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QIS Update #18 - 2016 - Q2 results from Lingo Media, NTG Clarity Networks and Quattro Exploration - August 31st 2016



Included in this update:

  • Lingo Media reports second quarter 2016 results
  • NTG Clarity reports Q2 2016 financial results
  • Quattro Exploration reports second quarter financial and operating results



Earnings season for the second quarter hit full stride this week as TSX-Venture listed companies were required to file prior to the deadline. We have been through a number of reports this week but quite frankly we have been disappointed by the vast majority of them. Revenues almost across the board for the first half of 2016 have stagnated or declined and increasing costs continue to hamper the bottom line of most companies. There were some improvements over Q1 results for the companies we will discuss in this QIS Update but there is still work to be done to get these companies up to the levels of cash flow and earnings that investors have been expecting.

Please feel free to email us anytime at info@smallcaps.ca or call us at (250) 377-1182. We look forward to your comments, questions, and feedback.



Lingo Media Corporation (LM:TSX-V)

Website: www.lingomedia.com
Current Price: $0.465 (coverage commenced March 22/16 - $0.76)

Lingo Media Corp. has provided its financial results for the second quarter ended June 30, 2016, reporting revenues of $1,549,397 and a net profit of $631,183 or two cents per share. All figures are reported in Canadian dollars and are in accordance with international financial reporting standards unless otherwise noted.

Michael Kraft, president and chief executive officer of Lingo Media, stated: "We are pleased to report our financial results for the second quarter of 2016 during which we earned two cents per share, while investing over $1-million in our digital content library, and significantly improving our balance sheet since the beginning of this year. For the period ended June 30, 2015, we reported a foreign exchange gain of $132,633 as compared with a loss of $215,571 for the same period in 2016, which negatively impacted our financial results by $348,204 period over period. However, we were able to generate significant cash during the period, which allowed us to invest $1,081,157 towards development of our digital content library, a key focus of our product strategy to position the company for future growth. Additionally, for the period ended June 30, 2016, our cash and cash equivalents increased to $1.5-million as compared with $409,000 as of Dec. 31, 2015. Likewise, our book value increased by $3-million to $7-million or 21 cents per share as of June 30, 2016, as compared with Dec. 31, 2015."

Mr. Kraft added: "Lingo Media continues to increase its investment in its sales management and marketing efforts. During the quarter, we focused on expanding our sales network, including new partnerships with Telefonica in Peru and Gale Cengage globally. Additionally, we are making progress in opening new markets beyond Latin America including Asia, where we are beginning to generate incremental revenues from our suite of digital learning products."

Q2 2016 operational highlights

On-line English language learning:

  • Released ELL Studio, a speech recognition and practice pronunciation mobile app that enables learners to practice their spoken English skills anywhere, any time;
  • Launched partnership with Telefonica Educacion Digital SLU to market, sell and distribute ELL Technologies' full suite of English language training products in Peru;
  • Entered into a distribution agreement with Gale, a subsidiary of Cengage Learning, whereby Gale is marketing and selling a co-branded version of ELL Scholar, named Gale-Lingo, as a self-study solution for digital libraries world wide, excluding Latin America;
  • Started marketing and selling, English for Success, a series of lessons and activities derived from ELL Library as a premium solution for governments and other institutions.
    Print-based English language learning:
  • Continued expanding the market for PEP Primary English and Starting Line textbook programs in China.

     

    FINANCIAL HIGHLIGHTS FOR THE SECOND QUARTER ENDED JUNE 30, 2016
      3 Months Ended June 30
      2016 2015
    Revenues $1,549,397 $1,794,659
    Operating Expenses 495,282 422,569
    Total Expenses 918,214 815,556
    Net Income 631,183 979,103
          per share $0.02 $0.04

     

  • Revenue for the period ended June 30, 2016, totaled $1,549,397 as compared with $1,794,659 in 2015, a 14-per-cent decrease.
  • Operating expenses for the period ended June 30, 2016, totaled $495,282 compared with $422,569 in 2015, a 17-per-cent increase reflecting sales and marketing efforts.
  • Net profit for the period ended June 30, 2016, was $631,183 or two cents per share (basic) based on 32.9 million weighted number of common shares as compared with 979,103 for 2015 or four cents per share (basic) on 25.9 million weighted number of common shares.
  • Income before amortization, share-based payments, depreciation, finance charges and taxes was $1,054,115 compared with $1,372,090 in 2015.

     

    FINANCIAL HIGHLIGHTS FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2016
      6 Months Ended June 30
      2016 2015
    Revenues $2,306,255 $2,446,286
    Operating Expenses 758,204 742,032
    Total Expenses 1,624,242 1,241,754
    Net Income 682,013 1,204,532
          per share $0.02 $0.05

     

  • Revenue for the six months ended June 30, 2016, totalled $2,306,255 compared with $2,446,286 for the same period in 2015, a 6-per-cent decrease.
  • Operating expenses for the six months ended June 30, 2016, totalled $758,204 as compared with $742,032 for the same period in 2015, a 2-per-cent increase.
  • Net profit for the six months was $682,013 or two-cent earnings per share (basic) based on 31.0 million weighted number of common shares as compared with net profit of $1,204,532 or five cents per share (basic) on 23.3 million weighted number of common shares for the same period in 2015.
  • Income before amortization, share-based payments, depreciation, finance charges and taxes was $1,548,051, compared with $1,704,254 in 2015.

  • Balance sheet as at June 30, 2016
  • Cash and cash equivalents as at June 30, 2016, totaled $1,479,831 as compared with $409,022 as at Dec. 31, 2015, an increase of $1,070,809 from operations and from the exercise of warrants and stock options.
  • Current ratio improved to 4.68:1 for the period ended June 30, 2016, as compared with 2.86:1 as at Dec. 31, 2015.
  • Total liabilities as at June 30, 2016, totaled $629,212 as compared with $1,186,167 as at Dec. 31, 2015, an improvement of $556,955 after loans payable of $580,000 were repaid in full and retired.
  • Book value improved to $7,034,519 as at June 30, 2016, as compared with $4,046,784 as at Dec. 31, 2015.
  • Mr. Kraft continued: "During the second half of 2016, we expect our revenue and profitability to trend in a similar fashion or greater as we gain sales transaction in Latin America and new markets in Asia. We look forward to providing our shareholders with updates as we continue to enter new markets, secure sales contracts and achieve revenue and earnings milestones."

  •  

    View the company’s complete financial statements online at www.sedar.com.

  •  

    QIS Capital: Lingo Media showed marked improvement in Q2 over Q1 with higher revenues and earnings. It will be important for the company to continue this trend in Q3 and Q4 in order to match last year’s record revenues and earnings. Lingo has announced some important new joint ventures over the past few months which are expected to boost revenues and earnings in the last half of 2016. The company is on solid financial footing with positive working capital of $4.1 million ($0.11 per share) and no long-term debt.




     

  • NTG Clarity Networks Inc. (NCI:TSX-V)
    Website: www.ntgclarity.com
    Current Price: $0.09 (coverage commenced Feb. 4/10 - $0.045)

     

  • NTG CLARITY NETWORKS ANNOUNCES SECOND QUARTER 2016 FINANCIAL RESULTS

  •  

    NTG Clarity Networks Inc. had second quarter 2016 revenues of $5,077,129, as compared with $3,031,041 in 2015, a 68-per-cent increase. For the first half of 2016, revenues were $7,510,462 as compared with $8,033,202, a 7-per-cent decline.

  •  

    In the fourth quarter of 2015 and the first half of 2016, the company significantly expanded its location and customer base with new customers in Saudi Arabia, Egypt and Kuwait. As a result, the company's selling and general and administrative expenses increased significantly as it incurred expenses for its new offices/staff in Oman and Kuwait and for new sales personnel. The uncertainty in the Middle East due to lower oil prices has delayed the awarding of new projects and the company has been experiencing longer lead time to close new projects. However, with the stability and increase of oil prices, renewals and new projects are starting up again. The company is working to reduce G&A costs, as contracts allow, and continues to work to optimize marketing and selling costs, based on the company's revenue.

  •  

    Gross margin for the three months ended June 30, 2016, increased to 49 per cent (second quarter 2015: 40 per cent) and for the six months was 42 per cent (2015: 37 per cent) as the company works to optimize the costs of delivering its products and services. New projects are up and running and resource/maintenance costs have levelled out. The company expects gross margins to stabilize between 40 and 45 per cent as the product mix will vary.

  •  

    Of particular note during the second quarter, the company recorded a loss on foreign exchange of $801,614 compared with a gain of $259,038 during the same period in 2015. As a result, the net loss in the second quarter of 2016 was $1,009,297 compared with net income of $166,270 in the second quarter of 2015. The second quarter net loss was 50 per cent smaller than the first quarter of 2016 as the company is working to increase sales from new offices, and to lower costs and improve margins.

  •  

    As at June 30, 2016, NTG Clarity had positive working capital of $902,783 and no long-term debt.

     

    INCOME STATEMENT HIGHLIGHTS
      3 Mos. Ended June 30 6 Mos. Ended June 30
      2016 2015 2016 2015
    Revenues $5,077,129 $3,031,041 $7,510,462 $8,033,202
    Cost of Sales 2,606,941 1,820,542 4,344,273 5,067,884
    Gross Profit 2,470,188 1,210,499 3,166,189 2,965,318
    Selling and G&A Exp. 2,593,073 1,390,760 4,940,921 2,342,202
    Forex Loss (gain) 801,614 (259,038) 816,126 (561,108)
    Net Income (loss) (1,009,297) 166,270 (2,995,754) 888,759
    per share ($0.03) $0.00 ($0.08) $0.02

     

    BALANCE SHEET
    (as at June 30, 2016)
    Current Assets $ 9,394,655
    Total Assets 15,184,183
    Current Liabilities 8,491,882
    Long-Term Debt nil
    Shareholders' Equity 6,692,301

    Looking toward the future, the company remains committed to its growth strategy and continues to focus on growing organic operations, expanding its marketing reach geographically and enhancing its product offering. The company is also looking to increase its reach through acquisitions and/or partnerships with global system integrators.

  •  

    The company has had challenges over the last few quarters as it positions itself for future growth. The company has had net losses resulting in a deficit to carry forward, however, it has reduced its losses from the first quarter to the second quarter of 2016. With the stabilization of oil prices, the company is on the path to return to profitability.

  •  

    View the company’s complete financial statements online at www.sedar.com.

  •  

    QIS Capital: NTG Clarity showed a significant improvement in revenues and the bottom line in Q2 after a very challenging first quarter. The majority of the company’s net loss in Q2 came from a foreign exchange loss, otherwise, NTG Clarity would have been back to almost break-even. Management expects revenues and earnings to continue to ramp up over the second half of 2016 as new contracts and renewals are awarded. The company remained free of long-term debt as at June 30, 2016 but is likely in need of additional capital during the remainder of the year. Overall business appears to be picking up for NTG Clarity after a very slow finish to 2015 and a slow start to 2016 caused in large part by the decline in oil prices.




     

  • Quattro Exploration and Production Ltd. (QXP:TSX-V)
    Website: www.qxp-petro.com
    Current Price: $0.07 (coverage commenced Sep. 3/15 - $0.18)

  •  

    QUATTRO RELEASES FINANCIALS FOR THE 6 MONTHS ENDING JUNE 30, 2016 AND INCREASES PRODUCTION YEAR OVER YEAR 15%

  •  

    Quattro Exploration and Production Ltd. has released its financial results for the quarter ended June 30, 2016, reporting a loss of two cents per share for the six-month period ended June 30, 2016. Despite these challenges Quattro is pleased to report that, in the first half of 2016, production averaged 1,593 barrels of oil equivalent per day, representing a year-over-year increase of 15 per cent from the average production of 1,390 barrels of oil equivalent per day recorded during the same period in 2015.

  •  

    In the second quarter, oil and natural gas production at Quattro was limited to 1,540 barrels of oil equivalent per day due to a decision to limit capital investments to only oil production, during a period of extremely low commodity prices. Quattro continues to believe that a diversified production base of oil and natural gas is a fundamental requirement within the industry, and, for the foreseeable future, Quattro intends to increase oil production to where it will represent a sustainable 60 per cent of its daily production, with this transformation being accelerated with the completion of its divestiture plan previously announced on Aug. 2, 2016. Over the past 12 months, the company's oil production continues to increasingly offset natural gas prices that in the second quarter briefly reached lows of 60 cents per thousand cubic feet. The company's decision in the fourth quarter of 2015 to more aggressively increase oil reserves and production through acquisitions has proved to be timely as natural gas prices are only now recovering to a more seasonally adjusted price range of $2.50 to $3.50 per thousand cubic feet from prices not seen in over 20 years.

  •  

    In the second quarter of 2016, despite the low overall commodity prices, the company's focus on increasing oil production positioned the company to increase quarter-over-quarter revenues to $19.55 per barrel of oil equivalent from the lows of $16.01 per barrel of oil equivalent reported in the first quarter of 2016, limiting losses, with the results as shown in the attached table.


    Revenues -- $19.55 per boe $ 2,740,199
    Net income from operations -- $1.19 per boe netback $ 163,213
    Comprehensive net loss -- $0.03 per share $ 1,151,987
    Cash and equivalents $ 8,062,119
    Working capital deficit (net of long-term debt) $ 178,241
    Net debt (excluding decommissioning, non-cash liabilities and deferred taxes) $10,476,407
  • The company's focus on increasing oil production in the second quarter will continue for the next 12 months and is being accelerated with the divestiture and monetizing of a portion of its operations in the Western Canadian sedimentary basin in the second half of 2016.

  •  

    "Commodity prices in the first half of 2016 continued to be a mixed bag of dramatic adjustments, while the overall industry continues to struggle with the determination of which sources of energy will be the driving force in the future. Despite this fact, Quattro continued to focus on improving its operational results, through the balancing of its portfolio of production through an increase in oil production," said Leonard B. Van Betuw, president and chief executive officer. "Quattro's diversified and competitive low-cost production strategy situated within low-risk geopolitical jurisdictions are what will ultimately be the foundation for the dramatic improvements in the company's financial strength."

  •  

    "The six months ending June 30, 2016, have been a series of contradictions for Quattro. The company increased production and cash flow from oil production, but unprecedented low natural gas prices, due to the shut-in of operations in regions close to the fires in Northern Alberta, masked both the company's results and the overall recovery in oil prices that are related as much to adjustments around the world as they are to the regional challenges in Alberta. These challenges for Quattro are understandable but difficult to convey to the industry and its stakeholders over the short term. It is within this economic background that Quattro believes that difficult and rational decisions had to be made in order that the company's long-term business plan will prevail. Therefore, the company's hard work over the past years has put Quattro in an envious position of having options, as a result of having a number of economically viable projects in inventory; as such, the company has determined that a non-core divestiture and monetization program will allow for the acceleration of the company's adjustments to the current market conditions. Resulting in both near-term and long-term rewards for all stakeholders of the company.

  •  

    "Quattro's board of directors' approval of the divestiture plan to sell 40 per cent of Quattro's year-end 2015 reserves is a testament to what the size of the company's unrecognized potential has become and is a clear recognition and support for what Quattro's team is capable of in terms of producing results when they are given the opportunity," said Mr. Van Betuw.

  •  

    "At the time of the filing its financials, Quattro continues to refine its divestiture plan while it evaluates its options for the funding and development of its long-life oil and natural gas assets in Saskatchewan and northeastern British Columbia, where it intends to collectively reach its first goal of a sustainable potential of more than 3,000 barrels per day," said Mr. Van Betuw. "It is these reserves that will position the company to grow for the next 15 to 20 years through both exploration and production in Canada, Central [America] and South America."
  •  

     

    Financial Results (in 000s)
      3 Mos Ended June 30 6 Mos Ended June 30
      2016 2015 2016 2015
    Revenues $2,379 $2,909 $4,553 $5,790
    Cash Flow (771) 704 (1,145) 1,997
    per share ($0.02) $0.02 ($0.03) $0.05
    Net Income (1,152) 1,654 (932) 1,861
    per share ($0.03) $0.05 ($0.02) $0.05
    Production Data
    Oil & NGLs (boe/d) 650 290 558 293
    Natural Gas (boe/d) 890 1,045 1,020 1,063
    Total boepd (6:1) 1,540 1,371 1,593 1,391

     

    BALANCE SHEET
    (as at June 30, 2016)
    Current Assets $8,343,974
    Total Assets 82,339,622
    Current Liabilities 18,045,815
    Long-Term Debt 2,845,443
    Shareholders' Equity 27,586,011

    QIS Capital: Seems that everyone is holding on tight to see if Quattro can complete its previously announced $30 million asset sale which is expected to complete very shortly. If successful, this sale would strengthen Quattro’s financial position monumentally with expected positive working capital of approximately $12 million ($0.27 per share). Production appears to have stabilized in this 1,500 boe/d range and should start to show improvement again once Quattro has capital to deploy into operations.


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  • 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 19,000 shares of Lingo Media Corporation, 1,132,000 shares of NTG Clarity Networks Inc. and 267,000 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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