UNITED
STATES SECURITIES AND EXCHANGE COMMISSION


Washington,
D.C.  20549





Annual
Report


FORM
20-F/A







o 
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) OFTHE
SECURITIES EXCHANGE ACT OF 1934




OR




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


For the transition period from __________ to
________




Commission
file number _______




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, #703, Toronto, Ontario, Canada  M5S
1S4


(Address
of principal executive offices)





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. 
9,587,024





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 12 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 ninety days.  Yes x  No o





Indicate
by check mark which financial statement item the registrant has elected to
follow:  Item 17 x   Item
18 o




1




LINGO
MEDIA CORPORATION


FORM
20-F ANNUAL REPORT


TABLE
OF CONTENTS




PART
      IItem
      1.
              Identity
      of Directors, Senior Management and Advisors
              3Item
      2.
              Offer
      Statistics and Expected Timetable
              3Item
      3.
              Key
      Information
              3Item
      4.
              Information
      on the Company
              18Item
      5.
              Operating
      and Financial Review and Reports
              32Item
      6.
              Directors,
      Senior Management and Employees
              50Item
      7.
              Major
      Shareholders and Related Party Transactions
              59Item
      8.
              Financial
      Information
              61Item
      9.
              The
      Offer and Listing
              62Item
      10
              Additional
      Information
              66Item
      11.
              Quantitative
      and Qualitative Disclosures About Market Risk
              79Item
      12.
              Description
      of Securities Other Than Equity Securities
              79PART
      IIItem
      13.
              Default,
      Dividend Arrearages and Delinquencies...
              79Item
      14.
              Material
      Modifications to the Rights of  Security Holders and Use of
      Proceeds
              79Item
      15.
              Controls
      and Procedures
              80Item
      16.
              Reserved
              80PART
      IIIItem
      17.
              Financial
      Statements
              81Item
      18.
              Financial
      Statements
              81Item
      19.
              Exhibits
              82
  2




Forward-Looking
Statements





Included
in this annual report are various forward-looking statements that can be
identified by the use of forward looking terminology such as "may", "will",
"expect", "anticipate", "estimate", "continue", "believe", or other similar
words.  We have made forward-looking statements with respect to the
following, among others:





-
            the
      Company’s goals and strategies;


-
            the
      Company’s ability to obtain licenses/permits to operate in China and
      Canada;


-
            the
      importance and expected growth of English language learning in
      China;


-
            the
      importance and expected growth of early childhood development in
      Canada;


-
            the
      Company’s revenues;


-
            the
      Company’s potential profitability;
and


-
            the
      Company’s need for external
capital.





These
statements are forward-looking and reflect our current
expectations.  They are subject to a number of risks and
uncertainties, including but not limited to, changes in the economic and
political environment in China.  In light of the many risks and
uncertainties surrounding China and the early childhood market in Canada
prospective purchasers of our shares should keep in mind that we cannot
guarantee that the forward-looking statements described in this annual report
will transpire.





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





3.A.2.  Selected
Financial Data





Our
financial statements are reported in Canadian Dollars and presented in
accordance with Canadian generally accepted accounting principles and reconciled
to U.S. generally accepted accounting principles in the footnotes, for the
fiscal years ended December 31, 2007, December 31, 2006, December 31, 2005,
December 31, 2004 and December 31, 2003. These financial reports have been
audited by Mintz & Partners LLP with the exception of December 31, 2007
which was audited by Meyers, Norris, Penny LLP.
  The
selected financial data should be read in conjunction with the financial
statements and other financial information included elsewhere in the Annual
Report.
  Lingo
Media Corporation (the “Company” or “Lingo Media”) 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.
  Please
note that the US GAAP reconciliation numbers in the following table are selected
from note 20 of the December 31, 2007 financial statements and note 10 of the
interim financial statements as of March 31, 2008.


3





Please
note that the US GAAP reconciliation numbers in the following table are selected
from the note 20 of the December 31, 2007 financial statements and note 10 of
the interim financial statements as of March 31, 2008.





Table
No. 3


Selected
Financial Data


Expressed
in Canadian Dollars


(CDN$
in 000's,except per share data)




Unaudited
            
            
            AuditedThree
      Months
            
            
            Year
            
            
            Year
            
            
            Year
            
            
            Year
            
            
            YearEnded
            
            
            Ended
            
            
            Ended
            
            
            Ended
            
            
            Ended
            
            
            Ended
            
            
            Ended03/31/08
            
            
            3/31/07
            
            
            12/31/07
            
            
            12/31/06
            
            
            12/31/05
            
            
            12/31/04
            
            
            12/31/03Revenue
            
            $
            672
            
            
            $
            667
            
            
            $
            4,004
            
            
            $
            1,574
            
            
            $
            906
            
            
            $
            590
            
            
            $
            1,018Gross
      Profit
            
            
            537
            
            
            
            528
            
            
            
            3246
            
            
            
            1255
            
            
            
            783
            
            
            
            495
            
            
            
            846Net Loss
            
            
            (454
            )
            
            
            (310
            )
            
            
            (925
            )
            
            
            (748
            )
            
            
            (726
            )
            
            
            (795
            )
            
            
            (257
            )(Loss) per
      Share
            
            $
            (0.05
            )
            
            $
            (0.07
            )
            
            $
            (0.16
            )
            
            $
            (0.18
            )
            
            $
            (0.21
            )
            
            $
            (0.28
            )
            
            $
            (0.07
            )Dividends per
      Share
            
            $
            0.00
            
            
            $
            0.00
            
            
            $
            0.00
            
            
            $
            0.00
            
            
            $
            0.00
            
            
            $
            0.00
            
            
            $
            0.00Weighted Avg.
      Shares
            
            
            9,584
            
            
            
            4,227
            
            
            
            5,656
            
            
            
            4,060
            
            
            
            3,530
            
            
            
            3,232
            
            
            
            2,675Period-end Sharesoutstanding
            
            
            9,587
            
            
            
            4,661
            
            
            
            9,582
            
            
            
            4,654
            
            
            
            4,125
            
            
            
            3,444
            
            
            
            3,364Working
      Capital
            
            $
            (377
            )
            
            $
            (401
            )
            
            $
            (348
            )
            
            $
            (347
            )
            
            $
            278
            
            
            $
            271
            
            
            $
            646Long-Term Debt/Loans
      Payable
            
            
            203
            
            
            
            395
            
            
            
            203
            
            
            
            348
            
            
            
            -
            
            
            
            -
            
            
            
            106Shareholders’
      Equity
            
            
            5,476
            
            
            
            1,089
            
            
            
            5,886
            
            
            
            1,376
            
            
            
            1,088
            
            
            
            938
            
            
            
            1,620Total
    Assets
            
            
            7,662
            
            
            
            2,834
            
            
            
            7,888
            
            
            
            2,884
            
            
            
            1,417
            
            
            
            1,798
            
            
            
            1,931US GAAP income
      (Loss)
            
            $
            (731
            )
            
            $
            (293
            )
            
            $
            (1,278
            )
            
            $
            (710
            )
            
            $
            (710
            )
            
            $
            (427
            )
            
            $
            (126
            )US GAAP Basic Loss
      per Share
            
            $
            (0.07
            )
            
            $
            (0.06
            )
            
            $
            (0.23
            )
            
            $
            (0.15
            )
            
            $
            (0.17
            )
            
            $
            (0.12
            )
            
            $
            (0.04
            )US GAAP
      Equity
            
            $
            4,156
            
            
            $
            567
            
            
            $
            4,941
            
            
            $
            963
            
            
            $
            625
            
            
            $
            482
            
            
            $
            764US GAAP Total
      Assets
            
            $
            6,656
            
            
            $
            2,713
            
            
            $
            7,186
            
            
            $
            2,763
            
            
            $
            1,391
            
            
            $
            1,212
            
            
            $
            990




(1)
                
                Cumulative Net Loss
      since incorporation under US GAAP has been ($4,615,982).(2)
                a)
                Under US GAAP,
      development costs of new businesses are expensed as incurred: 2007-$nil,
      2006-$nil, 2005-$nil, and 2004-$nil.b)
                Under US GAAP,
      development costs amortized under Canadian GAAP would be reversed to calculate
      Loss per Share:  2007 – $99,805, 2006 – $156,648, 2005 –
      $133,290 and 2004 – $346,124.c)
                Under US GAAP,
      software development costs are expensed as incurred: 2007-$452,709,
      2006-$nil; 2005-$nil; and
  2004-$nil.


3.A.3.  Exchange
Rates





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




4





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.





For
purposes of this table, the rate of exchange means the noon buying rate in
New York City for cable transfers in foreign currencies as certified for customs
purposes by the Federal Reserve Bank of New York.  The table sets
forth the number of Canadian Dollars required under that formula to buy one U.S.
Dollar.  The average rate means the average of the exchange rates on
the last day of each month during the period.





Table
No. 4


U.S.
Dollar/Canadian Dollar




Average
              
              
              High
              
              
              Low
              
              
              CloseMay
      2008
              
              
              1.00
              
              
              
              1.02
              
              
              
              0.98
              
              
              
              0.99April
      2008
              
              
              1.01
              
              
              
              1.03
              
              
              
              1.00
              
              
              
              1.01March
      2008
              
              
              1.00
              
              
              
              1.03
              
              
              
              0.97
              
              
              
              1.02February
      2008
              
              
              1.00
              
              
              
              1.02
              
              
              
              0.97
              
              
              
              0.98January
      2008
              
              
              1.01
              
              
              
              1.04
              
              
              
              0.98
              
              
              
              1.00December
      2007
              
              
              1.00
              
              
              
              1.02
              
              
              
              0.98
              
              
              
              0.99November
      2007
              
              
              0.96
              
              
              
              1.00
              
              
              
              0.91
              
              
              
              1.00October
      2007
              
              
              0.98
              
              
              
              1.00
              
              
              
              0.95
              
              
              
              0.94September
      2007
              
              
              1.03
              
              
              
              1.06
              
              
              
              0.99
              
              
              
              0.99August
      2007
              
              
              1.06
              
              
              
              1.09
              
              
              
              1.05
              
              
              
              1.06July
      2007
              
              
              1.05
              
              
              
              1.07
              
              
              
              1.03
              
              
              
              1.07June 2007
              
              
              1.07
              
              
              
              1.08
              
              
              
              1.05
              
              
              
              1.06Fiscal
      Year Ended Dec. 31, 2007
              
              
              1.07
              
              
              
              1.19
              
              
              
              0.91
              
              
              
              0.98Fiscal
      Year Ended Dec. 31, 2006
              
              
              1.13
              
              
              
              1.16
              
              
              
              1.11
              
              
              
              1.12Fiscal
      Year Ended Dec. 31, 2005
              
              
              1.21
              
              
              
              1.27
              
              
              
              1.15
              
              
              
              1.17Fiscal
      Year Ended Dec. 31, 2004
              
              
              1.30
              
              
              
              1.39
              
              
              
              1.17
              
              
              
              1.21Fiscal Year Ended Dec. 31,
    2003
              
              
              1.40
              
              
              
              1.57
              
              
              
              1.29
              
              
              
              1.29




3.B.  Capitalization
and Indebtedness





Not
applicable





3.D.  Risk
Factors




The
Company is subject to a number of risks and uncertainties.





Lingo
Media is a diversified print and online education product and services
corporation.  Speak2Me Inc. (“Speak2Me”), a  subsidiary acquired
during the year ended December 31, 2007, is a new media company focused on
interactive advertising in China through its Internet-based English Language
Learning (“ELL”) portal. Our subsidiary, Lingo Learning Inc., is a print-based
publisher of English Language Learning programs in China.  Our subsidiary,
A+ Child Development (Canada) Ltd. (“A+”), specializes in early childhood
cognitive development programs which publishes and distributes educational
materials along with its proprietary curriculum through its Canadian offices
located in Calgary, Edmonton, Vancouver and Toronto.




5





In
October 2007 the Company completed the acquisition of Speak2Me Inc.
("Speak2Me"), an  Ontario corporation. Speak2Me is a new media company
that has developed software combining speech recognition and animation
technology for the teaching and practice of spoken English. The acquisition was
completed by way of a share exchange agreement entered into between Lingo Media,
Speak2Me and the shareholders of Speak2Me on the basis of a share exchange ratio
of one post-consolidated common share of Lingo Media for each 3.975 common
shares of Speak2Me. Under the terms of the acquisition, Lingo Media acquired all
the issued and outstanding common shares of Speak2Me in exchange for 4,500,366
post-consolidated common shares of Lingo Media. Speak2Me is now a wholly-owned
subsidiary of Lingo Media.





In 2006,
through the acquisition of A+, Lingo Media extended its business to include the
sale of early childhood development programs in Canada. A+ operates through its
office in Calgary, Alberta, Canada. A+ is involved in the business of early
childhood cognitive development, through the publishing, teaching and
distribution of educational materials along with its proprietary curriculum
developed by its advisory panel of psychologists.





Lingo
Media operates three distinct reportable business segments as
follows:




Online
English Language Learning
  The
Company offers a groundbreaking online service using robust speech recognition
technology acquired through its acquisition of Speak2Me Inc. in October
2007.  The service currently provides participants with more than
250-targeted, interactive English language modules with a virtual teacher.
Recently launched in China, Speak2Me is a free, advertising-based portal and is
available at www.speak2me.cn
  English
Language Learning Publishing
 In China,
Lingo Media continues to expand its business via its subsidiary Lingo Learning
Inc. (“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 200 million students.  To date, it has published
197 million units from its library of more than 300 program titles in
China.


Early
Childhood Development




A+ Child
Development (Canada) Ltd. (“A+”) publishes and distributes educational materials
aimed at the early childhood market on a direct-to-consumer basis.  A+
has developed a proprietary curriculum for parents to use with their children
based on the latest neuroscience research. To date, A+ has focused its marketing
efforts only in Canada. Lingo Media holds a 70.33% controlling interest in
A+.




The
Company derives the majority of its revenue from doing business in Canada and
China. If any of the following risks occur, our business, results of operations
and financial condition would likely suffer.  In any such events, the
market price of our common stock could decline and you may lose all or part of
your investment in our shares of common stock.




6




Risks Associated With
Business of Online English Language Learning
 
 Early
Stage of Development
 
 The
Company is at an early stage of development in its business. There can be no
assurance that the Company's business will be profitable. There can be no
assurance that the Company will be able to generate sufficient activity to be
profitable in the future and the Company's limited operating history makes an
evaluation of its prospects difficult.
 
 Competitive
Markets
 
 The
Company operates 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 the Company will
be able to obtain market acceptance or compete for market share. The Company
must be able to keep current with the rapidly changing technologies, to adapt
its services to evolving industry standards and to improve the performance and
reliability of its services. New technologies could enable competitive product
offerings and adversely affect the Company and its failure to adapt to such
changes could seriously harm its business.
 
 Economic
Conditions
 
 Unfavourable
economic and market conditions could increase the Company's financing costs,
decrease net income, reduce demand for its products and services, limit access
to capital markets and negatively impact any future credit facilities extended
to the Company. Expenditures by advertisers tend to be cyclical, reflecting
overall economic conditions as well as budgeting and buying
patterns.
 
 Need
for Additional Financing
 
 The
business plan calls for revenue generation to begin in 2008, and the company
will require additional funds for sales and marketing. Failure to obtain
additional financing will result in significant delays in developing new
products and markets. If the Company is unsuccessful in raising the additional
financing called for in its Business Plan, the Company is confident it can
continue operations with a series of smaller fund raisings, but would be forced
to scale back its sales and expansion plans.
 
 Dependence
on Key Personnel
 
 The
Company will be dependent upon the personal efforts, performance and commitment
of its senior officers, Michael Kraft, Jonathan Brody and Victor Wong, who are
responsible for the future development of the Company's business. Shareholders
and investors will be relying upon the business judgment, expertise and
integrity of the Company's senior officers and directors. To the extent that the
services of any senior officers or directors would be unavailable for any
reason, a disruption to the operations of the Company could result, and other
persons would be required to manage and operate the Company. The Company's
future success will also depend in large part upon its ability to attract and
retain highly skilled personnel. There can be no assurance that the Company will
be successful in attracting and retaining such personnel.
  7
 
 Acceptance
of Corporate Advertising in an Educational Context
 
 The
Company’s market research indicates that potential advertisers and its target
demographic is receptive to the placement of corporate advertising in the
context of a website devoted to education. However, the Company is aware of the
risk of political change in any country in which it is operating which may mean
a Ministry of Education is no longer willing to accept corporate advertising
within its student network.
 
 Parents
and Students are Unwilling to Pay for Online Services
 
 Offline
English Language Learning (ELL) instruction is a growing industry, but attempts
to attract large numbers of paying students to subscription based ELL services
have largely failed. Given that online consumption patterns in China are largely
following trends already established in the West, and given that few industries
and companies in the West have been able to establish thriving
subscription-supported online services, a pure subscription model is unlikely to
succeed in China.
 
 Growth
of Internet Advertising
 
 The
Company is aware that the level of Internet advertising is currently low,
especially in Asia and Central and South American countries. The Company's
forecast profitability is highly dependent on the assumption that Internet
advertising will grow rapidly. The market for Internet advertising, content and
services is intensely competitive and rapidly evolving. The Company expects that
competition will continue to increase, including in its target market. It is not
difficult to enter this market, and current and new competitors, including
companies in traditional media, can launch Internet sites rapidly.
 
 The
Company Must Generate Online Advertising Revenue
 
 The
Company’s future success depends in part on its ability to establish, increase
and sustain online advertising revenue. Therefore market and advertiser
acceptance of  the Company's services will be important to the success
of the Company’s business. The Company’s ability to generate advertising revenue
will be directly affected by the number of users of its service. The Company’s
ability to generate advertising revenue will also depend on several other
factors, including the level and type of market penetration of the Company’s
service, broadening its relationships with advertisers to small and medium size
businesses, its user base being attractive to advertisers, its ability to derive
better demographic and other information from users, competition for advertising
funds from other media and changes in the advertising industry and economy
generally. The Company’s expense levels are based in part on expectations of
future revenue. The Company may be unable to adjust spending quickly enough to
compensate for any unexpected revenue shortfall. The Company anticipates that
some of its advertising customers will not allow the Company to place their
advertisements next to other advertisements. The Company may not always be
successful at accommodating these orders. In such situations, inability to
fulfill competing orders might cause the Company to lose a potentially
significant amount of revenue, particularly if the customer that cannot be
accommodated chooses not to advertise with the Company at all.
  8
 
 Maintenance
of Client Relationships
 
 The
ability of the Company to attract and maintain clients requires that it provide
a competitive offering of products and services that meet the needs and
expectations of its clients. The Company's ability to satisfy the needs or
demands of its clients may be adversely affected by factors such as the
inability or failure to identify changing client needs or expectations or the
inability to adapt in a timely and cost-effective manner to innovative products
and services offered by competitors. In addition, the Company must continue to
attract and retain clients to compete successfully for advertising and
subscription revenue. The Company cannot be sure that it will compete
successfully with current or future competitors in sustaining or growing the
Company’s web site traffic levels and subscriber levels. If the Company fails to
attract and retain more clients, the Company’s market share, brand acceptance
and revenue would decline, which would have a material adverse effect on the
Company’s business, financial condition and results of operations.
 
 Create
Content and Services Accepted by Users
 
 The
Company’s success is dependent upon its ability to deliver original and
compelling content and services for its online English language instruction
software that attract and retain users in its target market. The Company’s
ability to successfully develop and produce content and services is subject to
numerous uncertainties, including the ability to:
 
 ·
              Anticipate
      and successfully respond to rapidly changing consumer tastes and
      preferences;
 ·
              Fund
      new content development;
 ·
              Attract
      and retain qualified editors, writers, producers, and technical
      personnel;
 ·
              Build
      brand loyalty among users; and
 ·
              Build
      a sense of community among users and encourage use of the interactive
      features on Speak2Me’s website.
 
 Failure
of Speak2Me’s Delivery Infrastructure to Perform Consistently
 
 The
Company’s success as a business depends, in part, on its ability to provide
consistently high quality online services to users via the Speak2Me delivery
infrastructure. There is no guarantee that the Speak2Me delivery infrastructure
and/or Speak2Me’s software will not experience problems or other performance
issues. If the Speak2Me delivery infrastructure or software fails or suffers
performance problems, then it would likely affect the quality and interrupt the
continuation of Speak2Me’s service and significantly harm the Company’s
business.
 
 Speak2Me’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 Speak2Me delivery infrastructure could harm Speak2Me’s
goodwill and the Speak2Me brand and ultimately could significantly and
negatively impact the amount of revenue it may earn from its
service.  Like all Internet transmissions, Speak2Me’s services may be
subject to interception and malicious attack. Pirates may be able to obtain or
copy Speak2Me’s products without paying fees to Speak2Me. The Speak2Me delivery
infrastructure is exposed to spam, viruses, worms, spyyware, denial of service
or other attacks by hackers and other acts of malice. Speak2Me uses security
measures intended to make theft of its software more difficult. However, if
Speak2Me is required to upgrade or replace existing security technology, the
cost of such security upgrades or replacements could have a material adverse
effect on Speak2Me’s financial condition, profitability and cash
flows.
  9
 
 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, the Company’s 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 the Company will develop future
proprietary products that are patentable, that any issued patents will provide
the Company 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 the Company’s products or, if patents are issued to the
Company, design their products so as to circumvent the patent protection held by
the Company. The Company will seek to protect its 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 Speak2Me’s business and
marketing plans or future strategic documents or to obtain and use information
that the Company regards as proprietary. There can be no assurance that the
Company’s means of protecting its proprietary rights will be adequate or that
the Company’s competitors will not independently develop similar or superior
technology. Litigation may be necessary in the future to enforce the Company’s
intellectual property rights, to protect the Company’s 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.
 
 Government
Regulation and Licensing
 
 The
operations of Speak2Me may be subject to Canadian and foreign federal and
provincial regulations and licensing. There can be no assurance that the Company
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 the Company's ability to achieve its financial and operational
objectives. The Company is subject to federal, state, local 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 the
Company’s growth and reduce its 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, labour, political and economic instability. There can be no assurance
that such risks will not adversely affect the Company’s business, financial
condition and results of operations. Furthermore, a portion of the Company’s
expenditures and revenues will be in currencies other than the Canadian dollar.
the Company’s foreign exchange exposure may change over time with changes in the
geographic mix of its business activities. Foreign currencies may be
unfavourably impacted by global developments, country-specific events and many
other factors. As a result, the Company’s future results may be adversely
affected by significant foreign exchange fluctuations.
  10
 
 Risks associated with
business of English Language Learning Publishing
 
 Risk
of Failing to Achieve Market Acceptance
 
 Although
the Company has contracts with People Education Press (“PEP”) in Beijing for
English Language Learning materials, there can be no assurance that the State
Ministry of Education in China will continue to accept the educational
publications produced by the Company.
 
 Limited
Experience in China
 
 The
Company has limited experience in providing traditional educational publishing
in China.  Although the Company has retained the services of Canadian,
US, British and Chinese educators to assist the Company with these endeavors,
there can be no assurance that the Company will be able to attract and retain
qualified personnel with relevant experience for the continued management and
development of its business.
 
 Political
and Economic Policies of the Chinese Government
 
 The
growth of the Company’s business is dependent on government budgetary policy,
particularly the allocation of funds to sustain the growth of the English
language learning and training programs in China.  The Company’s
customers in China, excluding Renzhen Group, are directly or indirectly owned or
controlled by the Chinese government.  Accordingly, their business
strategies, capital expenditure budgets and spending plans are largely decided
in accordance with government policies, which, in turn, are determined on a
centralized basis at the highest level by the State Planning Commission of
China.  As a result, the growth of our business is heavily dependent
on government policies for English language learning and
training.  Despite the high priority currently accorded by the
government to this area, and a high level of funding allocated by the government
to this sector, insufficient government allocation of funds to sustain its
growth in the future could reduce the demand for our products and services and
have a material adverse effect on our ability to grow our business.
  Since the
establishment of the People’s Republic of China (“PRC”) in 1949, the Communist
Party has been the governing political party in China.  The highest
bodies of leadership are the Politburo of the Communist Party, the Central
Committee and the National People's Congress.  The State Council,
which is the highest institution of government administration, reports to the
National People's Congress and has under its supervision various commissions,
agencies and ministries, including Ministry of Commerce of the PRC
“MOFCOM”.  Since the late 1970s, the Chinese government has been
reforming the Chinese economic system.  Reforms have included
decollectivization of farms; legalization of interregional and international
trade by individuals and businesses; legalization of markets in most goods and
services; elimination of price controls; and privatization of some state-owned
productive assets.  Reforms began in the farming sector and rural
industry, and were later implemented in various service
industries.  In the last five years, China has also begun dismantling
large state monopolies in heavy industry. Although the Company believes that
economic reform and the macroeconomic measures adopted by the Chinese government
have had and will continue to have a positive effect on the economic development
in China, there can be no assurance that the economic reform strategy will not
from time to time be modified or revised.  Such modifications or
revisions, if any, could have a material adverse effect on the overall economic
growth of China and investment in the English language learning and training
sectors in China.  Such developments could reduce, perhaps
significantly, the demand for our products and services.  There is no
guarantee that the Chinese government will not impose other economic or
regulatory controls that would have a material adverse effect on our
business.  Furthermore, changes in political, economic and social
conditions in China, adjustments in policies of the Chinese government or
changes in laws and regulations could adversely affect our industry in general
and our competitive position in particular.  Changes in government
policies might include  increased restrictions on the nature of
business activities that foreign-owned enterprises may perform or additional
tax/fee/license requirements for foreign-owned enterprises; increased
restrictions on the publishing industry, including restrictions on the nature of
business activities that publishers may perform; additional tax/fee/license
requirements; requirements to publish or not to publish certain content; and
direct state supervision or control of publisher's activities; and more
intensive approval requirements for educational materials.
  11
 
 Highly
Competitive Market
 
 The
educational publishing market in China is rapidly
changing.   Competitors to the Company’s strategic co-publishing
partners in the market mainly include provincial and municipal educational
publishing companies such as Hebei Education Press and Shanghai Foreign Language
Educational Press.  In addition, there are many large multinational
educational publishing companies with substantial, existing publishing
operations in Asian markets including China, that have significantly greater
financial, technological, marketing and human resources who have entered the
English language learning and training market in China, which could hurt the
Company’s future prospects and erode its market share.
 
 Most of
our competitors have greater financial, technical and human resources than us,
may be able to respond more quickly to new and emerging technologies and changes
in customer requirements or devote greater resources to the development,
promotion and sale of new products or services.  It is possible that
competition in the form of new competitors or alliances, joint ventures or
consolidation among existing competitors may decrease our market
share.  Increased competition could result in fewer customer
engagements, reduced gross margins and loss of market share, any one of which
could materially and adversely affect our revenues and overall financial
condition.
 
 Economic
Risks Associated with Doing Business in China
 
 The
Chinese economy has experienced uneven growth across geographic and economic
sectors. The current economic situation may adversely affect our profitability
over time as expenditures for English language training products may decrease
due to the results of slowing domestic demand and deflation.  In
addition, the Chinese government may implement changes in fiscal policy that
could increase our costs of operating our business in China or slow demand for
our products.  We cannot predict what effects changes in Chinese
government policies may have on our business or results of
operations.
 
 Currency
Exchange Risk
  Our
reporting currency is the Canadian Dollar.  However, substantially all
revenues from China activities are denominated in United States
Dollars.  In July 2005, the Chinese government announced that the Yuan
would no longer be pegged to the United States Dollar, but would float against a
basket of currencies. China's currency had been pegged at 8.28 against the
United States Dollar for a decade, but the adjustment allowed it to float
against a number of currencies including the US dollar, the Euro, the Japanese
Yen, the South Korean Won, the UK Pound, the Thai Baht and the Russian
Rouble.  Since that time, the Yuan has traded below the pegged
rate.
  If the
Yuan were no longer pegged to the basket of currencies, rate fluctuations may
have a material impact on the Company’s consolidated financial reporting. The
Company’s accounts receivable from China will decline in value if the Yuan
depreciates relative to the Canadian and United States Dollar.  Any
such depreciation could adversely affect the market price of our common
stock.  Very limited hedging transactions are available in China to
reduce our exposure to exchange rate fluctuations.  To date, we have
not entered into any hedging transactions in an effort to reduce our exposure to
foreign currency exchange risk.  While we may decide to enter into
hedging transactions in the future, the availability and effectiveness of these
hedges may be limited and we may not be able to successfully hedge our exposure
at all.  In addition, our currency exchange losses may be magnified by
Chinese exchange control regulations that may restrict our and our Chinese
partners’ ability to convert Renminbi into United States Dollars.
  12
  Growth
Management
 
 As the
Company endeavors to increase its sales and develop new lines of business, it
will be subject to a number of risks associated with the management of such
growth. These risks include increased responsibilities for existing personnel,
the need to hire additional qualified personnel and, in general, higher levels
of operating expenses.  In order to manage current operations and any
future growth effectively, the Company will need to continue to implement and
improve it’s operational, financial and management information systems and to
hire, train, motivate, manage and retain qualified employees.  In
particular, it will need to ensure that adequate mechanisms are in place to
address potential growth from the largely untapped Chinese marketplace and to
ensure that the Company has hired, trained and retained employees that are
familiar with that marketplace.  There can be no assurance that the
Company will be able to manage such growth effectively, that its management,
personnel or systems will be adequate to support the Company’s operations or
that the Company will be able to achieve the increased levels of revenue
commensurate with the increased levels of operating expenses associated with
this growth. In the event the Company is unable to manage its growth effectively
due to expenses exceeding sales, the timing of expenses becoming due or other
reasons, the Company may be forced to reduce or curtail operations.
 
 Concentrated
Customer Base
 
 We have
derived and believe that we will continue to derive a significant portion of our
revenues from one large customer.  In 2004, 2005, 2006 and 2007, one
customer accounted for 91%, 98%, 75% and 22% of the Company’s revenues
respectively. The loss, cancellation or deferral of the large contract with this
large customer would have a material adverse effect on our revenues from
China.  In addition, there can be no assurance that we will bring in
any new significant customers in China.
 
 Risks Associated With
Business of Early Childhood Development
 
 Dependence
on Third Party Vendors
 
 The
Company sells programs that include third party products.  There is no
certainty that the vendors of these products will continue the production of
these products and the Company’s ability to source a replacement of such
products. Such discontinuation of these products will significantly impact our
ability to continue the sales of these programs.
 
 Dependency
on Key Personnel
 
 The
Company’s future success is dependent on the success and ability of its key
management, President Terry Pallier.  The loss of key personnel or the
inability to attract and retain highly qualified personnel, consultants or
advisors could adversely affect the Company’s business.  The Company
faces competition for such personnel from other companies and
organizations.  There can be no assurance that the Company will be
successful in hiring or retaining qualified personnel.  The inability
of the Company to retain and attract the necessary personnel or the loss of
services of any of its key personnel could have a material adverse effect on the
Company’s profitability.
 
 Keep
Pace with New Technologies
 
 The
Company sells programs primarily consisting of printed materials.  The
educational industry continues to evolve from traditional printed materials to
digital products. The inability of the Company to keep pace with the new
technologies and standards in the educational industry could render its products
and services non-competitive.  The Company’s future success will
depend on its ability to address the increasingly sophisticated needs of its
customers by producing and marketing enhancements to its products and services
that respond to customer requirements. The Company may be required to invest
significant capital in order to remain competitive. A failure on the part of the
Company to effectively manage a product transition will directly affect the
demand for the Company’s products and the future profitability of the Company’s
operations.
  13
 
 Foreign
Exchange Risk
 
 The
Company’s programs include third party products that are purchased in US dollars
and the Company may incur losses if the US Dollar is strengthened against the
Canadian dollar.
 
 Consumer
Financing
 
 The
Company’s sales are highly dependent on its ability to arrange third party
financing for its customers.  The Company’s revenues will
significantly decline if the third party financier decides to discontinue this
program and we are unable to negotiate other sources for similar consumer
financing program.
 
 Generating
Sales Leads
 
 Company
is highly dependent on its ability to generate sales leads through its
telemarketing activities.  A new technology that would block incoming
telemarketing telephone calls into homes will jeopardize the Company’s ability
to generate sales leads and revenues in Canada.
 
 A+
derives all of its revenue from sales made in a clients home. This format
requires that an appointment be made with the family in order for the sale to
take place. The appointment can only be arranged from leads generated from our
call centres. There are certain factors that could restrict the number of
appointments that we are able to set. including:
 
 1)  The
number of families with children 3 and under in the territory which we serve,
roughly 1 million households. We work off lists purchased from brokers to
contact these people. Approximately 400,000 names of such families end up on
such lists. The number of names we will require as we expand will exceed that
figure. When this occurs the growth in the child development side of the company
will plateau, as will profits.
 
 2)  Other
factors which could reduce appointments include:
 a.
                Increasingly
      more stringent privacy laws
 b.
                The
      possibility and indeed the likelihood of a “do not call” list being
      legislated.
 c.
                A
      perceptible increase in the reluctance of families to entertain a
      perceived “sales person” in their
home.
 These
could lead to detrimental effects on the Company’s ability to make appointments
with prospective customers and will affect productivity and therefore
profitability.
 
 Dependence
on Trained Management Staff
 
 In order
to provide as broad coverage as possible in the territory we serve, it is
necessary to establish district sales offices, which serve between 100,000 and
300,000 prospective families. As expansion takes place we must of course have
managers who can hire, train and continually advise and assist sales
consultants. In order to do this the manager must have experience and knowledge
in this highly specialized and unique field. This means that, ideally, the
manager should be hired from within the sales consultant force. This does not
totally rule out hiring a manager from outside operations, but should that be
necessary, such person would probably require 6-12 months of training to
effectively manage a district sales office. There is always the risk of under
performing sales results, in district offices, which could restrict
profitability.
  14
  Other Risk
Factors





Dependence
on Michael P. Kraft, the Company’s Chief Executive Officer, as well as other
executives





The
Company’s future success is dependent on the success and ability of its key
management and product development teams.  The Company has obtained
key man insurance on its senior executive in the amount of
$1,000,000.  The loss of key personnel or the inability to attract and
retain highly qualified personnel, consultants or advisors, could adversely
affect the Company’s business.  The Company faces competition for such
personnel from other companies and organizations.  There can be no
assurance that the Company will be successful in hiring or retaining qualified
personnel.  The inability of the Company to retain and attract the
necessary personnel or the loss of services of any of its key personnel could
have a material adverse effect on the Company.




Technological
changes may reduce the Company’s sale of its products and services





The
traditional publishing industry continues to experience technological
change.  The publishing industry continues to evolve from traditional
mechanical format printing to full digital printing.  The inability of
the Company to keep pace with the new technologies and standards in the print
industry could render its products and services non-competitive.  The
Company’s future success will depend on its ability to address the increasingly
sophisticated needs of its customers by producing and marketing enhancements to
its products and services that respond to customer requirements.  The
Company may be required to invest significant capital in order to remain
competitive. A failure on the part of the Company to effectively manage a
product transition will directly affect the demand for the Company’s products
and the future profitability of the Company’s operations.





Exchange
rate fluctuations may reduce the Company’s revenues or increase the Company’s
expenses





The
Company does transact some business involving currencies other than the Canadian
currency in both purchasing and selling goods and services.  The
Company is exposed to fluctuations in foreign currency exchange rates that may
have an adverse effect on the Company’s businesses.





Dependence
on key contractors for maintenance of high quality content





A key
component of the continued success of the traditional publishing activities of
the Company will be the ability of the Company to maintain high quality
content.  The Company must continue to develop new and innovative
products to sustain its educational publishing activities in order to ensure the
continued viability of the traditional publishing aspects of its
business.  Although the Company continues to retain experienced
educators and editors to develop content for its educational publications, there
can be no assurance that the Company will be able to continue hiring experienced
educators and editors to maintain the current high quality level of content for
future publications.





Competition
is likely to have a tremendous impact on our business





The
Company faces considerable competition from traditional educational publishing
companies and from educational software providers in China both of which offer
the same or similar services as are available from the Company’s traditional
publishing operations.  In addition, it is anticipated that as China
becomes more open to foreign involvement for educational programs, the level of
competition will further intensify.




15





We
may need additional capital in the future and it may not be available on
acceptable terms





We may
need to raise additional funds in order to finance our
operations.  The Company expects that corporate growth will be funded
from equity and/or debt financing(s) to help generate needed
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.





Risk
of history of losses





The
Company has had a history of losses and there is no assurance that it can reach
profitability in the future.  The Company will require significant
additional funding to meet its business objectives.  Capital will need
to be available to help expand not only the Company’s product line but also to
improve market penetration and sales through an increasing distribution
network.





Our
public trading market is highly volatile


The
Company's common shares trade on the TSX Venture Exchange under the symbol "LM",
and on NASD:OTC BB under the symbol “LMDCF” and are quoted on the Berlin-Bremen
Stock Exchange under the symbol “LIM.BE” and the German securities code is (WKN)
121226.
 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 are quoted on the OTC Electronic Bulletin Board; a NASD sponsored
and operated quotation system for equity securities.  It is a more
limited trading market than the NASDAQ Capital Market, 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, the activity of only a few shares may affect
the market and may result in wide swings in price and in volume.




16





Our
common shares are listed on the NASD OTC Bulletin Board, and are subject to the
requirements of Rule 15(g) 9, promulgated under the Securities Exchange Act as
long as the price of our common shares is below $5.00 per
share.  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, OTC BB
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 in 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, Barbados, and Hong Kong
and Representative Offices in China and Taiwan.  In addition, a
majority 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.


Risk Factors Associated With
Jintu Joint Venture (“Jintu JV”) in China:





Jintu JV
is a development stage company and is subject to all of the uncertainties of
starting a new business segment.





A print
media joint venture in China requires approvals from the General Administration
of Press and Publications Bureau and from the Ministry of
Commerce.  While the Company anticipates getting the requisite
approvals for Jintu Joint Venture (“Jintu JV”), there can be no assurance that
Jintu JV will receive the requisite government approvals and that the joint
venture will obtain the necessary business registration and
license.




17





Jintu JV
requires a total of ¥5,000,000 Yuan as its Registered Capital and the Company
will be required to invest its proportionate share or ¥2,550,000 Yuan
(CDN$365,000) as its contribution to the Jintu JV.  There can be no
assurance that the Company will have sufficient funds to finance its share of
the Registered Capital required for the establishment of the Jintu
JV.





The key
executives of the joint venture have prior experience in sales and marketing of
a leading educational software company in China.  However, their
experience is limited to managing a sales force and not in the establishment and
managing of a joint venture. There can be no assurance that the management will
be successful in operating the joint venture as they lack operational experience
as it is a new entity with no operating history.





The joint
venture’s future success is dependent on success and ability of its key
executive officer, Yan Hui Zhang. The loss of its key officer or the inability
to attract and retain highly qualified personnel, consultants or advisors,
particularly with respect to the Company’s intended expansion into the
distribution of print media products in China, could adversely affect the Jintu
JV’s operations.





Jintu JV
may need additional capital in the future and it may not be available on
acceptable terms. If adequate funds are not available on acceptable terms, we
may be forced to curtail or cease Jintu JV’s operations.  Even if we
are able to continue Jintu JV’s operations, the failure to obtain financing
could have a substantial adverse effect on its business and financial
results.





ITEM
4.  INFORMATION ON THE COMPANY





4.A. History and Development
of the Company





Introduction





Lingo
Media operates three distinct reportable business segments as
follows:





Online
English Language Learning




The
Company offers a groundbreaking online service using robust speech recognition
technology acquired through its acquisition of Speak2Me Inc. in October
2007.  The service currently provides participants with more than
250-targeted, interactive English language modules with a virtual teacher.
Recently launched in China, Speak2Me is a free, advertising-based portal and is
available at www.speak2me.cn
  English
Language Learning Publishing
  In China,
Lingo Media continues to expand its business via its subsidiary Lingo Learning
Inc. 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 200 million students.  To date, it has published 197 million
units from its library of more than 300 program titles in
China.





18




Early
Childhood Development




A+ Child
Development (Canada) Ltd. publishes and distributes educational materials aimed
at the early childhood market on a direct-to-consumer basis.  A+ has
developed a proprietary curriculum for parents to use with their children based
on the latest neuroscience research. To date, A+ has focused its marketing
efforts only in Canada. Lingo Media holds a 70.33% controlling interest in
A+.




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:


Jianwai
SOHO


Building
17, Suite 601


39 East
3rd Ring Road,


Dong San
Huan Zhong Lu


Beijing,
100022, China


Telephone:
+86 10 5900 0152


Facsimile:  +86
10 5900 1800





The
A+ offices are located at:


Head
Office / Calgary, AB


2116 - 27
Avenue N.E, Suite 341


Calgary,
AB   T2E 7A6


Telephone:
(403) 250-6616


E-mail:  phs.calgary@apluschilddevelopment.com





District Offices
A+


Edmonton


5004 98
Avenue, Suite 1021


Edmonton,
AB   T6A 0A1


Telephone:
(780) 444-4490


E-mail:  phs.edmonton@apluschilddevelopment.com




19





Vancouver


204,-
3997 Henning Drive


Burnaby,
BCV5L 6N5


Telephone:
(604) 422-8190


E-mail:
 phs.vancouver@apluschilddevelopment.com





Toronto


301 -
9040 Leslie Street


Richmond
Hill, ON L4B 3M4


Telephone:
(905) 763-1176


E-mail: phs.richmondhill@apluschilddevelopment.co




The
Company's fiscal year ends December 31st.
  The
Company's common shares trade on the TSX Venture Exchange under the symbol "LM",
and on NASD:OTC BB under the symbol “LMDCF” and are quoted on the Berlin-Bremen
Stock Exchange under the symbol “LIM.BE” and the German securities code is (WKN)
121226.


History and
Development





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 six active subsidiaries: Lingo Learning Inc. "LLI", Lingo
Media International Inc. "LMII", ", A + Child Development (Canada) Ltd.,
Speak2Me Inc. “S2M”,  Speak2Me International Inc. “S2MII”, and
Speak2Me (Hong Kong) Limited “S2MHK”.
 LLI 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..
  LMII was
incorporated pursuant to the Companies Act of Barbados on September 11, 1996
under the name International Alpha Ventures Inc.  On May 13, 1997,
wholly-owned subsidiary's name was changed to International Alpha Media, Inc.
and then was changed to Lingo Media International Inc. on September 20,
2000.


20





A+ was
incorporated pursuant to the Business Corporations Act of Alberta on February
12, 1999. A+ is 70.33% owned by the Company.
  S2M was
incorporated pursuant to the Business Corporations Act (Ontario) on February 22,
2007.
  S2MII was
incorporated pursuant to the Companies Act of Barbados on October 15, 1996 under
the name Consolidated Sino Ventures Ltd.  On March 20, 2008,
wholly-owned subsidiary’s name was changed to Speak2Me International Inc. under
the Companies Act of Barbados.
  S2MHK was
incorporated pursuant to the Companies Ordinance, Hong Kong on March 12,
2008.
 Acquisition
of A + Child Development (Canada) Ltd.
  In 2006,
Lingo Media acquired a 62.33% controlling interest in A+ and acquired an
additional 8% interest in March 2007. A+ derives revenues from publishing and
distribution of educational materials aimed at the early childhood
market.  A+ has developed a unique curriculum for parents to use with
their children based on the latest neuroscience research. To date, A+ has
focused its marketing efforts only in Canada. With Lingo Media’s established
operations in Beijing, A+ plans to introduce its learning system and products to
parents of pre-school children in China.
  Under the
terms of the acquisition, Lingo Media:





i)
            acquired
      50.33% of the outstanding capital stock of A+ from its shareholders for
      the purchase price of CAD$730,000 satisfied by issuing 2,650,000 common
      shares of Lingo Media and paying CAD$200,000
  cash;





ii)
            invested
      CAD$150,000 in A+ for an additional 12%
  interest;





iii)
            invested
      a further CAD$100,000 in A+ for an additional 8% interest;
    and





iv)
            issued
      an additional 3,000,000 common shares of Lingo Media to the selling
      shareholders of A+ subject to meeting annual earnings milestones to be
      held in escrow and released over a three-year period with a maximum of
      1,000,000 shares released per year;





Acquisition of Speak2Me
Inc.





In
October 2007 the Company completed the acquisition of Speak2Me Inc.
("Speak2Me"). Speak2Me is a new media company that has developed software
combining speech recognition and animation technology for the teaching and
practice of spoken English. The acquisition was completed by way of a share
exchange agreement entered into between Lingo Media, Speak2Me and the
shareholders of Speak2Me on the basis of a share exchange ratio of one
post-consolidated common share of Lingo Media for each 3.975 common shares of
Speak2Me. Under the terms of the acquisition, Lingo Media acquired all the
issued and outstanding common shares of Speak2Me in exchange for 4,500,366
post-consolidated common shares of Lingo Media. Speak2Me is now a wholly-owned
subsidiary of Lingo Media.




21





4.B.  BUSINESS
OVERVIEW




Background





Lingo
Media is a diversified print and online education product and services
corporation.  Speak2Me Inc. (“Speak2Me”), a new subsidiary acquired during
the year, is a new media company focused on interactive advertising in China
through its Internet-based English Language Learning (“ELL”) portal. In China,
Lingo Media is a print-based publisher of English Language Learning programs
through its subsidiary Lingo Learning Inc.  In Canada, Lingo Media through
its subsidiary A+ Child Development (Canada) Ltd. (“A+”), specializes in early
childhood cognitive development programs which publishes and distributes
educational materials along with its proprietary curriculum through its four
offices in Calgary, Edmonton, Vancouver and Toronto.
  In
October 2007, the Company completed the acquisition of Speak2Me Inc.
("Speak2Me"). Speak2Me is a new media company that has developed software
combining speech recognition and animation technology for the teaching and
practice of spoken English. The acquisition was completed by way of a share
exchange agreement entered into between Lingo Media, Speak2Me and the
shareholders of Speak2Me on the basis of a share exchange ratio of one
post-consolidated common share of Lingo Media for each 3.975 common shares of
Speak2Me. Under the terms of the acquisition, Lingo Media acquired all the
issued and outstanding common shares of Speak2Me in exchange for 4,500,366
post-consolidated common shares of Lingo Media. Speak2Me is now a wholly-owned
subsidiary of Lingo Media.


In 2006,
through the acquisition of A+, Lingo Media extended its business to include the
sale of early childhood development programs in Canada. A+ operates through its
office in Calgary, Alberta, Canada. A+ is involved in the business of early
childhood cognitive development, through the publishing, teaching and
distribution of educational materials along with its proprietary curriculum
developed by its advisory panel of psychologists.





Lingo
Media operates three distinct reportable business segments as
follows:





Online
English Language Learning




The
Company offers a groundbreaking online service using robust speech recognition
technology acquired through its acquisition of Speak2Me Inc. in October
2007.  The service currently provides participants with more than
250-targeted, interactive English language modules with a virtual teacher.
Recently launched in China, Speak2Me is a free, advertising-based portal and is
available at www.speak2me.cn






22




English
Language Learning Publishing




In China,
Lingo Media continues to expand its business via its subsidiary Lingo Learning
Inc. (“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 200 million students.  To date, it has
published 197 million units from its library of more than 300 program titles in
China.


Early
Childhood Development




A+ Child
Development (Canada) Ltd. (“A+”) publishes and distributes educational materials
aimed at the early childhood market on a direct-to-consumer basis.  A+
has developed a proprietary curriculum for parents to use with their children
based on the latest neuroscience research. To date, A+ has focused its marketing
efforts only in Canada. Lingo Media holds a 70.33% controlling interest in
A+.




English
Language Learning




Lingo
Media’s strengths and opportunities lie in its approach to the development of
original language learning materials-including English as a Second/Foreign
Language (ESL/EFL) and English for Special Purposes (ESP).  In China,
the Company pre-sells its program to educational ministries through
co-publishing with local publishers, while retaining full copyright ownership
and distribution rights for all other markets.


China
Publishing





Lingo
Media has spent six years developing English as a Foreign Language (EFL),
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 EFL book, 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.




23





Co-Publishing Partners 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 training.  PEP has a readership of more than 120 million
students. Lingo Media has four programs with PEP. Three 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); Starting Line (Grades 1-6);
and Beginning English for
Young Learners (Grades 1 and 2). The Reading Practiceseries is
for junior middle school students. All series include the core textbooks in
addition to supplemental activity books, audiocassettes, teacher resource books,
and other materials.





Foreign
Language Teaching and Research Press





Foreign
Language Teaching and Research Press (FLTRP) is one of the forerunners in
international copyright co-operation in China and is a leading university
reference and K-12 publisher in China.





China
International Publishing Group





Foreign
Language Press (“FLP”) is a subsidiary of China's largest trade publishing
group, China International Publishing Group (“CIPG”). CIPG develops and
distributes books to Chinese retail bookstores, in addition to producing
selected texts and supplemental books for the educational market. Lingo Media
co-published with CIPG theEnglish for Hosts book and audiocassette package.





Phoenix
Publishing & Media Group





Phoenix
Publishing and Media Group (PPMG), formerly Jiangsu Publishing Group, was
established in September 2001. It is one of the largest publishing houses in
China with a registered capital of 720 million RMB, revenue of more than 8
billion RMB and total assets of 7.4 billion RMB.  PPMG’s subsidiaries
include 8 publishing houses, 1 audio visual publishing house, 1 printing house
and an import-export trading corporation.  Lingo Media has
co-published and launched Lingo College English with
Yilin Press.




24




Guangzhou
Renzhen English Production Group “Renzhen Group”:




Lingo
Media completed a co-publishing agreement for two language-learning programs
with Renzhen Group in December 2000. Renzhen Group is one of China’s leading
privately owned language learning publishers of book and audiocassette packages
focusing on wholesaling to bookstores and newsstands throughout China, as well
as on its growing mail order business. The two programs that have been launched
include English In Business
Communications— a series of six self-study books and 12 audiocassettes
providing specialized English training; and The Out Loud Program: Rhymes,
Rhythms and Patterns for Language Learning— a set of student books and
audiocassette packages with 3 levels.




The
Lingo Media Approach





Lingo
Media specializes in publishing materials for language learning. Lingo Media
focuses on two sectors: English as a Second Language (ESL) in English-speaking
countries and English as a Foreign Language (EFL) in China.





The key
to publishing successful EFL programs are two simple concepts: quality and
relevance. Our core philosophy says that English language learning materials
should be relevant to the market we are trying to reach. In a nutshell, our
approach involves:




Researching
and Understanding the Market


The
process began with relationship building and communication.  We talk
with key organizations, associations and ministries in each country to better
understand their needs and concerns. We looked for the right niche for Lingo
Media, and then sought out local partners to aid in the marketing and
implementation of our programs.  Moreover, we searched for individuals
in China who manage the Company’s affairs.  These individuals become
our links to China's community and culture.





Bilateral
Relationships


With
Lingo Media liaisons in place, our goal is to assure that our English Language
Learning materials meet the highest educational standards.




Constant
Monitoring of Effectiveness


Our
people in the field in China are constantly monitoring the effectiveness of our
programs; they ask and answer the crucial questions - Does the material serve
the intended audience?





Comprehensive
Product Development


Because
we know that a language learning program needs to serve a number of different
groups, we considered the requirements of all of the ultimate users:
administrators, teachers and students.  Each group has its own
perspective. We developed an approach that works for all.




Collaborative
Partnerships


With
local partners and educational organizations involved with the process of
implementing programs, they are pleased with the results.  Our
partners are involved in all stages of program marketing, implementation and
monitoring – in effect they are strategic team members.




25





Bilateral
Development


September
2001 marked the first official launch of a Lingo Media program entitled PEP Primary English. The
program was developed by an international team of respected educational writers:
Jack Booth, David Booth, Linda Booth and Larry Swartz (award winning Canadian
authors of the elementary language arts series Impressions), together with
Yuexin Wu from Wuxi Normal School and PEP’s English Editorial Team.





Relevant
Material


We know
how to listen. Our teams ensure that program material is relevant and culturally
appropriate, as well as educationally sound.





Early Childhood
Development





A+
markets a cognitive development program to the parents of children from newborn
to age five. The program is based upon the significant knowledge of brain
development that has come about since the invention of sophisticated brain
scanning equipment and devices. The components of the program are designed to
deliver to the child age appropriate, properly neurobiologically sequenced and
developmentally valid information. It is designed with the goal of having the
child in the home eventually reach his/her full intellectual
potential.





A+ has
four offices in Canada - Toronto, Calgary, Edmonton and Vancouver. Expansion
plans call for the opening of a sales office in Ottawa, Ontario before the end
of 2008 and another sales office in London, Ontario in early 2009.




Products





English
Language Learning





Programs
for children;





Series:
            Beginning
      English For Young LearnersType
      of Program:
            English
      as a Foreign Language (EFL)
              English
      as a Second Language (EFL)Description:
            A
      series of student books, audiocassettes, teacher resource books and
      ancillary materials. The program promotes oral language use through
      partner-based activities suited for both large and small groups. It
      enhances listening, speaking and emerging literacy skills, using an
      activity-based approach.Components:
            Student
      Books: 4
              Audiocassettes: 8
              Teacher
      Resource Books: 2Target
      Audience:
            Elementary
      Schools: JK, SK, Grades 1-2




26


Series:
            PEP
      Primary EnglishType
      of Program:
            English
      as a Foreign Language (EFL)
              English
      as a Second Language (ESL)Description:
            A
      series of student books, audiocassettes, teacher resource books and
      ancillary materials. The program employs a variety of learning strategies
      to promote interactive, two-way communication as students explore the
      content through task-based activities.Components:
            Student
      Books: 8
              Audiocassettes: 16
              Teacher
      Resource Books: 8
              Ancillary
      Materials: 56Target
      Audience:
            Elementary
      Schools: Grade 3-6Series:
            Starting
      LineType
      of Program:
            English
      as a Foreign Language (EFL)
              English
      as a Second Language (EFL)Description:
            A
      series of student books, audiocassettes, teacher resource books and
      ancillary materials. The program employs interactive, two-way
      communication to help and encourage students to build word power in
      listening, speaking, reading, and writing as they participate in
      task-based activities designed for use in multi-level
      classrooms.Components:
            Student
      Books: 12
              Audiocassettes: 12
              Teacher
      Resource Books: 6
              Ancillary
      Materials: 72Target
      Audience:
            Elementary
      Schools: Grade 1-6




27




Series:
            The
      Out Loud Program: Rhymes, Rhythms and Patterns for Language
      LearningType
      of Program:
            Language
      Arts
              English
      as a Second Language (EFL)
              English
      as a Foreign Language (EFL)Description:
            A
      series of student books, audiocassettes, Teacher's Source Books and
      ancillary materials. The program is based on the principle that becoming
      fluent in a language depends largely on the participants being involved in
      authentic, interactive discourse using the language. As young learners
      experience the sounds of the English language found in these fascinating
      and inviting materials, they are immediately working with the language,
      participating in its structures and vocabulary from the inside out. This
      program presents teachers with hundreds of helpful models of the English
      language to explore with students.Components:
            Student
      Books: 3
              CDs/Audiocassettes: 3
              Teacher's
      Source Books: 3
              Poster
      Card Sets: 3Target
      Audience:
            Elementary
      Schools: JK, SK, Grades 1–2




Programs
for juveniles;





Series:
            Reading
      PracticeType
      of Program:
            English
      as a Foreign Language (ESP)
              English
      as a Second Language (EFL)Description:
            A
      series of student books to supplement the widely used PEP textbooks for
      grades 7-9. These supplemental books provide a wide range of reading
      selections and follow-up activities, language games, puzzles, and other
      sources for developing comprehension.Components:
            Student
      Books: 5
              Audiocassettes: 5Target
      Audience:
            Junior
      Middle Schools: Grades 7-9Series:
            Subject-Based
      EnglishType
      of Program:
            English
      for Special Purposes (ESP)Description:
            A
      series of student textbooks, audiocassettes, and teacher resource books.
      The first set of six subjects includes Law, Mathematics, Physics,
      Geological Prospecting and Mining, Biology, and
      Transportation.
              This
      program is required in order to meet the new curriculum mandated by the
      Chinese State Ministry of Education stating that all third and fourth year
      students not majoring in English must take English courses related to
      their subject area.Components:
            Student
      textbooks: 6
              Audiocassettes: 12
              Teacher
      Resource Books: 6Target
      Audience:
            Third
      and fourth year university students majoring in subjects other than
      English




28


Series:
            English
      in Business CommunicationsType
      of Program:
            English
      for Special Purposes (ESP)Description:
            A
      series of self-study books and audiocassettes for adult English learners
      focused on specific English language needs for a variety of professions
      and occupations.  The series is designed to develop and enhance
      listening comprehension, vocabulary development and pronunciation. Subject
      areas include Insurance, Marketing, Meetings, Negotiations, Banking,
      Presentations and English for Hosts.Components:
            Self-Study
      Books:  6
              Audiocassettes:   12Target
      Audience:
            Self-Study
      Adult Market




Series:
            Vocational
      EnglishType
      of Program:
            English
      as a Foreign Language (EFL) English as a Second Language
    (ESL)Description:
            Create
      fluency and gain skills in modern spoken and written
      English  using modern pedagogy.  Students will gain
      oral fluency as they work across the four modalities—listening, speaking,
      reading and writing—while supporting their general knowledge
      skills.  This program uses two different
      textbooks—listening/speaking, and reading/writing, as well as
      audiocassettes, to support learning.Components:
            Student
      Books, AudiocassettesTarget
      Audience:
            Chinese
      Vocational SchoolNumber
      of Levels:
            4Publication
      Date:
            September
      2006Author(s):
            Lisa
      Bruno, Lisa Black, Sarah MillerPublisher:
            Lingo
      Media
              China
      School Edition: Co-publisher – Yilin
Press





Early Childhood Development
Product Description





The
components of the A+ program are as follows:





1.
            3
      Steps Ahead – Employs colour cards with symbols and uses a
      magnetically activated light pen.  Teaches basic classification
      and discrimination.


2.
            The
      Phonics Factory – Teaches the sounds of our language and the
      letters and words that are used to record those sounds.  Teaches
      basic language structure and the connection between sight and
      sound.




29




3.
            The
      Math Factory – Teaches numerals and their
      values.  Teaches basic computations skills utilizing
      numerals.


4.
            Children’s
      Dictionary – Defines and in most cases provides illustrations of
      the 1,500 most commonly used words.


5.
            Classical
      Music – Selection assist in developing linear thinking skills,
      increases attention span and provides a calming and soothing
      effect.


6.
            Welcome
      to Reading – A complex kit divided into four modules that teaches
      reading recognition, basic reading skills and progresses through to
      reading comprehension and
composition.


7.
            A
      15 Volume Set arranged thematically – Contains answers to most
      questions asked by pre-school children and allows them to pursue an
      interest.  Provides the beginning basic skills necessary to
      become an independent learner.  Provides numerous hands-on
      activities that can be done by the child with the
  parent.


8.
            Launch
      Pad Library – Well illustrated series that concentrates on
      providing in-depth information on the “need to know” topics for the
      pre-school child.


9.
            Young
      Scientist Series – Provides basic information on all of the
      sciences and progresses to a stage where they can be used throughout
      Elementary School.  Contains 180 elementary experiments that can
      be done with a parent.


10.
            Treasure
      Tree Knowledge – 16 Volume Set.  Well illustrated
      designed to be read by the children on their own.  Continue to
      develop reading and comprehension
skills.


11.
            Student
      Discovery Library – 15 Volume Set.  Providing information
      on most relevant subjects laid out in an encyclopedic
      format.  Further develops the research skills needed to become
      an independent learner.


12.
            Interactive
      Reader Series – Well illustrated set that provides solid
      information and then tests the absorption and comprehension of the child
      by frequent question boxes throughout the
set.


13.
            Wise
      Old Owl – Provides 100 Coupons that can be used to obtain answers
      to questions that children have.  Provides those answers in age
      appropriate language and develops child’s delayed gratification
      attitude.


14.
            The
      Parents Curriculum Guide– A step-by-step instruction manual that
      guides the parent through proper utilization of the entire A+
      program.





United
States vs. Foreign Sales/Assets





During
the fiscal years ended December 31, 2007, 2006, and 2005 respectively,
$3,126,651, $685,521, and $17,812, of sales revenue were generated in
Canada.





During
the fiscal years ended December 31, 2007, 2006, and 2005 respectively, no sales
revenue were generated in the United States.





During
the fiscal years ended December 31, 2007, 2006, and 2005 respectively, $877,706,
$888,816, and $888,545of sales revenue were generated in China.





At
December 31, 2006, and 2005, substantially all of the Company’s assets were
located in Canada. At December 31, 2007, $3,327,303 of the Company’s
identifiable assets are located in Canada, and, as a result of the acquisition
of Speak2Me, $4,560,247 are located in China.




30





Dependency
Upon Intellectual Property





The
Company is dependent on its intellectual property and the contracts in China
with various Chinese publishers and in Canada with it’s A+ Parent’s Curriculum
Guide.





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).





Research and Development,
Trademarks, Licenses, and Etc.





Research
and Development





During
the years ended December 31, 2007, 2006, and 2005, respectively, the Company
expended $4,480,474, $400,717, and $104,106 on research and development,
under the categories of “development costs” “software development costs” and
“deferred costs”.  These expenditures were primarily directed at
developing products for the China market.





Trademarks
and Copy rights





The
Company owns the trademarks, Lingo Media, EnglishLingo and EnglishNihao, in
Canada and China. In addition, certain materials are copy righted.





Employees





As of
June 15, 2008, the Company had one hundred thirty employees including
ninety-nine employees of A+. Forty-two of these employees are part-time. None of
the Company's employees are covered by collective bargaining
agreements.





4.C. Organization
Structure





The
Company currently has six active subsidiaries: Lingo Learning Inc. (previously
Lingo Media Ltd.), Lingo Media International Inc., A+ Child Development (Canada)
Ltd., Speak2Me Inc., Speak2Me (Hong Kong) Limited, and Speak2Me International
Inc. Refer to ITEM 4.  “Information on the Company, 4.A. History and
Development of the Company, History and Development” for more
information.


4.D.  Property,
Plant and Equipment





The
Company’s executive offices are located in rented premises of approximately
4,523 sq. ft. at 151 Bloor Street West, Suite 703, Toronto, Ontario, Canada M5S
1S4.  The Company began occupying these facilities, through its
subsidiary Lingo Learning Inc. in March 2006.




31





The
Company’s Beijing representative offices are located in rented premises of
approximately 1,200 sq. ft. at Jianwai SOHO, Building 17, Suite 601, 39 East 3rd
Ring Road, Dong San Huan Zhong Lu, Beijing, 100022, China





A+
has following leased premises:




Head Office - #341,
2116 – 27 Ave. N.E., Calgary Alberta, Canada, T2E 7A6 which is approximately
3,366 sq. ft


Edmonton - #1021,
5004 – 98 Ave., Edmonton Alberta, Canada, T6A 0A1 which is approximately 1,905
sq. ft.




Vancouver -#204- 3997
Henning Drive, Burnaby British Columbia, Canada, V5L 6N5 which is approximately
1,671 sq. ft.




Toronto - #301, 9040
Leslie Street, Richmond Hill, Ontario, Canada, L4B 3M4 which is approximately
2,811 sq. ft.





The
Company is outsourcing its manufacturing services.




ITEM 5.  OPERATING
AND FINANCIAL REVIEW AND PROSPECTS





The
following discussion for the fiscal years ended December 31, 2007, and December
31, 2006 and for the three months ended March 31, 2008 and March 31, 2007 should
be read in conjunction with the consolidated financial statements of the Company
and the notes thereto.





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
Overview




Lingo
Media is a diversified print and online education product and services
corporation.  Speak2Me Inc. (“Speak2Me”), a new subsidiary acquired during
the year, is a new media company focused on interactive advertising in China
through its Internet-based English Language Learning portal. In China, Lingo
Media is a print-based publisher of English Language Learning programs through
its subsidiary Lingo Learning Inc.  In Canada, Lingo Media through its
subsidiary A+ Child Development (Canada) Ltd., specializes in early childhood
cognitive development programs which publishes and distributes educational
materials along with its proprietary curriculum through its four offices in
Calgary, Edmonton, Vancouver and Toronto.


32





Critical Accounting Policies
and Estimates





The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of financial statements and the
reported amounts of revenue and expenses during the reporting period. Actual
results could differ materially from those estimates and
assumptions.





In
management’s opinion, revenue recognition, development costs, deferred costs,
acquired publishing content and use of estimates as presented in the financial
statements of the year ended December 31, 2007 are critical accounting policies
and are as follows:





Revenue
recognition:





Revenues
from the sale of educational products in Canada are recognized at the time of
delivery and when the risk of ownership is transferred and collectibility is
reasonably assured.





Royalty
revenue from sales by licensees of finished products in China is recognized
based on confirmation of finished products produced by its
licensees.  Royalty revenue from audiovisual product is recognized
based on the confirmation of sales by its licensees, and when collectibility is
reasonably assured.  Royalty revenues are not subject to right of
return or product warranties. Amounts received in advance of the confirmation
are treated as customer deposits. Revenue from the sale of published and
supplemental products is recognized upon delivery and when the risk of ownership
is transferred and collectibility is reasonably assured.





Deferred
costs, investment and advances:





The
pre-operating costs relating to establishing a joint venture in China are
recorded as deferred costs.  Pre-operating costs are capitalized until
the commencement of commercial operations and then amortized on a straight-line
basis, over a maximum of five years.  Loans made in trust with a view
to establishing a joint venture are recorded as investment and
advances.  The carrying value of these deferred costs and advances are
assessed on a periodic basis to determine if a write-down is required. Any
required write-down is charged to operations in the year such write-down is
determined to be necessary.





Development
costs:





The
Company has capitalized pre-operating costs relating to establishing a business
base in the United States and the development of business in
China.  Pre-operating costs are capitalized until the commencement of
commercial operations and then amortized on a straight-line basis, over a
maximum of five years.  The carrying value is assessed on a periodic
basis to determine if a write-down is required. Any required write-down is
charged to operations in the year such write-down is determined to be necessary.
Technology costs and web development costs included in deferred development
costs are capitalized in accordance with Section 3062 ("goodwill and other
intangible assets"), of the C.I.C.A. Handbook. Development costs are amortized
on a straight-line basis over a maximum of five years.




33





Acquired
publishing content:





The costs
of obtaining the English as a Foreign Language ("EFL") program entitled
"Communications: An Interactive EFL Program" and an international folktale
series entitled "Stories Lost and Found: The Universe of Folktale" have been
capitalized and are being amortized over a five-year period.  The
Company regularly reviews the carrying values of its acquired publishing
content.  The Company evaluates the carrying value of these assets
based on the undiscounted value of expected future cash flows.  If the
carrying value exceeds the amount recoverable, a write-down of the asset to its
estimated fair value would be charged to operations in the year such a
write-down is determined to be necessary.





Use of
estimates:





The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities as at December 31, 2007 and December 31, 2006
and the reported amounts of revenue and expenses during the years then
ended.  Actual results may differ from those
estimates.  Significant areas requiring the use of management
estimates related to the useful lives and impairment of property and equipment,
development costs and acquired publishing content.





Operating
Results





Three Months Ended March 31,
2008 vs. Three Months Ended March 31, 2007





Revenue
and Margin





Lingo
Media earned revenues for three months ended March 31, 2008 as
follows:





English
              Language
              Learning
            
            
            Early
              Childhood
              Development
            
            
            TotalRevenue
            
            
            -
            
            
            $
            671,793
            
            
            $
            671,793Cost
      of Sales
            
            
            -
            
            
            
            134,737
            
            
            
            134,737Margin
            
            
            -
            
            
            
            537,056
            
            
            $
            537,056





Lingo
Media earned revenues for three months ended March 31, 2007 as
follows:





English
              Language
              Learning
            
            
            Early
              Childhood
              Development
            
            
            TotalRevenue
            
            
            587
            
            
            $
            666,946
            
            
            $
            667,533Cost
      of Sales
            
            
            235
            
            
            
            139,339
            
            
            
            139,574Margin
            
            
            352
            
            
            
            527,607
            
            
            $
            527,959




34




English
Language Learning:





China


Lingo
Media earns its royalty revenues from its key customer, People’s Education Press
(“PEP”), a Chinese State Ministry of Education publisher on the following
basis:





·Finished
      Product Sales – PEP prints and sells Lingo Media’s English language
      learning programs to provincial distributors in
  China;





·Licensing
      Sales – PEP licenses Lingo Media’s English language learning programs to
      provincial publishers who then print and sell the programs to provincial
      distributors in China.





Lingo
Media earns a significantly higher royalty rate from Finished Product Sales
compared to Licensing Sales.





Revenues
from China for the quarter ended March 31, 2008 were $nil compared to $nil for
Q1-2007. The Company continues to advance its relationship with PEP and has
developed new programs to maintain its royalty revenue. The Company had unearned
revenues of $159,755 as at March 31, 2008 as compared to $177,778 as at March
31, 2007.





In July
2006, the Company entered into a publishing agreement with Yilin Press to
co-publish a Vocational
English For College program in China.  In addition, the Company
developed a new educational program – Lingo Kindergarten English –
aimed at China’s vast pre-school market.





Lingo
Media has expanded its in-house product development team with the appointment of
Chris Andersonas its
Managing Editor in order to develop new English language learning
programs.  The Company has also appointed Jenny Bao as Director of
Marketing to enhance its relationships with existing customers and to secure new
business.





Canada


Up until
December 31, 2007 Lingo Media continued to earn revenue from the Out Loud
program launched in 2001. Revenue from this program has declined and was $nil
for the first quarter of 2008 vs. $587 for the first quarter of 2007.  Cost
of sales includes direct costs such as product cost, delivery and author
royalty.


Early
Childhood Development





In 2006,
Lingo Media expanded into early childhood development sector through the
acquisition of A+ effective October 1, 2006. A+ publishes and distributes
educational materials aimed at the early childhood market.  A+ has
developed a proprietary curriculum for parents to use with their children based
on the latest neuroscience research. A+ has focused its efforts in Canada and
with Lingo Media’s established operations in Beijing, A+ plans to introduce its
learning system and products to parents of pre-school children across China.
Future plans also include an expansion to the United States.





Lingo
Media’s revenue from Early Childhood Development was $671,793 for the first
quarter of 2008 compared to $666,946 for the same period last year. Cost of
sales includes direct costs such as product and delivery costs of the goods
sold.




35





General and
Administrative





General
and administrative costs consist of executive compensation, consulting fees,
office administration, rent, marketing, professional fees, shareholders
services, any foreign exchange losses or gains and government grants which are
offset against the general and administration expenses incurred during the
period.





General
and administrative expenses were $882,537 during the first quarter of 2008 as
compared to $770,319 for the similar period in 2007. Overall, general and
administrative expenses increased due to the acquisition and consolidation of A+
and Speak2Me operations into the financials of Lingo Media for the first quarter
of 2008.  Below is the detailed analysis of general and administrative
expenses for the quarter ended March 31, 2008:




Early
            
            
            EnglishChildhood
            
            
            LanguageDevelopment
            
            
            Learning
            
            
            TotalThree
      months ended March 31,
            
            
            
            
            2008
            
            
            
            
            
            2007Selling
            
            
            334,101
            
            
            
            -
            
            
            
            334,101
            
            
            
            403,823Advertising and
      promotion
            
            
            3,216
            
            
            
            -
            
            
            
            3,216
            
            
            
            6,874Executive
      compensation
            
            
            -
            
            
            
            45,074
            
            
            
            45,074
            
            
            
            35,521Consulting fees and
      employee compensation
            
            
            86,710
            
            
            
            197,243
            
            
            
            283,953
            
            
            
            170,569Travel
            
            
            1,008
            
            
            
            4,703
            
            
            
            5,711
            
            
            
            15,971Administrative
            
            
            81,055
            
            
            
            35,941
            
            
            
            116,996
            
            
            
            68,679Premises
            
            
            49,222
            
            
            
            39,182
            
            
            
            88,404
            
            
            
            64,843Equipment
      leases
            
            
            3,583
            
            
            
            4,721
            
            
            
            8,304
            
            
            
            7,255Foreign
      exchange
            
            
            -
            
            
            
            (8,634
            )
            
            
            (8,634
            )
            
            
            (9,768
            )Shareholder
      services
            
            
            -
            
            
            
            10, 377
            
            
            
            10,377
            
            
            
            5,120Professional
      fees
            
            
            6,818
            
            
            
            15,733
            
            
            
            22,591
            
            
            
            30,182565,713
            
            
            
            344,380
            
            
            
            910,093
            
            
            
            799,069Less:
    Grants
            
            
            -
            
            
            
            (27,556
            )
            
            
            (27,556
            )
            
            
            (28,750
            )Total
            
            
            565,713
            
            
            
            316,824
            
            
            
            882,537
            
            
            
            770,319




Government
Grants




The
Company 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 the pool of eligible candidates.





These
government grants are recorded as a reduction of general and administrative
expenses to offset direct costs funded by the grant. The Company records a
liability for the repayment of the grants in the period in which conditions
arise that will cause the government grant to be repayable.  Certain
government grants are repayable in the event that the Company's annual net
income for each of the previous two years exceeds 15% of revenue. During the
quarter, the conditions for the repayment of grants did not arise and no
liability was recorded. Included as a reduction of general and administrative
expenses, are government grants of $27,566 for the first quarter of 2008
(Q1-2007 – $28,750), relating to the Company's publishing projects in
China.  While the Company will continue to apply for various
government grants to fund its ongoing development and market expansion, there
can be no assurance the Company will be successful in obtaining these grants in
the future, that the Company will meet the eligibility requirements for the
grants or that the programs will still be offered for qualifying
companies.




In 2007,
the Canadian government conducted a routine audit on companies that received
funding under its CIDA-INC program from 2003 thru 2005 that included Lingo
Media.  Based on the review by an independent auditing firm, they
determined that eligible expenditures should be adjusted and reclassified
resulting in an audit adjustment amount of $139,420.  The Company is
in the process of appealing this audit adjustment and does not believe that it
appropriately reflects the eligible expenditures that the Company incurred on
its project in China.  No amounts have been accrued in the financial
statements as at March 31, 2008.


36





Foreign
Exchange




Included
in general and administrative expenses is a foreign exchange gain of
approximately $8,634 as compared to a loss of $9,768 during the first quarter of
2007, 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
substantial portion of its revenue is denominated in US dollars and Chinese
Renminbi.





Interest
and Other Financial Expenses




In the
first quarter of 2008, the Company had loans payable bearing interest at 12%
(2007 - 12%) per annum.  Interest expense related to these loans for
the quarter ended March 31, 2008 is $5,978.  At March 31, 2008, the
outstanding loans were in the aggregate sum of $421,000, plus accrued interest
of $8,727. In addition, the expense includes charges paid to a finance company
that facilitates the sale of A+ programs.




In
addition, the Company has revolving lines of credit bearing interest at prime
plus 4% per annum. This bank facility is supported by general security
agreements, a short term investment and a charge against the Company’s accounts
receivable and inventory.  Interest expense paid on the loan for the
quarter is $4,808. The outstanding balance of this loan at March 31, 2008 was
$190,000.





Amortization





The
following is a summary amortization schedule:





Q1-2008
              
              
              
              Q1-2007Property
      Plant and Equipment
              
              
              9,427
              
              
              
              4,120Development
      Costs
              
              
              23,932
              
              
              
              16,598Acquired
      Publishing Content
              
              
              -
              
              
              
              -33,359
              
              
              
              20,718




Amortization
expense includes amortization of property and equipment, development costs and
acquired publishing content. The amortization charge for Q1-2008 was $33,359
(Q1-2007 - $20,718). This represents a significant increase over 2007 due to the
increase in development costs.





Stock-Based
Compensation





The
Company amortizes stock-based compensation with a corresponding increase to the
contributed surplus account. During the first quarter of 2008, the Company
expensed $43,833 compared to $17,154 during Q1-2007.




37





Net
Loss





The
Company reported a net loss of ($453,552) for the first quarter of 2008 as
compared to a net loss of ($309,674) for Q1-2007. The Company reported taxes
paid of $nil for the first quarter ended March 31, 2008 compared to taxes paid
of $nil during the first quarter of 2007.





Fiscal Year Ended December
31, 2007 vs. Fiscal Year Ended December 31, 2006





Revenue
and Margin





Lingo
Media earned revenues at December 31, 2007 in China and Canada as
follows:


English
      Language Learning
              (China)
            
            
            Early
              Childhood
      Development
              (Canada)
            
            
            TotalRevenue
            
            $
            879,626
            
            
            $
            3,124,731
            
            
            $
            4,009,357Cost
      of Sales
            
            
            113,317
            
            
            
            644,759
            
            
            
            763,076Margin
            
            $
            766,309
            
            
            $
            2,479,972
            
            
            $
            3,246,281




Lingo
Media earned revenues at December 31, 2006 in China and Canada as
follows:
 
 English
                Language
      Learning(China)
              
              
              Early
                Childhood
      Development
                (Canada)
              
              
              TotalRevenue
              
              $
              894,073
              
              
              $
              680,264
              
              
              $
              1,574,337Cost
      of Sales
              
              
              132,968
              
              
              
              186,309
              
              
              
              319,277Margin
              
              $
              761,105
              
              
              $
              493,955
              
              
              $
              1,255,060


Revenues
from China for the year ended December 31, 2007 were $879,626 compared to
$894,073 for 2006. The Company continues to advance its relationship with PEP
and has developed new programs to maintain and increase its royalty revenue.





In July
2006, the Company entered into a publishing agreement with Yilin Press to
co-publish a Vocational
English For College program in China.  In addition, the Company
developed a new educational program – Lingo Kindergarten English –
aimed at China’s vast pre-school market.





Lingo
Media expanded its in-house product development team with the appointment of
Chris Anderson as its Managing Editor in order to develop new English language
learning programs.  The Company also appointed Jenny Bao as Director of
Marketing to enhance its relationships with existing customers and to secure new
business.


In 2006,
Lingo Media expanded into early childhood development sector through the
acquisition of A+ effective October 1, 2006.  Revenues and expenses of A+
for the period from October 1, 2006 to December 31, 2006 were included in the
consolidated statements of operations of the Company.   A+ had
reported revenues of $3.1 million in 2006, of which $685,521 had been recognized
as revenue and included in the operations of Lingo Media for the period from
October 1, 2006 to December 31, 2006. A+ derives revenues from publishing and
distribution of educational materials aimed at the early childhood market.
 A+ has developed a successful and proprietary curriculum for parents to
use with their children based on the latest neuroscience research. To date, A+
has focused its marketing efforts only in Canada. With Lingo Media’s established
operations in Beijing, A+ will introduce its learning system and products to
parents of pre-school children across China.


The
Company had no unearned revenues as at December 31, 2007.




38





General and
Administrative





General
and administrative costs consist of executive compensation, consulting fees,
office administration, rent, marketing, professional fees, shareholders
services, any foreign exchange losses or gains and government grants which are
offset against the general and administration expenses incurred during the
period.





The
following sets out the details for the general and administrative expenses for
2007 as compared to 2006:





General
and administrative expenses were $3,745,276 during fiscal 2007 as compared to
$1,417,867 for fiscal 2006. Overall, general and administrative expenses
increased due to the acquisition and consolidation of A+ and Speak2Me operations
into the financials of Lingo Media. Below is the detailed analysis of general
and administrative expenses for the year ended December 31, 2007:




Early
              
              
              EnglishChildhood
              
              
              LanguageDevelopment
              
              
              Learning
              
              
              Total2007
              
              
              
              
              
              2006Selling
              
              
              1,733,955
              
              
              
              -
              
              
              
              1,733,955
              
              
              
              42,127Advertising and
      promotion
              
              
              -
              
              
              
              51,829
              
              
              
              51,829
              
              
              
              322,676Executive
      compensation
              
              
              309,000
              
              
              
              139,771
              
              
              
              448,771
              
              
              
              211,291Consulting fees and
      employee compensation
              
              
              92,121
              
              
              
              602,767
              
              
              
              694,888
              
              
              
              482,043Travel
              
              
              33,170
              
              
              
              90,984
              
              
              
              124,154
              
              
              
              72,703Administrative
              
              
              234,686
              
              
              
              111,003
              
              
              
              345,689
              
              
              
              170,908Premises
              
              
              185,836
              
              
              
              118,145
              
              
              
              303,981
              
              
              
              152,380Equipment
      leases
              
              
              10,975
              
              
              
              16,891
              
              
              
              27,866
              
              
              
              14,021Foreign
      exchange
              
              
              -
              
              
              
              (103,505
              )
              
              
              (103,505
              )
              
              
              6,690Shareholder
      services
              
              
              -
              
              
              
              49,740
              
              
              
              49,740
              
              
              
              45,985Professional
      fees
              
              
              36,243
              
              
              
              182,210
              
              
              
              218,453
              
              
              
              79,3432,635,986
              
              
              
              1,259,835
              
              
              
              3,895,821
              
              
              
              1,600,167Less:
    Grants
              
              
              -
              
              
              
              (150,545
              )
              
              
              (150,545
              )
              
              
              (182,300
              )Total
              
              
              2,635,986
              
              
              
              1,109,290
              
              
              
              3,745,276
              
              
              
              1,417,867


Government
Grants


The
Company 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
the pool of eligible candidates.





These
government grants are recorded as a reduction of general and administrative
expenses to offset direct costs funded by the grant. The Company records a
liability for the repayment of the grants in the period in which conditions
arise that will cause the government grant to be repayable.  Certain
government grants are repayable in the event that the Company's annual net
income for each of the previous two years exceeds 15% of revenue. During the
year, the conditions for the repayment of grants did not arise and no liability
was recorded. Included as a reduction of general and administrative expenses,
are government grants of $164,545 for fiscal 2007 (2006 – $182,300), relating to
the Company's publishing projects in China and Canada.  While the Company
will continue to apply for various government grants to fund its ongoing
development and market expansion, there can be no assurance the Company will be
successful in obtaining these grants in the future, that the Company will meet
the eligibility requirements for the grants or that the programs will still be
offered for qualifying companies.




39





Foreign
Exchange




Included
in general and administrative expenses is a foreign exchange loss of
approximately $103,505 (2006 - $7,968), relating to currency translation rates
in respect of the Company’s activities  denominated in foreign
currencies.





Interest
on Debt




In 2007,
the Company had loans payable bearing interest at 12% (2006 - 12%) per
annum.  Interest expense related to these loans for the year ended
December 31, 2007 is $62,136.  At December 31, 2007, the outstanding
loans were in the aggregate sum of $417,000, plus accrued interest of $14,705.
In addition, the expense includes charges paid to a finance company that
facilitates the sale of A+ programs.




In
addition, the Company has revolving lines of credit bearing interest at prime
plus 4% per annum. This bank facility is supported by general security
agreements, a short term investment and a charge against the Company’s accounts
receivable and inventory.  Interest expense paid on the loan for the
fiscal 2007 was $28,910. The outstanding balance of this loan at December 31,
2007 was $230,000.





Amortization





The
following is a summary amortization schedule:





2007
            
            
            2006Property
      Plant and Equipment
            
            
            17,581
            
            
            
            12,655Development
      Costs
            
            
            99,805
            
            
            
            156,648Acquired
      Publishing Content
            
            
            nil
            
            
            
            53,003117,386
            
            
            
            222,306




Amortization
expense includes amortization of property and equipment, development costs and
acquired publishing content. The amortization charge for 2007 was $117,386 (2006
- $222,306). This represents a significant decrease over 2006 due to reduced
carrying values of development costs.




40





Stock-Based
Compensation





The
Company amortizes stock-based compensation with a corresponding increase to the
contributed surplus account. During 2007, the Company expensed $156,395 compared
to $193,819 during 2006.





Net Loss




The
Company reported a net loss of ($925,040) for fiscal 2007 as compared to a net
loss of ($748,924) for fiscal 2006. The Company reported taxes paid of $38,895
for the fiscal year ended December 31, 2007 compared to taxes paid of $112,895
for fiscal 2006.
 
 Fiscal Year Ended December
31, 2006 vs. Fiscal Year Ended December 31, 2005
 
 Revenue
and Margin
 
 Lingo
Media earned revenues in China and Canada as follows:
 
 English
                Language
                Learning
                (China)
              
              
              Early
                Childhood
                Development
                (Canada)
              
              
              TotalRevenue
              
              $
              894,073
              
              
              $
              680,264
              
              
              $
              1,574,337Cost
      of Sales
              
              
              132,968
              
              
              
              186,309
              
              
              
              319,277Margin
              
              $
              761,105
              
              
              $
              493,955
              
              
              $
              1,255,060
 
 Revenues
from China for the year ended December 31, 2006 were $894,073 compared to
$888,545 for 2005. The Company continues to advance its relationship with PEP
and has developed new programs to maintain and increase its royalty
revenue.
 
 In July
2006, the Company entered into a publishing agreement with Yilin Press to
co-publish a Vocational
English For College program in China.  In addition, the Company
developed a new educational program – Lingo Kindergarten English –
aimed at China’s vast pre-school market.
 
 Lingo
Media expanded its in-house product development team with the appointment of
Suzanne Robare as its Managing Editor in order to develop new English language
learning programs.  The Company has also appointed Jenny Bao as
Director of Marketing to enhance its relationships with existing customers and
to secure new business.
 
 In 2006,
Lingo Media expanded into early childhood development sector through the
acquisition of A+ effective October 1, 2006.  Revenues and expenses of
A+ for the period from October 1, 2006 to December 31, 2006 are included in the
consolidated statements of  operations of the
Company.   A+ had reported revenues of $3.1 million in 2006, of
which $685,521 have been recognized as revenue and included in the operations of
Lingo Media for the period from October 1, 2006 to December 31,
2006..  A+ derives revenues from publishing and distribution of
educational materials aimed at the early childhood market.  A+ has
developed a successful and proprietary curriculum for parents to use with their
children based on the latest neuroscience research. To date, A+ has focused its
marketing efforts only in Canada. With Lingo Media’s established operations in
Beijing, A+ will introduce its learning system and products to parents of
pre-school children across China. Future plans also include an expansion of A+’
markets to the United States and Latin America.
  41
 
 The
Company had no unearned revenues as at December 31, 2006.
 
 General and
Administrative
 
 General
and administrative costs consist of executive compensation, consulting fees,
office administration, rent, marketing, professional fees, shareholders
services, any foreign exchange losses or gains and government grants which are
offset against the general and administration expenses incurred during the
period.
 
 The
following sets out the details for the general and administrative expenses for
2006 as compared to 2005:
 
 General
and administrative expenses were $1,417,867 during fiscal 2006 as compared to
$855,118 for fiscal 2005. Overall, general and administrative expenses increased
due to the acquisition and consolidation of A+ operations into the financials of
Lingo Media for the last quarter of 2006.  Below is the detailed
analysis of general and administrative expenses for the year ended December 31,
2006:
  Early
                  
                  
                  English
                  
                  
                  
                  
                  
                  EnglishChildhood
                  
                  
                  Language
                  
                  
                  
                  
                  
                  LanguageDevelopment
                  
                  
                  Learning
                  
                  
                  Total
                  
                  
                  Learning2006
                  
                  
                  
                  
                  
                  2005Advertising and
      promotion
                  
                  
                  -
                  
                  
                  
                  42,127
                  
                  
                  
                  42,127
                  
                  
                  
                  26,788Selling
      expenses
                  
                  
                  322,676
                  
                  
                  
                  -
                  
                  
                  
                  322,676
                  
                  
                  
                  -Executive
      compensation
                  
                  
                  64,000
                  
                  
                  
                  147,291
                  
                  
                  
                  211,291
                  
                  
                  
                  176,383Consulting fees and
      employee compensation
                  
                  
                  39,374
                  
                  
                  
                  442,669
                  
                  
                  
                  482,043
                  
                  
                  
                  472,300Travel
                  
                  
                  21,230
                  
                  
                  
                  51,473
                  
                  
                  
                  72,703
                  
                  
                  
                  76,630Administrative
                  
                  
                  58,021
                  
                  
                  
                  112,887
                  
                  
                  
                  170,908
                  
                  
                  
                  110,818Premises
                  
                  
                  42,717
                  
                  
                  
                  109,663
                  
                  
                  
                  152,380
                  
                  
                  
                  83,915Equipment
      leases
                  
                  
                  1,824
                  
                  
                  
                  12,197
                  
                  
                  
                  14,021
                  
                  
                  
                  10,318Foreign
      exchange
                  
                  
                  -
                  
                  
                  
                  6,690
                  
                  
                  
                  6,690
                  
                  
                  
                  18,373Shareholder
      services
                  
                  
                  -
                  
                  
                  
                  45,985
                  
                  
                  
                  45,985
                  
                  
                  
                  40,743,Professional
      fees
                  
                  
                  22,500
                  
                  
                  
                  56,843
                  
                  
                  
                  79,343
                  
                  
                  
                  58,622572,342
                  
                  
                  
                  1,027,825
                  
                  
                  
                  1,600,167
                  
                  
                  
                  1,074,890Grants
                  
                  
                  -
                  
                  
                  
                  (182,300
                  )
                  
                  
                  (182,300
                  )
                  
                  
                  (219,772
                  )Total
                  
                  
                  572,342
                  
                  
                  
                  845,525
                  
                  
                  
                  1,417,867
                  
                  
                  
                  855,118
 Government
Grants
 The
Company 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 the pool of eligible candidates.
 
 These
government grants are recorded as a reduction of general and administrative
expenses to offset direct costs funded by the grant. The Company records a
liability for the repayment of the grants in the period in which conditions
arise that will cause the government grant to be repayable.  Certain
government grants are repayable in the event that the Company's annual net
income for each of the previous two years exceeds 15% of revenue. During the
year, the conditions for the repayment of grants did not arise and no liability
was recorded. Included as a reduction of general and administrative expenses,
are government grants of $182,300 for fiscal 2006 (2005 – $219,772), relating to
the Company's publishing projects in China.  While the Company will
continue to apply for various government grants to fund its ongoing development
and market expansion, there can be no assurance the Company will be successful
in obtaining these grants in the future, that the Company will meet the
eligibility requirements for the grants or that the programs will still be
offered for qualifying companies.
 
 Foreign
Exchange
  Included
in general and administrative expenses is a foreign exchange loss of
approximately $6,690 (2005 - $18,373), 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 substantial portion of its revenue is
denominated in US dollars and Chinese Renminbi.
 
 Interest
on Debt
  During
the year the Company had loans payable bearing interest at 12 % (2005 - 12%) per
annum.  Interest expense related to these loans for the year is
$21,766 (2005 - $11,767).  At December 31, 2006, $347,541 (2005 -
$101,929) was due to those lenders.
  42
  In
addition, the Company has revolving lines of credit bearing interest at prime
plus 2% and 2.5%.   These bank facilities are supported by
general security agreements, a short term investment and a charge against the
Company’s accounts receivable and inventory.  Interest expense paid on
the loan for the year is $36,897 (2005: $7,609). The outstanding balance of
these loans at year end was $485,000.
  Premiums
paid on the Export Development Corporation insurance policy were $13,755 for the
year.
 
 Amortization
 
 The
following is a summary amortization schedule:
 
 2006
                
                
                2005Property
      Plant and Equipment
                
                
                12,655
                
                
                
                12,278Development
      Costs
                
                
                156,648
                
                
                
                184,797Acquired
      Publishing Content
                
                
                53,003
                
                
                
                70,670222,306
                
                
                
                267,745
  Amortization
expense includes amortization of property and equipment, development costs and
acquired publishing content. The amortization charge for 2006 was $222,306 (2005
- $267,745). This represents a significant decrease over 2005 due to reduced
carrying values of development costs.
 
 Stock-Based
Compensation
 
 The
Company amortizes stock-based compensation with a corresponding increase to the
contributed surplus account. During 2006, the Company expensed $193,819 compared
to $214,337 during 2005.
 
 Net Loss
 
 The
Company reported a net loss of ($748,924) for fiscal 2006 as compared to a net
loss of ($725,732) for fiscal 2005. The Company reported taxes paid of $112,895
for the fiscal year ended December 31, 2006 compared to taxes paid of $128,839
for fiscal 2005.
  43


5.B Liquidity and Capital
Resources




Three Months Ended March 31,
2008
 
 As at
March 31, 2008, the Company had cash on hand of $171,475 (Q1-2007 - $(16,701)),
short term investment of $150,000 and accounts and grants receivable of $697,017
(Q1-2007 - $251,805). The Company’s total current assets amounted to $1,267,742
(Q1-2007 - $933,049) with current liabilities of $1,645,075 (Q1-2007 -
$1,333,852) resulting in a working capital deficiency of $377,333 (Q1-2007 -
working capital of $400,803).
 
 During
the course of Q1-2008, the Company received $3,017 through the exercise of stock
options. The Company secured additional loans in the amount of
$43,833.  As at March 31, 2008, the company had one line of credit
with a balance outstanding of $190,000. The bank facility is secured by a
General Security Agreement and the short-term investment of
$150,000.
 
 The
Company receives government grants based on certain eligibility criteria for
international marketing support and publishing industry development in Canada.
These government grants are recorded as a reduction of general and
administrative expenses to offset direct costs funded by the
grant.  The Company receives these grants throughout the quarter from
different agencies and government programs.   Each grant is
applied for separately based on the Company either 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.
 
 Government
grants received during Q1-2008 were $27,556 compared to $28,750 in
Q1-2007.
  The terms
of the $190,000 revolving line of credit require that certain measurable
covenants be met. As at March 31, 2008, the Company was in violation of certain
covenants. As the line of credit is currently presented as a current
liability no additional adjustment is required.
  The
Company plans on raising additional equity through private placements, as the
capital markets permit, in an effort to finance its growth plans in addition to
finance ongoing working capital needs resulting therefrom.  The
Company has been successful in raising sufficient working capital in the
past.
  44
 
 Fiscal Year Ended December
31, 2007
 
 As at
December 31, 2007, the Company had cash on hand of $343,338 (2006 - $73,169),
short term investment of $150,000 and accounts and grants receivable of
$1,110,151 (2006 - $304,924). The Company’s total current assets amounted to
$1,856,681 (2006 - $812,942) with current liabilities of $1,508,698 (2006 -
$1,160,069) resulting in a working capital surplus of $576,657 (2006 - working
capital deficiency of $347,127).
 
 During
the course of 2007, the Company received $775,000 through the exercise of stock
options. The Company secured loans  in the amount of $84,164 and it
repaid $nil of these loans in 2007, $340,000 of the loan proceeds were used to
fund the cash portion of the A+ acquisition. As at December 31, 2007, the
Company had one line of credit with a balance outstanding of $230,000. The bank
facility is secured by a General Security Agreement and the short-term
investment of $150,000.
 
 The terms
of the revolving lines of credit require the Company to maintain certain
measurable covenants such as current ratio, debt to equity ratio and tangible
net worth.  As at December 31, 2007, the Company was in violation of all
these covenants. Financial statements reflect these facilities as current
liability. The Company plans to partially repay and reduce the facilities to an
acceptable amount funded through an equity financing.
 
 The
Company receives government grants based on certain eligibility criteria for
international marketing support and publishing industry development in Canada.
These government grants are recorded as a reduction of general and
administrative expenses to offset direct costs funded by the
grant.  The Company receives these grants throughout the year from
different agencies and government programs.   Each grant is
applied for separately based on the Company either 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.
 
 Government
grants received during 2007 were $164,545 compared to $182,300 in
2006.  This represents a significant portion of the Company’s sources
of funds.
 
 The terms
of the $230,000 revolving line of credit require that certain measurable
covenants be met.  As at December 31, 2007, the Company was in
violation of certain covenants, for which the lender subsequently provided a
written waiver stating that it will not demand repayment until April 30,
2008.  As the lines of credit are currently presented as a current
liability no additional adjustment is required.
 
 The
Company plans on raising additional equity through private placements, as the
capital markets permit, in an effort to finance its growth plans in addition to
finance ongoing working capital needs resulting therefrom.  The
Company has been successful in raising sufficient working capital in the
past.


Fiscal Year Ended December
31, 2006





As at
December 31, 2006, the Company had cash on hand of $73,169 (2005 - $144,337),
short term investment of $150,000 and accounts and grants receivable of $304,924
(2005 - $488,303). The Company’s total current assets amounted to $812,942 (2005
- $801,072) with current liabilities of $1,160,069 (2005 - $523,320) resulting
in a working capital deficiency of $347,127 (2005 - working capital of
$277,752).




45





During
the course of 2006, the Company received $66,679 through the exercise of stock
options. The Company secured loans  in the amount of $711,500 and it
repaid $465,887 of these loans in 2006, $340,000 of the loan proceeds were used
to fund the cash portion of the A+ acquisition. As at December 31, 2006, the
company had two lines of credit with a balance outstanding of $485,000. First
bank facility is secured by the accounts receivable from China, which in turn
are insured by the Export Development Corporation. Second bank facility is
secured by a General Security Agreement and the short-term investment of
$150,000.





The
Company receives government grants based on certain eligibility criteria for
international marketing support and publishing industry development in Canada.
These government grants are recorded as a reduction of general and
administrative expenses to offset direct costs funded by the
grant.  The Company receives these grants throughout the year from
different agencies and government programs.   Each grant is
applied for separately based on the Company either 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.





Government
grants received during 2006 were $182,300 compared to $219,772 in
2005.  This represents a significant portion of the Company’s sources
of funds.





The
Company plans on raising additional equity through private placements, as the
capital markets permit, in an effort to finance its growth plans in addition to
finance ongoing working capital needs resulting therefrom.  The
Company has been successful in raising sufficient working capital in the
past.





Fiscal Year Ended December
31, 2005





As at
December 31, 2005, the Company had cash on hand of $144,337 (2004 - $29,791) and
accounts receivable of $488,303 (2004 - $562,558). The Company’s total current
assets amounted to $801,072 (2004 - $749,473) with current liabilities of
$523,320 (2004 - $478,488) resulting in a working capital surplus of $277,752
(2004 - $270,985).





During
the year, the Company was successful in raising $735,000 via a non-brokered
private placement.  The funds were used to advance working capital to
Sanlong in China, for investigation and due diligence of joint ventures
opportunities in China and Mexico and for general working
capital.  During the course of the year, the Company was able to
source $10,800 in funds by the exercise of stock options. It secured an
additional third party loan in the amount of $50,279 and it drew down another
$20,000 from its $150,000 available line of credit (bringing the total drawdown
to $110,000).  The shareholder’s loan was partially repaid by an
amount of $26,113 with $51,649 still outstanding.  The line of credit
is secured by the accounts receivable from China, which are in turn insured by
the Export Development Corporation.





The
Company receives government grants based on certain eligibility criteria for
international marketing support and publishing industry development in Canada.
These government grants are recorded as a reduction of general and
administrative expenses to offset direct costs funded by the
grant.  The Company receives these grants throughout the year from
different agencies and government programs.   Each grant is
applied for separately based on the Company either meeting certain eligibility
requirements or by the Company achieving specific milestones to continue ongoing
support for the specific project, the proceeds of which are used to develop new
or ongoing English learning programs for its markets.  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 its future success in
obtaining these grants in the future.




46





Government
grants received during 2005 were $219,772 compared to $261,269 in
2004.  This represents a significant portion of the Company’s sources
of funds.





During
2004, the Chinese State Ministry of Education (“MOE”) mandated PEP to increase
its market share by shifting its sales from Finished Product Sales to Licensing
Sales.  As a result of this new MOE stance, PEP had significantly
reduced the size of its print runs for Finished Product Sales in 2004 and is now
focusing on Licensing Sales.  This shift in product mix had a
significant impact on the overall revenues and a decrease in cash flows from
operations from China during 2004.





Although
revenues from China during 2004 were significantly reduced compared to 2003, the
Company’s 2005 Chinese revenues steadily increased back to its 2003 levels as
the MOE’s mandate is in full force.   The Company has instituted
budgetary measures aimed at ensuring that its core operation has sufficient
funds to sustain itself for the next 12 months.  Nonetheless, the
Company plans on raising additional equity through private placements, as the
capital markets permit, in an effort to finance its growth plans as well as to
finance ongoing working capital needs resulting therefrom.  The
Company has been successful in raising sufficient working capital.





Reconciliation of Canadian
and United States generally accepted accounting principles
("GAAP"):





Development
Costs





Under
Canadian GAAP, the Company defers the incremental costs relating to the
development of and the 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 United States GAAP, incremental costs related to
development of and the pre-operating plan of a 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.





Under
United States GAAP, the amounts shown on the consolidated balance sheets for
development costs would be $222,303.





Statement
of comprehensive income




Statement
No. 130, Reporting Comprehensive Income ("SFAS 130"), establishes standards for
the reporting and disclosure of comprehensive income and its components in
financial statements.  Components of comprehensive income or loss
include net income or loss and all other changes in other non-owner changes in
equity, such as the change in the cumulative translation adjustment and the
unrealized gain or loss for the year on "available-for-sale"
securities.  For all periods presented, comprehensive loss is the same
as loss for the year under US GAAP.




47




Options
to consultants




Starting
January 1, 2004 under United States 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 and employees. Before January 1, 2003,
for the options issued and vested to employees the Company did not recognize a
compensation expense under Canadian GAAP but recorded a compensation expense
under US GAAP and Canadian GAAP for the options issued to
consultants.





Calculation of Loss for the
Year





The
consolidated financial statements are prepared in accordance with generally
accepted accounting principles ("GAAP") as applied in Canada.  In the
following respects, GAAP as applied in the United States differs from that
applied in Canada.





If United
States GAAP were employed, the loss in each year would be adjusted as
follows:





Expressed
in Canadian Dollars




2007
            
            
            2006
            
            
            2005Income
      (loss) for the year, Canadian GAAP
            
            $
            (925,040
            )
            
            $
            (748,924
            )
            
            $
            (725,732
            )Impact
      of US GAAP and adjustments:Amortization
      of development costs
            
            
            99,805
            
            
            
            156,648
            
            
            
            133,290Amortization
      of software development costs
            
            
            (452,709
            )
            
            
            -
            
            
            
            -Share
      issue costs
            
            
            -
            
            
            
            -
            
            
            
            -Effect
      of change in accounting policy
            
            
            -
            
            
            
            -
            
            
            
            -Deferred
      Costs
            
            
            -
            
            
            
            (40,316
            )
            
            
            (117,102
            )Income
      (loss) for the year, US GAAP
            
            $
            (1,277,944
            )
            
            $
            (632,592
            )
            
            $
            (709,544
            )




The
consolidated interim financial statements for the three months ended March 31,
2008 and 2007 are prepared in accordance with GAAP as applied in
Canada.  In the following respects, GAAP as applied in the United
States differs from that applied in Canada:





Expressed
in Canadian Dollars




March
      2008
            
            
            March
      2007Income
      (loss) for the year, Canadian GAAP
            
            $
            (481,108
            )
            
            $
            (309,674
            )Impact
      of US GAAP and adjustments:Amortization
      of development costs
            
            
            23,932
            
            
            
            16,598Software
      development costs
            
            
            (274,039
            )
            
            
            -Income
      (loss) for the year, US GAAP
            
            $
            (731,216
            )
            
            $
            (293,076
            )




48




Calculation of Earnings Per
Share:





Under
both US and Canadian GAAP, basic earnings per share are computed by dividing the
net income for the year available to common shareholders, as measured by the
respective accounting principles (numerator), by the weighted average number of
common shares outstanding during that year (denominator).  Basic
earnings per share exclude the dilutive effect of potential common
shares.





Diluted
earnings per share under Canadian GAAP and US GAAP give effect to all potential
common shares outstanding during the year. Potential common shares consist of
the incremental common shares issuable upon the exercise of stock options using
the treasury stock method.





The
following table reconciles the numerators and denominators of the basic and
diluted earnings per share under U.S. GAAP as required by SFAS 128:





Expressed
in Canadian Dollars




2007
            
            
            2006
            
            
            2005numerator
      for basic and diluted income (loss) per share:Income
      (loss) – US GAAP
            
            $
            (1,277,944
            )
            
            $
            (632,592
            )
            
            $
            (709,544
            )Denominator
      for basic and diluted (loss) per share:Weighted
      average common shares
            
            
            5,655,792
            
            
            
            4,060,331
            
            
            
            3,530,231Basic
      and diluted loss per share – US GAAP
            
            $
            (0.23
            )
            
            $
            (0.16
            )
            
            $
            (0.20
            )




5.E Research and
Development





During
the years ended December 31, 2007 and 2006, respectively, the Company expended
$4,212,564 and $500,727 on research and development, under the categories of
“development costs”, “software and web development costs” and “deferred
costs”.  These expenditures in 2007 were primarily directed at
developing the Speak2Me products for the China market.




49




5.F Trend
Information





Lingo
Media believes that the trend in English language learning in China is strong
and growing.  The State Ministry of Education in China (“MOE”) is
expanding its mandate for the teaching of English learning programs to
students.    Although the outlook for learning English in
China remains positive, there can be no assurance that this trend will continue
or that the Company will benefit from this trend.


In
Canada, pre-school supplemental education market remains strong, there can be no
assurance that this trend will continue or that the Company will benefit from
this trend.





5.F
Tabular disclosure of contractual obligations





Our
obligations as of March 31, 2008, were as follows:


Expressed
in Canadian Dollars





Obligation
            Expiring
            
            BalanceEquipment
      Lease
            April
      29, 2009
            
            $
            32,789Rent
      in China
            November
      14, 2008
            
            $
            34,800Rent
      in Canada
            December
      31, 2011
            
            $
            825,003Revolving
      Line of Credit
            On
      Demand
            
            $
            230,000Loan
      Payable
            On
      Demand
            
            $
            228,674Loan
      Payable
            April
      30, 2009
            
            $
            203,031





ITEM
6.  DIRECTORS, SENIOR MANAGEMENT, AND EMPLOYEES





6.A.  Directors
and Senior Management





Table
No. 6


Directors
and Senior Management


July
15, 2008




Date
      ofFirstElection
      orName
              Position
              Age
              AppointmentMichael
      P. Kraft
              President/CEO/Director
              45
              November
      1996Khurram
      R. Qureshi
              CFO/Secretary/Treasurer
              45
              April
      1997Scott
      Remborg
              Director
              59
              July
      2000John
      P. Schram
              Director
              65
              June
      2004Nereida
      Flannery
              Director
              37
              June
      2005Terry
      Pallier
              Director
              41
              October
      2007Sanjay
      Joshi
              Director
              36
              October
      2007Anthony
      Lacavera
              Director
              34
              April
      2008




50




Michael P. Kraft is the
President & Chief Executive Officer of the Company since its inception in
1996. Mr. Kraft is also the Chairman of Buckingham Group Limited, a private
merchant banking corporation and President of MPK Inc., a private business
consulting corporation to both private and public corporations since 1994. He is
also a director of JM Capital Corp. since June 2006, Pioneering Technology Inc.
since July 2006 and Grenville Gold Corporation since April 2007, TSX Venture
listed companies.  Mr. Kraft received a Bachelor of Arts in
Economics from York University in 1985.





Khurram R. Qureshi is the
Chief Financial Officer of the Company since 1997.  Mr. Qureshi is
also the Chief Financial Officer of Canadian Shield Resources Inc. since 1997
and a director since June 2004.  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 Chaba Qureshi and Karnani, Professional Accountants.





Scott Remborg is an
independent consultant in Information Technology and eCommerce.  From 2001
to 2003, hewas
General Manager, eBusiness, at Air Canada. From 1994 to 1999,Mr Remborg started
up and led Sympatico, the largest Internet service and web
portal in Canada.  Earlier in his career he held senior
management positions at Reuters and I.P. Sharp Associates. Mr Remborg has an MBA and
was educated at the BI Norwegian School of Management in Oslo and
the University of Alberta, Canada.





John P. Schram is the
President & Chief Executive Officer of We Care Health Services Inc.,
Canada’s largest national home health services company since
1999.  Mr. Schram has held the position of President & Chief
Executive Officer in a number of Canadian and US educational publishing
companies including Simon & Schuster from 1992 to 1996 and Prentice Hall
Canada Limited from 1991 to 1992.  Mr. Schram received an Honours BA
in Business Administration from Wilfred Laurier University in 1966.





Nereida Flannery is a
Partner and was co-founder of  Beijing based The Balloch Group, one of
China's premier Investment Banks.  The firm today has 60 employees and
is involved with financing through public and private investments and M&A
advisory.  She focused on the firm's M&A business in particular in
natural resources and was responsible for heading teams that advised on some of
China's most important overseas acquisitions of late.   With over
13 years experience in China, Ms. Flannery previously was  VP of
business development at Alibaba.com in Shanghai and was the General Manager of
the Canada China Business Counsel in China (CCBC).  Ms. Flannery has a
degree in Political Science from Queen's University and speaks Chinese, Greek
and French.




51




Terry
Pallier is the co-founder and Chief Executive Officer of A+ Child
Development (Canada) Ltd., a subsidiary of Lingo Media. He is also the president
and co-founder of TJP Holdings Inc., a private holding company. Mr. Pallier
attended the University of Alberta in the Faculty of Physical Education in
1988-89.
 Sanjay Joshi is a partner
with WeirFoulds LLP in Toronto and practices corporate and securities law, with
an emphasis on financing transactions. He obtained his LL.B. degree from Queen's
University in 1999. Mr. Joshi represents agents and issuers active in the
Canadian and US public markets. He advises Canadian investment dealers, limited
market dealers and merchant banks as well as listed issuers in the natural
resource, new-media and telecommunications sectors. Mr. Joshi sits on the board,
and is Chair of the Audit Committee, for numerous companies, both public and
private. He is called to the Bar in Ontario and British
Columbia.




Anthony Lacavera co-founded
Globalive Communications Corp. in 1998, becoming President and Chief Executive
Officer in 1999. Mr. Lacavera also serves as co-founder and Chairman of several
of Globalive’s present and past portfolio companies, including Enunciate
Conferencing, OneConnect Services, Cohere Conferencing, Cellwand Communications,
and most recently as the initial director and principal executive officer of Yak
Communications (NASDAQ: YAKC) acquired by Globalive in November 2006. Mr.
Lacavera received a B.A.Sc. (Honours) in Computer Engineering from the
University of Toronto in 1997.




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.





Despite
the Company’s Executive Officers spending material portions of their time on
businesses other than the Company, the Company believes that they devote
sufficient time to the Company to properly carry out their duties.





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.




52





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 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


Expressed
in Canadian Dollars




ANNUAL
      COMPENSATION
            LONG-TERM
      COMPENSATIONAwards
            Payouts(NEO)
              Name
      and
              Principal
              Position
            Year
            Salary
              ($)
            Bonus
              ($)
            Other
              Annual
              Compen-
              sation(1)
              ($)
            Securities
              Under
              Options/
              SARs
              Granted
      (2)
              (#)
            Restricted
              Shares
      or
              Restricted
              Share
              Units
              ($)
            LTIP
      (3)
              Payouts
              ($)
            All
      Other
              Compen-
              sation
              ($)Michael
      P. Kraft (4)
              President
      & CEO
            2007
              2006
              2005
            120,000
              122,500
              123,489
            Nil
              Nil
              Nil
            Nil
              Nil
              Nil
            142,857
              Nil
              295,000
            Nil
              Nil
              Nil
            Nil
              Nil
              Nil
            Nil
              Nil
              36,750
      (5)Khurram
      R. Qureshi
              Chief
      Financial Officer
            2007
              2006
              2005
            42,942
              96,000
              96,000
            Nil
              Nil
              Nil
            Nil
              Nil
              Nil
            71,429
              Nil
              300,000
            Nil
              Nil
              Nil
            Nil
              Nil
              Nil
            Nil
              Nil
              Nil





Notes:


(1)
            Perquisites
      and other personal benefits, securities or property that do not in the
      aggregate exceed the lesser of $50,000 and 10% of the total of the annual
      salary and bonus for any NEO for the financial year, if any, are not
      disclosed.




(2)
            "SAR" or "stock appreciation
      right" means a right granted by the Company, as compensation for
      services rendered, to receive a payment of cash or an issue or transfer of
      securities based wholly or in part on changes in the trading price of
      publicly traded securities of the
Company.




(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.




(4)
              Paid
      by Lingo Learning Inc., a wholly-owned subsidiary of the Company, to MPK
      Inc., a company controlled by Mr. Kraft.  See " Management
      Agreement".




(5)
            Represents
      success fee.   See "Management
  Agreement".




53




Management
Agreement The
Company entered into a consulting agreement ("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. 
 The
Consulting Agreement provides for an initial term of twenty-four
(24) months to begin on January 1, 2008 and renewals for a further two (2)
years unless terminated pursuant to the terms thereof.  The Consulting
Agreement provides that the Company pay MPK Inc. $15,000 per month plus
reimbursement for certain expenses properly incurred in connection with the
Company.  In addition to providing an allowance for a health plan and
life insurance policy, the Consulting Agreement also provides for an automobile
allowance of $1,500 per month.
 
 The
Consultant may terminate the 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 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 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 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
  The
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.
  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
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 a 18 month non-complete period following the
termination of the Consulting Agreement. MPK Inc. is a corporation
controlled by Michael P. Kraft, the President & Chief Executive Officer of
the Company.
 
 Stock
Options.  The Company grants stock options to Directors, Senior
Management and employees; refer to ITEM #6.E., "Share Ownership, Stock
Options”.


Director
Compensation.  The non-management directors of the Company are
entitled to receive a fee of $250 for each board meeting and for each committee
meeting attended.Directors 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.  The Company has no plans or
arrangements in respect of remuneration received or that may be received by
Executive Officers of the Company in Fiscal 2006 to compensate such officers in
the event of termination of employment (as a result of resignation, retirement,
change of control) or a change of responsibilities following a change of
control, where the value of such compensation exceeds US$60,000 per Executive
Officer.


54


Other
Compensation.  No Executive Officer/Director received “other
compensation” in excess of the lesser of US$25,000 or 10% of such officer's cash
compensation, and all Executive Officers/Directors as a group did not receive
other compensation which exceeded US$25,000 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 has no material bonus or profit
sharing plans pursuant to which cash or non-cash compensation is or may be paid
to the Company's Directors or Executive Officers.





Pension/Retirement
Benefits.  No funds were set aside or accrued by the Company
during Fiscal 2007 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 two committees: Audit Committee and Compensation
Committee.





The Audit
Committee recommends to the Board of Directors the engagement of the independent
auditors of the Company and reviews with the independent auditors the scope and
results of the Company’s audits, the Company’s internal accounting controls, and
the professional services furnished by the independent auditors to the
Company.  The current members of the Audit Committee are: Scott
Remborg, Michael P. Kraft and Sanjay Joshi.





The
Compensation Committee establishes and modifies compensation and incentive plans
and programs, and reviews and approves compensation and awards under
compensation and incentive plans and programs for elected officers of the
Company. The current members of the Compensation Committee are: Scott Remborg,
Nereida Flannery and John Schram.





6.E.  Share
Ownership





Table No.
7 lists, as of June 30, 2008, 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.




55




Table
No. 7


Shareholdings
of Directors and Executive Officers


Shareholdings
of 5% Shareholders




Title
              Name
      of
              Amount
      and Nature
              Percentof
              Beneficial
              of
      Beneficial
              ofClass
              Owner
              Ownership
      (1)
              ClassCommon
              Michael
      P. Kraft (2)
              1,450,102(5)
              15.13%Common
              Scott
      Remborg (2)(3)(4)
              154,372(6)
              1.61%Common
              Khurram
      Qureshi (10)
              128,990
              1.34%Common
              John
      Schram(3)(4)
              10,714
      (8)
              *Common
              Nereida
      Flannery(3)
              [nil]
      (7)
              *Common
              Terry
      Pallier
              144,107
      (9)
              1.50%Common
              Sanjay
      Joshi (2)(4)
              [nil]
      (10)
              *Common
              Anthony
      Lacavera
              282,220
      (11)
              2.94%Directors/Officers
      as a group (8 persons)
              
              2,170,505
              22.64%




*  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 nominees
  individually.
  (2)
              Member
      of the Audit Committee.
  (3)
              Member
      of the Compensation Committee.
  (4)
              Member
      of the Corporate Governance
Committee.
  (5)
              Of
      such shares, 427,043 are held by a wholly owned company of his wife,
      76,808 are held in his wife's RRSP, 23,184 are held in his children's
      names, 57,736 are held in Mr. Kraft's RRSP, and 865,331 are held by
      Buckingham Group Limited., a company controlled by Mr.
      Kraft.  Mr. Kraft also holds options to purchase up to an
      additional 195,715 common shares of the
Company.
  (6)
              Of
      such shares, 3,428 are held in Mr. Remborg's RRSP account. Mr. Remborg
      also holds options to purchase up to an additional 42,857 common shares of
      the Company.
  (7)
              Ms.
      Flannery also holds options to purchase up to an additional 32,143 common
      shares of the Company.
  (8)
              Mr.
      Schram also holds options to purchase up to an additional 42,857 common
      shares of the Company.
  (9)
              Mr.
      Pallier holds his shares in a  wholly-owned holding company
      called TJP Holdings Inc.
  (10)
              Of
      such shares, 38,606 shares are held in his wife’s RRSP, 9,819 in his
      wife’s name and 7,750 are held in Mr. Qureshi’s RRSP.  Mr.
      Qureshi also holds options to purchase up to an additional 54,486 common
      shares of the Company.
  (11)
              Of
      such shares, 274,820 shares are held in 425243Ontario Inc. and 7,400 in
      AAL Telecom Holdings Inc., both wholly owned holding companies of Mr.
      Lacavera.  425243 Ontario Inc. also holds 30,125 warrants to
      purchase up to an additional 30,125 common shares in the
      Company.


56




Stock
Options





TSX Venture Exchange Rules
and Policies





The terms
and conditions of incentive options granted by the Company are done 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 theoutstanding
      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 theoutstanding
      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 shareswhich,
      in aggregate, exceed 5% of the outstanding commonshares
      of the Company; or(iv)
            the issuance to any
      consultant of common shares which, in aggregate,
      exceed 2% of the outstanding common shares ofthe
      Company; or




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





Company Stock Option
Plan




A new
stock option plan (the "2005
Plan") was adopted by the board of directors in May 30, 2005 and approved
by the shareholders of the Company at the annual and special Meeting of
shareholders on June 30, 2005 to encourage ownership of common shares by
directors, officers, employees and consultants of the Company. The number of
shares which may be reserved for issuance under the 2005 Plan is limited to
5,421,342 common shares, representing approximately 20% of the issued and
outstanding common shares of the Company as at June 30, 2005, less the number of
shares reserved for issuance pursuant to options previously
granted.
  57
 
 Options
may be granted under the 2005 Plan only to directors, officers, employees,
consultants of the Company and its subsidiaries and personal holding
corporations controlled by a director or officer of the Company and its
subsidiaries as designated from time to time by the board of directors of the
Company.  The maximum number of common shares which may be reserved
for issuance to any one person under the 2005 Plan is 5% of the common shares
outstanding at the time of the grant (calculated on a non-diluted basis) less
the number of shares reserved for issuance to such person under any option to
purchase common shares granted as a compensation or incentive
mechanism.  Any shares subject to an option granted under the 2005
Plan that for any reason is cancelled or terminated prior to exercise will be
available for a subsequent grant under the 2005 Plan.  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 granted under the 2005 Plan may be
exercised during a period not exceeding five 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 an
of its subsidiaries, as applicable, or upon the optionee retiring, becoming
permanently disabled or dying.  Options granted to optionees vest over
an 18 month period with no greater than 16.67% of any options granted to an
optionee vesting in any three month period or such longer period as the board
may determine.  The options under the 2005 Plan are
non-transferable.  The 2005 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.
 
 The 2005
Plan provides that the Company may provide financial assistance in respect of
options granted under the 2005 Plan by means of loans to
optionees.  Under the terms of the 2005 Plan, the Company may, but is
not obligated to, loan to an optionee the funds required to exercise any
particular option.  The 2005 Plan provides that any such loan will be
for a term not exceeding 10 years and will be non-interest
bearing.  Any such loan will be repayable at maturity or upon the
death of the optionee or earlier in certain other circumstances.  Any
loans made under the 2005 Plan are to be secured by a pledge of the shares
acquired upon the exercise of the option exercised being funded to a trustee for
such purposes.  In the event that any loan amount is not fully repaid
when due the trustee holding the pledged shares is entitled to realize on the
shares being held by it as security for the loan.  Loans made under
the 2005 Plan are made on a full recourse basis.  The 2005 Plan
provides that any shares acquired pursuant to loans made under the 2005 Plan may
be sold by the optionee from time to time provided that an amount equal to the
aggregate option exercise price or the balance of the loan is applied in
repayment of the loan.  Any financial assistance so provided under the
2005 Plan will be subject to and made in accordance with all applicable laws and
regulatory policies at the time of making the loan.
 
 On July
5, 2006 and October 5, 2007, the Company's shareholders ratified and approved an
increase in the number of common shares eligible to be issued under the
Company's 2005 Plan to approximately 20% of the issued and outstanding common
shares as at the date of the respective shareholders
meetings.  Currently the 2005 Plan provides that the maximum aggregate
number of shares reserved for issuance and which could be purchased upon the
exercise of all options granted thereunder could not exceed 6,558,820, which
number represented approximately 20% of the 32,794,102 issued and outstanding as
at the Company’s last Annual and Special Meeting held on October 5, 2007 (“2007 Shareholder’s
Meeting”).
 
 At the
2007 Shareholder’s Meeting, the Company's shareholders also approved a
consolidation of the Company's issued share capital on the basis of one (1) new
for seven (7) old common shares (the "Consolidation"). As a result,
the number of common shares eligible to be issued under the Company's 2005 Plan
was also reduced on a one (1) for seven (7) basis.
 
 Currently,
the 2005 Plan provides that the maximum aggregate number of shares reserved for
issuance and which could be purchased upon the exercise of all options granted
thereunder could not exceed 936,974, which number represents approximately 20%
of the issued and outstanding common shares of the Company after giving affect
to the Consolidation.
 
 As of the
date hereof, options to purchase an aggregate of 908,833 common shares are
outstanding under the 2005 Plan.
  58


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 July 15, 2008, as
well as the number of options granted to Directors and officers as a
group.


Stock
Options Outstanding


Expressed
in Canadian Dollars




Name
            Common
              Stock
            Exercise
              Price
            Grant
              Date
            Expiration
              DateJohn
      Schram
            10,714
            $1.33
            10/5/04
            10/5/09John
      Schram
            10,714
            $1.47
            10/17/05
            10/17/10John
      Schram
            21,429
            $0.84
            5/22/07
            5/22/12Khurram
      Qureshi
            2,000
            $1.33
            10/5/04
            10/5/09Khurram
      Qureshi
            52,486
            $0.70
            2/14/07
            2/14/12Michael
      Kraft
            10,714
            $1.33
            10/5/04
            10/5/09Michael
      Kraft
            42,143
            $1.33
            1/14/05
            1/14/10Michael
      Kraft
            142,857
            $0.70
            2/14/07
            2/14/12Nereida
      Flannery
            10,714
            $1.47
            10/17/05
            10/17/10Nereida
      Flannery
            21,429
            $0.84
            5/22/07
            5/22/12Scott
      Remborg
            10,714
            $1.33
            10/5/04
            10/5/09Scott
      Remborg
            10,714
            $1.47
            10/17/05
            10/17/10Scott
      Remborg
            21,429
            $0.84
            5/22/07
            5/22/12Total
      Officers/Directors 723,119





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. and Table No. 7. Other than those shareholders set forth in Table
No.7, there are no shareholders who hold more than 5% of the Company's
shares.





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





The
participation in private placements of equity by the Company and exercise of
stock options/share purchase warrants has lead over the last several years to
some significant changes in the holdings of major shareholders; table reflects
direct/indirect holdings of common shares, refer to Table No. 7 for additional
information.




59




Shares
              Shares
              Shares
              SharesOwned
              Owned
              Owned
              Owned12/31/2007
              12/31/2006
              12/31/2005
              12/31/2004Michael
      P. Kraft
              1,450,102
              495,450
              356,523
              298,665
  7.A.2.  Canadian
Share Ownership. On July
14, 2008, the Company’s registered shareholders’ list showed 10,015,595 common
shares outstanding with 49 registered shareholders, with 9,460,866 owned by
40 shareholders residing in Canada, 14,714 shares owned by 4 registered
shareholders in US and 540,015 shares owned by 5 foreign registered
shareholders.


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) except as described in
ITEM #4.A., “History and Development of the Company”, and ITEM #6.E., “Share
Ownership”.





7.B.  Related
Party Transactions





Michael P. Kraft,
President/CEO/Director


Mr. Kraft
is compensated indirectly through MPK Inc., as discussed in ITEM
#6.B.





Funds Owed to
Officers/Directors


Officers/Directors
have lent the Company funds during the last several years to alleviate the
corporate need for working capital.  Principal owed
totaled:




Expressed
in Canadian Dollars


Name
                12/31/2007
                12/31/2006
                12/31/2005
                12/31/2004Richard
      J.G. Boxer
                $nil
                $nil
                $51,649(1)
                $77,762(1)(1) 
      867214
      Ontario Ltd. a company controlled by Richard J.G. Boxer loaned funds to
      the Company.




Interest Payable to
Officers/Directors





Officers/Directors
have lent the Company funds during the last several years to alleviate the
corporate need for working capital.  Officer/Director loans bear
interest at 12% per annum interest payable totaled:





From June
2004 through November 2004, LMK Inc., a company controlled by the wife of
Michael P. Kraft, MPK Inc., a company controlled by Michael P. Kraft, and 867214
Ontario Ltd., a company controlled by Richard J.G. Boxer, loaned the Company an
aggregate of $265,000. These loans bore interest at 12% per annum.  At
December 31, 2004, $ 77,762 was due to 867214 Ontario Ltd.  This loan
was repaid in full during 2005.




60





From
January 2005 through February 2005, LMK Inc., a company controlled by the wife
of Michael P. Kraft, MPK Inc., a company controlled by Michael P. Kraft, and
867214 Ontario Ltd., a company controlled by Richard J.G. Boxer, loaned the
Company an aggregate of $223,500. These loans bore interest at 12% per
annum.  These loans were repaid in full during 2006.





From
January 2007 through May 2007, LMK Inc., a company controlled by the wife of
Michael P. Kraft, MPK Inc., Ten-Grad Investments Limited, a company controlled
by the father of Michael P. Kraft loaned the Company an aggregate of $202,000.
These loans bore interest at 12% per annum.  At June 15, 2007,
$202,000 was outstanding related to these loans.





On
September 22, 2005 the TSX Venture Exchange approved a private placement of
3,675,000 units at a price of $0.20 per unit (the “Units”).  Each Unit
consisted of one (1) common share and one-half of a share purchase warrant, each
whole warrant entitled the holder to purchase an additional common share of the
Company, at an exercise price of $0.40 per warrant share until September 20,
2006.  The only insiders who participated in this private placement
were Michael P. Kraft, as to 495,000 Units; Khurram R. Qureshi, as to 175,000
Units; Daniel Wiseman, as to 150,000 Units; Imran Atique, as to 50,000 Units;
John Booth, as to 250,000 Units; Jing Zhang, as to 50,000 Units; Nicolas
Chapman, as to 185,000 Units; and Bailing Xia, as to 50,000 Units.





Other
than as disclosed above, there have been no transactions since December 31,
2003, 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.  Consolidated
Statements and Other Financial Information


The
Company's financial statements are stated in Canadian Dollars (CDN$) and are
prepared in accordance with Canadian Generally Accepted Accounting Principles
(GAAP), the application of which, in the case of the Company, conforms in all
material respects for the periods presented with United States GAAP, except as
discussed in footnotes to the financial statements.





The
financial statements as required under ITEM #17 are attached hereto and found
immediately following the text of this Annual Report.  The audit
reports of Mintz & Partners LLP, Chartered Accountants, are
included herein immediately preceding the financial statements and
schedules.





Audited
Financial Statements for
Fiscal 2007 and Fiscal 2006





Unaudited
Financial Statements For Three
months ended March 31, 2008 and March 31, 2007




61




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





No
significant change has occurred since the date of the annual financial
statements, and/or since the date of the most recent interim financial
statement.





ITEM 9.  THE OFFER
AND LISTING





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 was absorbed by the TSX Venture Exchange.  The
Company’s listing was automatically transferred from the Alberta Stock Exchange
to the TSX Venture Exchange “TSX VEN” as a Tier 2 company.  The
current stock symbol on the TSX VEN is “LM”. The CUSIP number is
5357441065.


The TSX
Venture Exchange (“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 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 Inc. 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”.  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.




62





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.




The 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




Sales-Canadian
      DollarsPeriod
      Ended
            Volume
            High
            Low
            CloseMonthlyJune
      2008
            185,323
            1.97
            1.70
            1.85May
      2008
            118,497
            2.03
            1.63
            1.89April
      2008
            238,481
            2.20
            1.62
            2.00March
      2008
            369,300
            1.83
            1.28
            1.81February
      2008
            59,000
            1.29
            1.10
            1.29January
      2008
            35,300
            1.18
            0.85
            1.10December
      2007
            20,500
            1.23
            0.91
            1.19November
      2007
            68,700
            1.39
            0.91
            1.23October
      2007
            72,357
            1.50
            1.19
            1.36September
      2007
            44,886
            1.40
            1.19
            1.19August
      2007
            265,000
            1.40
            1.05
            1.40July
      2007
            92,000
            1.33
            1.05
            1.12June
      2007
            6,457
            1.19
            0.91
            1.05




Quarterly3/31/2008
            463,600
            1.83
            0.85
            1.8112/31/2007
            161,557
            1.39
            1.19
            1.199/30/2007
            401,886
            1.40
            1.05
            1.196/30/2007
            294,400
            1.19
            0.84
            1.053/31/2007
            72,291
            1.155
            0.63
            0.87512/31/2006
            128,088
            1.365
            0.70
            1.1559/30/2006
            123,945
            1.47
            0.84
            1.3656/30/2006
            187,668
            1.12
            0.49
            1.053/31/2006
            226,664
            1.33
            0.77
            1.0512/31/2005
            83,509
            1.54
            0.77
            1.199/30/2005
            216,388
            1.855
            0.77
            1.5756/30/2005
            142,287
            1.575
            0.84
            1.333/31/2005
            255,582
            2.275
            1.26
            1.2612/31/2004
            147,959
            2.24
            1.19
            1.969/30/2004
            128,796
            1.75
            1.12
            1.336/30/2004
            317,914
            2.94
            1.40
            1.61




Yearly12/31/2007
            930,134
            1.50
            0.63
            1.1912/31/2006
            666,365
            1.47
            0.49
            1.15512/31/2005
            697,765
            2.275
            0.77
            1.1912/31/2004
            1,497,789
            2.03
            1.89
            1.9612/31/2003
            578,401
            2.24
            0.56
            2.03




63




The
Company's shares became quoted for trading on the NASD OTC Bulletin Board on
January 22, 2004.





The table
No.10 lists the volume of trading and high, low and closing sales prices on the
NASD OTC Bulletin Board for the Company's common shares for the last 12 months,
the last twelve fiscal quarters; and since commencement of trading.





Table
No. 10


NASD
OTC Bulletin Board


Common
Shares Trading Activity




Sales-US
      DollarsPeriod Ended
            Volume
            High
            Low
            CloseMonthlyJune
      08
            15,300
            1.90
            1.66
            1.86May
      08
            33,300
            2.00
            1.00
            1.85April
      08
            9,600
            2.00
            1.74
            1.97March
      2008
            85,300
            1.79
            1.02
            1.79February
      2008
            38,100
            1.25
            0.71
            1.25January
      2008
            20,800
            1.21
            0.84
            1.09December
      2007
            12,400
            1.24
            0.86
            1.22November
      2007
            17,300
            1.40
            0.21
            1.24October
      2007
            7,389
            1.40
            0.77
            1.40September
      2007
            4,757
            1.40
            0.77
            1.33August
      2007
            38,014
            1.40
            0.77
            1.40July
      2007
            20,123
            1.19
            0.84
            1.19




Quarterly3/31/2008
            144,200
            1.79
            0.71
            1.7912/31/2007
            37,089
            1.40
            0.77
            1.229/30/2007
            62,944
            1.40
            0.77
            1.336/30/2007
            78,952
            1.19
            0.70
            0.913/31/2007
            47689
            2.10
            0.35
            0.8412/31/2006
            76626
            4.06
            0.63
            1.1769/30/2006
            128421
            2.66
            0.63
            1.2886/30/2006
            143740
            1.19
            0.41
            1.013/31/2006
            144133
            1.33
            0.70
            0.9112/31/2005
            12106
            1.39
            0.56
            0.8059/30/2005
            36046
            1.68
            0.525
            1.266/30/2005
            65326
            1.27
            0.735
            0.983/31/2005
            62985
            1.89
            0.98
            1.2612/31/2004
            11374
            2.52
            0.875
            1.619/30/2004
            37872
            1.47
            0.84
            1.126/30/2004
            166566
            2.45
            0.91
            1.263/31/2004
            330383
            3.57
            1.435
            2.10




Yearly12/31/2007
            245,718
            1.40
            0.21
            1.2212/31/2006
            492,923
            5.80
            0.406
            1.17612/31/2005
            219,321
            1.89
            0.525
            0.80512/31/2004
            778,080
            3.57
            0.84
            1.61




64





The
Company's common shares became quoted for trading on the Berlin-Bremen Stock
Exchange on August 20, 2003.  No trades of the Company's common shares
have taken place on the Berlin-Bremen Stock Exchange to this date.





9.A.5.  Common
Share Description





Registrar/Common Shares
Outstanding/Shareholders





The
Company's common shares are issued in registered form and the following
information is taken from the records of Computershare Trust Company of Canada
(located in Calgary, Alberta, Canada), the registrar and transfer agent for the
common shares.




On
July 14, 2008, the registered shareholders' list for the Company's common
shares showed 49 registered shareholders and 9,587,024 shares issued and
outstanding. Four of these registered shareholders were U.S. residents owning
14,714 shares representing less than one percent of the issued and outstanding
common shares.
  Common
Share Description


All of
the authorized common shares of the Company are of the same class and, once
issued, rank equally as to dividends, voting powers, and participation in
assets.  Holders of common shares are entitled to one vote for each
share held of record on all matters to be acted upon by the
shareholders.  Holders of common shares are entitled to receive such
dividends as may be declared from time to time by the Board of Directors, in its
discretion, out of funds legally available therefore.





Upon
liquidation, dissolution or winding up of the Company, holders of common stock
are entitled to receive pro rata the assets of Company, if any, remaining after
payments of all debts and liabilities.  No shares have been issued
subject to call or assessment.  There are no pre-emptive or conversion
rights and no provisions for redemption or purchase for cancellation, surrender,
or sinking or purchase funds.




Provisions
as to the modification, amendment or variation of such shareholder rights or
provisions are contained in the Business Corporations Act
(Ontario).  Unless the Business Corporations Act or
the Company's Articles or Memorandum otherwise provide, any action to be taken
by a resolution of the members may be taken by an ordinary resolution or by a
vote of a majority or more of the shares represented at the shareholders'
meeting.




65





There are
no restrictions on the repurchase or redemption of common shares of the Company
while there is any arrearage in the payment of dividends or sinking fund
installments.





Preference Share
Description





The
Company has not issued any preference shares.  The unlimited number of
no-par preference shares designated in the Company's certificate of
incorporation is "blank check" preference shares, which authorizes the board of
directors to authorize and issue one or more series of preference shares with
the designations, rights and preferences as determined, from time to time, by
the board of directors.  The board of directors is authorized to make
such designations without shareholder approval.





Share Purchase
Warrants/Convertible Debenture





As of
July 14, 2008, there were no warrants outstanding to purchase common shares of
the Company.





9.C.  Stock
Exchanges Identified





The
common shares trade on the TSX Venture Exchange, NASD OTCBB and are quoted for
trading on the Berlin-Bremen Stock Exchange. Refer to ITEM #9.A.4.





TEM
10.  ADDITIONAL INFORMATION





10.A.  Share
Capital





10.A.1.  Authorized/Issued
Capital.  As of December 31, 2007, December 31, 2006, December
31, 2005, December 31, 2004, and December 31, 2003, the authorized capital of
the Company was an unlimited number of common shares without par value and there
were 9,582,262, 4,654,024, 3,982,110, 3,444,253, and 3,363,515 common shares
issued and outstanding, respectively.





At the
Annual and Special Meeting of shareholders held on October 5, 2007, the
shareholders


of Lingo
Media approved, by special resolution, the consolidation of all its common
shares on a one-for-seven basis and the change of the Company's name to Lingo
Media Corporation. The consolidation reduced the number of common shares
outstanding of the Company to


5,113,443
common shares and 9,582,262 common shares post acquisition.




10.A.4.  Stock
Options/Share Purchase Warrants





10.A.5.  Stock
Options/Share Purchase Warrants





--- Refer
to ITEM #6.E. and Table No. 11. ---




66




10.A.6.  History
of Share Capital




May
      1997; reverse takeover of AC,
              6,978,828
      shares,
              ---April
      1997; stock option exercise,
              70,000
      shares,
              $14,000March
      1998; acquisition of CSVL,
              960,000
      shares,
              $307,200March
      2000; stock option exercise,
              150,000
      shares,
              $30,000April
      2000; private placement,
              5,000,000
      units,
              $1,811,872November
      2000; stock option exercise,
              40,000
      shares,
              $8,000May
      2001; stock option exercise,
              100,000
      shares,
              $20,000November
      2001; private placement,
              1,000,000
      shares,
              $100,000March
      2002; private placement,
              3,700,000
      shares,
              $370,000March
      2003; warrants exercise,
              150,000
      shares,
              $15,000September
      2003; warrants exercise,
              18,750
      shares,
              $2,250September
      2003; stock option exercise,
              49,000
      shares,
              $4,900October
      2003; stock option exercise,
              10,000
      shares,
              $1,000December
      2003; warrants exercise,
              2,583,030
      shares,
              $309,964March
      2004; stock option exercise,
              377,666
      shares,
              $59,766May
      2004; stock option exercise,
              37,500
      shares,
              $3,750December
      2004; stock option exercise,
              150,000
      shares,
              $37,500September
      2005; private
      placement
              3,675,000
      shares,
              $735,000Fiscal
      2005; stock option exercise
              90,000
      shares,
              $10,800December
      2006; acquisition of A+
                  Child
      Development (Canada) Ltd
              2,849,500
      shares,
              $569,900.Fiscal
      2006; stock option exercise
              1,853,897
      shares,
              $461,785Fiscal
      2007; stock option exercise
              282,600
      shares,
              $59,450October
      2007;
                share
      consolidation
              1
      new common
                share
      for
              7
      old common
                sharesOctober
      2007; private placement
              387,500
      shares,
              $775,000October
      2007; acquisition of Speak2Me Inc.
              4,500,366
      shares,
              $4,536,351


10.B.  Memorandum
and Articles of Association





Objects and
Purposes





The
Company’s corporation number as assigned by the Ontario Ministry of Consumer and
Commercial Relations is 4020-1165.  The Company’s Articles of
Incorporation do not contain the Company’s purpose or its objectives, as neither
is required under the laws of Ontario.





Disclosure of Interest of
Directors





No
director of the Company is permitted to vote on any resolution to approve a
material contract or transaction in which such director has a material
interest.




67





Subject
to the Articles of Incorporation and any unanimous shareholder agreement, the
board may fix their remuneration.





Borrowing Powers of
Directors, ByLaws - Section 3.10





The board
of directors may from time to time:




i)
              borrow
      money upon the credit of the
Corporation;
 
 ii)
              issue,
      reissue, sell or pledge debt obligations of the Corporation;
 
 iii)
              subject
      to the Business Corporations Act (Ontario), give a guarantee on behalf of
      the Corporation
      to secure performance of an obligation of anyperson;
      and
 
 iv)
              mortgage,
      hypothecate, pledge or otherwise create a security
      interest in all or any property of theCorporation,
      owned or subsequently acquired, to secure anydebt
      obligations of the
Corporation.


Delegation of Power to
Borrow, Bylaws – Section 3.11





The board
may by resolution delegate all or any of the powers conferred on them by
paragraphs (i) and (iii) of section 3.10 hereof, to any one or more of the
directors, the Managing Director, the executive committee, the Chairman of the
Board (if any), the President, any Vice-President, the Secretary, the Treasurer,
any Assistant Secretary, any Assistant Treasurer or the General
Manager.





Director Qualification and
Retirement





Neither
the Articles of Incorporation nor the Bylaws of the Company discuss the
retirement or non-retirement of directors under an age limit requirement, and
there is no number of shares required for director qualification.





Description of Rights,
Preferences and Restrictions Attaching to Each Class of
Shares





a) Class/Number
of Shares.  The Company’s Articles of Incorporation provide
that: the Corporation is authorized to issue two classes of shares, namely an
unlimited number of Preferred Shares without nominal or par value (“Preferred
Shares”) and an unlimited number of Common Shares (“Common
Shares”).





b) Common
Shares. The holders of Common Shares shall be entitled:




1) to
vote at all meetings of shareholders, except meetings at which
only holders of a specified class of shares are entitled to vote, and on every
poll taken at every such meeting, or adjourned meeting, every holder of Common
Shares shall be entitled to one vote in respect of each Common Share held;
and




2)
subject to the rights of the holders of Preferred Shares, to
receive the remaining property of the Corporation upon a dissolution;
and




3)
subject to the rights of the holders of Preferred Shares, to
receive all other dividends declared by the Corporation.




68





c) Preferred
Shares.  The Preferred Shares as a class shall carry and be
subject to the following rights, privileges, restrictions and
conditions:




1) Directors’ Rights to Issue in One or More
Series. The Preferred
Shares may at any time or from time to time be issued in one or more series,
each series to consist of such number of shares as may before the issue thereof
be determined by the Directors by resolution; the Directors of the Company may
(subject as hereinafter provided) by resolution fix, from time to time before
the issued thereof, the designation, rights, privileges, restrictions and
conditions attaching to the shares of such series including, without limiting
the generality of the foregoing (1) the issue price, (2) the rate, amount or
method of calculation of dividends and whether the same are subject to change of
dividends and whether the same are subject to change or adjustment, (3) whether
such dividends shall be cumulative, non-cumulative or partly cumulative, (4) the
dates, manner and currencies of payments of dividends and the dates from which
dividends shall accrue, (5) the redemption and/or purchase prices and terms and
conditions of redemption and/or purchase, with or without provision for sinking
or similar funds, (6) conversion and/or exchange and/or classification rights,
(7) the voting rights if any, and/or (8) other provisions, the whole subject to
the following provisions, and to the issue of Certificate(s) of Amendment
setting forth such designations, rights, privileges, restrictions and conditions
attaching to the shares of each series.




2) Ranking of Preferred
Shares.  The Preferred Shares shall be entitled
to preference over the Common Shares of the Corporation and over any other
shares ranking junior to the Preferred Shares with respect to payment of
dividends and distribution of assets in the event of liquidation, dissolution or
winding-up of the Corporation, whether voluntary or involuntary, or any other
distribution of the assets of the Corporation among its shareholders for the
purpose of winding up its affairs and may also be given such other preferences
not inconsistent with paragraphs (1) and (2) hereof over the Common Shares of
the Corporation and over any other shares ranking junior to the Preferred Shares
as may be determined in the case of each series of Preferred Shares authorized
to be issued.




3) Amendment with Approval of Holders of
Preferred Shares. The rights,
privileges, restrictions and conditions attaching to the Preferred Shares as a
class may be repealed, altered, modified, amended or amplified by Certificate(s)
of Amendment, but in each case with the approval of the holders of Preferred
Shares (only as a class but not as individual series) given as hereinafter
specified.




Approval of Holders of Preferred
Shares




69





d) Dividend
Rights.  The Company’s Bylaws provide that holders of common
shares shall be entitled to receive dividends and the Company shall pay
dividends thereon, as and when declared by the board of directors of the Company
out of moneys properly applicable to the payment of dividends, in such amount
and in such form as the board of directors may from time to time determine and
all dividends which the directors may declare on the common shares shall be
declared and paid in equal amounts per share on all common shares at the time
outstanding, subject to the prior rights of any shares ranking senior to the
common shares with respect to priority in the payment of
dividends.




e) Voting
Rights.  Neither the Company’s Bylaws nor its Articles of
Incorporation provide for the election or re-election of directors at staggered
intervals.





f) Redemption
Provisions.  The Company may purchase any of its issued common
shares subject to the provisions of the Ontario Business Corporations
Act.





g)Sinking
Fund Provisions.  Neither the Company’s Articles of
Incorporation nor its Bylaws contain sinking fund provisions.





h) Liability
to Further Capital Calls by the Company.  Neither the Company’s
Articles of Incorporation nor its Bylaws contain provisions allowing the Company
to make further capital calls with respect to any shareholder of the
Company.





i) Discriminatory
Provisions Based on Substantial Ownership.  Neither
the Company’s Articles of Incorporation nor its Bylaws contain provisions that
discriminate against any existing or prospective holders of securities as a
result of such shareholder owning a substantial number of
shares.





j) Miscellaneous
Provisions.  Neither the Articles of Incorporation nor the
Bylaws of the Company address the process by which the rights of holders of
stock may be changed.  The general provisions of the Ontario Business
Corporations Act apply to this process, and require shareholder meetings and
independent voting for such changes.


A meeting
of shareholders may be called at any time by resolution or by the Chairman of
the Board or by the President and the Secretary shall cause notice of a meeting
of shareholders to be given when directed so to do by resolution of the board or
by the Chairman or the Board or the President.




70





The board
shall call an annual meeting of the shareholders not later than eighteen (18)
months after the Corporation comes into existence and subsequently not later
than fifteen (15) months after holding the last preceding annual
meeting.





A special
meeting of shareholders may be called at any time and may be held in conjunction
with an annual meeting of shareholders.





Meeting
of shareholders shall be held at the place within Canada determined by the board
from time to time.  Notwithstanding the above subsection, a meeting of
shareholders may be held outside Canada if all the shareholders entitled to vote
at that meeting so agree, and a shareholder who attends a meeting of
shareholders held outside Canada is deemed to have so agreed except when he
attends the meeting for the express purpose of objecting to the transaction of
any business on the grounds that the meeting is not lawfully held.





Neither
the Articles of Incorporation nor the Bylaws of the Company discuss limitations
on the rights to own securities or exercise voting rights thereon.





Although
not expressly enumerated in the Articles, pursuant to Canadian regulations,
shareholder ownership must be disclosed by any shareholder who owns more than
10% of the Company’s common stock.





There is
no provision of the Company’s Articles of Incorporation or Bylaws that would
delay, defer or prevent a change in control of the Company, and that would
operate only with respect to a merger, acquisition, or corporate restructuring
involving the Company (or any of its subsidiaries).  The Company’s
Bylaws do not contain a provision indicating the ownership threshold above which
shareholder ownership must be disclosed.  With respect to the matters
discussed in this Item 10B, the law applicable to the Company is not
significantly different from United States law.  Neither the Articles
of Incorporation nor Bylaws contain provisions governing changes in capital that
are more stringent than the conditions required by law.





The
Ontario Business Corporations Act contains provisions that require a "special
resolution" for effecting certain corporate actions.  Such a "special
resolution" requires a three-quarters vote of shareholders rather than a simple
majority for passage.  The principle corporate actions for which
the Company would require a "special resolution" include:




a.  Changing
its name;




b.  Changing
the place where its registered office is situated;




c.
 Adding, changing or removing
any restriction on the business or
businesses that the corporation may carry on;




d.  Certain
reorganizations of the corporation and alterations of share
capital;




71




e.  Increasing or decreasing
the number of directors or the minimum
or maximum number of directors;




f.  Any
amendment to its articles regarding constraining the issue or
transfer of shares to persons who are not resident Canadians;
and




g.  Dissolution
of the corporation.





10.C.  Material
Contracts





a.  Acquisition
Agreements with Alpha Corporation, dated May 7, 1997




b.  Acquisition
Agreements for CSVL, dated March 5, 1998




c.  Management
Agreement with MPK Inc., dated October 18, 2007




d.  Performance
Shares Escrow Agreement, dated
April 30, 1997 and May 7, 1997





10.D.  Exchange
Controls





Except as
discussed in ITEM #10.E., the Company is unaware of any Canadian federal or
provincial laws, decrees, or regulations that restrict the export or import of
capital, including foreign exchange controls, or that affect the remittance of
dividends, interest or other payments to non-Canadian holders of the common
shares.  The Company is unaware of any limitations on the right of
non-Canadian owners to hold or vote the common shares imposed by Canadian
federal or provincial law or by the charter or other constituent documents of
the Company.





10.E.  Taxation





A brief
description of provisions of the tax treaty between Canada and the United States
is included below, together with a brief outline of certain taxes, including
withholding provisions, to which United States security holders are subject
under existing laws and regulations of Canada.  The consequences, if
any, of provincial, state and local taxes are not considered.





Security
holders should seek the advice of their own tax advisors, tax counsel or
accountants with respect to the applicability or effect on their own individual
circumstances of the matters referred to herein and of any provincial, state or
local taxes.





Material
Canadian Federal Income Tax Consequences





The
discussion under this heading relates to the principal Canadian federal income
tax consequences of acquiring, holding and disposing of shares of common stock
of the Company for a shareholder of the Company who is not a resident of Canada
but is a resident of the United States and who will acquire and hold shares of
common stock of the Company as capital property for the purposes of the Income Tax Act(Canada) (the
“Canadian Tax Act”).  This summary does not apply to a shareholder who
carries on business in Canada through a “permanent establishment” situated in
Canada or performs independent personal services in Canada through a fixed base
in Canada if the shareholder’s holding in the Company is effectively connected
with such permanent establishment or fixed base.  This information is
based on the provisions of the Canadian Tax Act and the regulations thereunder
and on an understanding of the administrative practices of Canada Customs and
Revenue Agency, and takes into account all specific proposals to amend the
Canadian Tax Act or regulations made by the Minister of Finance of Canada as of
the date hereof.  This discussion is not a substitute for independent
advice from a shareholder’s own Canadian and U.S. tax advisors.




72





The
provisions of the Canadian Tax Act are subject to income tax treaties to which
Canada is a party, including the Canada-United States Income Tax Convention
(1980), as amended (the “Convention”).





Dividends on Common Shares and Other
Income.Under the Canadian Tax Act, a non-resident of Canada
is subject to Canadian withholding tax at the rate of 25 percent on dividends
paid or deemed to have been paid to him or her by a corporation resident in
Canada.  The Convention limits the rate to 15 percent if the
shareholder is a resident of the United States and the dividends are
beneficially owned by and paid to such shareholder, and to 5 percent if the
shareholder is also a corporation that beneficially owns at least 10 percent of
the voting stock of the payor-corporation.





The
amount of a stock dividend (for tax purposes) would be equal to the amount by
which the paid up or stated capital of the Company had increased because of the
payment of such dividend.  The Company will furnish additional tax
information to shareholders in the event of such a dividend.  Interest
paid or deemed to be paid on the Company’s debt securities held by non-Canadian
residents may also be subject to Canadian withholding tax, depending upon the
terms and provisions of such securities and any applicable tax
treaty.





The
Convention exempts from Canadian income tax dividends paid to a religious,
scientific, literary, educational or charitable organization or to an
organization constituted and operated exclusively to administer a pension,
retirement or employee benefit fund or plan, if the organization is a resident
of the United States and is exempt from income tax under the laws of the United
States.





Dispositions of Common
Shares.Under the Canadian Tax Act, a taxpayer’s capital gain
or capital loss from a disposition of a share of common stock of the Company is
the amount, if any, by which his or her proceeds of disposition exceed (or are
exceeded by, respectively) the aggregate of his or her adjusted cost base of the
share and reasonable expenses of disposition.  One-half of a capital
gain (the “taxable capital gain”) is included in income, and one-half of a
capital loss in a year (the “allowable capital loss”) is deductible from taxable
capital gains realized in the same year.  The amount by which a
shareholder’s allowable capital loss exceeds the taxable capital gain in a year
may be deducted from a taxable capital gain realized by the shareholder in the
three previous or any subsequent year, subject to adjustment when the capital
gains inclusion rate in the year of disposition differs from the inclusion rate
in the year the deduction is claimed.





If a
share of common stock of the Company is disposed of to the Company other than in
the open market in the manner in which shares would normally be purchased by the
public, the proceeds of disposition will, in general terms, be considered as
limited to the paid-up capital of the share and the balance of the price paid
will be deemed to be a dividend.  In the case of a shareholder that is
a corporation, the amount of any capital loss otherwise determined may be
reduced by the amount of dividends previously received in respect of the shares
disposed of, unless the corporation owned the shares for at least 365 days prior
to sustaining the loss and (together with corporations, persons and other
entities, with whom the corporation was not dealing at arm’s length) did not own
more than five percent of the shares of any class of the corporation from which
the dividend was received. These loss limitation rules may also apply where a
corporation is a member of a partnership or a beneficiary of a trust that owned
the shares disposed of.




73





Under the
Canadian Tax Act, a non-resident of Canada is subject to Canadian tax on taxable
capital gains, and may deduct allowable capital losses, realized on a
disposition of “taxable Canadian property.”  Shares of common stock of
the Company will constitute taxable Canadian property of a shareholder at a
particular time if the shareholder used the shares in carrying on business in
Canada, or if at any time in the five years immediately preceding the
disposition 25 percent or more of the issued shares of any class or series in
the capital stock of the Company belonged to one or more persons in a group
comprising the shareholder and persons with whom the shareholder did not deal at
arm’s length.





The
Convention relieves United States residents from liability for Canadian tax on
capital gains derived on a disposition of shares unless (a) the value of the
shares is derived principally from “real property” in Canada, including the
right to explore for or exploit natural resources and rights to amounts computed
by reference to production, (b) the shareholder was resident in Canada for 120
months during any period of 20 consecutive years preceding, and at any time
during the 10 years immediately preceding, the disposition and the shares were
owned by him when he or she ceased to be resident in Canada, or (c) the shares
formed part of the business property of a “permanent establishment” that the
holder has or had in Canada within the 12 months preceding the
disposition.





Material
United States Federal Income Tax Considerations





The
following discussion is based upon the sections of the Internal Revenue Code of
1986, as amended (the "Code"), Treasury Regulations, published Internal Revenue
Service ("IRS") rulings, published administrative positions of the IRS and court
decisions that are currently applicable.  This discussion does not
consider the potential effects, both adverse and beneficial, of any recently
proposed legislation that, if enacted, could be applied, possibly on a
retroactive basis, at any time.  Holders and prospective holders of
shares of the Company should consult their own tax advisors about the Federal;
state, local and foreign tax consequences of purchasing, owning and disposing of
shares of the Company.





U.S. Holders.  As
used herein, a "U.S. Holder" includes a holder of shares of the Company who is a
citizen or resident of the United States, a corporation created or organized in
or under the laws of the United States or of any political subdivision thereof,
any entity that is taxable as a corporation for U.S. tax purposes and any other
person or entity whose ownership of shares of the Company is effectively
connected with the conduct of a trade or business in the United
States.  A U.S. Holder does not include persons subject to special
provisions of Federal income tax law, such as tax exempt organizations,
qualified retirement plans, financial institutions, insurance companies, real
estate investment trusts, regulated investment companies, broker-dealers,
nonresident alien individuals or foreign corporations whose ownership of shares
of the Company is not effectively connected with conduct of trade or business in
the United States, shareholders who acquired their stock through the exercise of
employee stock options or otherwise as compensation and shareholders who hold
their stock as ordinary assets and not as capital assets.




74





Distributions on Shares of the
Company.  U.S. Holders receiving dividend distributions
(including constructive dividends) with respect to shares of the Company are
required to include in gross income for United States Federal income tax
purposes the gross amount of such distributions to the extent that the Company
has current or accumulated earnings and profits as defined under U.S. Federal
tax law, without reduction for any Canadian income tax withheld from such
distributions.  Such Canadian tax withheld may be credited against the
U.S. Holder's United States Federal income tax liability or, alternatively, may
be deducted in computing the U.S. Holder's United States Federal taxable income
by those who itemize deductions.  (See discussion that is more
detailed at "Foreign Tax Credit" below).  To the extent that
distributions exceed current or accumulated earnings and profits of the Company,
they will be treated first as a return of capital up to the U.S. Holder's
adjusted basis in the shares and thereafter as gain from the sale or exchange of
the shares.  Preferential tax rates for net capital gains are
applicable to a U.S. Holder that is an individual, estate or
trust.  There are currently no preferential tax rates for long-term
capital gains for a U.S. Holder that is a corporation.





Dividends
paid on the shares of the Company are not expected to be eligible for the
dividends received deduction provided to corporations receiving dividends from
certain United States corporations.  A U.S. Holder that is a
corporation may be entitled to a 70% deduction of the United States source
portion of dividends received from the Company (unless the Company qualifies as
a "foreign personal holding company" or a "passive foreign investment company",
as defined below) if such U.S. Holder owns shares representing at least 10% of
the voting power and value of the Company.





In the
case of foreign currency received as a dividend that is not converted by the
recipient into U.S. Dollars on the date of receipt, a U.S. Holder will have a
tax basis in the foreign currency equal to its U.S.Dollar value on the date of
receipt.  Any gain or loss recognized upon a subsequent sale or other
disposition of the foreign currency, including the exchange for U.S. Dollars,
will be ordinary income or loss.  However, for tax years after 1997,
an individual whose realized foreign exchange gain does not exceed U.S. $200
will not recognize that gain, to the extent that there are not expenses
associated with the transaction that meet the requirement for deductibility as a
trade or business expense (other than travel expenses in connection with a
business trip or as an expense for the production of income).





Foreign Tax
Credit.A U.S. Holder who pays (or has withheld from
distributions) Canadian income tax with respect to the ownership of shares of
the Company may be entitled, at the option of the U.S. Holder, to either a
deduction or a tax credit for such foreign tax paid or withheld.  It
will be more advantageous to claim a credit because a credit reduces United
States Federal income taxes on a dollar-for-dollar basis, while a deduction
merely reduces the taxpayer's income subject to tax.  This election is
made on a year-by-year basis and applies to all foreign taxes paid by (or
withheld from) the U.S. Holder during that year.  There are
significant and complex limitations that apply to the credit, among which is the
general limitation that the credit cannot exceed the proportionate share of the
U.S. Holder's United States Federal income tax liability that the U.S. Holder's
foreign source income bears to his or its worldwide taxable
income.  In the determination of the application of this limitation,
the various items of income and deduction must be classified into foreign and
domestic sources.  Complex rules govern this classification
process.  There are further limitations on the foreign tax credit for
certain types of income such as "passive income", "high withholding tax
interest", "financial services income", and "shipping income". The availability
of the foreign tax credit and the application of the limitations on the credit
are fact specific and holders and prospective holders of shares of the Company
should consult their own tax advisors regarding their individual
circumstances.




75





In the
case of certain U.S. Holders that are corporations (other than corporations
subject to Subchapter S of the Code), owning 10% or more of the Company's Common
Shares, a portion of the qualifying Canadian income tax paid by the Company will
also be available as a foreign tax credit for U.S. federal income tax purposes,
at the election of the U.S. Holder.





Disposition of Shares of the
Company.A U.S. Holder will recognize a gain or loss upon the
sale of shares of the Company equal to the difference, if any, between (i) the
amount of cash plus the fair market value of any property received, and (ii) the
shareholder's tax basis in the shares of the Company.  This gain or
loss will be a capital gain or loss if the shares are a capital asset in the
hands of the U.S. Holder, and will be a short-term or long-term capital gain or
loss depending upon the holding period of the U.S. Holder.  Gains and
losses are netted and combined according to special rules in arriving at the
overall capital gain or loss for a particular tax year.  Deductions
for net capital losses are subject to significant
limitations.  Corporate capital losses (other than losses of
corporations electing under Subchapter S or the Code) are deductible to the
extent of capital gains.  Non-corporate taxpayers may deduct net
capital losses, whether short-term or long-term, up to U.S. $3,000 a year (U.S.
$1,500 in the case of a married individual filing separately).  For
U.S. Holders that are individuals, any unused portion of such net capital loss
may be carried over to be used in later tax years until such net capital loss is
thereby exhausted.  For U.S. Holders that are corporations (other than
corporations subject to Subchapter S of the Code), an unused net capital loss
may be carried back three years from the loss year and carried forward five
years from the loss year to be offset against capital gains until such net
capital loss is thereby exhausted.





Other
Considerations





In the
following circumstances, the above sections of this discussion may not describe
the United States Federal income tax consequences resulting from the holding and
disposition of shares of the Company:





Foreign Personal Holding
Company.If at any time during a taxable year more than 50% of
the total combined voting power or the total value of the Company's outstanding
shares is owned, directly or indirectly, by five or fewer individuals who are
citizens or residents of the United States and 60% (50% in subsequent years) or
more of the Company's gross income for such year was derived from certain
passive sources (e.g., from dividends received from its subsidiaries), the
Company would be treated as a "foreign personal holding company".  In
that event, U.S. Holders that hold shares of the Company (on the earlier of the
last day of the Company's tax year or the last date on which the Company was a
foreign personal holding company) would be required to include in gross income
for such year their allowable portions of such passive income to the extent the
Company does not actually distribute such income.




76





Foreign Investment
Company.If 50% or more of the combined voting power or total
value of the Company's outstanding shares are held, directly or indirectly, by
citizens or residents of the United States, United States domestic partnerships
or corporations, or estates or trusts other than foreign estates or trusts (as
defined by the Code Section 7701 (a)(31)), and the Company is found to be
engaged primarily in the business of investing, reinvesting, or trading in
securities, commodities, or any interest, it is possible that the Company might
be treated as a "foreign investment company" as defined in Section 1246 of the
Code, causing all or part of any gain realized by a U.S. Holder selling or
exchanging shares of the Company to be treated as ordinary income rather than
capital gain.





Passive Foreign Investment
Company.As a foreign corporation with U.S. Holders, the
Company will be treated as a passive foreign investment company ("PFIC"), as
defined in Section 1297 of the Code, if 75% or more of its gross income in a
taxable year is passive income, or the average percentage of the Company’s
assets (by value) during the taxable year which produce passive income or which
are held for production of same is at least 50%.  Passive income is
defined to include gross income in the nature of dividends, interest, royalties,
rents and annuities; excess of gains over losses from certain transactions in
any commodities not arising inter alia from a PFIC whose business is actively
involved in such commodities; certain foreign currency gains; and other similar
types of income.  Foreign mining companies that are in the exploration
stage may have little or no income from operations and/or may hold substantial
cash and short-term securities that pay interest and dividends while awaiting
expenditure in connection with the business.  Given the complexities
of determining what expenditures may be deductible and of how assets held for
production of active income should be valued, the Company, based on advice from
its professional advisers, cannot conclude whether it is a PFIC.





It is not
the intention of the Company to be considered a PFIC and the Company does not
consider this to be a material risk.  In the event that it were to
become classified as a PFIC, the following should be taken into
consideration.  U.S. Holders owning shares of a PFIC are subject to a
special tax and to an interest charge based on the value of deferral of U.S. tax
attributable to undistributed earnings of a PFIC for the period during which the
shares of the PFIC are owned.  This special tax would apply to any
gain realized on the disposition of shares of a PFIC.  In addition,
the gain is subject to U.S. federal income tax as ordinary income, taxed at top
marginal rates, rather than as capital gain income.  The special tax
would also be payable on receipt of excess distributions (any distributions
received in the current year that are in excess of 125% of the average
distributions received during the 3 preceding years or, if shorter, the
shareholder's holding period).  If, however, the U.S. Holder makes a
timely election to treat a PFIC as a qualified electing fund ("QEF") with
respect to such shareholder's interest and the Company provides an annual
information statement, the above-described rules will not apply.  The
Company will provide such an information statement upon request from a U.S.
Holder for current and prior taxable years.  Instead, the electing
U.S. Holder would include annually in his gross income his pro rata share of the
PFIC's ordinary earnings and any net capital gain regardless of whether such
income or gain was actually distributed.  A U.S. Holder of a PFIC
treated as a QEF can, however, further elect to defer the payment of United
States Federal income tax on such income and gain inclusions, with tax payments
ultimately requiring payment of an interest factor.  In addition, with
a timely QEF election, the electing U.S. Holder will obtain capital gain
treatment on the gain realized on disposition of such U.S. Holder’s interest in
the PFIC.  Special rules apply to U.S. Holders who own their interests
in a PFIC through intermediate entities or persons.




77





Effective
for tax years of U.S. Holders beginning after December 31, 1997, U.S. Holders
who hold, actually or constructively, marketable stock of a foreign corporation
that qualifies as a PFIC may elect to mark such stock to the market (a
“mark-to-market election”).  If such an election is made, such U.S.
Holder will not be subject to the special taxation rules of PFIC described above
for the taxable years for which the mark-to-market election is
made.  A U.S. Holder who makes such an election will include in income
for the taxable year an amount equal to the excess, if any, of the fair market
value of the shares of the Company as of the close of such tax year over such
U.S. Holder's adjusted basis in such shares.  In addition, the U.S.
Holder is allowed a deduction for the lesser of (i) the excess, if any, of such
U.S. Holder's adjusted tax basis in the shares over the fair market value of
such shares as of the close of the tax year, or (ii) the excess, if any of (A)
the mark-to-market gains for the shares in the Company included by such U.S.
Holder for prior tax years, including any amount which would have been included
for any prior year but for Section 1291 interest on tax deferral rules discussed
above with respect to a U.S. Holder, who has not made a timely QEF election
during the year in which he holds (or is deemed to have held) shares in the
Company and the Company is a PFIC (“Non-Electing U.S. Holder”), over (B) the
mark-to-market losses for shares that were allowed as deductions for prior tax
years.  A U.S. Holder's adjusted tax basis in the shares of the
Company will be increased or decreased to reflect the amount included or
deducted as a result of mark-to-market election.  A mark-to-market
election will apply to the tax year for which the election is made and to all
later tax years, unless the PFIC stock ceases to be marketable or the IRS
consents to the revocation of the election.





The IRS
has issued proposed regulations that would treat as taxable certain transfers of
PFIC stock by a Non-Electing U.S. Holder that are not otherwise taxed, such as
gifts, exchanges pursuant to corporate reorganizations, and transfers at
death.  In such cases, the basis of the Company's shares in the hands
of the transferee and the basis of any property received in the exchange for
those shares would be increased by the amount of gain recognized.  A
U.S. Holder who has made a timely QEF election (as discussed herein) will not be
taxed on certain transfers of PFIC stock, such as gifts, exchanges pursuant to
corporate reorganizations, and transfers at death.  The transferee's
basis in this case will depend on the manner of the transfer.  The
specific tax effect to the U.S. Holder and the transferee may vary based on the
manner in which the shares of the Company are transferred.  Each U.S.
Holder should consult a tax advisor with respect to how the PFIC rules affect
their tax situation.





The PFIC
and QEF election rules are complex.  U.S. Holders should consult a tax
advisor regarding the availability and procedure for making the QEF election as
well as the applicable method for recognizing gains or earnings and profits
under the foregoing rules.





Controlled Foreign
Corporation.If more than 50% of the voting power of all
classes of stock or the total value of the stock of the Company is owned,
directly or indirectly, by citizens or residents of the United States, United
States domestic partnerships and corporations or estates or trusts other than
foreign estates or trusts, each of whom own 10% or more of the total combined
voting power of all classes of stock of the Company ("United States
shareholder"), the Company could be treated as a "controlled foreign
corporation" under Subpart F of the Code. This classification would effect many
complex results including the required inclusion by such United States
shareholders in income of their pro rata share of "Subpart F income" (as
specially defined by the Code) of the Company.  Subpart F requires
current inclusions in the income of United States shareholders to the extent of
a controlled foreign corporation's accumulated earnings invested in "excess
passive" assets (as defined by the Code).  In addition, under Section
1248 of the Code, a gain from the sale or exchange of shares by a U.S. Holder
who is or was a United States shareholder at any time during the five year
period ending with the sale or exchange is treated as ordinary dividend income
to the extent of earnings and profits of the Company attributable to the stock
sold or exchanged.  Because of the complexity of Subpart F, and
because it is not clear that Subpart F would apply to the U.S. Holders of shares
of the Company, a more detailed review of these rules is outside of the scope of
this discussion.




78





If the
Company is both a PFIC and controlled foreign corporation,  the
company will not be treated as a PFIC with respect to United States shareholders
of the controlled foreign corporation.  This rule will be effective
for taxable years of the Company ending with or within such taxable years of
United States shareholders.




Summary





Management
believes this discussion covers all material tax
consequences.  Nevertheless, this is not intended to be, nor should it
be construed to be, legal or tax advice to any holder of common shares of the
Company Holders and prospective holders are encouraged to consult their own tax
advisers with respect to their particular circumstances.





10.F.  Dividends
and Paying Agents





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





Notwithstanding
the aforementioned: the Company is unaware of any dividend restrictions; has no
specific procedure for the setting of the date of dividend entitlement; but
might expect to set a record date for stock ownership to determine entitlement;
has no specific procedures for non-resident holders to claim dividends, but
might expect to mail their dividends in the same manner as resident
holders.  The Company has not nominated any financial institutions to
be the potential paying agents for dividends in the United States.





Item
11





Foreign
Currency Risk





We
operate one segment of our business in China, and a substantial portion of our
operating expenses and development expenditures are in Canadian dollars, whereas
our revenue (current and potential) from co-publishing agreements are, and will
be, primarily in US dollars.  A significant adverse change in foreign
currency exchange rates between the Canadian dollar relative to the US dollar
could have a material effect on our consolidated results of operations,
financial position or cash flows. We have not hedged exposures denominated in
foreign currencies, as they are not material at this time.





Item
12





Not
applicable





PART
II





Item
13 and 14





Not
applicable




79





ITEM 15.  CONTROLS
AND PROCEDURES





15.A.   Within
the 90-day period prior to the filing of this report ("Date of Evaluation"), an
evaluation was carried out under the supervision and with the participation of
the Company's management, including the Chief Executive Officer ("CEO") and
Chief Financial Officer ("CFO"), of the effectiveness of our disclosure controls
and procedures. Based on that evaluation, the CEO and CFO have concluded that
the Company's disclosure controls and procedures are effective to ensure that
information required to be disclosed by the Company in reports that it files or
submits under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in Securities and
Exchange Commission rules and forms.




The
Company did not maintain a complete set of policies and procedures governing
decision and  authorization processes. As such, reliance was placed on
management’s substantive review of period end balances, transactions recorded in
each period, scrutiny of business activity and centralized cash management to
detect errors and ensure the financial statements do not contain material
misstatements. The Company assigned dedicated staff to formulate a plan, using a
generally recognized framework, to document key processes and controls, and
initiated the creation of a comprehensive set of policies and procedures. The
completion of documentation and implementation of the initiative will continue
in 2008.


Segregation
of Duties


Due to
resource constraints, the Company is reliant on the performance of compensating
procedures during  its financial close process in order to ensure that the
financial statements are presented fairly and accurately, in all material
respects. Additional compensating control procedures have been performed in the
preparation of our financial statements to ensure their
reliability.





These
compensating controls include:




·
            Review
      of all balances and
reconciliations;


·
            Review
      of bank registers and disbursement details in risk locations;
      and


·
            Analytical
      review and analysis of performance against
  expectations.


·
            During
      2007, the Company enhanced internal controls over financial reporting by
      introducing the following additional
changes:


·
            Improved
      budgetary controls; and


·
            Strengthened
      technical expertise in the accounting and finance areas of the
      organization;





15.B.   There
have been no significant changes in the Company's internal controls or the
occurrence of events or other factors that could significantly affect these
controls, subsequent to the Date of Evaluation.




ITEM
16.  RESERVED




80




PART
III




ITEM
17.  FINANCIAL STATEMENTS




The
Company's financial statements are stated in Canadian Dollars (CDN$) and are
prepared in accordance with Canadian Generally Accepted Accounting Principles
(GAAP), the application of which, in the case of the Company, conforms in all
material respects for the periods presented with United States GAAP, except as
discussed in footnotes to the financial statements.


The
financial statements as required under ITEM #17 are attached hereto as
exhibits.  The audit reports of Mintz & Partners LLP, Chartered
Accountants, and Meyers Norris Penny LLP are included herein immediately
preceding the financial statements and schedules.


Audited
Financial Statements




Auditor's
Report, dated April 20, 2008


Consolidated
Balance Sheets at December 31, 2007 and December 31, 2006


Consolidated
Statements of Operations and Deficitfor the
years ended December 31, 2007 and December 31, 2006


Consolidated
Statements of Cash Flowsfor the
years ended December 31, 2007 and December 31, 2006


Notes to
Financial Statements





Unaudited Interim Financial
Statements




Consolidated
Interim Balance Sheets at March 31, 2008 and December 31, 2007


Consolidated
Interim Statements of Operations and Deficit for the
Three Months Ended March 31, 2008 and March 31, 2007


Consolidated
Interim Statements of Cash Flows for the
Three Months Ended March 31, 2008 and March 31, 2007


Notes to
Consolidated Interim Financial Statements





ITEM
18.  FINANCIAL STATEMENTS





The
Company has elected to provide financial statements pursuant to ITEM
#17.




81





ITEM
19.  EXHIBITS





1.  Certificates
of Incorporation and Name Changes, By-Laws/Articles, incorporated by reference
from the Lingo Media Inc. F-1 Registration Statement filed August 20,
2002.





2.  Instruments
defining the rights of holders of equity or debt securities being registered
incorporated by reference from the Lingo Media Inc. F-1 Registration Statement
filed August 20, 2002.





4.  Material
Contracts:




a.  Acquisition
Agreements with Alpha Corporation,(now Lingo Media Ltd.) dated May 7, 1997,
incorporated by reference from the Lingo Media Inc. F-1 Registration Statement
filed August 20, 2002





b.  Acquisition
Agreements for CSVL, dated March 5, 1998, incorporated by reference from the
Lingo Media Inc. F-1 Registration Statement filed August 20, 2002





c.
Management Agreement with MPK Inc., dated May 1, 1997, renewed on December 14,
1998 and November 26, 1999, and the renewal of November 26, 1999 amended July 3,
2000, incorporated by reference from the Lingo Media Inc. F-1 Registration
Statement filed August 20,2002





d.
Performance Shares Escrow Agreement, dated April 30, 1997 and May 7, 1997,
incorporated by reference from the Lingo Media Inc. F-1 Registration Statement
filed August 20, 2002





10.
Additional Exhibits:





a.
Notice/Information Circular re: Annual General Meeting of Shareholders, July 4,
2001, incorporated by reference from the Lingo Media Inc. F-1 Registration
Statement filed August 20, 2002





b. Stock
Option Plan, dated May 22, 2001, incorporated by reference from the Lingo Media
Inc. F-1 Registration Statement filed August 20, 2002


c. Financial
statements of A+ Child Development (Canada) Inc. for December 31, 2005
(Audited), December 31, 2004 and September 30, 2006(non-audited)
  EXHIBIT
12.1 PURSUANT TO RULE 13a-14 AND 15d-14,UNDER THE SECURITIES EXCHANGE ACT OF
1934.
 
 EXHIBIT
12.2 PURSUANT TO RULE 13a-14 AND 15d-14,UNDER THE SECURITIES EXCHANGE ACT OF
1934.
 
 EXHIBIT
13.1 PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002.
 
 EXHIBIT
13.2 PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002.
 82





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
      CORPORATIONJuly
      15, 2008
              By:
              /s/ Michael
      P. KraftMichael
      P. Kraft
                President and Chief Executive Officer
  July
      15, 2008
                By:
                /s/ Khurram
      R. QureshiKhurram
      R. Qureshi
                  Chief Financial Officer
 83