Ann: MEL announces scrip merger with Elk Petroleum, page-27

"....I think we need a lot more detail here. Its all a bit concerning given we have just funded ELK for $2.5m in working capital when really the cash balance of MEL is its last remaining lifeline if things dont get better..."

and that's the point here.
do MEL s/h realise that they have no say in this?
the Scheme of Arrangement and voting on the deal, is for the s/h of ELK only.
the s/h of MEL do not get to vote.

so MEL has $10.251m at end of Sept Qtr.
MEL is to provide s/t loan to ELK of $2.5m in form of Convertible Note.
I think this loan is effective immediately? it does not seem to be contingent upon deal being approved by ELK s/h.
so whatever happens, MEL will have invested $2.5m of its cash in equity in ELK !
that's about 53m new ELK shares at $0.047. ELK has 196m shares.
so 53m represents 21% of expanded capital.
(am not clear on t/o aspect as MEL would need to launch t/o of ELK if it goes over 20% threshold).
point is, if deal falls over, loan is due for repayment after 30 days of MID being terminated.

the issue for s/h of MEL is that if deal falls over, then MEL is stuck with $2.5m loan to ELK.
so will ELK be able to repay loan to MEL if deal fails? they have only $1.6m cash, and state that they were looking for funding all over the place. good luck.
so instead of security, the loan can be converted to equity in ELK.
terrific - 21% of ELK (with no funds).

this deal might well be a bargain for MEL s/h, in that MEL just might be getting an interest in a USA O&G explorer and producer (hopefully) at a discount to sunk costs !?

but you guys get no say in it as far as I can tell.

seems to me that MEL has its Nth Coast assets, plus $10.251m of cash.
at this stage the Nth Coast O&G assets are worthless. and they are, because at the moment MEL cannot explore up there.
so that leaves only real asset as $10.251m cash.

and now the MEL board is lending $2.5m of that cash to a US based business, on the hope it will get repaid, or else MEL will end up with 21% of a US O&G explorer.
what good is 21% of a business operation over which it has no control? will it get a board seat if deal falls over?

what surprises me is this deal smacks of a "handcuff" arrangement. seen it before.
MEL s/h are to be stuck with a US investment no matter what.
and you don't get to vote
if deal goes thru you end up with 77% of a coy with Nth Coast O&G assets which are not able to be explored or developed at present time, a loan to ELK of $2.5m, balance of cash of $6.5m, and a diluted interest in a US O&G coy operating in a foreign country.

the upshot for my view is that this appears to be a major change in direction for MEL.
You MEL s/h should be given the opportunity to vote on the proposal.
and you should get to vote before they lend the funds to ELK.
all imho only. note I am not a MEL s/h.