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, 2017

 

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 ☒ Form 40-F ☐

 

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): ☐

 

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): ☐

 

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 ☐ No ☒

 

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

 

 

 
 

 

 

LINGO MEDIA CORPORATION

 

Condensed Consolidated Interim Financial Statements

 

For the three-month period ended March 31, 2017

 

 

 

 
1

 

 

LINGO MEDIA CORPORATION

Condensed Consolidated Interim Financial Statements

As at March 31, 2017

 

 

 

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 Sheets as at March 31, 2017 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.

 

 

 
2

 

 

LINGO MEDIA CORPORATION

Condensed Consolidated Interim Financial Statements

As at March 31, 2017

 

 

Contents

 
   

Condensed Consolidated Interim Financial Statements

Page

   

Balance Sheets

4

Statements of Comprehensive Income

5

Statements of Changes in Equity

6

Statements of Cash Flows

7

Notes to the Financial Statements

8-20

 

 

 
3

 

 

LINGO MEDIA CORPORATION

Condensed Consolidated Interim Balance Sheets

As of March 31, 2017 and December 31, 2016

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

 

   

Notes

   

March 31,

2017

   

December 31,

2016

 

ASSETS

                       

Current A ssets

                       

Cash and cash equivalents

          $ 300,042     $ 84,303  

Accounts and grants receivable

    5       2,663,280       3,044,928  

Prepaid and other receivables

            338,329       579,846  
              3,301,651       3,709,077  

Non- C urrent A ssets

                       

Long-term deposit

            300,000       300,000  

Property and equipment

    6       26,087       27,488  

Intangibles

    7       3,580,555       3,000,009  

Goodwill

            139,618       139,618  

TOTAL ASSETS

          $ 7,347,911     $ 7,176,192  
                         

EQUITY AND LIABILITIES

                       
                         

Current L iabilities

                       

Accounts payable

          $ 264,898     $ 273,750  

Accrued liabilities

            194,620       249,736  

Lease inducement

            44,633       57,673  

Loans payable

    8       395,000       150,000  

TOTAL LIA B ILITIES

          $ 899,151     $ 731,159  
                         

Equity

                       

Share capital

    9       21,914,722       21,914,722  

Share-based payment reserve

    10       3,421,165       3,421,165  

Warrants

    11       -       -  

Accumulated other comprehensive income

            (302,255 )     (302,037 )

Deficit

            (18,584,872 )     (18,588,817 )

TOTAL EQUITY

            6,448,760       6,445,033  

TOTAL EQUITY AND LIABILITIES

          $ 7,347,911     $ 7,176,192  

   

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 27, 2017.

 

/s/ Michael Kraft

 

/s/ Martin Bernholtz

Director

 

Director

 

 

 
4

 

   

LINGO MEDIA CORPORATION

Condensed Consolidated Interim Statements of Comprehensive Income

For the three-months ended March 31, 2017, 2016 and 2015

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

 

   

Notes

   

2017

   

2016

   

2015

 

Revenue

          $ 597,977     $ 756,858     $ 651,627  
                                 

E xpenses

                               
                                 

Selling, general and administrative

            231,688       204,701       260,184  

Amortization - intangibles

    7       294,272       224,288       180,041  

Direct costs

            37,930       58,221       59,279  

Share-based payments

            -       -       29,239  

Depreciation – property and equipment

    6       1,389       1,444       1,718  

Total E xpenses

            565,279       488,654       530,461  
                                 

Income / ( Loss ) from O perations

            32,698       268,204       121,166  
                                 

Net Finance Charges

                               

Interest expense

            9,382       18,157       48,329  

Foreign exchange (gain) / loss

            13,452       186,544       (159,743 )
                                 

Income / ( Loss ) Before Income Tax

            9,864       63,503       232,580  

Income Tax Expense

            5,919       12,673       7,151  

Net Profit / (Loss) for the Period

            3,945       50,830       225,429  
                                 

Other C omprehensive I ncome

                               
                                 

Exchange differences on translating foreign operations gain / (loss)

            (218 )     60,958       (78,831 )
                                 

Total Comprehensive Income / (Loss) , N et of T ax

          $ 3,727     $ 111,788     $ 146,598  
                                 

Earnings / (Loss) per S hare

                               

Basic

          $ 0.00     $ 0.01     $ 0.01  

Diluted

          $ 0.00     $ 0.00     $ 0.01  

Weighted Average Number of Common Shares Outstanding

                               

Basic

            35,529,132       29,746,494       22,134,245  

Diluted

            37,099,039       30,731246       25,878,767  

 

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

 

 

 
5

 

 

LINGO MEDIA CORPORATION

Condensed Consolidated Interim Statements of Changes in Equity

For the three month ended March 31, 2017 and 2016

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

 

   

Issued Share Capital

   

Share- B ased R eserves

   

Warrants

   

Accumulated Other Comprehensive Income

   

Deficit

   

Total Equity

 
   

No. of Shares

   

Amount

                                         

Balance as at January 1, 2016

    29,518,343     $ 18,927,388     $ 2,695,038     $ 1,439,632     $ (362,210 )   $ (18,653,064 )   $ 4,046,784  

Profit for the period

    -       -       -       -       -       50,830       50,830  

Other comprehensive loss

    -       -       -       -       60,958       -       60,958  

Warrants exercise

    1,450,000       595,445       -       (39,195 )     -       -       556,250  

Stock option exercise

    63,333       35,430       (12,647 )     -       -       -       22,783  

Balance as at March 31, 2016

    31,031,676     $ 19,558,263     $ 2,682,391     $ 1,400,437     $ (301,252 )   $ (18,602,234 )   $ 4,737,605  

Profit for the period

    -       -       -       -       -       13,417       13,417  

Other comprehensive loss

    -       -       -       -       (785 )     -       (785 )

Warrant exercise

    4,261,683       2,309,395       -       (644,383 )     -       -       1,665,012  

Stock option exercise

    235,773       47,064       (17,280 )     -       -       -       29,784  

Expired warrant

                    756,054       (756,054 )                     -  

Balance as at December 31, 2016

    35,529,132     $ 21,914,722     $ 3,421,165     $ -     $ (302,037 )   $ (18,588,817 )   $ 6,445,033  

Profit for the period

    -       -       -       -       -       3,945       3,945  

Other comprehensive loss

    -       -       -       -       (218 )     -       (218 )

Balance as at March 31, 2017

    35,529,132     $ 21,914,722     $ 3,421,165     $ -     $ (302,255 )   $ (18,584,872 )   $ 6,448,760  

 

No preference shares were issued at March 31, 2017, December 31, 2016 and 2015.

 

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

 

 

 
6

 

 

LINGO MEDIA CORPORATION

Condensed Consolidated Interim Statements of Cash Flows

For the three-months ended March 31, 2017, 2016 and 2015

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

 

   

2017

   

2016

   

2015

 

CASH FLOWS FROM OPERATING ACTIVITIES

                       
                         

Net Profit / (Loss) for the Period

  $ 3,945     $ 50,830     $ 225,429  
                         

Adjustments to N et P rofit for N on -C ash I tems:

                       
                         

Amortization - intangible

    294,272       204,701       180,041  

Share-based payment

    -       -       29,239  

Unrealized foreign exchange gain / (loss)

    (13,246 )     73,824       (84,566 )

Interest accretion

    -       -       15,000  

Depreciation – property and equipment

    1,389       1,444       1,718  
                         

Operating Profit / (L oss ) B efore W orking C apital C hanges

    286,360       350,386       366,862  
                         

Working C apital A djustments:

                       
                         

(Increase)/decrease in accounts and grants receivable

    381,648       (620,365 )     (521,912 )

(Increase)/decrease in prepaid and other receivables

    241,517       (2,262 )     (34,670 )

Increase/(decrease) in accounts payable

    (8,852 )     8,630       4,783  

Increase/(decrease) in accrued liabilities

    (55,116 )     12,402       86,243  
                         

Cash G enerated f rom / (used in) O perations

    845,557       (251,209 )     (98,694 )
                         

CASH FLOWS FROM INVESTING ACTIVITIES

                       

Purchase of intangibles

    (874,818 )     (601,716 )     (377,923 )

Purchase of property and equipment

    -       (2,022 )     (2,769 )
                         

Net C ash F lows G enerated from / (used in) investing activities

    (874,818 )     (603,738 )     (380,692 )
                         

CASH FLOWS FROM FINANCING ACTIVITIES

                       

Stock Option Exercise

    -       10,883       -  

Warrant Exercise

    -       556,250       -  

Proceeds from loans

    685,000       -       90,000  

Repayment of loan payable

    (440,000 )     -       -  
                         

Net C ash F lows G enerated from / (used in) F inancing A ctivities

    245,000       567,133       90,000  
                         

NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS

    215,739       (287,814 )     (389,386 )
                         

Cash and C ash E quivalents at the B eginning of the Period

    84,303       409,022       477,001  
                         

Cash and C ash E quivalents at the E nd of the Period

  $ 300,042     $ 121,208     $ 87,615  

 

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

 

 

 
7

 

   

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

March 31, 2017

(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 OTCQB Marketplace. The consolidated financial statements of the Company as at and for the year ended December 31, 2016 comprise the Company and its wholly owned subsidiaries: Lingo Learning Inc., ELL Technologies Ltd., ELL Technologies Limited, ELL Technologies Worldwide Ltd., Speak2Me Inc., Parlo Corporation and Lingo Group Limited (the “Group”) .

 

Lingo Media is an EdTech company that is ‘ Changing the way the world learns English . The Company provides online and print-based solutions through its two distinct business units: ELL Technologies Ltd. (“ELL Technologies”) and Lingo Learning Inc. (“Lingo Learning”) . ELL Technologies is a global English language learning multi-media and online training company. Lingo Learning is a print-based publisher of English language learning school programs in China.

 

The head office, principal address and registered and records office of the Company is located at 151 Bloor Street West, Suite 703, Toronto, Ontario, Canada, M5S 1S4.  

   

2.

BASIS OF PREPRATION

 

 

2.1

Statement of compliance

     

 

 

These condensed consolidated interim financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations of the IFRS Interpretations Committee (“IFRIC”). These consolidated financial statements were authorized by the Board of Directors on May 27 , 2017.

     

 

2.2

Basis of measurement

     
   

These condensed consolidated interim financial statements have been prepared on the historical cost basis except as provided in note 4. The comparative figures presented in these consolidated financial statements are in accordance with the same accounting policies.

     

 

2.3

Basis of consolidation

     
   

The consolidated financial statements comprise the financial statements of the Company and its wholly owned subsidiaries controlled by the Company (the “Group”) as at March 31, 2017. Control exists when the Company is exposed to, or has the rights to variable returns from its involvement with the entity and has the ability to affect these returns through its power over the entity.

 

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.

 

 

 
8

 

   

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

March 31, 2017

(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. The functional currency of ELL Technologies Limited and Lingo Group Limited are United States Dollar (“USD”). All other subsidiaries’ functional currency is Canadian Dollar (“CAD”).

 

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 condensed consolidated interim 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 currency

 

 

Determination of allowance for doubtful accounts

 

 

Determination of the recoverability of the carrying value of intangibles and goodwill

 

 

Recognition of internally developed intangibles

 

 

Determination and recognition of long-term revenue contracts

 

 

Recognition of government grant and grant receivable

 

 

Recognition of deferred tax assets

 

 

Valuation of share-based payments

 

 

Recognition of provisions and contingent liabilities

 

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, 2016.

 

 

 
9

 

   

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

March 31, 2017

(Unaudited - See Notice to Reader)


 

5.

ACCOUNTS AND GRANTS RECEIVABLE

   
  Accounts and grants receivable consist of:

    

   

March 31, 2017

   

December 31, 2016

 

Trade receivable

  $ 2,586,433     $ 3,023,081  

Grants receivable

    76,847       21,847  
    $ 2,663,280     $ 3,044,928  

 

6.

PROPERTY AND EQUIPMENT


Cost, January 1, 2016

  $ 188,421  

Additions

    2,022  

Effect of foreign exchange

    (2,061 )

Cost, March 31, 2016

  $ 188,382  

Additions

    6,610  

Disposal

    (114,624 )

Effect of foreign exchange

    345  

Cost, December 31, 2016

  $ 80,713  

Additions

    -  

Effect of foreign exchange

    (104 )

Cost, March 31, 2017

  $ 80,609  
         

Accumulated depreciation, January 1, 2016

  $ 159,542  

Charge for the period

    1,444  

Effect of foreign exchange

    (2,030 )

Accumulated depreciation, March 31, 2016

  $ 158,956  

Charge for the period

    5,853  

Disposal

    (117,294 )

Effect of foreign exchange

    5,710  

Accumulated depreciation, December 31, 2016

  $ 53,225  

Charge for the period

    1,389  

Effect of foreign exchange

    (92 )

Accumulated depreciation, March 31, 2017

  $ 54,522  

Net book value, January 1, 2016

  $ 28,879  

Net book value, December 31, 2016

  $ 27,488  

Net book value, March 31, 2017

  $ 26,087  

 

 

 
10

 

 

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

March 31, 2017

(Unaudited - See Notice to Reader)


   

7.

INTANGIBLES

       

   

Software and

W eb

D evelopment

   

Content

Platform

   

Content

Development

   

Total

 

Cost, January 1, 2016

  $ 8,631,006     $ 1,477,112     $ 1,288,495     $ 11,396,613  

Additions

    188,735       -       412,981       601,716  

Effect of foreign exchange

    (25,651 )     -       -       (26,651 )

C o st, March 31, 2016

    8,794,090       1,477,112       1,701,476     $ 11,972,678  

Additions

    424,428       -       772,544       1,196,972  

Effect of foreign exchange

    20,570       -       -       20,570  

Cost, December 31, 2016

    9,239,088       1,477,112       2,474,020       13,190,219  

Additions

    306,317       -       568,501       874,818  

Cost, March 31, 2017

  $ 9,545,405     $ 1,477,122     $ 3,042,521     $ 14,065,037  

 

Accumulated depreciation, January 1, 2016

  $ 7,622,225     $ 1,477,112     $ 91,532     $ 9,190,869  

Charge for the period

    141,962       -       72,855       214,817  

Effect of foreign exchange

    (15,446 )     -               (15,446 )

Accumulated depreciation, March 31, 2016

  $ 7,748,741     $ 1,477,112     $ 164,387     $ 9,390,240  

Charge for the period

    469,903       -       318,765       788,668  

Effect of foreign exchange

    11,302       -       -       11,302  

Accumulated depreciation, December 31, 2016

    8,229,946       1,477,112       483,152       10,190,210  

Charge for the period

    170,571       -       123,701       294,272  

Accumulated depreciation, March 31, 2017

  $ 8,400,517     $ $ 1,477,112     $ 606,853     $ 10,484,482  

Net book value, December 31, 2016

  $ 1,009,142     $ -     $ 1,990,867     $ 3,000,009  

Net book value, March 31, 2017

  $ 1,144,888     $ -     $ 2,435,668     $ 3,580,555  

 

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.

 

 

 
11

 

   

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

March 31, 2017

(Unaudited - See Notice to Reader)


     

8.

LOANS PAYABLE


   

March 31, 2017

   

December 31, 2016

 

Loans payable, interest bearing at 8% per annum with monthly interest payments, due on April 30, 2017 (i)

  $ 395,000     $ 150,000  
    $ 395,000     $ 150,000  

 

 

(i)

The Company received an unsecured bridge loan in the first quarter of 2017. Included in loans payable are loans amounting to $nil (2016 – $580,000) to related parties as disclosed in Note 17.

     
    Subsequent to the period end, the loans payable were repaid in full.

   

9.

SHARE CAPITAL

 

 

a)

Authorized

     
   

Unlimited number of preference shares with no par value

Unlimited number of common shares with no par value

     
  b) 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.

   

 

   

On August 23, 2012, the expiry date of the Warrants was extended for additional 18 months to March 4, 2014 with all other conditions remaining the same. On February 21, 2014, the expiry date of the warrants was extended for an additional 2 years to March 4, 2016 with all other terms remaining consistent.

 

In March 2016, 600,000 warrants were exercised. Each warrant entitled the holder to one common share of the Company at an exercise price of $0.75 for the gross proceeds of $450,000. These warrants have a grant date fair value of $0.241. The weighted average exercise price on the date of exercise of these warrants was $0.78, and the remaining expired on March 4, 2016

   

 

(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 .

   

 

   

On August 23, 2012, the expiry date of the Warrants from the Second Financing was extended for an additional 18 months to May 11, 2014 with all other conditions remaining the same. Additionally, on February 21, 2014, the warrants were extended for an additional 2 years to May 11, 2016 with all other terms remaining consistent.

 

 

 
12

 

   

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

March 31, 2017

(Unaudited - See Notice to Reader)


   

9.

SHARE CAPITAL (Cont’d)

 

 

b)

Common shares Transactions: (Cont’d)

 

 

(ii)

In April 2016, 1,811,683 warrants were exercised. Each warrant entitled the holder to one common share of the Company at an exercise price of $0.75 for the gross proceeds of $1,358,762. These warrants have a grant date fair value of $0.272. The weighted average exercise price on the date of exercise of these warrants was $1.01, and the remaining expired on May 11, 2016

 

 

(iii)

On April 17, 2015, Lingo Media closed a non-brokered private placement financing of 5,000,000 units at $0.10 per Unit for gross proceeds of $500,000. Each Unit is comprised of one common share in the capital of the Company and one common share purchase warrant. Each Warrant entitles the holder to purchase one Common Share at an exercise price of $0.125 per share until April 17, 2016. The securities issued pursuant to the Financing will be subject to a 4-month regulatory hold period commencing from April 17, 2015. One director of the Company participated in the private placement and subscribed to 400,000 Units for a total price of $40,000. During 2016, 3,300,000 warrants were exercised for the gross proceeds of $412,500. These warrants have a grant date fair value of $0.014. The weighted average exercise price on the date of exercise of these was $0.99.

 

 

c)

Stock options exercise

     
   

In 2016, 299,166 stock options were exercised. Each stock option entitled the holder to one common share of the Company at an exercise price of $0.13, $0.14, 0.24 and $0.66 for the gross proceeds of $52,567. These options have a grant date fair value of $0.0674, $0.0721, 0.1443 and $0.5174 respectively. The weighted average exercise price on the date of exercise of these options was $0.18.

   

 

d)

Warrants exercise

     
   

In 2016, 5,711,683 warrants were exercised. Each warrant entitled the holder to one common share of the Company at an exercise price of $0.125 and $0.75 for the gross proceeds of $2,221,262. These warrants have a grant date fair value of $0.014, $0.241 and $0.272. The weighted average exercise price on the date of exercise of these warrants was $0.39.

 

1 0

SHARE-BASED PAYMENTS

 

 

 

In December 2011, the Company amended its stock option plan (the “2011 Plan”). The 2011 Plan was established to provide an incentive to management (officers), employees, 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 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.

 

 

 
13

 

      

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

March 31, 2017

(Unaudited - See Notice to Reader)


   

10.

SHARE-BASED PAYMENTS (Cont’d)

   
 

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. However, 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. The following summarizes the options outstanding:

 

The following summarizes the options outstanding: 

   

   

Number of Options

   

Weighted Average

Exercise Price

 

Outstanding as at January 1, 2016

    3,602,501     $ 0.33  

Granted

    700,000       0.69  

Forfeited

    -       -  

Expired

    (957,500 )     0.81  

Exercised

    (63,333 )     0.17  

Outstanding as at March 31, 2016

    3,281,668       0.28  

Granted

    -       0.47  

Expired

    -       0.2  

Forfeited

    (1,000,000 )     0.7  

Exercised

    (235,833 )     0.15  

Outstanding as at December 31, 2016

    2,045,835       0.18  

Granted

    -       -  

Forfeited

    -       -  

Expired

    -       -  

Exercised

    -       -  

Outstanding as at March 31, 2017

    2,045,835     $ 0.18  

 

Options exercisable as at March 31, 2016

    2,271,668     $ 0.24  

Options exercisable as at December 31, 2016

    1,820,835     $ 0.19  

Options exercisable as at March 31, 2017

    1,820,835     $ 0.19  

 

 

The weighted average remaining contractual life for the stock options outstanding as at March 31, 2017 was 0.61 years (2016 – 1.7 years, 2015 – 1.21 years). The range of exercise prices for the stock options outstanding as at March 31, 2017 was $0.14 - $0.24 (2016 - $0.13 - $0.77 , 2015 - $0.13 - $1.70). The weighted average grant-date fair value of options granted to management, employees, directors and consultants during period has been estimated at $nil (2015 - $0.47, 2015 - $0.07) using the Black-Scholes option-pricing model. The estimated fair value of the options granted is expensed immediately.

 

The vesting period on the options granted in 2016 was nine months after grant date. In 2015, the vesting periods on the options granted was immediate. In 2014, the vesting periods were as follows, 435,000 stock options vested immediately upon issuance, 445,000 stock options will vest quarterly over 18 months, 410,000 stock options will vest quarterly over 12 months, and 300,000 stock options will vest upon achievements of performance milestones .

 

 

 
14

 

 

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

March 31, 2017

(Unaudited - See Notice to Reader)


 

10.

SHARE-BASED PAYMENTS (Cont’d)

   
 

The pricing model assumes the weighted average risk free interest rates of 0.44% (2015 – 1.21%) weighted average expected dividend yields of Nil (2015 – Nil), the weighted average expected common stock price volatility (based on historical trading) of 78.9% (2015– 79%), a forfeiture rate of zero, a weighted average stock price of $0.69, a weighted average exercise price of $0.69, and a weighted average expected life of 3 years (2015 – 3 years), which were estimated based on past experience with options and option contract specifics.

   

11.

Warrants

   
 

The following summarizes the warrants outstanding:

   

   

Weighted Average Remaining Contractual Life (Years)

 

Series

 

Number of

Warrants

   

Weighted   Average

Exercise

Price

 

Extended

    1.18  

A

    3,658,668     $ 0.75  

Extended

    1.36  

B

    1,875,000       0.75  

December 31, 2014

              5,533,668          

Issued

    0.30         5,000,000       0.125  

Exercised

              (1,700,000 )     0.125  

December 31, 2015

              8,833,668       0.125 0.52  

Exercised

              (5,711,683 )     0.39  

Expired

              (3,121,985 )     0.75  

December 31, 2016 and March 31, 2017

              -     $ -  

   

 

The 3,658,668 Series A warrants issued on March 4, 2011 and the 1,875,000 Series B warrants issued on May 11, 2011 had an expiry date of March 4, 2014 and May 11, 2014 respectively. On February 14, 2014, the warrants were extended to March 4, 2016 and May 11, 2016 , respectively. During the year ended December 31, 2016, 600,000 Series A warrants were exercised. The exercise price was $0.75 with proceeds of $450,000. During the year ended December 31, 2016, 1,811,683 Series B warrants were exercised. The exercise price was $0.75 with proceeds of $1,358,762.

 

The 5,000,000 warrants issued in 2015 had an expiry date of April 17, 2016. (Note 9 (v)) During the year-ended December 31, 2016, 3,300,000 warrants were exercised. The exercise price was $0.125 with proceeds of $412,500.

   

12.

GOVERNMENT GRANTS

   
 

Included as a reduction of selling, general and administrative expenses are government grants of $55,000 (2016 - $54,365), relating to the Company's publishing and software projects. At the end of the period, $76,847 (March 31, 2016 - $70,273) is included in accounts and grants receivable.

 

 

 
15

 

 

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

March 31, 2017

(Unaudited - See Notice to Reader)


   

12.

GOVERNMENT GRANTS (Cont’d)

 

One government grant for the print-based ELL segment is repayable in the event that the segment’s annual net income for each of the previous two years exceeds 15% of revenue. During the year, the conditions for the repayment of grants did not arise and no liability was recorded.

 

One grant, relating to the Company’s “Development of Comprehensive, Interactive Phonetic English Learning Solution” project, is repayable semi-annually at a royalty rate of 2.5% per year’s gross sales derived from this project until 100% of the grant is repaid.

 

13.

FINANCIAL INSTRUMENTS

 

Fair values

 

The carrying value of cash and accounts and grants receivable, approximates its fair value due to the liquidity of these instruments. The carrying value of accounts payables and accrued liabilities and loans payables approximates its fair value due to the requirement to extinguish the liabilities 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.

 

Management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner. The Company’s Management oversees these risks. The Board of Directors reviews and agrees on policies for managing each of these risks.

 

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.

 

A 10% strengthening of the US Dollar against the Canadian Dollar would have increased the net equity approximately by $158,962 (2016 - $139,000) due to reduction in the value of net liability balance. A 10% of weakening of the US Dollar against the Canadian Dollar at March 31, 2017 would have had the equal but opposite effect. The significant financial instruments of the Company, their carrying values and the exposure to other denominated monetary assets and liabilities, as of March 31, 2017 are as follows:

 

   

US Denominated

   

China Denominated

   

Euro Denominated

 
   

USD

   

RMB

   

Euro

 

Cash

    138,897       -       1,786  

Accounts receivable

    2,029,759       -       -  

Accounts payable

    38,450       -       -  

 

 

 
16

 

 

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

March 31, 2017

(Unaudited - See Notice to Reader)


 

13.

FINANCIAL INSTRUMENTS (Cont’d)

 

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, 2017, the Company had cash of $300,042, accounts and grants receivable of $2,663,280 and prepaid and other receivables of $338,329 to settle current liabilities of $899,151.

 

Credit risk

 

Credit risk refers to the risk that one party to a financial instrument will cause a financial loss for the
counterparty by failing to discharge an obligation. The Company is primarily exposed to credit risk   through accounts receivable. The maximum credit risk exposure is limited   to the reported amounts of these financial assets. Credit risk is managed by   ongoing review of the amount and aging of accounts receivable balances. As at March 31, 2017, the   Company has outstanding receivables of $2,586,433. An allowance for doubtful accounts is taken on accounts receivable if the account has not been collected after a predetermined period of time as determined by the contract and collectability is offset to other operating expenses. The Company deposits its cash with high credit quality financial institutions, with the majority deposited within Canadian Tier 1 Banks.

 

14.

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 2017 or 2016.

 

15.

SEGMENTED INFORMATION

 

The Company operates two distinct reportable business segments as follows:

 

Print-based English Language Learning: Lingo Learning is a print-based publisher of English language learning textbook programs in China. It earns significantly higher royalties from Licensing Sales compared to Finished Product Sales.

 

Online English Language Learning: ELL Technologies is a global web-based educational technology (“EdTech”) English language learning training and assessment company. It earns training revenue by developing and hosting online English language learning solutions for its customers, both off the shelf and customized solutions.

 

 

 
17

 

 

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

March 31, 2017

(Unaudited - See Notice to Reader)


 

15.

SEGMENTED INFORMATION (Cont’d)

 

Segmented I nformation (B efore O ther F inancial I tems Below)

 

March 31, 201 7

 

Online English Language Learning

   

Print-Based English Language Learning

   

Total

 

Segmented assets

  $ 5,938,392     $ 1,409,519     $ 7,347,911  

Segmented liabilities

    584,210       314,941       899,151  

Segmented revenue

    518,787       79,190       597,977  

Segmented direct costs

    16,049       21,881       37,930  

Segmented selling, general & administrative

    156,237       75,451       231,688  

Segmented intangible amortization

    294,272       -       294,272  

Segmented profit

    52,017       (23,052 )     26,779  

Segmented intangible addition

    874,818       -       874,818  
                         

March 31, 2016

 

Online English Language Learning

   

Print-Based English Language Learning

   

Total

 

Segmented assets

  $ 4,778,413     $ 1,166,391     $ 5,944,804  

Segmented liabilities

    843,061       364,137       1,207,198  

Segmented revenue

    677,719       79,139       756,858  

Segmented direct costs

    35,256       22,965       58,221  

Segmented selling, general & administrative

    155,546       49,155       204,701  

Segmented intangible amortization

    224,288       -       224,288  

Segmented profit

    262,263       (6,733 )     255,530  

Segmented intangible addition

    601,716       -       601,716  
                         

March 31, 2015

 

Online English Language Learning

   

Print-Based English Language Learning

   

Total

 

Segmented assets

  $ 1,811,790     $ 983,511     $ 2,795,301  

Segmented liabilities

    579,027       1,296,481       1,875,508  

Segmented revenue

    606,381       45,246       651,627  

Segmented direct costs

    38,804       20,475       59,279  

Segmented selling, general & administrative

    313,247       195,26       508,373  

Segmented intangible amortization

    180,041       -       180,041  

Segmented profit

    293,134       (149,880 )     143,254  

Segmented intangible addition

    377,923       -       377,923  

 

 

 
18

 

 

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

March 31, 2017

(Unaudited - See Notice to Reader)


 

15.

SEGMENTED INFORMATION (Cont’d)

 

Other Financial Items

 

2017

   

2016

   

2015

 

Online English Language Learning segmented income (loss)

    52,017     $ 235,342     $ 293,134  

Print-Based English Language Learning segmented income (loss)

    (23,052 )     (25,533 )     (149,880 )

Foreign exchange

    (13,452 )     (140,823 )     159,743  

Interest expense

    (9,382 )     (18,157 )     (48,329 )

Share-based payment

    -       -       (29,239 )

Other comprehensive income (loss)

    (218 )     60,958       (78,831 )

Total Comprehensive Income ( Loss )

  $ 3,727     $ 111,787     $ 146,598  

   

Revenue by Geographic Region

 

   

2017

   

2016

   

2015

 

Latin America

  $ 482,775     $ 600,013     $ 529,617  

China

    103,296       120,329       106,054  

Other

    11,906       36,516       15,956  
    $ 597,977     $ 756,858     $ 651,627  

 

Identifiable Assets by Geographic Region

 

   

2017

   

2016

   

2015

 

Canada

  $ 7,347,911     $ 5,897,799     $ 2,786,395  

China

    -       1,284       8,906  
    $ 7,347,911     $ 5,899,083     $ 2,795,301  

   

16 .

SUPPLEMENTAL CASH FLOW INFORMATION

 

   

2017

   

2016

   

2015

 

Income taxes and other taxes paid

  $ 5,919     $ 12,673     $ 7,151  

Interest paid

  $ 9,382     $ 18,157     $ 23,178  

   

17.

RELATED PARTY BALANCES AND TRANSACTIONS

 

During the period, 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)

The Company charged $6,434(2016 - $5,400, 2015 - $nil) to two corporations with one director in common for rent, administration, office charges and telecommunications.

 

 

 
19

 

 

LINGO MEDIA CORPORATION

Notes to Condensed Consolidated Interim Financial Statements

March 31, 2017

(Unaudited - See Notice to Reader)


 

17.

RELATED PARTY BALANCES AND TRANSACTIONS (Cont’d)

 

 

(b)

Key management compensation was $82,500 (2016 – $82,500) and is reflected as consulting fees paid to corporations owned by a director and officers of the Company.

 

 

(c)

At March 31, 2017, the Company had loans payable due to two corporations controlled by directors and officers of the Company in the amount of $nil (2016 - $480,000) bearing interest at 8% per annum. Interest expense related to these loans is $4,480 (2016 - $10,800).

 

18.

SUBSEQUENT EVENT

 

On April 30, 2017, the Company repaid all loans, including interest.

 

 

 
20

 

 

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  27, 2017

By:

/s/ Michael Kraft

 

 

 

Michael Kraft

President and CEO

 

 

 

 

 

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