Company Quick10K Filing
Quick10K
Lingo Media
20-F 2018-12-31 Annual: 2018-12-31
20-F 2017-12-31 Annual: 2017-12-31
20-F 2016-12-31 Annual: 2016-12-31
20-F 2015-12-31 Annual: 2015-12-31
SPB Spectrum Brands Holdings 2,661
APTI Apptio 1,641
ITUS ITUS 67
MFST Medifirst Solutions 0
FCCN Spectral Capital 0
RSAP Reign Sapphire 0
CQCQ Makingorg 0
SRUP Sirrus 0
INTB Intelligent Buying 0
AMHI Ameri Holdings 0
LMDC 2018-12-31
Part I
Item 1. Identity of Directors, Senior Management and Advisors
Item 2. Offer Statistics and Expected Timetable
Item 3. Key Information
Item 4. Information on The Company
Item 4A. Unresolved Staff Comments
Item 5. Operating and Financial Review and Prospects
Item 6. Directors, Senior Management and Employees
Item 7. Major Shareholders and Related Party Transactions
Item 8. Financial Information
Item 9. The Offer and Listing
Item 10. Additional Information
Item 11. Quantitative and Qualitative Disclosures About Market Risk
Item 12. Description of Securities Other Than Equity Securities
Part II
Item 13. Defaults, Dividend Arrearages and Delinquencies
Item 14. Material Modifications To The Rights of Security Holders and Use of Proceeds
Item 15. Controls and Procedures
Item 16. Reserved
Item 16A. Audit Committee Financial Expert
Item 16B. Code of Ethics
Item 16C. Principal Accountant Fees and Services
Item 16D. Not Applicable
Item 16E. Not Applicable
Item 16F. Not Applicable
Item 16G. Not Applicable
Item 16H. Not Applicable
Part III
Item 17. Financial Statements
Item 18. Financial Statements
Item 19. Exhibits
EX-12.1 ex_144808.htm
EX-12.2 ex_144809.htm
EX-13.1 ex_144810.htm

Lingo Media Earnings 2018-12-31

LMDC 20F Annual Report

Balance SheetIncome StatementCash Flow

20-F 1 lmdcf20181231_20f.htm FORM 20-F lmdcf20181231_20f.htm
 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Annual Report

FORM 20-F

 

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

 

OR

X

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

  For the fiscal year ended December 31, 2018

 

OR

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

 

OR

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

 

Date of event requiring this shell company report . . . . . . . . . . . . . . . . . . .

 

For the transition period from __________ to ________

 

Commission file number 333-98397

 

LINGO MEDIA CORPORATION

(FORMERLY LINGO MEDIA INC.)

(Exact name of Registrant as specified in its charter)

 

Ontario, Canada

(Jurisdiction of incorporation or organization)

 

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

(Address of principal executive offices)

 

Gali Bar-Ziv, President & CEO

Tel: (416) 927-7000 x33 Fax: (416) 927-1222 Email: investor@lingomedia.com

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

 

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Shares

LM

TSX Venture Exchange

Common Shares

LMDCF

OTC Markets

Common Shares

LIMA

Frankfurt Stock Exchange

 

Securities to be registered pursuant to Section 12(b) of the Act:

None

 

Securities to be registered pursuant to Section 12(g) of the Act:

Common Shares, without par value

(Title of Class)

 

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

 

 

 

 

Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report. 35,529,192

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act

Yes ___ No X

 

If this report is an annual transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes ___ No X

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X   No ___

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File rerquiredd to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ___ No X

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):

 

Large accelerated filer ___ Accelerated Filer ___            Non-accelerated filer X    
   

Emerging growth company ___

   

                                                                                

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.   ___

 

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

 

U.S. GAAP ____ International Financial Reporting Standards as issued by the International Accounting Standards Board X  Other ____

 

If “Other” has been checked in response to the previous question mark, indicate by check mark which financial statement item the registrant has elected to follow: Item 17          Item 18 ___

 

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ___ No X

 

2

 

 

 

LINGO MEDIA CORPORATION

FORM 20-F ANNUAL REPORT

TABLE OF CONTENTS

 

PART I

     

Item 1.

Identity of Directors, Senior Management and Advisors

4

Item 2.

Offer Statistics and Expected Timetable

4

Item 3.

Key Information

4

Item 4.

Information on the Company

12

Item 4A.     

Unresolved Staff Comments

20

Item 5.

Operating and Financial Review and Prospects

20

Item 6.

Directors, Senior Management and Employees

29

Item 7.

Major Shareholders and Related Party Transactions

38

Item 8.

Financial Information

39

Item 9.

The Offer and Listing

48

Item 10.

Additional Information

43

Item 11.

Quantitative and Qualitative Disclosures about Market Risk

53

Item 12.

Description of Securities Other Than Equity Securities

55

     

PART II

     

Item 13.

Default, Dividend Arrearages and Delinquencies

55

Item 14.

Material Modifications to the Rights of Security Holders and Use of Proceeds

55

Item 15.

Controls and Procedures

55

Item 16.      

Reserved

57

Item 16A.

Audit Committee Financial Expert

57

Item 16B.

Code of Ethics

57

Item 16C.

Principal Accountant Fees and Services

58

Item 16D.   

Exemptions from the Listing Standards for Audit Committees

58

Item 16E.   

Purchase of Equity Security by the Issuer and Affiliated Purchasers

58

Item 16F.  

Change in Registrant’s Certifying Accountant

58

Item 16G.  

Corporate Governance

58

Item 16H.

Mine Safety Disclosure

58

     

PART III

 

Item 17.

Financial Statements

58

Item 18.

Financial Statements

59

Item 19.

Exhibits

59

 

3

 

 

 

Forward-Looking Statements

 

This Annual Report on Form 20-F contains certain forward-looking statements, which reflect management’s expectations regarding the Company’s results of operations, performance, growth, and business prospects and opportunities.

 

Statements about the Company’s future plans and intentions, results, levels of activity, performance, goals or achievements or other future events constitute forward-looking statements. Wherever possible, words such as "may," "will," "should," "could," "expect," "plan," "intend," "anticipate," "believe," "estimate," "predict," or "potential" or the negative or other variations of these words, or similar words or phrases, have been used to identify these forward-looking statements. These statements reflect management’s current beliefs and are based on information currently available to management as at the date hereof.

 

Forward-looking statements involve significant risk, uncertainties and assumptions. Many factors could cause actual results, performance or achievements to differ materially from the results discussed or implied in the forward-looking statements. These factors should be considered carefully and readers should not place undue reliance on the forward-looking statements. Although the forward-looking statements contained in this Annual Report are based upon what management believes to be reasonable assumptions, the Company cannot assure readers that actual results will be consistent with these forward-looking statements. These forward-looking statements are made as of the date of this Annual Report, and the Company assumes no obligation to update or revise them to reflect new events or circumstances, except as required by law. Many factors could cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, including: general economic and market segment conditions, competitor activity, product capability and acceptance, international risk and currency exchange rates and technology changes. More detailed assessment of the risks that could cause actual results to materially differ than current expectations is contained in the sections entitled "Risk Factors", “Information on the Company” and “Operating and Financial Review and Prospects”.

 

PART I

 

ITEM 1. Identity of Directors, Senior Management and Advisors

 

Not applicable

 

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

 

Not applicable.

 

ITEM 3. KEY INFORMATION

 

Lingo Media Corporation (“Lingo Media” or the “Company”) is a publicly listed company incorporated in Canada with limited liability under the legislation of the Province of Ontario and its shares are listed on the TSX Venture Exchange and inter-listed on the OTC Marketplace. The consolidated financial statements of the Company as at and for the year ended December 31, 2018 comprise the Company and its wholly owned subsidiaries: Lingo Learning Inc., ELL Technologies Ltd., Vizualize Technologies Corporation, ELL Technologies Limited, 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.

 

4

 

 

3.A      Selected Financial Data

 

The consolidated 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 International Financial Reporting Interpretations Committee (“IFRIC”).

 

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

 

The Company has not declared any dividends since incorporation and does not anticipate that it will do so in the foreseeable future. The present policy of the Company is to retain any future earnings for use in its operations and the expansion of its business.

 

The following data for the fiscal years ended December 31, 2018, 2017, 2016, 2015, and 2014 is derived from our consolidated financial statements prepared in accordance with IFRS as issued by the IASB and all are expressed in Canadian Dollars.

 

   

Fiscal Year Ended December 31

 

         
   

2018

   

2017

   

2016

   

2015

   

2014

 

Revenue

  $ 1,940,182     $ 2,776,768     $ 3,195,221     $ 4,925,735     $ 2,512,464  

Profit/(Loss) from Operations

    98,925       (5,839,868 )     434,319       2,601,824       523,736  

Total Comprehensive Profit/(Loss)

    (71,954 )     (6,262,792 )     124,420       2,374,699       107,406  

Total Assets

    1,302,004       1,534,072       7,176,192       5,232,951       2,423,438  

Current Assets

    1,248,840       1,503,383       3,709,077       2,858,710       1,411,416  

Issued Share Capital

    35,529,192       35,529,192       35,529,192       29,518,343       22,379,177  

Weighted Average Number of Common Shares Outstanding

    35,529,192       35,529,192       33,987,383       26,288,889       21,986,300  

Total Equity

    558,594       553,754       6,445,033       4,046,784       743,956  

Dividends per Common Share

 

NIL

   

NIL

   

NIL

   

NIL

   

NIL

 

Earnings/(Loss) per Share

                                       

Basic

  $ (0.00 )   $ (0.18 )   $ 0.00     $ 0.10     $ 0.01  

Diluted

  $ (0.00 )   $ (0.18 )   $ 0.00     $ 0.09     $ 0.01  

 

5

 

 

3.A.3.      Exchange Rates

 

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

 

The table sets forth the rate of exchange for the Canadian Dollar at the end of the five most recent fiscal periods ended December 31st, the average rates for the period and the range of high and low rates for the period. The data for each month during the previous twelve months is also provided.

 

Table No. 4

U.S. Dollar/Canadian Dollar

 

   

Average

   

High

   

Low

   

Close

 

Mar-19

    1.3368       1.3471       1.3128       1.3342  

Feb-19

    1.3206       1.3343       1.3066       1.3165  

Jan-19

    1.3301       1.3664       1.3116       1.3142  

Dec-18

    1.3432       1.3664       1.3157       1.3644  

Nov-18

    1.3200       1.3362       1.3047       1.3285  

Oct-18

    1.3010       1.3173       1.2780       1.3124  

Sept-18

    1.3037       1.3228       1.2882       1.2921  

Aug-18

    1.3041       1.3176       1.2885       1.3077  

Jul-18

    1.3130       1.3291       1.2983       1.3014  

Jun-18

    1.3129       1.3387       1.2857       1.3141  

May-18

    1.2873       1.3049       1.2727       1.2966  

Apr-18

    1.2733       1.2945       1.2524       1.2817  
                                 

Fiscal Yr Ended December 31, 2018

    1.2961       1.3642       1.2552       1.3644  

Fiscal Yr Ended December 31, 2017

    1.2986       1.3743       1.2128       1.2545  

Fiscal Yr Ended December 31, 2016

    1.3219       1.4691       1.2458       1.3433  

Fiscal Yr Ended December 31, 2015

    1.1048       1.1643       1.0614       1.1601  

Fiscal Yr Ended December 31, 2014

    1.0302       1.0697       0.9839       1.0636  

 

3.B.      Capitalization and Indebtedness

 

Not applicable

 

3.C.      Reasons for the Offer and Use of Proceeds

 

Not applicable

 

6

 

 

3.D.      Risk Factors

 

Financial risk management objectives and policies

 

The financial risk arising from the Company’s operations are currency risk, liquidity risk and credit 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 accounts receivable and the policies on how to mitigate these risks are as follows:

 

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 are as follows:

 

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 monetary assets and liabilities denominated in currencies other than the Canadian Dollar 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.

 

The Company has been exposed to this fluctuation and has not implemented a program against these foreign exchange fluctuations.

 

A 10% strengthening of the US Dollars against Canadian Dollars would have increased the net equity by approximately $63,030 (2017 - $67,000) due to reduction in the value of net liability balance. A 10% weakening of the US Dollar against Canadian Dollar at December 31, 2018 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 December 31, 2018 and 2017 are as follows:

 

 

   

2018

   

2017

 
   

USD

   

USD

 

Cash

    14,741       122,319  

Accounts receivable

    660,704       518,999  

Accounts payable

    189,586       104,225  

Accrued liabilities

    23,882       -  

 

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 December 31, 2018, the Company had cash of $233,843 (2017 - $327,434), accounts and grants receivable of $913,458 (2017 - $970,467) to settle current liabilities of $743,410 (2017 - $980,318).

 

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 December 31, 2018, the Company has outstanding receivables of $913,458 (2017 - $970,467). New impairment requirements use an 'expected credit loss' ('ECL') model to recognize an allowance. Impairment is measured using a 12-month ECL method unless the credit risk on a financial instrument has increased significantly since initial recognition in which case the lifetime ECL method is adopted. For receivables, a simplified approach to measuring expected credit losses using a lifetime expected loss allowance is available. The Company deposits its cash with high credit quality financial institutions, with the majority deposited within Canadian Tier 1 Banks.

 

7

 

 

Dependence on Major Customer

 

The Company had sales to a major customer in 2018 and 2017, a government agency of the People’s Republic of China. The total percentage of sales to this customer during the year was 80% (2017 – 59%, 2016 – 54%) and the total percentage of accounts receivable at December 31, 2018 was 89% (2017 – 84%, 2016 – 52%).

 

Market Trends and Business Uncertainties

 

Lingo Media believes that the global market trends in English language learning are strong and will continue to grow. Developing countries around the world, specifically in Latin America and Asia are expanding their mandates for the teaching of English amongst students, young professionals and adults. The British Council suggests that there are 1.6 billion people learning English globally. English language learning products and services are currently a US$56.3 billion global market notes Ambient Insight.

 

GlobalEnglish forecasts the global eLearning market to grow to $37.6 billion by 2020, while experiencing exponential growth to reach $325 billion worldwide by 2025.

 

Markets and Markets forecasts the global EdTech market to grow from US$43.27 billion in 2015 to US$93.76 billion to 2019, or at a CAGR or 16.72%.

 

Latin American Region

 

The Inter-American Dialogue recently noted that while English language training programs exist in various forms throughout Latin American region, there are three key factors that these programs must address to be successful: ensuring continuity, developing a strong monitoring and evaluation framework that informs adaptation, and addressing the lack of sufficient quality teachers. Students attending English language training (“ELT”) classes in Latin America accounted for approximately 14 per cent of worldwide revenues, or US$321-million in 2017. Growth has been very rapid in the Latin American region and represents a particularly strong opportunity moving forward relative to other geographic regions.

 

Asia-Pacific Region

 

Technavio forecasts the English language training (ELT) market in China to be worth $75 billion by 2022, growing at a CAGR of 22%. The growth of the ELT market in China is driven by more people desiring to learn English, the adaptation of smartphones, increasing levels of disposable income, and the inherent advantages of online education. Technavio also notes that 49% of the growth in the global digital English language learning market will come from the Asia-Pacific region.

 

Lingo Media is positioned to take advantage of the market opportunity for English language training in Latin America and Asia, with its scalable digital language learning technology and solutions. Although the market outlook remains positive, there can be no assurance that this trend will continue or that the Company will benefit from this trend.

 

8

 

 

Competitive Markets

 

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

 

Failure of Delivery Infrastructure to Perform Consistently

 

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

 

The Company’s delivery infrastructure is susceptible to natural or man-made disasters such as earthquakes, floods, fires, power loss and sabotage, as well as interruptions from technology malfunctions, computer viruses and hacker attacks. Other potential service interruptions may result from unanticipated demands on network infrastructure, increased traffic or problems in customer service. Significant disruptions in the delivery infrastructure could harm the Company’s goodwill and its brands and ultimately could significantly and negatively impact the amount of revenue it may earn from its service. Like all Internet transmissions, our services may be subject to interception and malicious attack. Pirates may be able to obtain or copy our products without paying fees. The delivery infrastructure is exposed to spam, viruses, worms, trojan horses, malware, spyware, denial of service or other attacks by hackers and other acts of malice. The Company uses security measures intended to make theft of its software more difficult. However, if the Company is required to upgrade or replace existing security technology, the cost of such security upgrades or replacements could have a material adverse effect on our financial condition, profitability and cash flows.

 

Limited Intellectual Property Protection

 

The Company relies on a combination of copyright and trademark laws, trade secrets, confidentiality procedures and contractual provisions to protect its proprietary rights. In addition, our success may depend, in part, on its ability to obtain patent protection and operate without infringing the rights of third parties. There can be no assurance that, once filed, the Company’s patent applications will be successful, that we will develop future proprietary products that are patentable, that any issued patents will provide us with any competitive advantages or will not be successfully challenged by any third parties or that the patents of others will not have an adverse effect on the ability of the Company to do business. In addition, there can be no assurance that others will not independently develop similar products, duplicate some or all of our products or, if patents are issued, design their products so as to circumvent the patent protection held by the Company. We protect our product documentation and other written materials under trade secret and copyright laws which afford only limited protection. Despite precautions taken by the Company, it may be possible for unauthorized third parties to copy aspects of our business and marketing plans or future strategic documents or to obtain and use information that we regard as proprietary. There can be no assurance that the Company’s means of protecting its proprietary rights will be adequate or that our competitors will not independently develop similar or superior technology. Litigation may be necessary in the future to enforce our intellectual property rights, to protect trade secrets or to determine the validity and scope of the propriety rights of others. Such litigation could result in substantial costs and diversion of resources, and there can be no guarantee of the ultimate success thereof.

 

9

 

 

Government Regulation and Licensing

 

The Company’s operations may be subject to Canadian and foreign provincial and/or state and federal regulations and licensing. There can be no assurance that we will be able to comply with the regulations or secure and maintain the required licensing for its operations. Government regulation and licensing could seriously impact our ability to achieve its financial and operational objectives. The Company is subject to local, provincial and/or state, federal, and international laws affecting companies conducting business on the Internet, including user privacy laws, laws giving special protection to children, regulations prohibiting unfair and deceptive trade practices and laws addressing issues such as freedom of expression, pricing and access charges, quality of products and services, taxation, advertising, intellectual property rights and information security. The restrictions imposed by and the costs of complying with, current and possible future laws and regulations related to its business could limit our growth and reduce client base and revenue.

 

Operating in Foreign Jurisdictions

 

The Company’s current and future development opportunities relate to geographical areas outside of Canada. There are a number of risks inherent in international business activities, including government policies concerning the import and export of goods and services, costs of localizing products and subcontractors in foreign countries, costs associated with the use of foreign agents, potentially adverse tax consequences, limits on repatriation of earnings, the burdens of complying with a wide variety of foreign laws, nationalization and possible social, labor, political and economic instability. There can be no assurance that such risks will not adversely affect the business, financial condition and results of operations. Furthermore, a portion of expenditures and revenues will be in currencies other than the Canadian Dollar. Foreign exchange exposure may change over time with changes in the geographic mix of its business activities. Foreign currencies may be unfavorably impacted by global developments, country-specific events and many other factors. As a result, future results may be adversely affected by significant foreign exchange fluctuations.

 

Economic Conditions

 

Unfavorable economic and market conditions could increase our financing costs, reduce demand for our products and services, limit access to capital markets and negatively impact any access to future credit facilities. Expenditures by educational institution, government and corporation tend to be cyclical, reflecting overall economic conditions as well as budgeting and purchasing patterns.

 

Working Capital

 

We may need to raise additional funds in order to finance our operations and growth strategy. The Company expects that corporate growth will be funded from cash flow equity and/or debt financing(s) to help generate any required capital. Insuring that capital is available to increase production; sales and marketing capacity; and to provide support materials and training in the market place and to expand is essential to success. There can be no assurance that financing will be available on terms favorable to us, or at all. If adequate funds are not available on acceptable terms, we may be forced to curtail or cease our operations. Even if we are able to continue our operations, the failure to obtain financing could have a substantial adverse effect on our business and financial results.

 

Uncertainty of Assumptions Underlying Business Plan

 

The Company’s business plan is based upon numerous assumptions that may later prove to be incorrect. The Company’s ability to adhere to its business plan will depend upon a variety of factors, many of which are beyond the Company’s control. Likewise, the Company’s management is not bound to follow its business plan, and may elect to adopt other strategies and courses of action based upon changes in circumstances and/or market conditions. The Company cannot assure that the actual results of the Company’s operations will materially conform to its business plan.

 

10

 

 

Success Dependent on Key Management Personnel

 

The success of the Company is highly dependent on the skills, experience and successful performance of the Company’s management team. The loss of such services could adversely affect development of the Company’s business, revenues, cash flows and profitability.

 

Managing Growth

 

The Company must expand its business to achieve greater profitability. Any further expansion of the Company’s business may strain its current managerial, financial, operational, and other resources. Success in managing this expansion and growth will depend, in part, upon the ability of senior management to manage growth effectively. Any failure to do so may lead to inefficiencies and redundancies, and result in reduced growth prospects. As a result, the Company’s profitability, if any, may be curtailed or eliminated.

 

Supply Failures

 

The Company relies on third parties for the timely supply of maintenance services. Although the Company actively manages these third-party relationships to ensure continuity of services on time and to its required specifications, some events beyond its control could result in the complete or partial failure of services or services not being delivered on time. Any such failure could negatively affect the Company’s operating results.

 

Our Public Trading Market is Highly Volatile

 

The Company's common shares trade on the TSX Venture Exchange under the symbol "LM", and had previously traded on the OTC Markets under the symbol “LMDCF”.

 

The market price of our common shares could fluctuate substantially due to:

 

 

Quarterly fluctuations in operating results;

 

Announcements of new products or services by us or our competitors;

 

Technological innovations by us or our competitors;

 

General market conditions or market conditions specific to our or our customer’s industries; or

 

Changes in earning estimates or recommendations by analysts.

 

Penny Stock Rules

 

Our common shares had previously been quoted on the OTC Marketplace; a quotation system for equity securities. It is a more limited trading market than the NASDAQ, and timely, accurate quotations of the price of our common shares may not always be available. You may expect trading volume to be low in such a market. Consequently, should trading resume on such market, the activity of only a few shares may affect the market and may result in wide swings in price and in volume.

 

11

 

 

Our common shares had been listed on the OTC Marketplace, and had been subject to the requirements of Rule 15(g)- 9, promulgated under the Securities Exchange Act. Under such rule, broker-dealers who recommend low-priced securities to persons other than established customers and accredited investors must satisfy special sales practice requirements, including a requirement that they make an individualized written suitability determination for the purchaser and receive the purchaser’s consent prior to the transaction. The Securities Enforcement Remedies and Penny Stock Reform Act of 1990 also requires additional disclosure in connection with any trade involving a stock defined as a penny stock. Generally, the Commission defines a penny stock as any equity security not traded on an exchange or quoted on NASDAQ that has a market price of less than $5.00 per share. The required penny stock disclosures include the delivery, prior to any transaction, of a disclosure schedule explaining the penny stock market and the risks associated with it. Such requirements could severely limit the market liquidity of the securities and the ability of purchasers to sell their securities in the secondary market.

 

The stock market has experienced significant price and volume fluctuations, and the market prices of companies, have been highly volatile. Investors may not be able to sell their shares at or above the then current price. In addition, our results of operations during future fiscal periods might fail to meet the expectations of stock market analysts and investors. This failure could lead the market price of our common shares to decline.

 

There is Uncertainty as to the Company’s Shareholders’ Ability to Enforce Civil Liabilities Both Within and Outside of the United States

 

The preponderance of our assets are located outside the United States and are held through companies incorporated under the laws of Canada, Hong Kong, China, and the United Kingdom and representative office in China. In addition, all of our directors and officers are nationals and/or residents of countries other than the United States. All or a substantial portion of the assets of these persons are located outside the United States. As a result, it may be difficult for shareholders to effect service of process within the United States upon these persons. In addition, investors may have difficulty enforcing, both in and outside the United States, judgments based upon the civil liability provisions of the securities laws of the United States or any State thereof.

 

ITEM 4. INFORMATION ON THE COMPANY

 

4.A.        History and Development of the Company

 

Incorporation and Name Changes

 

The Company was incorporated under the name Alpha Publishing Inc. pursuant to the Business Corporations Act (Alberta) on April 22, 1996. The name was changed to Alpha Ventures Inc. on May 24, 1996. Pursuant to Articles of Continuance effective April 22, 1998, the Company was continued as an Ontario company under the provisions of the Business Corporations Act (Ontario) under the name, Alpha Communications Corp. The name was changed to Lingo Media Inc. on July 4, 2000, and changed to Lingo Media Corporation on October 16, 2007.

 

The Company currently has two active segments: Lingo Learning Inc. ("LLI") and ELL Technologies Ltd. (“ELL Technologies”)

 

Lingo Learning Inc. was incorporated pursuant to the Business Corporations Act (Ontario) on November 21, 1994 under the name Alpha Corporation. Alpha Corporation changed its name to Lingo Media Ltd. on August 25, 2000 and again on March 6, 2008 to Lingo Learning Inc.

 

ELL Technologies Limited was incorporated pursuant to the Companies Act of United Kingdom under the name The Q Group Limited. On April 29, 2010, the Company changed its name to ELL Technologies Limited.

 

12

 

 

ELL Technologies Ltd. was incorporated pursuant to the Business Corporations Act (Ontario) on February 23, 2012 under the name 2318041 Ontario Inc. 2318041 Ontario Inc. changed its name to ELL Technologies Ltd. on January 15, 2014.

 

Vizualize Technologies Corporation was incorporated pursuant to the Business Corporation Act (Ontario) on March 22, 2010.

 

Speak2Me Inc. was incorporated pursuant to the Business Corporations Act (Ontario) on February 22, 2007.

 

Parlo Corporation was incorporated pursuant to the Business Corporations Act (Ontario) on September 24, 2009.

 

The Company’s Executive Office is located at:

151 Bloor Street West

Suite 703

Toronto, Ontario, Canada M5S 1S4

Telephone: (416) 927-7000

Facsimile: (416) 927-1222

E-mail: investor@lingomedia.com

Website: www.lingomedia.com

 

The Company’s Beijing Representative Office is located at:

8 Xiao Yun Road, Suite 201, Unit 083A

Chao Yang District, Beijing China 100020

 

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

The Company's common shares trade on the TSX Venture Exchange under the symbol "LM", are quoted on the Frankfurt Stock Exchange under the symbol “LIMA” and the German securities code is (WKN) 121226, and had previously been on the OTC Market under the symbol “LMDCF”.

 

4.B.      BUSINESS OVERVIEW

 

Background

 

Lingo Media (“Lingo Media,” the “Company,” “we” or” us”) is an EdTech company that is ‘Changing the way the world learns Languages’ through the combination of education with technology. The Company is focused on online and print-based technologies and solutions through its two subsidiaries: Lingo Learning Inc. (Lingo Learning”) and ELL Technologies Ltd. (“ELL Technologies”). Through its two distinct business units, Lingo Media develops, markets and supports a suite of English language learning solutions consisting of web-based software licensing subscriptions, online and professional services, audio practice tools and multi-platform applications. The Company continues to operate its legacy textbook publishing business from which it collects recurring royalty revenues.

 

Lingo Media’s two distinct operating units include ELL Technologies and Lingo Learning. ELL Technologies is a web-based educational technology (“EdTech”) English language learning training and assessment company that creates innovative software-as-a-service e-learning solutions. Lingo Learning is a print-based publisher of English language learning textbook programs in China. The Company has formed successful relationships with key government and industry organizations, establishing a strong presence in China’s education market of more than 500 million students. Lingo Media is extending its global reach, with an initial market expansion into Latin America and continues to expand its product offerings and technology applications.

 

13

 

 

As of December 31, 2018, the Company operated two distinct business segments as follows:

 

Print-Based English Language Learning

 

The Company continues to maintain its legacy textbook publishing business through Lingo Learning, a print-based publisher of English language learning programs in China since 2001. Lingo Learning has an established presence in China’s education market of over 300 million students. To date, it has co-published more than 671 million units from its library of program titles.

 

China Publishing

 

Lingo Media has spent 19 years developing English Language Learning (ELL), products, programs, and relationships in the Chinese market. Learning to communicate in English is seen as a top priority for Chinese school students and young adult learners. Along with learning how to use a PC, English skills are perceived as a key determinant of their future levels of prosperity. The Company’s ELL books, audio and CD-based programs are unique in that they have a special focus on the spoken language. In addition to developing learning materials, considerable resources have been expended on the development of relationships with leading Chinese publishers, both in the education and trade sectors, as well as in extensive marketing of Lingo Media’s programs.

 

The Company is capitalizing on its co-development approach in the Chinese market. Lingo Media sees its relationships with leading Chinese publishers; its Canadian and Chinese author teams; and its original custom-developed content as key factors in opening up the Chinese educational market. The Company has secured long-term publishing contracts for the Kindergarten to Grade 12 (K-12) and higher educational markets, which it anticipates will generate ongoing revenue streams from the sale of its programs.

 

Co-Publishing Partner in China

 

People's Education Press

 

People's Education Press (“PEP”) a division of China's State Ministry of Education, publishes more than 60% of educational materials for the Kindergarten to Grade 12 (“K-12”) market throughout China, for all subjects, including English Language Learning. PEP has a readership of more than 120 million students. Lingo Learning has two programs with PEP. These series target the elementary market of 100 million students: PEP Primary English (for Grades 3-6; Chinese students now begin learning English in Grade 3); and Starting Line (Grades 1-6); All series include the core textbooks in addition to supplemental activity books, audiocassettes, teacher resource books, and other materials.

 

Seasonality

 

The Company may experience some seasonal trends in the sale of its publications. For example, sales of educational published materials experience seasonal fluctuations with higher sales in the Spring (second calendar quarter) and Fall (fourth calendar quarter).

 

Online English Language Learning

 

ELL Technologies offers more than 2,000 hours of interactive learning through a number of product offerings that include Winnie’s World, English Academy, Campus, English for Success, Master and Business in addition to offering custom solutions. ELL Technologies is primarily marketed in Latin America through a network of distributors and earns its revenues from online and offline licensing fees from its suite of web-based language learning products and applications.

 

 

 

14

 

 

ELL Technologies had an extensive existing product line which required substantial revisions in the technology platform and user interface. Over the past five years, our development team has engineered an eLearning platform and has been introducing new products to the market since the beginning of 2015, integrating cutting-edge technologies, solutions, content and pedagogy.

 

ELL Technologies’ high-tech, easy to implement eLearning Software-as-a-Service solutions have positioned the Company to provide learners of all ages and levels of English proficiency with a platform to further their language learning development. See our “Correlation Table”:

 

 

 

The horizontal axis contains our product information and correlates to the vertical axis which contains the ages and levels of proficiency that our solutions target.

 

Segmented Information (Before Other Financial Items Below)

 

The Company operates two distinct reportable business segments as follows:

 

License of intellectual property: 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 and offline Language Learning: ELL Technologies is a global web-based educational technology (“EdTech”) language learning, training, and assessment company. The Company provides the right to access to hosted software over a contract term without the customer taking possession of the software. The Company also provides Offline licenses for the right to use perpetual language-learning.

 

15

 

 

Transactions between operating segments and reporting segment are recorded at the exchange amount and eliminated upon consolidation.

 

 

 

2018

 

Online English

Language

Learning

   

Print-Based

English Language

Learning

   

Head Office

   

Total

 

Segmented assets

  $ 141,238     $ 1,087,463     $ 73,303     $ 1,302,004  

Segmented liabilities

    348,214       160,750       234,446       743,410  

Segmented revenue - online

    206,955       -       -       206,955  

Segmented revenue – offline

    8,012       -               8,012  

Segmented revenue – royalty

    38,701       1,686,514               1,725,215  

Segmented direct costs

    180,832       90,188       -       271,020  

Segmented selling, general & administrative

    348,436       64,580       787,750       1,200,766  

Segmented other expense

    10,918       196,079       905       207,902  

Segmented profit (loss)

    (475,131 )     1,335,666       (788,655 )     71,879  

 

 

 

2017

 

Online English

Language

Learning

   

Print-Based

English Language

Learning

   

Head Office

   

Total

 

Segmented assets

  $ 189,200     $ 1,257,239     $ 87,633     $ 1,534,072  

Segmented liabilities

    228,418       164,294       587,606       980,318  

Segmented revenue

    1,088,197       1,688,571       -       2,776,768  

Segmented direct costs

    134,695       90,923       -       225,618  

Segmented selling, general & administrative

    455,915       97,404       814,834       1,368,153  

Segmented intangible amortization

    1,051,928       -       -       1,051,928  

Segmented other expense

    1,074       182,461       1,131       184,666  

Segmented impairment

    2,087,700       -               2,087,700  

Segmented profit (loss)

    (6,148,195 )     1,317,783       (815,965 )     (5,646,377 )

 

 

 

2016

 

Online English

Language

Learning

   

Print-Based

English Language

Learning

   

Head Office

   

Total

 

Segmented assets

  $ 4,521,560     $ 1,675,740     $ 978,892     $ 7,176,192  

Segmented liabilities

    206,784       198,315       326,059       731,158  

Segmented revenue

    1,456,421       1,738,800       -       3,195,221  

Segmented direct costs

    167,597       217,787       -       385,384  

Segmented selling, general & administrative

    168,161       295,549       901,025       1,364,735  

Segmented intangible amortization

    1,003,485       -       -       1,003,485  

Segmented other expense

    806       192,658       1,539       195,003  

Segmented profit

    116,372       1,032,806       (902,564 )     246,614  

Segmented intangible addition

    1,798,687       -       -       1,798,687  

 

16

 

 

 

 

2015

 

Online English

Language

Learning

   

Print-Based

English Language

Learning

   

Head Office

   

Total

 

Segmented assets

  $ 3,503,171     $ 1,306,848     $ 422,932     $ 5,232,951  

Segmented liabilities

    158,399       96,536       931,232       1,186,167  

Segmented revenue

    2,954,614       1,971,121       -       4,925,735  

Segmented direct costs

    276,049       106,822       -       382,871  

Segmented selling, general & administrative

    273,078       68,248       718,377       1,059,703  

Segmented intangible amortization

    721,720       -       -       721,720  

Segmented other expense

    2,187       315,161       1,520       318,868  

Segmented profit

    1,681,580       1,480,891       (719,897 )     2,442,574  

Segmented intangible addition

    2,071,440       -       -       2,071,440  

 

 

 

2014

 

Online English

Language

Learning

   

Print-Based

English Language

Learning

   

Head Office

   

Total

 

Segmented assets

  $ 928,893     $ 975,891     $ 518,654     $ 2,423,438  

Segmented liabilities

    234,160       82,097       1,363,225       1,679,482  

Segmented revenue

    831,650       1,680,814       -       2,512,464  

Segmented direct costs

    286,945       95,649       -       382,594  

Segmented selling, general & administrative

    148,974       164,567       636,688       950,229  

Segmented intangible amortization

    582,857       -       -       582,857  

Segmented other expense

    3,339       272,246       920       276,505  

Segmented profit

    (190,466 )     1,148,352       (637,607 )     320,279  

Segmented intangible addition

    544,635       -       -       544,635  

 

Other Financial Items   2018     2017     2016     2015     2014  

Print-Based English Language Learning segmented income

  $ 1,335,666     $ 1,317,783     $ 1,032,806     $ 1,480,891     $ 1,148,352  

Online English Language Learning segmented income (loss)

    (475,131 )     (6,148,195 )     116,372       1,681,580       (190,466 )

Head Office

    (788,655 )     (815,965 )     (902,564 )     (719,897 )     (637,607 )

Foreign exchange gain (loss)

    38,351       (189,783 )     (146,599 )     399,314       106,437  

Interest and other financial

    (51,898 )     (53,709 )     (35,768 )     (158,792 )     (217,040 )

Share-based payments

    (162,489 )     (371,513 )     -       (151,038 )     (65,663 )

Other comprehensive loss

    32,202       (1,410 )     60,173       (157,358 )     (36,607 )

Total Comprehensive Income /(Loss)

  $ (71,954 )   $ (6,262,792 )   $ 124,420     $ 2,374,699     $ 107,406  

 

17

 

 

Revenue by Geographic Region

 

   

2018

   

2017

   

2016

   

2015

   

2014

 

Latin America

  $ 187,008     $ 997,661     $ 821,762     $ 2,660,535     $ 424,892  

China

    1,702,249       1,712,079       2,252,170       2,069,253       1,822,660  

Other

    50,925       67,028       121,289       195,947       264,912  
    $ 1,940,182     $ 2,776,768     $ 3,195,221     $ 4,925,735     $ 2,512,464  

 

Identifiable Non-Current Assets by Geographic Region

 

    2018     2017     2016     2015     2014  

Canada

  $ 52,131     $ 29,804     $ 3,467,115     $ 2,374,241     $ 1,004,424  

China

    1,033       885       -       -       7,598  
    $ 53,164     $ 30,689     $ 3,467,115     $ 2,374,241     $ 1,012,022  

 

Intangibles

 

Software and Web

Development

   

Content

Platform

   

Content

Development

   

Total

 

Cost, January 1, 2014

  $ 7,225,065     $ 1,477,112     $ -     $ 8,702,177  

Additions

    544,635       -       -       544,635  

Effect of foreign exchange

    11,911       -       -       11,911  

Cost, December 31, 2014

    7,781,611       1,477,112       -       9,258,723  

Additions

    782,945       -       1,288,495       2,071,440  

Effect of foreign exchange

    66,450       -       -       66,450  

Cost, December 31, 2015

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

Additions

    613,163       -       1,185,525       1,798,687  

Effect of foreign exchange

    (5,081 )     -       -       (5,081 )

Cost, December 31, 2016

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

Cost, December 31, 2017 and 2018

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

 

Intangibles

 

Software and Web

Development

   

Content

Platform

   

Content

Development

   

Total

 

Accumulated depreciation, January 1, 2014

  $ 6,763,414     $ 1,061,868     $ -     $ 7,955,282  

Charge for the year

    287,435       295,422       -       582,857  

Effect of foreign exchange

    2,986       -       -       2,986  

Accumulated depreciation, December 31, 2014

    7,053,835       1,357,290       -       8,411,125  

 

18

 

 

Intangibles

 

Software and Web

Development

   

Content

Platform

   

Content

Development

   

Total

 

Charge for the year

  $ 510,366     $ 119,822     $ 91,532     $ 721,720  

Effect of foreign exchange

    58,024       -       -       58,024  

Accumulated depreciation, December 31, 2015

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

Charge for the year

    611,865       -       391,620       1,003,485  

Effect of foreign exchange

    (4,144 )     -       -       (4,144 )

Accumulated depreciation, December 31, 2016

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

Charge for the year

    557,124       -       494,804       1,051,928  

Impairment

    452,018       -       1,496,064       1,948,082  

Accumulated depreciation, December 31, 2017 and 2018

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

Net book value, December 31, 2014

  $ 727,776     $ 119,822     $ -     $ 847,598  

Net book value, December 31, 2015

  $ 1,008,781     $ -     $ 1,196,963     $ 2,205,744  

Net book value, December 31, 2016

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

Net book value, December 31, 2017 and 2018

  $ -     $ -     $ -     $ -  

 

4.C.      Organization Structure

 

See 4.A. “History and Development of the Company” for more information.

 

Name of subsidiary Principal activity

Place of

incorporation

Proportion of ownership interest

and voting rights held

   

and operation

December 31,

2018

December 31,

2017

December 31,

2016

Lingo Learning Inc.

Developer and publisher of English language learning print and audio-based products

Canada

100%

100%

100%

ELL Technologies Ltd.

English language learning multi-media & online training service

Canada

100%

100%

100%

ELL Technologies Limited

English language learning multi-media & online training service

U.K.

100%

100%

100%

Speak2Me Inc.

Free English language learning online service

Canada

100%

100%

100%

Parlo Corporation

Fee-based online English language learning training and assessment service

Canada

100%

100%

100%

 

19

 

 

4.D.      Property and Equipment

 

The Company’s executive offices are located in rented premises of approximately 4,270 sq. ft. at 151 Bloor Street West, Suite 703, Toronto, Ontario, M5S 1S4 Canada. The Company began occupying these facilities, through its subsidiary Lingo Learning Inc. in March 2006.

 

The Company’s Beijing representative offices are located in rented premises of approximately 2,174 sq. ft. at 6 Chao Wai Street, Vantone Center, Tower A, Suite 401, Chaoyang District, Beijing, China 100020

 

The Company has office equipment, furniture and computer equipment located in these offices and for the fiscal years ended December 31, 2018, 2017, 2016, 2015, and 2014, they have a net carrying value of $53,164, $30,689, $27,488, $28,879, and $24,806, respectively.

 

ITEM 4A. UNRESOLVED STAFF COMMENTS

 

None.

 

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

 

The following discussion for the fiscal years ended December 31, 2018, December 31, 2017, and December 31, 2016 should be read in conjunction with the consolidated financial statements of the Company and the notes thereon.

 

The following discussion contains forward-looking statements that are subject to significant risks and uncertainties. Readers should carefully review the risk factors described herein and in other documents the Company files from time to time with the Securities and Exchange Commission.

 

5.A      Operating Results

 

On January 1, 2018, the Company adopted the new rules IFRS 15, Revenue Recognition from Contracts with Customers (“IFRS 15”) retrospectively with the cumulative effect of initially applying the rules recognized at the date of initial application.

 

The following table summarize the impacts of adopting IFRS 15 on operating results.

 

December 31, 2018

 

As reported

   

Adjustments

   

Amounts

without

adoption of

IFRS 15

 

Assets

                       

Prepaid and other receivables

  $ 101,539     $ 25,610     $ 75,929  

Total Assets

    1,302,004       25,610       1,276,394  
                         

Liabilities

                       

Contract liabilities

    217,259       217,259       -  

Total Liabilities

    743,410       217,259       526,151  
                         

Equity

                       

Deficit

    (25,040,050 )     (191,649 )     (24,848,402 )

Total equity

    558,594       (191,649 )     750,243  
                         

Total equity and liabilities

    1,302,004       25,610       1,276,394  

 

20

 

 

Impact on the consolidated statement of comprehensive income (loss)

 

For the year ended December 31, 2018

 

As reported

   

Adjustments

   

Amounts

without

adoption of

IFRS 15

 

Revenue

  $ 1,940,182     $ (126,400 )   $ 2,066,582  

Direct costs

    271,020       (20,445 )     291,465  

Net Profit / (Loss) for the Year

    (104,156 )     105,955       1,799  

Total Comprehensive Income (Loss)

    (71,954 )     105,955       34,001  

 

Fiscal Year Ended December 31, 2018 vs. Fiscal Year Ended December 31, 2017

 

Revenues from Print-Based English language learning for the period were $1,686,514 compared to $1,688,571 in 2017 as a result of foreign exchange fluctuations in the Chinese RMB and Canadian Dollar vs. the US Dollar. Direct costs associated with publishing revenue are relatively modest and have been consistent throughout the years. The Company continues to maintain its relationship with PEP and is investing in the development of its existing and new programs and marketing activities to maintain and increase its royalty revenues.

 

During 2018, Lingo Media recorded revenues of $1,940,182 as compared to $2,776,768 in 2017, a decrease of 30%. Net loss was $104,156 as compared to $6,261,382 in 2017 resulting in a $0.00 loss per share as compared to $0.18 loss per share in 2017.

 

Selling, General and Administrative Costs

 

Selling, general and administrative expenses were $1,200,766 compared to $1,368,153 in 2017. Selling, general and administrative expenses for the two segments are segregated below.

 

(i) Print-Based English Language Learning

 

Selling, general and administrative cost for print-based publishing decreased from $97,404 in 2017 to $64,580 in 2018 due to the increase in government grants and general admin expense recovery. The following is a breakdown of selling, general and administrative costs directly related to print-based English language learning:

 

For the Year Ended December 31

 

2018

   

2017

 

Sales, marketing & administration

  $ 72,154     $ 38,022  

General admin expense recovery

    (82,464 )     (9,673 )

Consulting fees & salaries

    246,783       167,708  

Travel

    48,465       37,951  

Premises

    11,577       83,550  

Professional fees

    10,878       12,259  

Less: Grants

    (242,813 )     (232,413 )
    $ 64,580     $ 97,404  

 

21

 

 

(ii) Online English Language Learning

 

Selling, general and administrative costs related to online English language learning was $348,436 for the year compared to $455,915 in 2017. Selling, general and administrative costs for this operating unit decreased in 2018 as compared to 2017, which is the result of managing expenses.

 

For the Year Ended December 31

 

2018

   

2017

 

Sales, marketing & administration

  $ 120,629     $ 189,698  

Consulting fees and salaries

    146,202       165,940  

Travel

    18,593       36,759  

Premises

    48,000       48,000  

Professional fees

    15,012       15,518  
    $ 348,436     $ 455,915  

 

(iii)

Head Office

 

Selling, general and administrative costs related to head office was $787,750 for the year compared to $814,834 in 2017. Selling, general and administrative costs for this reporting unit decreased in 2018 as compared to 2017, which is the result of decrease on expenditures related to shares holder services and professional fees.

 

For the Year Ended December 31

 

2018

   

2017

 

Sales, marketing & administration

  $ 117,538     $ 57,230  

Consulting fees & salaries

    481,574       354,112  

Travel

    9,322       11,861  

Shareholder services

    76,240       137,517  

Professional fees

    103,076       254,114  
    $ 787,750     $ 814,834  
Total Selling and Administrative Expenses   $ 1,200,766     $ 1,368,153  

 

Government Grants

 

Included as a reduction of selling, general and administrative expenses are government grants of $242,813 (2017 - $232,413), relating to the Company’s publishing and software projects. At the end of the year, $nil (2017 - $22,556) is included in accounts and grants receivable.

 

The government grant for the print-based English language learning segment is repayable in the event that the segment’s annual net income before tax for the current year and the previous two years exceeds 15% of revenue. During 2018 and 2017, the conditions for the repayment of grants did not arise and no liability was recorded.

 

22

 

 

Segmented Information

 

Total comprehensive loss for the Company was $71,954 for the year ended December 31, 2018 as compared to total comprehensive loss $6,262,792 in 2017. Total comprehensive loss can be attributed to the two operating segments as shown below:

 

Online English Language Learning (“ELL”)

 

2018

   

2017

 

Revenue

  $ 253,668     $ 1,088,197  

Expenses:

               

Direct costs

    180,832       134,695  

General & administrative

    348,436       455,915  

Bad debt expense

    (293,379 )     732,254  

Amortization of property & equipment

    1,605       894  

Amortization of development costs

    -       1,051,928  

Development costs

    481,992       2,692,009  

Loss on acquisition

    -       80,818  

Impairment loss – goodwill

    -       139,618  

Impairment – intangible assets

    -       1,948,081  

Income taxes and other taxes

    9,313       180  
      728,799       7,236,392  

Segmented Loss Online ELL

    (475,131 )     (6,148,195 )
             
Print-Based English Language Learning                

Revenue

    1,686,514       1,688,571  

Expenses:

               

Direct costs

    90,188       90,923  

Selling, general & administrative

    64,580       97,404  

Amortization of property & equipment

    15,859       4,619  

Income taxes and other taxes

    180,221       177,842  
      350,848       370,788  
Segmented Profit – Print-Based ELL     1,335,666       1,317,783  

Head Office

               

Expenses:

               

General & administrative

    787,750       814,834  

Amortization of property & equipment

    905       1,131  
      788,655       815,965  

Total Segmented Profit (Loss)

  $ 71,880     $ ( 5,646,377 )

Other

               

Foreign exchange

    38,351       (189,783 )

Interest and other financial expenses

    (51,898 )     (53,709 )

Share-based payment

    (162,489 )     (371,513 )

Other comprehensive income (loss)

    32,202       (1,410 )
      (143,834 )     (616,415 )

Total Comprehensive Loss

  $ (71,954 )   $ (6,262,792 )

 

23

 

 

Share-Based Payments

 

The Company amortizes share-based payments with a corresponding increase to the contributed surplus account. During the year, the Company recorded an expense of $162,489 compared to $371,513 in 2017.

 

Foreign Exchange

 

The Company recorded foreign exchange gain of $38,351 as compared to foreign exchange loss of $189,783 in 2017, relating to the Company's currency risk through its activities denominated in foreign currencies as the Company is exposed to foreign exchange risk as a significant portion of its revenue and expenses are denominated in Chinese Renminbi and US Dollars.

 

Income Tax Expense

 

The Company recorded a tax expense of $189,534 for the year ended December 31, 2018 compared to a tax expense of $178,022 in 2017. This tax is a withholding tax paid on revenues earned in China and repatriated outside of China.

 

Net Profit (Loss) for the Year

 

The Company reported a net loss of $104,156 for the year as compared to $6,261,382 in 2017. The loss per share is $0.00.

 

Fiscal Year Ended December 31, 2017 vs. Fiscal Year Ended December 31, 2016

 

Revenues from print-based English language learning for the year ended December 31, 2017 were $1,688,571 compared to $1,738,800 for fiscal 2016, a decrease of 3%. This decrease is due to foreign exchange fluctuation, a decrease in both the Chinese RMB and the Canadian Dollar vs. the US Dollar.

 

Direct costs associated with publishing revenue are relatively modest and have been consistent throughout the years. The Company continues to maintain its relationship with Peoples’ Education Press and is investing in the development of its existing and new programs and marketing activities to maintain and increase its royalty revenues.

 

In 2017, Lingo Media generated $1,088,197 in online English language learning revenue as compared to $1,456,421 in 2016, a decrease of 25%. The decrease in revenue is a result of extended sales cycles in securing contracts and time shifting of the sales pipeline.

 

Selling, General and Administrative Costs

 

Selling, general and administrative expenses were $1,368,153 in fiscal 2017 compared to $1,364,735 for fiscal 2016. Selling, general and administrative expenses for the operating and reporting segments are segregated below.

 

24

 

 

(i) Print-Based English Language Learning

 

Selling, general and administrative cost for print-based publishing decreased from $295,549 in 2016 to $97,404 in 2017 due to the decreases in sales, marketing and administration, travel, and rent. The following is a breakdown of selling, general and administrative costs directly related to print-based English language learning:

 

For the Year Ended December 31

 

2017

   

2016

 

Sales, marketing & administration

  $ 38,022     $ 185,177  

General admin expense recovery

    (9,673 )     -  

Consulting fees & salaries

    167,708       149,081  

Travel

    37,951       55,069  

Premises

    83,550       126,632  

Professional fees

    12,259       9,283  

Less: Grants

    (232,413 )     (229,694 )
    $ 97,404     $ 295,549  

 

ii) Online English Language Learning

 

Selling, general and administrative costs related to online English language learning was $455,915 for the year compared to $168,161 in 2016. Selling, general and administrative costs for this operating unit increased in 2017 as compared to 2016, which included the increase of sales, marketing and administrative expenses, and consulting fees.

 

For the Year Ended December 31

 

2017

   

2016

 

Sales, marketing & administration

  $ 189,698     $ 28,722  

Consulting fees and salaries

    165,940       56,988  

Travel

    36,759       35,791  

Premises

    48,000       48,000  

Professional fees

    15,518       (1,340 )
    $ 455,915     $ 168,161  

 

iii) Head Office

 

Selling, general and administrative costs related to head office was $814,834 for the year compared to $901,025 in 2016. Selling, general and administrative costs for this reporting unit decreased in 2017 as compared to 2016, which is the result of decrease on expenditures related to marketing, consulting fees, and shareholder services.

 

For the Year Ended December 31

 

2017

   

2016

 

Sales, marketing & administration

  $ 57,230     $ 175,744  

General and admin expense recovery

    -       (175,131 )

Consulting fees & salaries

    354,112       457,841  

Travel

    11,861       48,542  

Shareholder services

    137,517       292,035  

Professional fees

    254,114       101,995  
    $ 814,834     $ 901,025  
Total Selling and Administrative Expenses   $ 1,368,153     $ 1,364,736  

 

Government Grants

 

Lingo Media makes applications to the Canadian government for various types of grants to support its publishing and international marketing activities. Each year, the amount of any grant may vary depending on certain eligibility criteria (including prior year revenues) and the monies available to and the number of eligible candidates. These government grants are recorded as a reduction of general and administrative expenses to offset direct costs funded by the grant. During 2017, the Company recorded $232,413 of such grants.

 

25

 

 

One government grant for the print-based English language learning segment is repayable in the event that the segment’s annual net income before tax for the current year and the previous two years exceeds 15% of revenue. During 2017 and 2016, 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. No royalty was paid in 2017, 2016 or 2015 as no sales were generated from this project.

 

Segmented Information

 

Total comprehensive loss for the Company was $6,262,792 for the year ended December 31, 2017 as compared to a total comprehensive income of $124,420 in 2016. Total comprehensive loss can be attributed to the business segments as shown below:

 

Online English Language Learning

 

2017

   

2016

 

Revenue

  $ 1,088,197     $ 1,456,421  

Expenses:

               

Direct costs

    134,695       167,597  

General & administrative

    455,915       168,161  

Bad debt expense

    732,254       -  

Amortization of property & equipment

    894       -  

Amortization of development costs

    1,051,928       1,003,485  

Development costs

    2,692,009       -  

Loss on acquisition

    80,818       -  

Impairment loss – goodwill

    139,618       -  

Impairment – intangible assets

    1,948,081       -  

Income taxes and other taxes

    180       806  
      7,236,392       1,340,049  

Segmented Loss - Online ELL

  $ (6,148,195 )   $ 116,372  
                 

Print-Based English Language Learning

               

Revenue

  $ 1,688,571     $ 1,738,800  

Expenses:

               

Direct costs

    90,923       217,787  

Selling, general & administrative

    97,404       295,549  

Amortization of property & equipment

    4,619       5,758  

Income taxes and other taxes

    177,842       186,900  
    $ 370,788     $ 705,994  

Segmented Income – Print-Based ELL

  $ 1,317,783     $ 1,032,806  
                 

Head Office

               

Expenses:

               

General & administrative

  $ 814,834     $ 901,025  

Amortization of property & equipment

    1,131       1,539  
      815,965       902,564  

Total Segmented Profit (Loss)

  $ (5,646,377 )   $ 246,614  
                 

Other

               

Foreign exchange

  $ (189,783 )   $ (146,599 )

Interest and other financial expenses

    (53,709 )     (35,768 )

Share-based compensation

    (371,513 )     -  

Other comprehensive loss

    (1,410 )     60,173  
      (616,415 )     (122,194 )

Total Comprehensive Income (Loss)

  $ (6,262,792 )   $ 124,420  

 

26

 

 

Share-Based Payments

 

The Company amortizes share-based payments with a corresponding increase to the contributed surplus account. During 2017, the Company recorded an expense of $371,513 compared to $Nil in 2016.

 

Foreign Exchange

 

The Company recorded foreign exchange loss of $189,783 as compared to $146,599 in 2016, relating to the Company's currency risk through its activities denominated in foreign currencies as the Company is exposed to foreign exchange risk as a significant portion of its revenue and expenses are denominated in Chinese Renminbi and US Dollars.

 

Income Tax Expense

 

The Company recorded a tax expense of $178,022 for the year ended December 31, 2017 compared to a tax expense of $187,705 in 2016. This tax is a withholding tax paid on revenues earned in China and repatriated outside of China.

 

Net Profit for the Year

 

The Company reported a net loss of $6,261,382 for the year as compared to $64,247 in 2016. The loss per share is $0.18 per share and is primarily due to an impairment of intangible assets and goodwill of $2,087,700 and development costs of $2,692,009 in addition to recording an allowance for bad debts of $732,254. The impairment arose primarily as a result of weakened market conditions in the online English Language Learning segment.

 

5.B      Liquidity and Capital Resources

 

Financial information for the years ended December 31, 2018, 2017 and 2016 was prepared in accordance with IFRS as issued by the IASB.

 

As at December 31, 2018, the Company had cash of $233,843 compared to $327,434 in 2017. Accounts and grants receivable of $913,458 were outstanding at the end of the year compared to $970,467 in 2017. With 89% of the receivables from PEP and the balance due from ELL Technologies’ customers, the Company does not anticipate an effect on its liquidity. Total current assets amounted to $1,248,840 (2017 - $1,503,383) with current liabilities of $743,410 (2017 - $980,318) resulting in working capital of $505,430 (2017 - $523,065).

 

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

 

27

 

 

Lingo Media has access to working capital through equity financings or debt financings, if required to finance its growth plans and expansion into new international markets. The Company has been successful in raising sufficient working capital in the past.

 

5.C      Research and Development

 

During the years ended December 31, 2018, 2017 and 2016, respectively, the Company expended $Nil, $Nil, and $1,798,687 on intangibles, under the categories of “software and web development costs” and “content platform”. The expenditures in 2016 were primarily directed at developing the ELL Technologies products for the international market.

 

5.D      Trend Information

 

Lingo Media believes that the global market trends in English language learning are strong and will continue to grow at a rapid pace. Developing countries around the world, specifically in Latin America and Asia are expanding their mandates for the teaching of English amongst students, young professionals and adults.

 

5.E      Off-Balance Sheet Arrangements

 

The Company has not entered into any off-balance sheet finance arrangements.

 

5.F      Tabular disclosure of contractual obligations

 

The Company has future minimum lease payments under operating leases for premises and equipment as follows:

 

2019

    225,471  

2020

    219,036  

2021

    38,306  

 

The rent expense associated with operating lease for premise and equipment is recognized on a straight-line basis.

 

5.G. Safe Harbor

 

Portions of this Annual Report on Form 20-F may include "forward-looking statements" within the meaning of securities laws. These statements are made in reliance upon Sections 21E and 27A of the Securities Exchange Act of 1934, which involve known and unknown risks, uncertainties or other factors that could cause actual results to differ materially from the results, performance, or expectations implied by these forward-looking statements. These statements are based on management's current expectations and involve certain risks and uncertainties. Actual results may vary materially from management's expectations and projections and thus readers should not place undue reliance on forward-looking statements. The Company has tried to identify these forward-looking statements by using words such as "may," "should," "expect," "hope," "anticipate," "believe," "intend," "plan," "estimate" and similar expressions. The Company’s expectations, among other things, are dependent upon general economic conditions, the continued and growth in demand for its products, retention of its key management and operating personnel, its need for and availability of additional capital as well as other uncontrollable or unknown factors. No assurance can be given that the actual results will be consistent with the forward-looking statements. Except as otherwise required by US Federal securities laws, the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason. See also under “Forward Looking Statements” above.

 

28

 

 

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

 

6.A.      Directors and Senior Management

 

Table No. 6

Directors and Senior Management

December 31, 2018

 

Name                 

Position                

Age

Date of Election/ Appointment                                                  

Michael P. Kraft     

Chairman/Director   

56

November 1996/December 2018

Khurram Qureshi

CFO/Secretary/Treasurer

56

April 1997/December 2011

Gali Bar-Ziv

President /CEO

47

June 2009//December 2018

Jerry Grafstein

Director

84

September 2010

Tommy Weibing Gong

Director    

51

September 2010

Martin Bernholtz

Director

56

August 2013

Robert Martellacci

Director                

57

December 8, 2017

 

Michael P. Kraft is the Founder, Chairman and a Director of Lingo Media and has been since its inception in 1996.  He is also the President of MPK Inc. a management services and consulting business providing strategic planning, business development and corporate development since 1989. Mr. Kraft is the Chairman of Buckingham Group Limited, a small privately-owned merchant bank that has played a significant role in the capital formation strategy and financing as a principal of various emerging and growth enterprises and participated in financing these companies to become viable entities within their field. He is also a Co-Founder and Chairman of WeedMD Inc., the Founder of Internet of Things Inc., and Co-Founder & Chairman of Lingo Media Corporation.

 

Khurram R. Qureshi was the Chief Financial Officer of the Company from 1997 to July 2009, and was reappointed as such in December 2011. Mr. Qureshi received a Bachelor of Administrative Studies from York University in 1987 and received the Chartered Accountant designation in 1990. Mr. Qureshi is also a partner at CQK Chartered Accountants LLP.

 

Gali Bar-Ziv is the President and Chief Executive Officer of Lingo Media. Mr. Bar-Ziv brings more than 15 years of management and entrepreneurial experience, including financing, mergers and acquisitions, strategic planning, channel development and corporate development with extensive international experience in Israel, China and Latin America. Mr. Bar-Ziv profitably grew a sale, marketing and distribution start-up to sales growth of more than 700% year over year. He also successfully turned around the largest service division of a $300 million financial services company while at Fairfax Financial. Mr. Bar-Ziv holds a Bachelor of Law (LL.B) degree from the University of London and an MBA in Strategic and Entrepreneurial studies from the Schulich School of Business in Toronto.

 

29

 

 

The Hon. Jerry S. Grafstein, Q.C., holds degrees from the University of Western Ontario and the University of Toronto and has taught the Bar Admission Course at Osgoode Hall. Mr. Grafstein serves as counsel emeritus at Minden Gross LLP in Toronto and practices corporate finance and communication law. Mr. Grafstein devotes most of his business time to technology start-ups in Canada, the U.S. and Latin America. Mr. Grafstein has wide-ranging legal and business experience in all aspects of media. He was a co-founder of a range of media companies, focusing on broadcasting, cable, communications, film production and public enterprises in Canada, the U.S., the U.K., and South America. Mr. Grafstein recently co-founded online news sites from Canada, the U.S., the U.K., Brazil, China, Russia, Africa, Europe and the Mideast. In addition to his media experience, Mr. Grafstein advised several key government ministries, including Transportation, External Affairs, Consumer and Corporate Affairs and Justice. He was appointed to the Senate of Canada in 1984 by then Prime Minister Pierre Elliott Trudeau and served on all Senate Committees, including: Foreign Affairs; Legal and Constitutional Affairs; and (as Chairman) Senate Banking, Trade and Commerce. While in the Senate, Mr. Grafstein was a long serving Co-Chair of the Canada-United States Inter-Parliamentary Group, and a long serving senior officer of the Organization for Security and Co-Operation in Europe Parliamentary Assembly (OSCE PA). He retired from the Senate on January 1, 2010.  

 

Tommy Weibing Gong holds an Engineering degree from Huazhong University of Science and Technology in China, and IT certifications through his North American education and started his IT career in 1996 in Silicon Valley. He is Founder of Polar Bear Energy Inc., a business in the Cleantech and Greentech sector. Mr. Gong is now a leading commercial property developer in Shanghai. He serves as Chairman of Shanghai Green Town Plaza Real Estate Development Co., Ltd, Shanghai Zhetie Green Town Real Estate Development Co., Ltd, Zysteq North America Corporation, Shanghai Tommy Real Estate Development Co., Ltd, Shanghai Tommy & Jane Property Investment and Management Co., Ltd., and Canada & China Real Estate Management Co., Ltd. Mr. Gong was appointed as Economy Advisor by Shanghai Yangpu District Government in 2010. He is the recipient of “2009: China’s Top 10 Intelligent and Financial Person”; “2010: Person of the Year in Overseas Business”, “2013: China’s Top 10 Outstanding Business Leaders”.

 

Martin Bernholtz, BBA, CA is the Chief Financial Officer of Kerbel Group Inc. since 1988, an integrated construction and land development company. In this capacity, he is responsible for strategy, finance, accounting, taxation and personnel. Mr. Bernholtz has considerable sophisticated business experience in real estate, finance and public markets. He graduated with a Bachelor degree in Business Administration from York University in 1981 and became a Chartered Accountant in 1984. While in practice at Laventhol & Horwath and at BDO Dunwoody, Mr. Berholtz gained considerable experience in the business valuation and litigation support areas. He is a director of several TSX Venture Exchange listed companies including Covalon Technologies Limited, Selectcore Limited, Titan Medical Devices Inc., Continental Precious Metals Inc., KGIC Inc., Imex Systems Inc., and NanoStruck Technologies Inc. listed on Canadian Securities Exchange.

 

Robert Martellacci is founder and President, MindShare Learning Technology since 2002 and President and Co-Founder, C21 Canada—Canadians for 21st Century Learning & Innovation. He has over 25 years of expertise in the learning and technology field as an administrator at York University & Country Manager, TLC Canada School Division and MLS. Mr. Martellacci served on the President’s Task Force on the College System at York University. His board appointments include: Past Chair, Canadian eLearning Enterprise Alliance and board member York University Institute on Learning Technology. Mr. Martellacci was also appointed to the ICTC Task Force on Driving Change Education and Skills DigitalTalent2020. Mr. Martellacci was awarded the 2016 Chair’s Global Best Partnership Award for outstanding work nationally and internationally for taking a leadership role in forging strategic partnerships between industry and education. He is also founder and CEO of MindShare WorkSpace, a coworking/innovation space on a mission to redefine the future of work and learning. Mr. Martellacci is a graduate of Pepperdine University with a Master’s degree in Educational Technology.

 

The Directors have served in their respective capacities since their election and/or appointment and will serve until the next Annual General Meeting or until a successor is duly elected, unless the office is vacated in accordance with the Articles/By-Laws of the Company.

 

30

 

 

The Senior Management serves at the pleasure of the Board of Directors with management service contracts but without term of office, except as disclosed herein.

No Director and/or Executive Officer has been the subject of any order, judgment, or decree of any governmental agency or administrator or of any court or competent jurisdiction, revoking or suspending for cause any license, permit or other authority of such person or of any corporation of which he is a Director and/or Executive Officer, to engage in the securities business or in the sale of a particular security or temporarily or permanently restraining or enjoining any such person or any corporation of which he is an officer or director from engaging in or continuing any conduct, practice, or employment in connection with the purchase or sale of securities, or convicting such person of any felony or misdemeanor involving a security or any aspect of the securities business or of theft or of any felony.

 

There are no arrangements or understandings between any two or more Directors or Executive Officers, pursuant to which he was selected as a Director or Executive Officer. There are no family relationships between any two or more Directors or Executive Officers.

 

6.B.      Compensation

 

The table below sets forth information concerning the compensation paid, during each of the last three fiscal years (as applicable), to the Company’s Chief Executive Officer, Chief Financial Officer, and other Executive Officers of the Company and its subsidiaries who received total remuneration, determined on the basis of base salary and bonuses in excess of $100,000 during the last three fiscal years ended December 31 (the “Named Executive Officers”).

 

Summary Compensation Table

 

                             

Non-equity

incentive plan

compensation

                         

Name and principal

position

Year  

Salary

($)

   

Share-based

awards

($)

   

Option-based

awards

($)(2)

   

Annual

incentive

plans

   

Long-

term

incentive

plans(3)

   

Pension

Value

($)

   

All other

compensation

($)(1)

   

Total

compensation

($)

 

Michael P. Kraft

2018

    115,500      

Nil

      Nil       Nil       Nil       Nil       23,916       139,416  
Chairman, and Director 2017     120,000       Nil       100,000       Nil       Nil       Nil       25,854       245,854  
  2016     120,000       Nil       Nil       Nil       Nil       Nil       134,198       254,198  
                                                                   

Gali Bar-Ziv

2018

    153,000       Nil       Nil       Nil       Nil       Nil       21,308       174,308  
President, 2017     150,000       Nil       100,000       Nil       Nil       Nil       37,844       287,844  
Chief Executive Officer 2016     150,000       Nil       Nil       Nil       Nil       Nil       42,898       192,898  
                                                                   

Khurram Qureshi

2018

    60,000       Nil       Nil       Nil       Nil       Nil       18,999       78,999  
Chief Financial Officer 2017     60,000       Nil       50,000       Nil       Nil       Nil       Nil       110,000  
  2016     60,000       Nil       Nil       Nil       Nil       Nil       7,500       67,500  

 

Notes:

(1)

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

(2)

The weighted average grant date fair value was calculated in accordance with the Black-Scholes model using the common share price on the date of grant, with the key valuation assumptions being stock-price volatility of 79%, risk free interest rate of 1.35%, no dividend yields, and expected life of 5 years.

(3)

"LTIP" or "long term incentive plan" means any plan which provides compensation intended to serve as incentive for performance to occur over a period longer than one financial year, but does not include option or stock appreciation right plans or plans for compensation through restricted shares or restricted share units.

 

31

 

 

Management Agreements

 

Michael P. Kraft

 

The Company entered into a consulting agreement (the "Kraft Consulting Agreement") dated as of October 18, 2007 with MPK Inc. pursuant to which the Company engaged MPK Inc. to provide the services of Michael P. Kraft (the "Consultant") to be the President & Chief Executive Officer of the Company. MPK Inc. is a corporation wholly-owned and controlled by Michael P. Kraft.

 

The Kraft Consulting Agreement provides for an initial term of twenty-four (24) months to begin on January 1, 2008 and was renewed in September 2009, 2011, 2013, 2015 and 2017. (The Kraft Consulting Agreement and Amendment provide that the Company pay MPK Inc. an aggregate of $38,000 plus applicable HST for the Applicable Period. In consideration of the Consultant agreeing to a reduction of consulting fees from $180,000 to $150,000. A further reduction was taken in 2013, from $150,000 to $38,000. The Company agrees to pay the Consultant a cash bonus in the amount of $100,000 upon completion of a merger or acquisition as approved by the board of directors or if the Company’s market capitalization increases from approximately $3,000,000 to $6,000,000.) Beginning on January 1, 2014, the Kraft Consulting Agreement resumed to $150,000 per year. An amendment was entered into whereby the monthly consulting fees were reduced from $12,500 to $10,000 as of June 1, 2015. In addition to providing an allowance for a health plan, the Kraft Consulting Agreement also provides for an automobile allowance of up to $1,500 per month. A further amendment was entered into whereby the monthly consulting fees were reduced from $10,000 to $5,500 as of December 1, 2018.

 

Gali Bar-Ziv

 

The Company entered into a consulting agreement (the "Bar-Ziv Consulting Agreement") dated as of June 1, 2009 with Busy Babies Inc. pursuant to which the Company engaged Busy Babies Inc. to provide the services of Gali Bar-Ziv (the "Consultant") to be the Chief Operating Officer of the Company. Busy Babies Inc. is a corporation wholly-owned and controlled by Gali Bar-Ziv.

 

The Bar-Ziv Consulting Agreement provided for an initial term of twelve (12) months to begin on June 1, 2009 and automatic renewals for a further one (1) year unless terminated pursuant to the terms thereof. The Bar-Ziv Consulting Agreement, as amended, provides that the Company pay Busy Babies Inc. an aggregate of $186,000 plus applicable HST per annum. The Company has also agreed to enable the Consultant to participate in a bonus program based upon agreed-to KPIs. The Bar-Ziv Consulting Agreement also provides for an allowance for mobile phone and parking allowance.

 

Khurram Qureshi

 

The Corporation has entered into a consulting agreement (the “Qureshi Consulting Agreement”) dated as of August 1, 2011 with CQK Chartered Accountants LLP (“CQK”), to provide the services of Khurram Qureshi as Chief Financial Officer of the Corporation. CQK Chartered Accountants LLP is a partnership where Mr. Qureshi is a senior partner.

 

The Qureshi Consulting Agreement provided for an initial term of 12 months to begin on August 1, 2011, and automatically renews for subsequent one-year terms unless terminated in accordance with its terms. The Corporation pays to CQK a base consulting fee of $5,000 per month, plus applicable HST. Mr. Qureshi is eligible for reimbursement for certain expenses properly incurred in connection with the Corporation’s business. Mr. Qureshi is eligible to receive annual incentive bonuses and grants stock of options pursuant to the Option Plan from time to time, in each case at the discretion of the Board. The Qureshi Consulting Agreement also provides that the Corporation will provide to Mr. Qureshi extended health benefits.

 

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Stock Options

 

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

 

Director Compensation

 

The non-management directors of the Company are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of the Board of Directors. The Board of Directors may award special remuneration to any Director undertaking any special services on behalf of the Company other than services ordinarily required of a Director. Other than indicated below no Director received any compensation for his services as a Director, including committee participation and/or special assignments.

 

Change of Control Remuneration

 

Michael P. Kraft

 

1.

The Consultant may terminate the Kraft Consulting Agreement upon ninety (90) days written notice to the Company and the Company shall pay to the Consultant, all amounts due and owing up to the effective date of termination. The Consultant may also terminate the Kraft Consulting Agreement for the following reasons: (i) a material change in the position, duties and responsibilities of the Consultant; (ii) the Consultant ceases to be the most senior officer of the Company; (iii) any material reduction in the compensation payable to the Consultant in accordance with the terms of the Kraft Consulting Agreement; and (iv) the Company's head office being located more than 50 kilometres from its current location and the Consultant's current residence ("Good Cause"). If the Consultant terminates the Kraft Consulting Agreement for Good Cause the Company shall pay to the Consultant, all amounts due and owing up to the effective date of termination and a settlement amount equal to eighteen (18) months of compensation at the rate of compensation payable to the Consultant immediately prior to the effective date of termination.

 

2.

The Kraft Consulting Agreement may be terminated by the Company by giving written notice to the Consultant and the Company shall pay to the Consultant, all amounts due and owing up to the effective date of termination and a settlement amount equal to eighteen (18) months of compensation at the rate of compensation payable to the Consultant immediately prior to the effective date of termination.

 

3.

In the event of a change of control, the Consultant may, for a period of six (6) months after the effective date of any such change of control, elect to terminate the Kraft Consulting Agreement with the Company upon eight weeks’ notice and the Company shall pay to the Consultant, all amounts due and owing up to the effective date of termination and a settlement amount equal to eighteen (18) months of compensation at the rate of compensation payable to the Consultant immediately prior to the effective date of termination by voluntary resignation. In the event of a change of control and if the Company terminates the Consultant without cause, the settlement amount shall be equal to twenty-four (24) months of compensation at the rate of compensation payable to the Consultant immediately prior to the effective date of termination.

 

The Consultant is subject to an 18 month non-compete period following the termination of the Kraft Consulting Agreement.

 

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Gali Bar-Ziv

 

1.

The Consultant may terminate the Bar-Ziv Consulting Agreement upon ninety (90) days written notice to the Company and the Company shall pay to the Consultant, all amounts due and owing up to the effective date of termination. The Consultant may also terminate the Bar-Ziv Consulting Agreement for the following reasons: (i) a material change in the position, duties and responsibilities of the Consultant; (ii) the Consultant ceases to be a senior officer of the Company; (iii) any material reduction in the compensation payable to the Consultant in accordance with the terms of the Bar-Ziv Consulting Agreement; and (iv) the Company's head office being located more than 50 kilometres from its current location and the Consultant's current residence ("Good Cause"). If the Consultant terminates the Bar-Ziv Consulting Agreement for Good Cause the Company shall pay to the Consultant, all amounts due and owing up to the effective date of termination as well as a settlement amount.

 

2.

The Bar-Ziv Consulting Agreement may be terminated by the Company by giving written notice to the Consultant and the Company shall pay to the Consultant, all amounts due and owing up to the effective date of termination and a settlement amount equal to nine (9) months of compensation at the rate of compensation payable to the Consultant immediately prior to the effective date of termination.

 

The Consultant is subject to a nine month non-compete period following the termination of the Bar-Ziv Consulting Agreement.

 

Khurram Qureshi

 

1.

Mr. Qureshi may terminate the Qureshi Consulting Agreement upon 90 days’ written notice to the Corporation and the Corporation shall pay to CQK Chartered Accountants LLP all amounts due and owing up to the effective date of termination. The Corporation shall pay to CQK Chartered Accountants LLP all amounts due and owing up to the effective date of termination, and a settlement amount equal to three months’ compensation at the rate of compensation payable within 30 days of the termination date.

 

2.

The Corporation may terminate the Qureshi Consulting Agreement for convenience by giving written notice to CQK Chartered Accountants LLP and payment by the Corporation of all amounts due and owing up to the effective date of termination plus a settlement amount equal to three months’ compensation at the rate of compensation payable to CQK Chartered Accountants LLP within 30 days of the termination date.

 

Other Compensation

 

Except as set forth above under “Summary Compensation Table”, no Executive Officer/Director received “other compensation” in excess of the lesser of US$10,000 or 10% of such officer's cash compensation, and all Executive Officers/Directors as a group did not receive other compensation which exceeded US$10,000 times the number of persons in the group or 10% of the compensation.

 

Bonus/Profit Sharing/Non-Cash Compensation

 

Except for the stock option program discussed in ITEM #6.E, the Company also agreed to enable Gali Bar-Ziv to participate in the Company’s sales commission program, pursuant to which Mr. Bar-Ziv is to receive 7% of net revenue for business initiative, 2% of net revenue for direct influence, other discretionary bonus by the board if applicable. Effective December 1, 2018, Bar-Ziv’s was amended to provide bonus compensation based upon agreed-to KPIs.

 

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Pension/Retirement Benefits

 

No funds were set aside or accrued by the Company during fiscal 2017 to provide pension, retirement or similar benefits for Directors or Executive Officers.

 

6.C.      Board Practices

 

6.C.1.   Terms of Office.

 

The Directors have served in their respective capacities since their election and/or appointment and will serve until the next Annual General Meeting or until a successor is duly elected, unless the office is vacated in accordance with the Articles/By-Laws of the Company.

 

The Senior Management serves at the pleasure of the Board of Directors with management service contracts but without term of office, except as disclosed herein.

 

6.C.2.     Termination benefits

 

Not applicable

 

6.C.3.     Board of Director Committees.

 

The Company has established an Audit Committee, Compensation Committee and Corporate Governance and Nominating Committee in compliance with the Guidelines.

 

The Audit Committee assists the Board in its oversight of: (i) the integrity of the financial reporting of the Company; (ii) the independence and performance of the Company's external auditors; and (iii) the Company's compliance with legal and regulatory requirements. The members of the Audit Committee during the past fiscal year were Martin Bernholtz (Chairman), Tommy Weibing Gong, and Michael Kraft, Messrs. Bernholtz and Gong being independent as defined in the Guidelines. Following the 2017 shareholder meeting, the Committee was comprised of Martin Bernholtz (Chairman), Robert Martellacci, and Michael Kraft, with Messrs. Bernholtz and Martellacci being independent as defined in the Guidelines.

 

The Compensation Committee assists the Board in fulfilling its obligations relating to human resource and compensation matters of the Company and its subsidiaries and to establish a plan for the continuity and development of senior management. The members of the Compensation Committee during the past fiscal year were Martin Bernholtz (Chairman), Jerry Grafstein, and Tommy Weibing Gong, all being independent as defined in the Guidelines. Following the 2017 shareholder meeting, the Committee was comprised of Jerry Grafstein (Chairman), Martin Bernholtz, and Robert Martellacci, all being independent as defined in the Guidelines.

 

The Corporate Governance and Nominating Committee assists the Board by: (i) developing, reviewing and planning the Company's approach to corporate governance issues, including developing a set of corporate governance principles and guidelines specifically applicable to the Company; (ii) identifying and recommending to the Board potential new nominees to the Board; (iii) monitoring management's succession plan for the Chief Executive Officer (the "CEO") and other senior management; and (iv) overseeing enforcement of and compliance with the Company's proposed Code of Business Conduct. The members of the Corporate Governance Committee during the past fiscal year were Messrs. Grafstein (Chairman), Bernholtz and Kraft, Messrs. Grafstein and Bernholtz being independent directors as defined in the Guidelines. Following the 2017 shareholder meeting, the Committee was comprised of Grafstein (Chairman), Bernholtz, and Tommy Gong all being independent as defined in the Guidelines.

 

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6.E.      Share Ownership

 

Table No. 7 lists, as of April 30, 2019, Directors and Executive Officers who beneficially own the Company's voting securities and the amount of the Company's voting securities owned by the Directors and Executive Officers as a group. Table No. 7 includes all persons/companies where the Company is aware that they have 5% or greater beneficial interest in the Company’s securities.

 

Table No. 7

Shareholdings of Directors and Executive Officers

Shareholdings of 5% Shareholders

 

Title of Class

Name of Beneficial Owner

 

Amount and Nature of

Beneficial Ownership (1)

   

Percent of Class

 

Common

Michael P. Kraft(2)(3)

    2,376,012 (5)      6.69 %

Common

Khurram Qureshi

    392,606 (6)      1.11 %

Common

Gali Bar-Ziv

    242,864 (7)      0.68 %

Common

Martin Bernholtz (2)(3)(4)

    250,000 (8)      0.07 %

Common

Tommy Gong(4)

    [nil] (9)       0.00 %

Common

Jerry Grafstein(3)(4)

    900,000 (10)      2.53 %

Common

Robert Martellacci(2)(3)

    [nil] (11)      0.00 %

Common

Global Telecom Holding SAE

    2,857,143       8.04 %

As a group (8 parties)

    6,793,625       19.12 %

 

*  Less than 1%.

 

(1)

The information as to voting securities beneficially owned, controlled or directed, not being within the knowledge of the Company, has been furnished by the respective individuals.

 

(2)

Member of the Audit Committee.

 

(3)

Member of the Compensation Committee.

 

(4)

Member of the Corporate Governance and Nominating Committee.

 

(5)

Of such shares, 95,636 are held in Mr. Kraft's RRSP and 2,280,376 are held by Buckingham Group Limited, a company controlled by Mr. Kraft.  Mr. Kraft also holds options and to purchase up to an additional 1,000,000 common shares of the Company.

 

(6)

Of such shares, 38,606 are held in Mr. Qureshi’s RRSP. Mr. Qureshi also holds options to purchase up to 500,000 common shares of the Company.

 

(7)

Of such shares, 2,000 are held in Mr. Bar-Ziv's RRSP, and 240,864 are held by Busy Babies Inc., a company controlled by Mr. Bar-Ziv.  Mr. Bar-Ziv also holds options to purchase up to an additional 1,000,000 common shares of the Company.

 

(8)

Of such shares, 120,000 are held by Accretive Capital Corp, a company controlled by Mr. Bernholtz. Mr. Bernholtz also holds options to purchase up to an additional 470,000 common shares of the Company.

 

(9)

Tommy Gong holds options to purchase up to 290,000 common shares of the Company.

 

(10)

Of such shares, 900,000 are held by New Court Corporation, a company controlled by Mr. Grafstein.  New Court Corporation also holds options to purchase up to an additional 450,000 common shares of the Company.

 

(11)

Robert Martellacci holds options to purchase up to 80,000 common shares of the Company.

 

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Stock Options

 

TSX Venture Exchange Rules and Policies

 

Incentive options granted by the Company are made in accordance with the rules and policies of the TSX Venture Exchange ("TSX VEN"), including the number of common shares under option, the exercise price and expiration date of such options, and any amendments thereto.

 

Such terms and conditions, including the pricing of the options, expiration and the eligibility of personnel for such stock options; are described below. The TSX VEN policy in respect of incentive stock options provides that shareholder approval is not required if the aggregate number of common shares that may be reserved for issuance pursuant to incentive stock options does not exceed 10% of the issued common shares of the Company, 5% to any one individual and 2% to any consultant at the time of granting.

 

Shareholder approval of the grant of incentive stock options is required pursuant to the rules of the TSX VEN where the grant will result in the Company having options outstanding which, in aggregate, are exercisable to acquire over 10% (to a maximum of 20%) of the outstanding common shares of the Company. In addition, disinterested shareholders (all shareholders excluding insiders and associates of insiders) approval is required pursuant to the rules of the TSX VEN where:

 

(a) grant of incentive stock options could result at any time in:

 

 

(i)

the Company having options outstanding to insiders which, in aggregate, are exercisable to acquire over 20% of the outstanding common shares of the Company; or

 

(ii)

the issuance to insiders, within a one-year period, of common shares which, in aggregate, exceed 10% of the outstanding common shares of the Company; or

 

(iii)

the issuance to any one insider and such insider's associates, within a one-year period, of common shares which, in aggregate, exceed 5% of the outstanding common shares of the Company; or

 

(iv)

the issuance to any consultant of common shares which, in aggregate, exceed 2% of the outstanding common shares of the Company; or

 

(b) the Company is proposing to decrease the exercise price of stock options held by any insiders.

 

Company Stock Option Plan 

 

The Board has approved an amended stock option plan (the "Stock Option Plan") on November 3, 2017 whereby options may be granted to directors, officers, employees, consultants of the Company and its subsidiaries. The number of shares which may be reserved for issuance under the Stock Option Plan is limited to 7,105,838 common shares, representing approximately 20% of the issued and outstanding common shares of the Company as at November 3, 2017.

 

The maximum number of common shares which may be reserved for issuance in a 12 month period to any one individual under the Stock Option Plan, shall not, in the aggregate, exceed 5% of the issued and outstanding common shares of the Company at the time of grant. The maximum number of common shares which may be reserved for issuance in a 12 month period to any consultants and persons engaged in investor relations activities for the Company, shall not, in the aggregate, exceed 2% of the issued and outstanding common shares at the time of grant. Any common shares subject to a prior option granted under the Stock Option Plan which for any reason are cancelled or terminated prior to exercise will be available for a subsequent grant under the Stock Option Plan.

 

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The option price of any common shares cannot be less than the closing price of the shares on the day immediately preceding the day upon which the option is granted less any permitted discount. Options may be granted under the Stock Option Plan to be exercisable for a maximum period of ten years, subject to earlier termination, upon the termination of the optionee’s employment, upon the optionee ceasing to be an employee, officer, director or consultant of the Company or any of its subsidiaries, as applicable, or upon the optionee retiring, becoming permanently disabled or dying. The options under the Stock Option Plan are non-transferable. The Stock Option Plan contains provisions for adjustment in the number of shares issuable thereunder in the event of a subdivision, consolidation, reclassification or change of the common shares, a merger or other relevant changes in the Company’s capitalization.

 

As of the date hereof, options to purchase an aggregate of 7,704,000 common shares are outstanding under the Stock Option Plan.

 

The names and titles of the Directors/Executive Officers of the Company to whom outstanding stock options have been granted and the number of common shares subject to such options are set forth in the Table below as of April 30, 2019, as well as the number of options granted to Directors and officers as a group.

 

Stock Options Outstanding 

Expressed in Canadian Dollars

 

   

Number of securities

underlying unexercised

   

Option exercise

price (C$)

 

Option

expiration date

Jerry Grafstein

Director

    50,000       0.07  

Novembre 20, 2021  

Martin Bernholtz

Director

    50,000       0.07  

Novembre 20, 2021  

 

ITEM 7.   MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

 

7.A.           Major Shareholders

 

7.A.1.a.     Holdings By Major Shareholders

 

Refer to ITEM #6.E.

 

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

 

None.

 

7.A.1.c.  Different Voting Rights

 

None.

 

7.A.2.  Canadian Share Ownership

 

As of April 30, 2019, the Company’s registered shareholders’ list showed 35,529,192 common shares outstanding with 29 registered shareholders, with 34,939,458 shares owned by 19 shareholders residing in Canada, 425,576 shares owned by 5 registered shareholders in US and 164,158 shares owned by 5 foreign registered shareholders.

 

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7.A.3.  Control of Company.

 

The Company is a publicly owned Canadian corporation, the shares of which are owned by U.S. residents, Canadian residents and other foreign residents. The Company is not controlled by any foreign government or other person(s).

 

7.A.4.  Change in Control

 

None.

 

7.B.  Related Party Transactions

 

During the 2018 fiscal year, the Company had the following transactions with related parties, made in the normal course of operations, and accounted for at an amount of consideration established and agreed to by the Company and related parties.

 

a.     The Company charged $165,726 (2017 - $52,001, 2016 - $33,020) to four corporations with directors in common for rent, administration, office charges and telecommunications.

 

b.     Key management compensation was $360,672 (2017 – $360,023, 2016 – $480,577) and is reflected as consulting fees and commissions paid to corporations owned by a director and officers of the Company, of which, $17,065 (2017 - $3,121, 2016 - $nil) is unpaid and included in accounts payable and accrued liabilities. Options granted to key management was $ nil ($2017 - $508,000, 2016 - $nil).

 

c.     At the year end, the Company had fully repaid unsecured loans bearing interest at 12% per annum due to related parties of the Company (2017 - $150,000, 2016 - $50,000). Throughout the year, $420,000 was advanced to the company and $720,000 was repaid to related parties. Interest expense related to the loans is $42,133 (2017 - $4,586, 2016 - $351). Options granted to related paries during the year have a fair value of $25,988 (2017 - $ nil, 2016 - $ nil).

 

Other than as disclosed above, there have been no transactions since December 31, 2018 or proposed transactions, which have materially affected or will materially affect the Company in which any director, executive officer, or beneficial holder of more than 10% of the outstanding common stock, or any of their respective relatives, spouses, associates or affiliates has had or will have any direct or material indirect interest. Management believes the transactions referenced above were on terms at least as favorable to the Company as the Company could have obtained from unaffiliated parties.

 

ITEM 8. FINANCIAL INFORMATION

 

8.A. 1-6  Consolidated Statements and Other Financial Information

 

The Company's financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”).

 

The financial statements as required under ITEM #18 are attached hereto and found immediately following the text of this Annual Report. The audit reports of RSM Canada LLP are included herein immediately preceding the financial statements and schedules.

 

Audited Financial Statements for Fiscal 2018 and Fiscal 2017

 

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8.A.7.      Legal/Arbitration Proceedings

 

The Directors and the management of the Company do not know of any material, active or pending, legal proceedings against them; nor is the Company involved as a plaintiff in any material proceeding or pending litigation. The Directors and the management of the Company know of no active or pending proceedings against anyone that might materially adversely affect an interest of the Company.

 

8.A.8       Company Policy on Dividend Distribution

 

The Company does not intend to pay dividends in cash or in kind in the foreseeable future. The Company expects to retain any earnings to finance the further growth of the Company. The directors of the Company will determine if and when dividends should be declared and paid in the future based upon the earnings and financial conditions of the Company at the relevant time and such other factors as the directors may deem relevant. All of the Common Shares of the Company are entitled to an equal share in any dividends declared and paid.

 

8.B.          Significant Changes

 

None.

 

ITEM 9.  THE OFFER AND LISTING

 

9.A.1-3.   Not applicable

 

9.A.4.      Common Share Trading Information

 

The Company's common shares began trading on the Alberta Stock Exchange in Calgary, Alberta, Canada under its former name Alpha Ventures Inc. in November 1996. The Alberta Stock Exchange was absorbed by the Canadian Venture Exchange, which in turn was absorbed by the TSX Venture Exchange (“Exchange”). The Company’s listing was automatically transferred from the Alberta Stock Exchange to the Exchange as a Tier 2 company. The current stock symbol on the Exchange is “LM”. The CUSIP number is 5357441065.

 

The Exchange currently classifies Issuers into different tiers based on standards, including historical financial performance, stage of development and financial resources of the Issuer at the time of listing. Specific Minimum Listing Requirements for each industry segment in each of Tier 1, Tier 2 and Tier 3 have also been established by the Exchange.

 

Policy 2.1 of the Exchange outlines the Minimum Listing Requirements for each industry segment in Tier 1 and Tier 2. Under this policy, Lingo Media Corporation is a Tier 2 Issuer in the industry segment category of Junior Industrial. Each industry segment is further divided into categories. Quantitative minimum requirements for listing for the industry segment Junior Industrial and Tier 2 are provided in Section 4.3 of Exchange Policy 2.1.

 

Similarly, Policy 2.5 of the Exchange sets out the minimum standards to be met by Issuers to continue to qualify for listing in each Tier, referred to as Tier Maintenance Requirements (“TMR”). A Tier 2 Issuer which fails to meet one of the Tier 2 TMR will not automatically be suspended or designated as “Inactive”. Rather, the Exchange will provide notice of failure to meet one of the Tier 2 TMR and will allow the Issuer 6 months from the date of notice to meet the requirement, failing which the Exchange may designate the Issuer as Inactive. If a Tier 2 Issuer fails to meet more than one Tier 2 TMR, notice will be given to the Issuer by the Exchange and if the requirements are not met within 90 days of the notice, the Exchange will designate the Issuer as Inactive and apply the restrictions on Inactive Issuers retroactively. An Inactive Issuer may continue to trade on Tier 2 of the Exchange for 18 months from the date it is designated as Inactive. If the Issuer does not meet all of the applicable Tier 2 TMR within that 18 month period, its listed shares may be suspended from trading by the Exchange.

 

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To maintain a listing as an active Tier 2 Issuer, an Issuer must meet all Tier 2 TMR for its industry segment as set out in Section 4 of the Exchange Policy 2.5.

 

Table No. 9 lists the volume of trading and high, low and closing sales prices on the TSX Venture Exchange for the Company's common shares for: the last 12 months, the last twelve fiscal quarters; and the last five fiscal years.

 

Table No. 9

TSX Venture Exchange

Common Shares Trading Activity

 

Period            Sales -- Canadian Dollars  

Ended

  Volume     High     Low     Close  
Monthly