necessary personnel or the loss of services of any of its key personnel could have a material adverse effect on the Company.

Technological Changes May Reduce the Company’s Sale of Its Products and Services

The traditional publishing industry continues to experience technological change. The publishing industry continues to evolve from traditional mechanical format printing to full digital printing. The inability of the Company to keep pace with the new technologies and standards in the print industry could render its products and services non-competitive. The Company’s future success will depend on its ability to address the increasingly sophisticated needs of its customers by producing and marketing enhancements to its products and services that respond to customer requirements. The Company may be required to invest significant capital in order to remain competitive. A failure on the part of the Company to effectively manage a product transition will directly affect the demand for the Company’s products and the future profitability of the Company’s operations.

Exchange Rate Fluctuations May Reduce the Company’s Revenues or Increase the Company’s Expenses

The Company does transact some business involving currencies other than the Canadian currency in both purchasing and selling goods and services. The Company is exposed to fluctuations in foreign currency exchange rates that may have an adverse effect on the Company’s businesses.

Dependence on Key Contractors for Maintenance of High Quality Content

A key component of the continued success of the traditional publishing activities of the Company will be the ability of the Company to maintain high quality content. The Company must continue to develop new and innovative products to sustain its educational publishing activities in order to ensure the continued viability of the traditional publishing aspects of its business. Although the Company continues to retain experienced educators and editors to develop content for its educational publications, there can be no assurance that the Company will be able to continue hiring experienced educators and editors to maintain the current high quality level of content for future publications.

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Competition is Likely to Have a Tremendous Impact on our Business

The Company faces considerable competition from traditional educational publishing companies and from educational software providers in China both of which offer the same or similar services as are available from the Company’s traditional publishing operations. In addition, it is anticipated that as China becomes more open to foreign involvement for educational programs, the level of competition will further intensify.

We May Need Additional Capital in the Future and it May Not Be Available on Acceptable Terms

We may need to raise additional funds in order to finance our operations. The Company expects that corporate growth will be funded from equity and/or debt financing(s) to help generate needed 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.

Risk of History of Losses

The Company has had a history of losses and there is no assurance that it can reach profitability in the future. The Company will require significant additional funding to meet its business objectives. Capital will need to be available to help expand not only the Company’s product line but also to improve market penetration and sales through an increasing distribution network.

Our Public Trading Market is Highly Volatile

The Company's common shares trade on the TSX Venture Exchange under the symbol "LM", and on NASD:OTC BB under the symbol “LMDCF” and are quoted on the Berlin-Bremen Stock Exchange under the symbol “LIM.BE” and the German securities code is (WKN) 121226.

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.

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Penny Stock Rules

Our common shares are quoted on the OTC Electronic Bulletin Board; a FINRA sponsored and operated quotation system for equity securities. It is a more limited trading market than the NASDAQ Capital Market, 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, 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 are listed on the OTC Bulletin Board, and are subject to the requirements of Rule 15(g) 9, promulgated under the Securities Exchange Act as long as the price of our common shares is below $5.00 per share. 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, OTC BB 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, Barbados, and Hong Kong and Representative Offices in China and Taiwan. In addition, a majority 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

Introduction

As of December 31, 2008, the Company operated two distinct business segments as follows:

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Online English Language Learning

The Company offers an online English language learning community in China through its acquisition of Speak2Me. Speak2Me incorporates Lingo Media’s proven pedagogy with fun, interactive lesson modules to address the rapidly growing need for spoken English worldwide. Speak2Me’s groundbreaking service uses speech recognition technology to teach spoken English online through more than 350 targeted lessons that engage users in interactive conversations with a virtual teacher. A unique social-networking infrastructure that allows students to form study groups and offers contests, prizes and other incentives, creates a learning environment that engenders co-operation and competition, just as in a conventional classroom. In addition, Speak2Me offers premium content development services and custom training modules to support businesses and institutions that require English language training for their personnel.

Print-Based English Language Learning

On December 23, 2008 A+ filed a Notice of Intention to Make a Proposal under the Bankruptcy and Insolvency Act (“Proposal”). On April 23, 2009, the Proposal by A+ was approved by the Superior Court of Justice. This filing precipitated from the decision made on December 23, 2008 to restructure A+’s operations. After an extensive strategic evaluation, Lingo Media decided to focus its resources on the expansion of its English language learning businesses including its subsidiaries Lingo Learning and Speak2Me.

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:

Jianwai SOHO

Building 17, Suite 601

39 East 3rd Ring Road,

Dong San Huan Zhong Lu

Beijing, 100022, China

Telephone: +86 10 5900 0152

Facsimile: +86 10 5900 1800

The Speak2Me office is located at:

76 Roosevelt Road

7F-2, Section 3

Taipei 100

Taiwan

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

The Company's common shares trade on the TSX Venture Exchange under the symbol "LM", and on the OTC BB under the symbol “LMDCF” and are quoted on the Berlin-Bremen Stock Exchange under the symbol “LIM.BE” and the German securities code is (WKN) 121226.

History and Development

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 eight active subsidiaries: Lingo Learning Inc. "LLI", Lingo Media International Inc. "LMII", Lingo Group Limited “LGL", A + Child Development (Canada) Ltd., Speak2Me Inc. “S2M”, Speak2Me International Inc. “S2MII”, Speak2Me (Hong Kong) Limited “S2MHK” and Speak2Me (Beijing) “S2MBJ”.

LLI 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..

LMII was incorporated pursuant to the Companies Act of Barbados on September 11, 1996 under the name International Alpha Ventures Inc. On May 13, 1997, wholly-owned subsidiary's name was changed to International Alpha Media, Inc. and then was changed to Lingo Media International Inc. on September 20, 2000.

LGL was incorporated under the laws of the State of Delaware on April 16, 1999 under the name Yangtze Online. On May 16, 2000, wholly-owned subsidiary’s name was changed to EnglishLingo, Inc. On August 12, 2002 the company jurisdiction was transferred to the Province of Ontario. On October 28, 2004 the wholly-owned subsidiary’s name was changed to Lingo Group Limited.

A+ was incorporated pursuant to the Business Corporations Act of Alberta on February 12, 1999. A+ is 70.33% owned by the Company. In December 2008, A+ filed a Notice of Intent to Make a Proposal under the Bankruptcy and Insolvency Act.

S2M was incorporated pursuant to the Business Corporations Act (Ontario) on February 22, 2007.

S2MII was incorporated pursuant to the Companies Act of Barbados on October 15, 1996 under the name Consolidated Sino Ventures Ltd. On March 20, 2008, wholly-owned subsidiary’s name was changed to Speak2Me International Inc. under the Companies Act of Barbados.

S2MHK was incorporated pursuant to the Companies Ordinance, Hong Kong on March 12, 2008.

S2MBJ was incorporated under the laws of the People’s Republic of China on May 22, 2008.

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4.B. BUSINESS OVERVIEW

Background

As of December 31, 2008, the Company operated two distinct business segments as follows:

Online English Language Learning

Print-Based English Language Learning

English Language Learning

Lingo Media’s strengths and opportunities lie in its approach to the development of original language learning materials including English as a Second/Foreign Language (ESL/EFL) and English for Special Purposes (ESP). In China, the Company pre-sells its program to educational ministries through co-publishing with local publishers, while retaining full copyright ownership and distribution rights for all other markets.

China Publishing

Lingo Media has spent six years developing English as a Foreign Language (EFL), 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 EFL book, 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.

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Co-Publishing Partners 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 Media has four programs with PEP. Three 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); Starting Line (Grades 1-6); and Beginning English for Young Learners (Grades 1 and 2). The Reading Practice series is for junior middle school students. All series include the core textbooks in addition to supplemental activity books, audiocassettes, teacher resource books, and other materials.

Phoenix Publishing & Media Group

Phoenix Publishing and Media Group (PPMG), formerly Jiangsu Publishing Group, was established in September 2001. It is one of the largest provincial publishing houses in China with a registered capital of 720 million RMB, revenue of more than 8 billion RMB and total assets of 7.4 billion RMB. PPMG’s subsidiaries include 8 publishing houses, 1 audio visual publishing house, 1 printing house and an import-export trading corporation. Lingo Media has co-published and launched Lingo College English with Yilin Press.

China International Publishing Group

Foreign Language Press (“FLP”) is a subsidiary of China's largest trade publishing group, China International Publishing Group (“CIPG”). CIPG develops and distributes books to Chinese retail bookstores, in addition to producing selected texts and supplemental books for the educational market. Lingo Media co-published with CIPG the English for Hosts book and audiocassette package.

The Lingo Media Approach

Lingo Media specializes in publishing materials for language learning. Lingo Media focuses on two sectors: English as a Second Language (ESL) in English-speaking countries and English as a Foreign Language (EFL) in China.

The key to publishing successful EFL programs are two simple concepts: quality and relevance. Our core philosophy says that English language learning materials should be relevant to the market we are trying to reach. Our approach involves:

Researching and Understanding the Market

The process began with relationship building and communication. We talk with key organizations, associations and ministries in each country to better understand their needs and concerns. We looked for the right niche for Lingo Media, and then sought out local partners to aid in the marketing and implementation of our programs. Moreover, we searched for individuals in China who manage the Company’s affairs. These individuals become our links to China's community and culture.

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Bilateral Relationships

With Lingo Media liaisons in place, our goal is to assure that our English Language Learning materials meet the highest educational standards.

Constant Monitoring of Effectiveness

Our people in the field in China are constantly monitoring the effectiveness of our programs; they ask and answer the crucial questions - Does the material serve the intended audience?

Comprehensive Product Development

Because we know that a language learning program needs to serve a number of different groups, we considered the requirements of all of the ultimate users: administrators, teachers and students. Each group has its own perspective. We developed an approach that works for all.

Collaborative Partnerships

With local partners and educational organizations involved with the process of implementing programs, they are pleased with the results. Our partners are involved in all stages of program marketing, implementation and monitoring – in effect they are strategic team members.

Bilateral Development

September 2001 marked the first official launch of a Lingo Media program entitled PEP Primary English. The program was developed by an international team of respected educational writers: Jack Booth, David Booth, Linda Booth and Larry Swartz (award winning Canadian authors of the elementary language arts series Impressions), together with Yuexin Wu from Wuxi Normal School and PEP’s English Editorial Team.

Relevant Material

We know how to listen. Our teams ensure that program material is relevant and culturally appropriate, as well as educationally sound.

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Products

English Language Learning

Programs for Children:

Series:	Beginning English For Young Learners
Type of Program:	English as a Foreign Language (EFL) English as a Second Language (EFL)
Description:	A series of student books, audiocassettes, teacher resource books and ancillary materials. The program promotes oral language use through partner-based activities suited for both large and small groups. It enhances listening, speaking and emerging literacy skills, using an activity-based approach.
Components:	Student Books: 4 Audiocassettes: 8 Teacher Resource Books: 2
Target Audience:	Elementary Schools: JK, SK, Grades 1-2

Series:	PEP Primary English
Type of Program:	English as a Foreign Language (EFL) English as a Second Language (ESL)
Description:	A series of student books, audiocassettes, teacher resource books and ancillary materials. The program employs a variety of learning strategies to promote interactive, two-way communication as students explore the content through task-based activities.
Components:	Student Books: 8 Audiocassettes: 16 Teacher Resource Books: 8 Ancillary Materials: 56
Target Audience:	Elementary Schools: Grade 3-6
Series:	Starting Line
Type of Program:	English as a Foreign Language (EFL) English as a Second Language (EFL)
Description:	A series of student books, audiocassettes, teacher resource books and ancillary materials. The program employs interactive, two-way communication to help and encourage students to build word power in listening, speaking, reading, and writing as they participate in task-based activities designed for use in multi-level classrooms.
Components:	Student Books: 12 Audiocassettes: 12 Teacher Resource Books: 6 Ancillary Materials: 72
Target Audience:	Elementary Schools: Grade 1-6

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Programs for Juveniles

Series:	Reading Practice
Type of Program:	English as a Foreign Language (ESP) English as a Second Language (EFL)
Description:	A series of student books to supplement the widely used PEP textbooks for grades 7-9. These supplemental books provide a wide range of reading selections and follow-up activities, language games, puzzles, and other sources for developing comprehension.
Components:	Student Books: 5 Audiocassettes: 5
Target Audience:	Junior Middle Schools: Grades 7-9
Series:	Subject-Based English
Type of Program:	English for Special Purposes (ESP)
Description:	A series of student textbooks, audiocassettes, and teacher resource books. The first set of six subjects includes Law, Mathematics, Physics, Geological Prospecting and Mining, Biology, and Transportation. This program is required in order to meet the new curriculum mandated by the Chinese State Ministry of Education stating that all third and fourth year students not majoring in English must take English courses related to their subject area.
Components:	Student textbooks: 6 Audiocassettes: 12 Teacher Resource Books: 6
Target Audience:	Third and fourth year university students majoring in subjects other than English


Series:	English in Business Communications
Type of Program:	English for Special Purposes (ESP)
Description:	A series of self-study books and audiocassettes for adult English learners focused on specific English language needs for a variety of professions and occupations. The series is designed to develop and enhance listening comprehension, vocabulary development and pronunciation. Subject areas include Insurance, Marketing, Meetings, Negotiations, Banking, Presentations and English for Hosts.
Components:	Self-Study Books: 6 Audiocassettes: 12
Target Audience:	Self-Study Adult Market
Series:	Lingo Vocational English
Type of Program:	English as a Foreign Language (EFL) English as a Second Language (ESL)
Description:	Create fluency and gain skills in modern spoken and written English using modern pedagogy. Students will gain oral fluency as they work across the four modalities—listening, speaking, reading and writing—while supporting their general knowledge skills. This program uses two different textbooks—listening/speaking, and reading/writing, as well as audiocassettes, to support learning.
Components:	Student textbooks: 10 CD Roms: 8 Teacher Resource Books: 10
Target Audience:	Chinese Vocational Schools
Number of Levels:	4
Publication Date:	September 2006
Author(s):	Lisa Bruno, Lisa Black, Sarah Miller
Publisher:	Lingo Media China School Edition: Co-publisher – Yilin Press

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United States vs. Foreign Sales/Assets

During the fiscal years ended December 31, 2008, 2007, and 2006 respectively, $2,568,086, $3,126,651, and $685,521, of sales revenue were generated in Canada. In 2008, the Company discontinued the line of business that generates all sales in Canada.

During the fiscal years ended December 31, 2008, 2007, and 2006 respectively, no sales revenue was generated in the United States.

During the fiscal years ended December 31, 2008, 2007, and 2006 respectively, $967,908, $877,706, and $888,816of sales revenue were generated in China.

At December 31, 2006 substantially all of the Company’s assets were located in Canada. At December 31, 2008 and 2007 respectively, $2,453,878 and $3,304,571 of the Company’s identifiable assets are located in Canada, and, as a result of the acquisition of Speak2Me, $6,072,914 and $5,462,464 are located in China.

Dependency Upon Intellectual Property

The Company is dependent on its intellectual property and the contracts in China with various Chinese publishers.

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).

Research and Development, Trademarks, Licenses, and Etc.

Research and Development

During the years ended December 31, 2008, 2007, and 2006 respectively, the Company expended $880,846, $4,352,341, and $91,325 on research and development, under the categories of “development costs” “software development costs” and “deferred costs”. These expenditures were primarily directed at developing products for the China market.

Trademarks and Copyrights

The Company owns the trademarks, Lingo Media and English Lingo in Canada and China. The Company also owns certain trademarks for Speak2Me in China and has pending trademark applications in other jurisdictions. In addition, certain materials are copyrighted.

Employees

As of May 15, 2009, the Company has forty employees. None of the Company's employees are covered by collective bargaining agreements.

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4.C. Organization Structure

The Company currently has eight active subsidiaries: Lingo Learning Inc. (previously Lingo Media Ltd.), Lingo Media International Inc., Lingo Group Limited, A+ Child Development (Canada) Ltd., Speak2Me Inc., Speak2Me (Hong Kong) Limited, Speak2Me International Inc. and Speak2Me Beijing Refer to ITEM 4. “Information on the Company, 4.A. History and Development of the Company, History and Development” for more information.

4.D. Property, Plant 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, Canada M5S 1S4. 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 Jianwai SOHO, Building 17, Suite 601, 39 East 3rd Ring Road, Dong San Huan Zhong Lu, Beijing, 100022, China

The Company’s Taiwan representative offices are located in rented premises of approximately 1,615 sq. ft. at 76 Roosevelt Road, 7F-2, Section 3, Taipei 100, Taiwan

The Company has office equipment, furniture and computer equipments located in these offices and for the fiscal years ended December 31, 2008, 2007 and 2006 they have a net carrying value of $64,839, $73,144 and $58,716 respectively.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following discussion for the fiscal years ended December 31, 2008, and December 31, 2007 should be read in conjunction with the consolidated financial statements of the Company and the notes thereto.

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 Overview

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Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from those estimates and assumptions.

In management’s opinion, revenue recognition, development costs, deferred costs, acquired publishing content and use of estimates as presented in the financial statements of the year ended December 31, 2008 are critical accounting policies and are as follows:

Revenue recognition:

Revenue from web-based advertising in China is recognized at the time of delivery and when collectability is reasonably assured.

Lingo Media earns royalty revenues from its key customer, People’s Education Press (“PEP”), a Chinese State Ministry of Education publisher on the following basis:

·	Finished Product Sales – PEP prints and sells Lingo Media’s English language learning programs to provincial distributors in China.

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

Lingo Media earns a significantly higher royalty rate from Finished Product Sales compared to Licensing Sales.

In accordance with the co-publishing agreement between PEP and Lingo Media (the “Co-Publishing Agreement”), PEP pays to Lingo Media a royalty on print runs of Finished Product Sales and a royalty on actual revenues of Licensing Sales. PEP provides Lingo Media with print run reconciliations on a semi-annual basis, as their reporting systems are unable to provide quarterly sales information. Under the Co-Publishing Agreement, Lingo Media invoices PEP on a quarterly basis at 40% of the prior six months actual sales. PEP then provides a reconciliation of the royalty revenues for the first and second quarters by the end of August and for the third and forth quarters by the end of March.

Royalty revenues from audiovisual products are recognized upon the confirmation of sales, and when collectibility is reasonably assured. Royalty revenues are not subject to right of return or product warranties. Revenues from the sale of published and supplemental products are recognized upon delivery and when the risk of ownership is transferred and collectibles are reasonably assured.

Deferred costs, investment and advances:

The pre-operating costs relating to establishing a joint venture in China are recorded as deferred costs. Pre-operating costs are capitalized until the commencement of commercial operations and then amortized on a straight-line basis, over a maximum of five years. Loans made in trust with a view to establishing a joint venture are recorded as investment and advances. The carrying value of these deferred costs and advances are assessed on a periodic basis to determine if a write-down is required. Any required write-down is charged to operations in the year such write-down is determined to be necessary.

In June 2005, the Company signed a definitive Joint Venture Agreement (“JV Agreement”) with Sanlong Cultural Communication Co. Ltd. (“Sanlong”). The joint venture company will be known as Hebei Jintu Education Book Co. Ltd. (“Jintu”). The Company has incurred and advanced a total of $339,939 to the joint venture. The Company intended to utilize the sales channel of Jintu to localize and distribute product of A+. Since A+ has filed a Proposal the Company has written-off its investment in the joint venture.

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Development costs:

Under Canadian GAAP, the Company capitalized costs related to English Language Learning products and programs and amortizes these costs on a straight-line basis over periods of up to five years. Under United States GAAP, these costs are expensed as incurred per Statement of Financial Accounting Standards (“SFAS”) No. 2, Research and Development Costs. The Company failed to expense the development costs for US GAAP purposes in its 2007 financial statement reconciliation of Canadian to US GAAP disclosure and has now restated the reconciliation to reflect the expense.

Acquired publishing content:

The costs of obtaining the English as a Foreign Language ("EFL") program entitled "Communications: An Interactive EFL Program" and an international folktale series entitled "Stories Lost and Found: The Universe of Folktale" have been capitalized and are being amortized over a five-year period. The Company regularly reviews the carrying values of its acquired publishing content. The Company evaluates the carrying value of these assets based on the undiscounted value of expected future cash flows. If the carrying value exceeds the amount recoverable, a write-down of the asset to its estimated fair value would be charged to operations in the year such a write-down is determined to be necessary.

Use of estimates:

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as at December 31, 2008 and December 31, 2007 and the reported amounts of revenue and expenses during the years then ended. Actual results may differ from those estimates. Significant areas requiring the use of management estimates related to the useful lives and impairment of property and equipment, development costs and acquired publishing content.

Operating Results

Fiscal Year Ended December 31, 2008 vs. Fiscal Year Ended December 31, 2007

Revenue and Margin

Lingo Media earned revenues in China as follows:

	Online English Language Learning		Print-Based English Language Learning		Total
Revenue	$	-	$	969,128	$	969,128
Cost of sales		-		126,329		126,329
Margin	$	-	$	842,799	$	842,799

Revenues from China for the year ended December 31, 2008 were $969,128 compared to $879,626 for fiscal year 2007. The Company continues to advance its relationship with PEP and is developing new programs to maintain and increase its royalty revenues.

In Canada, revenues from A+ for the year ended December 31, 2008 were $2,575,559 compared to $3,124,731 for fiscal year 2007. As part of its restructuring, A+ discontinued its operations in Canada and these revenues and related expenses are reported as discontinued operations.

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Lingo Media earned revenues at December 31, 2007 in China as follows:

	Online English Language Learning		Print-Based English Language Learning		Total
Revenue	$	-	$	879,626	$	879,626
Cost of Sales		-		113,317		113,317
Margin	$	-	$	766,309	$	766,309

Revenues from China for the year ended December 31, 2008 were $969,128 compared to $879,626 for 2007. The Company continues to advance its relationship with PEP and has developed new programs to maintain and increase its royalty revenue.

Lingo Media expanded its in-house product development team with the appointment of Chris Anderson as its Managing Editor in order to develop new English language learning programs. The Company also appointed Jenny Bao as Director of Marketing to enhance its relationships with existing customers and to secure new business.

The Company had no unearned revenues as at December 31, 2008.

General and Administrative

General and administrative costs consist of executive compensation, consulting fees, office administration, rent, marketing, professional fees, shareholders services, any foreign exchange losses or gains and government grants which are offset against the general and administration expenses incurred during the period.

Overall, general and administrative expenses increased due to the acquisition and consolidation of Speak2Me operations into the financial results of Lingo Media. Below is the detailed analysis of general and administrative expenses for the year ended December 31, 2008.

	2008		2007
Administration	191,290		183,777
Advertising and promotion	39,737		17,797
Consulting fees and employee compensation	829,057		405,715
Equipment leases	17,931		16,891
Executive compensation	358,841		201,233
Foreign exchange	160,223		(103,505	)
Premises	161,895		118,145
Professional fees	260,977		129,395
Shareholder services	54,877		49,740
Travel	118,328		91,664
	2,193,156		1,110,852
Less Grants	(65,430	)	(164,545	)
Total	2,127,726		946,307

Selling general and administrative expenses related to A+ have been reallocated and reported as discontinued operations.

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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 the pool 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 the year the Company recorded $110,430 of such grant. Certain government grants are repayable in the event the Company's annual net income for each of the previous two years exceeds 15% of revenue, at such time a liability would be recorded. During the year, the conditions for the repayment of grants were not met and no liability was recorded.

During 2008, Lingo Media was audited by a government grant agency and was assessed with a repayment amount of $115,075. The Company believes their claim is unjust and is vigorously disputing the assessment. At the end of the year, a provision of $45,000 has been recorded in general and administrative expenses.

While the Company will continue to apply for various government grants to fund its ongoing development and market expansion, there can be no assurance the Company will be successful in obtaining these grants in the future, that the Company will meet the eligibility requirements for the grants or that the programs will still be offered.

Foreign Exchange

Included in general and administrative expenses is a foreign exchange loss of approximately $160,223 as compared to a gain of approximately $103,505 in fiscal 2007, 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 is denominated in US Dollars, New Taiwanese Dollars and Chinese Renminbi.

Interest and Other Financial Expenses

In 2008, the Company had loans payable bearing interest at 12% (2007 - 12%) per annum. Interest expense related to these loans for the year ended December 31, 2008 is $95,544.

Stock-Based Compensation

The Company amortizes stock-based compensation with a corresponding increase to the contributed surplus account. During 2008, the Company recorded an expense of $252,792 compared to $156,395 during 2007. This increase is primarily due to the issuance of new options in 2008 and it has a full year effect of the option granted in 2007.

Discontinued Operations

On December 23, 2008, A+ filed a Notice of Intent to file a Proposal. The Company wrote-down the carrying value A+, resulting in a charge of $1,571,369 (2007 - $292,848, 2006 - $57,906) to net loss, included in the write-down was $274,852 of future income tax assets.

All comparative figures have been adjusted to exclude results from the discontinued operations. The net assets of A+ were presented as assets and liabilities of the discontinued operations at their carrying value.

- 27 -

Net Loss

The Company reported a net loss of ($3,882,843) for the year ended December 31, 2008 as compared to a net loss of ($925,040) in 2007 in accordance with Canadian GAAP. The loss for 2008 is comprised of the following:

	2008			2007
Operating loss	$	(2,311,474	)	$	(632,192	)
Loss from the operations of A+		(450,238	)		(292,848	)
Write off of goodwill from the acquisition of A+		(1,121,131	)		-
Net Loss	$	(3,882,843	)	$	(925,040	)

Fiscal Year Ended December 31, 2007 vs. Fiscal Year Ended December 31, 2006

Revenue and Margin

Lingo Media earned Print-Based English Language Learning revenues at December 31, 2007 and December 31, 2006 in China as follows:

	2007		2006
Revenue	$	879,626	$	894,073
Cost of Sales		113,318		132,968
Margin	$	766,308	$	761,105

Revenues from China for the year ended December 31, 2007 were $879,626 compared to $894,073 for 2006. The Company continues to advance its relationship with PEP and has developed new programs to maintain and increase its royalty revenue.

In July 2006, the Company entered into a publishing agreement with Yilin Press to co-publish a Vocational English For College program in China. In addition, the Company developed a new educational program – Lingo Kindergarten English – aimed at China’s vast pre-school market.

Lingo Media earned revenue from its Early Childhood Development segment in the year ended December 31, 2007 and December 31, 2006. In December 2008, the Company filed a Notice of Intent to File a Proposal under the Bankruptcy and Insolvency Act; all results from this operation are included in discontinued operations.

	2007		2006
Revenue	$	3,124,731	$	680,264
Cost of Sales		644,758		186,309
Margin	$	2,479,973	$	493,955

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In 2006, Lingo Media expanded into early childhood development sector through the acquisition of A+ effective October 1, 2006. Revenues and expenses of A+ for the period from October 1, 2006 to December 31, 2006 were included in the consolidated statements of operations of the Company. A+ had reported revenues of $3.1 million in 2006, of which $680,264 had been recognized as revenue and included in the operations of Lingo Media for the period from October 1, 2006 to December 31, 2006. A+ derives revenues from publishing and distribution of educational materials aimed at the early childhood market. A+ has developed a successful and proprietary curriculum for parents to use with their children based on the latest neuroscience research. As of December 23, 2008, A+ filed a Notice of Intent to File a Proposal under the Bankruptcy and Insolvency Act. All results from this operation are included in discontinued operations.

The Company had no unearned revenues as at December 31, 2007.

General and Administrative

The following sets out the details for the general and administrative expenses for 2007 as compared to 2006:

General and administrative expenses were $946,307 during fiscal 2007 as compared to $809,260 for fiscal 2006. Overall, general and administrative expenses increased due to the acquisition of Speak2Me operations into the financials of Lingo Media. Below is the detailed analysis of general and administrative expenses for the year ended December 31, 2007 and 2006:

	2007			2006
Administration		183,777			76,622
Advertising and promotion		17,797			42,127
Consulting fees and employee compensation		405,715			442,669
Equipment leases		16,891			12,197
Executive compensation		201,233			147,291
Foreign exchange		(103,505	)		6,690
Premises		118,145			109,663
Professional fees		129,395			56,843
Shareholder services		49,740			45,984
Travel		91,664			51,473
		1,110,852			991,560
Less Grants		(164,545	)		(182,300	)
Total		946,307			809,260

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Government Grants

The Company 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 the pool of eligible candidates.

These government grants are recorded as a reduction of general and administrative expenses to offset direct costs funded by the grant. The Company records a liability for the repayment of the grants in the period in which conditions arise that will cause the government grant to be repayable. Certain government grants are repayable in the event that the Company'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. Included as a reduction of general and administrative expenses, are government grants of $164,545 for fiscal 2007 (2006 – $182,300), relating to the Company's publishing projects in China and Canada. While the Company will continue to apply for various government grants to fund its ongoing development and market expansion, there can be no assurance the Company will be successful in obtaining these grants in the future, that the Company will meet the eligibility requirements for the grants or that the programs will still be offered for qualifying companies.

Foreign Exchange

Included in general and administrative expenses is a foreign exchange loss of approximately $103,505 (2006 - $7,968), relating to currency translation rates in respect of the Company’s activities denominated in foreign currencies.

Interest on Debt

In 2007, the Company had loans payable bearing interest at 12% (2006 - 12%) per annum. Interest expense related to these loans for the year ended December 31, 2007 is $27,077. At December 31, 2007, the outstanding loans were in the aggregate sum of $431,705 plus accrued interest of $14,705.

Amortization

The following is a summary amortization schedule:

	2007		2006
Property Plant and Equipment		13,465		64,402
Development Costs		99,805		156,648
Acquired Publishing Content	nil			53,003
		113,270		274,053

Amortization expense includes amortization of property and equipment, development costs and acquired publishing content. The amortization charge for 2007 was $113,270 (2006 - $274,053). This represents a significant decrease over 2006 due to reduced carrying values of these assets.

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Stock-Based Compensation

The Company amortizes stock-based compensation with a corresponding increase to the contributed surplus account. During 2007, the Company expensed $156,395 compared to $193,819 during 2006.

Net Loss

The Company reported a net loss of ($925,040) for fiscal 2007 as compared to a net loss of ($748,924) for fiscal 2006. The Company reported taxes paid of $127,267 for the fiscal year ended December 31, 2007 compared to taxes paid of $160,465 for fiscal 2006.

Fiscal Year Ended December 31, 2006 vs. Fiscal Year Ended December 31, 2005

Revenue and Margin

Lingo Media earned Print-Based English Language Learning revenues at December 31, 2006 and December 31, 2005 in China as follows:

	2006		2005
Revenue	$	894,073	$	888,545
Cost of Sales		132,968		123,107
Margin	$	761,105	$	765,438

Revenues from China for the year ended December 31, 2006 were $894,073 compared to $888,545 for 2005. The Company continues to advance its relationship with PEP and has developed new programs to maintain and increase its royalty revenue.

Lingo Media expanded its in-house product development team with the appointment of Suzanne Robare as its Managing Editor in order to develop new English language learning programs. The Company has also appointed Jenny Bao as Director of Marketing to enhance its relationships with existing customers and to secure new business.

The Company had no unearned revenues as at December 31, 2006.

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General and Administrative

The following sets out the details for the general and administrative expenses for 2006 as compared to 2005:

General and administrative expenses were $809,260 during fiscal 2006 as compared to $855,118 for fiscal 2005. Below is the detailed analysis of general and administrative expenses for the year ended December 31, 2006:

	2006			2005
Administration		76,622			110,818
Advertising and promotion		42,127			26,788
Consulting fees and employee compensation		442,669			472,300
Equipment leases		12,197			10,318
Executive compensation		147,291			176,383
Foreign exchange		6,690			18,373
Premises		109,663			83,915
Professional fees		56,843			58,622
Shareholder services		45,984			40,743
Travel		51,473			76,630
		991,560			1,074,890
Less Grants		(182,300	)		(219,772	)
Total		809,260			855,118

Government Grants

These government grants are recorded as a reduction of general and administrative expenses to offset direct costs funded by the grant. The Company records a liability for the repayment of the grants in the period in which conditions arise that will cause the government grant to be repayable. Certain government grants are repayable in the event that the Company'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. Included as a reduction of general and administrative expenses, are government grants of $182,300 for fiscal 2006 (2005 – $219,772), relating to the Company's publishing projects in China. While the Company will continue to apply for various government grants to fund its ongoing development and market expansion, there can be no assurance the Company will be successful in obtaining these grants in the future, that the Company will meet the eligibility requirements for the grants or that the programs will still be offered for qualifying companies.

- 32 -

Foreign Exchange

Included in general and administrative expenses is a foreign exchange loss of approximately $7,968 (2005 - $18,373), 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 substantial portion of its revenue is denominated in US dollars and Chinese Renminbi.

Interest on Debt

During the year the Company had loans payable bearing interest at 12 % (2005 - 12%) per annum. Interest expense related to these loans for the year is $31,260 (2005 - $11,767). At December 31, 2006, $347,541 (2005 - $101,929) was due to those lenders.

In addition, the Company has revolving lines of credit bearing interest at prime plus 2% and 2.5%. These bank facilities are supported by general security agreements, a short term investment and a charge against the Company’s accounts receivable and inventory. Interest expense paid on the loan for the year is $36,897 (2005: $7,609). The outstanding balance of these loans at year end was $485,000.

Premiums paid on the Export Development Corporation insurance policy were $13,755 for the year.

Amortization

The following is a summary amortization schedule:

	2006	2005
Property Plant and Equipment	64,402	12,278
Development Costs	156,648	184,797
Acquired Publishing Content	53,003	70,670
	274,05	267,745

Amortization expense includes amortization of property and equipment, development costs and acquired publishing content. The amortization charge for 2006 was $222,306 (2005 - $267,745). This represents a significant decrease over 2005 due to reduced carrying values of development costs.

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Stock-Based Compensation

The Company amortizes stock-based compensation with a corresponding increase to the contributed surplus account. During 2006, the Company expensed $193,819 compared to $214,337 during 2005.

Net Loss

The Company reported a net loss of ($748,924) for fiscal 2006 as compared to a net loss of ($725,732) for fiscal 2005. The Company reported taxes paid of $160,455 for the fiscal year ended December 31, 2006 compared to taxes paid of $128,839 for fiscal 2005.

5.B Liquidity and Capital Resources

Fiscal Year Ended December 31, 2008

As at December 31, 2008, the Company had cash and cash equivalents of $2,279,937 (2007 $377,127), and accounts and grants receivable of $642,543 (2007 - $958,179). The Company’s total current assets amounted to $3,117,249 (2007 - $1,716,903) with current liabilities of $1,321,411 (2007 - $1,508,696) resulting in a working capital surplus of $1,795,838 (2007 - working capital surplus of $208,207).

In October 2008, the Company successfully completed a private placement with Orascom Telecom of $5 million by issuing 2,857,143 units at a price of $1.75 per unit (“Unit”), with each Unit consisting of one common share (“Common Share”) and three-quarters (0.75) of one share purchase warrant (“Warrant”). Each whole Warrant is exercisable to acquire one further Common Share for a period of 24 months from September 15, 2008 (the “Closing Date“): (i) at a price of $4.00 for a period of 12-months from the Closing Date; (ii) at a price of $6.00 per Common Share if exercised between 12-18 months from the Closing Date; and (iii) at a price of $8.00 per Common Share if exercised between 18-24 months from the Closing Date. The Warrants are callable, 120 days after the Closing Date, at the option of Lingo Media, in the event the Common Shares of the Company trade at or over 50% above the strike price of the Warrant for 10 consecutive trading days.

During 2008, the Company repaid loans in the amount of $783,620. As at December 31, 2008, A+ had a revolving line of credit outstanding in the amount of $80,986 (2007 - $230,000) bearing interest at prime plus 4% per annum. This bank facility is secured by a general security agreement and a short-term investment of $150,000. The term of the revolving line of credit requires that certain measurable covenants be met. As at December 31, 2008, the Company was in violation of certain covenants and the Company subsequently paid down and closed the line of credit. The line of credit outstanding at year end is presented as part of current liabilities of discontinued operations.

The Company receives government grants based on certain eligibility criteria for international marketing support and publishing industry development in Canada. These government grants are recorded as a reduction of general and administrative expenses to offset direct costs funded by the grant. The Company receives these grants throughout the year from different agencies and government programs. Each grant is applied for separately based on the Company meeting certain eligibility requirements. The Company has relied on obtaining these grants for its operations and has been successful at securing them in the past, but it cannot be assured of obtaining these grants in the future.

Government grants received during the year were $110,430 compared to $164,545 during 2007; this amount includes a one time reduction of $45,000 based on anticipated adjustment for a prior period grant. During 2008, the Company was audited by a government grant agency and was assessed with a repayment amount of $115,075. The Company believes their claim is unjust and is vigorously disputing the assessment. At the end of the year, a provision of $45,000 has been recorded in general and administrative expense.

The Company plans on raising additional equity through private placements, as the capital markets permit, in an effort to finance its growth plans into international markets in addition to financing growth capital for the China market. The Company has been successful in raising sufficient working capital in the past.

- 34 -

Fiscal Year Ended December 31, 2007

As at December 31, 2007, the Company had cash on hand of $377,127 (2006 - $94,896), and accounts and grants receivable of $958,179 (2006 - $278,803). The Company’s total current assets amounted to $1,716,903 (2006 - $812,942) with current liabilities of $1,508,698 (2006 - $1,160,069) resulting in a working capital surplus of $208,206 (2006 - working capital deficiency of $347,127).

During the course of 2007, the Company received $775,000 through the exercise of stock options. The Company secured loans in the amount of $84,164 and it repaid $nil of these loans in 2007, $340,000 of the loan proceeds were used to fund the cash portion of the A+ acquisition. As at December 31, 2007, the Company had one line of credit with a balance outstanding of $230,000. The bank facility is secured by a General Security Agreement and the short-term investment of $150,000.

The terms of the revolving lines of credit require the Company to maintain certain measurable covenants such as current ratio, debt to equity ratio and tangible net worth. As at December 31, 2007, the Company was in violation of all these covenants. Financial statements reflect these facilities as current liability. The Company plans to partially repay and reduce the facilities to an acceptable amount funded through an equity financing.

The Company receives government grants based on certain eligibility criteria for international marketing support and publishing industry development in Canada. These government grants are recorded as a reduction of general and administrative expenses to offset direct costs funded by the grant. The Company receives these grants throughout the year from different agencies and government programs. Each grant is applied for separately based on the Company either 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.

Government grants received during 2007 were $164,545 compared to $182,300 in 2006. This represents a significant portion of the Company’s sources of funds.

The terms of the $230,000 revolving line of credit require that certain measurable covenants be met. As at December 31, 2007, the Company was in violation of certain covenants, for which the lender subsequently provided a written waiver stating that it will not demand repayment until April 30, 2008. As the lines of credit are currently presented as a current liability no additional adjustment is required.

The Company plans on raising additional equity through private placements, as the capital markets permit, in an effort to finance its growth plans in addition to finance ongoing working capital needs resulting therefrom. The Company has been successful in raising sufficient working capital in the past.

Fiscal Year Ended December 31, 2006

As at December 31, 2006, the Company had cash on hand of $94,896 (2005 - $144,337), and accounts and grants receivable of $278,803 (2005 - $488,303). The Company’s total current assets amounted to $812,942 (2005 - $801,072) with current liabilities of $1,160,069 (2005 - $523,320) resulting in a working capital deficiency of $347,127 (2005 - working capital of $277,752).

During the course of 2006, the Company received $66,679 through the exercise of stock options. The Company secured loans in the amount of $711,500 and it repaid $465,887 of these loans in 2006, $340,000 of the loan proceeds were used to fund the cash portion of the A+ acquisition. As at December 31, 2006, the company had two lines of credit with a balance outstanding of $485,000. First bank facility is secured by the accounts receivable from China, which in turn are insured by the Export Development Corporation. Second bank facility is secured by a General Security Agreement and the short-term investment of $150,000.

The Company receives government grants based on certain eligibility criteria for international marketing support and publishing industry development in Canada. These government grants are recorded as a reduction of general and administrative expenses to offset direct costs funded by the grant. The Company receives these grants throughout the year from different agencies and government programs. Each grant is applied for separately based on the Company either 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.

Government grants received during 2006 were $182,300 compared to $219,772 in 2005. This represents a significant portion of the Company’s sources of funds.

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Reconciliation of Canadian and United States Generally Accepted Accounting Principles ("GAAP"):

Development Costs

Statement of Comprehensive Income

SFAS No. 130, Reporting Comprehensive Income ("SFAS 130"), establishes standards for the reporting and disclosure of comprehensive income and its components in financial statements. Components of comprehensive income or loss include net income or loss and all other changes in other non-owner changes in equity, such as the change in the cumulative translation adjustment and the unrealized gain or loss for the year on "available-for-sale" securities. For all periods presented, comprehensive loss is the same as loss for the year under US GAAP.

Calculation of Loss for the Year

The consolidated financial statements are prepared in accordance with generally accepted accounting principles ("GAAP") as applied in Canada. In the following respects, GAAP as applied in the United States differs from that applied in Canada.

If United States GAAP were employed, the loss in each year would be adjusted as follows:

Expressed in Canadian Dollars	2008			2007			2006

Loss for the year - Canadian GAAP	$	(3,882,843	)	$	(925,040	)	$	(748,924	)
Impact of US GAAP and adjustments:
Amortization of development costs (a)		128,478			99,805			156,648
Development cost write-off (a)		(218,795	)		-			-
Deferred cost write-off (b)		157,419			-			-
Deferred cost expense (b)		-			-			(40,316	)
Software and web development cost (c)		(880,846	)		(4,352,341	)		-
Loss for the year - United States GAAP	$	(4,696,587	)	$	(5,177,576	)	$	(632,592	)

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Calculation of Earnings per Share:

Under both US and Canadian GAAP, basic earnings per share are computed by dividing the net income for the year available to common shareholders, as measured by the respective accounting principles (numerator), by the weighted average number of common shares outstanding during that year (denominator). Basic earnings per share exclude the dilutive effect of potential common shares.

Diluted earnings per share under Canadian GAAP and US GAAP give effect to all potential common shares outstanding during the year. Potential common shares consist of the incremental common shares issuable upon the exercise of stock options using the treasury stock method.

The following table reconciles the numerators and denominators of the basic and diluted earnings per share under U.S. GAAP as required by SFAS 128:

Expressed in Canadian Dollars	2008			2007			2006

Numerator for basic and diluted income (loss) per share:
Income (loss) – US GAAP		(4,696,587	)		(5,177,576	)		(632,592	)
Denominator for basic and diluted (loss) per share:
Weighted average common shares		10,426,861			5,655,792			4,060,331
Basic and diluted loss per share – US GAAP	$	(0.45	)	$	(0.92	)	$	(0.16	)

5.E Research and Development

During the years ended December 31, 2008 and 2007, respectively, the Company expended $880,846 and $4,352,341 on research and development, under the categories of “development costs”, “software and web development costs” and “deferred costs”. These expenditures in 2008 and 2007 were primarily directed at developing the Speak2Me products for the China market.

5.F Trend Information

Lingo Media believes that the trend in English language learning in China is strong and growing. The State Ministry of Education in China (“MOE”) is expanding its mandate for the teaching of English learning programs to students. Although the outlook for learning English in China remains positive, there can be no assurance that this trend will continue or that the Company will benefit from this trend.

In Canada, pre-school supplemental education market remains strong, there can be no assurance that this trend will continue or that the Company will benefit from this trend.

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5.F Tabular disclosure of contractual obligations

Our obligations as of December 31, 2008, were as follows:

Expressed in Canadian Dollars

Obligation	Expiring	Balance
Equipment Lease	July 31, 2012	$	53,005
Rent in Canada	February 28, 2011	$	314,712

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

6.A. Directors and Senior Management

Table No. 6

Directors and Senior Management

May 15, 2009

Name	Position	Age	Date of First Election of Appointment
Michael P. Kraft	President/CEO/Director	45	November 1996
Khurram R. Qureshi	CFO/Secretary/Treasurer	46	April 1997
Scott Remborg	Director	59	July 2000
Ashraf Halim	Director	43	October 2008
Nereida Flannery	Director	37	June 2005
Ashesh Shah	Director	40	October 2008
Sanjay Joshi	Director	36	October 2007
Anthony Lacavera	Director	34	April 2008

- 38 -

Michael P. Kraft is the President & Chief Executive Officer of the Company since its inception in 1996. Mr. Kraft is also the Chairman of Buckingham Group Limited, a private merchant banking corporation and President of MPK Inc., a private business consulting corporation to both private and public corporations since 1994. He is also a director of Pioneering Technology Inc. since July, a TSX Venture listed company. Mr. Kraft received a Bachelor of Arts in Economics from York University in 1985.

Khurram R. Qureshi is the Chief Financial Officer of the Company since 1997. Mr. Qureshi is also the Chief Financial Officer of Canadian Shield Resources Ltd. since 1997. 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.

Scott Remborg is an independent consultant in Information Technology and eCommerce. From 2001 to 2003, he was General Manager, eBusiness, at Air Canada. From 1994 to 1999, Mr. Remborg started up and led Sympatico, the largest internet service and web portal in Canada. Earlier in his career he held senior management positions at Reuters and I.P. Sharp Associates. Mr. Remborg has an MBA and was educated at the BI Norwegian School of Management in Oslo and the University of Alberta, Canada.

Ashraf Halim has 20 years of commercial and management experience of which 17 are in the telecom industry. He is currently responsible for Strategic Marketing for Orascom Telecom Holding S.A.E., a role which encompasses market strategy, commercial budget, pricing, products and services roadmap and research. In this capacity, Ashraf spearheaded various successful key strategic commercial initiatives for OTH. Prior to joining Orascom Telecom Holding S.A.E., Ashraf held the position of Marketing Deputy Director with the Egyptian Company for Mobile Services, and several commercial positions with Lucent Technologies in both Egypt and the UK where he was in charge of the GSM business development for Lucent in the Middle East and Africa. Ashraf holds a BSc. in Engineering from Cairo University.

Nereida Flannery is a Partner and was co-founder of Beijing based The Balloch Group, one of China's premier Investment Banks. The firm today has 60 employees and is involved with financing through public and private investments and M&A advisory. She focused on the firm's M&A business in particular in natural resources and was responsible for heading teams that advised on some of China's most important overseas acquisitions of late. With over 13 years experience in China, Ms. Flannery previously was VP of business development at Alibaba.com in Shanghai and was the General Manager of the Canada China Business Counsel in China (CCBC). Ms. Flannery has a degree in Political Science from Queen's University and speaks Chinese, Greek and French.

Ashesh Shah is an entrepreneur and corporate advisor who enjoys the dynamic process of taking concepts from “ideation” to commercialization. Mr. Shah co-founded InterMedia Interactive Software in 1991, a firm specializing in consumer-focused education CD-ROM titles. From 1998 to 2004, Mr. Shah built several internet-focused firms targeting healthcare and “clicks and mortar” clients. From 2004-2007, Mr. Shah served as a General Partner with the DCP Group, a boutique consulting firm specializing in cross-border advisory services designed to assist education-market clients in evaluating market opportunities, and building relationship networks to accelerate their success in international markets. Currently, Ashesh is actively pursuing several entrepreneurial activities that leverage his cross-cultural and technology expertise. He serves as the CEO of Maxx Medical.

Sanjay Joshi is a partner with WeirFoulds LLP in Toronto and practices corporate and securities law, with an emphasis on financing transactions. He obtained his LL.B. degree from Queen's University in 1999. Mr. Joshi represents agents and issuers active in the Canadian and US public markets. He advises Canadian investment dealers, limited market dealers and merchant banks as well as listed issuers in the natural resource, new-media and telecommunications sectors. Mr. Joshi sits on the board, and is Chair of the Audit Committee, for numerous companies, both public and private. He is called to the Bar in Ontario and British Columbia.

Anthony Lacavera co-founded Globalive Communications Corp. in 1998, becoming President and Chief Executive Officer in 1999. Mr. Lacavera also serves as co-founder and Chairman of several of Globalive’s present and past portfolio companies, including Enunciate Conferencing, OneConnect Services, Cohere Conferencing, Cellwand Communications, and most recently as the initial director and principal executive officer of Yak Communications (NASDAQ: YAKC) acquired by Globalive in November 2006. Mr. Lacavera received a B.A.Sc. (Honours) in Computer Engineering from the University of Toronto in 1997.

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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.

Despite the Company’s Executive Officers spending material portions of their time on businesses other than the Company, the Company believes that they devote sufficient time to the Company to properly carry out their duties.

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 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

Expressed in Canadian Dollars

	ANNUAL COMPENSATION				LONG-TERM COMPENSATION
					Awards		Payouts
(NEO) Name and Principal Position	Year	Salary ($)	Bonus ($)	Other Annual Compen-sation(1) ($)	Securities Under Options/ SARs Granted(2) (#)	Restricted Shares or Restricted Share Units ($)	LTIP(3) Payouts ($)	All Other Compen- sation ($)
Michael P. Kraft (4) President & CEO	2008 2007 2006	180,000 120,000 122,500	Nil Nil Nil	Nil Nil Nil	Nil 142,857 Nil	Nil Nil Nil	Nil Nil Nil	Nil Nil Nil
Khurram R. Qureshi Chief Financial Officer	2008 2007 2006	101,750 42,942 96,000	Nil Nil Nil	Nil Nil Nil	Nil 71,429 Nil	Nil Nil Nil	Nil Nil Nil	Nil Nil Nil

Notes:

(1)	Perquisites and other personal benefits, securities or property that do not in the aggregate exceed the lesser of $50,000 and 10% of the total of the annual salary and bonus for any NEO for the financial year, if any, are not disclosed.

(2)	"SAR" or "stock appreciation right" means a right granted by the Company, as compensation for services rendered, to receive a payment of cash or an issue or transfer of securities based wholly or in part on changes in the trading price of publicly traded securities of the Company.

(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.

(4)	Paid by Lingo Learning Inc., a wholly-owned subsidiary of the Company, to MPK Inc., a company controlled by Mr. Kraft. See “Management Agreement".

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Management Agreement The Company entered into a consulting agreement ("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.

The Consulting Agreement provides for an initial term of twenty-four (24) months to begin on January 1, 2008 and renewals for a further two (2) years unless terminated pursuant to the terms thereof. The Consulting Agreement provides that the Company pay MPK Inc. $15,000 per month plus reimbursement for certain expenses properly incurred in connection with the Company. In addition to providing an allowance for a health plan and life insurance policy, the Consulting Agreement also provides for an automobile allowance of $1,500 per month.

The Consultant may terminate the 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 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 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 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 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 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-complete period following the termination of the Consulting Agreement. MPK Inc. is a corporation controlled by Michael P. Kraft, the President & Chief Executive Officer of the Company.

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

Director Compensation. The non-management directors of the Company are entitled to receive a fee of $250 for each board meeting and for each committee meeting attended. Directors 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. The Company has no plans or arrangements in respect of remuneration received or that may be received by Executive Officers of the Company in Fiscal 2008 to compensate such officers in the event of termination of employment (as a result of resignation, retirement, change of control) or a change of responsibilities following a change of control, where the value of such compensation exceeds US$60,000 per Executive Officer.

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Other Compensation. No Executive Officer/Director received “other compensation” in excess of the lesser of US$25,000 or 10% of such officer's cash compensation, and all Executive Officers/Directors as a group did not receive other compensation which exceeded US$25,000 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 has no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to the Company's Directors or Executive Officers.

Pension/Retirement Benefits. No funds were set aside or accrued by the Company during Fiscal 2008 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 four committees: Audit Committee, Compensation Committee and Corporate Governance Committee.

The Audit Committee recommends to the Board of Directors the engagement of the independent auditors of the Company and reviews with the independent auditors the scope and results of the Company’s audits, the Company’s internal accounting controls, and the professional services furnished by the independent auditors to the Company. The current members of the Audit Committee are: Scott Remborg, Michael P. Kraft and Sanjay Joshi.

The Compensation Committee establishes and modifies compensation and incentive plans and programs, and reviews and approves compensation and awards under compensation and incentive plans and programs for elected officers of the Company. The current members of the Compensation Committee are: Michael P. Kraft, Anthony Lacavera and Ashesh Shah.

The Corporate Governance Committee was established to assist 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 Code of Conduct. The current members of the Corporate Governance Committee are Sanjay Joshi and Michael P. Kraft.

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6.E. Share Ownership

Table No. 7 lists, as of May 15, 2009, 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)(4)	963,235(5)	7.73%
Common	Scott Remborg(2	154,372(6)	1.24%
Common	Khurram Qureshi	129,490(10)	1.04%
Common	Ashraf Halim	[nil](8)	*
Common	Nereida Flannery	[nil](7)	*
Common	Ashesh Shah(3)	3,000(9)	*
Common	Sanjay Joshi(2)(4)	[nil] (12)	*
Common	Anthony Lacavera	403,220(11)	3.24%
As a group (8 parties)		1,653,317	13.27%

* 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 Committee.

(5)	Of such shares, 71,636 are held in Mr. Kraft's RRSP, and 891,599 are held by Buckingham Group Limited, a company controlled by Mr. Kraft. Mr. Kraft also holds options to purchase up to an additional 195,715 common shares of the Company.

(6)	Of such shares, 3,428 are held in Mr. Remborg's RRSP account. Mr. Remborg also holds options to purchase up to an additional 73,607 common shares of the Company.

(7)	Ms. Flannery also holds options to purchase up to an additional 62,893 common shares of the Company.

(8)	Ashraf Halim also holds options to purchase up to an additional 20,000 common shares of the Company.

(9)	Ashesh Shah also holds options to purchase up to an additional 22,500 common shares of the Company.

(10)	Of such shares, 38,606 shares are held in his wife’s RRSP, 9,819 in his wife’s name and 7,750 are held in Mr. Qureshi’s RRSP. Mr. Qureshi also holds options to purchase up to an additional 54,486 common shares of the Company.

(11)

Of such shares, 274,820 shares are held in 425243Ontario Inc. and 108,400 in AAL Telecom Holdings Inc., both wholly owned holding companies of Mr. Lacavera. 425243 Ontario Inc. also holds 30,125 warrants to purchase up to an additional 30,125 common shares in the Company. Mr. Lacavera also holds options to purchase up to an additional 30,000 common shares of the Company.

(12)	Sanjay Joshi also holds options to purchase up to an additional 33,250 common shares of the Company.

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Stock Options

TSX Venture Exchange Rules and Policies

The terms and conditions of incentive options granted by the Company are done 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.

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Company Stock Option Plan

A new stock option plan (the "2005 Plan") was adopted by the board of directors in May 30, 2005 and approved by the shareholders of the Company at the annual and special Meeting of shareholders on June 30, 2005 to encourage ownership of common shares by directors, officers, employees and consultants of the Company. The number of shares which may be reserved for issuance under the 2005 Plan is limited to 5,421,342 common shares, representing approximately 20% of the issued and outstanding common shares of the Company as at June 30, 2005, less the number of shares reserved for issuance pursuant to options previously granted.

Options may be granted under the 2005 Plan only to directors, officers, employees, consultants of the Company and its subsidiaries and personal holding corporations controlled by a director or officer of the Company and its subsidiaries as designated from time to time by the board of directors of the Company. The maximum number of common shares which may be reserved for issuance to any one person under the 2005 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 granted as a compensation or incentive mechanism. Any shares subject to an option granted under the 2005 Plan that for any reason is cancelled or terminated prior to exercise will be available for a subsequent grant under the 2005 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 granted under the 2005 Plan may be exercised during a period not exceeding five 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 an of its subsidiaries, as applicable, or upon the optionee retiring, becoming permanently disabled or dying. Options granted to optionees vest over an 18 month period with no greater than 16.67% of any options granted to an optionee vesting in any three month period or such longer period as the board may determine. The options under the 2005 Plan are non-transferable. The 2005 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.

The 2005 Plan provides that the Company may provide financial assistance in respect of options granted under the 2005 Plan by means of loans to optionees. Under the terms of the 2005 Plan, the Company may, but is not obligated to, loan to an optionee the funds required to exercise any particular option. The 2005 Plan provides that any such loan will be for a term not exceeding 10 years and will be non-interest bearing. Any such loan will be repayable at maturity or upon the death of the optionee or earlier in certain other circumstances. Any loans made under the 2005 Plan are to be secured by a pledge of the shares acquired upon the exercise of the option exercised being funded to a trustee for such purposes. In the event that any loan amount is not fully repaid when due the trustee holding the pledged shares is entitled to realize on the shares being held by it as security for the loan. Loans made under the 2005 Plan are made on a full recourse basis. The 2005 Plan provides that any shares acquired pursuant to loans made under the 2005 Plan may be sold by the optionee from time to time provided that an amount equal to the aggregate option exercise price or the balance of the loan is applied in repayment of the loan. Any financial assistance so provided under the 2005 Plan will be subject to and made in accordance with all applicable laws and regulatory policies at the time of making the loan.

On July 5, 2006 and October 5, 2007, the Company's shareholders ratified and approved an increase in the number of common shares eligible to be issued under the Company's 2005 Plan to approximately 20% of the issued and outstanding common shares as at the date of the respective shareholders meetings. Currently the 2005 Plan provides that the maximum aggregate number of shares reserved for issuance and which could be purchased upon the exercise of all options granted thereunder could not exceed 6,558,820, which number represented approximately 20% of the 32,794,102 issued and outstanding as at the Company’s last Annual and Special Meeting held on October 5, 2007 (“2007 Shareholder’s Meeting”).

At the 2007 Shareholder’s Meeting, the Company's shareholders also approved a consolidation of the Company's issued share capital on the basis of one (1) new for seven (7) old common shares (the "Consolidation"). As a result, the number of common shares eligible to be issued under the Company's 2005 Plan was also reduced on a one (1) for seven (7) basis.

Currently, the 2005 Plan provides that the maximum aggregate number of shares reserved for issuance and which could be purchased upon the exercise of all options granted thereunder could not exceed 1,920,000, which number represents approximately 20% of the issued and outstanding common shares of the Company as at the Company’s last Annual and Special Meeting held on October 14, 2008. .

As of the date hereof, options to purchase an aggregate of 1,250,369 common shares are outstanding under the 2005 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 May 15, 2009, as well as the number of options granted to Directors and officers as a group.

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Stock Options Outstanding

Expressed in Canadian Dollars

Name	Common Stock		Exercise Price		Grant Date	Expiration Date
Khurram Qureshi		2,000	$	1.33	10/5/04	10/5/09
Khurram Qureshi		52,486	$	0.70	2/14/07	2/14/12
Michael Kraft		10,714	$	1.33	10/5/04	10/5/09
Michael Kraft		42,143	$	1.33	1/14/05	1/14/10
Michael Kraft		142,857	$	0.70	2/14/07	2/14/12
Nereida Flannery		10,714	$	1.47	10/17/05	10/17/10
Nereida Flannery		21,429	$	0.84	5/22/07	5/22/12
Nereida Flannery		30,750	$	1.75	05/01/09	05/01/14
Scott Remborg		10,714	$	1.33	10/5/04	10/5/09
Scott Remborg		10,714	$	1.47	10/17/05	10/17/10
Scott Remborg		21,429	$	0.84	5/22/07	5/22/12
Scott Remborg		30,750	$	1.75	05/01/09	05/01/14
Sanjay Joshi		33,250	$	1.75	05/01/09	05/01/14
Anthony Lacavera		30,000	$	1.75	05/01/09	05/01/14
Ashraf Halim		20,000	$	1.75	05/01/09	05/01/14
Ashesh Shah		22,500	$	1.75	05/01/09	05/01/14
Total Officers/Directors		492,450

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. and Table No. 7. Other than those shareholders set forth in Table No.7, there are no shareholders who hold more than 5% of the Company's shares.

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

The participation in private placements of equity by the Company and exercise of stock options/share purchase warrants has lead over the last several years to some significant changes in the holdings of major shareholders; table reflects direct/indirect holdings of common shares, refer to Table No. 7 for additional information.

Shares Owned

12/31/2008

12/31/2007

12/31/2006

Michael P. Kraft

963,235

1,450,102

495,450

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7.A.2. Canadian Share Ownership. On May 15, 2009, the Company’s registered shareholders’ list showed 12,457,607 common shares outstanding with 36 registered shareholders, with 9,048,735 owned by 27 shareholders residing in Canada, 11,714 shares owned by 3 registered shareholders in US and 3,397,158 shares owned by 6 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) except as described in ITEM #4.A., “History and Development of the Company”, and ITEM #6.E., “Share Ownership”.

7.B. Related Party Transactions

Michael P. Kraft, President/CEO/Director

Mr. Kraft is compensated indirectly through MPK Inc., as discussed in ITEM #6.B.

Funds Owed to Officers/Directors

Officers/Directors have lent the Company funds during the last several years to alleviate the corporate need for working capital.

Interest Payable to Officers/Directors

Officers/Directors have lent the Company funds during the last several years to alleviate the corporate need for working capital. Officer/Director loans bear interest at 12% per annum interest payable totaled:

From January 2007 through May 2007, LMK Inc., a company controlled by the wife of Michael P. Kraft, MPK Inc., loaned the Company an aggregate of $182,000. These loans bore interest at 12% per annum. These loans were repaid in full during 2008.

From January 2008 through October 2008, LMK Inc., a company controlled by the wife of Michael P. Kraft, loaned the Company an aggregate of $60,000. These loans bore interest at 12% per annum. At May 15, 2009, $nil was outstanding related to these loans.

Other than as disclosed above, there have been no transactions since December 31, 2008, 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.

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ITEM 8. FINANCIAL INFORMATION

8.A. Consolidated Statements and Other Financial Information

The Company's financial statements are stated in Canadian Dollars (CDN$) and are prepared in accordance with Canadian Generally Accepted Accounting Principles (GAAP), the application of which, in the case of the Company, conforms in all material respects for the periods presented with United States GAAP, except as discussed in footnotes to the financial statements.

The financial statements as required under ITEM #17 are attached hereto and found immediately following the text of this Annual Report. The audit reports of Collins Barrow Toronto LLP, Chartered Accountants, and Meyers, Norris Penny, LLP are included herein immediately preceding the financial statements and schedules.

Audited Financial Statements for Fiscal 2008 and Fiscal 2007

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

No significant change has occurred since the date of the annual financial statements.

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ITEM 9. THE OFFER AND LISTING

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 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 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”. 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.

The 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.

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Table No. 9

TSX Venture Exchange

Common Shares Trading Activity

	Sales -- Canadian Dollars
Period Ended	Volume		High		Low		Close

Monthly
April 2009		146,260		1.19		0.66		0.88
March 2009		84,529		0.98		0.62		0.90
February 2009		81,167		1.05		0.76		0.95
January 2009		79,810		1.05		0.80		1.05
December 2008		72,292		1.19		0.55		1.19
November 2008		113,424		1.46		0.90		1.19
October 2008		175,409		1.71		0.85		1.18
September 2008		165,208		1.90		1.36		1.70
August 2008		85,205		1.92		1.58		1.92
July 2008		196,945		1.87		1.60		1.79
June 2008		185,323		1.97		1.70		1.85
May 2008		118,497		2.00		1.00		1.85

Quarterly
03/31/2009	245,506	1.05	0.62	0.90
12/31/2008	361,125	1.71	0.55	1.19
09/30/2008	447,358	1.92	1.36	1.70
06/30/2008	542,301	2.20	1.62	1.85
3/31/2008	463,600	1.83	0.85	1.81
12/31/2007	161,557	1.39	1.19	1.19
9/30/2007	401,886	1.40	1.05	1.19
6/30/2007	294,400	1.19	0.84	1.05
3/31/2007	72,291	1.155	0.63	0.875
12/31/2006	128,088	1.365	0.70	1.155
9/30/2006	123,945	1.47	0.84	1.365
6/30/2006	187,668	1.12	0.49	1.05
3/31/2006	226,664	1.33	0.77	1.05
12/31/2005	83,509	1.54	0.77	1.19
9/30/2005	216,388	1.855	0.77	1.575
6/30/2005	142,287	1.575	0.84	1.33
3/31/2005	255,582	2.275	1.26	1.26

Yearly
12/31/2008	1,494,984	2.20	0.55	1.19
12/31/2007	930,134	1.50	0.63	1.19
12/31/2006	666,365	1.47	0.49	1.155
12/31/2005	697,765	2.275	0.77	1.19
12/31/2004	1,497,789	2.03	1.89	1.96

The Company's shares became quoted for trading on the OTC Bulletin Board on January 22, 2004.

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The table No.10 lists the volume of trading and high, low and closing sales prices on the OTC Bulletin Board for the Company's common shares for the last 12 months, the last twelve fiscal quarters; and since commencement of trading.

Table No. 10

OTC Bulletin Board

Common Shares Trading Activity

	Sales -- US Dollars
Period Ended	Volume		High		Low		Close

Monthly
April 2009		10,367		0.90		0.51		0.70
March 2009		7,123		1.00		0.60		0.90
February 2009		13,170		1.00		0.62		0.75
January 2009		100		1.00		1.00		1.00
December 2008		11,600		1.24		0.61		0.75
November 2008		18,657		1.30		0.80		1.25
October 2008		36,784		1.58		0.65		1.00
September 2008		175,908		1.85		1.30		1.85
August 2008		51,524		1.80		1.60		1.80
July 2008		51,309		1.85		1.55		1.74
June 2008		15,300		1.90		1.66		1.86
May 2008		33,300		2.00		1.00		1.85

Quarterly
03/31/2009	20,393	1.00	0.60	0.90
12/31/2008	67,041	1.58	0.61	1.24
09/30/2008	278,741	1.85	1.30	1.85
06/30/2008	58,200	2.00	1.00	1.85
3/31/2008	144,200	1.79	0.71	1.79
12/31/2007	37,089	1.40	0.77	1.22
9/30/2007	62,944	1.40	0.77	1.33
6/30/2007	78,952	1.19	0.70	0.91
3/31/2007	47689	2.10	0.35	0.84
12/31/2006	76626	4.06	0.63	1.176
9/30/2006	128421	2.66	0.63	1.288
6/30/2006	143740	1.19	0.41	1.01
3/31/2006	144133	1.33	0.7	0.91
12/31/2005	12106	1.39	0.56	0.805
9/30/2005	36046	1.68	0.525	1.26
6/30/2005	65326	1.27	0.735	0.98
3/31/2005	62985	1.89	0.98	1.26

Yearly
12/31/2008	867,582	2.00	0.61	1.24
12/31/2007	245,718	1.40	0.21	1.22
12/31/2006	492,923	5.80	0.406	1.176
12/31/2005	219,321	1.89	0.525	0.805
12/31/2004	778,080	3.57	0.84	1.61

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.

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9.A.5. Common Share Description

Not Applicable

9.C. Stock Exchanges Identified

The common shares trade on the TSX Venture Exchange, OTCBB and are quoted for trading on the Berlin-Bremen Stock Exchange. Refer to ITEM #9.A.4.

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, ByLaws - 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.

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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 hereof, 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

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

3)	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:

1)	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.

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2)	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.

3)	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.

4)	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.

d) 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 Ownership. 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.

j) 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.

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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:

a.	Changing its name;

b.	Changing the place where its registered office is situated;

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

d.	Certain reorganizations of the corporation and alterations of share capital;

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

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

g.	Dissolution of the corporation.

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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.

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 Customs and 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.

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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.

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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.

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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.

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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.F. Dividends and Paying Agents

Not Applicable.

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Item 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency Risk

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 12/31/08			-5%		- 10%		- 15%
Year-end exchange rate for 1 RMB to USD				0.1466		0.1393		0.1319		0.1246
Annual co-publishing revenue from China		6,269,713		919,140		873,183		827,226		781,269
Accounts receivable		4,016,308		588,791		559,351		529,912		500,472

	USD		CDN		CDN		CDN		CDN
			Year 2008			+ 5%		- 5%		- 10%
Average annual exchange rate for 1 USD to CDN				1.0660		1.1193		1.0127		0.9594
Annual co-publishing revenue from China		907,981		967,908		1,016,303		919,512		871,117

	USD		CDN		CDN		CDN		CDN
			At 12/31/08			+ 5%		- 5%		- 10%
Year-end exchange rate for 1 USD to CDN				1.2180		1.2789		1.1571		1.0962
Cash		284,286		346,260		363,573		328,947		311,634
Accounts receivable		500,383		609,466		639,940		578,993		548,520
Accounts payable		50,000		60,900		63,945		57,855		54,810

Item 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not Applicable

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PART II

Item 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

Not Applicable

Item 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

Not Applicable

ITEM 15. CONTROLS AND PROCEDURES

15.A. Within the 90-day period prior to the filing of 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. Based on that evaluation, the CEO and CFO have concluded that the Company's disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

Changes in Accounting Policies Including Initial Adoption

Effective January 1, 2008, the Company has adopted the following Sections issued or amended by the CICA:

Section 1400, General Standards of Financial Statement Presentation

Section 1535, Capital Disclosures

Section 3031, Inventories

Section 3862, Financial Instruments Disclosures

Section 3863, Financial Instruments Presentation

Adoption of these new accounting standards has no material impact on the amounts reported in the Company’s financial statements as most of them relate primarily to disclosure.

Adoption of International Financial Reporting Standards

In January 2006, the Accounting Standards Board announced its decision to require all publicly accountable enterprises to report under International Financial Reporting Standards (“IFRS”) for years beginning on or after January 1, 2011. These changes reflect a global shift to IFRS and they are intended to facilitate capital flows and bring greater clarity and consistency to financial reporting in the global marketplace. The Company is in the process of completing the scoping phase of its conversion plan which has a timeline for assessing resources and training, analyzing key differences, and selecting accounting policies under IFRS.

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Policies and Procedures

The Company did not maintain a complete set of policies and procedures governing decision and authorization processes. As such, reliance was placed on management’s substantive review of period end balances, transactions recorded in each period, scrutiny of business activity and centralized cash management to detect errors and ensure the financial statements do not contain material misstatements. The Company assigned dedicated staff to formulate a plan, using a generally recognized framework, to document key processes and controls, and initiated the creation of a comprehensive set of policies and procedures. The completion of documentation and implementation of the initiative will continue in 2008.

Segregation of Duties

Due to resource constraints, the Company is reliant on the performance of compensating procedures during its financial period-end closing process in order to ensure that the financial statements are presented fairly and accurately, in all material respects. Additional compensating control procedures have been performed in the preparation of our financial statements to ensure their reliability.

These Compensating Controls Include:

·	Review of all balances and reconciliations;

·	Review of bank registers and disbursement details in risk locations; and

·	Analytical review and analysis of performance against expectations.

During 2008, the Company enhanced internal controls over financial reporting by introducing the following additional changes:

·	Improved budgetary controls; and

·	Strengthened technical expertise in the accounting and finance areas of the organization

15.B. There have been no significant changes in the Company's internal controls or the occurrence of events or other factors that could significantly affect these controls, subsequent to the Date of Evaluation.

ITEM 16. RESERVED

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PART III

ITEM 17. FINANCIAL STATEMENTS

The financial statements as required under ITEM #17 are attached hereto as exhibits. The audit reports of Meyers Norris Penny LLP and Collins Barrow Toronto LLP are included herein immediately preceding the financial statements and schedules.

Audited Financial Statements

Auditor's Report, dated April 14, 2009

Consolidated Balance Sheets at December 31, 2008 and December 31, 2007

Consolidated Statements of Operations and Deficit for the years ended December 31, 2008, December 31, 2007 and December 31, 2006

Consolidated Statements of Cash Flows for the years ended December 31, 2008, December 31, 2007 and December 31, 2006

Notes to Financial Statements

ITEM 18. FINANCIAL STATEMENTS

The Company has elected to provide financial statements pursuant to ITEM #17.

ITEM 19. EXHIBITS

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

2. Instruments defining the rights of holders of equity or debt securities being registered incorporated by reference from the Lingo Media Inc. F-1 Registration Statement filed August 20, 2002.

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SIGNATURES

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, thereunto duly authorized.

	LINGO MEDIA CORPORATION

October 8, 2009	By:	/s/ Michael P. Kraft
		Michael P. Kraft
		President and Chief Executive Officer

	By:	/s/ Khurrum R. Qureshi
		Khurrum R. Qureshi
		Chief Financial Officer