UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
Pursuant to Rule 13a-16 or 15d-16 under
the Securities Exchange Act of 1934
For the month of June 30, 2008
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: August 29, 2008 | By: | /s/ Michael Kraft | |
Michael Kraft President and CEO |
Consolidated Interim Financial Statements
(Expressed in Canadian dollars)
LINGO MEDIA CORPORATION
June 30, 2008 and 2007
(Unaudited)
The Consolidated Interim Balance Sheet of Lingo Media Corporation (the "Company” or “Lingo Media") as at June 30, 2008 and the Consolidated Interim Statements of Operations, Deficits and Cash Flows for the six months then ended have not been reviewed by the Company’s auditors. These financial statements are the responsibility of the management and have been reviewed and approved by the Company’s Audit Committee.
1
LINGO MEDIA CORPORATION
June 30, 2008 and 2007
(Expressed in Canadian dollars)
(Unaudited)
Notice to Reader
Management has compiled the unaudited financial statements of Lingo Media Corporation (“Lingo Media” or the “Company”) consisting of the Interim Consolidated Balance Sheets as at June 30, 2008 and the Interim Statements of Deficit, Operations, and Cash Flows for the six months ended June 30, 2008. All amounts are stated in Canadian dollars. An accounting firm has not reviewed or audited this interim financial information.
2
LINGO MEDIA CORPORATION
June 30, 2008 and 2007
(Expressed in Canadian dollars)
(Unaudited - - See Notice to Readers)
CONTENTS
Page | |
Consolidated Interim Balance Sheets | 4 |
Consolidated Interim Statements of Deficit | 5 |
Consolidated Interim Statements of Operations | 6 |
Consolidated Interim Statements of Cash Flows | 7 |
Notes to Consolidated Interim Financial Statements | 8 |
3
LINGO MEDIA CORPORATION
Consolidated Interim Balance Sheets
(Expressed in Canadian dollars)
(Unaudited - - See Notice to Readers)
June 30, 2008 | December 31, 2007 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash | $ | 24,405 | $ | 343,338 | ||||
Short term investment | 150,000 | 150,000 | ||||||
Accounts and grants receivable (note 3) | 708,034 | 996,469 | ||||||
Inventory | 126,822 | 121,323 | ||||||
Prepaid and sundry assets | 110,898 | 131,869 | ||||||
1,120,159 | 1,742,999 | |||||||
Investment and advances | 182,520 | 182,520 | ||||||
Deferred costs | 157,419 | 157,419 | ||||||
Property and equipment, net | 78,418 | 89,325 | ||||||
Development costs, net | 248,226 | 267,910 | ||||||
Software & web development costs, net (note 4) | 4,542,451 | 4,326,246 | ||||||
Goodwill | 1,121,131 | 1,121,131 | ||||||
$ | 7,450,323 | $ | 7,887,550 | |||||
Liabilities and Shareholders' Equity | ||||||||
Current liabilities: | ||||||||
Bank loans (note 5) | $ | 210,000 | $ | 230,000 | ||||
Accounts payable | 945,240 | 822,818 | ||||||
Accrued liabilities | 130,509 | 227,206 | ||||||
Current portion of loans payable (note 6) | 439,196 | 228,674 | ||||||
1,724,945 | 1,508,698 | |||||||
Loans payable (note 6) | 203,031 | 203,031 | ||||||
Future income taxes | 354,452 | 290,145 | ||||||
2,282,428 | 2,001,873 | |||||||
Shareholders' equity: | ||||||||
Capital stock (note 8 (a)) | 10,338,725 | 10,335,707 | ||||||
Contributed surplus | 676,394 | 452,411 | ||||||
Deficit | (5,847,224 | ) | (4,902,442 | ) | ||||
5,167,894 | 5,885,677 | |||||||
$ | 7,450,323 | $ | 7,887,550 |
See accompanying notes to consolidated interim financial statements.
Approved on behalf of the Board:
/s/ Michael Kraft | ||||
Michael Kraft Director |
/s/ Sanjay Joshi | ||||
Sanjay Joshi Director |
4
LINGO MEDIA CORPORATION
Consolidated Interim Statements of Deficit
(Expressed in Canadian dollars)
(Unaudited - - See Notice to Readers)
Three months ended June 30 | Six months ended June 30 | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
Deficit, beginning of period | $ | (5,355,994 | ) | $ | (4,287,222 | ) | $ | (4,902,442 | ) | $ | (3,977,402 | ) | ||||
Net loss for the period | (491,231 | ) | (79,716 | ) | (944,783 | ) | (389,536 | ) | ||||||||
Deficit, end of period | $ | (5,847,224 | ) | $ | (4,366,938 | ) | $ | (5,847,224 | ) | $ | (4,366,938 | ) |
See accompanying notes to consolidated interim financial statements.
5
LINGO MEDIA CORPORATION
Consolidated Interim Statements of Operations
(Expressed in Canadian dollars)
(Unaudited - - See Notice to Readers)
Three months ended June 30 | Six months ended June 30 | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
Revenue | $ | 1,157,313 | $ | 925,978 | $ | 1,829,106 | $ | 1,593,511 | ||||||||
Direct costs | 198,164 | 180,080 | 332,901 | 319,801 | ||||||||||||
Margin | 959,149 | 745,898 | 1,496,205 | 1,273,710 | ||||||||||||
Expenses: | ||||||||||||||||
General and administrative | 1,142,596 | 696,692 | 2,025,132 | 1,467,011 | ||||||||||||
Amortization of property and equipment | 33,039 | 21,868 | 66,399 | 42,587 | ||||||||||||
Interest and other financial expenses | 74,032 | 27,939 | 104,911 | 57,379 | ||||||||||||
Stock-based compensation | 143,750 | 41,329 | 187,583 | 58,483 | ||||||||||||
1,393,417 | 787,828 | 2,384,025 | 1,625,460 | |||||||||||||
Loss before income taxes and other taxes | (434,268 | ) | (41,930 | ) | (887,820 | ) | (351,750 | ) | ||||||||
Income taxes and other taxes | 56,963 | 37,786 | 56,963 | 37,786 | ||||||||||||
Net loss for the period | $ | (491,231 | ) | $ | (79,716 | ) | $ | (944,783 | ) | $ | (389,536 | ) | ||||
Loss per share | $ | (0.05 | ) | $ | (0.02 | ) | $ | (0.10 | ) | $ | (0.09 | ) | ||||
Weighted average number of | ||||||||||||||||
common shares outstanding | 9,585,831 | 4,391,621 | 9,587,024 | 4,391,621 |
See accompanying notes to consolidated interim financial statements.
6
LINGO MEDIA CORPORATION
Consolidated Interim Statements of Cash Flows
(Expressed in Canadian dollars)
(Unaudited - - See Notice to Readers)
Three months ended June 30 | Six months ended June 30 | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
Cash flows provided by (used in): | ||||||||||||||||
Operations: | ||||||||||||||||
Net loss for the period | $ | (491,231 | ) | $ | (79,716 | ) | $ | (944,783 | ) | $ | (389,536 | ) | ||||
Items not affecting cash: | ||||||||||||||||
Amortization of property and equipment | 9,513 | 3,817 | 18,940 | 7,937 | ||||||||||||
Amortization of development costs | 23,526 | 16,598 | 47,458 | 33,196 | ||||||||||||
Stock-based compensation | 143,750 | 41,329 | 187,583 | 58,483 | ||||||||||||
Foreign exchange gain/(loss) | 36,259 | - | 70,466 | - | ||||||||||||
Change in non-cash balances related to operations: | ||||||||||||||||
Accounts and grants receivable | (11,017 | ) | (164,868 | ) | 288,435 | (111,913 | ) | |||||||||
Inventory | (1,120 | ) | 46,697 | (5,499 | ) | 28,342 | ||||||||||
Prepaid and sundry assets | 12,650 | 33,866 | 20,971 | (21,343 | ) | |||||||||||
Accounts payable | 180,514 | 109,876 | 122,423 | 163,130 | ||||||||||||
Accrued liabilities | (173,389 | ) | (27,048 | ) | (96,697 | ) | (84,297 | ) | ||||||||
Unearned revenue | (159,755 | ) | (177,778 | ) | - | - | ||||||||||
Cash provided by (used in) operating activities | (428,291 | ) | (197,227 | ) | (288,694 | ) | (316,001 | ) | ||||||||
Financing: | ||||||||||||||||
Increase in bank loans | 20,000 | (15,000 | ) | (20,000 | ) | (15,000 | ) | |||||||||
Advances of loans payable | - | 199,520 | - | 246,750 | ||||||||||||
Issuance of capital stock | - | - | 3,017 | 5,000 | ||||||||||||
Current portion of long term loan | 212,500 | - | 210,522 | - | ||||||||||||
Cash provided by financing activities | 232,501 | 184,520 | 193,540 | 236,750 | ||||||||||||
Investing: | ||||||||||||||||
Expenditures on software & web development costs | 57,835 | - | (216,204 | ) | - | |||||||||||
Purchase of property and equipment | (4,115 | ) | - | (7,575 | ) | - | ||||||||||
Development costs | - | (15,698 | ) | - | (39,025 | ) | ||||||||||
Cash used in investing activities | 53,720 | (15,698 | ) | (223,779 | ) | (39,025 | ) | |||||||||
Increase / (decrease) in cash | (142,070 | ) | (28,405 | ) | (318,933 | ) | (118,275 | ) | ||||||||
Cash, beginning of period | 166,475 | (16,701 | ) | 343,338 | 73,169 | |||||||||||
Cash, end of period | $ | 24,405 | $ | (45,106 | ) | $ | 24,405 | $ | (45,106 | ) |
See accompanying notes to consolidated interim financial statements.
7
LINGO MEDIA CORPORATION
Consolidated Interim Financial Statements
(Expressed in Canadian dollars)
June 30, 2008 and 2007
(Unaudited - - See Notice to Readers)
1. Nature of Operations:
Lingo Media Corporation is a diversified print and online education product and services corporation. Speak2Me Inc. (“Speak2Me”), a new subsidiary acquired during 2007, is a new media company focused on interactive advertising in China through its Internet-based English Language web Learning portal. Lingo Learning Inc. (formerly Lingo Media Ltd.), a subsidiary of Lingo Media, is a print-based publisher of English language learning programs in China In Canada, Lingo Media through its subsidiary A+ Child Development (Canada) Ltd., specializes in early childhood cognitive development programs which publishes and distributes educational materials along with its proprietary curriculum through its four offices in Calgary, Edmonton, Vancouver and Toronto.
2. Significant Accounting Policies:
(a) Basis of presentation:
The disclosures contained in these unaudited interim consolidated financial statements do not include all the requirements of Canadian generally accepted accounting principles (GAAP) for annual financial statements. The unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended December 31, 2007.
The unaudited interim consolidated financial statements reflect all adjustments, consisting only of normal recurring accruals, which are, in the opinion of management, necessary to present fairly the financial position of the Company as of June 30, 2008 and the results of operations and cash flows for the six months ended June 30, 2008 and 2007.
3. Accounts and Grants Receivable:
Accounts and grants receivable consist of:
June 30, 2008 | December 31, 2007 | |||||||
Trade receivables | $ | 641,746 | $ | 853,384 | ||||
Cash advance | - | 128,007 | ||||||
Grants receivable (note 7) | 66,288 | 15,078 | ||||||
$ | 708,034 | $ | 996,469 |
4. Software and Web Development Costs:
In October 2007, the Company acquired Speak2Me Inc. (“Speak2Me”), a new media company that has developed software combining speech recognition and animation technology for the teaching and practice of spoken English. All costs associated with development of the Speak2Me software and its contents are capitalized as software and web development:
June 30, 2008 | December 31, 2007 | |||||||
Software and web development costs | $ | 4,542,451 | $ | 4,326,246 |
8
LINGO MEDIA CORPORATION
Consolidated Interim Financial Statements
(Expressed in Canadian dollars)
June 30, 2008 and 2007
(Unaudited - - See Notice to Readers)
5. Bank Loans:
June 30, 2008 | December 31, 2007 | |||||||
Revolving line of credit of $500,000 bearing interest at prime plus 4.0% | ||||||||
per annum and secured by a $150,000 GIC, bearing interest at 3.5% | ||||||||
maturing on December 10, 2008, and a charge on all assets including | ||||||||
inventory and accounts receivables. | 210,000 | 230,000 | ||||||
$ | 210,000 | $ | 230,000 |
The terms of the $210,000 revolving line of credit require that certain measurable covenants be met. As at June 30, 2008, the Company was in violation of certain covenants. As the line of credit is currently presented as a current liability no additional adjustment is required.
6. Loans Payable:
Loans payable consists of the following:
June 30, 2008 | December 31, 2007 | |||||||
Loan payable, due to a non-related party, interest bearing at 12% per | ||||||||
annum payable monthly, unsecured and due on demand. | $ | 439,196 | $ | 228,674 | ||||
Loan payable, due to a non-related party, interest bearing at 12% per | ||||||||
annum with monthly interest payments, secured by a general security | ||||||||
agreement and due on April 30, 2009. | 203,031 | 203,031 | ||||||
642,227 | 431,705 | |||||||
Less: Current portion | 439,196 | 228,674 | ||||||
$ | 203,031 | $ | 203,031 |
9
LINGO MEDIA CORPORATION
Consolidated Interim Financial Statements
(Expressed in Canadian dollars)
June 30, 2008 and 2007
(Unaudited - - See Notice to Readers)
7. Capital Stock:
(a) Authorized:
Unlimited preference shares, no par value
Unlimited common shares, no par value
The following details the changes in issued and outstanding common shares:
Common Shares | ||||||||
Number | Amount | |||||||
Balance, January 1, 2007 | 32,578,170 | $ | 5,028,656 | |||||
Issued: | ||||||||
Options exercised | 282,600 | 59,450 | ||||||
32,860,770 | $ | 5,088,106 | ||||||
Share Consolidation (1 new for 7 old) | 4,694,396 | 5,088,106 | ||||||
Issued: | ||||||||
Private Placement (iv) | 387,500 | 775,000 | ||||||
Common Shares issued for the acquisition of Speak2Me Inc. | 4,500,366 | 4,536,351 | ||||||
Less: Share issue costs | - | (63,750 | ) | |||||
Balance, December 31, 2007 | 9,582,262 | $ | 10,335,707 | |||||
Issued: | ||||||||
Options exercised | 4,762 | 3,017 | ||||||
Balance, June 30, 2008 | 9,587,024 | $ | 10,338,725 |
(b) Stock options
2008 | 2007 | |||||||||||||||
Number of shares | Weighted average exercise price | Number of shares | Weighted average exercise price | |||||||||||||
Options outstanding, beginning of year | 516,738 | $ | 0.98 | 275,634 | $ | 1.33 | ||||||||||
Options granted | 420,000 | 1.24 | 300,000 | 0.68 | ||||||||||||
Options exercised | (4,762 | ) | 0.70 | 40,372 | 0.84 | |||||||||||
Options expired/canceled | (595 | ) | 0.70 | (68,524 | ) | - | ||||||||||
Outstanding, June 30, 2008 | 913,381 | 0.98 | 516,738 | 0.98 | ||||||||||||
Options exercisable, June 30, 2008 | 913,381 | $ | 0.98 | 338,509 | $ | 1.10 |
The following table summarizes information about stock options outstanding at June 30, 2008:
Options outstanding | Options exercisable | |||||||||||||||||||||
Range of exercise prices | Number outstanding | Weighted average remaining contractual life | Weighted average exercise price | Number outstanding | Weighted average exercise price | |||||||||||||||||
$ | 0.70 - $1.00 | 397,011 | 4.40 | $ | 0.74 | 138,545 | $ | 0.74 | ||||||||||||||
$ | 1.01 - $1.33 | 138,656 | 1.98 | 1.30 | 138,656 | 1.30 | ||||||||||||||||
$ | $1.34 - $2.00 | 395,713 | 3.98 | 1.17 | 60,713 | 1.46 | ||||||||||||||||
Total | 913,380 | 3.86 | 1.00 | 337,914 | 1.11 |
10
LINGO MEDIA CORPORATION
Consolidated Interim Financial Statements
(Expressed in Canadian dollars)
June 30, 2008 and 2007
(Unaudited - - See Notice to Readers)
8. Government Grants:
Included as a reduction of general and administrative expenses are government grants of $ 45,000 (Q2-2007 – $61,067), relating to the Company's publishing projects in China and Canada.
Certain government grants are repayable in the event that the Company's annual net income for each of the previous two years exceeds 15% of revenue. During the year, the conditions for the repayment of grants did not arise and no liability was recorded.
9. Financial Instruments and Risk Management:
The Company as part of its operations carries a number of financial instruments. It is management's opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments except as otherwise disclosed.
(a) Currency Risk:
The Company is subject to currency risk through its activities outside of Canada. Unfavourable changes in the exchange rate may affect the operating results of the Company. The Company is also exposed to currency risk as a substantial amount of its revenue is denominated in U.S. dollars and Chinese Renminbi ("RMB").
There were no derivative instruments outstanding at June 30, 2008 and 2007.
(b) Financial Instruments:
The significant financial instruments of the Company, their carrying values and the exposure to U.S. dollar denominated monetary assets and liabilities, as of June 30, 2008 are as follows:
US Denominated | Chinese Denominated | |||||||||||||||
CAD | USD | CAD | RMB | |||||||||||||
Cash | 24,405 | 24,815 | - | - | ||||||||||||
Accounts and grants receivable | 321,426 | 326,828 | 386,608 | 3,092,862 | ||||||||||||
Accounts payable | 894,858 | 909,896 | 50,382 | 403,060 |
US dollars and Chinese Renminbi are converted on the prevailing year-end exchange rates.
(c) Fair Market Values:
The carrying values of cash, short-term investment, accounts and grants receivable, accounts payable, accrued liabilities, bank loans and loans payable approximate their fair values due to the relatively short periods to maturity.
(d) Concentration of Risk:
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and accounts receivable. Cash and short-term investment consist of deposits with major financial institutions. With respect to accounts receivable, the Company performs periodic credit evaluations of the financial condition of its customers and typically does not require collateral from them. Management assesses the need for allowances for potential credit losses by considering the credit risk of specific customers, historical trends and other information.
11
LINGO MEDIA CORPORATION
Consolidated Interim Financial Statements
(Expressed in Canadian dollars)
June 30, 2008 and 2007
(Unaudited - - See Notice to Readers)
(d) Interest Rate Risk:
The Company manages its exposure to interest rate risk through floating rate borrowings. The floating rate debt is subject to interest rate cash flow risk, as the required cash flows to service the debt will fluctuate as a result of changes in market rates.
10. Segmented Information:
The Company operates two distinct reportable business segments as follows:
English Language Learning: The Company develops, publishes and licenses book, audio/video cassette, CD-based product and supplemental product for English language learning for the educational school market in China. The Company has also developed a new media platform that focuses on online advertising in China via its internet-based English Language Learning portal and through its subsidiary, Speak2Me Inc.
Early Childhood Development: The Company specializes in early childhood cognitive development programs, through the publishing and distribution of educational materials along with its proprietary curriculum through its four offices in Calgary, Edmonton, Vancouver and Toronto.
June 30, 2008 | English Language Learning | Early Childhood Development | Total | |||||||||
Revenue | $ | 393,709 | $ | 1,435,397 | $ | 1,829,106 | ||||||
Cost of sales | 50,626 | 282,275 | 332,901 | |||||||||
Margin | $ | 343,083 | $ | 1,153,122 | $ | 1,496,205 |
June 30, 2007 | English Language Learning | Early Childhood Development | Total | |||||||||
Revenue | $ | 261,182 | $ | 1,332,329 | $ | 1,593,511 | ||||||
Cost of Sales | 37,665 | 282,136 | 319,801 | |||||||||
Margin | $ | 223,517 | $ | 1,050,193 | $ | 527,960 |
The Company's revenue by geographic region based on the region in which the customers are located is as follows:
June 30, 2008 | June 30, 2007 | |||||||
Canada | $ | 1,436,260 | $ | 1,332,916 | ||||
China | 392,846 | 260,595 | ||||||
$ | 1,829,106 | $ | 1,593,511 |
12
LINGO MEDIA CORPORATION
Consolidated Interim Financial Statements
(Expressed in Canadian dollars)
June 30, 2008 and 2007
(Unaudited - - See Notice to Readers)
The majority of the Company’s identifiable assets as at June 30, 2008 are located as follows:
June 30, 2008 | December 31, 2007 | |||||||
Canada | $ | 2,907,872 | $ | 3,327,303 | ||||
China | 4,542,451 | 4,560,247 | ||||||
$ | 7,450,323 | $ | 7,887,550 |
11. Subsequent Event:
On August 26, 2008 the Company announced that it had signed a non-brokered private placement (the “Financing”) with Orascom Telecom Holdings S.A.E. (“Orascom Telecom”). The Financing includes the issuance of 2,857,143 special warrants (“Special Warrants”) at a price of $1.75 per Special Warrant for gross proceeds of $5,000,000.
Each Special Warrant is convertible for no additional consideration into units (“Units”), with each Unit consisting of one common share (“Common Share”) and three-quarters (0.75) of one share purchase warrant (“Warrant”). Each whole Warrant being exercisable to acquire one further Common Share for a period of 24 months from the Closing Date (as defined below): (i) at a price of $4.00 for a period of 12-months from the Closing Date, (ii) at a price of $6.00 per Common Share if exercised between 12-18 months from the Closing Date, and (iii) at a price of $8.00 per Common Share if exercised between 18-24 months from the Closing Date. The Warrants are callable, 120 days after the Closing Date, at the option of Lingo Media, in the event the Common Shares of the Company trade at or over 50% above the strike price of the Warrant for 10 consecutive trading days.
Upon the automatic conversion of the Special Warrants into Units, Orascom Telecom will become a new control person of Lingo Media, holding 22.96% of the issued and outstanding Common Shares of the Company (or 34.28% on a fully diluted basis).
Pursuant to applicable securities laws and TSX Venture Exchange rules regarding new control persons, the Company will seek shareholder approval of the Financing at its annual and special meeting scheduled for October 14, 2008.
Lingo Media anticipates that payment and delivery of the Special Warrants (the "Closing") will occur on or about September 4, 2008, or such other date as may determined by the Company and Orascom Telecom (“Closing Date”). In the event that the closing conditions are not met, the Company agrees to repurchase the Special Warrants consistent with the terms of the arrangement.
The proceeds from the Financing will be used for on-going development, maintenance and operation of Lingo Media’s Speak2Me web portal and for general working capital purposes.
13
LINGO MEDIA CORPORATION
Consolidated Interim Financial Statements
(Expressed in Canadian dollars)
June 30, 2008 and 2007
(Unaudited - - See Notice to Readers)
12. Reconciliation of Canadian and United States generally accepted accounting principles ("GAAP"):
These interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles ("GAAP") in Canada. Except as set out below, these financial statements also comply, in all material aspects, with the United States generally accepted accounting principles.
The following tables reconcile results as reported under Canadian GAAP with those that would have been reported under United States GAAP.
Statements of Operations:
June 30, 2008 | June 30, 2007 | |||||||
Loss for the period - Canadian GAAP | $ | (944,738 | ) | $ | (389,536 | ) | ||
Impact of United States GAAP and adjustments: | ||||||||
Amortization of development costs | 47,458 | 16,598 | ||||||
Software and web development costs | (216,204 | ) | - | |||||
Loss for the period - United States GAAP | $ | (1,111,520 | ) | $ | (372,938 | ) |
Statements of cash flows:
June 30, 2008 | June 30, 2007 | |||||||
Cash (used in) provided by investing activities – Canadian GAAP | $ | (223,779 | ) | $ | (39,025 | ) | ||
Impact of United States GAAP and adjustments: | ||||||||
Write-off of Software & web development costs | 216,204 | - | ||||||
Cash used in investing activities - United States GAAP | $ | (7,575 | ) | $ | (39,025 | ) |
June 30, 2008 | June 30, 2007 | |||||||
Cash (used in) provided by operating activities – Canadian GAAP | $ | (288,694 | ) | $ | (316,001 | ) | ||
Impact of United States GAAP and adjustments: | ||||||||
Write-off of Software & web development costs | (216,204 | ) | - | |||||
Cash used in operating activities - United States GAAP | $ | (504,898 | ) | $ | (316,001 | ) |
The cumulative effect of these adjustments on the consolidated shareholders' equity of the Company is as follows:
June 30, 2008 | December 31, 2007 | |||||||
Shareholders' equity - Canadian GAAP | $ | 5,167,894 | $ | 5,885,677 | ||||
Development costs | (153,846 | ) | (153,846 | ) | ||||
Compensation expense | (287,083 | ) | (243,250 | ) | ||||
Deferred costs | (157,419 | ) | (157,419 | ) | ||||
Software & web development costs | (216,204 | ) | (216,204 | ) | ||||
Shareholders' equity - United States GAAP | $ | 4,353,342 | $ | 5,114,957 |
13