LINGO MEDIA CORPORATION
Condensed Consolidated Interim Financial Statements
For the six-month period ended June 30, 2011
LINGO MEDIA CORPORATION
Condensed Consolidated Interim Financial Statements
As at June 30, 2011
Notice to Reader
Management has compiled the Condensed Consolidated Interim Financial Statements of Lingo Media Corporation (“Lingo Media” or the “Company”) consisting of the Condensed Consolidated Interim Balance Sheet as at June 30, 2011 and the Condensed Consolidated Interim Statements of Comprehensive Income, Changes in Equity and Cash Flows for the six months then ended. All amounts are stated in Canadian Dollars. An accounting firm has not reviewed or audited these Interim Financial Statements and Management Discussion and Analysis thereon.
LINGO MEDIA CORPORATION
Condensed Consolidated Interim Financial Statements
As at June 30, 2011
Contents
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Condensed Consolidated Interim Financial Statements
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Page
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Balance Sheet
|
4
|
Statement of Comprehensive Income
|
5
|
Statement of Changes in Equity
|
6
|
Statement of Cash Flows
|
7
|
Notes to the Financial Statements
|
8
|
LINGO MEDIA CORPORATION
Condensed Consolidated Interim Balance Sheet
As at June 30, 2011
(Unaudited, expressed in Canadian Dollars, unless otherwise stated)
|
|
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Notes
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June 30,
2011
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|
|
December 31,
2010
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|
ASSETS
|
|
|
|
|
|
|
|
(Note 17)
|
|
Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
$ |
458,203 |
|
|
$ |
230,906 |
|
Accounts receivable
|
|
|
6 |
|
|
|
932,165 |
|
|
|
931,101 |
|
Prepaid and other receivables
|
|
|
|
|
|
|
470,069 |
|
|
|
93,465 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,860,437 |
|
|
|
1,255,472 |
|
Non-Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
7 |
|
|
|
56,215 |
|
|
|
62,342 |
|
Publishing development cost, net
|
|
|
8 |
|
|
|
- |
|
|
|
8,807 |
|
Software and web development costs, net
|
|
|
9 |
|
|
|
3,103,962 |
|
|
|
4,234,283 |
|
Goodwill
|
|
|
19 |
|
|
|
139,618 |
|
|
|
139,618 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
|
|
|
|
|
5,160,232 |
|
|
|
5,700,522 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
|
|
|
|
281,205 |
|
|
|
903,689 |
|
Accrued liabilities
|
|
|
|
|
|
|
428,529 |
|
|
|
729,892 |
|
Loans payable
|
|
|
10 |
|
|
|
990,000 |
|
|
|
1,587,000 |
|
|
|
|
|
|
|
|
1,699,734 |
|
|
|
3,220,581 |
|
Non-Current Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan payable
|
|
|
19 |
|
|
|
- |
|
|
|
763,729 |
|
TOTAL LIABILITIES
|
|
|
|
|
|
|
1,699,734 |
|
|
|
3,984,310 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Attributable to the Equity Holders of the Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital
|
|
|
11 |
|
|
|
18,216,004 |
|
|
|
15,131,192 |
|
Warrants
|
|
|
13 |
|
|
|
792,058 |
|
|
|
- |
|
Share based payment reserve
|
|
|
12 |
|
|
|
2,172,671 |
|
|
|
1,641,283 |
|
Accumulated other comprehensive income
|
|
|
|
|
|
|
55,384 |
|
|
|
80,417 |
|
Deficit
|
|
|
|
|
|
|
(17,775,619 |
) |
|
|
(15,136,680 |
) |
TOTAL EQUITY
|
|
|
|
|
|
|
3,460,498 |
|
|
|
1,716,212 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND EQUITY
|
|
|
|
|
|
$ |
5,160,232 |
|
|
$ |
5,700,522 |
|
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
These condensed consolidated interim financial statements are authorized for issue by the Board of Directors on August 29, 2011.
LINGO MEDIA CORPORATION
Condensed Consolidated Interim Statement of Comprehensive Income
For the six-months ended June 30, 2011 and 2010
(Unaudited, expressed in Canadian Dollars, unless otherwise stated)
|
|
|
|
|
For the three months ended June 30
|
|
|
For the six months ended June 30
|
|
|
|
Notes |
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
(Note 17)
|
|
|
|
|
|
(Note 17)
|
|
Revenue
|
|
|
|
|
$ |
455,740 |
|
|
$ |
559,437 |
|
|
$ |
756,574 |
|
|
$ |
694,732 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct costs
|
|
|
|
|
|
(67,621 |
) |
|
|
(57,666 |
) |
|
|
(125,489 |
) |
|
|
(67,299 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
|
|
|
|
|
388,119 |
|
|
|
501,771 |
|
|
|
631,085 |
|
|
|
627,433 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation – property and equipment costs
|
|
|
7 |
|
|
|
3,081 |
|
|
|
1,974 |
|
|
|
6,127 |
|
|
|
3,690 |
|
Amortization – publishing development costs
|
|
|
8 |
|
|
|
425 |
|
|
|
1,521 |
|
|
|
16,501 |
|
|
|
18,266 |
|
Amortization – software and web development
|
|
|
9 |
|
|
|
645,868 |
|
|
|
573,130 |
|
|
|
1,243,509 |
|
|
|
1,177,798 |
|
Selling, general and administrative expenses
|
|
|
|
|
|
|
419,812 |
|
|
|
768,526 |
|
|
|
1,198,872 |
|
|
|
1,312,250 |
|
Share based payment
|
|
|
12 |
|
|
|
152,263 |
|
|
|
44,319 |
|
|
|
531,385 |
|
|
|
87,465 |
|
Total Expenses
|
|
|
|
|
|
|
1,221,449 |
|
|
|
1,389,470 |
|
|
|
2,996,394 |
|
|
|
2,599,469 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Operations
|
|
|
|
|
|
|
(833,330 |
) |
|
|
(887,699 |
) |
|
|
(2,365,309 |
) |
|
|
(1,972,036 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Finance Charges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest (income) expense
|
|
|
|
|
|
|
19,055 |
|
|
|
15,437 |
|
|
|
63,636 |
|
|
|
17,821 |
|
Foreign exchange (gain) / loss
|
|
|
|
|
|
|
192,781 |
|
|
|
198,085 |
|
|
|
125,298 |
|
|
|
(26,398 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before Tax
|
|
|
|
|
|
|
(1,045,166 |
) |
|
|
(1,011,221 |
) |
|
|
(2,554,243 |
) |
|
|
(1,963,459 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Tax Expense
|
|
|
|
|
|
|
72,841 |
|
|
|
58,713 |
|
|
|
84,696 |
|
|
|
67,412 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss for the Period – Continuing Operations
|
|
|
|
|
|
|
(1,118,007 |
) |
|
|
(1,159,936 |
) |
|
|
(2,638,939 |
) |
|
|
(2,030,881 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange differences on translating foreign operations
|
|
|
|
|
|
|
(47,763 |
) |
|
|
235,895 |
|
|
|
(25,033 |
) |
|
|
(26,255 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Comprehensive Loss, Net of Tax
|
|
|
|
|
|
$ |
(1,165,770 |
) |
|
$ |
(924,041 |
) |
|
$ |
(2,663,972 |
) |
|
$ |
(2,004,616 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted
|
|
|
|
|
|
$ |
(0.06 |
) |
|
$ |
(0.07 |
) |
|
$ |
(0.15 |
) |
|
$ |
(0.16 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Number of Common Shares Outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted
|
|
|
|
|
|
|
18,689,811 |
|
|
|
13,004,319 |
|
|
|
18,253,908 |
|
|
|
12,736,575 |
|
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
LINGO MEDIA CORPORATION
Condensed Consolidated Interim Statement of Changes in Equity
For the six-months ended June 30, 2011
(Unaudited, expressed in Canadian Dollars, unless otherwise stated)
|
|
Issued share capital
|
|
|
Share
based
|
|
|
|
|
|
Accumulated other
|
|
|
|
|
|
|
|
|
|
Number of shares
|
|
|
Amount
|
|
|
payment reserve |
|
|
Warrants
|
|
|
comprehensive income |
|
|
Deficit
|
|
|
Total
equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at
January 1, 2010
|
|
$ |
12,465,857 |
|
|
$ |
14,220,192 |
|
|
$ |
1,290,631 |
|
|
$ |
281,355 |
|
|
$ |
(181,733 |
) |
|
$ |
(11,195,403 |
) |
|
$ |
4,415,042 |
|
Loss for the period / year
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(2,226,580 |
) |
|
|
(2,226,580 |
) |
Other comprehensive income / (loss)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
221,964 |
|
|
|
- |
|
|
|
221,964 |
|
Share based payments charged to operations
|
|
|
- |
|
|
|
- |
|
|
|
87,465 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
87,465 |
|
Balance as at
June 30, 2010
|
|
|
13,515,857 |
|
|
|
14,871,192 |
|
|
|
1,378,096 |
|
|
|
281,355 |
|
|
|
40,231 |
|
|
|
(13,421,983 |
) |
|
|
3,148,891 |
|
Loss for the period / year
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,714,697 |
) |
|
|
(1,714,697 |
) |
Issued shares - acquisition of ELL Technologies
|
|
|
1,050,000 |
|
|
|
651,000 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
651,000 |
|
Issued shares - against loan payable
|
|
|
433,332 |
|
|
|
260,000 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
260,000 |
|
Warrants expired - shares
|
|
|
- |
|
|
|
- |
|
|
|
281,355 |
|
|
|
(281,355 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
Comprehensive loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
40,186 |
|
|
|
- |
|
|
|
40,186 |
|
Share based payments charged to operations
|
|
|
- |
|
|
|
- |
|
|
|
(18,168 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(18,168 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at
December 31, 2010
|
|
|
13,949,189 |
|
|
|
15,131,192 |
|
|
|
1,641,283 |
|
|
|
- |
|
|
|
80,417 |
|
|
|
(15,136,680 |
) |
|
|
1,716,212 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued shares - equity financing
|
|
|
5,557,001 |
|
|
|
3,076,835 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3,076,835 |
|
Issued shares - debt settlement
|
|
|
1,053,487 |
|
|
|
800,035 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
800,035 |
|
Loss for the period
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(2,638,939 |
) |
|
|
(2,638,939 |
) |
Warrants issued
|
|
|
- |
|
|
|
(792,058 |
) |
|
|
- |
|
|
|
792,058 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Share based payments charged to operations
|
|
|
- |
|
|
|
- |
|
|
|
531,388 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
531,388 |
|
Comprehensive Loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(25,033 |
) |
|
|
- |
|
|
|
(25,033 |
) |
Balance as at
June 30, 2011
|
|
$ |
20,559,677 |
|
|
$ |
18,216,004 |
|
|
$ |
2,172,671 |
|
|
$ |
792,058 |
|
|
$ |
55,384 |
|
|
$ |
(17,913,323 |
) |
|
$ |
3,460,498 |
|
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
LINGO MEDIA CORPORATION
Condensed Consolidated Interim Statement of Cash Flows
For the six-months ended June 30, 2011
(Unaudited, expressed in Canadian Dollars, unless otherwise stated)
|
|
For the three months
ended June 30
|
|
|
For the six months
ended June 30
|
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before Tax
|
|
$ |
(1,165,770 |
) |
|
$ |
(924,041 |
) |
|
$ |
(2,663,972 |
) |
|
$ |
(2,004,616 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to Net Profit for Non Cash Items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation / amortization
|
|
|
649,374 |
|
|
|
576,625 |
|
|
|
1,266,137 |
|
|
|
1,199,754 |
|
Share based payment
|
|
|
152,263 |
|
|
|
44,319 |
|
|
|
531,388 |
|
|
|
87,465 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Loss before Working Capital Changes
|
|
|
(501,837 |
) |
|
|
(303,097 |
) |
|
|
(1,004,154 |
) |
|
|
(717,397 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working Capital Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in accounts receivable
|
|
|
(131,005 |
) |
|
|
14,523 |
|
|
|
(1,064 |
) |
|
|
59,440 |
|
Increase/(decrease) in prepaid and other receivables
|
|
|
(420,178 |
) |
|
|
(33,851 |
) |
|
|
(376,604 |
) |
|
|
(110,983 |
) |
(Increase)/decrease in accounts payable
|
|
|
(500,535 |
) |
|
|
251,895 |
|
|
|
(622,484 |
) |
|
|
442,888 |
|
Decrease in deferred revenue
|
|
|
- |
|
|
|
30,959 |
|
|
|
|
|
|
|
74,214 |
|
(Increase)/decrease in accrued liabilities
|
|
|
(238,585 |
) |
|
|
(54,236 |
) |
|
|
(301,363 |
) |
|
|
(11,652 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Generated from / (used in) Operations
|
|
|
(1,654,436 |
) |
|
|
(93,807 |
) |
|
|
(2,167,965 |
) |
|
|
(263,490 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenditures on software & web development costs
|
|
|
71,465 |
|
|
|
(396,103 |
) |
|
|
(98,073 |
) |
|
|
(505,679 |
) |
Deferred cost
|
|
|
- |
|
|
|
(46,714 |
) |
|
|
- |
|
|
|
(48,248 |
) |
Purchase of property, plant and equipment
|
|
|
(1,846 |
) |
|
|
- |
|
|
|
- |
|
|
|
105 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Flows Generated from / (used in) Investing Activities
|
|
|
69,619 |
|
|
|
(442,817 |
) |
|
|
(98,073 |
) |
|
|
(553,822 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital issue during the period
|
|
|
1,125,000 |
|
|
|
- |
|
|
|
3,320,200 |
|
|
|
- |
|
Share issue costs
|
|
|
(151,230 |
) |
|
|
- |
|
|
|
(243,365 |
) |
|
|
- |
|
Increase/(Decrease) in loans payable
|
|
|
(763,729 |
) |
|
|
325,000 |
|
|
|
(1,360,729 |
) |
|
|
675,000 |
|
Loan and payable settled by shares
|
|
|
777,229 |
|
|
|
|
|
|
|
777,229 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Flows Generated from / (used in) Financing Activities
|
|
|
987,270 |
|
|
|
325,000 |
|
|
|
2,493,335 |
|
|
|
675,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
|
(597,547 |
) |
|
|
(211,624 |
) |
|
|
227,297 |
|
|
|
(142,312 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents at the Beginning of the Period
|
|
|
1,055,750 |
|
|
|
270,943 |
|
|
|
230,906 |
|
|
|
201,451 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents at the End of the Period
|
|
$ |
458,203 |
|
|
$ |
59,319 |
|
|
$ |
458,203 |
|
|
$ |
59,319 |
|
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
LINGO MEDIA CORPORATION
Notes to Condensed Consolidated Interim Financial Statements
June 30, 2011
(Unaudited - See Notice to Reader)
1. CORPORATE INFORMATION
Lingo Media Corporation (“Lingo Media” or the “Company”) is a publicly listed company incorporated in Canada with limited liability under the legislation of the Province of Ontario and its shares are listed on the TSX Venture Exchange and inter-listed on the OTC Bulletin Board. The condensed interim consolidated financial statements of the Company as at and for the quarter ended June 30, 2011 comprise the Company and its subsidiaries (together referred to as the” Group" and individually as "Group entities"). The Company is a diversified online and print-based education product and services company focused on English language learning ("ELL").
ELL Technologies Limited ("ELL Technologies"), a subsidiary acquired in 2010, is a globally-established ELL multi-media and online training company marketing under the Q Group brand. Parlo Corporation ("Parlo"), is a fee-based online ELL training and assessment service. Speak2Me Inc. (“Speak2Me”), a subsidiary acquired in 2007, is a free-to-customer advertising-based online ELL service in China. Lingo Learning Inc. ("Lingo Learning") (formerly Lingo Media Ltd.) is a print-based publisher of ELL programs in China. Lingo Media through its subsidiary A+ Child Development (Canada) Ltd. (“A+”), until filing for a proposal to creditors, specialized in distributing early childhood cognitive development programs.
The head office, principal address and registered and records office of the Company are located at 151 Bloor Street West, Suite 703, Toronto, Ontario, Canada, M5S 1S4.
These condensed consolidated interim financial statements have been prepared on a going concern basis, which contemplates the realization of assets and settlement of liabilities in the normal course of business. The Company has incurred significant losses over the years. This raises significant doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon raising additional financing through share issuance, borrowing, sales agreements and distribution agreements. There are no assurances that the Company will be successful in achieving these goals.
2. BASIS OF PREPRATION
2.1 Statement of compliance
These consolidated interim financial statements are unaudited and have been prepared in accordance with IAS 34 ‘Interim Financial Reporting’ (“IAS 34”) using accounting policies consistent with the International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”) and Interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”).
These are the Group’s first IFRS consolidated interim financial statements for part of the period covered by the Company’s first IFRS consolidated annual financial statements for the year ending December 31, 2011. Previously, the Company prepared its consolidated annual and consolidated interim financial statements in accordance with Canadian Generally Accepted Accounting Principles (“GAAP”). These condensed interim consolidated financial statements should be read in conjunction with annual financial statements for the year ending December 31, 2010.
As these are the Group’s first set of consolidated interim financial statements in accordance with IFRS, the Company’s disclosures exceed the minimum requirements under IAS 34. The Company has elected to exceed the minimum requirements in order to present the Company’s accounting policies in accordance with IFRS and the additional disclosures required under IFRS, which also highlight the changes from the Group’s 2010 annual consolidated financial statements prepared in accordance with Canadian GAAP. In 2012 and beyond, the Company may not provide the same amount of disclosure in the Group’s interim consolidated financial statements under IFRS as the reader will be able rely on the annual consolidated financial statements which will be prepared in accordance with IFRS. An explanation of how the transition to IFRS has affected the reported financial position, financial performance and cash flows of the Group is provided in Note 17.
The policies set out below in Note 4 have been consistently applied to all the years presented and by all companies within the Group, unless otherwise stated
LINGO MEDIA CORPORATION
Notes to Condensed Consolidated Interim Financial Statements
June 30, 2011
(Unaudited - See Notice to Reader)
2. BASIS OF PREPRATION (Cont’d)
2.2 Basis of measurement
These condensed interim consolidated financial statements have been prepared on the historical cost basis. The comparative figures presented in these condensed consolidated interim financial statements are in accordance with IFRS and any changes from figures previously reported under Canadian GAAP have been discussed in Note 17.
2.3 Basis of consolidation
The condensed interim consolidated financial statements comprise the financial statements of the Company and the entities controlled by the Company (i.e. subsidiaries) as at March 31, 2011. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities.
Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date when such control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies.
All inter-group balances, transactions, unrealized gains and losses resulting from inter-group transactions and dividends are eliminated in full.
2.4 Functional and presentation currency
The functional currency is the currency of the primary economic environment in which the entity operates and has been determined for each entity within the Group. These consolidated financial statements are presented in Canadian Dollars, which is the Company’s functional currency and presentation currency. The functional currency of its Chinese subsidiary is Chinese Renminbi (“RMB”) and the functional currency of its ELL Technologies subsidiary is the United States Dollar (“US$”).
The functional currency determinations were conducted through an analysis of the consideration factors identified in IAS 21, “The Effects of Changes in Foreign Exchange Rates”. Subsequent to the adoption of IFRS, all resulting translation differences are reported as a separate component of shareholders’ equity titled “Accumulated Other Comprehensive Income”.
3. SIGINFICANT ACCOUTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of the Group’s consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies, reported amounts of assets, liabilities and contingent liabilities, revenues and expenses at the date of the consolidated financial statements and during the reporting period.
Estimates and assumptions are continuously evaluated and are based on management’s historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. However, actual outcomes can differ from these estimates. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and further periods if the review affects both current and future periods.
Information about critical judgements in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements is included in the following notes:
Note 2.4 – Determination of functional and presentation currency
LINGO MEDIA CORPORATION
Notes to Condensed Consolidated Interim Financial Statements
June 30, 2011
(Unaudited - See Notice to Reader)
4. SUMMARY OF SIGINFICANT ACCOUTING POLICIES
The Company prepares its consolidated financial statements in accordance with Canadian generally accepted accounting principles as set out in the Handbook of the Canadian Institute of Chartered Accountants (“CICA Handbook”). In 2010, the CICA Handbook was revised to incorporate International Financial Reporting Standards, and require publicly accountable enterprises to apply such standards effective for years beginning on or after January 1, 2011. Accordingly, the Company commenced reporting on this basis in its 2011 interim consolidated financial statements. In these consolidated financial statements, the term “Canadian GAAP” refers to Canadian GAAP before the adoption of IFRS.
These interim consolidated financial statements have been prepared in accordance with IFRS applicable to the preparation of these financial statements, including IAS 34, Interim Financial Reporting, and IFRS 1, First-time Adoption of International Financial Reporting Standards. The accounting policies followed in these condensed consolidated interim financial statements are the same as those applied in the Company’s condensed consolidated interim financial statements for the period ended March 31, 2011. The Company consistently applied the same accounting policies throughout all periods presented, as if the policies had always been in effect. Note 18 discloses the impact of the transition to IFRS on the Company’s reported equity as at June 30, 2010 and comprehensive income for the three and six months ended June 30, 2010, including the nature and effect of significant changes in accounting policies from those used in the Company’s consolidated financial statements for the year ended December 31, 2010.
The accounting policies applied in these condensed interim consolidated financial statements are based on IFRS effective for the year ended December 31, 2011, as issued and outstanding as of August 29, 2011, the date the Board of Directors approved the financial statements. Any subsequent changes to IFRS that are given effect in the Company’s annual consolidated financial statements for the year ending December 31, 2011 could result in restatement of these condensed consolidated interim financial statements, including transition adjustments recognized on change-over to IFRS. The condensed consolidated interim financial statements should be read in conjunction with the Company’s Canadian GAAP annual financial statements for the year ended December 31, 2010, and the Company’s condensed consolidated interim financial statements for the quarter ended March 31, 2011 prepared in accordance with IFRS applicable to interim financial statements.
LINGO MEDIA CORPORATION
Notes to Condensed Consolidated Interim Financial Statements
June 30, 2011
(Unaudited - See Notice to Reader)
Name of subsidiary
|
Principal activity
|
Place of
incorporation
and operation
|
Proportion of ownership
interest and voting rights held
|
June 30, 2011
|
December 31, 2010
|
January 1, 2010
|
Lingo Learning Inc.
|
Developer and publisher of English language learning products print and audio based
|
Canada
|
100%
|
100%
|
100%
|
|
|
|
|
|
|
Speak2Me Inc.
|
Free English language learning online service
|
Canada
|
100%
|
100%
|
100%
|
|
|
|
|
|
|
Parlo Corporation
|
Fee-based English language online training service
|
Canada
|
100%
|
100%
|
100%
|
|
|
|
|
|
|
ELL
Technologies Limited
|
Fee-based English language online training service
|
U.K
|
100%
|
100%
|
100%
|
|
|
|
|
|
|
Lingo Media
International Inc.
|
Marketer and distributor of Lingo Learning products
|
Barbados
|
100%
|
100%
|
100%
|
|
|
|
|
|
|
Speak2Me
International Inc.
|
Holding Company
|
Barbados
|
100%
|
100%
|
100%
|
|
|
|
|
|
|
Speak2Me (Hong Kong) Limited
|
Holding Company
|
Hong Kong
|
100%
|
100%
|
100%
|
|
|
|
|
|
|
Speak2Me Education Information & Technology Co. Ltd.
|
Marketing and sales of Speak2Me service and products
|
China
|
100%
|
100%
|
100%
|
|
|
|
|
|
|
Lingo Group Limited
|
Holding Company
|
Canada
|
83.3%
|
83.3%
|
83.3%
|
6. ACCOUNTS AND GRANTS RECEIVABLE:
Accounts and grants receivable consist of:
|
|
June 30,
2011
|
|
|
December 31,
2010
|
|
Trade receivable
|
|
$ |
857,457 |
|
|
$ |
931,101 |
|
Grants receivable
|
|
|
74,708 |
|
|
|
- |
|
|
|
$ |
932,165 |
|
|
$ |
931,101 |
|
LINGO MEDIA CORPORATION
Notes to Condensed Consolidated Interim Financial Statements
June 30, 2011
(Unaudited - See Notice to Reader)
7. PROPERTY AND EQUIPMENT
|
|
Office
equipment
|
|
|
Furniture
and fixtures
|
|
|
Total
|
|
Cost, January 1, 2010
|
|
$ |
124,503 |
|
|
$ |
101,207 |
|
|
$ |
225,710 |
|
Additions
|
|
|
3,072 |
|
|
|
|
|
|
|
3,072 |
|
Cost, December 31, 2010
|
|
|
127,575 |
|
|
|
101,207 |
|
|
|
228,782 |
|
Additions
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Cost, June 30, 2011
|
|
|
127,575 |
|
|
|
101,207 |
|
|
|
228,782 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated depreciation, January 1, 2010
|
|
|
102,049 |
|
|
|
50,310 |
|
|
|
152,359 |
|
Charge for the year
|
|
|
4,051 |
|
|
|
10,030 |
|
|
|
14,081 |
|
Accumulated depreciation, December 31, 2010
|
|
|
106,100 |
|
|
|
60,340 |
|
|
|
166,440 |
|
Charge for the period
|
|
|
4,236 |
|
|
|
1,891 |
|
|
|
6,127 |
|
Accumulated depreciation, June 30, 2011
|
|
|
110,336 |
|
|
|
62,231 |
|
|
|
172,567 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value, December 31, 2010
|
|
|
21,475 |
|
|
|
40,867 |
|
|
|
62,342 |
|
Net book value, June 30, 2011
|
|
$ |
17,239 |
|
|
$ |
38,976 |
|
|
$ |
56,215 |
|
8. PUBLISHING DEVELOPMENT COSTS
|
|
June 30,
2011
|
|
|
June 30,
2010
|
|
|
December 31,
2010
|
|
|
|
|
|
|
|
|
|
|
|
Opening balance
|
|
$ |
8,807 |
|
|
$ |
24,018 |
|
|
$ |
24,018 |
|
Amortization
|
|
|
(8,807 |
) |
|
|
(15,211 |
) |
|
|
(15,211 |
) |
Balance
|
|
$ |
- |
|
|
$ |
8,807 |
|
|
$ |
8,807 |
|
9. SOFTWARE AND WEB DEVELOPMENT COSTS
In October 2007, the Company acquired Speak2Me, a media company that has developed software combining speech recognition and animation technology for the teaching and practice of spoken English. From that point until late 2009, the Company continued to develop this technology and capitalized it as software and web development costs. Upon acquisition of ELL Technologies Limited in 2010, the Company started capitalizing costs related to their new software and web development initiatives.
|
|
June 30,
2011
|
|
|
June 30,
2010
|
|
|
December 31,
2010
|
|
Cost
|
|
$ |
8,203,089 |
|
|
$ |
8,121,993 |
|
|
$ |
8,073,400 |
|
Accumulated Amortization
|
|
|
(5,099,127 |
) |
|
|
(2,573,534 |
) |
|
|
(3,839,400 |
) |
Written down value
|
|
$ |
3,103,962 |
|
|
$ |
5,548,459 |
|
|
$ |
4,234,283 |
|
(i)
|
The Company began commercial production and sale of its service and product during 2009 and started amortizing the cost of software and web development costs on a straight-line basis over the useful life of the assets which is estimated to be 3 years.
|
(ii)
|
In 2010, the Company acquired a content platform, which was already commercialized. The content platform costs are being amortized on a straight-line basis over the useful life of the assets which is estimated to be 5 years.
|
(iii)
|
In 2010, the Company acquired customer relationships from its acquisition. The customer relationships are being amortized on a straight-line basis over the useful life of the assets which is estimated to be 2 years.
|
LINGO MEDIA CORPORATION
Notes to Condensed Consolidated Interim Financial Statements
June 30, 2011
(Unaudited - See Notice to Reader)
|
|
June 30,
2011
|
|
|
December 31,
2010
|
|
Loans payable, interest bearing at 9% per annum with monthly interest payments,
secured by a general security agreement and due on September 8 2011. (i) (ii)
|
|
|
890,000 |
|
|
|
1,000,000 |
|
Loan payable, interest bearing at 12% per annum with monthly interest payments,
secured by assigned accounts and due on demand. (iii)
|
|
|
100,000 |
|
|
|
100,000 |
|
Loan payable in USD, interest bearing at 12% per annum with monthly interest
payments, secured by assigned accounts and due on demand. (iii)
|
|
|
- |
|
|
|
102,000 |
|
Loan payable, interest bearing at 12% per annum with monthly interest payments,
secured by a general security agreement and due on demand.
|
|
|
- |
|
|
|
100,000 |
|
Loan payable, interest bearing at 12% per annum with monthly interest payments,
secured by a general security agreement and due June 30, 2011. (iii)
|
|
|
- |
|
|
|
200,000 |
|
Loans payable, interest bearing at 12% per annum with monthly interest payments,
secured by a general security agreement and due October 31, 2011.
|
|
|
- |
|
|
|
50,000 |
|
Loans payable, interest bearing at 12% per annum with monthly interest payments,
secured by assigned accounts and due on demand. (iii)
|
|
|
- |
|
|
|
35,000 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
990,000 |
|
|
$ |
1,587,000 |
|
|
(i)
|
The Company issued 433,332 shares with a total value of $260,000 as a bonus to secure the loan financing (Note 11).
|
|
(ii)
|
Included in the $1,000,000 loan are loans in the amount of $435,000 to related parties as disclosed in Note 20.
|
|
(iii)
|
Loans in the amount of $597,000 were repaid in the period ending June 30, 2011.
|
a) Common shares - Authorized
|
|
Unlimited number of preference shares with no par value
Unlimited number of common shares with no par value
|
b) Common shares - Issued and outstanding:
Particular
|
|
|
Common Shares
|
|
|
Note
|
|
Number
|
|
|
Amount
|
|
Balance as of January 1, 2010
|
|
|
|
12,465,857 |
|
|
$ |
14,220,192 |
|
Issued: Acquisition of ELL Technologies
|
(a)
|
|
|
1,050,000 |
|
|
|
651,000 |
|
Balance as of June 30, 2010
|
|
|
|
13,506,857 |
|
|
|
14,871,192 |
|
Issued : Shares issued on loan financing
|
(b)
|
|
|
433,332 |
|
|
|
260,000 |
|
Balance as of December 31, 2010
|
|
|
|
13,949,189 |
|
|
$ |
15,131,192 |
|
Private placement
|
(c)
|
|
|
3,682,001 |
|
|
|
2,195,200 |
|
Less: Share issue costs
|
(c)
|
|
|
- |
|
|
|
(164,394 |
) |
Less: Warrants
|
(c)
|
|
|
- |
|
|
|
(512,214 |
) |
Issued for debt settlement
|
|
|
|
16,500 |
|
|
|
13,500 |
|
Private placement
|
(d)
|
|
|
1,875,000 |
|
|
|
1,125,000 |
|
Less: Share issue costs
|
(d)
|
|
|
- |
|
|
|
(115,065 |
) |
Less: Warrants
|
(d)
|
|
|
- |
|
|
|
(243,750 |
) |
Issued: ELL Acquisition - Loan Settlement
|
(e)
|
|
|
1,036,987 |
|
|
|
786,535 |
|
Balance as of June 30, 2011
|
|
|
|
20,559,677 |
|
|
$ |
18,216,004 |
|
LINGO MEDIA CORPORATION
Notes to Condensed Consolidated Interim Financial Statements
June 30, 2011
(Unaudited - See Notice to Reader)
11. SHARE CAPITAL (Cont’d)
(a) On May 13, 2010, the Company announced the acquisition of ELL Technologies from SCP Partners. The consideration payable to SCP Partners, as principal shareholder of ELL Technologies, for the acquisition was paid and satisfied as follows:
·
|
1,000,000 Lingo Media shares, subject to a lock-up and leak-out agreement for 36 months after closing and a monthly leak-out in equal instalments of 41,667 shares being released per month from the 13th to 36th month;
|
·
|
US$763,729 to be paid 12 months after the closing or earlier, in cash and/or in a second tranche of Lingo Media shares at the Company’s sole discretion. If US$763,729 is paid in Lingo Media shares, the price per share shall be (i) the then current market price based on a ten day trading average, and (ii) not less than CAD$0.50 per share, subject to a lock-up and a leak-out agreement for 24 months in equal monthly instalments; and
|
·
|
Lingo Media will pay royalties based on net revenues at rates ranging from 10% to 2% based on escalating sales from increments of US$1 Million to US$5 Million for a period of three years.
Landmark Ventures, Inc. acted as financial advisor to ELL Technologies and its principal shareholder, SCP Partners. As part of the transaction fee, the Company issued 50,000 Lingo Media shares to Landmark Ventures upon closing.
|
(b) On September 9, 2010, Lingo Media closed a $1 million financing.
Pursuant to the terms of the financing, Lingo Media has entered into a loan agreement and general security agreements with five arm's length parties and three insiders to borrow an aggregate of $1,000,000. The insider participation consisted of one director/officer who advanced $300,000, one director who advanced $100,000 and two executive officers who advanced $55,000 in aggregate.
The Loan has a maturity date of September 8, 2011 and bears interest at a rate of 9% per annum, payable monthly in arrears, and is secured by a charge over all of Lingo Media’s assets and properties. The Company issued to the lenders as additional consideration for the Loan an aggregate of 400,000 common shares of Lingo Media (the "Bonus Shares"). The Bonus Shares issued were based on 20% of the value of the Loan, divided by a deemed issue price of $0.50 per Bonus Share. The Company has also agreed to repay to the lenders $0.50 of every $1.00 raised by Lingo Media through any equity financing during the term of the Loan. Lingo Media may elect to prepay the Loan in whole or in part at any time at its sole discretion without penalty which was waived by all lenders prior to the Financings.
The Company has also agreed to issue 33,333 common shares of Lingo Media to eligible persons (collectively, the "Finder") in connection with the proceeds raised under the loan through the Finder.
(c) On March 4, 2011, the Company closed a non-brokered private placement financing of 2,500,000 units (each a "Unit") at $0.60 per Unit and an over-allotment of 1,158,668 Units for gross proceeds of $2,195,200 (the "Financing"). Each Unit is comprised of one common share (each a "Common Share") in the capital of the Company and one non-transferable common share purchase warrant (each a "Warrant"). Each Warrant entitles the holder to purchase one Common Share at an exercise price of $0.75 per share until September 4, 2012. The Warrants are callable, at the option of Lingo Media, after July 5, 2011 in the event its Common Shares trade at or over $1.20 per share for 10 consecutive trading days. The number of Common Shares issuable pursuant to the Financing, if all Warrants are exercised, is 7,317,336 Common Shares for gross proceeds of $4,939,201.
In connection with the Financing, the Company agreed to pay a 7% finder's fee payable in cash (the "Cash Finder's Fee") or Units (the "Finder's Units") to eligible persons (the "Finders"), along with finder's warrants ("Finder's Warrants") equal to 6% of the Units placed by the Finder in the Financing. Each Finder Unit entitles the holder to one Common Share and one Warrant. Each Finder's Warrant entitles the holder to acquire one Common Share of Lingo at $0.60 until September 4, 2012. On closing, the Company issued 23,333 Finder's Units, 151,620 Finder's Warrants and paid a $92,135 Cash Finder's Fee to the Finders.
LINGO MEDIA CORPORATION
Notes to Condensed Consolidated Interim Financial Statements
June 30, 2011
(Unaudited - See Notice to Reader)
11. SHARE CAPITAL (Cont’d)
(d) On May 11, 2011, Lingo Media closed a non-brokered private placement financing of 1,875,000 units (each a "Unit") at $0.60 per Unit for gross proceeds of $1,125,000 (the "Financing"). Each Unit is comprised of one common share (each a "Common Share") in the capital of the Company and one non-transferable common share purchase warrant (each a "Warrant"). Each Warrant entitles the holder to purchase one Common Share at an exercise price of $0.75 per share until November 11, 2012. The Warrants are callable, at the option of Lingo Media, after September 11, 2011 in the event its Common Shares trade at or over $1.20 per share for 10 consecutive trading days. The number of Common Shares issuable pursuant to the Financing, if all Warrants are exercised, is 3,750,000 Common Shares for gross proceeds of $2,531,250.
In connection with the Financing, the Company agreed to pay a 7% finder's fee payable in cash (the "Cash Finder's Fee") to eligible persons (the "Finders"), along with finder's warrants ("Finder's Warrants") equal to 6% of the Units placed by the Finder in the Financing. Each Finder's Warrant entitles the holder to acquire one Common Share of Lingo at $0.60 until November 11, 2012. On closing, the Company issued 78,900 Finder's Warrants and paid a $55,230 Cash Finder's Fee to the Finders.
(e) On June 3, 2011, the Company issued 1,036,987 common shares (the "Payment Shares") as the second and final payment representing the US$788,110 balance payable to SCP Partners, for the acquisition of ELL Technologies Limited (“ELL Technologies”). This payment was made pursuant to the purchase agreement (the "Purchase Agreement") between Lingo Media and SCP Partners announced on May 13, 2010, whereby Lingo Media acquired all of issued and outstanding shares of ELL Technologies (the "Acquisition").
The Payment Shares are subject to a four month regulatory hold period from the date of issuance and are also subject to a 24 month lock-up and leak-out agreement whereby the Payment Shares will be held in escrow and released in a monthly leak-out of equal instalments of 43,208 shares released each month.
Under the Purchase Agreement, Lingo Media had the right to settle the balance owed in cash and/or in a second tranche of Lingo Media shares at its sole discretion. The number of Payment Shares issued was based on the then market price, equal to the weighted average price per share at which the shares traded on the TSX Venture Exchange during the period of ten (10) consecutive trading days ending not more than five (5) business days before the payment date.
12. SHARE BASED PAYMENT RESERVE
|
|
Amount
|
|
Balance as of January 1, 2010
|
|
$ |
1,290,631 |
|
Share based payments charged to operations
|
|
|
43,146 |
|
Balance as of June 30, 2010
|
|
|
1,333,777 |
|
Share based payments charged to operations
|
|
|
26,151 |
|
Warrants expired
|
|
|
281,355 |
|
Balance as of December 31, 2010
|
|
|
1,641,283 |
|
Share based payments charged to operations
|
|
|
543,488 |
|
Stock options expired
|
|
|
(12,100 |
) |
Balance as of June 30, 2011
|
|
$ |
2,172,671 |
|
In September 2010, the Company amended its stock option plan (the “2010 Plan“). The 2010 Plan was established to provide an incentive to employees, officers, directors and consultants of the Company and its subsidiaries. The maximum number of shares which may be reserved for issuance under the 2010 Plan is limited to 2,703,171 common shares less the number of shares reserved for issuance pursuant to options granted under the 1996 Plan, the 2000 Plan, the 2005 Plan and 2009 Plan, provided that the Board of Directors of the Company has the right, from time to time, to increase such number subject to the approval of the relevant exchange on which the shares are listed and the approval of the shareholders of the Company.
LINGO MEDIA CORPORATION
Notes to Condensed Consolidated Interim Financial Statements
June 30, 2011
(Unaudited - See Notice to Reader)
12. SHARE BASED PAYMENT RESERVE (Cont’d)
The maximum number of common shares that may be reserved for issuance to any one person under the 2010 Plan is 5% of the common shares outstanding at the time of the grant (calculated on a non-diluted basis) less the number of shares reserved for issuance to such person under any option to purchase common shares of the Company granted as a compensation or incentive mechanism.
The exercise price of each option cannot be less than the market price of the shares on the day immediately preceding the day of the grant less any permitted discount. The exercise period of the options granted cannot exceed 10 years. Options granted under the 2010 Plan do not have any required vesting provisions. The Board of Directors of the Company may, from time to time, amend or revise the terms of the 2010 Plan or may terminate it at any time.
The following summarizes the options outstanding:
|
|
Number
of Options
|
|
|
Weighted
Average
Exercise Price
|
|
Outstanding as at January 1, 2010
|
|
$ |
919,106 |
|
|
$ |
1.30 |
|
Granted
|
|
|
100,000 |
|
|
|
|
|
Expired
|
|
|
(42,143 |
) |
|
|
|
|
Outstanding as at June 30, 2010
|
|
|
976,963 |
|
|
$ |
1.33 |
|
Granted
|
|
|
(155,816 |
) |
|
|
|
|
Forfeited
|
|
|
(112,791 |
) |
|
|
|
|
Outstanding as at December 31, 2010
|
|
|
708,356 |
|
|
$ |
1.27 |
|
Granted
|
|
|
1,812,000 |
|
|
|
|
|
Expired
|
|
|
(14,286 |
) |
|
|
|
|
Outstanding as at June 30, 2011
|
|
|
2,506,070 |
|
|
$ |
0.90 |
|
|
|
|
|
|
|
|
|
|
Options exercisable as at January 1, 2010
|
|
|
657,606 |
|
|
$ |
1.12 |
|
Options exercisable as at June 30, 2010
|
|
|
659,921 |
|
|
$ |
1.12 |
|
Options exercisable as at December 31, 2010
|
|
|
658,356 |
|
|
$ |
1.24 |
|
Options exercisable as at June 30, 2011
|
|
$ |
1,539,962 |
|
|
$ |
1.12 |
|
The following table summarizes information about stock options outstanding at June 30, 2011.
|
|
Options exercisable
|
|
|
Options outstanding
|
|
Expiry date
|
|
Number outstanding
|
|
|
Weighted
average
remaining contractual
life (years)
|
|
|
Weighted
average
exercise
price
|
|
|
Number outstanding
|
|
|
Weighted
average
exercise
price
|
|
2/14/2012
|
|
|
195,343 |
|
|
|
0.63 |
|
|
|
0.70 |
|
|
|
195,343 |
|
|
|
0.70 |
|
5/22/2012
|
|
|
21,429 |
|
|
|
0.90 |
|
|
|
0.84 |
|
|
|
21,429 |
|
|
|
0.84 |
|
6/14/2012
|
|
|
10,798 |
|
|
|
0.96 |
|
|
|
0.91 |
|
|
|
10,798 |
|
|
|
0.91 |
|
1/12/2013
|
|
|
85,000 |
|
|
|
1.54 |
|
|
|
0.70 |
|
|
|
85,000 |
|
|
|
0.70 |
|
3/10/2013
|
|
|
15,000 |
|
|
|
1.70 |
|
|
|
1.40 |
|
|
|
15,000 |
|
|
|
1.40 |
|
4/10/2013
|
|
|
50,000 |
|
|
|
1.78 |
|
|
|
1.70 |
|
|
|
50,000 |
|
|
|
1.70 |
|
4/22/2013
|
|
|
5,000 |
|
|
|
1.81 |
|
|
|
2.00 |
|
|
|
5,000 |
|
|
|
2.00 |
|
6/26/2013
|
|
|
25,000 |
|
|
|
1.99 |
|
|
|
1.80 |
|
|
|
25,000 |
|
|
|
1.80 |
|
5/1/2014
|
|
|
186,500 |
|
|
|
2.84 |
|
|
|
1.75 |
|
|
|
186,500 |
|
|
|
1.75 |
|
2/1/2015
|
|
|
83,333 |
|
|
|
3.59 |
|
|
|
1.75 |
|
|
|
100,000 |
|
|
|
1.75 |
|
2/15/2016
|
|
|
1,064,750 |
|
|
|
4.63 |
|
|
|
0.82 |
|
|
|
1,762,000 |
|
|
|
0.75 |
|
2/22/2016
|
|
|
50,000 |
|
|
|
4.65 |
|
|
|
0.75 |
|
|
|
950,000 |
|
|
|
0.75 |
|
LINGO MEDIA CORPORATION
Notes to Condensed Consolidated Interim Financial Statements
June 30, 2011
(Unaudited - See Notice to Reader)
12. SHARE BASED PAYMENT RESERVE (Cont’d)
The weighted average grant-date fair value of options granted to employees, consultants and directors during 2011 has been estimated at $0.47 using the Black-Scholes option-pricing model. The estimated fair value of the options granted is expensed over the options vesting periods. The pricing model assumes the weighted average risk free interest rates of 1.78% weighted average expected dividend yields of NIL (2010 – NIL), the weighted average expected common stock price volatility of 80% and a weighted average expected life of 5 years (2010 – 1 years), which were estimated based on past experience with options and option contract specifics.
13. WARRANTS
The following summarizes the warrants outstanding:
|
|
Amount
|
|
Balance as at January 1, 2010
|
|
$ |
281,355 |
|
Warrants issued
|
|
|
- |
|
Warrants expired
|
|
|
- |
|
Balance as at June 30, 2010
|
|
|
281,355 |
|
Warrants issued
|
|
|
- |
|
Warrants expired
|
|
|
281,355 |
|
Balance as at December 31, 2010
|
|
Nil
|
|
Warrants issued
|
|
|
792,058 |
|
Warrants expired
|
|
|
- |
|
Balance as at June 30, 2011
|
|
$ |
792,058 |
|
|
|
Weighted
Average Remaining Contractual
Life (years)
|
|
|
Series
|
|
|
Number of Warrants
|
|
|
Weighted
Average
Exercise
Price
|
|
January 1, 2010
|
|
|
|
|
2008
|
|
|
|
2,142,858 |
|
|
|
8.00 |
|
June 30, 2010
|
|
|
|
|
|
|
|
|
2,142,858 |
|
|
|
|
|
Expired
|
|
|
|
|
|
|
|
|
(2,142,858 |
) |
|
|
|
|
December 31, 2010
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
Expired
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
Issued
|
|
|
1.18 |
|
|
|
2011 |
a |
|
|
3,658,688 |
|
|
|
0.75 |
|
Issued
|
|
|
1.37 |
|
|
|
2011 |
b |
|
|
1,875,000 |
|
|
|
0.75 |
|
June 30, 2011
|
|
|
|
|
|
|
|
|
|
|
5,533,688 |
|
|
|
|
|
The following summarizes the compensation warrants outstanding:
|
|
Weighted
Average Remaining Contractual
Life (years)
|
|
|
Series
|
|
|
Number
of
Warrants
|
|
|
Weighted
Average
Exercise
Price
|
|
December 31, 2010
|
|
|
|
|
|
|
|
Nil
|
|
|
Nil
|
|
Expired
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued
|
|
|
1.18 |
|
|
|
2011 |
|
|
|
151,620 |
|
|
|
0.60 |
|
Issued
|
|
|
1.37 |
|
|
|
2011 |
|
|
|
78,900 |
|
|
|
0.60 |
|
June 30, 2011
|
|
|
|
|
|
|
|
|
|
|
230,520 |
|
|
|
|
|
LINGO MEDIA CORPORATION
Notes to Condensed Consolidated Interim Financial Statements
June 30, 2011
(Unaudited - See Notice to Reader)
14. FINANCIAL INSTRUMENTS
Fair values
The carrying value of cash approximates its fair value due to the liquidity of this instrument. The carrying value of accounts payables and accrued liabilities approximates its fair value due to the requirement to extinguish the liability on demand.
Financial risk management objectives and policies
The financial risk arising from the Group’s operations are currency risk and liquidity risk. These risks arise from the normal course of operations and all transactions undertaken are to support the Group’s ability to continue as a going concern. The risks associated with these financial instruments and the policies on how to mitigate these risks are set out below.
Management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner. The Group’s senior management oversees the management of these risks. The Board of Directors reviews and agrees on policies for managing each of these risks which are summarized below.
Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group’s exposure to the risk of changes in foreign exchange rates relates primarily to the Group’s operating activities (when revenue or expense is denominated in a different currency from the Group’s functional currency) and the Group’s net investments in foreign subsidiaries. The Company operates internationally and is exposed to foreign exchange risk as certain expenditures are denominated in non-Canadian Dollar currencies.
Liquidity Risk
The Company manages its liquidity risk by preparing and monitoring forecasts of cash expenditures to ensure that it will have sufficient liquidity to meet liabilities when due. The Company’s accounts payable and accrued liabilities generally have maturities of less than 90 days. At June 30, 2011, the Company had cash of $458,203 to settle current liabilities of $1,837,438.
Fair Hierarchy and Liquidity Risk
The following summarizes the methods and assumptions used in estimating the fair value of the Company's financial instruments where measurement is required. The measurements are subjective in nature, involve uncertainties and are a matter of significant judgment. The methods and assumptions used to develop fair value measurements, for those financial instruments where fair value is recognized in the balance sheet, have been prioritized into three levels as per the fair value hierarchy included in IFRS.
a.
|
Level one includes quoted prices (unadjusted) in active markets for identical assets or liabilities.
|
b.
|
Level two includes inputs that are observable other than quoted prices included in level one.
|
c.
|
Level three includes inputs that are not based on observable market data.
|
All of the Company's cash is a level one as per the fair value hierarchy included in IFRS.
The Company’s primary objectives when managing capital are to (a) safeguard the Company’s ability to develop, market and distribute English language learning products, and (b) provide a sound capital structure for raising capital at a reasonable cost for the funding of ongoing development of its products and new growth initiatives. The Board of Directors does not establish quantitative capital criteria for management, but rather relies on the expertise of the Company’s management to sustain future development of the business.
LINGO MEDIA CORPORATION
Notes to Condensed Consolidated Interim Financial Statements
June 30, 2011
(Unaudited - See Notice to Reader)
15. CAPITAL MANAGEMENT (Cont’d)
The Company includes equity, comprised of issued capital stock, warrants, contributed surplus and deficit, in the definition of capital. The Company is dependent on cash flow from co-publishing and distribution agreements and external financing to fund its activities. In order to carry out planned development of its products and pay for administrative costs, the Company will spend its existing working capital and raise additional amounts as needed. Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable.
16. SEGMENTED INFORMATION
The Company operates two distinct reportable business segments as follows:
Online English Language Learning: The Company offers an online service using robust speech recognition technology acquired through its acquisition of Speak2Me Inc. in October 2007.
Print-based English Language Learning: The Company develops, co-publishes and licenses book, audio/video cassette, CD-based product and supplemental product for English language learning for the educational school markets in China.
For Six Months Ended June 30, 2011
|
|
Online
English
Language Learning
|
|
|
Print-based English
Language Learning
|
|
|
Total
|
|
Revenue
|
|
|
239,562 |
|
|
|
517,012 |
|
|
|
756,574 |
|
Cost of sales
|
|
|
(13,036 |
) |
|
|
(112,453 |
) |
|
|
(125,489 |
) |
Margin
|
|
|
226,526 |
|
|
|
404,559 |
|
|
|
631,086 |
|
Segment assets
|
|
|
3,973,379 |
|
|
|
1,186,854 |
|
|
|
5,160,233 |
|
Segment loss
|
|
|
(1,726,099 |
) |
|
|
(1,075,577 |
) |
|
|
(2,801,676 |
) |
For Six Months Ended June 30, 2010
|
|
Online
English
Language Learning
|
|
|
Print-based English
Language Learning
|
|
|
Total
|
|
Revenue
|
|
|
204,494 |
|
|
|
490,238 |
|
|
|
694,732 |
|
Cost of sales
|
|
|
(30,172 |
) |
|
|
(37,127 |
) |
|
|
(67,299 |
) |
Margin
|
|
|
174,322 |
|
|
|
453,111 |
|
|
|
627,433 |
|
Segment assets
|
|
|
5,004,663 |
|
|
|
1,377,786 |
|
|
|
6,382,449 |
|
Segment loss
|
|
|
(1,410,659 |
) |
|
|
(593,957 |
) |
|
|
(2,004,616 |
) |
The Company's revenue by geographic region based on the region in which the customers are located is as follows:
|
|
June 30,
2011
|
|
|
June 30,
2010
|
|
Canada |
|
|
- |
|
|
|
- |
|
China
|
|
|
517,012
|
|
|
|
633,653
|
|
Other
|
|
|
239,562 |
|
|
|
61,079 |
|
|
|
$ |
756,574 |
|
|
$ |
694,732 |
|
LINGO MEDIA CORPORATION
Notes to Condensed Consolidated Interim Financial Statements
June 30, 2011
(Unaudited - See Notice to Reader)
16. SEGMENTED INFORMATION (Cont’d)
The majority of the Company’s identifiable assets as at June 30, 2011 are located as follows:
|
|
June 30,
2011
|
|
|
June 30,
2010
|
|
Canada |
|
$ |
5,277,611 |
|
|
$ |
6,357,176 |
|
China
|
|
|
28,622 |
|
|
|
25,273 |
|
|
|
$ |
5,256,233 |
|
|
$ |
6,382,449 |
|
17. EXPLANATIONS OF TRANSITION TO IFRS
The accounting policies in Note 4 have been applied in preparing the condensed interim consolidated financial statements for the quarter ended June 30, 2011 and the preparation of an opening IFRS statement of financial position on January 1, 2010, the Transition Date. An explanation of how the transition from GAAP to IFRS has affected the Group’s statement of financial position and statement of comprehensive income is set out in the following statements.
LINGO MEDIA CORPORATION
Notes to Condensed Consolidated Interim Financial Statements
June 30, 2011
(Unaudited - See Notice to Reader)
Reconciliation of Assets, Liabilities and Equity
|
|
As at June 30, 2010 |
|
|
As at December 31, 2010 |
|
|
As at June 30, 2011 |
|
ASSETS |
|
CGAAP
|
|
Effect of transition |
|
IFRS |
|
|
CGAAP |
|
Effect of transition |
|
IFRS |
|
|
CGAAP |
|
Effect of transition |
|
IFRS |
|
Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
59,319 |
|
|
|
$ |
59,319 |
|
|
$ |
230,906 |
|
|
|
$ |
230,906 |
|
|
$ |
458,203 |
|
|
|
$ |
458,203 |
|
Account receivable
|
|
|
510,131 |
|
|
|
|
510,131 |
|
|
|
931,101 |
|
|
|
|
931,101 |
|
|
|
932,165 |
|
|
|
|
932,165 |
|
Prepaid and sundry assets
|
|
|
187,937 |
|
|
|
|
187,937 |
|
|
|
93,465 |
|
|
|
|
93,465 |
|
|
|
470,069 |
|
|
|
|
470,069 |
|
|
|
|
757,387 |
|
|
|
|
757,387 |
|
|
|
1,255,472 |
|
|
|
|
1,255,472 |
|
|
|
1,860,437 |
|
|
|
|
1,956,437 |
|
Non-Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment
|
|
|
67,796 |
|
|
|
|
67,796 |
|
|
|
62,342 |
|
|
|
|
62,342 |
|
|
|
56,215 |
|
|
|
|
56,215 |
|
Publishing development cost, net
|
|
|
8,807 |
|
|
|
|
8,807 |
|
|
|
8,807 |
|
|
|
|
8,807 |
|
|
|
- |
|
|
|
|
- |
|
Software and web development costs, net
|
|
|
5,548,459 |
|
|
|
|
5,548,459 |
|
|
|
4,234,283 |
|
|
|
|
4,234,283 |
|
|
|
3,103,962 |
|
|
|
|
3,103,962 |
|
Goodwill
|
|
|
- |
|
|
|
|
- |
|
|
|
139,618 |
|
|
|
|
139,618 |
|
|
|
139.618 |
|
|
|
|
139,618 |
|
TOTAL ASSETS
|
|
|
6,382,449 |
|
|
|
|
6,382,449 |
|
|
|
5,700,522 |
|
|
|
|
5,700,522 |
|
|
|
5,160,232 |
|
|
|
|
5,160,232 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
756,800 |
|
|
|
|
756,800 |
|
|
|
903,689 |
|
|
|
|
903,689 |
|
|
|
281,205 |
|
|
|
|
281,205 |
|
Accrued liabilities
|
|
|
467,878 |
|
|
|
|
467,878 |
|
|
|
729,892 |
|
|
|
|
729,892 |
|
|
|
428,529 |
|
|
|
|
428,529 |
|
Deferred revenue
|
|
|
3,881 |
|
|
|
|
3,881 |
|
|
|
- |
|
|
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
Loans payable
|
|
|
675,000 |
|
|
|
|
675,000 |
|
|
|
1,587,000 |
|
|
|
|
1,587,000 |
|
|
|
990,000 |
|
|
|
|
990,000 |
|
|
|
|
1,903,561 |
|
|
|
|
1,903,561 |
|
|
|
3,220,581 |
|
|
|
|
3,220,581 |
|
|
|
1,699,734 |
|
|
|
|
1,699,734 |
|
Non-Current Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax
|
|
|
564,997 |
|
|
|
|
564,997 |
|
|
|
- |
|
|
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
Loans payable
|
|
|
765,000 |
|
|
|
|
765,000 |
|
|
|
763,729 |
|
|
|
|
763,729 |
|
|
|
- |
|
|
|
|
- |
|
TOTAL LIABILITIES
|
|
|
3,233,558 |
|
|
|
|
3,233,558 |
|
|
|
3,984,310 |
|
|
|
|
3,984,310 |
|
|
|
1,699,734 |
|
|
|
|
1,699,734 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Attributable to the Equity
Holders of the Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued share capital
|
|
|
15,032,446 |
|
|
|
|
15,032,446 |
|
|
|
15,131,192 |
|
|
|
|
15,131,192 |
|
|
|
18,216,004 |
|
|
|
|
18,216,004 |
|
Warrants
|
|
|
120,103 |
|
|
|
|
120,103 |
|
|
|
- |
|
|
|
|
- |
|
|
|
792,058 |
|
|
|
|
792,058 |
|
Share based payment reserve
|
|
|
1,378,096 |
|
|
|
|
1,378,096 |
|
|
|
1,641,283 |
|
|
|
|
1,641,283 |
|
|
|
2,172,671 |
|
|
|
|
2,172,671 |
|
Foreign currency translation reserves
|
|
|
- |
|
40,231
|
|
|
40,231 |
|
|
|
- |
|
80,417
|
|
|
80,417 |
|
|
|
- |
|
55,384
|
|
|
55,384 |
|
Profit and Loss – period/year
|
|
|
(2,004,616 |
) |
(221,964)
|
|
|
(2,240,511 |
) |
|
|
(3,679,127 |
) |
(262,150)
|
|
|
(3,941,277 |
) |
|
|
(2,663,972 |
) |
25,033
|
|
|
(2,638,939 |
) |
Accumulated loss
|
|
|
(11,377,136 |
) |
181,733
|
|
|
(11,195,403 |
) |
|
|
(11,377,136 |
) |
181,733
|
|
|
(11,195,403 |
) |
|
|
(15,056,263 |
) |
(80,417)
|
|
|
(15,136,680 |
) |
TOTAL EQUITY
|
|
|
3,148,893 |
|
|
|
|
3,148,893 |
|
|
|
1,716,212 |
|
|
|
|
1,716,212 |
|
|
|
3,468,860 |
|
|
|
|
3,460,498 |
|
TOTAL LIABILITIES AND EQUITY
|
|
$ |
6,382,451 |
|
|
|
$ |
6,382,451 |
|
|
$ |
5,700,522 |
|
|
|
$ |
5,700,522 |
|
|
$ |
5,160,232 |
|
|
|
$ |
5,160,232 |
|
LINGO MEDIA CORPORATION
Notes to Condensed Consolidated Interim Financial Statements
June 30, 2011
(Unaudited - See Notice to Reader)
Reconciliation of Loss and Comprehensive Loss
|
|
3 months ended June 30, 2010
|
|
|
6 months ended June 30, 2010
|
|
|
|
CGAAP
|
|
|
Effect of Transition
|
|
|
IFRS
|
|
|
CGAAP
|
|
|
Effect of Transition |
|
|
IFRS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$ |
559,437 |
|
|
|
|
|
$ |
559,437 |
|
|
$ |
694,732 |
|
|
|
|
|
$ |
694,732 |
|
Direct costs
|
|
|
(57,666 |
) |
|
|
|
|
|
(57,666 |
) |
|
|
(67,299 |
) |
|
|
|
|
|
(67,299 |
) |
Gross Profit
|
|
|
501,771 |
|
|
|
|
|
|
501,771 |
|
|
|
627,433 |
|
|
|
|
|
|
627,433 |
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization – publishing development costs
|
|
|
1,521 |
|
|
|
|
|
|
1,521 |
|
|
|
18,266 |
|
|
|
|
|
|
18,266 |
|
Amortization – property and equipment
|
|
|
1,974 |
|
|
|
|
|
|
1,974 |
|
|
|
3,690 |
|
|
|
|
|
|
3,690 |
|
Amortization – software development costs
|
|
|
573,130 |
|
|
|
|
|
|
573,130 |
|
|
|
1,177,798 |
|
|
|
|
|
|
1,177,798 |
|
Selling, general and administrative expense
|
|
|
730,716 |
|
|
|
37,810 |
|
|
|
768,526 |
|
|
|
1,259,597 |
|
|
|
52,653 |
|
|
|
1,312,250 |
|
Share based compensation
|
|
|
44,319 |
|
|
|
|
|
|
|
44,319 |
|
|
|
87,465 |
|
|
|
|
|
|
|
87,465 |
|
Total Expenses
|
|
|
1,351,660 |
|
|
|
37,810 |
|
|
|
1,389,470 |
|
|
|
2,546,816 |
|
|
|
52,653 |
|
|
|
2,599,469 |
|
Loss from Operations
|
|
|
(849,889 |
) |
|
|
37,810 |
|
|
|
(887,699 |
) |
|
|
(1,919,383 |
) |
|
|
52,653 |
|
|
|
(1,972,036 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income / Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
15,437 |
|
|
|
|
|
|
|
15,437 |
|
|
|
17,821 |
|
|
|
|
|
|
|
17,821 |
|
Foreign exchange (income)/loss
|
|
|
- |
|
|
|
198,085 |
|
|
|
198,085 |
|
|
|
- |
|
|
|
(26,398 |
) |
|
|
(26,398 |
) |
Loss from Continuing Operations Before Tax
|
|
|
(865,326 |
) |
|
|
235,895 |
|
|
|
(1,011,221 |
) |
|
|
(1,937,204 |
) |
|
|
26,255 |
|
|
|
(1,963,459 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
58,715 |
|
|
|
|
|
|
|
58,715 |
|
|
|
67,412 |
|
|
|
|
|
|
|
67,412 |
|
Loss for the Year
|
|
|
(924,041 |
) |
|
|
235,895 |
|
|
|
(1,159,936 |
) |
|
|
(2,004,616 |
) |
|
|
26,255 |
|
|
|
(2,030,881 |
) |
Other Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange differences on translating foreign operations
|
|
|
- |
|
|
|
(235,895 |
) |
|
|
(235,895 |
) |
|
|
- |
|
|
|
(26,255 |
) |
|
|
(26,255 |
) |
Total Comprehensive Loss for the Year, Net of Tax |
|
$ |
(924,041 |
) |
|
$ |
- |
|
|
$ |
(924,041 |
) |
|
$ |
(2,004,616 |
) |
|
$ |
- |
|
|
$ |
(2,004,616 |
) |
LINGO MEDIA CORPORATION
Notes to Condensed Consolidated Interim Financial Statements
June 30, 2011
(Unaudited - See Notice to Reader)
Reconciliation of Equity
The following reconciliation provides a quantification of the effect, after taxation, of the transition to IFRS
Reconciliation of equity
|
|
For the
6 months
ended
June 30,
2010
|
|
|
For the
year ended December 31,
2010
|
|
|
|
|
|
|
|
|
Equity previously reported under Canadian GAAP
|
|
$ |
3,913,891 |
|
|
$ |
1,716,212 |
|
|
|
|
|
|
|
|
|
|
Items separately disclosed in the shareholders‟ equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Non controlling interest, previously disclosed within accumulated loss
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
- Foreign currency translation reserves on translation and subsequent transfers
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
- Adjustment to accumulated deficit due to separate disclosure of above items
|
|
|
- |
|
|
|
- |
|
|
|
|
3,913,891 |
|
|
|
1,716,212 |
|
|
|
|
|
|
|
|
|
|
Adjustment upon adoption of IFRS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Differences arising from applying the closing rate for all reporting periods to non-monetary assets
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
- Differences arising from applying the closing rate for all reporting periods to non-monetary liabilities
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Equity reported under IFRS
|
|
$ |
3,913,891 |
|
|
$ |
1,716,212 |
|
LINGO MEDIA CORPORATION
Notes to Condensed Consolidated Interim Financial Statements
June 30, 2011
(Unaudited - See Notice to Reader)
18. RESTATEMENT OF STATEMENT OF CASH FLOWS FROM CANADIAN GAAP TO IFRS
The restatement from Canadian GAAP to IFRS had no significant effect on the reported cash flows generated by the Group. The reconciling items between Canadian GAAP and IFRS presentation have no net effect on the cash flows generated.
Notes to reconciliation
IFRS 1 – First-time Adoption of International Financial Reporting Standards (“IFRS”) sets forth guidance for the initial adoption of IFRS. Under IFRS 1 the standards are applied retrospectively at the transitional statement of financial position date with all adjustment to assets and liabilities taken to retained earning unless certain exemptions are applied. The Group has applied the following exemptions to its opening statement of financial positions dated January 1, 2010:
a) Basis of Consolidation and Business Combinations
The Group has adopted IAS27 (Revised) – Consolidated and Separate Financial Statements in accordance with the transitional provisions of IFRS 1.
As a result, for the financial year ended December 31, 2009, shareholders equity will remain unchanged. However; for the financial year ended December 31, 2010 it was re-allocated from accumulated deficit to non-controlling shareholder’s interest in order to comply with the disclosure requirements in IAS 27 (Revised).
b) Functional currency and foreign operations
IFRS requires that the functional currency of each entity in the consolidated Group be determined separately in accordance with the indicators as per IAS 21 – Foreign exchange and should be measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The functional currency of some companies of the Group is the US Dollars (“USD”) and the Chinese Renminbi (“RMB”). The consolidated financial statements are presented in Canadian Dollars (“$”) which is the group’s presentation currency. Under IFRS, the results and financial position of all the group entities (none of which has the currency of a hyper-inflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:
·
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assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
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·
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income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and
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·
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all resulting exchange differences are recognized as a separate component of equity.
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As a result of the application of the translation rules contained in IAS 21, for the year ended December 31, 2010, non-monetary assets which includes property and equipment and software and web development costs, is immaterial.
c) Share based payment transactions
The fair value of share options under the employee share incentive schemes and other equity instruments granted to Group employees is recognized as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and expensed over the period during which the employee becomes unconditionally entitled to the equity instruments. The total amount to be expensed is determined by reference to the fair value of the options granted, excluding the impact of any non-market service and performance vesting conditions. Non-market vesting conditions are included in assumptions about the number of options that are expected to vest.
The fair value of the instruments granted is measured using the Black-Scholes option pricing formula, taking into account the terms and conditions upon which the instruments are granted. At each balance sheet date, the entity revises its estimates of the number of options that are expected to vest based on the non-marketing vesting conditions. It recognizes the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised.
LINGO MEDIA CORPORATION
Notes to Condensed Consolidated Interim Financial Statements
June 30, 2011
(Unaudited - See Notice to Reader)
18. RESTATEMENT OF STATEMENT OF CASH FLOWS FROM CANADIAN GAAP TO IFRS (Cont’d)
This accounting policy has been applied to all equity instruments granted after November 7, 2002 that has not yet vested at January 1, 2005.
As under IFRS 2, Canadian GAAP also requires the Company to measure stock-based compensation related to stock-options granted to employees at the fair value of the options on the date of grant and to recognize such expense over the vesting period of the option.
19. ACQUISITION
On May 13, 2010, the Company acquired all issued and outstanding shares of ELL Technologies (the "Acquisition"). The results of ELL Technologies’ operations have been included in these consolidated financial statements since that date. The aggregate purchase price was $1,385,000 which is satisfied through issuance of 1,000,000 shares valued at $620,000 and an agreement to pay US$1,000,000 less identified liabilities greater than US$100,000, calculated to be $765,000, to be paid 12 months after the closing date or earlier, in cash and/or in Lingo Media shares at the Company’s sole discretion. In second quarter of 2011, this loan was repaid through issuance of common shares of the Company.
In connection with the Acquisition, 50,000 shares valued at $31,000 were issued, along with cash payments of $128,000, to an agent. These acquisition costs were expensed as incurred. The following table summarizes the estimated fair value of the assets acquired and liabilities assumed on the date of acquisition.
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ELL Technologies
|
|
Content
|
|
$ |
1,477,112 |
|
Customer relationships
|
|
|
130,000 |
|
Future income tax asset
|
|
|
433,000 |
|
Goodwill
|
|
|
139,618 |
|
Current liabilities
|
|
|
(340,195 |
) |
Future income tax liability
|
|
|
(433,000 |
) |
|
|
$ |
1,406,535 |
|
|
|
|
|
|
Share consideration
|
|
|
620,000 |
|
Loan payable
|
|
|
786,535 |
|
|
|
$ |
1,406,535 |
|
20. RELATED PARTY BALANCES AND TRANSACTIONS
During the year, the Company had the following transactions with related parties, made in the normal course of operations, and accounted for at an amount of consideration established and agreed to by the Company and related parties.
(a)
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In the first six months of 2011, the Company charged $28,385 to a corporation with one director in common for rent, administration, office charges and telecommunications.
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(b)
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In the first six months of 2011, the Company paid $186,333 in aggregate for consulting fees to corporations owned by a director and officers of the Company.
At June 30, 2011, the Company had loans payable due to corporations controlled by directors and officers of the Company in the amount of $435,000 bearing interest at 9% per annum. In addition, there were fees owing to corporations controlled by a director and officers of the Company in the amount of $75,667.
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