UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of
1934
Date of Report (Date of earliest event reported): April 10, 1997
LYRIC ENERGY, INC.
(Exact name of registrant as specified in its charter)
Colorado 0-9800 75-1711324
(State or other (Commission (IRS Employer
jurisdiction of File No.) Identification No.)
incorporation)
1013 West Eighth Avenue, Amarillo, Texas 79101
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(806) 376-5088
Not applicable.
(Former name or former address, if changed since last report.)
This Report Consists of ___ Pages
THIS AMENDMENT ON FORM 8-K/A TO THE REGISTRANT'S FORM 8-K FILED
ON APRIL 21, 1997 FOR THE EVENT OCCURRING ON APRIL 10, 1997, AS
AMENDED BY A FORM 8-K/A FILED ON JUNE 24, 1997, IS BEING FILED TO
PROVIDE REVISED FINANCIAL STATEMENTS FOR THE BUSINESS ACQUIRED
AND REVISED PRO FORMA FINANCIAL INFORMATION.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired.
1. Report of Independent Certified Public
Accountants
2. Balance Sheets - April 30, 1996 and 1995
3. Statements of Operations - For the Years
Ended April 30, 1996 and 1995
4. Statement of Changes in Stockholders' Equity
- For the Years Ended April 30, 1996 and 1995
5. Statements of Cash Flows - For the Years
Ended April 30, 1996 and 1995
6. Notes to Financial Statements
7. Balance Sheet - January 31, 1997 (unaudited)
8. Statements of Operations - For the Three
Month and Nine Month Periods Ended January
31, 1997 and 1996 (unaudited)
9. Statement of Cash Flows - For the Nine Month
Periods ended January 31, 1997 and 1996
(unaudited)
10. Notes to Financial Statements (unaudited)
11. Introductory Note to Pro Forma Combined
Financial Statements
12. Pro Forma Balance Sheet - As of January 31,
1997 (Unaudited)
13. Pro Forma Statement of Operations - For the
Nine Months Ended January 31, 1997
(Unaudited)
14. Pro Forma Statement of Operations - For the
Year Ended April 30, 1996 (Unaudited)
15. Notes to Pro Forma Combined Financial
Statements
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
LYRIC ENERGY, INC.
(Registrant)
Date: July 2, 1997 By: /s/ Brent Wagman
Chairman of the Board
NATURAL GAS TECHNOLOGIES, INC.
AUDITED FINANCIAL STATEMENTS
For the Years Ended
April 30, 1996 and 1995
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
NATURAL GAS TECHNOLOGIES, INC.
Abilene, Texas
We have audited the accompanying balance sheets of Natural Gas
Technologies, Inc. as of April 30, 1996 and 1995 and the related
statements of operations, changes in shareholders' equity and
cash flows for the years then ended. These financial statements
are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Natural Gas Technologies, Inc. as of April 30, 1996 and 1995, and the
results of its operations and its cash flows for the years then ended, in
conformity with generally accepted accounting principles.
Robert Early & Company, P.C.
Abilene, Texas
July 30, 1996
NATURAL GAS TECHNOLOGIES, INC.
Balance Sheets
April 30, 1996 and 1995
1996 1995
Assets
Cash $ 506 $ 19
Oil and gas properties 1,443,830 1,333,444
Lease and well equipment 29,503 7,277
Accumulated depreciation
and depletion (64,926) (24,346)
1,408,407 1,316,375
Investment in Wagman
Petroleum, Inc. stock 14, 464 14,464
Organizational costs
(net of amortization
of $1,114 and $732) 796 178
TOTAL ASSETS $ 1,424,173 $1,332,036
Liabilities and Stockholders' Equity
Liabilities
Accounts payable $ 38,205 $ 37,462
Accrued interest 80 46,263
Advances and amounts due officers - 53,322
Amount due Wagman Petroleum, Inc. - 44,977
Current portion of notes payable 18,794 396,988
Total Current Liabilities 57,079 579,012
Notes payable 15,434 -
TOTAL LIABILITIES 72,513 579,012
Redeemable Stock
Preferred stock, Series A
$4.00 par value (500,000 shares
authorized, 9,597 outstanding) 38,388 38,388
Stockholders's Equity
Preferred stock, Series B
$4.00 par value (500,000 shares
authorized, 210,736 outstanding) 842,944 842,944
Common stock, $.001 par value
(10,000,000 shares authorized,
2,805,024 and 2,190,130 outstanding) 2,807 2,191
Additional paid-in capital 1,181,563 332,712
Deferred services and director
fees (100,833) (70,833)
Retained earnings/(deficit) (613,209) (392,378)
Total Stockholders' Equity 1,313,272 714,636
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 1,424,173 $1,332,036
NATURAL GAS TECHNOLOGIES, INC.
Statements of Operations
For the years ended April 30, 1996 and 1995
1996 1995
Oil and gas revenues $ 133,030 $144,014
Other income 3,915 7,769
Total Revenues 136,945 151,783
Expenses:
Production taxes 4,608 7,768
Lease operating expenses 114,410 110,624
Depreciation, depletion
and amortization 40,962 23,239
Professional fees 10,571 -
Office expenses 3,002 6,411
Management and consulting fees 90,000 1,000
Rent 4,200 14,178
Secretarial services 500 1,428
Printing and distribution 2,092 6,884
Director fees 50,000 50,000
Taxes 1,885 1,051
Offering costs
(non-capitalizable) 4,000 113,061
Other expenses 3,339 17,588
Total Expenses 329,569 353,232
Income/(Loss) from Operations (192,624) (201,449)
Interest income - 75
Interest expense (28,207) (39,722)
NET (LOSS) $(220,831) $(241,096)
Less unpaid preferred
dividend claims 9,604 7,691
Net (loss) attributable to
common shareholders $(230,435) $(248,787)
Primary loss per share $ (0.09) $ (0.10)
Primary loss attributable to
common shares per share (0.10) (0.10)
Primary weighted average shares
outstanding 2,398,254 2,387,546
Fully diluted loss per share $ (0.08) $ (0.09)
Fully diluted loss attributable
to common shareholders per
share (0.09) (0.10)
Fully diluted weighted average
shares outstanding 2,618,587 2,607,879
NATURAL GAS TECHNOLOGIES, INC.
Statement of Changes in Stockholders' Equity
For the years ended April 30, 1996 and 1995
Preferred Stock
Series A Series B
Shares Amount Shares Amount
BALANCES April 30, 1994 - $ - - $ -
Voluntary reduction in
shares held by
directors - - - -
Stock issued for:
Oil and gas
interests - - 16,360 65,440
Cash 9,597 38,388 - -
Services - - - -
Exchange by Wagman
Petroleum Inc. of
common for preferred - - 194,376 777,504
Sale of option - - - -
Net loss - - - -
BALANCES
April 30, 1995 9,957 $ 38,388 210,736 $842,944
Stock issued for:
Related party
liabilities - - - -
Oil and gas interests - - - -
Liabilities to third
parties - - - -
Promotional services - - - -
Net loss - - - -
BALANCES
April 30, 1996 9,597 $ 38,388 210,736 $842,944
The accompanying notes are an integral part of these financial
statements.
NATURAL GAS TECHNOLOGIES, INC.
Statement of Changes in Stockholders' Equity
For the years ended April 30, 1996 and 1995 (cont.)
Additi- Accumu-
onal lated
Common Stock Paid-In Earnings
Shares Amount Capital (Deficit)
BALANCES
April 30, 1994 $ 2,843,562 $2,844 $473,394 $(151,282)
Voluntary reduction
in shares held by
directors (475,000) (475) 475 -
Stock issued for:
Oil and gas
interests 337,235 337 631,628 -
Cash - - 104 -
Services 2,667 3 3,997 -
Exchange by Wagman
Petroleum Inc. of
common for preferred (518,334) (518) (776,986) -
Sale of option - - 100 -
Net loss - - - (241,096)
BALANCES
April 30, 1995 $2,190,130 $2,191 $ 332,712 $(392,378)
Stock issued for:
Related party
liabilities 381,655 382 622,605 -
Oil and gas
interests 22,624 23 45,226 -
Liabilities to third
parties 10,615 11 21,220 -
Promotional services 200,000 200 159,800 -
Net loss - - - (220,831)
BALANCES
April 30, 1996 $2,805,024 $ 2,807 $1,181,563 $(613,209)
The accompanying notes are an integral part of these financial
statements.
NATURAL GAS TECHNOLOGIES, INC.
Statement of Cash Flows
For the years ended April 30, 1996 and 1995
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (220,831) $ (241,096)
Adjustments to reconcile net income/
(loss) to net cash provided by
operations:
Depreciation, depletion and
amortization 40,962 23,239
Amortization of directors fees 50,000 50,000
Stock issued for services 80,000 -
Stock issued for related party
interest 24,681 -
Expensing
of prepaid offering costs - 35,107
Increase/(decrease) in:
Accounts payable 21,975 8,495
Accrued expenses (32,033) 39,646
NET CASH (USED) BY OPERATING ACTIVITIES (35,246) (84,609)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (22,226) (7,277)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock to issued - 35,069
Advances from related parties 23,730 56,824
Note proceeds 35,000 -
Note payments (771) -
NET CASH PROVIDED BY FINANCING ACTIVITIES 57,959 91,893
Increase/(decrease) in cash for period 487 7
Cash, Beginning of period 19 12
Cash, End of period $ 506 $ 19
Supplemental Disclosures:
Cash payments for:
Interest $ 772 $ -
Income taxes - -
Stock issued for:
Professional services $ 80,000 $ 4,000
Prepaid professional services 80,000 -
Oil and gas properties 49,157 697,405
Reductions of accounts,
notes, and interest payable 644,218 -
NATURAL GAS TECHNOLOGIES, INC.
Notes to Financial Statements
April 30, 1996 and 1995
NOTE 1: SUMMARY OF
SIGNIFICANT
ACCOUNTING POLICIES
Natural Gas Technologies, Inc. (NGT) was incorporated on April
26, 1993 and began operations in June 1993. NGT acquired
interests in various oil and gas properties in February and June
1994 and has been active in this industry since that time. The
nature of the oil and gas industry lends itself to uncertainties
and risks. NGT s interests are currently concentrated in the
Central Texas area.
NGT was in the development stage during the year ended April 30,
1994 and statements to that date reflected such status. The year
ended April 30, 1995 is the first year during which the Company
is considered an operating Company.
The accounting and reporting policies of NGT conform with
generally accepted accounting principles and to general practices
within the industry. Policies that materially affect the
determination of financial position, changes in financial
position, and results of operations are summarized as follows:
Federal Income Taxes -- For Federal income tax purposes, NGT
reports its operations on the accrual basis of accounting.
Depreciation is calculated using the MACRS percentages. First
year expensing under Section 179 is utilized when it is
advantageous to do so.
Statement No. 109 (SFAS 109) "Accounting for Income Taxes"
requires that a liability approach to providing for deferred
taxes be used. That is, deferred taxes must be established for
all temporary differences between the book and tax bases of
assets and liabilities.
Oil and Gas Properties -- The Company has adopted the full cost
method of accounting for its oil and gas producing activities
and, accordingly, capitalizes all costs incurred in the
acquisition, exploration, and development of proved oil and gas
properties, including the costs of abandoned properties, dry
holes, geophysical costs, and annual lease rentals. In general,
sales or other dispositions of oil and gas properties are
accounted for as adjustments to capitalized costs, with no gain
or loss recorded.
Depletion and amortization are computed on a composite unit-of-
production method based on estimated proved reserves. All costs
associated with oil and gas properties are currently included in
the base for computation and amortization. The Company's proved
reserves were estimated by Company personnel based on previous
work done by a petroleum engineer. All of the Company's reserves
are located within the United States. Depletion totaled $36,993 and $22,535
for the years ended April 30, 1996 and 1995, respectively.
Depreciation is calculated on a straight line over the estimated
useful lives of the assets. This is seven years for lease and
well equipment. Depreciation totaled $3,587 and $322, for the years ended
April 30, 1996 and 1995, respectively
Earnings per Share and Shares to be Issued -- Primary earnings
per share is calculated on the basis of weighted average common
shares outstanding which includes shares to be issued as
discussed below. Fully diluted earnings per share is calculated
based on the assumption that convertible preferred shares were
converted at the first of the year.
At the end of each of the years presented, the Company had contractually or
otherwise committed to issue common and/or preferred shares. For various
reasons, the actual issuance of the stock certificates was delayed. These
shares have been treated as being issued in the outstanding shares in the
balance sheet and the statement of changes in stockholders' equity. They have
also been included in weighted average earnings per share as of the
effective date of the agreement rather than the date certificates were
ultimately issued.
Cash Flows -- The Company considers cash to be its only cash
equivalent for purposes of presenting its Statement of Cash
Flows.
Use of Estimates -- The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates.
Environmental Issues -- The oil and gas industry is regulated in
Texas by the Texas Railroad Commission (RRC) and Texas Natural
Resources Conservation Commission. Leases are operated under
permits from the RRC. Failure to comply with regulations could
result in interruption or termination of the operations.
Additionally, upon cessation of use, the wells will require
plugging and site cleanup. Costs of voluntary termination and
remediation have been estimated to be insignificant on a well by
well basis and are expected to be recorded as incurred.
New Accounting Pronouncements -- Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
(SFAS 121) issued by the Financial Accounting Standards Board
(FASB) is effective for financial statements for fiscal years
beginning after December 15, 1995. The new standard establishes
new guidelines regarding when impairment losses on long-lived
assets, which include plant and equipment, and certain
identifiable intangible assets, should be recognized and how
impairment losses should be measured. The Company does not
expect adoption to have a material effect on its financial
position or results of operations.
Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation" (SFAS 123) issued by the FASB is
effective for specific transactions entered into after December
15, 1995 while the disclosure requirements of SFAS 123 are
effective for financial statements for fiscal years beginning no
later than December 15, 1995. The new standard establishes a
fair value method of accounting for stock-based compensation
plans and for transactions in which an entity acquires goods or
services from non-employees in exchange for equity instruments.
The Company does not expect adoption to have a material effect on
its financial position or results of operations. At the present
time, the Company has not determined if it will change its
accounting policy for stock-based compensation or only provide
the required financial statement disclosures. As such, the
impact on the Company's financial position and results of
operations is currently unknown.
Advertising Costs -- All advertising costs are expensed as
incurred.
NOTE 2: CORRECTION OF AN ERROR AND TERMINATION OF
AGREEMENT
During the periods presented, Management determined that it had
overvalued the stock it had acquired in Wagman Petroleum, Inc. This stock was
acquired by issuing NGT stock to third parties in exchange for shares they
held in Wagman. In accordance with this determination, the carrying value was
reduced by $149,294. This reduction was charged directly against Additional
Paid in Capital as a correction of the entry recorded in the year ended April
1994.
During the year ended April 1994, NGT was attempting to develop
an alternative fuel formulation. That attempt included
contracting for testing and refinement of the base formulation
through the issuance of 150,000 shares common stock. These
services were never provided to NGT. During fiscal 1996, NGT
obtained legal counsel regarding the cancellation of these shares
and attempted to get the shares returned. The opinion of legal
counsel was that NGT should prevail due to the original contract
having not been fulfilled. Accordingly, NGT notified the
contractor that the shares had been voided. This reversal has
been recorded as though it were effective in the year ended April
1995.
The balances for April 1995 have been adjusted for effects of both of
these transactions and there is no effect to the results from
operations for either year presented.
NOTE 3: STOCK TRANSACTIONS
In order to acquire initial funding during 1993 and 1994, NGT
sold shares through two limited offerings under Regulation D of
the Securities and Exchange Commission. The Company also issued
shares to various entities for fund-raising and promotional
efforts, to certain entities for other services and
consideration, and to Wagman Petroleum, Inc. (WPI) for interests
in oil and gas properties. 150,000 shares and options to
purchase 100,000 additional shares of restricted stock at an
exercise price of $4 per share were issued to Warren Donohue of
Volvo America as compensation for his agreeing to serve as a
director of NGT for three years. These options were to commence
six months following the close of the public offering and expire
four years after commencement. Deferred Director Fees of $150,000
was recorded as a result of this transaction based on the
Regulation D offering. No additional costs were recorded for the
options due to the exercise price.
NGT acquired 64,300 shares of WPI from unrelated parties in
exchange for 54,586 shares of NGT stock. There is no market for
WPI's shares and their value has been determined by an estimate
of the future value of WPI. The Company intends to hold this
investment for the foreseeable future.
During the year ended April 1995, NGT authorized 1,000,000 preferred shares
and designated it as Series A and Series B. Both of
these series have a nine and one-quarter percent cumulative
annual dividend and are convertible to common shares on a one for
one basis. Series A shares may be called by the Company at five
cents per share if the trading price of the common shares exceeds
seven dollars for twenty consecutive trading days. They also are
subject to a mandatory redemption at par five years from the
effective date of issuance. Series B shares automatically
convert to common if the trading price of the common shares
exceeds five dollars for ten consecutive trading days. Other
differences between the two series relate to the timing of and
number of shares subject to the conversion privileges. It is
believed that all of the outstanding preferred shares are
convertible at the option of the holder at May 1,
1996.
The Company utilized its stock to purchase oil and gas working
interests effective July 1, 1994. This resulted in the issuance
of 337,235 common shares and 16,360 Series B preferred shares.
During the year ended April 1995, NGT s directors were advised
that it would be advantageous to the Company to reduce the number
of outstanding common shares. Accordingly, the directors returned
475,000 of the shares that had been issued for their initial efforts in
organizing the Company. Also, WPI exchanged 518,334 shares of
common stock for 194,376 Series B Preferred stock.
During the year ended April 1996, NGT approved a request by its president
and WPI to issue 26,661 and 354,994 common shares, respectively,
in exchange for the complete liquidation of unreimbursed
expenses, advances, accrued interest, and the note balance due to
WPI. Additionally, NGT negotiated an agreement to pay off
certain legal fees connected with an aborted offering via the issue of 10,615
common shares. It also finalized an agreement with a third party regarding
specific oil and gas interests that was effective May 1, 1995 through the
issue of 22,624 common shares and the assumption of $17,000 of
unpaid lease operating expenses.
During the year ended April 1996, NGT entered into an agreement for the
provision of public relations, identification of funding sources, merger
candidates, etc. services with a third party. These services are to be
rendered over a primary period ending in December 1996 with provisions for
extensions as approved by both parties. The agreement calls for cash funding
of $25,000 and 500,000 shares of stock. The shares are to be issued on a
milestone basis with 200,000 shares issued at the commencement of the
agreement. One-half of these shares are to be for services to be rendered
after April 1996 and have been included in Deferred Services in the equity
section of the balance sheet. The remaining 300,000 shares are to be issued
after the achievement of specified events, funding, etc. The agreement calls
for all of these shares to be registered in any registration pursued by NGT.
NOTE 4: TRANSACTIONS WITH
RELATED PARTIES
Prior to May 1994, NGT had issued 1,925,000 shares of stock to
its directors and officers as compensation for services rendered
in developing the concept for the Company and pursuing efforts to
implement plans of action. As discussed above this number was
reduced by 475,000 shares during the 1995 fiscal year. In
addition, NGT purchased interests in specified oil and gas
properties from WPI effective February 1, 1994. The contract
called for WPI to receive cash, common stock, and a note (described at Note 5).
As discussed above, NGT negotiated the exchange of the bulk of
WPI's common shares for preferred shares during the periods
presented. Also, the note, along with other liabilities to WPI in the amount
of $114,678, was ultimately repaid via the issuance of 354,994 common shares.
Also, the Company s president accepted 26,661 shares for unreimbursed
expenses and cash advances in lieu of cash repayments.
NGT reimburses WPI for rent, postage, travel and other office
expenses. The Company's president owns approximately 45% of the
outstanding stock of WPI and also serves as WPI's president.
Additionally, WPI operates the properties in which NGT is an
owner. As such, WPI incurs expenses and bills them out to the
respective owners. Currently, WPI collects NGT's gas production
revenues and offsets them against amounts that NGT owes WPI.
NOTE 5: NOTES PAYABLE
During the year ended April 1994, NGT entered into a note payable to WPI
in conjunction with the purchase of oil and gas properties for
$400,000. This note bore interest at 10% and was due to
be repaid out of proceeds from a stock offering or from oil and
gas production. It's balance of $396,988, along with $24,681 in accrued
interest, was retired during the year ended April 1996 through the issuance
313,494 shares of common stock. WPI waived collection of the interest accrued
on the note.
During February 1996, the Company borrowed $35,000 from a bank in
order to finance certain reworking expenses. This note bears
interest at 10.5% and is due in twenty-four installments
of $1,625 per month including interest. NGT has given its
interest in the wells being reworked as collateral for this note.
NOTE 6: OIL AND GAS
PROPERTIES
As previously discussed, NGT acquired interests in oil and gas
properties from WPI during the year ended April 1994. Effective July 1, 1995,
the Company acquired additional interests in these same
properties in exchange for stock. These interests are all
located in the central Texas area.
These properties are subject to tax liens for unpaid property
taxes owed by WPI. WPI has contested the values used by the
taxing authorities and is in the process of negotiating payment
of the back taxes. Should WPI be unsuccessful in settling these
tax liens, NGT and other interest owners could be caused to
forfeit any and all interests in the properties subject to such
liens to foreclosure by the taxing authorities. WPI is working
to ensure that this does not happen.
NOTE 7: REDEEMABLE STOCK
As discussed above, the Company s Series A preferred shares carry
a mandatory redemption at par at the end of five years. Both
preferred series may be converted to common stock by the Company
upon the attainment of specific circumstances as described above. In
accordance with generally accepted accounting principles, the shares
carrying the mandatory redemption feature have been segregated
from the balance of the stockholders equity. The redemption for
these shares is due on July 1, 1999.
NOTE 8: PREFERRED STOCK ACCUMULATED
DIVIDENDS
As discussed in Note 3 above, NGT has issued preferred stock which contains a
provision for cumulative dividends at the rate of 9.25%. These dividends have
remained undeclared and unpaid since issuance. The amounts accumulated during
the years ended April 1995 and 1996 totaled $61,679 and $85,748, respectively.
However, WPI waived its right to receive dividends on its preferred shares as
part of the agreement to receive common shares in exchange for debt. This
waiver reduces the cumulative amounts to $7,691 and $9,604 for 1995 and 1996.
The total amount accumulated at April 30, 1996 was $17,295. The statement of
operations presents net loss available to common shareholders after increasing
the actual net loss for the accumulated dividend arrearage.
NOTE 9: INCOME TAXES
As of April 30, 1996 and 1995, NGT had accumulated deficits of
$613,209 and $392,378. However, operating loss carry-forwards
for tax purposes vary from these amounts due to differences in
the tax treatment of various items. These loss carry-forwards,
which should provide future benefits, expire as shown in the
following table.
Amount of
Year of Operating Loss
Expiration Carry-Forward
2009 $301,283
2010 90,343
2011 222,200
$613,826
The provision for income taxes is as follows:
1996 1995
Current
Federal $ - $ -
State - -
Deferred
Federal (132,473) (102,203)
State (16,774) (12,943)
Less allowance 149,247 115,146
Total $ - $ -
The following temporary differences gave rise to the deferred tax
assets and liabilities at April 30, 1996 and 1995:
1996 1995
Excess of tax depreciation over
financial accounting depreciation $ 2,088 $ 718
The deferred tax asset and liabilities are comprised of the
following at April 30, 1996 and 1995:
1996 1995
Assets Liabilities Assets Liabilities
Depreciation $ - $ 769 $ - $ 265
Net operating
losses
carried
forward 150,017 - 115,411 -
Less
valuation
allowance (149,247) - (115,146) -
Totals $ 769 $ 769 $ 265 $ 265
Due to the way future utilization of tax benefits is analyzed
under SFAS 109, an allowance for the full amount of any benefits
which may arise from operating loss carry-forwards has been made
and no asset has been recorded as a result.
NOTE 10: SUBSEQUENT EVENTS
Subsequent to April 1996, NGT purchased an option to acquire the
lease under an eleven hundred acre water-flood project in North-
Central Texas. Engineers have estimated that this lease has
significant potential if managed properly. This option calls for
the Company to pay $375,000 cash plus a note for the remaining
appraised value and is exercisable at any time prior to July
1997.
NOTE 11: SUPPLEMENTARY INFORMATION RELATING
TO OIL AND GAS PRODUCING ACTIVITIES
The accompanying supplemental disclosures of oil and gas producing activities
are unaudited due to the nature of reserve estimates and their
calculation. The balances at April 30, 1994 included certain
properties that contained proven undeveloped reserves. During
fiscal 1995, it was determined that it would not be feasible for
the Company to develop these properties and their reserves were
eliminated from the estimated reserve base. During fiscal 1996, certain other
properties were reevaluated which resulted in revisions to their reserve
estimates.
NATURAL GAS TECHNOLOGIES, INC.
Supplementary Information Relating
To Oil and Gas Producing Activities
April 30, 1996 and 1995
(Unaudited)
Quantities of Reserves Oil Gas
Proved and Developed Reserves (Barrels) (MCF)
Balances, April 30, 1994 144,680 85,457
Acquisitions 149,353 212,335
Revisions of estimates 28,146 12,637
Extensions and discoveries - -
Production (3,439) (14,119)
Balances, April 30, 1995 318,740 296,310
Acquisitions 11,859 -
Revisions of estimates 26,292 (68,052)
Production (6,004) (17,210)
Balances, April 30, 1996 298,303 211,048
Costs Incurred in Acquisition, Exploration,
and Development of Properties
1996 1995
Acquisition $ 45,248 $ 697,405
Standardized Measure of Discounted Future Net Cash Flows
1996 1995
Future cash inflows $ 5,451,124 $5,952,025
Future production and
development costs (743,276) (856,376)
Future income taxes (1,080,308) (1,212,160)
Future net cash flows 3,627,540 3,883,489
10% annual discount for
estimated timing of cash flows (919,028) (1,098,988)
Standardized measure of
discounted future net cash flows $ 2,708,512 $ 2,784,501
Principal Sources of Changes in the Standardized Measure of
Discounted Future Net Cash Flows
1996 1995
Standardized Measure-Beginning
of Year $ 2,784,501 $ 3,059,926
Acquisition of reserves in place 45,248 697,405
Sales, net of production costs (98,251) (40,392)
Extensions & discoveries - (1,515,352)
Changes in estimated
future development costs - (31,885)
Revisions of quantity estimates (247,017) 140,705
Accretion of discount 365,674 424,022
Net change in income taxes 62,173 308,062
Changes in production timing and other (258,803) (257,990)
Changes in sales prices 54,987 -
Standardized Measure - End of Year $ 2,708,512 $ 2,784,501
NATURAL GAS TECHNOLOGIES, INC.
Balance Sheet
January 31, 1997
(Unaudited)
Assets
Cash $ 237
Oil and gas properties 1,448,417
Lease and well equipment 29,503
Other equipment 40,000
Accumulated depreciation and depletion (82,991)
1,434,929
License to fuel blending patent 360,000
Investment in Wagman Petroleum, Inc. stock 14,464
Other investments 10,000
Organizational costs
(net of amortization of $1,400) 510
TOTAL ASSETS $1,820,140
Liabilities and Stockholders' Equity
Liabilities
Accounts payable $ 59,695
Accrued interest 80
Advances and amounts due officers 36,989
Current portion of notes payable 18,794
Total Current Liabilities 115,558
Notes payable 2,174
TOTAL LIABILITIES 117,732
Redeemable Stock
Preferred stock, Series A
$4.00 par value (500,000 shares
authorized, 9,597 outstanding) 38,388
Stockholders' Equity
Preferred stock, Series B
$4.00 par value (500,000 shares
authorized, 260,736 outstanding) 1,042,944
Common stock, $.001 par value
(10,000,000 shares authorized,
3,105,024 outstanding) 3,105
Additional paid-in capital 1,541,263
Deferred services and director fees (160,000)
Accumulated deficit (763,292)
Total Stockholders' Equity 1,664,020
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $1,820,140
The accompanying notes are an integral part of this financial
statement.
NATURAL GAS TECHNOLOGIES, INC.
Statements of Operations
For the Three-Month and Nine-Month Periods Ended January 31, 1997
and 1996 (Unaudited)
Three-Month Nine-Month
Periods Ended Periods Ended
January 31, January 31,
1997 1996 1997 1996
Oil and gas revenues $ 21,682 $ 32,735 $ 62,459 $101,904
Other income - 162 5 732
Total Revenues 21,682 32,897 62,464 102,636
Expenses:
Production taxes 1,171 1,648 3,318 5,296
Lease operating
expenses 14,596 38,960 49,222 87,924
Depreciation,
depletion and
amortization 6,116 9,344 18,352 28,031
Professional fees 22,994 4,852 22,994 4,852
Consulting fees 80,000 - 80,000 -
Office expenses 2,574 1,784 5,716 3,592
Rent 1,050 1,142 3,150 3,242
Printing and
distribution 1,067 965 467 1,474
Director fees - 12,500 20,833 37,500
Taxes - - 1,788 -
Offering costs
(non-capitalizable) - - 3,000 4,000
Other expenses 210 606 709 836
Total Expenses 129,778 71,801 209,549 176,747
Loss from Operations (108,096) (38,904) (147,085) (74,111)
Interest expense (1,081) - (2,998) (19,850)
NET LOSS $(109,177)$ (38,904) $(150,083) $(93,961)
Unpaid preferred
dividend claims ( 600) ( 600) ( 1,801) ( 1,801)
Net loss attributable
to common shareholders $(109,777)$ (39,504)$ (151,884)$( 95,762)
Primary loss per share $ (.04) $ (.02) $ (.06) $ (.04)
Primary loss attributable
to common shares per
share $ (.04) $ (.02) $ (.06) $ (.04)
Primary weighted average
shares outstanding 2,739,807 2,330,130 2,548,820 2,330,130
Fully diluted loss
per share $ (.04) $ (.02) $ (.05) $ (.04)
Fully diluted loss
attributable to
common shareholders
per share $ (.04) $ (.02) $ (.05) $ (.04)
Fully diluted weighted
average shares
outstanding 2,960,140 2,550,463 2,769,153 2,550,463
The accompanying notes are an integral part of these financial
statements.
NATURAL GAS TECHNOLOGIES, INC.
Statement of Cash Flows
For the Nine-Month Periods Ended January 31, 1997 and 1996
(Unaudited)
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(150,083) $ (93,961)
Adjustments to reconcile net
loss to net cash provided by
(used by) operations:
Depreciation, depletion
and amortization 18,352 28,031
Amortization of directors fees 20,833 37,500
Accounts receivable increase - (43,879)
Accounts payable increase 44,252 83,070
Recognition of expense
for deferred services 80,000 -
Stock issued for related party debt - 17,256
NET CASH PROVIDED BY OPERATING
ACTIVITIES 13,354 28,017
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of fixed assets - (20,844)
Purchase of oil and gas properties (4,585) (21,741)
Temporary investments (10,000) -
NET CASH (USED BY) INVESTING
ACTIVITIES (14,585) (42,585)
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from related parties 14,222 15,030
Note payments (13,260) -
NET CASH PROVIDED BY FINANCING
ACTIVITIES 962 15,030
Increase/(decrease) in cash for period (269) 462
Cash, Beginning of period 506 19
Cash, End of period $ 237 $ 481
Supplemental Disclosures:
Cash payments for:
Interest $ 2,998 $ -
Income taxes $ - $ -
Stock issued for:
Oil and gas properties $ - $63,985
License to fuel blending and
related equipment $ 400,000 $ -
Reductions of accounts
and notes payable $ 499,534 $ 146,263
Deferred services $ 160,000 $ -
The accompanying notes are an integral part of these financial
statements.
NATURAL GAS TECHNOLOGIES, INC.
Notes to Financial Statements
(Unaudited)
NOTE 1: BASIS OF PRESENTATION
The unaudited financial statements and related notes to
financial statements presented herein have been prepared by
Natural Gas Technologies, Inc. ("NGT") 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 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: LETTER OF INTENT AND LOAN
NGT entered into a letter of intent dated January 2, 1997 and
modified March 17, 1997 (the "Letter of Intent") with Lyric
Energy, Inc. ("Lyric"), a development stage company with minimal
assets that is an SEC registrant, for a share exchange
transaction ("Share Exchange"). The Letter of Intent became
binding by the March 17, 1997 amendment. Prior to entering into
the Letter of Intent, NGT and Lyric were unrelated and NGT held
no shares of Lyric.
Pursuant to the Letter of Intent, NGT loaned Lyric $100,000
pursuant to a non-interest bearing Convertible Promissory Note
(the "Note"). The Note had a maturity date of December 31, 1997
and automatically converted into 203,041,517 shares of Lyric
common stock upon (i) Lyric coming into current compliance with
the Securities Exchange Act of 1934, as amended, and (ii) Lyric
obtaining a waiver from Amarillo National Bank of certain
non-dilution rights in favor of the Bank. The Note converted by
its terms on April 10, 1997, which resulted in NGT obtaining a
controlling interest in Lyric. The source of the $100,000 was a
loan to NGT from an officer, director and significant shareholder
of NGT.
The Share Exchange will commence after Lyric holds a shareholder
meeting for the purpose of (i) approving a reverse split of
Lyric's common stock which will result in additional common
shares being made available for issuance in the Share Exchange;
(ii) authorizing 10,000,000 shares of no par value preferred
stock, approximately 75,000 of which will be designated for
exchange with NGT preferred shareholders in the Share Exchange
and the remaining 9,925,000 of which will be reserved for future
issuance at the discretion of Lyric's Board of Directors; and
(iii) approving certain other amendments to Lyric's Articles of
Incorporation. By virtue of the shares acquired by NGT upon
conversion of the Note, NGT holds sufficient votes to assure
shareholder approval of all of the above matters. It is
anticipated that the Share Exchange will take place in two
stages. The first stage is to occur immediately after the Lyric
shareholder meeting and will consist of the exchange of
approximately 2,688,000 shares of the authorized but unissued
post-reverse split shares of Lyric for 3,405,550 NGT common
shares, which constitutes approximately 82 percent of the equity
interests in NGT. The NGT shares to be exchanged in the first
stage are held by certain officers, directors, affiliates and
sophisticated investors. Lyric will control NGT upon completion
of the first stage.
The second stage will occur upon the approval by NGT shareholders
of the exchange of the remaining shares pursuant to an SEC
Registration Statement on Form S-4 and Proxy Statement which
registers the exchange of all of the remaining equity interests
in NGT into shares of the authorized but unissued post-reverse
split shares of Lyric and further provides for the distribution
of the 878,043 post-reverse split shares of Lyric issued to NGT
upon conversion of the Note to the shareholders of NGT
immediately prior to the Share Exchange. It is also contemplated
that the shares issued in the first stage of the Share Exchange
will be registered by such registration statement. Upon
completion of the Share Exchange, the current shareholders of
Lyric will hold approximately five percent of the total
outstanding shares of Lyric and the shareholders of NGT will hold
the remaining 95 percent, assuming conversion of the preferred
shares to be issued in the Share Exchange.
The Share Exchange is expected to be accounted for as a purchase.
The Share Exchange is structured as a tax-free reorganization and
is not expected to have any tax consequences for NGT.
NOTE 3: ACQUISITION OF LICENSE TO FUEL BLENDING PATENT AND
RELATED EQUIPMENT
In December 1996, NGT acquired a non-exclusive license agreement
to utilize certain patented technology regarding a technique for
blending alternative fuels into gasoline. NGT also acquired
certain related office furnishings and equipment, including a
blending tower. The consideration for the acquisition of these
assets was 100,000 shares of Common Stock and 50,000 shares of
Series 1994-B Preferred Stock.
Under the license agreement, NGT is obligated to pay monthly
royalties of up to 3% of NGT's gross receipts related to the
technology, with such royalty percentage dependent upon the gross
margin per gallon of gasoline represented by such gross receipts
for the applicable month. The license agreement expires on the
later of the expiration of 21 years following the date the first
plant for fuel blending under the license agreement begins
commercial production or the expiration of the underlying
patents.
NOTE 4: SUBSEQUENT EVENTS
During the quarter ended April 30, 1997, NGT purchased all of the
issued and outstanding stock of Interior Energy, Inc., a Texas
corporation ("Interior"). The consideration for the purchase was
370,000 shares of NGT's common stock, $500,000 cash and
assumption of a note with a remaining balance of $3,000,000 due
in 1999. Interior holds two oil and gas property interests.
In addtion, NGT acquired during the quarter ended April 30, 1997
a fifty percent working interest in the Norton Palo Pinto Field
in consideration of 120,000 shares of its common stock and the
assumption of $12,500 in expenses and an overriding royalty
interest payable to the seller until the foregoing shares are
exchanged for shares of Lyric and registered under the Securities
Act of 1933, as amended. (See Note 2 above.) The field leased
consists of 1,248 acres with a net revenue interest of 80
percent.
PRO FORMA COMBINED FINANCIAL STATEMENTS
Upon completion of due diligence and other research, Lyric will acquire 100%
of the outstanding shares of Natural Gas Technologies, Inc. (NGT)
(a Texas corporation) in exchange for the issuance of new Lyric
shares. This transaction, coupled with the conversion of a note
payable to NGT into Lyric shares will cause former NGT
shareholders to own approximately 95% of Lyric. This transaction
qualifies as a purchase for accounting purposes. However, the
transaction also is considered to be a reverse purchase whereby
NGT is considered to be the acquirer for accounting purposes. As
such, there are no adjustments to the carrying value of NGT
assets and liabilities to reflect current fair values and Lyric
has no assets and liabilities that require adjustment.
The transaction consists of three parts, a loan from NGT to Lyric
that is convertible into Lyric common stock, the distribution of
these shares by NGT to its stockholders, and the issuance of new
Lyric shares for outstanding NGT shares. A portion of the
transaction agreement calls for Lyric to reverse split its
outstanding shares after the note conversion by a factor of one
share for 240.597 shares. The following table presents
summarized historical unaudited balance sheets for the two
entities, estimated adjustments required as a direct result of
the acquisition plan and the transactions contemplated therein,
and a pro forma consolidated balance sheet as of the date shown.
Adjustments consist of recording the effects of converting the
note, reverse splitting the outstanding shares, and issuing
shares for NGT shares.
Pro Forma Balance Sheet
As of January 31, 1997
Lyric Adjust- Pro Forma
Energy NGT ments Combined
ASSETS
Cash $ - $ 237 $ - $ 237
Fixed assets (oil and
gas properties included
are on cost method) - 1,434,929 - 1,434,929
Patent license 360,000 360,000
Other assets - 24,974 - 24,974
TOTAL ASSETS $ - $1,820,140 $ - $1,820,140
LIABILITIES AND
STOCKHOLDERS EQUITY
Liabilities:
Accounts payable and
accrued expenses $ 64,521 $59,775 $(64,521) $ 59,775
Loans from
stockholder - 36,989 - 36,989
Note payable - 20,968 - 20,968
Total Liabilities $ 64,521 117,732 (64,521) 117,732
Redeemable stock
(preferred A) - 38,388 - 38,388
Stockholders equity:
Preferred stock -
series B - 1,042,944 (777,504) 265,440
Common stock 469,584 3,105 (437,723) 34,996
Additional paid
in capital 1,690,5451,541,263 (944,902) 2,286,906
Deferred services (160,000) (160,000)
Retained deficit (2,224,650)(763,292) 2,224,650 (763,292)
Total Stockholders
Equity (64,521)1,664,020 64,521 1,664,020
TOTAL LIABILITIES
AND STOCKHOLDERS
EQUITY $ - $1,820,140 $ - $1,820,140
The following table presents summarized historical statements of
operation of the two entities for the nine months ended January
31, 1997. These statements include the recognition during the
nine months of certain transactions related directly to agreements
regarding the proposed merger with NGT. The adjustments consist of
eliminating the related party interest.
Pro Forma Statement of Operations
For the Nine Months Ended January 31, 1997
Lyric Adjust- Pro Forma
Energy NGT ments Combined
REVENUES $ - $62,464 $ - $62,464
Direct Expenses - 52,540 $ - 52,540
Depletion and
Depreciation - 18,352 - 18,352
Professional and
consulting fees - 102,994 102,994
Other Operating Expenses 114 35,663 - 35,777
Other Expenses (income) 5,928 2,998 (5,928) 2,998
Income from
Continuing
Operations $(6,042) (150,083) $5,928 $(150,197)
Loss per share $ (0.04)
The following table presents summarized historical statements of
operations of the two entities for the fiscal year ended April
30, 1996. The adjustment is the elimination of related party
interest that was based on related party debt eliminated in
January 1997 as debt forgiveness.
Pro Forma Statement of Operations
For the Twelve Months Ended April 30, 1996
Lyric Adjust- Pro Forma
Energy NGT ments Combined
REVENUES $ - $ 136,945 $ - $ 136,945
Direct expenses - 119,018 - 119,018
Depletion and
depreciation - 40,962 - 40,962
Professional and
consulting fees - 100,571 - 100,571
Other operating
expenses 906 69,018 - 69,924
Other expense
(income) 8,891 28,207 (8,891) 28,207
Income from
continuing
operations $(9,797) $(220,831) $8,891 $(221,737)
Loss per share $ (0.06)
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
The pro forma financial statements presented above assume that
the combination of these two entities will be approved by the stockholders of
each entity and that the transactions will occur in accordance with
the current agreements. They do not reflect any activities of
the entities subsequent to January 31, 1997. These statements do
not, and are not intended to, present a projection of the future
income of the combined entity. These pro forma statements also
do not include the effects on net assets of certain planned
transactions by NGT to acquire other oil and gas properties
through the issuance of stock prior to and after the merger. However, such
transaction, if consummated, would not effect the number of shares of Lyric to
be issued in the acquisition or the ratio of the holdings of former NGT
stockholders to former Lyric stockholders.
The stock transactions include the issuance of 203,041,517 Lyric
shares to NGT to convert the note payable. The reverse stock
split would result in outstanding shares of 1,041,082. The subsequent
issuance of Lyric shares for the outstanding NGT shares would result in total
outstanding Lyric shares of 3,496,575 which has been used as the basis for the
earnings per share calculation. The stock adjustments also include the
conversion of Preferred B shares held by Wagman Petroleum, Inc. to common
shares prior to the share exchange. It is believed that other Preferred
shareholders will convert their preferred shares to common shares, but no
estimate of how many shares may be converted can be made.
