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 January 31, 1997
[ ] 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....<PAGE>
Index to Quarterly Report on Form 10-QSB
PART I - FINANCIAL INFORMATION
Page
Item 1. Financial Statements:
Balance Sheet as of January 31, 1997 . .. . . 3
Statements of Operations for the Three-Month
and Nine-Month Periods ended January 31,
1997 and 1996 .. . .. . .. . .. . .. . .. . . 4
Statements of Cash Flows for the Nine-Month
Periods ended January 31, 1997 and 1996 . . . 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. . .. . .. . .. . .. . .. . .. . .. . .. . . 13
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Lyric Energy, Inc.
(A Development Stage Enterprise)
Balance Sheet
(Unaudited)
January 31,
1997
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
Current liabilities - accounts payable, trade
(including $48,811 due to related parties) $ 64,521
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 (net of $462,554 of
earnings during the development stage) (2,224,650)
Total shareholders' deficiency ( 64,521)
Total liabilities and shareholders'
deficiency $ -
See accompanying notes to financial statements.
Lyric Energy, Inc.
(A Development Stage Enterprise)
Statements of Operations
(Unaudited)
Three-Month Nine-Month November 1, 1996
Periods Ended Periods Ended (Inception)
January 31, January 31, Through
January
1997 1996 1997 1996 31, 1997
Revenues $ - $ - $ - $ - $ -
General and
administrative
expenses (57) - (158) - (57)
Other income - - 44 - -
Interest expense
to related
party (1,482) (2,223) (5,928) (6,669) (1,482)
Net loss before
income taxes
and extra-
ordinary
items (1,539) (2,223) (6,042) (6,669) (1,539)
Income taxes - - - - -
Net loss before
extra-
ordinary
items (1,539) (2,223) (6,042) (6,669) (1,539)
Extraordinary
items (Note 3):
Forgiveness of
judgment pay-
able to
related
party,
net of
income
taxes
of $- 250,000 - 250,000 - 250,000
Forgive-
ness of
advance pay-
able
to
related
party
and
related
accrued
interest,
net of
income
taxes
of $- 214,093 - 214,093 - 214,093
Net earnings
(loss) $ 462,554 $(2,223) 458,051 $(6,669) $462,554
Weighted
average
shares
outstan-
ding 46,958,483 46,958,483 46,958,483 46,958,483 46,958,483
Net loss per
share before
extra-
ordinary
items $ (.00003) $ (.00005) $ (.0001) $ (.0001) (.00003)
Net earnings
per share
from
extra-
ordinary
items .01 - .01 - .01
Net earnings
(loss)
per
common
share $ .01 $ (.00005) $ .01 $ (.0001) $ .01
See accompanying notes to financial statements.
Lyric Energy, Inc.
(A Development Stage Enterprise)
Statements of Cash Flows
(Unaudited)
November 1, 1996
Nine-Month (Inception)
Periods Ended Through
January 31, January 31, 1997
1997 1996
Net cash used in
operating activities
and net decrease
in cash $(1,453) $[ ] $(23)
Cash at beginning
of period 1,453 412 23
Cash at end of
period $ - $[ ] $ -
Schedule of Noncash Financing Activities
Forgiveness of advance
payable to related
party $88,907 $ - $ 88,907
See accompanying notes to financial statements.
Lyric Energy, Inc.
(A Development Stage Enterprise)
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.
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.
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
As of December 31, 1996, the Company was obligated to repay
an 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 $1,482, $2,223, $5,928 and $6,669 was incurred on this
advance during the three-month periods ended January 31, 1997 and
1996 and nine-month periods ended January 31, 1997 and 1996,
respectively. 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 November 30, 1996. The
underlying judgment occurred in 1993. 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 Letter of Intent and Promissory Note
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 January 31, 1997, the Company had no cash on hand. 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.
<PAGE>
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
10.3 Restated Convertible Promissory Note
dated February 4, 1997 (see Note)
10.4 Release of Judgment dated December 31,
1997 (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
Exhibit 10.2
Natural Gas Technologies, Inc.
231 Pine Street
Suite 106A
Abilene, Texas 79601
January 2, 1997
Lyric Energy, Inc.
c/o Stahl Petroleum Company
1013 West Eighth Avenue
Amarillo, Texas 79101
Gentlemen:
This letter agreement contains an outline of the terms of a
proposed loan and subsequent share exchange between Natural Gas
Technologies, Inc., a Texas corporation ("NGT") and Lyric Energy,
Inc., a Colorado corporation ("Lyric").
1. Lyric is a Colorado corporation in good standing.
Lyric has a total of 250,000,000 authorized shares of $.01 par
value common stock ("Common Stock") and has no other authorized
class of equity securities. 46,533,333 of such shares are
presently issued and outstanding. The remaining 203,466,667
shares are authorized and unissued, and there are no restrictions
or limitations on the ability of Lyric to issue such shares,
other than those which might be imposed by Colorado law. Lyric
is a reporting company under the Securities Exchange Act of 1934,
as amended (the "Act"), but is delinquent in the filing of
periodic reports required under the Act. G.E. Stahl is the sole
director of Lyric.
2. Upon completion of its review of the books and records
of Lyric pursuant to paragraph 9 hereof, NGT shall loan to Lyric
$100,000 (the "Loan") pursuant to a convertible note (the
"Note"). These funds shall be used to fully discharge the
liabilities of Lyric existing and disclosed to NGT on the date
hereof.
3. The Note shall bear interest at ten percent per annum,
with all principal and interest due December 31, 1997. The Note
shall automatically convert to 203,466,667 shares of Common Stock
upon a merger or share exchange of NGT and Lyric and upon such
conversion all principal and interest obligations under the Note
shall be discharged. The Note shall be secured by the
203,466,667 shares of Common Stock presently authorized but
unissued.
4. The Note shall provide that for so long as the Note is
outstanding, NGT shall have the right to appoint a majority of
the directors of Lyric. In order to effectuate the foregoing,
G.E. Stahl as sole director of Lyric shall agree to expand the
Board of Directors of Lyric to three directors and to appoint
Brent Wagman and one other nominee of NGT's choice to the
expanded Board. Mr. Stahl shall further agree for so long as the
Note is outstanding to vote all of his shares of Common Stock in
favor of NGT's two nominees to the Board of Directors at any
meeting of Lyric shareholders at which directors are elected.
5. Lyric shall use its best efforts to complete all
required filings under the Act and to fully respond to any
comments of the staff of the Securities and Exchange Commission
(the "SEC") concerning such filings prior to February 28, 1997.
NGT shall reimburse Lyric for the costs of such filings,
including reasonable attorneys' and accountants' fees, up to a
maximum of $25,000. The attorneys and accountants retained for
work in connection with these filings shall be subject to the
approval of NGT.
6. Upon completion of such filings and acceptance thereof
by the SEC, Lyric and NGT shall complete a share exchange whereby
all of the outstanding shares of NGT common stock are exchanged
for a sufficient number of Lyric shares (the "Exchange Shares")
so that upon completion of the share exchange, and conversion of
the Note thereupon, NGT or its shareholders shall own 95 percent
of the outstanding shares of Lyric (the "Share Exchange"). NGT
shall upon such Share Exchange be a wholly-owned subsidiary of
Lyric. It is understood by Lyric and NGT that the Exchange
Shares may not be issued until Lyric obtains the approval of its
shareholders for either an increase in the authorized
capitalization of Lyric or a reverse stock split.
7. Upon completion of the Share Exchange, Lyric shall use
its best efforts to secure shareholder approval for a 265.90476
shares for 1 share reverse stock split which shall provide that
the number of authorized shares of Common Stock will remain at
250,000,000, and Lyric shall prepare an information statement
pursuant to Section 14(c) of the Act and respond to any comments
of the SEC thereto. In the event that the shareholder approval
necessary to issue the Exchange Shares is not obtained prior to
December 31, 1998, the right of NGT shareholders to receive the
Exchange Shares shall be forfeited.
8. Upon execution hereof, NGT will deposit $10,000 (the
"Deposit") in escrow with Ronald D. Nickum, Esq., 313 West 15th
Avenue, Amarillo, Texas 79101, with instructions that upon
execution by Lyric and NGT of the Note and any other documents
reasonably required by NGT in connection with the Loan, such
amount shall be paid to Lyric and shall be applied towards the
$100,000 to be loaned to Lyric by NGT. In the event that NGT
elects not to make the Loan pursuant to paragraph 9 hereof, the
Deposit shall be returned to NGT.
9. NGT shall have the right to review all of the books and
records of Lyric, and NGT's obligation to proceed with the Loan
and the Share Exchange shall be contingent upon (i) NGT's receipt
of resolutions of the Board of Directors of Lyric authorizing the
transactions contemplated herein; (ii) NGT's determination that
there are no liens, lawsuits or liabilities that will not be
discharged, released or dismissed after the Loan; (iii) NGT's
determination that the financial records of Lyric are in a
condition to be audited without undue expense; and (iv) NGT's
reasonable satisfaction with all other aspects of Lyrics books,
records and business.
10. For a period of one year after the consummation of the
Share Exchange, NGT agrees that it shall not cause Lyric to issue
any additional shares of Common Stock without receipt of adequate
consideration therefor.
If the foregoing terms are agreeable, please indicate your
acceptance by signing and returning to NGT the enclosed copy of
this letter agreement.
Very truly yours,
NATURAL GAS TECHNOLOGIES, INC.
By: /s/ Brent A. Wagman
Brent A. Wagman, President
Agreed and accepted this
2nd day of January, 1997.
LYRIC ENERGY, INC.
By: /s/ G.E. Stahl
G.E. Stahl, President
Agreed and accepted this 2nd
day of January, 1997 as to the
provisions of paragraph 4 as
they relate to G.E. Stahl,
individually and as sole director
of Lyric.
/s/ G.E. Stahl
G.E. Stahl, individually and
as sole director of Lyric<PAGE>
Natural Gas Technologies, Inc.
231 Pine Street
Suite 106A
Abilene, Texas 79601
March 17, 1997
Lyric Energy, Inc.
c/o Stahl Petroleum Company
1013 West Eighth Avenue
Amarillo, Texas 79101
Gentlemen:
This letter agreement supplements our earlier agreement
dated January 2, 1997 (the "January 2 Agreement"). All
capitalized terms not defined herein have the same meaning as in
the January 2 Agreement.
1. As a result of certain non-dilution rights granted to
Amarillo National Bank (the "Bank"), Lyric issued an additional
425,150 shares of Common Stock to the Bank in February 1997.
Accordingly, 46,958,483 shares of Common Stock are currently
outstanding and 203,041,517 shares of Common Stock are currently
authorized but unissued.
2. Lyric and NGT shall immediately commence the
preparation of an information statement at NGT's expense to be
used in connection with a special meeting of Lyric stockholders
to approve (i) a 268.3342 share for one share reverse stock
split; (ii) a name change to Natural Gas Technologies, Inc.;
(iii) amendments to Lyric's articles of incorporation to
eliminate the liability of officers and directors and to reduce
the 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. Lyric and
NGT shall use their best efforts to complete the information
statement and obtain SEC approval of the same so as to allow the
special meeting of stockholders to occur in May 1997.
3. The Note, which was entered into on or about February
4, 1997, shall be amended and restated (i) to indicate that the
Note will be convertible into 203,041,517 shares; (ii) to provide
that conversion shall occur upon the later to occur of Lyric
becoming current on its periodic reports required under the
Securities Exchange Act of 1934, as amended (the "'34 Act"), and
the receipt by Lyric of a waiver by the Bank of its non-dilution
rights; and (iii) to delete the provisions of Section 9.6 and
provide instead that the vacancies created by the resignations of
L.K. Hayhurst and Jim Clements from Lyric's board of directors
shall be filled upon conversion of the Note by two directors
selected by NGT. NGT and Lyric shall use their best efforts to
complete and file as soon as practicable the periodic reports
required to bring Lyric current under the '34 Act and thereafter
Lyric shall use its best efforts to obtain the above-referenced
waiver from the Bank as soon as practicable.
4. The Share Exchange shall occur in two stages. The
first stage shall occur immediately after stockholder approval of
the matters set forth in paragraph 2 above and shall consist of
the exchange of approximately 2,055,000 shares of Lyric Common
Stock (post-reverse split) for approximately eighty percent of
the equity interests, which interests are held by certain NGT
officers, directors and their family members and affiliates.
Upon the completion of the first stage, Lyric will own
approximately eighty percent of all of the issued and outstanding
shares of NGT and shall thereafter consolidate the financial
statements of NGT with its own financial statements. The second
stage shall occur upon the effective date of an S-4 registration
statement registering the exchange of all of the remaining equity
interests of NGT into 513,000 shares of Lyric Common Stock
(post-reverse split) and providing for the distribution of the
756,674 post-reverse split shares 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 and based upon certain anticipated oil and gas property
acquisitions by NGT prior to the Share Exchange. Notwithstanding
the foregoing, the current Lyric shareholders shall hold five
percent of the Common Stock at the conclusion of the Share
Exchange.
5. The consummation of the Share Exchange shall be
conditioned upon the completion of due diligence and final
documentation therefor.
6. Except as modified hereby, the January 2 Agreement
shall remain in full force and effect.
If the foregoing terms are agreeable, please indicate your
acceptance by signing and returning to NGT the enclosed copy of
this letter agreement.
Very truly yours,
NATURAL GAS TECHNOLOGIES, INC.
By: /s/ Brent A. Wagman
Brent A. Wagman, President
<PAGE>
Agreed and accepted this
18th day of March, 1997.
LYRIC ENERGY, INC.
By: /s/ G.E. Stahl
G.E. Stahl, President
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