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QIS Update #17 - 2016 - Lingo Media secures new contract and Quattro Exploration adds to asset sale while receiving court protection - August 11th 2016

Included in this update:

  • Lingo Media subsidiary secures sales contract with large university in Peru
  • Quattro Exploration & Production increases its asset divestiture plan and is granted court protection to allow for its orderly completion

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Lingo Media Corporation (LM:TSX-V)

Current Price: $0.63 (coverage commenced March 22/16 - $0.76)

Lingo Media Corporation has announced that its wholly-owned subsidiary, ELL Technologies Ltd., has secured a sales contract with Universidad de San Martín de Porres.

Telefónica Educación Digital S.L.U. (Telefónica), a distribution partner of ELL Technologies, has signed an agreement with the Universidad de San Martín de Porres, an institution with over 20,000 students and having its two main campuses in Lima and Chiclayo, Peru. The University will use ELL Technologies’ Scholar English learning and training solution.

“Our partnership with Telefónica is progressing as anticipated and we are pleased to add the Universidad de San Martín de Porres to our growing list of university clients. Telefónica is making great strides in Peru and we are excited with the prospects of adding additional educational institutes throughout the country,” said Gali Bar-Ziv, COO of Lingo Media.

QIS Capital: This is another exciting development for Lingo Media as the company grows its sales channel. This sales contract is also very prospective for future similar contracts in the region. Lingo Media is set to release its second quarter financial results by the end of August.

Quattro Exploration and Production Ltd. (QXP:TSX-V)

Current Price: $0.065 (coverage commenced Sep. 3/15 - $0.18)

Quattro Exploration and Production Ltd. has announced today an increase in its divestiture plan to $30,000,000 including its previously announced asset sale of $24,250,000 and has filed a Notice of Intention to Make a Proposal (Notice of Intention) under the provisions of Part III of the Bankruptcy and Insolvency Act (the BIA). The notice was filed by the Company in order to allow it the necessary time to complete the previously announced asset sale and the sale of additional non-core assets that are currently in process, protecting Quattro and its assets from the claims of creditors and others while the Company pursues these objectives.

The Company is also pleased to announce that it is evaluating a number of financing proposals that are complementary to its current lender’s continued funding of Quattro's business plan.

Pursuant to the Notice of Intention, Hardie and Kelly Inc. has been appointed as the trustee in the Company's proposal proceedings and will assist the Company in these efforts.

The decision to file the Notice of Intention was made by Quattro’s board of directors following aggressive actions by certain of the Company’s trade creditors that have been limiting the Company’s ability to execute its business plan in an orderly manner.

A Notice of Intention permits the Company to pursue the restructuring of its financial affairs through an orderly and formal proposal process. The filing of the Notice of Intention has the effect of imposing an automatic stay of proceedings (Stay) that will protect the Company and its assets from the claims of creditors and others. The initial Stay period of 30 days can be extended by court order, during which time the Company will be presenting its proposal to its creditors.

The increased divestiture value anticipated to be realized is based on the sale of non-core shut-in assets in the region in addition to the Alberta assets previously disclosed. Therefore, as reported on August 2, 2016, based on Quattro’s independent 2015 year end reserve report, the oil and gas assets being sold represent 40% of Quattro’s reserves and 35% of the Company’s lands, averaging approximately 750 boe/d and were assigned total proven reserves (1P) estimated at 2.68 million boe, valued at $22.5 million, within a land base of 212,997 acres (gross) or 147,576(net) acres (the Properties).

The conclusion of this process is anticipated to provide Quattro the ability to address all of its obligations to its creditors and materially improve Quattro's working capital upon the completion of its divestiture plan. The Company’s divestiture plan is to reduce the Company's liabilities by up to $18 million and increase its working capital to more than $12 million.

QIS Capital: We answered a number of email and phone inquiries regarding Quattro Exploration today. We sought comment from management immediately upon the release of the news as no one likes to read the work bankrupt in a press release. However, we were provided a very different view from management which is in sync with what is disclosed in today’s press release. First and foremost is the exciting announcement that the assets being sold have increased to $30 million from the $24.25 million announced previously. The additional proceeds come from shut-in production which was not being valued by the market. The Board of Directors of Quattro felt that it was necessary to seek creditor protection as various groups were working to frustrate the sale process and hinder the company’s current operations. Management feels that with the creditor protection in place, that it can move forward on the completion of the sale in a timely and orderly fashion. The letter of intent is expected to be a binding contract of sale by the end of August 2016.

It is also important to point out that Quattro’s banking facilities appear to be onside with today’s announcement and continue to maintain a positive banking relationship with the company. This does not appear to be a company forced into bankruptcy by the main lending institution, but rather by aggressive industry creditors as Quattro has had limited working capital after taking a $4.5 million write-down at the end of 2015 due to the bankruptcy of several of its joint venture partners. Quattro continues to work towards securing additional assets due to the insolvency of these partners.

Of course we are always concerned with bankruptcy proceedings but at this time management retains control of its operations and appears to be making progress with its divestiture of core assets. If the company can complete this sale, Quattro will be in a very strong financial position with positive working capital of $12 million which far exceeds the current market capitalization of less than $3 million. This also doesn’t include the remaining 1,200 boe/d of production, various shut in wells, development locations, and additional business assets. Hopefully we see the completion of the asset sale in the next few weeks.

Disclaimer: This article is for informational purposes only. The information contained within this article should not be construed as offering investment advice. Those seeking direct investment advice should consult a qualified, registered, investment professional. BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf: 1bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. The company profiled assumes no liability for the information presented. This is not a direct or implied solicitation to buy or sell securities. Readers are advised to conduct their own due diligence prior to considering buying or selling any stock. The author(s) owns directly or indirectly 15,000 shares of Lingo Media Corporation and 282,000 shares of Quattro Exploration and Production Ltd. QIS Capital may have a financial relationship with these companies and may trade in the stocks mentioned. No stock exchange has approved or disapproved of the information contained herein. Copyright © 2003 - 2016 QIS Capital Corporation.

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