lingo_20f-123107.htm

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.

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.

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.

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.

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.

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.

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.

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.

Other Risk Factors

Consolidated Financial Statements

(Expressed in Canadian dollars)

LINGO MEDIA CORPORATION

December 31, 2007 and 2006

LINGO MEDIA CORPORATION

December 31, 2007 and 2006

(Expressed in Canadian dollars)

CONTENTS


	Page

Statement of Management’s Responsibility	3

Auditors’ Report	4

Consolidated Balance Sheets	6

Consolidated Statements of Deficit	7

Consolidated Statements of Operations	7

Consolidated Statements of Cash Flows	8

Notes to Consolidated Financial Statements	9 to 36

Management’s Responsibility

To the Shareholders of Lingo Media Corporation:

Management is responsible for the preparation and presentation of the accompanying consolidated financial statements, including responsibility for significant accounting judgments and estimates in accordance with Canadian generally accepted accounting principles and ensuring that all information in the Management Discussion & Analysis is consistent with the statements. This responsibility includes selecting appropriate accounting principles and methods, and making decisions affecting the measurement of transactions in which objective judgment is required.

In discharging its responsibilities for the integrity and fairness of the consolidated financial statements, management designs and maintains the necessary accounting systems and related internal controls to provide reasonable assurance that transactions are authorized, assets are safeguarded and financial records are properly maintained to provide reliable information for the preparation of financial statements.

The Board of Directors and the Audit Committee include some Directors who are neither management nor employees of the Company. The Board is responsible for overseeing management in the performance of its financial reporting responsibilities, and for approving the financial information included in the annual report. The Audit Committee has the responsibility of meeting with management and external auditors to discuss -the internal controls over the financial reporting process, auditing matters and financial reporting issues. The Committee is also responsible for recommending the appointment of the Company’s external auditors.

Meyers Norris Penny LLP, an independent firm of Chartered Accountants, is appointed by the shareholders to audit the consolidated financial statements and report directly to them; their report follows. The external auditors have full and free access to, and meet periodically and separately with, both the Audit Committee and management to discuss their audit findings.

April 20, 2008

/s/ “Michael Kraft” Signed

Chief Executive Officer

/s/ “Khurram Qureshi” Signed

Chief Financial Officer

To the Shareholders of Lingo Media Corporation:

We have audited the consolidated balance sheet of Lingo Media Corporation as at December 31, 2007, and the consolidated statements of operations, deficit and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with the Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). These standards require that we plan and perform an audit to obtain reasonable assurance whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2007, and the results of its operations and its cash flows for the year then ended in accordance with Canadian generally accepted accounting principles.

The consolidated financial statements as at and for the years ended December 31, 2006 and 2005 were audited by other auditors who expressed an opinion without reservation on those consolidated financial statements in their report dated May 4, 2007.

MEYERS NORRIS PENNY LLP

Independent Registered Chartered Accountants


/s/ Meyers Norris Penny LLP.
Calgary, Alberta
April 20, 2008

April 20, 2008

Independent Registered Chartered Accountants

Comments by Independent Registered Chartered Accountants on Canada – United States of America Reporting Differences:

The standards of the Public Company Accounting Oversight Board (United States) require the addition of explanatory paragraphs (following the opinion paragraph) when the financial statements are affected by conditions and events that cast substantial doubt on the Company’s ability to continue as a going concern, such as those described in Note 1 to the financial statements. Our report to the shareholders dated April 20, 2008 is expressed in accordance with Canadian reporting standards, which do not require a reference to such conditions and events in the report of the independent registered chartered accountants when these are properly accounted for and adequately disclosed in the financial statements.

MEYERS NORRIS PENNY LLP

Independent Registered Chartered Accountants


/s/ Meyers Norris Penny LLP.
Calgary, Alberta
April 20, 2008

LINGO MEDIA CORPORATION

Consolidated Balance Sheets

(Expressed in Canadian dollars)

As at December 31	2007			2006

Assets
Current assets:
Cash	$	343,338		$	73,169
Short term investment		150,000			150,000
Accounts and grants receivable (note 3)		1,110,151			304,924
Inventory		121,323			154,276
Prepaid and sundry assets		131,869			130,573
		1,856,681			812,942

Investment and advances (note 4)		182,520			182,520
Deferred costs (note 4)		157,419			157,419
Property and equipment, net (note 5)		89,325			77,304
Development costs, net (note 6)		267,910			343,308
Software and web development costs, net (note 7)		4,212,564			-
Future income taxes (note 12)		-			189,534
Goodwill (note 8)		1,121,131			1,121,131
	$	7,887,550		$	2,884,158

Liabilities and Shareholders' Equity
Current liabilities:
Bank loans (note 9)	$	230,000		$	485,000
Accounts payable (note 15)		822,818			526,491
Accrued liabilities		227,206			148,578
Less current portion of long term debt (note 10)		228,674			-
		1,508,698			1,160,069

Loans payable (note 10)		203,031			347,541
Future income taxes (note 12)		290,145			-
		2,001,873			1,507,610

Shareholders' equity:
Capital stock (note 11)		10,335,707			5,028,656
Contributed surplus (note 11)		452,411			325,293
Warrants (note 11)		-			-
Deficit		(4,902,441	)		(3,977,401	)
		5,885,677			1,376,548

Commitments (note 19)
	$	7,887,550		$	2,884,158

See accompanying notes to consolidated financial statements.

Approved on behalf of the Board:

“signed” Michael Kraft

Director

“signed” Sanjay Joshi

Director

LINGO MEDIA CORPORATION

Consolidated Statements of Deficit

(Expressed in Canadian dollars)

For the years ended December 31	2007			2006
Deficit, beginning of year	$	(3,977,401	)	$	(3,228,477	)
Net loss for the year		(925,040	)		(748,924	)
Deficit, end of year		(4,902,441	)		(3,977,401	)

See accompanying notes to consolidated financial statements.

For the years ended December 31	2007			2006			2005

Revenue (note 17)	$	4,004,357		$	1,574,337		$	906,357
Direct costs		758,076			319,277			123,107
Margin		3,246,281			1,255,060			783,250
Expenses:
General and administrative (note 13)		3,745,276			1,417,867			855,118
Amortization of property and equipment		117,386			222,306			267,819
Interest and other financial expenses		113,369			57,097			42,869
Stock-based compensation		156,395			193,819			42,869

		4,132,426			1,891,089			1,380,143

Loss before income taxes and other taxes		(886,145	)		(636,030	)		(596,893	)

Income taxes and other taxes (note 12)		38,895			112,895			128,839

Net loss for the year	$	(925,040	)		(748,924	)		(725,732	)

Loss per share (note 11 (g))	$	(0.16	)	$	(0.18	)	$	(0.21	)


Weighted average number of
common shares outstanding (note 11 (g))		5,655,792			4,060,331			3,530,231

See accompanying notes to consolidated financial statements.

LINGO MEDIA CORPORATION

Consolidated Statements of Cash Flows

(Expressed in Canadian dollars)

For the years ended December 31	2007			2006			2005

Cash flows provided by (used in):
Operations:
Net loss for the year	$	(925,040	)	$	(748,924	)	$	(725,732	)
Items not affecting cash:
Amortization of property and equipment		17,581			12,655			12,278
Amortization of development costs		99,805			156,648			184,797
Amortization of acquired publishing content		-			53,003			70,670
Stock-based compensation		156,395			193,819			214,337
Income taxes		-			(17,426	)		-
Inventory write down		-			36,279			-
Change in non-cash balances related to operations:
Accounts and grants receivable		(555,316	)		223,154			74,255
Inventory		32,953			(11,187	)		(10,793	)
Prepaid and sundry assets		(1,296	)		16,749			(1,347	)
Accounts payable		(111,870	)		285,534			(5,181	)
Accrued liabilities		78,628			84,733			5,845
Cash provided by (used in) operating activities		(1,208,160	)		285,037			(180,871	)
Financing:
Increase in bank loans		(255,000	)		45,000			20,000
Advances of loans payable		84,164			245.613			25,000
Issuance of capital stock		775,000			66,679			745,800
Advances from shareholders		(319,836	)		-			-
Share issue costs		(63,750	)		-			(85,099	)
Cash provided by financing activities		220,578			357,292			705,701
Investing:
Short term investment		-			(150,000	)		-
Investment and advances		-			-			(182,520	)
A Plus acquisition (note 8)		-			(344,814	)		-
Cash acquired on acquisition of Speak2Me		1,508,521			-			-
Expenditures on software & web development costs		(249,352	)		-			-
Purchase of property and equipment		(29,602	)		(20,785	)		(6,556	)
Deferred costs incurred		-			(40,316	)		(117,102	)
Development costs		28,184			(91,325	)		(104,106	)
Cash used in investing activities		1,257,751			(647,240	)		(410,284	)

Increase / (decrease) in cash		270,169			(4,893	)		114,546
Cash, beginning of year		73,169			144,337			29,791
Bank indebtedness assumed on acquisition		-			(66,257	)		-
Cash, end of year	$	343,338		$	73,169		$	144,337
Supplemental cash flow information (note 21)

See accompanying notes to consolidated financial statements.

LINGO MEDIA CORPORATION

Notes to Consolidated Financial Statements

(Expressed in Canadian dollars)

December 31, 2007 and 2006

Lingo Media is a diversified print and online education product and services corporation. Speak2Me Inc. (“Speak2Me”), its 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 Media Ltd. 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.

1. Significant accounting policies:

(a) Basis of presentation:

These consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles applicable to a going concern, on the basis that the Company will continue to generate sufficient capital to fund its operations and commitments. The Company has a plan to improve its operations and its cash flow from operations. Significant differences between Canadian generally accepted accounting principles and United States generally accepted accounting principles, as they relate to these consolidated financial statements, are explained in note 20.

These consolidated financial statements include the accounts of the Company and its subsidiaries, Lingo Media Ltd. (100%), Lingo Media International Inc. (100%) and Lingo Group Limited (100%), A+ Child Development (Canada) Ltd. (70.33%) and Speak2Me Inc. (100%). All inter-company transactions and balances have been eliminated.

(b) 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.

Short-term investments include investments that have a duration of longer than 90 days. Short-term investments are accounted for at the lower of cost and net realizable value.

LINGO MEDIA CORPORATION

Notes to Consolidated Financial Statements

(Expressed in Canadian dollars)

December 31, 2007 and 2006

1. Significant accounting policies (continued):

(d) Inventory:

Inventory is recorded at the lower of cost and net realizable value and expensed based on the average cost.

(e)Property and equipment:

Property and equipment are initially recorded at cost. Amortization is provided using methods outlined below at rates intended to amortize the cost of assets over their estimated useful lives.

Method	Rate
Computer and office equipment	declining balance 20 %
Leasehold improvements	straight-line 5 years

The Company’s policy is to record an impairment loss in the period when it is determined that the carrying amount of the asset may not be recoverable.

(f) 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.

(g) Development costs:

The Company has capitalized costs related to English Language Learning products and programs. 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.

LINGO MEDIA CORPORATION

Notes to Consolidated Financial Statements

(Expressed in Canadian dollars)

December 31, 2007 and 2006

1. Significant accounting policies (continued):

(h) Software & web development costs:

The Company capitalizes all costs related to the development of its Speak2Me online service.. The Company regularly reviews the carrying values of its software & web development costs. 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.

(i) Goodwill:

Goodwill represents the excess of the purchase price of acquired companies over the estimated fair value of the tangible and intangible net assets acquired. In accordance with CICA 3062 Goodwill and Other Intangible Assets, goodwill is not amortized but is subject to an impairment test annually, or more frequently if events or changes in circumstances indicate that the asset may be impaired. The impairment test consists of a comparison of the carrying value of the Company’s reporting units with their fair value, and any excess is recorded as a charge to net earnings. Fair value of goodwill is determined through discounted cash flow analysis.

(j) Government grants:

The Company receives government grants based on certain eligibility criteria for book 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 records a liability for the repayment of the grants and a charge to operations in the period in which conditions arise that will cause the government grants to be repayable.

(k) Future income taxes:

The Company follows the asset and liability method of accounting for income taxes. Under this method, future income tax assets and liabilities are determined based on temporary differences between the financial reporting and tax bases of assets and liabilities, as well as for the benefit of losses available to be carried forward to future years for income tax purposes. Future income tax assets and liabilities are measured using substantively enacted tax rates and laws that will be in effect when the differences are expected to reverse. Future income tax assets are recorded in the financial statements if realization is considered more likely than not.

LINGO MEDIA CORPORATION

Notes to Consolidated Financial Statements

(Expressed in Canadian dollars)

December 31, 2007 and 2006

1. Significant accounting policies (continued):

(l) Foreign currency translation:

Monetary assets and liabilities denominated in foreign currencies are translated into Canadian dollars at the exchange rates prevailing at the consolidated balance sheet dates. Non-monetary assets and liabilities are translated at historical rates. Transactions in foreign currencies are translated into Canadian dollars at the approximate rates prevailing at the dates of the transactions. Foreign exchange gains and losses are included in loss or gain for the year.

The Company's integrated foreign operations are translated into Canadian dollars at exchange rates prevailing at the consolidated balance sheet dates for monetary items and at exchange rates prevailing at the transaction dates for non-monetary items. Revenue and expenses are translated at exchange rates prevailing during the year. Exchange gains and losses are included in loss or gain for the year.

(m) 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.

The Company has products in various phases of development at any time during the year. Each product’s economic viability is determined by management, after appropriate testing has been completed. When a product is deemed viable, its accumulated development costs are recorded and amortized over the estimated period of economic viability. The accumulated development costs of any product not considered to be economically viable are considered unrecoverable and included in the current year's earnings.

Accounts receivable are stated after evaluation as to their collectibility and an appropriate allowance for doubtful accounts is provided where considered necessary. Provisions are made for slow moving and obsolete inventory. Amortization is based on the estimated useful lives of Property, Plant and Equipment.

The amounts disclosed relating to fair values of stock options issued are based on management’s estimates of expected stock price volatility, expected lives of the options, risk-free interest rates and certain other assumptions. By their nature, these estimates are subject to measurement uncertainty, and the effect on the consolidated financial statements from changes in such estimates in future years could be significant.

LINGO MEDIA CORPORATION

Notes to Consolidated Financial Statements

(Expressed in Canadian dollars)

December 31, 2007 and 2006

1. Significant accounting policies (continued):

The calculation of future income tax is based on assumptions, which are subject to uncertainty as to timing and which tax rates are expected to apply when temporary differences reverse. Future income tax recorded is also subject to uncertainty regarding the magnitude of non-capital losses available for carry forward and of the balances in various tax pools as the corporate tax returns have not been prepared as of the date of financial statement preparation. By their nature, these estimates are subject to measurement uncertainty, and the effect on the consolidated financial statements from changes in such estimates in future years could be significant.

(n) Earnings (loss) per share:

Earnings (loss) per share is computed using the weighted average number of common shares that are outstanding during the year. Diluted earnings per share is computed using the weighted average number of common and 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. Convertible instruments that are anti-dilutive are not included in the calculation of diluted earnings per share.

(o) Stock-based compensation plan:

The Company applies the fair value based method of accounting to all stock-based compensation. The fair value of the options issued in the year is determined using the Black-Scholes option pricing model. The estimated fair value of the options is expensed to income over the vesting period. For stock-based compensation issued to employees and non-employees, the Company recognizes an expense based on the fair value of the equity instrument issued.

(p) Recent accounting pronouncements:

Financial instruments

In January 2005, the Canadian Institute of Chartered Accountants issued new recommendations for the recognition and measurement of financial instruments, and amendments to the existing presentation and disclosure standards, effective for interim and annual financial statements with fiscal years beginning on or after October 1, 2006. Section 3855 Financial Instruments – Recognition and Measurement establishes standards for recognizing and measuring financial assets, financial liabilities and non-financial derivatives. Section 3861 Financial Instruments – Disclosure and Presentation discusses the presentation and disclosure of these items. The application of hedge accounting is covered in Section 3865 Hedges. Section 1530 Comprehensive Income establishes standards for reporting and displaying certain gains and losses, such as unrealized gains and losses related to hedges or other derivative instruments, outside of net income, in a statement of comprehensive income. Section 3251 Equity establishes standards for the presentation of equity and changes in equity, including changes arising from those items recorded in comprehensive income. There have also been numerous consequential amendments made to other Sections.

LINGO MEDIA CORPORATION

Notes to Consolidated Financial Statements

(Expressed in Canadian dollars)

December 31, 2007 and 2006

1. Significant accounting policies (continued):

In December 2006, the Canadian Institute of Chartered Accountants issued Section 3862 Financial Instruments – Disclosures and Section 3863 Financial Instruments – Presentation to replace Section 3861 Financial Instruments – Disclosure and Presentation. These new Sections are effective for interim and annual financial statements with fiscal years beginning on or after October 1, 2007, but may be adopted in place of Section 3861, before that date.

General standards of financial statement presentation

CICA Handbook Section 1400 General Standards of Financial Statement Presentation has been amended to include requirements to assess and disclose an entity’s ability to continue as a going concern. This amendment is effective for interim and annual financial statements relating to fiscal years beginning on or after January 1, 2008. The Company does not expect the adoption of these changes to have a material impact on its consolidated financial statements.

Inventories

CICA Handbook Section 3031 Inventories replaces corresponding Section 3030 and establishes new standards for the measurement and disclosure of inventories. The new Section prescribes that inventories should be measured at the lower of cost and net realizable value and provides guidance on the determination of cost. This standard is effective for interim and annual financial statements relating to fiscal years beginning on or after January 1, 2008. The Company has not yet determined the impact of the adoption of this new standard on its consolidated financial statements.

2. Changes in accounting policies:

On January 1, 2007, the Company adopted the new Canadian accounting standards for financial instruments – recognition and measurement, financial instruments – disclosure and presentation, hedging and comprehensive income. Prior periods have not been restated. Additional disclosure requirements for financial instruments and accounting changes have been approved by the Canadian Institute of Chartered Accountants (“CICA”) and will be required disclosure beginning January 1, 2008. These new standards have no material impact on the Company’s financial statements.

(a) Financial Instruments – Recognition and Measurement:

This new standard requires all financial instruments within its scope, including all derivatives, to be recognized on the balance sheet initially at fair value. Subsequent measurement of all financial assets and liabilities except those classified as held-for-trading or available-for-sale are measured at amortized cost determined using the effective interest rate method. Held-for-trading financial assets are measured at fair value with changes in fair value recognized in earnings. Available-for-sale financial assets are measured at fair value with changes in fair value recognized in other comprehensive income and reclassified to earnings when derecognized or impaired. There were no changes to the measurement of existing financial assets and liabilities at the date of adoption.

LINGO MEDIA CORPORATION

Notes to Consolidated Financial Statements

(Expressed in Canadian dollars)

December 31, 2007 and 2006

2. Changes in accounting policies (continued):

Cash and short term investments are designated as “held-for-trading” and are measured at carrying value, which approximates fair value due to the short-term nature of these instruments. Accounts receivable and investment and advances are designated as “loans and receivables” and accounts payable, accrued liabilities and bank loans are designated as “other liabilities”, all of which are measured at carrying value, which approximates fair value due to the short-term nature of these instruments.

(b) Other Comprehensive Income:

The new standards establish a new statement of comprehensive income, which is comprised of net earning and other comprehensive income. The Company currently has no other comprehensive income items and therefore a separate statement of comprehensive income is not presented.

Future Accounting Changes:

In 2006, the CICA issued new accounting standards: “Capital Disclosures,” “Financial Instruments – Disclosures” and “Financial Instruments – Presentation”. These standards are anticipated to be adopted for the Company’s interim and annual reporting effective periods commencing January 1, 2008.

The capital disclosures standard establishes guidelines for the disclosure of information concerning the Company’s capital and how it is managed. The standard requires disclosure of an entity’s objectives, policies and processes for managing capital, including the description of what the Company considers capital and to indicate if the Company has complied with any capital requirements and the ramifications of non-compliance, if applicable.

“Financial Instruments – Disclosures” and “Financial Instruments – Presentation” replace “Financial Instruments – Disclosure and Presentation;” revising and enhancing its disclosure requirements to provide additional information regarding the risks associated with both recognized and unrecognized financial instruments the Company is exposed to and how those risks are managed.

In January 2006, the CICA Accounting Standards Board (“AcSB”) adopted a strategic plan for the direction of accounting standards in Canada. As part of that plan, accounting standards in Canada for public companies are expected to converge with International Financial Reporting Standards (“IFRS”) by the start of 2011.

LINGO MEDIA CORPORATION

Notes to Consolidated Financial Statements

(Expressed in Canadian dollars)

December 31, 2007 and 2006

3. Accounts and grants receivable:

Accounts and grants receivable consist of:

	2007		2006
Trade receivables	$	853,384	$	285,141
Cash advance		241,059		-
Grants receivable (note 13)		15,078		19,783
	$	1,110,151	$	304,924

4. Deferred costs, investment and advances:

In June 2005, the Company signed a definitive Joint Venture Agreement (“JV Agreement”) with Sanlong Cultural Communication Co. Ltd. (“Sanlong”). The joint venture company will be known as Hebei Jintu Education Book Co. Ltd. (“Jintu”). Jintu will continue Sanlong’s recently launched direct-to-consumer business of distributing educational newspapers and product extensions located in Shijiazhuang, Hebei Province, China. Under the JV Agreement, Lingo Media invested approximately $365,000 (¥2,550,000 RMB) for its 51% share of Jintu.

Pursuant to the June 2005 agreement, the Company has advanced funds for working capital to Sanlong through a trust of $182,520, with a view to establishing Jintu and incurred $157,419 in expenditures related to pre-operating costs to date. These expenses are included in deferred costs. Upon commencement of the joint venture, the advances will be converted into Lingo Media’s investment in registered capital of the joint venture. These advances are non-interest bearing, and are non-refundable.

5. Property and equipment:

Property and equipment consists of the following:

2007	Cost		Accumulated Amortization		Net Carrying Value
Computer and office equipment	$	279,607	$	190,282	$	89,325

2006	Cost		Accumulated Amortization		Net Carrying Value
Computer and office equipment	$	176,409	$	99,105	$	77,304

LINGO MEDIA CORPORATION

Notes to Consolidated Financial Statements

(Expressed in Canadian dollars)

December 31, 2007 and 2006

6. Development costs:

Development costs consist of the following:

	2007			2006
Cost	$	1,552,572		$	1,646,446
Less accumulated amortization		(1,284,662	)		(1,303,138	)
	$	267,910		$	343,308

Subsequent to the December 31, 2007 year-end, one of the Company's branches was no longer operational. The resulting impairment provision of $28,738 is included in the Statement of Operations in General and administrative.

7. Software and web development costs:

In October 2007, the Company acquired Speak2Me Inc. (“Speak2Me”), a new media company that has developed software combining speech recognition and animation technology for the teaching and practice of spoken English. All costs associated with development of the Speak2Me software and its contents are capitalized as Software and web development:

		2007				2006
Cost		$	4,212,564			$	-

8. Acquisitions:

A + Child Development (Canada) Ltd.

In 2006, the Company acquired 62.33% of the issued and outstanding shares of A + Child Development (Canada) Ltd. (“A Plus”) for cash and shares plus 3,000,000 additional shares common of Lingo Media to the selling shareholders of A Plus 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. The results of operations of A Plus are included in the consolidated results of the Company commencing October 1, 2006.

LINGO MEDIA CORPORATION

Notes to Consolidated Financial Statements

(Expressed in Canadian dollars)

December 31, 2007 and 2006

8. Acquisitions (continued):

A + Child Development (Canada) Ltd.

Under the terms of the acquisition, Lingo Media:

i) acquired 50.33% of the outstanding capital stock of A Plus from its shareholders for the purchase price of CAD$730,000 satisfied by issuing 378,571 common shares of Lingo Media and paying CAD$200,000 cash;

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

iii) issued an additional 428,871 common shares of Lingo Media to the selling shareholders of A Plus subject to meeting annual earnings milestones to be held in escrow and released over a three-year period with a maximum of 142,857 shares released per year; In 2007, the previously established milestones were not achieved and consequently 142,857 shares were not earned and will be cancelled.

The Company issued 28,500 shares as consulting fees related to this acquisition.

During 2007, a further CAD$100,000 was invested in A Plus for an additional 8% interest resulting in an increase primarily in net current assets on consolidation.

8. Acquisitions (continued):

The allocation of the purchase price for the acquisitions are as follows:

	2006 A + Child Development (Canada) Ltd.
Net current assets	$	186,697
Property and equipment, net		19,844
Future income taxes		172,108
Deposits		11,336
Goodwill		1,121,131
Current liabilities		(596,402	)
	$	914,714
Share consideration		569,900
	$	914,714

LINGO MEDIA CORPORATION

Notes to Consolidated Financial Statements

(Expressed in Canadian dollars)

December 31, 2007 and 2006

Speak2Me Inc.

On October 18, 2007, the Company acquired 100% of the outstanding common shares of Speak2Me Inc. (“Speak2Me”). The results of Speak2Me’s operations have been included in these consolidated financial statements since that date. Speak2Me is a new media company that has developed software combining speech recognition and avatar technologies for the teaching and practice of spoken English.

The aggregate purchase price was $4,585,087. 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. The common shares were valued at $4,536,351 based on the average market price of the Company’s shares over a two-day period before and after the terms of the acquisition were agreed to and announced. The acquisition has been accounted for using the purchase method, whereby the total cost of the acquisition has been allocated to the assets acquired and to the liabilities assumed based upon their respective fair values at the measurement date.

As part of the acquisition, the shareholders of Lingo Media also approved 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 by way of a special resolution of the shareholders at the Company’s Annual and Special Meeting held on October 5, 2007.

The following table summarizes the estimated fair value of the assets acquired and liabilities assumed on the date of acquisition.

8. Acquisitions (continued):

	Speak2Me Inc.
Current assets	$	1,789,301
Property and equipment, net		17,903
Software and web development costs		3,963,212
Current liabilities		(588,457	)
Future income tax liability		(564,997	)
	$	4,616,962
Cash consideration		-
Share consideration		4,536,351
Business acquisition costs		80,611
	$	4,616,962

LINGO MEDIA CORPORATION

Notes to Consolidated Financial Statements

(Expressed in Canadian dollars)

December 31, 2007 and 2006

8. Acquisitions (continued):

Prior to the business combination described in above, the Company and some of the previous shareholders of Speak2Me were related by virtue of common control, by companies owned by a director, by management, and by immediate family members of management. The transaction was measured at the exchange amount, which is the amount of consideration paid or received as established and agreed to by related parties.

9. Bank loans:

	2007		2006
Revolving line of credit of $150,000 bore interest at prime plus 2.5% per annum, was due on demand and was secured by the Company’s accounts receivable from customers in China, which in turn were secured by the Export Development Corporation. This loan was repaid in full during 2007.	$	-	$	135,000
Revolving line of credit of $500,000 bearing interest at prime plus 4.0% per annum and secured by a $150,000 GIC, bearing interest at 3.5% maturing on December 10, 2008, and a charge on all assets including inventory and accounts receivables.		230,000		350,000
	$	30,000	$	485,000

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.

LINGO MEDIA CORPORATION

Notes to Consolidated Financial Statements

(Expressed in Canadian dollars)

December 31, 2007 and 2006

10. Loans payable:

Loans payable consists of the following:

	2007		2006
Loan payable, due to a non-related party, interest bearing at 12% per annum payable monthly, unsecured and due on demand.	$	228,674	$	-
Loan payable, due to a shareholder, interest bearing at 12% per annum, due January 31, 2008.		-		7,541
Loan payable, due to a non-related party, interest bearing at 12% per annum with monthly interest payments, secured by a general security agreement and due on April 30, 2009.	$	203,031	$	340,000
		431,705		347,541

Less: Current portion		228,674		-
		203,031		347,541
The principal repayments required are:
2008				228,674
2009				203,031
			$	431,705

LINGO MEDIA CORPORATION

Notes to Consolidated Financial Statements

(Expressed in Canadian dollars)

December 31, 2007 and 2006

11. Capital stock, warrants and stock options:

(a) Authorized:

Unlimited preference shares, no par value

Unlimited common shares, no par value

The following details the changes in issued and outstanding common shares:

	Common Shares
	Number		Amount

Balance, January 1, 2006		24,109,773	$	3,367,119
Issued:
Private placement (ii)		3,675,000		735,000
Options exercised		90,000		10,800
Less: Share issue costs		-		115,948
Balance, December 31, 2005		27,874,773	$	3,996,971
Issued:
Common shares issued for the acquisition of
A + Child Development (Canada) Ltd.		2,849,500		735,000
Options exercised (iii) (note 11 (b))		1,853,897		461,785
Balance, December 31, 2006		32,578,170	$	5,028,656
Issued:
Options exercised		282,600		59,450
		32,860,770	$	5,088,106
Share Consolidation (1 new for 7 old)		4,694,396		5,088,106
Issued:
Private Placement (iv)		387,500		775,000
Common shares issued for the acquisition of Speak2Me Inc.		4,500,366		4,536,351
Less: Share issue costs		-		(63,750	)
Balance, December 31, 2007		9,582,262	$	10,335,707

(i) Escrowed Shares:

On April 30, 1997, the Company entered into a performance escrow agreement in Form C of the TSX Venture Exchange (formerly Canadian Venture Exchange) (the “Exchange”) with ComputerShare Investor Services Inc. (formerly “Montreal Trust Company of Canada”) and certain security holders (the “Escrow Agreement”). The Escrow Agreement related to the escrow of certain common shares of the Company issued upon completion of the reverse take over transaction between Lingo Media Ltd. (formerly “Alpha Corporation”) and Lingo Media Inc. (formerly “Alpha Ventures Inc.”) in 1997. At the time of the transaction, 2,860,528 pre-consolidated common shares (the “Escrowed Shares”) were subject to a performance escrow agreement.

These shares were subject to a new escrow agreement (“Time Release Escrow Agreement”) made as of December 10, 2002 whereby the Escrowed Shares would be released on a timed-release basis rather than the performance based release provisions of the performance Escrow Agreement. Up to December 2005, 2,432,948 shares have been released. The balance of the shares, 427,580 were released during 2006.

LINGO MEDIA CORPORATION

Notes to Consolidated Financial Statements

(Expressed in Canadian dollars)

December 31, 2007 and 2006

11. Capital stock, warrants and stock options (continued):

(ii) In September 2005, the Company completed an exempt private placement of 3,675,000 Units of its securities at $0.20 per Unit, for gross proceeds of $735,000. Each Unit was comprised of one common share and one-half of one non-transferable common share purchase warrant (“Warrant”). Each whole Warrant entitles the holder to purchase one additional common share for $0.40 for a term of 12 months expiring on September 20, 2006. These warrants expired during 2006 without exercise. The Warrants are subject to accelerated expiration, at the option of the Company, at any time after January 20, 2006 in the event that the price of the Company’s common shares on the TSX Venture Exchange (“Exchange”) is $0.60 or more for 10 consecutive trading days. In such event, the Company has three business days to give notice of the acceleration of the term to the holders of the Warrant and the Warrant term will be reduced to ten business days from the date of such notice. A fee of 7% was paid to the agent and sub-agents with respect to the sale of 3,675,000 Units. In addition, a total of 118,650 Compensation Warrants were issued to the agent and the sub-agents. Each Compensation Warrant entitles the holder to purchase one common share for $0.40 for a term of 12 months expiring on September 20, 2006. The Compensation Warrants are subject to accelerated expiration on the same terms as the Warrant. These Warrants expired during 2006 without exercise.

(iii) During 2006, 835,901 options were exercised for cash consideration of $66,679 at an average price of $0.13 per share. In addition, 1,341,004 options were exercised for $207,294 in settlement of accounts payable. Fair value of $187,812 related to options exercised for cash and accounts payable settlement has been reallocated to capital stock from contributed surplus.

(iv) On October 17, 2007, the Company closed a private placement offering of subscription receipts. The gross proceeds of the offering totaled $775,000 with an aggregate of 387,500 subscription receipts issued at a price of $2.00 per subscription receipt. Each subscription receipt entitles the holder to receive one common share and one common share purchase warrant of Lingo Media upon the closing of the acquisition of Speak2Me. Each Warrant entitles the holder to purchase one (1) additional common share of Lingo Media at a purchase price of $6.00 per share and is exercisable for a period of twelve (12) months from the closing date of the Offering.

(b) Contributed Surplus:

Balance, January 1, 2006	$	131,474
Stock-based compensation		193,819
Balance, December 31, 2006	$	325,293
Stock-based compensation		156,395
Options exercised		(29,277	)
Balance, December 31, 2007	$	452,411

LINGO MEDIA CORPORATION

Notes to Consolidated Financial Statements

(Expressed in Canadian dollars)

December 31, 2007 and 2006

11. Capital stock warrants and stock options (continued):

In November 1996, the Company adopted a stock option plan (the “1996 Plan”). The 1996 Plan was established to encourage ownership of common shares by directors, senior officers, employees and consultants of the Company. The maximum number of shares which may be reserved for issuance under the 1996 Plan is limited to 1,078,000 common shares, provided that the Board has the right, from time to time, to increase such number subject to shareholder and regulatory approvals.

The maximum number of common shares that may be reserved for issuance to any one person under the 1996 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. The exercise price of each option cannot be less than the market price of the shares on the day immediately proceeding the day of the grant, less any discount specifically permitted by the TSX Venture Exchange. The exercise period of the options granted can not exceed five years. The directors of the Company may from time to time amend or revise the terms of the 1996 Plan or may terminate it at any time.

During May 2000, the Company adopted another stock option plan (the “2000 Plan”) for the benefit of the directors, officers, employees and consultants of the Company.

In June 2005, the Company adopted a new stock option plan (the “2005 Plan “). The 2005 Plan was established to provide an incentive to employees, officers, directors and consultants of the Company and its subsidiaries. The maximum number of shares which may be reserved for issuance under the 2005 Plan is limited to 4,821,955 common shares less the number of shares reserved for issuance pursuant to options granted under the 1996 Plan and the 2000 Plan, provided that the Board of Directors of the Company has the right, from time to time, to increase such number subject to the approval of the relevant exchange on which the shares are listed and the approval of the shareholders of the Company. The maximum number of common shares that 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 of the Company granted as a compensation or incentive mechanism. The exercise price of each option can not be less than the market price of the shares on the day immediately preceding the day of the grant less any permitted discount. The exercise period of the options granted can not exceed 5 years. Options granted under the 2005 Plan vest over an 18 month period with no greater than 16.67% of any options granted to an optionee vesting in any 3 month period or such longer period as the Board may determine. The Board of Directors of the Company may, from time to time, amend or revise the terms of the 2005 Plan or may terminate it at any time.

LINGO MEDIA CORPORATION

Notes to Consolidated Financial Statements

(Expressed in Canadian dollars)

December 31, 2007 and 2006

11. Capital stock warrants and stock options (continued):

Changes for the stock option plans during the years ended December 31, 2007 and 2006 are as follows (post consolidation equivalents):

	2007					2006
	Number of shares			Weighted average exercise price		Number of shares			Weighted average exercise price

Options outstanding, beginning of year		275,634		$	1.33		526,191		$	1.19
Options granted		300,000			0.68		14,286			1.40
Options exercised		40,372			0.84		(264,842	)		0.84
Options expired/canceled		(68,524	)		-		-			-

Options outstanding, end of year		516,738			0.98		275,634			1.33
Options exercisable, end of year		338,509		$	1.10		248,181		$	1.33

The following table summarizes information about stock options outstanding at December 31, 2007:

				Options outstanding				Options exercisable
Range of exercise prices		Number outstanding		Weighted average remaining contractual life		Weighted average exercise price		Number outstanding		Weighted average exercise price

$	0.70 - $1.00		317,368		4.21	$	0.75		139,140		$	0.75
$	1.01 - $1.33		138,656		1.98		1.30		138,656			1.30
$	1.34 - $1.54		60,713		2.44		1.46		60,713			1.46
Total			516,738		3.40		0.98		338,509			1.10

All vested options are exercisable as of December 31, 2007.

(d) Fair value of options:

The weighted average grant-date fair value of options granted to employees, consultants and directors during 2007 has been estimated at $0.89 (2006 - $0.12) using the Black-Scholes option-pricing model. The estimated fair value of the options granted is expensed over the options vesting periods. The pricing model assumes the weighted average risk free interest rates of 2.46% (2006 – 2.53%) weighted average expected dividend yields of nil (2006 – nil), the weighted average expected common stock price volatility of 105.0% (2006 – 157.9%) and a weighted average expected life of 5 years.

LINGO MEDIA CORPORATION

Notes to Consolidated Financial Statements

(Expressed in Canadian dollars)

December 31, 2007 and 2006

11. Capital stock warrants and stock options (continued):

(e) Warrants:

The following summarizes the Class E warrants outstanding (post consolidation equivalents):

Weighted Number of	average warrants			exercise price

Balance, January 1, 2006		262,500		$	2.80
Expired		(262,500	)		2.80
Balance, December 31, 2006 Issued		-			-
Balance, December 31, 2006		387,500			6.00
Balance, December 31, 2007		387,500		$	6.00

The 387,500 warrants have a fair value of $161,254 as calculated by a Black Scholes pricing model. The warrants have been classified within share capital.

(f) Compensation Warrants:

The following summarizes the compensation warrants outstanding (post consolidation equivalents):

Weighted Number of	average warrants			exercise price

Balance, January 1, 2006		16,950		$	2.80
Expired (note 11 (a)ii)		(16,950	)		2.80
Balance, December 31, 2006 and 2007		-			-

Fair value of Compensation Warrants:

During 2005, the Company issued 16,950 Compensation Warrants to agents in connection with private placements (see note 11(a)(ii)). The fair value of these warrants granted to agents was estimated at $1.82 using the Black-Scholes option-pricing model. The pricing model assumed weighted average risk free interest rates of 2.70%, weighted average expected dividend yields of nil, weighted average expected common stock price volatility of 133% and a weighted average expected life of one year. No Compensation Warrants were issued during 2006 and 2007.

11. Capital stock warrants and stock options (continued):

(g) Loss per share:

	2007			2006

Numerator: Loss for the year	$	(925,040	)	$	(748,924	)
Denominator:
Average number of common shares outstanding		9,582,262			4,060,331
Escrowed shares (note 11(a)(i))		-			-
Weighted average number of common shares		5,655,792			4,060,331
Loss per share, basic and diluted	$	(0.16	)	$	(0.18	)

Average number of common shares have been adjusted to reflect a 1 for 7 share consolidation that took effect during 2007.

LINGO MEDIA CORPORATION

Notes to Consolidated Financial Statements

(Expressed in Canadian dollars)

December 31, 2007 and 2006

12. Income taxes:

The provision for income taxes reflects an effective income tax rate, which differs from the Canadian corporate income tax rate as follows:

	2007			2006

Combined basic Canadian federal and provincial income tax rate		36.12	%		36.12	%
Effective income tax recovery on loss before income taxes	$	(320,076	)	$	(229,734	)
Increase (decrease) resulting from:
Change in the valuation allowance		(555,893	)		359,663
Effect of reduced income taxes in foreign jurisdiction and
subsidiary with lower tax rate		(220,387	)		(172,100	)
Withholding tax on sales to China		127,267			130,322
Stock based compensation		56,490			70,007
Change in enacted rates		561,996			-
Change in prior year estimates		413,603			-
Other		(24,105	)		85,059
	$	38,895		$	112,895

The tax effect of temporary differences representing future tax assets is as follows:

	2007			2006
Future tax assets (liabilities):
Operating loss carry forwards	$	2,564,846		$	2,158,000
Share issue costs		92,559			33,000
		2,657,405			2,191,000
Valuation allowance		(1,411,945	)		1,967,838	)
Future tax assets recognized		1,245,460			223,162
Software & web development costs		(932,362	)		-
Property and equipment		(22,953	)		(33,628	)
Net future tax assets (liabilities)	$	(290,145	)	$	189,534

Future tax assets and liabilities will be impacted by changes in future tax laws and rates. The effects of these changes are not currently determinable. In assessing the realizability of future tax assets, management considers whether it is more likely than not that some portion or all of the future tax assets will not be realized. The ultimate realization of future tax assets is dependent upon the generation of future taxable income during the years in which those temporary differences become deductible. Management considers projected future taxable income, uncertainties related to the industry in which the Company operates and tax planning strategies in making this assessment. The Company has not recognized any benefit for these losses.

LINGO MEDIA CORPORATION

Notes to Consolidated Financial Statements

(Expressed in Canadian dollars)

December 31, 2007 and 2006

12. Income taxes (continued):

At December 31, 2007, the Company has non-capital losses available for carry forward for Canadian income tax purposes amounting to $7,143,343. These losses expire in the following fiscal years:

2008		493,000
2009		291,000
2010		954,000
2014		1,113,000
2015		1,288,000
2026		1,297,000
2027		1,707,343
	$	7,143,343

13. Government grants:

Included as a reduction of general and administrative expenses are government grants of $164,545 (2006 – $182,300), relating to the Company's publishing projects in China and Canada.

Certain government grants are repayable in the event that the Company's annual net income for each of the previous two years exceeds 15% of revenue. During the year, the conditions for the repayment of grants did not arise and no liability was recorded.

14. Foreign exchange gain or loss:

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

15. Related party balances and transactions:

During the year, the Company had the following transactions with related parties, made in the normal course of operations, and accounted for at an amount of consideration established and agreed to by the Company and related parties. These transactions have not been disclosed elsewhere in the financial statements:

During the year, the Company had loans payable due to corporations controlled by two directors bearing interest at 12% (2006 - 12%) per annum. During 2007, the Company received $387,000 (2006 - $ nil) and repaid $310,000 (2006 - $50,000) of these loans. Interest expense related to these loans for the year is $62,137 (2006 - $5,878). At December 31, 2007 $nil (2006 - $ nil) was due to those corporations.

During the year, the Company was reimbursed $68,900 (2006 - $58,000) from a corporation with one director in common for rent, administration, office charges and telecommunications.

LINGO MEDIA CORPORATION

Notes to Consolidated Financial Statements

(Expressed in Canadian dollars)

December 31, 2007 and 2006

15. Related party balances and transactions (continued):

Speak2Me Inc. Acquisition:

The acquisition of Speak2Me constituted as a "related party transaction" as the CEO of the Company was also a director of Speak2Me and partially owned common shares of Speak2Me prior to its acquisition by Lingo Media.

The President & CEO of Lingo Media beneficially owns, indirectly, 1,583,333 common shares representing 10.63% of the issued and outstanding common shares of Speak2Me prior to its acquisition by Lingo Media. Due to the conflict of interest, he abstained from voting on matters relating to the acquisition.

The Board of Directors of Lingo Media appointed a special committee, consisting of two independent directors, to review the proposed acquisition of Speak2Me. In reaching its conclusions and formulating its recommendations, the special committee considered among other factors: (i) audited financial statements of Speak2Me for the period ended August 24, 2007, (ii) information in respect of its assets and operations, and (iii) an independent valuation.

16. Financial instruments and risk management:

The Company as part of its operations carries a number of financial instruments. It is management's opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments except as otherwise disclosed.

(a) Currency risk:

The Company is subject to currency risk through its activities outside of Canada. Unfavourable changes in the exchange rate may affect the operating results of the Company. The Company is also exposed to currency risk as a substantial amount of its revenue is denominated in U.S. dollars and Chinese Renminbi ("RMB").

There were no derivative instruments outstanding at December 31, 2007 and 2006.

(b) Financial Instruments:

The significant financial instruments of the Company, their carrying values and the exposure to foreign dollar denominated monetary assets and liabilities, as of December 31, 2007 are as follows:

	US Denominated				Chinese Denominated
	CAD		USD		CAD		RMB
Cash		105,635		107,571		16,056		835,675
Accounts and grants receivable		275,155		236,184		813,068		6,061,418
Accounts payable		108,828		93,415		100,733		102,579

US dollars and Chinese Renmimbi are converted on the prevailing year-end exchange rates

Fair market values:

The carrying values of cash, short-term investment, accounts and grants receivable, accounts payable, accrued liabilities, bank loans and loans payable approximate their fair values due to the relatively short periods to maturity.

LINGO MEDIA CORPORATION

Notes to Consolidated Financial Statements

(Expressed in Canadian dollars)

December 31, 2007 and 2006

16. Financial instruments and risk management (continued):

(d) Concentration of risk:

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and accounts receivable. Cash and short-term investment consist of deposits with major financial institutions. With respect to accounts receivable, the Company performs periodic credit evaluations of the financial condition of its customers and typically does not require collateral from them. Management assesses the need for allowances for potential credit losses by considering the credit risk of specific customers, historical trends and other information. The Jintu loan receivable (note 4) is secured by a personal guarantee from a non – related party.

(e) Interest rate risk:

The Company manages its exposure to interest rate risk through floating rate borrowings. The floating rate debt is subject to interest rate cash flow risk, as the required cash flows to service the debt will fluctuate as a result of changes in market rates.

17. Economic dependence

The Company has sales to a major customer in 2007 and 2006, a government agency of the People’s Republic of China. The accounts receivable due from this customer are insured up to 90% by the Export Development Corporation. The total percentage of sales to this customer during the year was 22% (2006 – 56%), and the total percentage of accounts receivable at December 31, 2007 was 93% (2006 – 75%).

18. Segmented information:

The Company operates two distinct reportable business segments as follows. These business segments are differentiated by English language learning products have separate methodology, ELL is Lingo’s products / IP, ECD Lingo combines third party products.

English Language Learning: The Company develops, publishes, distributes and licenses book, audio/video cassette, CD-based product and supplemental product for English language learning for the educational school markets in China and in Canada.

Early Childhood Development: The Company specializes in early childhood cognitive development programs, through the publishing and distribution of educational materials along with its proprietary curriculum through its four offices in Calgary, Edmonton, Vancouver and Toronto.

	English Language Learning			Early Childhood Development			Total
Revenue	$	879,626		$	3,124,731		$	4,004,357
Cost of sales		113,317			644,759			758,076
Margin	$	766,309		$	2,479,972		$	3,246,281
Acquisition of property and equipment		26,276			1,712			27,988
Segment Assets		6,635,015			672,246			7,857,551
Segment loss		(579,421	)		(345,619	)		(925,040	)

LINGO MEDIA CORPORATION

Notes to Consolidated Financial Statements

(Expressed in Canadian dollars)

December 31, 2007 and 2006

18. Segmented information (continued):

The Company's revenue by geographic region based on the region in which the customers are located is as follows:

	2007		2006
Canada	$	3,126,651	$	685,521
China		877,706		888,816
	$	4,004,357	$	1,574,337

The majority of the Company’s identifiable assets as at December 31, 2007 are located as follows:

	2007		2006
Canada	$	3,327,303	$	2,701,638
China		4,560,247		182,520
	$	7,887,550	$	2,884,158

19. Commitments:

In addition to the commitments described in note 3, the Company has future minimum lease payments under operating leases for premises and equipment are as follows:

2008	$ 271,883
2009	209,830
2010	167,303
2011	34,816
2012	5,094

LINGO MEDIA CORPORATION

Notes to Consolidated Financial Statements

(Expressed in Canadian dollars)

December 31, 2007 and 2006

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

These consolidated financial statements have been prepared in accordance with generally accepted accounting principles ("GAAP") in Canada. Except as set out below, these financial statements also comply, in all material aspects, with the United States generally accepted accounting principles.

The following tables reconcile results as reported under Canadian GAAP with those that would have been reported under United States GAAP.

Statements of Operations:

	2007			2006
Loss for the year - Canadian GAAP	$	(925,040	)	$	(748,924	)
Impact of United States GAAP and adjustments:
Amortization of development costs (a)		99,805			156,648
Deferred costs (d)		-			(40,316	)
Software and web development costs		(452,709	)		-
Loss for the year - United States GAAP	$	(1,277,944	)	$	(632,592	)
Statements of cash flows:
	2007			2006
Cash (used in) provided by investing activities – Canadian GAAP	$	1,257,751		$	(647,240	)
Impact of United States GAAP and adjustments:
Write-off of Software & web development costs		452,709			-
Cash used in investing activities - United States GAAP	$	1,710,460		$	(647,240	)

	2007			2006
Cash (used in) provided by operating activities – Canadian GAAP	$	(1,208,160	)	$	285,037
Impact of United States GAAP and adjustments:
Write-off of Software & web development costs		(452,709	)		(40,316	)
Cash used in operating activities - United States GAAP	$	(1,660,869	)	$	244,721

The cumulative effect of these adjustments on the consolidated shareholders' equity of the Company is as follows:

	2007			2006
Shareholders' equity - Canadian GAAP	$	5,845,677		$	1,376,548
Development costs (a)		(91,522	)		(121,005	)
Compensation expense (b)		(243,250	)		(243,250	)
Deferred costs (d)		(157,419	)		(157,419	)
Software & web development costs (a)		(452,709	)		-
Shareholders' equity - United States GAAP		4,940,777			854,874

LINGO MEDIA CORPORATION

Notes to Consolidated Financial Statements

(Expressed in Canadian dollars)

December 31, 2007 and 2006

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

(a) 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.

(b) Options to consultants:

Starting January 1, 2004 under United States, the Company records compensation expense based on the fair value for stock or stock options granted in exchange for services from consultants and employees.

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.

(d) Deferred costs:

(e) Recent Accounting Pronouncements:

(i) In February 2006, FASB issued FASB 155, Accounting for Certain Hybrid Financial Instruments an amendment to FASB 133, Accounting for Derivative Instruments and Hedging Activities, and FASB 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. FASB 155, provides the framework for fair value remeasurement of any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation as well as establishes a requirement to evaluate interests in securitized financial assets to identify interests. FASB 155 further amends FASB 140 to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. The FASB 155 guidance also clarifies which interest-only strips and principal-only strips are not subject to the requirement of FASB 133 and concentrations of credit risk in the form of subordination are not embedded derivatives. This statement is effective for all financial instruments acquired or issued after the beginning of an entity's first fiscal year that begins after September 15, 2006. The Company does not believe SFAS No. 155 will have a significant impact on its consolidated financial position or results of operations.

LINGO MEDIA CORPORATION

Notes to Consolidated Financial Statements

(Expressed in Canadian dollars)

December 31, 2007 and 2006

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

(e) Recent Accounting Pronouncements:

(ii) In March 2006, FASB issued FASB 156, Accounting for Servicing of Financial Assets--an amendment of FASB Statement No. 140. FASB 156 requires the recognition of a servicing asset or servicing liability under certain circumstances when an obligation to service a financial asset by entering into a servicing contract. FASB 156 also requires all separately recognized servicing assets and servicing liabilities to be initially measured at fair value utilizing the amortization method or fair market value method. FASB 156 is effective the beginning of the first fiscal year that begins after September 15, 2006. The Company does not believe SFAS No. 156 will have a significant impact on its consolidated financial position or results of operations.

(iii) FASB issued statement of Financial Accounting No. 157 Fair Value Measurement, this statement is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. Early adoption is permitted. The standard provides enhanced guidance for using fair value to measure assets and liabilities, the information used to measure fair value, and the effect of fair value measurement on earnings. The standard applies whenever other standards require (or permit) assets or liabilities to be measured at fair value. It does not expand the use of fair value in any new circumstances. The Company does not expect there to be any material impact on the Consolidated Financial Statements upon adoption of the standard.

(iv) In January 2003, the FASB issued Financial Interpretation 46 “Accounting for Variable Interest Entities” (“FIN 46”) that requires the consolidation of Variable Interest Equities (“VIEs”). VIEs are entities that have insufficient equity or their equity investors lack one or more of the specified elements that a controlling entity would have. The VIEs are controlled through financial interests that indicate control (referred to as “variable interests”). Variable interests are the rights or obligations that expose the holder of the variable interest to expected losses or expected residual gains of the entity. The holder of the majority of an entity’s variable interests is considered the primary beneficiary of the VIE and is required to consolidate the VIE. In December 2003 the FASB issued FIN 46R which superseded FIN 46 and restricts the scope of the definition of entities that would be considered VIEs that require consolidation. The Company does not believe FIN 46R results in the consolidation of any additional entities.

(v) Effective January 1, 2007, the Company adopted FIN 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109.” This interpretation requires that an entity recognize in the financial statements, the impact of a tax position, if that position is more likely than not to be sustained on examination by the taxing authorities, based on technical merits of the position. Tax benefits resulting from such a position should be measured as the amount that is more likely than not on a cumulative basis to be sustained on examination. FIN 48 also provides guidance on de-recognition, classification, interest and penalties on income taxes and accounting in interim periods. The adoption of this interpretation did not impact the Company’s Financial Statements.

(vi) On 1 January 2006, the Company adopted the provisions of SFAS No. 154, Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20 and FASB Statement No. 3. This statement applies to all voluntary changes in accounting principle and changes the requirements for accounting for and reporting of a change in accounting principle. The statement requires retrospective application to prior periods’ Financial Statements of a voluntary change in accounting principle versus including the cumulative effect of changing to the new accounting principle in net income. SFAS No. 154 carries forward many provisions of APB Opinion No. 20 without change, including the provisions related to the reporting of a change in accounting estimate, a change in the reporting entity, and the correction of an error. The adoption of this standard did not impact the Company’s Financial Statements.

LINGO MEDIA CORPORATION

Notes to Consolidated Financial Statements

(Expressed in Canadian dollars)

December 31, 2007 and 2006

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

(e) Recent Accounting Pronouncements:

(vii) In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statement No. 115 (SFAS No. 159). This statement permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value and establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 is effective on January 1, 2008. The Company is currently evaluating the impact of this standard on its Financial Statements.

21. Supplemental cash flow information:

Income taxes and other taxes paid		$	127,267			$	200,491			$	151,121
Interest paid		$	113,369			$	23,654			$	9,838

Non-cash transactions:

(i) 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.

(ii) In 2006, 2,849,500 common shares (407,071 after reorganization) were issued as consideration for the acquisition of A + Child Development (Canada) Ltd. in the amount of $569,900. As at December 31, 2006, this amount is included in capital stock.

(iii) Included in the capital stock is $29,277 (2006 - $ 187,812) representing the fair value of stock options exercised (note 11 (b)).

(iv) In 2005, warrants issued to agents in connection with a private placement (see note 11(a)(ii)) are valued at $30,849. 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.

(v) In 2005, the Company issued 150,000 common shares in exchange for services with a fair value of $30,000.

22. Comparative figures:

Certain comparative figures have been reclassified to conform with the financial statement presentation adopted in the current year.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934 the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunder duly authorized.

	LINGO MEDIA INC.

May 16, 2008	By:	/s/ Khurram Qureshi
		Khurram Qureshi
		President and Chief Executive Officer

	PART I

Item 1.	Identity of Directors, Senior Management and Advisors	3
Item 2.	Offer Statistics and Expected Timetable	3
Item 3.	Key Information	3
Item 4.	Information on the Company	18
Item 5.	Operating and Financial Review and Reports	32
Item 6.	Directors, Senior Management and Employees	50
Item 7.	Major Shareholders and Related Party Transactions	59
Item 8.	Financial Information	61
Item 9.	The Offer and Listing	62
Item 10	Additional Information	66
Item 11.	Quantitative and Qualitative Disclosures About Market Risk	79
Item 12.	Description of Securities Other Than Equity Securities	79

	PART II

Item 13.	Default, Dividend Arrearages and Delinquencies...	79
Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds	79
Item 15.	Controls and Procedures	80
Item 16.	Reserved	80

	PART III

Item 17.	Financial Statements	81
Item 18.	Financial Statements	81
Item 19.	Exhibits	82

	Unaudited						Audited
	Three Months						Year			Year			Year			Year			Year
	Ended			Ended			Ended			Ended			Ended			Ended			Ended
	03/31/08			3/31/07			12/31/07			12/31/06			12/31/05			12/31/04			12/31/03

Revenue	$	672		$	667		$	4,004		$	1,574		$	906		$	590		$	1,018
Gross Profit		537			528			3246			1255			783			495			846
Net 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		$	0.00
Weighted Avg. Shares		9,584			4,227			5,656			4,060			3,530			3,232			2,675
Period-end Shares outstanding		9,587			4,661			9,582			4,654			4,125			3,444			3,364

Working Capital	$	(377	)	$	(401	)	$	(348	)	$	(347	)	$	278		$	271		$	646
Long-Term Debt/Loans Payable		203			395			203			348			-			-			106
Shareholders’ Equity		5,476			1,089			5,886			1,376			1,088			938			1,620
Total Assets		7,662			2,834			7,888			2,884			1,417			1,798			1,931

US 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		$	764
US 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.

	Average		High		Low		Close
May 2008		1.00		1.02		0.98		0.99
April 2008		1.01		1.03		1.00		1.01
March 2008		1.00		1.03		0.97		1.02
February 2008		1.00		1.02		0.97		0.98
January 2008		1.01		1.04		0.98		1.00
December 2007		1.00		1.02		0.98		0.99
November 2007		0.96		1.00		0.91		1.00
October 2007		0.98		1.00		0.95		0.94
September 2007		1.03		1.06		0.99		0.99
August 2007		1.06		1.09		1.05		1.06
July 2007		1.05		1.07		1.03		1.07
June 2007		1.07		1.08		1.05		1.06

Fiscal Year Ended Dec. 31, 2007		1.07		1.19		0.91		0.98
Fiscal Year Ended Dec. 31, 2006		1.13		1.16		1.11		1.12
Fiscal Year Ended Dec. 31, 2005		1.21		1.27		1.15		1.17
Fiscal Year Ended Dec. 31, 2004		1.30		1.39		1.17		1.21
Fiscal Year Ended Dec. 31, 2003		1.40		1.57		1.29		1.29

Series:	Beginning English For Young Learners
Type 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: 2
Target Audience:	Elementary Schools: JK, SK, Grades 1-2

Series:	PEP Primary English
Type 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: 56
Target Audience:	Elementary Schools: Grade 3-6

Series:	Starting Line
Type 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: 72
Target Audience:	Elementary Schools: Grade 1-6

Series:	The Out Loud Program: Rhymes, Rhythms and Patterns for Language Learning
Type 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: 3
Target Audience:	Elementary Schools: JK, SK, Grades 1–2

Series:	Reading Practice
Type 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: 5
Target Audience:	Junior Middle Schools: Grades 7-9

Series:	Subject-Based English
Type 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: 6
Target Audience:	Third and fourth year university students majoring in subjects other than English

Series:	English in Business Communications
Type 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: 12
Target Audience:	Self-Study Adult Market

Series:	Vocational English
Type 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, Audiocassettes
Target Audience:	Chinese Vocational School
Number of Levels:	4
Publication Date:	September 2006
Author(s):	Lisa Bruno, Lisa Black, Sarah Miller
Publisher:	Lingo Media China School Edition: Co-publisher – Yilin Press

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

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

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

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

	English Language Learning(China)		Early Childhood Development (Canada)		Total
Revenue	$	894,073	$	680,264	$	1,574,337
Cost of Sales		132,968		186,309		319,277
Margin	$	761,105	$	493,955	$	1,255,060

	English Language Learning (China)		Early Childhood Development (Canada)		Total
Revenue	$	894,073	$	680,264	$	1,574,337
Cost of Sales		132,968		186,309		319,277
Margin	$	761,105	$	493,955	$	1,255,060

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

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

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

	ANNUAL COMPENSATION				LONG-TERM COMPENSATION
					Awards		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

Title	Name of	Amount and Nature	Percent
of	Beneficial	of Beneficial	of
Class	Owner	Ownership (1)	Class
Common	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%

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

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

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

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

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

Total Officers/Directors 723,119

	Shares	Shares	Shares	Shares
	Owned	Owned	Owned	Owned
	12/31/2007	12/31/2006	12/31/2005	12/31/2004
Michael P. Kraft	1,450,102	495,450	356,523	298,665

	Sales-Canadian Dollars
Period Ended	Volume	High	Low	Close

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

Quarterly
3/31/2008	463,600	1.83	0.85	1.81
12/31/2007	161,557	1.39	1.19	1.19
9/30/2007	401,886	1.40	1.05	1.19
6/30/2007	294,400	1.19	0.84	1.05
3/31/2007	72,291	1.155	0.63	0.875
12/31/2006	128,088	1.365	0.70	1.155
9/30/2006	123,945	1.47	0.84	1.365
6/30/2006	187,668	1.12	0.49	1.05
3/31/2006	226,664	1.33	0.77	1.05
12/31/2005	83,509	1.54	0.77	1.19
9/30/2005	216,388	1.855	0.77	1.575
6/30/2005	142,287	1.575	0.84	1.33
3/31/2005	255,582	2.275	1.26	1.26
12/31/2004	147,959	2.24	1.19	1.96
9/30/2004	128,796	1.75	1.12	1.33
6/30/2004	317,914	2.94	1.40	1.61

Yearly
12/31/2007	930,134	1.50	0.63	1.19
12/31/2006	666,365	1.47	0.49	1.155
12/31/2005	697,765	2.275	0.77	1.19
12/31/2004	1,497,789	2.03	1.89	1.96
12/31/2003	578,401	2.24	0.56	2.03

	Sales-US Dollars
Period Ended	Volume	High	Low	Close

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

Quarterly
3/31/2008	144,200	1.79	0.71	1.79
12/31/2007	37,089	1.40	0.77	1.22
9/30/2007	62,944	1.40	0.77	1.33
6/30/2007	78,952	1.19	0.70	0.91
3/31/2007	47689	2.10	0.35	0.84
12/31/2006	76626	4.06	0.63	1.176
9/30/2006	128421	2.66	0.63	1.288
6/30/2006	143740	1.19	0.41	1.01
3/31/2006	144133	1.33	0.70	0.91
12/31/2005	12106	1.39	0.56	0.805
9/30/2005	36046	1.68	0.525	1.26
6/30/2005	65326	1.27	0.735	0.98
3/31/2005	62985	1.89	0.98	1.26
12/31/2004	11374	2.52	0.875	1.61
9/30/2004	37872	1.47	0.84	1.12
6/30/2004	166566	2.45	0.91	1.26
3/31/2004	330383	3.57	1.435	2.10

Yearly
12/31/2007	245,718	1.40	0.21	1.22
12/31/2006	492,923	5.80	0.406	1.176
12/31/2005	219,321	1.89	0.525	0.805
12/31/2004	778,080	3.57	0.84	1.61

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

	LINGO MEDIA CORPORATION

July 15, 2008	By:	/s/ Michael P. Kraft
		Michael P. Kraft President and Chief Executive Officer

July 15, 2008	By:	/s/ Khurram R. Qureshi
		Khurram R. Qureshi Chief Financial Officer


	Page

Consolidated Interim Financial Statements:

Consolidated Interim Balance Sheets	3

Consolidated Interim Statements of Deficit	4

Consolidated Interim Statements of Operations	4

Consolidated Interim Statements of Cash Flows	5

Notes to Consolidated Interim Financial Statements	6 to 11

	March 31, 2008			December 31, 2007
Assets
Current assets:
Cash	$	171,475		$	343,338
Short term investment		150,000			150,000
Accounts and grants receivable (note 2)		697,017			996,469
Inventory		125,702			121,323
Prepaid and sundry assets		123,548			131,869
		1,267,742			1,742,999

Investment and advances		182,520			182,520
Deferred costs		157,419			157,419
Property and equipment, net		87,784			89,325
Development costs, net		244,931			267,910
Software & web development costs, net (note 3)		4,600,286			4,326,246
Goodwill		1,121,131			1,121,131
	$	7,661,813		$	7,887,550

Liabilities and Shareholders' Equity Current liabilities:
Bank loans (note 4)	$	190,000		$	230,000
Accounts payable		764,726			822,818
Accrued liabilities		303,898			227,206
Current portion of loans payable (note 5)		226,696			228,674
Unearned revenue		159,755			-
		1,645,075			1,508,698

Loans payable (note 5)		203,031			203,031
Future income taxes		337,749			290,145
		540,780			493,176

Shareholders' equity:
Capital stock (note 7 (a))		10,338,725			10,335,707
Contributed surplus		493,227			452,411
Deficit		(5,355,994	)		(4,902,442	)
		5,475,958			5,885,676
	$	7,661,813		$	7,887,550