After delaying the filing of its 1Q2016 report, Lilis Energy Inc. (OTCMKTS: LLEX) finally did it and what came out wasn’t impressive. The company detailed its financial challenges and said it could close shop if it continued to face financial shortage. But at a recent shareholder meeting, the company’s shareholders voted in favor of the proposed merger with a company called Brushy Resources. The question is: will the merger keep LLEX aloft and for how long?
A looking into the Lilis Energy Inc. (OTCMKTS: LLEX) financials
When you look at Lilis Energy Inc. (OTCMKTS: LLEX)’s regulatory disclosure, you find that the company had only $29,000 of cash and equivalents at the end of 1Q2016. That indicates a high cash burn rate considering that the company’s cash and equivalents at the end of the previous quarter was $110,000.
Lilis Energy Inc. (OTCMKTS: LLEX) disclosed in the regulatory filing that its working capital deficit stood at $18,378 at the end of 1Q2016 compared to a deficit of $15,695 at the end of 4Q2015. The company also has outstanding convertible notes.
Coming to operating results, the company generated total revenue of $39,000 in the latest quarter, indicating a massive pullback from revenue of $118,000 in the prior quarter. The management blamed shrinking community prices and stoppage of production as some of the factors that contributed the nearly 67% decline in topline number in the most recent quarter.
What does the deal with Brushy entail?
According to the management of Lilis Energy Inc. (OTCMKTS: LLEX), merging with Brushy could provide them with the much needed relief to return the business to profitable operations. Inadequate funds have made it difficult for the company to reach its production goals. As such, combining with Brushy is expected to boost the company’s production capabilities, that paving the way for greater cash flow. Additionally, the merger with Brushy will provide LLEX with the opportunity to strengthen its balance sheet by eliminating or financing some of its debts.
With the shareholder blessing now secured in the path to combining with Brushy, it will be interesting to see how Lilis Energy Inc (OTCMKTS: LLEX) transforms.