U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-9800
LYRIC ENERGY, INC.
(Exact name of small business issuer as specified in its
Charter)
Colorado 75-1711324
(State of Incorporation) (I.R.S. Employer
Identification Number)
1013 West 8th Ave., Amarillo, Texas 79101
(Address of principal executive offices)
(806) 376-5088
(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be
filed by Sections 13 or 15(d) of the Securities Exchange Act
during the past 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes....... No...X....
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's
classes of common equity as of the latest practicable date:
46,958,483 shares of common stock as of April , 1997.
Transitional Small Business Disclosure Format (check one);
Yes....... No...X....
Index to Quarterly Report on Form 10-QSB
PART I - FINANCIAL INFORMATION
Page
Item 1. Financial Statements:
Balance Sheet as of July 31, 1996 .. . . 3
Statements of Operations for the
Three-Month Periods ended July 31,
1996 and 1995 .. . .. . .. . .. . .. . . 4
Statements of Cash Flows for the
Three-Month Periods ended July 31,
1996 and 1995 .. . .. . .. . .. . .. . . 5
Notes to Financial Statements.. . .. . . 6
Item 2. Plan of Operation. .. . .. . .. . .. . . 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. .. . .. . .. . .. . . 11
Item 2. Changes in Securities . .. . .. . .. . . 11
Item 3. Defaults Upon Senior Securities . .. . . 11
Item 4. Submission Of Matters To A Vote Of
Security Holders . .. . .. . .. . .. . . 11
Item 5. Other Information. .. . .. . .. . .. . . 11
Item 6. Exhibits And Reports on Form 8-K .. . . 11
SIGNATURES. . .. . .. . .. . .. . .. . .. . .. . . 12
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Lyric Energy, Inc.
Balance Sheet
(Unaudited)
July 31, 1996
ASSETS
Current asset - cash in bank $ 54
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
Current liabilities:
Accounts payable, trade
(including $48,811 due
to related parties) $ 64,487
Advance from a related party 88,907
Accrued interest payable to
a related party 121,481
Judgment payable to related party 250,000
Total current liabilities 524,875
Shareholders' deficiency:
Common stock, $.01 par value,
shares authorized, 250,000,000;
issued and outstanding, 46,958,483 469,584
Additional paid-in capital 1,690,545
Accumulated deficit (2,684,950)
Total shareholders' deficiency ( 524,821)
Total liabilities and
shareholders' deficiency $ 54
See accompanying notes to financial statements.
Lyric Energy, Inc.
Statements of Operations
(Unaudited)
Three-Month
Periods Ended
July 31,
1996 1995
Revenues $ - $ -
General and administrative expenses (56) -
Interest expense to related party (2,223) (2,223)
Other income 30 -
Net loss before income taxes (2,249) (2,223)
Income taxes - -
Net loss $ (2,249) $ (2,223)
Weighted average shares
outstanding 46,958,483 46,958,483
Net loss per common share $(.00005) $(.00005)
See accompanying notes to financial statements.
Lyric Energy, Inc.
Statements of Cash Flows
(Unaudited)
Three-Month
Periods Ended
July 31,
1996 1995
Net cash used in operating activities
and net decrease in cash $(1,399) $[ ]
Cash at beginning of period 1,453 412
Cash at end of period $ 54 $[ ]
See accompanying notes to financial statements.
Lyric Energy, Inc.
Notes to Financial Statements
Note 1. Basis of Presentation
The unaudited financial statements and related notes to
financial statements presented herein have been prepared by the
Company pursuant to the rules and regulations of the Securities
and Exchange Commission. Accordingly, certain information and
footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting
principles have been omitted pursuant to such rules and
regulations. The accompanying financial statements were prepared
in accordance with the accounting policies used in the
preparation of the Company's audited financial statements
included in its Annual Report on Form 10-KSB for the fiscal year
ended April 30, 1996 and should be read in conjunction with such
financial statements and the notes thereto.
In the opinion of management, all adjustments (consisting
only of normal recurring adjustments) which are necessary for a
fair presentation of operating results for the interim periods
presented have been made.
Note 2. Going Concern
The Company has been relatively inactive during the past two
years due to a lack of operating assets and working capital and a
significant deficiency in assets. These factors raise
substantial doubt about the Company's ability to continue as a
going concern. The Company is currently searching for the
acquisition of or merger with an operating company in order to
carry on the business of the acquired company. The Company has
signed a Letter of Intent to make such an acquisition (see Note
4). The ability of the Company to continue as a going concern is
dependent on the completion of such an acquisition. The
financial statements do not include any adjustments that might be
necessary if the Company is unable to continue as a going
concern.
Note 3. Related Party Transactions
Advance from a related party (ML&C Trust) consists of an
unsecured 10% demand note payable of $88,907. ML&C Trust is
controlled by a significant shareholder of the Company. Interest
expense of $2,223 was incurred on this advance during the
three-month periods ended July 31, 1996 and 1995. In January
1997, the Company received a release of its obligation to repay
this advance including any interest which was accrued under the
terms of the note.
The Company had a $250,000 judgment payable to a related
party (Dynamic Investing, Inc.) at July 31, 1996. Dynamic
Investing, Inc. is owned by the president of the Company. In
December 1996, the Company received a release of the judgment
from the related party at no cost to the Company.
Note 4. Subsequent Event
Effective November 1, 1996, the Company returned to the
development stage in accordance with Statement of Financial
Accounting Standards No. 7, Accounting and Reporting by
Development Stage Enterprises, with its planned principal
activities consisting of the evaluation, structure and completion
of a merger with or acquisition of a privately owned corporation.
On January 2, 1997, the Company entered into a Letter of
Intent ("LOI"), which was amended by subsequent negotiations and
a supplemental letter dated March 17, 1997, with Natural Gas
Technologies, Inc., a Texas corporation ("NGT"). Pursuant to the
LOI, NGT loaned the Company $100,000 pursuant to a
noninterest-bearing convertible note dated February 4, 1997
("Note"), and the loaned funds were placed in escrow. The loan
will be converted into 203,041,517 common shares, which are all
of the remaining authorized but unissued common shares of the
Company, after the Company has filed all of the required reports
pursuant to the Securities Exchange Act of 1934, as amended, and
after the Company obtains a waiver from the bank of the Company's
commitment in connection with a compromise and settlement
agreement related to a bank debt forgiveness in July 1991 to
issue additional common stock in the future as may be required to
maintain the bank at an 8.9976% ownership interest. Upon such
conversion, the loaned funds will be released from escrow and
paid to the Company for use in satisfying all existing debts and
encumbrances and to settle all claims against it. If the Note is
not converted by December 31, 1997, the funds in escrow will be
returned to NGT. The LOI further provides for a share exchange
transaction whereby the shareholders of NGT would be issued
additional shares in the Company such that these shareholders
would own a total of 95 percent of the total issued and
outstanding common shares of the Company and NGT would become a
wholly-owned subsidiary of the Company. The share exchange will
occur after the Company holds a shareholder meeting for the
purpose of (i) approving a reverse split of the Company's common
stock which will result in additional common shares being made
available for issuance in the shares exchange; (ii) authorizing
10,000,000 shares of no par value preferred stock approximately
25,000 of which will be designed for exchange with NGT preferred
shareholders in the share exchange and the remaining 9,975,000 of
which will be reserved for future issuance at the discretion of
the Board of Directors; and (iii) approving certain other
amendments to the Company's Articles of Incorporation. The share
exchange remains conditional upon the completion of due diligence
and final documentation.
Item 2. Plan of Operation.
The Company is currently searching for an operating company
to acquire in order to carry on the business of the acquired
company. The Company has only engaged in preliminary efforts in
attempting to identify possible merger or acquisition candidates;
however, effective January 2, 1997, as amended March 17, 1997,
the Company has entered into a letter of intent with Natural Gas
Technologies, Inc. See "Letter of Intent and Promissory Note."
The Company has insufficient capital with which to provide merger
or acquisition candidates with substantial cash or other assets,
regardless, management believes that the Company offers potential
merger or acquisition candidates the opportunity to acquire a
controlling ownership interest in a public company at
substantially less cost than is required to conduct an initial
public offering.
Management contemplates that the Company will seek to merge
with or acquire a company with assets or earnings, or both. The
Company has not established a specific level of earnings or
assets below which the Company would not consider a merger
acquisition of the target company. Moreover, management may
identify and acquire a target company which is generating losses
if it believes that the prospects of the target company merit the
risks involved.
The Company has very limited liquidity and in fact in the
absence of being able to borrow money from its Chairman of the
Board of Directors or some other source, it will not be able to
continue operations. In recent history, the Company's sole
source of liquidity was in fact from loans of cash or services
provided to it by its Chairman. The Company does not plan on
hiring third party consultants to perform due diligence or market
research relative to availability of target companies but instead
plans on relying on its own judgment in determining the viability
of the merger and acquisition market and any target candidates
which may be made available to it. The Company's sole employee
is its Chairman and Chief Executive Officer and it is expected
this shall remain true until such time as the Company completes
an acquisition of a target operating company or a business of
another company by way of a merger transaction. As a result of
the Company's lack of cash, its only available form of
acquisition "capital" is its stock.
Letter of Intent and Promissory Note
On January 2, 1997, the Company entered into a Letter of
Intent with Natural Gas Technologies, Inc. ("NGT"), a Texas
corporation engaged in the exploration, development and
production of oil and gas properties. The Letter of Intent was
amended March 17, 1997. Pursuant to the Letter of Intent, NGT
loaned the Company $100,000 pursuant to a non-interest bearing
Convertible Promissory Note (the "Note"). The Note automatically
converts into 203,041,517 shares of the Company upon the later to
occur of (i) the Company becoming current on all reports required
under Section 13 or 15(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and (ii) the Company obtaining a
waiver from Amarillo National Bank of the Bank's non-dilution
rights contained in the July 31, 1991 agreement with the Bank.
If the Note does not convert prior to December 31, 1997, the
funds in escrow will be repaid to NGT. Upon conversion of the
Note, the Company has agreed to fill two vacancies on the Board
of Directors with two directors nominated by NGT.
The Letter of Intent further provides for a special meeting
of the shareholders of the Company to approve the following
matters: (i) a 268.3342 shares for one share reverse split of the
Company's common stock; (ii) a name change of the Company to
Natural Gas Technologies, Inc.; (iii) amendments to the Company's
articles of incorporation to eliminate the liability of officers
and directors in certain circumstances and to reduce the
shareholder voting requirements for certain significant corporate
actions; and (iv) the authorization of 10,000,000 shares of no
par value preferred stock which will be reserved for future
issuance in the discretion of the Board of Directors. Assuming
approval of the foregoing matters, the current shareholders of
the Company will upon conversion of the Note hold 175,000 shares
and NGT will hold 756,674 shares on a post-reverse split basis.
The special meeting will be held as soon as practicable after the
conversion of the Note, and all costs associated with the
meeting, including the preparation and mailing of the information
statements and notices will be borne by NGT.
The Letter of Intent further contemplates a share exchange
between NGT and Lyric. The share exchange is intended to take
place in two stages. The first stage will occur immediately
after shareholder approval of the matters specified above and
will consist of the exchange of approximately 2,055,000 shares of
the authorized but unissued post-reverse split shares of the
Company for approximately eighty percent of the equity interests
in NGT, which interests are held by certain officers, directors
and their family members and affiliates. The Company will
therefore control NGT upon completion of the first stage. The
second stage will occur upon the effective date of a registration
statement on Form S-4 which registers the exchange of all of the
remaining equity interests in NGT into approximately 513,000
shares of the authorized but unissued post-reverse split shares
of the Company and further providing for the distribution of the
756,674 post-reverse split shares of the Company issued to NGT
upon conversion of the Note to the shareholders of NGT
immediately prior to the share exchange. The foregoing terms are
subject to adjustment based upon the anticipated conversion of
certain preferred stock of NGT into common stock and based upon
certain anticipated oil and gas property acquisitions by NGT
prior to the share exchange. It is anticipated that upon
completion of the share exchange, the current shareholders of the
Company will hold five percent of the total outstanding shares of
Lyric and the shareholders of NGT will hold the remaining 95
percent.
The share exchange remains conditional upon the completion
of due diligence and final documentation therefor.
Liquidity and Capital Resources
On July 31, 1996, the Company had cash on hand of $54. At
the date of this report, the Company has entered into a
Convertible Promissory Note pursuant to which $100,000 has been
loaned to Company but is currently being held in escrow. Such
funds will be taken out of escrow and paid to the Company upon
the later to occur of (i) the Company becoming current on all
reports required under Section 13 or 15(d) of the Exchange Act
and (ii) the Company obtaining a waiver from Amarillo National
Bank of the Bank's non-dilution rights contained in a settlement
agreement with the Bank. See Note 4 of the Notes to Financial
Statements presented herein. Pursuant to a letter of intent
between the Company and the lender, the Company must use such
funds for the payment of outstanding obligations in preparation
for a share exchange with the lender. In the event the foregoing
escrow release conditions do not occur before December 31, 1997,
the funds in escrow will be repaid to the lender. Should this
occur, the Company will have inadequate liquidity on its own to
carry out its business plan and will have to rely on future
advances from its President and Sole Director.
Except for historical information contained herein,
statements in this discussion are forward looking statements.
Forward looking statements involve known and unknown risks and
uncertainties which may cause the Company's actual results in
future periods to differ materially from forecast results.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
See the Company's Annual Report on Form 10-KSB for the
fiscal year ended April 30, 1996.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits And Reports On Form 8-K
(a) Exhibits
Exhibit No. Description
3. Articles of Incorporation as amended and
Bylaws (see Note)
10.1 Compromise and Settlement Agreement
dated July 31, 1991 between the
Registrant and Amarillo National Bank
(see Note)
10.2 Letter of Intent dated January 2, 1997
with Natural Gas Technologies, Inc., as
amended by letter dated March 17, 1997
(see Note)
10.3 Restated Convertible Promissory Note
dated February 4, 1997 (see Note)
10.4 Release of Judgment dated December 31,
1996 (see Note)
10.5 Termination of Agreement and
Cancellation of Loan dated January 2,
1997 (see Note)
27.1 Financial Data Schedule
Note to Exhibits
Incorporated by reference to exhibits included in the
Company's Annual Report on Form 10-KSB for the fiscal
year ended April 30, 1996.
(b) Reports On Form 8-K
There were no reports on Form 8-K filed during the
quarter for which this report is filed.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
LYRIC ENERGY, INC.
Date: April 9, 1997 By: /s/ G.E. Stahl
G.E. Stahl, President and
Chief Executive Officer
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