----

----

----

|  Management’s Responsibility |
|-----------------------------------------|

|   | /s/ "Michael Kraft"              |   | /s/ "Khurram Qureshi"            |   |
|--------|----------------------------------|--------|----------------------------------|--------|
|   | Chief Executive Officer (Signed) |   | Chief Financial Officer (Signed) |   |

----

----

----

| As at December 31,                                        |   | 2009   |        |   | 2008   |   |
|-----------------------------------------------------------|--------|--------|-------------|--------|--------|--------|
| Assets                                                    |   |   |        |   |   |   |
|                                                      |   |   |        |   |   |   |
| Current                                                   |   |   |        |   |   |   |
| Cash and cash equivalents                                 |   | $      | 201,451     |   |   | $      | 2,279,937 |   |
| Accounts and grants receivable (Note 4)                   |   |   | 569,571     |   |   |   | 642,543 |   |
| Prepaid and sundry assets                                 |   |   | 76,954      |   |   |   | 160,161 |   |
| Current assets from discontinued operations (Note 9)      |   |   | -           |   |   |   | 34,608 |   |
|                                                      |   |   | 847,976     |   |   |   | 3,117,249 |   |
| Property and equipment, net (Note 6)                      |   |   | 73,351      |   |   |   | 64,839 |   |
| Publishing development costs, net (Note 7)                |   |   | 24,018      |   |   |   | 111,517 |   |
| Software and web development costs, net (Note 8)          |   |   | 4,757,807   |   |   |   | 5,233,187 |   |
|                                                      |   | $      | 5,703,152   |   |   | $      | 8,526,792 |   |
| Liabilities                                               |   |   |        |   |   |   |   |   |
| Current                                                   |   |   |        |   |   |   |   |   |
| Accounts payable                                          |   | $      | 313,915     |   |   | $      | 265,346 |   |
| Accrued liabilities                                       |   |   | 393,665     |   |   |   | 321,466 |   |
| Deferred revenue                                          |   |   | 15,533      |   |   |   | - |   |
| Current liabilities from discontinued operations (Note 9) |   |   | -           |   |   |   | 734,601 |   |
|                                                      |   |   | 723,113     |   |   |   | 1,321,413 |   |
| Future income taxes (Note 11)                             |   |   | 564,997     |   |   |   | 564,997 |   |
|                                                      |   |   | 1,288,110   |   |   |   | 1,886,410 |   |
| Shareholders' Equity                                      |   |   |        |   |   |   |   |   |
| Capital stock (Note 10)                                   |   |   | 14,220,192  |   |   |   | 14,205,515 |   |
| Warrants (Note 10)                                        |   |   | 281,355     |   |   |   | 372,383 |   |
| Contributed surplus (Note 10)                             |   |   | 1,290,631   |   |   |   | 847,768 |   |
| Deficit                                                   |   |   | (11,377,136 | )      |   |   | (8,785,284 | ) |
|                                                      |   |   | 4,415,042   |   |   |   | 6,640,382 |   |
|                                                      |   | $      | 5,703,152   |   |   | $      | 8,526,792 |   |

| Approved by the Board | /s/ "Michael Kraft" |   | /s/ "Sanjay Joshi" |   |
|-----------------------|---------------------|--------|--------------------|--------|
|                  | Director (Signed)   |   | Director (Signed)  |   |

----

| Years Ended December 31,        |   | 2009   |        |   | 2008   |   |       | 2007     |   |
|---------------------------------|--------|--------|-------------|--------|--------|--------|------------|----------|--------|
|                            |   |   |        |   |   |   |       | Restated |   |
| Deficit, beginning of year      |   | $      | (8,785,284  | )      |   | $      | (4,902,441 | )        |   | $ | (3,977,401 | ) |
| Net loss and comprehensive loss |   |   | (2,591,852  | )      |   |   | (3,882,843 | )        |   |   | (925,040 | ) |
| Deficit, end of year            |   | $      | (11,377,136 | )      |   | $      | (8,785,284 | )        |   | $ | (4,902,441 | ) |

----

| Years Ended December 31,                                                  |   | 2009   |       |   | 2008   |   |       | 2007     |   |
|---------------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|------------|----------|--------|
|                                                                      |   |   |       |   |   |   |       | Restated |   |
| Revenue                                                                   |   | $      | 1,466,696  |   |   | $      | 969,128    |     |   | $ | 879,626 |   |
| Direct costs                                                              |   |   | 144,994    |   |   |   | 126,329    |     |   |   | 113,318 |   |
| Gross margin                                                              |   |   | 1,321,702  |   |   |   | 842,799    |     |   |   | 766,308 |   |
| Expenses                                                                  |   |   |       |   |   |   |       |     |   |   |   |   |
| Amortization - publishing development costs                               |   |   | 89,375     |   |   |   | 128,478    |     |   |   | 99,805 |   |
| Amortization - property and equipment                                     |   |   | 14,446     |   |   |   | 21,243     |     |   |   | 13,465 |   |
| Amortization - software and web development                               |   |   | 1,395,736  |   |   |   | -          |     |   |   | - |   |
| Investment and advances write-off (Note 5)                                |   |   | -          |   |   |   | 339,939    |     |   |   | - |   |
| Development cost write-down                                               |   |   | -          |   |   |   | 27,915     |     |   |   | 28,184 |   |
| Selling, general and administrative                                       |   |   | 2,231,971  |   |   |   | 2,127,726  |     |   |   | 946,307 |   |
| Interest and other financial expenses                                     |   |   | 10,564     |   |   |   | 95,544     |     |   |   | 27,077 |   |
| Inventory write-off                                                       |   |   | -          |   |   |   | 15,618     |     |   |   | - |   |
| Stock-based compensation                                                  |   |   | 359,004    |   |   |   | 252,792    |     |   |   | 156,395 |   |
|                                                                      |   |   | 4,101,096  |   |   |   | 3,009,255  |     |   |   | 1,271,233 |   |
| Loss before the undernoted items and income taxes                         |   |   | (2,779,394 | )      |   |   | (2,166,456 | )        |   |   | (504,925 | ) |
| Income taxes and other taxes (Note 11)                                    |   |   | 179,751    |   |   |   | 145,018    |     |   |   | 127,267 |   |
| Loss from continuing operation                                            |   |   | (2,959,145 | )      |   |   | (2,311,474 | )        |   |   | (632,192 | ) |
| Income (loss) from discontinued operations (Note 9)                       |   |   | 367,293    |   |   |   | (1,571,369 | )        |   |   | (292,848 | ) |
| Net loss and comprehensive loss                                           |   | $      | (2,591,852 | )      |   | $      | (3,882,843 | )        |   | $ | (925,040 | ) |
|                                                                      |   |   |       |   |   |   |       |     |   |   |   |   |
| Earning (loss) per share                                                  |   |   |       |   |   |   |       |     |   |   |   |   |
| Loss per share from continued operations - basic and diluted              |   | $      | (0.24      | )      |   | $      | (0.22      | )        |   | $ | (0.11 | ) |
| Earning (loss) per share from discontinued operations - basic and diluted |   | $      | 0.03       |   |   | $      | (0.15      | )        |   | $ | (0.05 | ) |
|                                                                      |   |   |       |   |   |   |       |     |   |   |   |   |
| Weighted average number of common shares outstanding                      |   |   |       |   |   |   |       |     |   |   |   |   |
| Basic and diluted                                                         |   |   | 12,460,930 |   |   |   | 10,426,861 |     |   |   | 5,655,792 |   |

----

| Years Ended December 31,                             | 2009   |       |    | 2008   |   |       | 2007     |   |
|------------------------------------------------------|--------|------------|---------|--------|--------|------------|----------|--------|
|                                                 |   |       |    |   |   |       | Restated |   |
|                                                 |   |       |    |   |   |       | (Note 9) |   |
| Cash provided by (used in)                           |   |       |    |   |   |       |     |   |
| Operations                                           |   |       |    |   |   |       |     |   |
| Loss from continuing operations                      | $      | (2,959,145 | )       |   | $      | (2,311,474 | )        |   | $ | (632,192 | ) |
| Items not affecting cash                             |   |       |    |   |   |       |     |   |   |   |   |
| Amortization of property and equipment               |   | 14,446     |    |   |   | 21,243     |     |   |   | 13,465 |   |
| Amortization of publishing development costs         |   | 1,485,111  |    |   |   | 128,478    |     |   |   | 99,805 |   |
| Stock-based compensation                             |   | 359,004    |    |   |   | 252,792    |     |   |   | 156,395 |   |
| Inventory write-off                                  |   | -          |    |   |   | 15,618     |     |   |   | - |   |
| Investment and advances write-off                    |   | -          |    |   |   | 182,520    |     |   |   | - |   |
| Deferred costs write-off                             |   | -          |    |   |   | 157,419    |     |   |   | - |   |
| Development cost write down                          |   | -          |    |   |   | 27,915     |     |   |   | 28,184 |   |
| Net changes in non-cash working capital              |   |       |    |   |   |       |     |   |   |   |   |
| Accounts and grants receivable                       |   | 72,972     |    |   |   | 315,633    |     |   |   | (431,872 | ) |
| Inventory                                            |   | -          |    |   |   | 327        |     |   |   | 418 |   |
| Prepaid and sundry assets                            |   | 83,207     |    |   |   | (70,530    | )        |   |   | 29,606 |   |
| Accounts payable                                     |   | 48,569     |    |   |   | (158,933   | )        |   |   | (315,271 | ) |
| Accrued liabilities and other                        |   | 87,732     |    |   |   | 198,793    |     |   |   | (25,904 | ) |
| Cash used in continuing operating activities         |   | (808,104   | )       |   |   | (1,240,199 | )        |   |   | (1,077,366 | ) |
|                                                 |   |       |    |   |   |       |     |   |   |   |   |
| Cash provided by (used in) discontinued operations   |   | (332,700   | )  |   |   | 10,657     |     |   |   | (77,294 | )  |
|                                                 |   |       |    |   |   |       |     |   |   |   |   |
| Investing                                            |   |       |    |   |   |       |     |   |   |   |   |
| Cash acquired on acquisition of Speak2Me             |   | -          |    |   |   | -          |     |   |   | 1,508,521 |   |
| Expenditures on software & web development costs |   | (922,232   | )       |   |   | (895,262   | )        |   |   | (389,129 | ) |
| Purchase of property and equipment                   |   | (22,958    | )       |   |   | (12,938    | )        |   |   | (23,079 | ) |
|                                                 |   | (945,190   | )       |   |   | (908,200   | )        |   |   | 1,096,313 |   |
| Financing                                            |   |       |    |   |   |       |     |   |   |   |   |
| Increase (decrease) in bank loans                    |   | -          |    |   |   | -          |     |   |   | (135,000 | ) |
| Advances (repayment) of loans payable                |   | -          |    |   |   | (431,705   | )        |   |   | 84,164 |   |
| Issuance of capital stock                            |   | 7,508      |    |   |   | 5,198,659  |     |   |   | 775,000 |   |
| Decrease in advances from shareholders               |   | -          |    |   |   | -          |     |   |   | (319,836 | ) |
| Share issue costs                                    |   | -          |    |   |   | (726,402   | )        |   |   | (63,750 | ) |
|                                                 |   | 7,508      |    |   |   | 4,040,552  |     |   |   | 340,578 |   |
| Net change in cash and cash equivalents              |   | (2,078,486 | )       |   |   | 1,902,810  |     |   |   | 282,231 |   |
| Cash and cash equivalents, beginning of year         |   | 2,279,937  |    |   |   | 377,127    |     |   |   | 94,896 |   |
| Cash and cash equivalents, end of year               | $      | 201,451    |    |   | $      | 2,279,937  |     |   | $ | 377,127 |   |

----

| 1. | NATURE OF OPERATIONS |
|----|----------------------|

| 2. | SIGNIFICANT ACCOUNTING POLICIES |
|----|---------------------------------|

----

| 2. | SIGNIFICANT ACCOUNTING POLICIES (Cont'd) |
|----|------------------------------------------|

|                          | Method            |   | Rate |
|-------------------------------|-------------------|--------|------|
| Computer and office equipment | declining balance |   | 20 % |

----

| 2. | SIGNIFICANT ACCOUNTING POLICIES (Cont'd) |
|----|------------------------------------------|

----

| 2. | SIGNIFICANT ACCOUNTING POLICIES (Cont'd) |
|----|------------------------------------------|

----

| 2. | SIGNIFICANT ACCOUNTING POLICIES (Cont'd) |
|----|------------------------------------------|

----

| 2. | SIGNIFICANT ACCOUNTING POLICIES (Cont'd) |
|----|------------------------------------------|

| Financial Instrument           | Classification        |
|--------------------------------|-----------------------|
| Cash and cash equivalents      | Held for trading      |
| Accounts and grants receivable | Loans and receivables |
| Accounts payable               | Other liabilities     |
| Accrued liabilities            | Other liabilities     |

| 3. | CHANGE IN ACCOUNTING POLICIES |
|----|-------------------------------|

|   | (a) | Effective January 1, 2009, the Company adopted CICA Handbook Section 3064, Goodwill and Intangible Assets, replaces Section 3062, Goodwill and Other Intangible Assets and Section 3450, Research and Development Costs. Section 3064 establishes standards for the recognition, measurement, presentation and disclosure of goodwill subsequent to its initial recognition and of intangible assets. This section also addresses when an internally developed intangible asset meets the criteria for recognition as an asset. The adoption of this standard had no impact on the Company's financial statements. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | In January 2009, the Emerging Issues Committee of the CICA issued EIC 173, Credit Risk and the Fair Value of Financial Assets and Financial Liabilities, which applies to interim and annual financial statements for periods ending on or after date of its issuance. The adoption of this standard had no impact on the Company’s presentation of its financial position or results of operations as at December 31, 2009. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (c) | In June 2009, the CICA issued an amendment to Handbook Section 3862 to provide improvements to fair value and liquidity risk disclosures. The amendment applies to the Company's fiscal year ending December 31, 2009. This adoption resulted in additional disclosure as provided in note 16 to these consolidated financial statements. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (a) | In February 2008, the Canadian Accounting Standards Board confirmed that publicly accountable entities will be required to adopt International Financial Reporting Standards (“IFRS”). The Company must prepare its interim and annual financial statements in accordance with IFRS for periods beginning on January 1, 2011.  The Company has developed a plan to convert its consolidated financial statements to IFRS. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 3. | CHANGE IN ACCOUNTING POLICIES (Cont'd) |
|----|----------------------------------------|

|   | (b) | In January 2009, the CICA has recently issued CICA Handbook Section 1582, Business Combinations, Section 1601, Consolidated Financial Statements, and Section 1602, Non Controlling Interests.  These new sections replace the currently existing standards in CICA Handbook Section 1581, Business Combinations, and Section 1600, Consolidated Financial Statements.  These new standards are effective for fiscal periods beginning on or after January 1, 2011, however, early adoption is permitted.  Once adopted, these standards will be harmonized with international financial reporting standards. Section 1582 amends the standards for measurement, presentation and disclosure of a business combination.  A number of changes are specified, including an expanded definition of a business, a requirement to measure all business acquisitions at fair value, a requirement to measure non controlling interests at fair value, and a requirement to recognize acquisition related costs as expenses. These standards will require a change in the measurement and presentation of non controlling interest.  As a result of these changes, net earnings will include 100% of the subsidiary’s results and non controlling interest will be presented as part of shareholders’ equity on the balance sheet. The Company is currently assessing the impact of these new accounting standards on its financial statements. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4. | ACCOUNTS AND GRANTS RECEIVABLE |
|----|--------------------------------|

|                        |   | 2009   |    |   | 2008   |   |
|-----------------------------|--------|--------|---------|--------|--------|--------|
| Trade receivables           |   | $      | 569,571 |   |   | $      | 615,501 |   |
| Grants receivable (Note 12) |   |   | -       |   |   |   | 27,042 |   |
|                        |   | $      | 569,571 |   |   | $      | 642,543 |   |

| 5. | INVESTMENT AND ADVANCES |
|----|-------------------------|

----

| 6. | PROPERTY AND EQUIPMENT |
|----|------------------------|

|                     |   | 2009   |     |   | 2008   |   |
|--------------------------|--------|--------|----------|--------|--------|--------|
| Cost                     |   | $      | 225,710  |   |   | $      | 200,879 |   |
| Accumulated amortization |   |   | (152,359 | )      |   |   | (136,040 | ) |
| Net carrying value       |   | $      | 73,351   |   |   | $      | 64,839 |   |

| 7. | PUBLISHING DEVELOPMENT COSTS |
|----|------------------------------|

|                           |   | 2009   |       |   | 2008   |   |
|--------------------------------|--------|--------|------------|--------|--------|--------|
| Cost                           |   | $      | 1,301,220  |   |   | $      | 1,431,567 |   |
| Less: Accumulated amortization |   |   | (1,277,202 | )      |   |   | (1,320,050 | ) |
|                           |   | $      | 24,018     |   |   | $      | 111,517 |   |

| 8. | SOFTWARE AND WEB DEVELOPMENT COSTS |
|----|------------------------------------|

|                           |   | 2009   |       |   | 2008   |   |
|--------------------------------|--------|--------|------------|--------|--------|--------|
| Cost                           |   | $      | 6,153,543  |   |   | $      | 5,233,187 |   |
| Less: Accumulated amortization |   |   | (1,395,736 | )      |   |   | - |   |
|                           |   | $      | 4,757,807  |   |   | $      | 5,233,187 |   |

----

| 9. | DISCONTINUED OPERATIONS |
|----|-------------------------|

|                                           |   | 2009   |   |   | 2008   |   |
|------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Current assets of discontinued operations      |   |   |   |   |   |   |
| Cash and short term investment                 |   | $      | -      |   |   | $      | 34,608 |   |
| Current liabilities of discontinued operations |   |   |   |   |   |   |   |   |
| Accounts payable                               |   | $      | -      |   |   | $      | 653,615 |   |
| Bank loan                                      |   |   | -      |   |   |   | 80,986 |   |
|                                           |   | $      | -      |   |   | $      | 734,601 |   |

----

| 9. | DISCONTINUED OPERATIONS (Cont'd) |
|----|----------------------------------|

|                                       |   | 2009   |    |   | 2008   |   |       | 2007   |   |
|--------------------------------------------|--------|--------|---------|--------|--------|--------|------------|--------|--------|
| Operating revenue                          |   | $      | -       |   |   | $      | 2,575,559  |   |   | $ | 3,124,731 |   |
| Recovery (expenses)                        |   |   | 367,293 |   |   |   | (3,025,797 | )      |   |   | (3,417,579 | ) |
| Write-off of goodwill                      |   |   | -       |   |   |   | (1,121,131 | )      |   |   | - |   |
| Income (loss) from discontinued operations |   | $      | 367,293 |   |   | $      | (1,571,369 | )      |   | $ | (292,848 | ) |

| 10. | CAPITAL STOCK, WARRANTS AND STOCK OPTIONS |
|-----|-------------------------------------------|

|                       |   | Number |       |   | Amount |   |
|----------------------------|--------|--------|------------|--------|--------|--------|
| Balance, January 1, 2008   |   |   | 9,582,262  |   |   | $      | 10,174,453 |   |
| Issued:                    |   |   |       |   |   |   |   |   |
| Private placement (i)      |   |   | 2,857,143  |   |   |   | 4,718,645 |   |
| Options exercised          |   |   | 18,202     |   |   |   | 38,821 |   |
| Less: Share issue costs    |   |   | -          |   |   |   | (726,404 | ) |
| Balance, December 31, 2008 |   |   | 12,457,607 |   |   | $      | 14,205,515 |   |
| Issued:                    |   |   |       |   |   |   |   |   |
| Options exercised          |   |   | 8,250      |   |   |   | 14,677 |   |
| Balance, December 31, 2009 |   |   | 12,465,857 |   |   | $      | 14,220,192 |   |

----

| 10. | CAPITAL STOCK, WARRANTS AND STOCK OPTIONS (Cont'd) |
|-----|----------------------------------------------------|

|   | (i) | On October 15, 2008, the shareholders approved a $5 million investment from Orascom Telecom Holding S.A.E. ("Orascom Telecom") by issuing 2,857,143 units. Each unit consists of one common share (“Common Share”) and three-quarters (0.75) of one warrant (“Warrant”).  Each whole Warrant is exercisable to acquire one further Common Share for a period of 24 months from September 15, 2008 (the "Closing Date"): (I) at a price of $4.00 for a period of 12-months from the Closing Date, (II) at a price of $6.00 per Common Share if exercised between 12-18 months from the Closing Date, and (III) at a price of $8.00 per Common Share if exercised between 18-24 months from the Closing Date. The Warrants are callable, 120 days after the Closing Date, at the option of Lingo Media, in the event the Common Shares of the Company trade at or over 50% above the strike price of the Warrant for 10 consecutive trading days.  The value attributable to the warrants in the amount of $281,355 has been allocated to warrants.  All securities issued pursuant to the Offering are subject to a four-month hold period from the Closing Date. In connection with the financing, the Company agreed to pay cash finders' fees in the aggregate of $437,500 in respect of the gross proceeds and to issue an aggregate of 171,428 non-transferable compensation warrants.  Each compensation warrant entitles the holder to purchase one common share at an exercise price of $2.00 per share for a period of 12-months from the Closing Date.  The value attributable to the compensation warrants in the amount of $91,028 has been allocated to warrants. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                 |   | Number |      |   | Amount |   |     | WeightedAvg. Price |   |   | WeightedAvg. Life |   |
|----------------------------------------------------------------------|--------|--------|-----------|--------|--------|--------|----------|--------------------|--------|--------|-------------------|--------|
| Balance, January 1, 2008                                             |   |   | 387,500   |   |   | $      | 161,254  |               |   | $      | 6.00              |   |   |   | 1.0 |   |
| Issued:                                                              |   |   |      |   |   |   |     |               |   |   |              |   |   |   |   |   |
| Warrants issued with private placement (Note 10(a)(i))               |   |   | 2,142,858 |   |   |   | 281,355  |               |   |   | 6.00              |   |   |   | 0.7 |   |
| Warrants issued in relation to private placement (Note 10(a)(i))     |   |   | 171,428   |   |   |   | 91,028   |               |   |   | 2.00              |   |   |   | 1.0 |   |
| Less: Expired warrants issued with private placement                 |   |   | (387,500  | )      |   |   | (161,254 | )                  |   |   | 6.00              |   |   |   | 1.0 |   |
| Balance, December 31, 2008                                           |   |   | 2,314,286 |   |   | $      | 372,383  |               |   | $      | 4.00              |   |   |   | 1.9 |   |
| Less: Expired warrants issued with private placement (Note 10(a)(i)) |   |   | (171,428  | )      |   |   | (91,028  | )                  |   |   | 2.00              |   |   |   | 1.0 |   |
| Balance, December 31, 2009                                           |   |   | 2,142,858 |   |   | $      | 281,355  |               |   | $      | 6.00              |   |   |   | 0.7 |   |

----

| 10. | CAPITAL STOCK, WARRANTS AND STOCK OPTIONS (Cont'd) |
|-----|----------------------------------------------------|

|                       |   | Total  |      |
|----------------------------|--------|--------|-----------|
| Balance, December 31, 2007 |   | $      | 452,411   |   |
| Stock-based compensation   |   |   | 252,791   |   |
| Options exercised          |   |   | (18,688   | ) |
| Warrants expired           |   |   | 161,254   |   |
| Balance, December 31, 2008 |   | $      | 847,768   |   |
| Stock-based compensation   |   |   | 359,004   |   |
| Options exercised          |   |   | (7,169    | ) |
| Warrants expired           |   |   | 91,028    |   |
| Balance, December 31, 2009 |   | $      | 1,290,631 |   |

----

| 10. | CAPITAL STOCK, WARRANTS AND STOCK OPTIONS (Cont'd) |
|-----|----------------------------------------------------|

|                                   |   | 2009            |     |   | 2008                         |   |
|----------------------------------------|--------|-----------------|----------|--------|------------------------------|--------|
|                                   |   | NumberofOptions |     |   | WeightedAverageExercisePrice |   |   | NumberofOptions |   |   | WeightedAverageExercisePrice |   |
| Options outstanding, beginning of year |   |            | 633,120  |   |                         | $      | 1.04 |   |   |   | 516,738 |   |   | $ | 0.98 |   |
| Options granted                        |   |            | 597,250  |   |                         |   | 1.75 |   |   |   | 290,000 |   |   |   | 1.21 |   |
| Options exercised                      |   |            | (8,250   | )      |                         |   | 0.91 |   |   |   | (18,202 | ) |   |   | 1.11 |   |
| Options expired                        |   |            | (202,179 | )      |                         |   | 1.62 |   |   |   | (155,416 | ) |   |   | 1.13 |   |
| Options forfeited                      |   |            | (105,835 | )      |                         |   | 1.75 |   |   |   | - |   |   |   | - |   |
| Options outstanding, end of year       |   |            | 914,106  |   |                         | $      | 1.30 |   |   |   | 633,120 |   |   | $ | 1.04 |   |
| Options exercisable, end of year       |   |            | 657,606  |   |                         | $      | 1.12 |   |   |   | 502,287 |   |   | $ | 0.99 |   |

|                              |         |   |   |              |    |   |   | Options Outstanding                           |   |   |   | Options Exercisable                |   |
|-----------------------------------|--------------|--------|--------|-------------------|---------|--------|--------|-----------------------------------------------|--------|--------|--------|------------------------------------|--------|
| RangeofExercisePrices   |         |   |   | NumberOutstanding |    |   |   | WeightedAverageRemainingContractualLife  |   |   |   | WeightedAverageExercisePrice  |   |   |   | NumberOutstanding  |   |   |   | WeightedAverageExercisePrice |   |
| $                                 | 0.70 - $1.00 |   |   |              | 333,999 |   |   |                                          | 2.40   |   |   | $                                  | 0.72   |   |   |   | 333,999 |   |   | $ | 0.72 |   |
| $                                 | 1.01 - $1.33 |   |   |              | 147,857 |   |   |                                          | 1.73   |   |   |                               | 1.25   |   |   |   | 147,857 |   |   |   | 1.25 |   |
| $                                 | 1.34 - $2.00 |   |   |              | 432,250 |   |   |                                          | 4.15   |   |   |                               | 1.75   |   |   |   | 175,750 |   |   |   | 1.75 |   |
| Total                             |         |   |   | 914,106           |    |   |   | 3.12                                          |   |   | $      | 1.30                               |   |   |   | 657,606 |   |   | $ | 1.12 |   |

----

| 11. | INCOME TAXES |
|-----|--------------|

|                                                                                      |   | 2009   |     |   | 2008   |   |     | 2007   |   |
|-------------------------------------------------------------------------------------------|--------|--------|----------|--------|--------|--------|----------|--------|--------|
| Combined basic Canadian federal and provincial income tax rate                            |   |   | 31 .00   | %      |   |   | 33.50    | %      |   |   | 36.12 | % |
| Effective income tax recovery on loss from continuing operations before income taxes      |   | $      | (917,200 | )      |   | $      | (725,763 | )      |   | $ | (182,378 | ) |
| Increase (decrease) resulting from change in the valuation allowance                      |   |   | 118,265  |   |   |   | 14,309   |   |   |   | (555,893 | ) |
| Effect of reduced income taxes in foreign jurisdiction and subsidiary with lower tax rate |   |   | -        |   |   |   | 76,000   |   |   |   | 220,387 |   |
| Withholding tax on sales to China                                                         |   |   | 179,751  |   |   |   | 145,018  |   |   |   | 127,267 |   |
| Non-deductible items                                                                      |   |   | 128,165  |   |   |   | 298,161  |   |   |   | 56,490 |   |
| Expiration of non-capital losses                                                          |   |   | 93,120   |   |   |   | -        |   |   |   | - |   |
| Change in enacted rates                                                                   |   |   | 367,791  |   |   |   | 57,438   |   |   |   | 121,222 |   |
| Change in prior year estimates                                                            |   |   | 209,859  |   |   |   | 464,105  |   |   |   | 364,277 |   |
| Share issue cost and other                                                                |   |   | -        |   |   |   | (184,250 | )      |   |   | (24,105 | ) |
|                                                                                      |   | $      | 179,751  |   |   | $      | 145,018  |   |   | $ | 127,267 |   |

|                                |   | 2009   |       |   | 2008   |   |
|-------------------------------------|--------|--------|------------|--------|--------|--------|
| Future tax assets:                  |   |   |       |   |   |   |
| Operating loss carry forwards       |   | $      | 2,193,075  |   |   | $      | 2,223,329 |   |
| Share issue costs                   |   |   | 101,681    |   |   |   | 186,235 |   |
|                                |   |   | 2,294,756  |   |   |   | 2,409,564 |   |
| Valuation allowance                 |   |   | (1,672,220 | )      |   |   | (2,006,309 | ) |
| Future tax assets recognized        |   |   | 622,536    |   |   |   | 403,255 |   |
| Software and web development costs  |   |   | (1,195,456 | )      |   |   | (932,362 | ) |
| Property and equipment              |   |   | 7,923      |   |   |   | (35,890 | ) |
| Net future tax assets (liabilities) |   | $      | (564,997   | )      |   | $      | (564,997 | ) |

----

| 11. | INCOME TAXES (Cont'd) |
|-----|-----------------------|

| 2010   |   | $      | 897,681   |   |
|--------|--------|--------|-----------|--------|
| 2014   |   |   | 707,084   |   |
| 2015   |   |   | 767,114   |   |
| 2026   |   |   | 1,189,664 |   |
| 2027   |   |   | 1,067,640 |   |
| 2028   |   |   | 2,170,269 |   |
| 2029   |   |   | 1,972,846 |   |
|   |   | $      | 8,772,298 |   |

| 12. | GOVERNMENT GRANTS |
|-----|-------------------|

| 13. | FOREIGN EXCHANGE GAIN OR LOSS |
|-----|-------------------------------|

| 14. | RELATED PARTY BALANCES AND TRANSACTIONS |
|-----|-----------------------------------------|

----

| 14. | RELATED PARTY BALANCES AND TRANSACTIONS (Cont'd) |
|-----|--------------------------------------------------|

|   | (a) | In 2008, the Company had loans payable due to a corporation controlled by one of its directors bearing interest at 12% per annum.  The Company received $60,000 (2007 - $387,000) and repaid $277,000 (2007 - $310,000) of these loans in 2008.  Interest expense related to these loans for 2008 is $18,490 (2007 - $62,137).  At December 31, 2008, $9,344 (2007 - $217,000) was due to those corporations. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | During the year, the Company charged $98,734 (2008 - $41,913, 2007 - $68,900) to a corporation with one director in common for rent, administration, office charges and telecommunications.   At December 31, 2009, $8,636 overpayment is recorded as part of accrued liabilities (2008 - $5,888 was in accounts receivable). |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (c) | During the year, the Company paid $52,371 (2008 - $218,075, 2007 - $NIL) in legal fees to a law firm in which a director of the Company is a partner.  These fees are included in general and administrative expense and share issuance cost within share capital.  At December 31, 2009, $45,422 is recorded as part of accrued liabilities (2008 - $NIL) |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (d) | During the year, the Company paid $180,000 (2008 - $180,000, 2007 - $120,000) for consulting fees to a corporation owned by a director and officer of the Company. At December 31, 2009, $23,913 is recorded as part of accrued liabilities (2008 - $NIL). |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 15. | CAPITAL RISK MANAGEMENT |
|-----|-------------------------|

| 16. | FINANCIAL INSTRUMENTS AND RISK MANAGEMENT |
|-----|-------------------------------------------|

|   |  (a) | Currency risk: |
|--------|-----------|----------------|

----

| 16. | FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (cont'd) |
|-----|----------------------------------------------------|

|   | (b) | Financial Instruments: |
|--------|-----|------------------------|

|                |   | US Denominated |   |   | China Denominated |   |   | Taiwan Denominated |   |
|---------------------|--------|----------------|--------|--------|-------------------|--------|--------|--------------------|--------|
|                |   | CAD            |   |   | USD               |   |   | CAD                |   |   | RMB |   |   | CAD |   |   | NTW |   |
| Cash                |   |           | 75,887 |   |              |   | 72,204 |               |   |   | 10,160 |   |   |   | 66,279 |   |   |   | 8,208 |   |   |   | 250,856 |   |
| Accounts receivable |   |           | -      |   |              |   | -      |               |   |   | 569,571 |   |   |   | 4,088,957 |   |   |   | - |   |   |   | - |   |
| Accounts payable    |   |           | 56,715 |   |              |   | 53,963 |               |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |

|   | (c) | Fair market values: |
|--------|-----|---------------------|

|   | (d) | Concentration of risk: |
|--------|-----|------------------------|

|   |  (e) | Liquidity risk: |
|--------|-----------|-----------------|

| 17. | ECONOMIC DEPENDENCE |
|-----|---------------------|

----

| 18. | SEGMENTED INFORMATION |
|-----|-----------------------|

|                                  |   | OnlineEnglishLanguageLearning |       |   | EnglishLanguageLearning |   |      | Total  |   |
|---------------------------------------|--------|-------------------------------|------------|--------|-------------------------|--------|-----------|--------|--------|
| Revenue                               |   |                          | 370,702    |   |                    |   | 1,095,994 |   |   |   | 1,466,696 |   |
| Cost of sales                         |   |                          | 70,429     |   |                    |   | 74,565    |   |   |   | 144,994 |   |
| Margin                                |   |                          | 300,273    |   |                    |   | 1,021,429 |   |   |   | 1,321,702 |   |
| Acquisition of property and equipment |   |                          | 11,117     |   |                    |   | 11,841    |   |   |   | 22,958 |   |
| Segment assets                        |   |                          | 5,010,667  |   |                    |   | 692,485   |   |   |   | 5,703,152 |   |
| Segment income (loss)                 |   |                          | (3,089,789 | )      |                    |   | 130,644   |   |   |   | (2,959,145 | ) |

|   |   | 2009   |      |   | 2008   |   |    | 2007   |   |
|--------|--------|--------|-----------|--------|--------|--------|---------|--------|--------|
| Canada |   | $      | -         |   |   | $      | 1,220   |   |   | $ | 1,920 |   |
| China  |   |   | 1,466,696 |   |   |   | 967,908 |   |   |   | 877,706 |   |
|   |   | $      | 1,466,696 |   |   | $      | 969,128 |   |   | $ | 879,626 |   |

|   |   | 2009   |      |   | 2008   |   |
|--------|--------|--------|-----------|--------|--------|--------|
| China  |   | $      | 18,368    |   |   | $      | 227,827 |   |
| Canada |   |   | 5,684,784 |   |   |   | 8,298,965 |   |
|   |   | $      | 5,703,152 |   |   | $      | 8,526,792 |   |

----

| 19. | COMMITMENTS AND CONTINGENCY |
|-----|-----------------------------|

| 2010 |   | $ | 199,034 |   |
|------|--------|---|---------|--------|
| 2011 |   | $ | 39,736  |   |
| 2012 |   | $ | 7,572   |   |

| 20. | RECONCILIATION OF CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES |
|-----|---------------------------------------------------------------------------------------|

|                                      |   |  2009          |        |   |  2008       |   |
|-------------------------------------------|--------|---------------------|-------------|--------|------------------|--------|
|                                      |   | BalanceCanadianGAAP |        |   |  Adjustment |   |   | BalanceUSGAAP |   |   | BalanceCanadianGAAP |   |   |  Adjustment |   |   | BalanceUSGAAP |   |
| Current assets                            |   |                | 847,976     |   |             |   | - |   |   |   | 847,976 |   |   |   | 3,117,249 |   |   |   | - |   |   |   | 3,117,249 |   |
| Property and equipment, net               |   |                | 73,351      |   |             |   | - |   |   |   | 73,351 |   |   |   | 64,839 |   |   |   | - |   |   |   | 64,839 |   |
| Publishing development costs, net         |   |                | 24,018      |   |             |   | (24,018 | ) |   |   | - |   |   |   | 111,517 |   |   |   | (111,517 | ) |   |   | - |   |
| Software & web development costs, net |   |                | 4,757,807   |   |             |   | (4,757,807 | ) |   |   | - |   |   |   | 5,233,187 |   |   |   | (5,233,187 | ) |   |   | - |   |
|                                      |   |                | 5,703,152   |   |             |   | (4,781,825 | ) |   |   | 921,327 |   |   |   | 8,526,792 |   |   |   | (5,344,704 | ) |   |   | 3,182,088 |   |
| Current liabilities                       |   |                | 723,113     |   |             |   | - |   |   |   | 723,113 |   |   |   | 1,321,413 |   |   |   | - |   |   |   | 1,321,413 |   |
| Future income taxes                       |   |                | 564,997     |   |             |   | - |   |   |   | 564,997 |   |   |   | 564,997 |   |   |   | - |   |   |   | 564,997 |   |
|                                      |   |                | 1,288,110   |   |             |   | - |   |   |   | 1,288,110 |   |   |   | 1,886,410 |   |   |   | - |   |   |   | 1,886,410 |   |
| Common shares                             |   |                | 14,220,192  |   |             |   | - |   |   |   | 14,220,192 |   |   |   | 14,205,515 |   |   |   | - |   |   |   | 14,205,515 |   |
| Warrants                                  |   |                | 281,355     |   |             |   | - |   |   |   | 281,355 |   |   |   | 372,383 |   |   |   | - |   |   |   | 372,383 |   |
| Contributed surplus                       |   |                | 1,290,631   |   |             |   | 243,250 |   |   |   | 1,533,881 |   |   |   | 847,768 |   |   |   | 243,250 |   |   |   | 1,091,018 |   |
| Deficit                                   |   |                | (11,377,136 | )      |             |   | (5,025,075 | ) |   |   | (16,402,211 | ) |   |   | (8,785,284 | ) |   |   | (5,587,954 | ) |   |   | (14,373,238 | ) |
|                                      |   |                | 5,703,152   |   |             |   | (4,781,825 | ) |   |   | 921,327 |   |   |   | 8,526,792 |   |   |   | (5,344,704 | ) |   |   | 3,182,088 |   |

----

| 20. | RECONCILIATION OF CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Cont'd) |
|-----|------------------------------------------------------------------------------------------------|

|                                                                             |   | 2009   |       |   | 2008   |   |       | 2007   |   |
|----------------------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|------------|--------|--------|
| Loss from continuing operations - Canadian GAAP                                  |   | $      | (2,959,145 | )      |   | $      | (2,311,474 | )      |   | $ | (632,192 | ) |
| Impact of US GAAP and adjustments:                                               |   |   |       |   |   |   |       |   |   |   |   |   |
| Amortization of publishing development costs (a)                                 |   |   | 89,375     |   |   |   | 128,478    |   |   |   | 99,805 |   |
| Amortization of software and web development (c)                                 |   |   | 1,395,736  |   |   |   | -          |   |   |   | - |   |
| Publishing development cost write-off (a)                                        |   |   | -          |   |   |   | (218,795   | )      |   |   | - |   |
| Deferred cost write-off (b)                                                      |   |   | -          |   |   |   | 157,419    |   |   |   | - |   |
| Software and web development cost write-off (c)                                  |   |   | (922,232   | )      |   |   | (880,846   | )      |   |   | (452,709 | ) |
| Loss from continuing operations - United States GAAP                             |   |   | (2,396,266 | )      |   |   | (3,125,218 | )      |   |   | (985,096 | ) |
| Restatement(a,c)                                                                 |   |   | -          |   |   |   | -          |   |   |   | (3,899,632 | ) |
| Restated loss from continuing operations - United States GAAP                    |   |   | (2,396,266 | )      |   |   | (3,125,218 | )      |   |   | (4,884,728 | ) |
| Net income (loss) from discontinued operations - United States GAAP              |   |   | 367,293    |   |   |   | (1,571,369 | )      |   |   | (292,848 | ) |
| Net loss and comprehensive loss - United States GAAP                             |   | $      | (2,028,973 | )      |   | $      | (4,696,587 | )      |   | $ | (5,177,576 | ) |
| Basic and diluted loss per share from continuing operations - United States GAAP |   | $      | (0.19      | )      |   | $      | (0.30      | )      |   | $ | (0.86 | ) |
| Basic and diluted loss per share - United States GAAP                            |   | $      | (0.16      | )      |   | $      | (0.45      | )      |   | $ | (0.92 | ) |

----

| 20. | RECONCILIATION OF CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Cont'd) |
|-----|------------------------------------------------------------------------------------------------|

|                                                                 |   | 2009   |       |   | 2008   |   |       | 2007   |   |
|----------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|------------|--------|--------|
| Cash used in operating activities - Canadian GAAP                    |   | $      | (808,104   | )      |   | $      | (1,240,199 | )      |   | $ | (1,077,366 | ) |
| Impact of United States GAAP and adjustments:                        |   |   |       |   |   |   |       |   |   |   |   |   |
| Write-off of software & web development cost                     |   |   | (922,232   | )      |   |   | (880,846   | )      |   |   | (452,709 | ) |
|                                                                 |   | $      | (1,730,336 | )      |   | $      | (2,121,045 | )      |   | $ | (1,530,075 | ) |
|                                                                 |   |   |       |   |   |   |       |   |   |   |   |   |
| Cash (used in) provided by investing activities - Canadian GAAP      |   | $      | (945,190   | )      |   | $      | (908,200   | )      |   | $ | 1,096,313 |   |
| Impact of United States GAAP and adjustments:                        |   |   |       |   |   |   |       |   |   |   |   |   |
| Write-off of software & web development cost                     |   |   | 922,232    |   |   |   | 880,846    |   |   |   | 452,709 |   |
| Cash (used in) provided by investing activities - United States GAAP |   | $      | (22,958    | )      |   | $      | (27,354    | )      |   | $ | 1,549,022 |   |
|                                                                 |   |   |       |   |   |   |       |   |   |   |   |   |
| Cash (used in) provided by discontinued operations:                  |   |   |       |   |   |   |       |   |   |   |   |   |
| Operating activies                                                   |   | $      | (251,714   | )      |   | $      | 159,671    |   |   | $ | 1,104,870 |   |
| Investing activities                                                 |   |   | -          |   |   |   | -          |   |   |   | (1,412,164 | ) |
| Financing activities                                                 |   |   | (80,986    | )      |   |   | (149,014   | )      |   |   | 230,000 |   |
|                                                                 |   | $      | (332,700   | )      |   | $      | 10,657     |   |   | $ | (77,294 | ) |

----

| 20. | RECONCILIATION OF CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Cont'd) |
|-----|------------------------------------------------------------------------------------------------|

|                               |   |  NumberofShares |       |   |  Amount |   |       |  NumberofWarrants |   |   |  Amount |   |   |  Contrib-utedSurplus |     |   |  Deficit |   |      |  Total |   |
|------------------------------------|--------|----------------------|------------|--------|--------------|--------|------------|------------------------|--------|--------|--------------|--------|--------|---------------------------|----------|--------|---------------|--------|-----------|-------------|--------|
| Balance, January 1, 2007           |   |                 | 4,654,025  |   |         | $      | 5,028,656  |                   |   |   | -            |   |   | $                         | -        |   |          | $      | 568,543   |        |   | $ | (4,499,075 | ) |   | $ | 1,098,124 |   |
| Private placement for cash, net    |   |                 | 387,500    |   |         |   | 549,996    |                   |   |   | 387,500      |   |   |                      | 161,254  |   |          |   | -         |        |   |   | - |   |   |   | 711,250 |   |
|  Common share issued for the  |   |                 |       |   |         |   |       |                   |   |   |         |   |   |                      |     |   |          |   |      |        |   |   |   |   |   |   |   |   |
|  acquisition of Speak2Me Inc. |   |                 | 4,500,366  |   |         |   | 4,536,351  |                   |   |   | -            |   |   |                      | -        |   |          |   | -         |        |   |   | - |   |   |   | 4,536,351 |   |
| Options exercised                  |   |                 | 40,371     |   |         |   | 59,450     |                   |   |   | -            |   |   |                      | -        |   |          |   | (29,277   | )           |   |   | - |   |   |   | 30,173 |   |
| Stock-based compensation           |   |                 | -          |   |         |   | -          |                   |   |   | -            |   |   |                      | -        |   |          |   | 156,395   |        |   |   | - |   |   |   | 156,395 |   |
| Net loss for the year              |   |                 | -          |   |         |   | -          |                   |   |   | -            |   |   |                      | -        |   |          |   | -         |        |   |   | (5,177,576 | ) |   |   | (5,177,576 | ) |
| Balance, December 31, 2007         |   |                 | 9,582,262  |   |         |   | 10,174,453 |                   |   |   | 387,500      |   |   |                      | 161,254  |   |          |   | 695,661   |        |   |   | (9,676,651 | ) |   |   | 1,354,717 |   |
| Private placement for cash, net    |   |                 | 2,857,143  |   |         |   | 3,992,241  |                   |   |   | 2,314,286    |   |   |                      | 372,383  |   |          |   | -         |        |   |   | - |   |   |   | 4,364,624 |   |
| Options exercised                  |   |                 | 18,202     |   |         |   | 38,821     |                   |   |   | -            |   |   |                      | -        |   |          |   | (18,688   | )           |   |   | - |   |   |   | 20,133 |   |
| Expired warrants                   |   |                 | -          |   |         |   | -          |                   |   |   | (387,500     | )      |   |                      | (161,254 | )      |          |   | 161,254   |        |   |   | - |   |   |   | - |   |
| Stock-based compensation           |   |                 | -          |   |         |   | -          |                   |   |   | -            |   |   |                      | -        |   |          |   | 252,791   |        |   |   | - |   |   |   | 252,791 |   |
| Net loss for the year              |   |                 | -          |   |         |   | -          |                   |   |   | -            |   |   |                      | -        |   |          |   | -         |        |   |   | (4,696,587 | ) |   |   | (4,696,587 | ) |
| Balance, December 31, 2008         |   |                 | 12,457,607 |   |         |   | 14,205,515 |                   |   |   | 2,314,286    |   |   |                      | 372,383  |   |          |   | 1,091,018 |        |   |   | (14,373,238 | ) |   |   | 1,295,678 |   |
| Options exercised                  |   |                 | 8,250      |   |         |   | 14,677     |                   |   |   | -            |   |   |                      | -        |   |          |   | (7,169    | )           |   |   | - |   |   |   | 7,508 |   |
| Expired warrants                   |   |                 | -          |   |         |   | -          |                   |   |   | (171,428     | )      |   |                      | (91,028  | )      |          |   | 91,028    |        |   |   | - |   |   |   | - |   |
| Stock-based compensation           |   |                 | -          |   |         |   | -          |                   |   |   | -            |   |   |                      | -        |   |          |   | 359,004   |        |   |   | - |   |   |   | 359,004 |   |
| Net loss for the year              |   |                 | -          |   |         |   | -          |                   |   |   | -            |   |   |                      | -        |   |          |   | -         |        |   |   | (2,028,973 | ) |   |   | (2,028,973 | ) |
| Balance, December 31, 2009         |   |                 | 12,465,857 |   |         | $      | 14,220,192 |                   |   |   | 2,142,858    |   |   | $                         | 281,355  |   |          | $      | 1,533,881 |        |   | $ | (16,402,211 | ) |   | $ | (366,783 | ) |

|   | (a) | Publishing development costs: |
|--------|-----|-------------------------------|

|   | (b) | The portion of investment and advances relating to a joint venture recorded under Canadian GAAP as deferred costs and written down during 2008 is added back for United States GAAP as it is already expensed in prior years as incurred. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 20. | RECONCILIATION OF CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Cont'd) |
|-----|------------------------------------------------------------------------------------------------|

|   | (c) | Under Canadian GAAP, the Company capitalized the cost of the Speak2Me acquisition and will begin amortization upon the selling of the products on a straight-ling basis over three years. Under FASB Section No. 141 of the United States GAAP, acquisition costs of the Speak2Me technology are considered acquired in-process research and development. Since as of the acquisition date, the technology acquired requires a substantial amount of development work in order to begin selling as a product hence this cost is expensed in 2007.  The Company failed to expense the acquisition costs for US GAAP purposes in its 2007 financial statement reconciliation of Canadian to US GAAP disclosure and has now restated the reconciliation to reflect the expense. Furthermore, the Company continues to expense any development costs incurred during 2007, 2008 and 2009 for United States GAAP purposes. |
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|   | (d) | Starting January 1, 2002 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. Before January 1, 2002, for the options issued and completely vested the Company did not recognize a compensation expense under Canadian GAAP but recorded a compensation expense under US GAAP for the options issued to consultants. In respect to options issued before January 1, 2002 but vesting in year 2002, the Company records expense under US GAAP but recognized no expenses under Canadian GAAP. |
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|   | (e) | FIN 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109” (“FIN 48”), clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes” (“SFAS 109”). The interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides accounting guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The evaluation of tax positions under FIN 48 is a two-step process, whereby (1) the Company determines whether it is more likely than not that the tax positions will be sustained based on the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the Company would recognize the largest amount of tax benefit that is greater than fifty percent likely of being realized upon ultimate settlement with the related tax authority. The Company has not adopted FIN 48 for Canadian GAAP purposes. Based on the Company’s assessment, the adoption of FIN 48 would not have a significant impact on the Company’s financial statements for purposes of reconciling Canadian GAAP to United States GAAP. |
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|   | (f) | Recently Adopted Accounting Pronouncements |
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|   | (i) | In June 2009, the FASB launched the FASB Accounting Standards Codification, or the Codification, as the single source of authoritative U.S. GAAP recognized by the FASB. The Codification reorganizes various U.S. GAAP pronouncements into accounting topics and displays them using a consistent structure. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. The Codification is effective for interim and annual periods ending after September 15, 2009. The adoption of this standard had no impact on the Company's financial statements. |
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| 20. | RECONCILIATION OF CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Cont'd) |
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|   | (f) | Recently Adopted Accounting Pronouncements (Cont'd) |
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|   | (ii) | ASU2010-06 Fair Value Measurements and Disclosures, the new disclosure requirements regarding inputs and valuation techniques for Level 2 fair value measurements are effective for interim and annual reporting periods beginning after December 15, 2009, and are consistent with IFRS 7 Financial Instruments: Disclosures. The Company uses Level 1 inputs (Quoted prices in active market) for determination of fair value of available-for-sale securities. The Company uses Level 2 inputs (significant observable inputs) to estimate the fair value of incentive stock options when determining compensation expense to be recognized. It is not anticipated that there will be a change in the nature of inputs or in the valuation techniques applied so there will be no material impact on the Company's financial statements. The Company is assessing the required disclosure to prepare for implementation for the first interim period of the fiscal year ending December 31, 2010. |
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|   | (iii) | In April 2008, the FASB issued FAS 142-3, Determination of the Useful Life of Intangible Assets which amends the factors an entity should consider in developing renewal or extension assumptions used in determining the useful life of recognized intangible assets. This new guidance applies prospectively to intangible assets that are acquired individually or with a group of other assets in business combinations and asset acquisitions. The new standard is effective for fiscal years and interim periods beginning after December 15, 2008. The Company adopted the new standard starting on January 1, 2009 and the adoption had no impact on our consolidated financial statements. |
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|   | (iv) | In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements. This statement affects only entities that have an outstanding noncontolling interest in one or more subsidiaries or that deconsolidate a subsidiary. This statement provides guidance on the accounting and reporting for noncontrolling interest in a subsidiary to improve the relevance, comparability, and transparency of the financial information provided by consolidated financial statements. The adoption of this standard had no material impact on the Consolidated Financial Statements. |
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|   | (g) | Recent Accounting Pronouncements |
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|   | (i) | In October 2009, the FASB issued a new accounting standard for revenue recognition for arrangements with multiple deliverables. The new standard impacts the determination of when the individual deliverables included in a multiple-element arrangement may be treated as separate units of accounting. Additionally, the new standard modifies the manner in which the transaction consideration is allocated across the separately identified deliverables by no longer permitting the residual method of allocating arrangement consideration. The new standard is effective for fiscal years beginning on or after June 15, 2010; however, early adoption of this standard is permitted. We have determined that there will be no impact on our consolidated financial statements for existing customer arrangements upon adoption of the new accounting standard. |
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| 20. | RECONCILIATION OF CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Cont'd) |
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|   | (ii) | In October 2009, the FASB issued a new accounting standard for the accounting for certain revenue arrangements that include software elements. The new standard amends the scope of pre-existing software revenue guidance by removing from the guidance non-software components of tangible products and certain software components of tangible products. The new standard is effective for fiscal years beginning on or after June 15, 2010; however, early adoption of this standard is permitted. We have determined that there will be no impact on our consolidated financial statements for existing customer arrangements upon adoption of the new accounting standard. |
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| 21. | SUPPLEMENTAL CASH FLOW INFORMATION |
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|                              |   | 2009 |    |   | 2008   |   |    | 2007   |   |
|-----------------------------------|--------|------|---------|--------|--------|--------|---------|--------|--------|
| Income taxes and other taxes paid |   | $    | 179,751 |   |   | $      | 145,018 |   |   | $ | 127,267 |   |
| Interest paid                     |   | $    | -       |   |   | $      | 95,544  |   |   | $ | 27,077 |   |

|   | (a) | In 2008, warrants were issued in connection with a private placement (see Note 10 (a)(i)) are valued at  $281,357.  This amount has been recorded as an increase in warrants amount charged against share capital. |
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|   | (b) | In 2008, compensation warrants were issued in connection with a private placement (see Note 10(a)(i)) are valued at  $91,025. This amount has been recorded as an increase in warrants amount with a corresponding increase in share issue costs which is charged against share capital |
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|   | (c) | Included in the capital stock is $7,169 (2008 - $18,688) representing the fair value of stock options exercised (see Note 10(c)). |
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|   | (d) | In 2007, 4,500,366 common shares were issued as consideration for the acquisition of Speak2Me Inc. in the amount of $4,536,351.  As at December 31, 2007, this amount is included in capital stock. |
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| 22. | COMPARATIVE FIGURES |
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| 23. | SUBSEQUENT EVENTS |
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