UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER PURSUANT TO RULES 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the period ended June 30, 2004
Commission File Number: 333-98397
LINGO MEDIA INC.
______________________________________________________________
151 Bloor Street West, Suite 890, Toronto, Ontario Canada M5S 1S4
_______________________________________________________________
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F [ X ] Form 40-F [ ]
Indicate by check mark whether the registrant by furnishing the information in this Form is also thereby furnishing
the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes [ ] No [ X ]
LINGO MEDIA INC.
CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Expressed in Canadian dollars)
(Unaudited)
June 30, 2004 and 2003
LINGO MEDIA INC.
CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Expressed in Canadian dollars)
(Unaudited)
June 30, 2004 and 2003
INDEX
Consolidated Interim Balance Sheets
Consolidated Interim Statement of Deficit
Consolidated Statements of Operations
Consolidated Interim Statements of Cash Flows
Notes to Consolidated Interim Financial Statements
LINGO MEDIA INC.
CONSOLIDATED INTERIM BALANCE SHEETS
(Expressed in Canadian dollars)
(Unaudited)
June 30, 2004 (Restated) | December 31, 2003 | |
ASSETS | ||
Current: | ||
Cash | $ 5,950 | $ 232,502 |
Accounts receivable, net (note 3) | 591,152 | 528,092 |
Loan receivable | 17,315 | 17,315 |
Prepaid expenses and other | 16,667 | 16,667 |
Inventory | 27,563 | 29,109 |
658,648 | 823,685 | |
Property and equipment, net | 39,006 | 41,848 |
Development costs, net | 771,555 | 706,672 |
Acquired publishing content, net | 159,008 | 194,343 |
Software development costs, net | 10,348 | 31,046 |
$ 1,638,565 | $ 1,797,594 | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||
Current: | ||
Accounts payable | $ 251,169 | $ 145,197 |
Accrued liabilities | 17,775 | 32,048 |
268,944 | 177,245 | |
Shareholders’ equity: | ||
Capital stock (note 4) | ||
Authorized: Unlimited common shares and preferred shares with no par value | ||
Issued: 23,959,770 common shares (December 31, 2003: 23,544,607) | 3,357,703 | 3,341,875 |
Deferred stock-based compensation | (7,667) | (23,000) |
Deficit | (1,980,415) | (1,698,526) |
1,369,621 | 1,620,349 | |
$ 1,638,565 | $ 1,797,594 |
See accompanying notes to consolidated interim financial statements.
LINGO MEDIA INC.
CONSOLIDATED INTERIM STATEMENTS OF DEFICIT
(Expressed in Canadian dollars)
(Unaudited)
For the six months ended June 30 | ||
2004 (Restated) | 2003 (Restated) | |
Deficit, beginning of period | $ (1,698,526) | $ (1,441,444) |
Net loss for the period | (281,889) | (182,993) |
Deficit, end of period | $ (1,980,415) | $ (1,624,437) |
See accompanying notes to consolidated interim financial statements.
LINGO MEDIA INC.
CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS
(Expressed in Canadian dollars)
(Unaudited)
For the three months ended June 30 | For the six months ended June 30 | |||
2004 (Restated) | 2003 (Restated) | 2004 (Restated) | 2003 (Restated) | |
Revenue | $ 230,910 | $ 486700 | $ 238,534 | $ 493,124 |
Cost of sales | 33,412 | 63,734 | 36,808 | 70,355 |
Margin | 197,498 | 422,966 | 201,727 | 422,769 |
Expenses General and Administrative | 166,616 | 200,970 | 300,359 | 370,366 |
Earnings (loss) before interest, taxes and amortization | 30,883 | 221,996 | (98,632) | 52,403 |
Interest and other financial expenses | 8,563 | 17,739 | 8,563 | 21,336 |
Amortization | 71,638 | 61,370 | 143,452 | 144,180 |
Loss before income taxes | (49,318) | 142,887 | (250,646) | (113,113) |
Income taxes | 31,242 | 69,880 | 31,242 | 69,880 |
Loss for the period | $ (80,560) | $ 73,007 | $ (281,889) | $ (182,993) |
Loss per share | $ (0.00) | $ (0.00) | $ (0.01) | $ (0.01) |
Weighted average number of common shares outstanding | 21,676,157 | 17,949,532 | 21,676,157 | 17,949,532 |
See accompanying notes to consolidated interim financial statements.
LINGO MEDIA INC.
CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
(Expressed in Canadian dollars)
(Unaudited)
For the three months ended June 30 | For the six months ended June 30 | |||
2004 (Restated) | 2003 (Restated) | 2004 (Restated) | 2003 (Restated) | |
Cash flows provided by (used in): | ||||
OPERATIONS: | ||||
Loss for the period | $ (80,560) | $ 73,007 | $ (281,889) | $ (182,993) |
Items not affecting cash: | ||||
Amortization of property and equipment | 2,116 | 2,460 | 4,410 | 3,803 |
Amortization of development costs | 33,838 | 22,559 | 67,676 | 67,677 |
Amortization of acquired publishing content | 17,668 | 17,666 | 35,335 | 35,335 |
Amortization of software development costs | 10,349 | 10,348 | 20,697 | 20,697 |
Amortization of deferred stock-based compensation | 7,667 | 8,334 | 15,333 | 16,667 |
Change in non-cash balances related to operations: | ||||
Accounts receivable | (225,840) | (339,823) | (63,060) | (69,573) |
Loan receivable | - | 1,500 | - | 1,500 |
Prepaid expenses and other | - | 41,698 | - | (11,488) |
Inventory | 988 | 361 | 1,546 | 4,054 |
Accounts payable | 143,986 | 89,697 | 105,972 | 58,901 |
Accrued liabilities | (20,023) | (19,466) | (14,273) | (14,090) |
(109,811) | (91,657) | (108,253) | (69,510) | |
FINANCING: | ||||
Issuance of capital stock | 3,750 | - | 63,517 | 15,000 |
Share issue costs | - | - | (47,689) | - |
Increase (decrease) in long-term debt | - | (45,820) | - | 32,302 |
3,750 | (45,820) | 15,828 | 47,302 | |
INVESTING: | ||||
Purchase of property and equipment | (1,491) | - | (1,491) | (1,000) |
Development costs | (34,581) | (29,193) | (132,636) | (45,135) |
(36,073) | (29,193) | (134,128) | (46,135) | |
Net change in cash | (142,133) | (166,670) | (226,552) | (68,343) |
Cash – beginning of period | 148,083 | 178,198 | 232,502 | 79,871 |
Cash – end of period | $ 5,950 | $ 11,528 | $ 5,950 | $ 11,528 |
See accompanying notes to consolidated interim financial statements.
LINGO MEDIA INC.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Expressed in Canadian dollars)
June 30, 2004 and 2003
Lingo Media Inc. (the "Company") develops, publishes, distributes and licenses book, audio/video cassettes, CD-based product and supplemental product for English language learning for the educational school and retail bookstore markets in China and educational school market in Canada.
1.
Significant accounting policies:
The disclosures contained in these unaudited interim consolidated financial statements do not include all requirements of generally accepted accounting principles (GAAP) for annual financial statements. The unaudited interim consolidated financial statements should be read in conjunction with the annual consolidated financial statements for the year ended December 31, 2003.
The unaudited interim consolidated financial statements reflect all adjustments, consisting only of normal recurring accruals, which are, in the opinion of management, necessary to present fairly the financial position of the Company as of June 30, 2004 and the results of operations and cash flows for the six months ended June 30, 2004 and 2003.
2.
Correction to the application of Accounting Principles
These statements have been amended to correct the prior unaudited interim financial statements ended June 30, 2004 and 2003 that were issued in order to reflect the change in application of accounting policy for revenue recognition for the interim periods.
The effect of these changes on June 30, 2004 interim financial statements are as follows:
Previously reported
Restated
June 30, 2004
Change
June 30, 2004
Balance Sheet
Accounts receivable
$ 817,476
$ (226,324)
$ 591,152
Accounts payable
285,117
(33,948)
251,169
Deficit
(1,788,040)
(192,375)
(1,980,415)
Income Statement
Revenue
503,240
(264,706)
238,534
Cost of sales
70,757
(33,949)
36,808
Income Taxes
69,624
(38,382)
31,242
Net Income
(89,514)
(192,375)
(281,889)
3.
Accounts receivable
The components of account receivables at the following dates are as follows:
June 2004 (Restated) | December 2003 | |
Trade Receivables | $ 480,140 | $ 334,760 |
Grant Receivable | 111,012 | 193,332 |
$ 591,152 | $ 528,092 |
4.
Capital stock:
Common Shares | |||
Number | Amount | ||
Balance, December 31, 2003: | 23,544,607 | $ 3,341,875 | |
Stock Option exercised (i) | 415,163 | 63,517 | |
Less: share issue costs | (47,689) | ||
Balance, June 30, 2004 | 23,959,770 | $ 3,357,703 |
(i)
During March 2004, 100,000 and 50,000 stock options were exercised for $0.20 and $0.10 respectively, by a director of the Company.
5.
Stock options:
On June 30, 2004, the Company had 1,803,340 (June 30, 2003 – 2,298,340) outstanding options to purchase the common shares of the Company.
6.
Segment information:
The Company operates as an international business and has no distinct reportable business segments.
The Company develops, publishes, distributes and licenses book, audio/video cassettes, CD- based product and supplemental product for English language learning for the educational school and retail bookstore market in China and for educational school market in Canada.
The Company's revenue by geographic region based on the region in which the customer is located is as follows:
For the six months ended | June 2004 (Restated) | June 2003 (Restated) |
Canada | $ 23,072 | $ 16,152 |
China | 215,462 | 476,972 |
$ 238,534 | $ 493,124 |
Substantially all of the Company’s identifiable assets as at June 30, 2004 and December 31, 2003 were located in Canada.
7.
Reconciliation of Canadian and United States generally accepted accounting principles (“GAAP”):
These interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles ("GAAP") in Canada. Except as set out below, these financial statements also comply, in all material aspects, with accounting principles generally accepted in the US.
The Following tables reconcile results as reported under Canadian GAAP with those that would have been reported under US GAAP.
Statements of Operations:
Loss for the Period | June 30, 2004 (Restated) | June 30, 2003 (Restated) |
Loss for the period, based on Canadian GAAP | $ (281,889) | $ (182,993) |
Development costs (a) | - | - |
Amortization of development costs | 67,676 | 67,667 |
Amortization of software development costs | 20,697 | 20,697 |
Compensation expense (c) | - | (16,630) |
Share issue costs (d) | (47,689) | - |
Loss for the Period – US GAAP | $ (241,205) | $ (111,249) |
The cumulative effect of these adjustments on the consolidated shareholders' equity of the Company is as follows:
Shareholders’ Equity | June 2004 (Restated) | December 2003 (Restated) |
Shareholders’ equity based on Canadian GAAP | $ 1,369,622 | $ 1,620,349 |
Development cost (a) | (530,221) | (581,794) |
Software development costs (b) | (10,348) | (31,046) |
Share issue costs (d) | (108,688) | - |
Compensation expense (c) | (243,250) | (243,250) |
Shareholders’ equity – US GAAP | $ 477,115 | $ 764,259 |
Under US GAAP, the amounts shown on the consolidated balance sheets for development costs and software development costs would be $241,334 (December 2003: 124,698) and nil (December 2003:nil) for June 2004 respectively.
(a)
Development costs:
Under Canadian GAAP, the Company defers the incremental costs relating to the development and pre-operating phases of new businesses and established business and amortizes these costs on a straight-line basis over periods up to five years. Under US GAAP, Incremental costs related to development and pre-operating plan of new business are expensed as incurred but the incremental costs incurred for established businesses are capitalized and amortized over on a straight line basis over periods up to five years.
(b)
Software development costs:
Under US GAAP, the software development costs would be expensed as incurred.
(c)
Options to consultants:
Starting January 1, 2002 under US and Canadian GAAP, the Company records compensation expense based on the fair value for stock or stock options granted in exchange for services from consultants. Before January 1, 2002, for the options issued and completely vested the Company did not recognize a compensation expense under Canadian GAAP but recorded a compensation expense under US GAAP for the options issued to consultants. In respect to options issued before January 1, 2002 but vesting in year 2002 and thereafter, the Company records expense under US GAAP but recognized no expenses under Canadian GAAP.
(d)
Share issue costs:
The Company incurred costs in 2004 and prior years to file registration statement with Securities and Exchange Commission in order to interlist for trading in United States. In accordance with US GAAP these costs are expensed as incurred but charged against share capital under Canadian GAAP. There is no effect on shareholder equity in 2004 as funds expended in 2004 have already been charged to shareholder equity.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
LINGO MEDIA INC.
By: /s/ “Michael P. Kraft”___________
Michael P. Kraft
President and Chief Executive Officer
By: /s/ “Khurram R. Qureshi”________
Khurram R. Qureshi
Chief Financial Officer
March 28, 2005