Edgar Filing: LINGO MEDIA CORP

lmc_6k-033112.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

Pursuant to Rule 13a-16 or 15d-16 under

the Securities Exchange Act of 1934

For the month of March 31, 2012

Commission File Number 333-98397

Lingo Media Corporation

(Translation of registrant's name into English)

151 Bloor Street West, Suite 703, Toronto, Ontario Canada M5S 1S4

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. Form 20-F x Form 40-F o

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): o

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): o

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934. Yes o No x

If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- .

SIGNATURE

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

	LINGO MEDIA CORPORATION

Date: May 30, 2012	By:	/s/ Michael Kraft
		Michael Kraft
		President and CEO

LINGO MEDIA CORPORATION

Condensed Consolidated Interim Financial Statements

For the three-month period ended March 31, 2012

LINGO MEDIA CORPORATION

Condensed Consolidated Interim Financial Statements

As at March 31, 2012

Notice to Reader

Management has compiled the Condensed Consolidated Interim Financial Statements of Lingo Media Corporation (“Lingo Media” or the “Company”) consisting of the Balance Sheet as at March 31, 2012 and the Statements of Comprehensive Income, Changes in Equity and Cash Flows for the three months then ended. All amounts are stated in Canadian dollars. An accounting firm has not reviewed or audited these interim financial statements and management discussion and analysis thereon.

LINGO MEDIA CORPORATION

Condensed Consolidated Interim Financial Statements

As at March 31, 2012

Contents

Condensed Consolidated Interim Financial Statements	Page

Balance Sheet	4
Statement of Comprehensive Income	5
Statement of Changes in Equity	6
Statement of Cash Flows	7
Notes to the Financial Statements	8-17

LINGO MEDIA CORPORATION

Condensed Consolidated Interim Balance Sheet

(Unaudited, expressed in Canadian Dollars, unless otherwise stated)

	Notes		March 31, 2012			December 31, 2011
ASSETS
Current Assets

Cash and cash equivalents			$	175,283		$	482,767
Accounts and grants receivable, net		5		895,370			1,175,330
Prepaid and other receivables				107,248			103,618

				1,177,901			1,761,715
Non-Current Assets

Property and equipment, net		6		45,780			48,321
Intangibles, net		7		1,014,167			1,099,521
Goodwill				139,618			139,618

TOTAL ASSETS				2,377,466			3,049,175

EQUITY AND LIABILITIES

Current Liabilities

Accounts payable				351,266			373,521
Accrued liabilities				286,261			335,820
Loans payable		8		890,000			890,000
TOTAL LIABILITIES				1,527,527			1,599,341

Equity

Share capital		9		17,925,347			17,925,347
Warrants		11		1,046,365			1,046,365
Share-based payment reserve				2,159,461			2,130,735
Accumulated other comprehensive income				(79,159	)		(86,760	)
Deficit				(20,202,075	)		(19,565,853	)
TOTAL EQUITY				849,939			1,449,834

TOTAL EQUITY AND LIABILITIES			$	2,377,466		$	3,049,175

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 May 30, 2012.

/s/ Michael Stein		/s/ Michael Kraft
Director		Director

LINGO MEDIA CORPORATION

Condensed Consolidated Interim Statement of Comprehensive Income

For the three-months ended March 31, 2012 and 2011

(Unaudited, expressed in Canadian Dollars, unless otherwise stated)

	Notes		2012			2011


Revenue			$ 257,927			$ 300,834

Expenses

Selling, general and administrative expenses				607,546			779,060
Share-based payment				28,726			379,122
Direct costs				71,472			57,868
Amortization – publishing development costs				-			8,807
Depreciation – property and equipment		6		3,048			10,315
Amortization – intangibles		7		99,562			597,641
Total Expenses				810,354			1,832,813

Loss from Operations				(552,427	)		(1,531,979	)

Net Finance Charges

Interest expense				28,575			44,581
Foreign exchange (gain) / loss				42,201			(67,483	)

Loss Before Income Tax				(623,203	)		(1,509,077	)

Income Tax Expense				13,019			11,855

Net Loss for the Period				(636,222	)		(1,520,932	)


Other Comprehensive Income

Exchange differences on translating foreign operations				7,601			(22,730	)

Total Comprehensive Income, Net of Tax			$	(628,621	)	$	(1,543,662	)

Loss per Share
Basic and Diluted				(0.03	)		(0.09	)

Weighted Number of Common Shares Outstanding
Basic and Diluted				20,011,494			17,631,190

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 three month ended March 31, 2012 and 2011

(Unaudited, expressed in Canadian Dollars, unless otherwise stated)

	Issued Share Capital					Share- Based Reserves		Warrants		Accumulated Other Comprehensive Income			Deficit			Total Equity
	No. of Shares		Amount
Balance as at January 1, 2011		13,949,189		15,131,192			1,612,621		-		(4,181	)		(14,848,806	)		1,890,826
Issued shares - equity financing		3,682,001		2,060,457			-		-		-			-			2,060,457
Net loss for the period / year		-		-			-		-		-			(1,520,932	)		(1,520,932	)
Warrants issued		-		(1,074,309	)		-		1,074,309		-			-			-
Other comprehensive income / (loss)		-		-			-		-		(22,730	)		-			(22,730	)
Share-based payments charged to operations		-		-			379,122		-		-			-			379,122
Balance as at March 31, 2011		17,631,190		16,117,340			1,991,743		1,074,309		(26,911	)		(16,369,738	)		2,786,743
Issued shares - equity financing		1,875,000		993,528			-		-		-			-			993,528
Issued shares – balance of ELL Technologies Limited acquisition payment due		1,036,987		786,535													786,535
Net loss for the period / year		-		-			-		-		-			(3,196,115	)		(3,196,115	)
Warrants issued		-		(534,151	)		-		534,151		-			-			-
Other comprehensive income / (loss)		-		-			-		-		(59,849	)		-			(59,849	)
Share-based payments charged to operations		-		-			138,992		-		-			-			138,992
Balance as at January 1, 2012		20,543,177		17,925,347			2,130,735		1,046,365		(86,760	)		(19,565,853	)		1,449,834
Loss for the period / year		-		-			-		-		-			(636,222	)		(636,222	)
Other comprehensive income / (loss)		-		-			-		-		7,601			-			7,601
Share-based payments charged to operations		-		-			28,726		-		-			-			28,726
Balance as at March 31, 2012		20,543,177		17,925,347			2,159,461		1,046,365		(79,159	)		(20,202,075	)		849,939

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 three-months ended March 31, 2012 and 2011

(Unaudited, expressed in Canadian Dollars, unless otherwise stated)

	Notes	2012			2011
CASH FLOWS FROM OPERATING ACTIVITIES

Net Loss Before Income Tax		$	(623,203	)	$	(1,509,077	)

Adjustments to Net Profit for Non-Cash Items:

Depreciation / amortization			102,610			616,763
Share-based payment			28,726			379,122
Unrealized foreign exchange gain			5,791			(34,586	)

Operating Loss Before Working Capital Changes			(486,076	)		(547,778	)

Working Capital Adjustments:

(Increase)/decrease in accounts receivable			279,960			129,941
(Increase)/decrease in prepaid and other receivables			(3,630	)		43,574
(Increase)/decrease in accounts payable			(22,255	)		(121,949	)
(Increase)/decrease in accrued liabilities			(49,559	)		(39,778	)

Cash Generated from / (used in) Operations			(281,560	)		(535,990	)


CASH FLOWS FROM INVESTING ACTIVITIES

Expenditures on software & web development costs			(25,924	)		(97,201	)
Purchase of property and equipment			-			(5,423	)

Net Cash Flows Generated from / (used in) investing activities			(25,924	)		(102,624	)

CASH FLOWS FROM FINANCING ACTIVITIES

Share capital issue during the period			-			2,195,200
Share issue costs			-			(134,743	)
Increase/(Decrease) in loans payable			-			(597,000	)

Net Cash Flows Generated from / (used in) Financing Activities			-			1,463,457

NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS			(307,484	)		824,843

Cash and Cash Equivalents at the Beginning of the Period			482,767			230,907

Cash and Cash Equivalents at the End of the Period		$	175,283		$	1,055,750

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

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

March 31, 2012

(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 OTCBB. The condensed interim consolidated financial statements of the Company as at and for the quarter ended March 31, 2012 comprise the Company and its subsidiaries.

Lingo Media Corporation is an ESL industry acquisition company in online and print-based education product and services. The Company is focused on English language learning (“ELL”) on an international scale through its four distinct business units: ELL Technologies Limited (“ELL Technologies”); Parlo Corporation (“Parlo”); Speak2Me Inc. (“Speak2Me”); and Lingo Learning Inc. (“Lingo Learning”). ELL Technologies is a globally-established ELL multi-media and online training company marketed under the Q Group brand. Parlo is a fee-based online ELL training and assessment service. Speak2Me is a free-to-consumer advertising-based online ELL service in China. Lingo Learning is a print-based publisher of ELL programs in China.

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.

2. BASIS OF PREPRATION

2.1 Statement of compliance and going concern

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

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 a working capital deficiency as at March 31, 2012 and has incurred significant losses recurring 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 contracts and distribution agreements. There are no assurances that the Company will be successful in achieving these goals.

The condensed consolidated interim financial statements for the period ended March 31, 2012 (including comparatives) were approved and authorized for issue by the board of directors on May 30, 2012.

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.

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, 2012. 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.

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

March 31, 2012

(Unaudited - See Notice to Reader)

2. BASIS OF PREPRATION (Cont’d)

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 Speak2Me Inc. 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”.

3. SIGINFICANT ACCOUTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS

The preparation of the Company’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:

Determination of functional and presentation currency

Determination of impairment loss

Income taxes

Valuation of share-based payments

4. SUMMARY OF SIGINFICANT ACCOUTING POLICIES

The accounting policies applied by the Company in these Condensed Consolidated Interim Financial Statements are the same as those applied by the Company in its Consolidated Financial Statements for the year ended December 31, 2011.

5. ACCOUNTS AND GRANTS RECEIVABLE

Accounts and grants receivable consist of:

	March 31, 2012		December 31, 2011
Trade receivable	$	821,104	$	1,042,730
Grants receivable		74,266		132,600
	$	895,370	$	1,175,330

6. PROPERTY AND EQUIPMENT

Cost, January 1, 2011	$	209,733
Additions		2,585
Effect of foreign exchange		844
Cost, December 31, 2011	$	213,162
Additions		-
Effect of foreign exchange		(599	)
Cost, March 31, 2012	$	212,563

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

March 31, 2012

(Unaudited - See Notice to Reader)

6. PROPERTY AND EQUIPMENT (Cont’d)

Accumulated depreciation, January 1, 2011		151,572
Charge for the year		58,159
Effect of foreign exchange		(44,890	)
Accumulated depreciation, December 31, 2011	$	164,841
Charge for the period		2,455
Effect of foreign exchange		(503	)
Accumulated depreciation, March 31, 2012	$	166,783

Net book value, January 1, 2011	$	58,161
Net book value, December 31, 2011	$	48,321
Net book value, March 31, 2012	$	45,780

7. INTANGIBLES

In October 2007, the Company acquired Speak2Me, an online 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 in 2010, the Company started capitalizing costs related to their new software and web development initiatives.

March 31, 2011	Cost		Accumulated Amortization		Net
Software and web development(i)	$	6,586,259	$	4,159,351	$	2,426,908
Content platform(ii)		1,477,122		246,050		1,231,072
Customer relationships(iii)		130,000		54,137		75,863
	$	8,193,381	$	4,459,538	$	3,733,843

			Accumulated
December 31, 2011	Cost		Amortization		Net
Software and web development(i)	$	5,931,786	$	5,865,705	$	66,081
Content platform(ii)		1,477,112		470,214		1,006,898
Customer relationships(iii)		130,000		103,458		26,542
	$	7,538,898	$	6,439,377	$	1,099,521

			Accumulated
March 31, 2012	Cost		Amortization		Net
Software and web development(i)	$	242,269	$	171,693	$	70,576
Content platform(ii)		1,477,122		543,868		933,254
Customer relationships(iii)		130,000		119,663		10,337
	$	1,849,391	$	835,224	$	1,014,167

(i)

The Company began commercial production and sale of its services and products 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. At December 31, 2011, Management assessed the value of this asset and found it to be impaired. Accordingly, an impairment loss of $703,600 was recorded.

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

March 31, 2012

(Unaudited - See Notice to Reader)

7. INTANGIBLES (Cont’d)

(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.

8. LOANS PAYABLE

	March 31, 2012		March 31, 2011
Loans payable, interest bearing at 9% per annum with monthly interest payments, secured by a general security agreement and due on September 8, 2012(i)(ii)(iii).		890,000		890,000
Loan payable, interest bearing at 12% per annum with monthly interest payments, secured by assigned accounts and due on demand(iii).		-		100,000
	$	890,000	$	990,000

(i)

The Company issued 433,332 common shares with a total value of $260,000 as a lending fee to secure the loan financing in September 2010. These transaction costs were amortized into income over the term of the debt.

(ii)

Included in the $890,000 loan are loans in the amount of $435,000 to related parties as disclosed in Note 15.

(iii)

On September 9, 2011 the maturity date of the loans payable in the amount of $890,000 was extended for an additional year to September 8, 2012.

9. SHARE CAPITAL

Common shares - Authorized

Unlimited number of preference shares with no par value

Unlimited number of common shares with no par value

Common shares - Transactions:

(i)

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. The Loan lenders waived their right to be repaid $0.50 of every $1.00 raised by Lingo Media through this financing.

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

March 31, 2012

(Unaudited - See Notice to Reader)

9. SHARE CAPITAL (Cont’d)

The warrants were valued using the Black-Scholes pricing model using the following assumption: weighted average risk free interest rates of 1.78% weighted average expected dividend yields of NIL, the weighted average expected common stock price volatility (based on historical trading) of 83% and a weighted average expected life of 1.5 years.

(ii)

On May 11, 2011, Lingo Media closed a non-brokered private placement financing of 1,875,000 units at $0.60 per Unit for gross proceeds of $1,125,000 (the "Second Financing"). Each Unit is comprised of one common share in the capital of the Company and one non-transferable common share purchase 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 Second Financing, if all Warrants are exercised, is 3,750,000 Common Shares for gross proceeds of $2,531,250.

In connection with the Second Financing, the Company agreed to pay a 7% finder's fee payable in cash to eligible persons, along with 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. The Loan lenders waived their right to be repaid $0.50 of every $1.00 raised by Lingo Media through this financing. The warrants were valued using the Black-Scholes pricing model using the following assumption: weighted average risk free interest rates of 1.51% weighted average expected dividend yields of NIL, the weighted average expected common stock price volatility (based on historical trading) of 65% and a weighted average expected life of 1.5 years.

(iii)

On June 3, 2011, the Company issued 1,036,987 common shares (the "Payment Shares") as the second and final payment representing the US$763,729 (CAD$786,535) balance payable to SCP Partners, for the acquisition of ELL Technologies. This payment was made pursuant to 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 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.

10. STOCK OPTIONS

In December 2011, the Company amended its stock option plan (the “2011 Plan“). The 2011 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 2011 Plan is limited to 4,108,635 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 the 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.

The maximum number of common shares that may be reserved for issuance to any one person under the 2011 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 2011 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 2011 Plan or may terminate it at any time.

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

March 31, 2012

(Unaudited - See Notice to Reader)

10. STOCK OPTIONS (Cont’d)

The following summarizes the options outstanding:

	Number of Options			Weighted Average Exercise Price
Outstanding as at January 1, 2011		708,356		$	1.27
Granted		1,922,000			0.79
Expired		(14,286	)		1.05
Outstanding as at March 31, 2011		2,616,070		$	0.91
Expired		(581,000	)
Outstanding as at December 31, 2011		2,035,070		$	0.89
Expired		(295,343	)
Outstanding as at March 31, 2012		1,739,727		$	0.92

Options exercisable as at January 1, 2011	658,356	$	1.24
Options exercisable as at March 31, 2011	1,693,069	$	1.12
Options exercisable as at December 31, 2011	1,600,763	$	0.95
Options exercisable as at March 31, 2012	1,462,727	$	0.97

The following table summarizes information about stock options outstanding at March 31, 2012:

	Options Exercisable			Options Outstanding
Expiry Date	Number Outstanding	Weighted Average Remaining Contractual Life (Years)	Weighted Average Exercise Price	Number Outstanding	Weighted Average Exercise Price
5/22/2012	21,429	0.14	0.84	21,429	0.84
6/14/2012	10,798	0.21	0.91	10,798	0.91
1/12/2013	85,000	0.79	0.70	85,000	0.70
3/10/2013	15,000	0.94	1.40	15,000	1.40
4/10/2013	50,000	1.03	1.70	50,000	1.70
4/22/2013	5,000	1.06	2.00	5,000	2.00
6/26/2013	25,000	1.24	1.80	25,000	1.80
5/1/2014	151,500	2.08	1.75	151,500	1.75
2/15/2016	891,693	3.88	0.82	1,276,000	0.79
2/22/2016	100,000	3.90	0.83	100,000	0.83
	1,462,327			1,739,727

The weighted average grant-date fair value of options granted to employees, consultants and directors has been estimated at $0.47 (2011 - $0.44) 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 1.50% (2011 – 1.78%) weighted average expected dividend yields of NIL (2011 – NIL), the weighted average expected common stock price volatility (based on historical trading) of 80% (2011 – 81%) and a weighted average expected life of 5 years (2011 – 5 years), which were estimated based on past experience with options and option contract specifics.

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

March 31, 2012

(Unaudited - See Notice to Reader)

11. WARRANTS

The following summarizes the warrants outstanding:

	Weighted Average Remaining Contractual Life (Years)		Series		Number of Warrants		Weighted Average Exercise Price
January 1, 2011						-
Expired						-
Issued		0.45		2011a		3,658,668		0.75
Issued		0.29		2011b		1,875,000		0.75
December 31, 2011						5,533,668
March 31, 2012						5,533,668

The following summarizes the compensation warrants outstanding:

	Weighted Average Remaining Contractual Life (Years)		Series		Number of Warrants		Weighted Average Exercise Price
January 1, 2011					Nil		Nil
Issued		0.45		2011		151,620		0.60
Issued		0.30		2011		78,900		0.60
December 31, 2011						230,520
March 31, 2012						230,520

12. FINANCIAL INSTRUMENTS

Fair values

The carrying value of cash and cash equivalent and accounts and grants receivable, approximates its fair value due to the liquidity of this instrument. The carrying value of accounts payables and accrued liabilities and loans payables 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 Company’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 Company’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.

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

March 31, 2012

(Unaudited - See Notice to Reader)

12. FINANCIAL INSTRUMENTS (Cont’d)

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 Company’s exposure to the risk of changes in foreign exchange rates relates primarily to the Company’s operating activities (when revenue or expense is denominated in a different currency from the Company’s functional currency) and the Company’s net investments in foreign subsidiaries. The Company operates internationally and is exposed to foreign exchange risk as certain expenditures are denominated in non-Canadian Dollar currencies.

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 March 31, 2012, the Company had cash and cash equivalent of $175,283, accounts and grants receivable of $895,370 and prepaid and other receivables of $107,248 to settle current liabilities of $1,527,527.

13. CAPITAL MANAGEMENT

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

The Company includes equity, comprised of issued share capital, warrants, share-based payments reserve and deficit, in the definition of capital. The Company is dependent on cash flow from co-publishing and distribution agreements and external financing to fund its activities. In order to carry out planned development of its products and pay for administrative costs, the Company will spend its existing working capital and raise additional amounts as needed. Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable. There has been no change to the Company’s capital management in 2012 or 2011.

14. SEGMENTED INFORMATION

The Company operates two distinct reportable business segments as follows:

Print-based English Language Learning: Lingo Learning Inc. ("Lingo Learning") is a print-based publisher of English school programs in China.

Online English Language Learning: 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 is a fee-based online English language training and assessment service. Speak2Me, a subsidiary acquired in 2007, is a free-to-customer advertising-based online English learning service in China.

Segmented Information (Before Other Financial Items Below)

	Online English Language Learning			Print-Based English Language Learning			Total
Revenue		183,767			74,160			257,927
Acquisition of property and equipment		-			-			-
Segment assets		1,473,644			903,822			2,377,466
Segment income (loss)		(425,425	)		(111,295	)		(536,720	)

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

March 31, 2012

(Unaudited - See Notice to Reader)

14. SEGMENTED INFORMATION (Cont’d)

For Print-Based English Language Learning Segment

	2012			2011
Revenue		74,160			70,378
Acquisition of property and equipment		-			-
Segment assets		903,822			1,703,648
Segment income (loss)		(111,295	)		(735,691	)

For Online English Language Learning Segment

	2012			2011
Revenue		183,767			230,456
Acquisition of property and equipment		-			14,458
Segment assets		1,473,644			4,134,064
Segment income (loss)		(425,425	)		(808,143	)

Other Financial Items

	2012			2011
Foreign exchange		42,201			(67,483	)
Interest and other financial		28,575			44,851
Share-based payments		28,726			379,122
Other comprehensive income		(7,601	)		22,730
Total		91,901			379,220

Revenue by Geographic Region

	2012		2011
China	$	76,271	$	163,371
Other		181,656		137,463
	$	257,927	$	300,834

Identifiable Assets

	2012		2011
Canada	$	2,296,400	$	5,805,924
China		81,066		31,788
	$	2,377,466	$	5,837,712

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

March 31, 2012

(Unaudited - See Notice to Reader)

14. SEGMENTED INFORMATION (Cont’d)

Non-Current Assets

	Online English Language Learning		Print-Based English Language Learning		Total
Segment assets	$	1,473,644	$	903,822	$	2,377,466
Current assets		313,731		864,170		1,177,901
Long-term assets		1,159,913		39,652		1,199,565

15. RELATED PARTY BALANCES AND TRANSACTIONS

During the quarter, 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)

Key management compensation was $63,000 (2011 – $106,000) and is reflected as consulting fees paid to corporations owned by a director and officers of the Company, all of which is deferred and included in accounts payable.

(b)

At March 31, 2012, the Company had loans payable due to corporations controlled by directors and officers of the Company in the amount of $435,000 (2011 - $435,000) bearing interest at 9% per annum. Interest expense related to these loans is $9,761 (2011 - $9,809).

16. SUPPLEMENTAL CASH FLOW INFORMATION

	2011		2010
Income taxes and other taxes paid	$	1,524	$	-
Interest paid	$	19,822	$	30,164