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, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-9800
LYRIC INTERNATIONAL, INC.
(Exact name of small business issuer as specified in its charter)
Colorado 75-1711324
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
16775 Addison Road, Suite 300, Dallas, Texas 75248
(Address of principal executive offices)
(972) 713-7163
(Issuer's telephone number)
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...X... No.......
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: 1,041,969 shares of common
stock as of September 18, 1998.
Transitional Small Business Disclosure Format (check one);
Yes....... No...X....
Index to Quarterly Report on Form 10Q-SB
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Report on Review by Independent Certified
Public Accountants
Balance Sheets as of July 31, 1998 and April
30, 1998
Statements of Operations for the Three-Month
Periods ended July 31, 1998 and 1997 and
Cumulative Period During the Development Stage
Statements of Cash Flows for the Three-Month
Periods ended July 31, 1998 and 1997 and
Cumulative Period During the Development Stage
Selected Information for Financial Statements
Item 2. Plan of Operation.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Item 2. Changes in Securities.
Item 3. Defaults Upon Senior Securities.
Item 4. Submission Of Matters To A Vote Of Security Holders.
Item 5. Other Information.
Item 6. Exhibits And Reports on Form 8-K.
SIGNATURES
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
REPORT ON REVIEW BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Lyric International, Inc.
Dallas, Texas
We have reviewed the accompanying balance sheet of Lyric International, Inc.
(formerly Lyric Energy, Inc.) as of July 31, 1998, and the related statements
of operations and cash flows for three months ended July 31, 1998 and 1997.
These financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical review
procedures to financial data and making inquiries of persons responsible for
financial and accounting matters. It is substantially less in scope than an
audit conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet as of April 30, 1998, and the related statements
of operations, retained earnings and cash flows for the year then ended (not
presented herein); and in our report dated June 19, 1997, we expressed an
unqualified opinion on those financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated balance sheet
as of April 30, 1998 is fairly stated in all material respects in relation to
the consolidated balance sheet from which it has been derived.
/s/ Robert Early & Company
Robert Early & Company, P.C.
Abilene, Texas
September 19, 1998
LYRIC INTERNATIONAL, INC.
(A Development Stage Enterprise)
Balance Sheets
<TABLE>
<CAPTION>
July 31, April 30,
1998 1998
(Unaudited)
<S> <C> <C>
Assets
Cash $26,403 $ -
Fixed Assets
Oil and gas properties 1,675,816 -
______________ ____________
TOTAL ASSETS $1,702,219 $ -
================ =============
Liabilities and Stockholders' Equity/(Deficiency)
Liabilities
Accounts payable $9,481 $ -
Payable to Natural Gas
Technologies, Inc. 14,993 15,117
Accrued interest 521 -
Advance from related parties 12,124 -
Notes payable to related parties 475,000 -
__________ ____________
TOTAL LIABILITIES 512,119 15,117
___________ ______________
Stockholders' Equity/(Deficiency)
Preferred stock:
Series B, $1.00 stated value
(10,000,000 shares authorized,
13,500 shares outstanding) 1,350,000 -
Common stock, $.01 stated
value (250,000,000 shares
authorized, 1,104,196 and
1,037,529 outstanding) 11,086 10,419
Additional paid-in capital 2,588,952 2,713,803
Retained (deficit) (2,687,204) (2,687,204)
(Deficit) accumulated during
the Development Stage (72,734) (52,135)
______________ ________________
Total Stockholders' Equity 1,190,100 (15,117)
______________ ________________
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $1,702,219 $ -
=============== =================
</TABLE>
See accompanying selected information and accountant's report.
LYRIC INTERNATIONAL, INC.
(A Development Stage Enterprise)
Statements of Operations
For Three Months Ended July 31, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
Cumulative
During the
Development
Stage 1998 1997
<S> <C> <C> <C>
Lease operating expenses $9,481 $9,481 $ -
General and administrative expenses 61,771 11,118 -
Loss from Operating (71,252) (20,599) -
Other Income - - -
Interest expense to related parties (1,482) - -
NET (LOSS) $(72,734) $(20,599) $ -
========= ========== ========
Net loss per weighted average share $ (0.08) $ (0.02) $(0.00)
========= ========= ============
Weighted average shares outstanding 855,731 1,044,868 1,041,969
========== ========== ============
</TABLE>
See accompanying selected information and accountant's report.
LYRIC INTERNATIONAL, INC.
(A Development Stage Enterprise)
Statement of Changes in Stockholders' Equity/(Deficiency)
<TABLE>
<CAPTION>
Deficit
Accumulated
During The
Date of Additional Accum- Develop-
Tran- Preferred Stock Common Stock Paid-In lated ment
saction Shares Amount Shares Amount Capital (Deficit) Stage
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCES,
November
30, 1996 - $ - 195,717 $1,957 $2,158,172 $(2,682,701) $ -
Contributed
by related
parties
through
cancellation
of debts
01/15/97 - - - - 464,093 - -
Issued
for
Cash 04/10/97 - - 846,252 8,462 91,538 - -
Net (loss) - - - - - (4,503) (37,018)
________ _______ _______ _______ ________ ________ ________
BALANCES,
April
30, 1997 - - 1,041,969 10,419 2,713,803 (2,687,204) -
Net (loss) - - - - - - (15,117)
_________ _______ ________ ________ ________ ________ ________
BALANCES,
April
30, 1998 1,041,969 10,419 2,713,803(2,687,204)(52,135)
Issued for
oil &
gas
property
07/27/98 13,500 1,350,000 66,667 667 (124,851) - -
Net (loss) - - - - - - (20,599)
_______ ___________ ________ ______ ___________ _________ ________
BALANCES,
July
31, 1998 13,500 $1,350,0001,108,636 $11,086 $2,588,952 $(2,687,204)$(72,734)
======== ======== ======== ======== ========= ========= ========
</TABLE>
See accompanying selected information and accountant's report.
LYRIC INTERNATIONAL, INC.
(A Development Stage Enterprise)
Statements of Cash Flows
For Three Months Ended July 31, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
Cumulative
During the
Development
Stage 1998 1997
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(72,734) $(20,599) $ -
Adjustments to reconcile
net income/(loss) to
net cash provided by operations:
Increase/(decrease) in:
Accounts payable (27,887) 21,483 -
Accrued expenses 2,003 521 -
_______________ ___________ _________
Net Cash Provided/(Used)
by Operating Activities (98,618) 1,405 -
_______________ ____________ _________
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of oil and gas
properties (240,002) (240,002) -
_______________ ____________ __________
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable 265,000 265,000 -
Proceeds from issuing stock 100,000 - -
________________ ____________ _________
Net Cash Provided by
Investing Activities 365,000 265,000 -
_________________ ____________ _________
Increase in cash for period 26,380 26,403 -
Cash, Beginning of period 23 - -
________________ _____________ ________
Cash, End of period $26,403 $26,403 $ -
================ ============= =========
Supplemental Disclosures:
Cash payments for:
Interest $ - $ - $ -
Income taxes - - -
Cancellation of related party
and other indebtedness $458,166 $ - $ -
Acquisition of oil and gas property:
Note payable $210,000 $ - $ -
Common & preferred stock 1,225,816 - -
</TABLE>
See accompanying selected information and accountant's report.
Lyric International, Inc.
(A Development Stage Enterprise)
SELECTED INFORMATION FOR FINANCIAL STATEMENTS
January 31, 1998
(Unaudited)
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions of Regulation S-B. They do not include all
information and footnotes required by generally accepted accounting
principles for complete financial statements. However, except as disclosed
herein, there has been no material change in the information included in the
Company's Annual Report on Form 10-KSB for the year ended April 30, 1998. In
the opinion of Management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
The report of Robert Early & Company, P.C. commenting on their review
accompanies the condensed financial statements included in Item 1 of Part 1.
Operating results for the nine month period ended July 31, 1998, are not
necessarily indicative of the results that may be expected for the year
ending April 30, 1999.
Development Stage Enterprise -- The Company returned to the development stage in
November 1996 with the transfer of its final operating responsibility to others
and thereby reducing its activities to the sole pursuit of identifying,
evaluating, structuring, and completing a merger with or acquisition of a
privately owned entity.
Going Concern Issues The Company has been relatively inactive during the past
three years due to a shortage of operating assets and working capital. The
Company has no assets (or credit) with which to initiate new business or to
acquire an existing business These factors raise substantial doubt about the
Company's ability to continue as a going concern. The Company reentered the
development stage in November 1996 when it transferred its last operations to
another operator and reinforced its search for a merger or acquisition target in
order to carry on the operations of the target Company. The Company signed a
Letter of Intent to merge with Natural Gas Technologies, Inc. (NGT) in January
1997. In January 1998, the merger agreement with NGT was terminated by NGT.
During July 1998, the Company acquired an oil and gas lease in Mitchell County,
Texas with limited production and significant development potential. Workover
and rework efforts were begun to bring existing wells back into production.
The ability of the Company to continue as a going concern is dependent on its
ability to acquire the funds to bring this property into profitable
production or to complete a merger transaction. There are no adjustments of
financial statement information required should the Company be unable to
continue as a going concern.
NOTE 2: STOCK TRANSACTIONS
During July, the Company held a special stockholder meeting at which the
following was approved: a reverse split of common shares of 1 for 240.597,
authorization of 10,000,000 shares of preferred stock, and to change the name
of the Company from Lyric Energy, Inc. to its current name. All share
amounts presented have been restated as though the reverse split had occurred
at the earliest date presented.
The directors established a Series B Preferred Stock with par value set at $100
per share and which is entitled to cumulative dividends at 8% of par value.
These Series B shares are also convertible, at the option of the holder, into
the Company's common stock during calendar 1999. The conversion will be based
on the 10 day average closing price of the Company's common stock immediately
prior to the conversion effective date. Additionally, all Series B preferred
shares convert to common shares on January 1, 2000 based on the average of
the last 10 days' closing prices in 1999.
The shares issued as described in Note 3 had not been issued by the Company's
stock transfer agent at July 31, 1998. However, they have been presented as
issued in these financial statements due to contract requirements.
NOTE 3: ACQUISITION OF OIL AND GAS ASSETS
During July 1998, the Company purchased an oil and gas lease in Mitchell County,
Texas covering approximately 560 acres. This property has 56 existing wells
which had limited production but needed work. The Company plans to convert a
number of wells to water injection wells to enhance oil recovery. Some
existing wells will have to be plugged.
The Company paid a total of $1,850,000 for this property. The purchase price
consisted of $240,000 cash, a note for $210,000, 66,667 shares of common stock,
and 13,500 shares of preferred Series B stock. The note bears interest at
8% and is due July 27, 1999. The stock has been valued at $0.375 per share
for the common and $100 per share for the preferred. However, due to a
discounted present value calculation by a petroleum engineer using a 20%
discount factor, the property was recorded at the lower estimated fair value
of $1,675,816 with the balance being an adjustment of additional paid in
capital.
NOTE 4: SUBSEQUENT EVENTS
Subsequent to July 31, 1998, the Company has agreed to issue approximately 2,580
shares of Series B Preferred Stock to Brent Wagman, a former officer of the
Company, in exchange for certain notes receivable plus accrued interest, from
TransEnergy, Inc. with a combined face value of $256,662.
Additionally, on September 1, 1998, the Company acquired the stock of Woodman
Enterprises, Inc. in exchange for 5,000 shares of Series B Preferred Stock from
Redbank Petroleum, Inc. Woodman Enterprises is in the oil field service
business. Its primary assets consist of a workover rig and related supporting
equipment. The Company has been using this equipment in its efforts to rework
wells on the Mitchell County, Texas lease.
Item 2. Plan of Operation
Cautionary Statement with Regard to Forward Looking Information
This report may include certain statements that may be deemed to be "forward-
looking statements" within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. All statements, other than statements of historical facts, included in
this report that address activities, events or developments that Lyric
International, Inc. (the "Company" or "Lyric") expects, believes
or anticipates will or may occur in the future, including such matters as costs
and expenses of the acquisition of producing, developmental or exploratory
properties, oil and gas reserve data and information, costs of capital,
projected margins, repayment of debt, business strategies, expansion and
growth of the Company's operations and other such matters are forward-looking
statements. These statements are based on certain assumptions and analyses
made by the Company in light of its experience and its perception of
historical trends, current conditions, expected future developments and other
factors it believes are appropriate in the circumstances. Such statements are
subject to a number of assumptions, risks and uncertainties, including
general economic and business conditions, oil and gas pricing issues, the
availability of certain business opportunities (or lack thereof) that may be
presented to and pursued by the Company, changes in laws or regulations and
other factors, many of which are beyond the control of the Company. Prospective
investors are cautioned that any such statements are not guarantees of future
performance and that actual results or developments may differ materially from
those projected in the forward-looking statements.
General
Lyric currently is focusing on three plans of operations: (i) resources, (ii)
technology, and (iii) real estate.
Resources
The Company primarily plans to build shareholder value through consistent growth
in per share reserves, production and the resulting cash flow in earnings of the
Company. To accomplish this, the Company plans to acquire working interests in
properties which are expected to produce secondary recoveries of oil and gas
through the use of new technologies, water floods or additional drilling. These
types of properties can usually be acquired on more favorable terms than
properties in primary production, although lease operating costs for these
properties are higher upon acquisition than properties in primary production.
In July 1998, the Company completed an acquisition of oil and gas properties
from West Texas Recovery, Inc. ("WTR") in exchange for shares of the
Company's Common Stock Series B Preferred Stock, a promissory note and cash.
(See the Notes to the Financial Statements). The property covers 600 acres,
all of which are developed. The property contains a total of 57 wells,
including 48 wells that are shut-in, eight producing wells, and one injection
well. Lyric has plans to rework the oil and gas properties acquired from WTR
and increase revenues from these properties. There is not however any
assurance that this will occur or that the Company will be successful in
reworking the properties on a profitable basis.
The Company presently has not identified any other properties in which to
acquire a working interest or determined the manner in which any such
acquisitions may be financed.
Technology
The Company currently is negotiating with an affiliated party to acquire
advanced 4-D seismic equipment and technology to systematically explore for
and exploit natural gas and oil accumulations. No determination has been made
by the parties as to whether the Company will purchase all of, part of or
lease the 4-D seismic equipment and technology from the affiliated party. If
that transaction is consummated, it will be on a non-arm's-length basis.
Real Estate
The Company currently is negotiating with certain parties to acquire a beach
front hotel in Key Largo, Florida. The parties however have yet to enter
into a letter of intent. The Company has not determined the manner in which
the possible purchase of the hotel may be financed.
Other Developments
On September 1, 1998, the Company acquired all of the outstanding shares of
common stock of Woodman Enterprises, Inc. ("WEI") in exchange for 5,000
shares of Lyric's $100 par value Series B Preferred Stock. WEI is a company
primarily engaged in the business of subcontracting equipment used to service
and maintain oil and gas wells. WEI also subcontracts equipment used for the
re-entry of oil and gas wells. Lyric plans to continue to use the property
and equipment of WEI in operations that are the same as the operations in
which WEI currently is engaged. WEI was a wholly owned subsidiary of Redbank
Petroleum, Inc., a corporation which is owned 50 percent by Warren Donohue, a
director and officer of Lyric, and 50 percent by Brent Wagman, a former
officer and director of Lyric.
Liquidity and Capital Resources
As of July 31, 1998, Lyric had a cash balance of approximately $27,000 and
capitalized well costs of $1,800,000 on the properties located in the Coleman
Ranch Field, Mitchell County, Texas purchased from WTR. The Company's capital
requirements to exploit the Coleman Ranch properties is significant and there is
not any assurance that the Company will be able to obtain such funds or
obtain the require capital on terms favorable to the Company. If Lyric is
unable to obtain financing from related parties or some other source, it is
unlikely that Lyric will continue as a going concern.
Year 2000 Issues
Year 2000 issues may arise if computer programs have been written using two
digits (rather than four) to define the applicable year. In such case,
programs that have time-sensitive logic may recognize a date using "00" as
the year 1900 rather than the year 2000, which could result in
miscalculations or system failures.
The Company has not completed its assessment of the Year 2000 issue, but
currently believes that costs of addressing the issue will not have a
material adverse impact on the Company's financial position. The Company has
not automated many of its operations with information technology ("IT")
systems and non-IT systems because of the size of the Company, and presently
believes that the Company's existing computer systems and software will not
need to be upgraded to mitigate the Year 2000 issues. The Company has not
incurred any costs associated with its assessment of the Year 2000 problem.
In the event that Year 2000 issues impact the Company's accounting operations
and other operations aided by its computer system, the Company believes, as
part of a contingency plan, that it has adequate personnel to perform those
functions manually until such time that any Year 2000 issues are resolved.
The Company believes that the third parties with whom the Company has material
relationships will not materially be affected by the Year 2000 issues as those
third parties are relatively small entities which do not rely heavily on IT and
non-IT systems for their operations. However, if the Company and third parties
upon which it relies are unable to address any Year 2000 issues in a
timely manner, it could result in a material financial risk to the Company,
including loss of revenue and substantial unanticipated costs. Accordingly, the
Company plans to devote all resources required to resolve any significant Year
2000 issues in a timely manner.
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, 1998.
Item 2. Changes in Securities
On July 27, 1998, the Company agreed to issue to one person 66,667 shares of the
Company's common stock and 13,500 shares of the Company's $100 par value
Series B Preferred Stock as partial consideration for the acquisition of an
oil and gas property. The aggregate purchase price of the property was
$1,800,000 and the seller of the property received in addition to the common
stock and Series B Preferred Stock $240,000 cash and a promissory note in the
amount of $210,000 bearing an interest rate of eight percent. The issuance of
the securities in that transaction was made pursuant to Section 4(2) under
the Securities Act of 1933, as amended, as an offering not involving a public
offering.
Holders of the Series B Preferred Stock are entitled to cumulative dividends at
the rate of 8% of the par value of the Series B Preferred Stock. Each share of
Series B Preferred Stock is convertible, at the option of the holder thereof,
into the Company's $.01 par value common stock (the "Common Stock") during
the period commencing on January 1, 1999 until December 31, 1999 (the
"Expiration Date"). The number of shares of Common Stock into which one share
of Series B Preferred Stock will be converted will be equal to $100 divided
by the average closing price of the Company's Common Stock traded over the
counter, or on Nasdaq or any national exchange (the "Average Closing Price")
for the ten trading days immediately prior to the conversion effective date.
All shares of Series B Preferred Stock automatically convert to shares of the
Company's Common Stock on January 1, 2000 based on the Average Closing Price
for the ten trading days immediately prior to January 1, 2000.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
On July 1, 1998, a Special Meeting of Shareholders of the Company was held. At
that meeting, the following matters were approved by an aggregate of 858,776
(post-split) shares of Common Stock held by the officers, directors and
principal shareholders of the Company representing 82 percent of the
outstanding Common Stock. Proxies were not solicited for that meeting.
1. A proposal to ratify a one share-for-240.597 share (1 for 240.597)
reverse split of the issued and outstanding shares of the Company's $.01 Common
Stock.
2. A proposal to adopt Articles of Amendment of the Company's Articles
of Incorporation which contain provisions:
a. To authorize 10,000,000 shares of preferred stock to be
reserved for future issuance in the discretion of the Board
of Directors;
b. To eliminate the liability of the Company's officers and
directors in certain circumstances;
c. To reduce the voting requirements for certain fundamental
corporate actions; and
d. To reduce the quorum requirement for shareholder meetings
from shares representing a majority of the outstanding voting
rights to shares representing one-third of the outstanding
voting rights on the matters presented.
3. To change the name of the Company from "Lyric Energy, Inc." to
"Lyric International, Inc."
Item 5. Other Information
Brent A. Wagman resigned as an officer and director of the Company effective
as of September 1, 1998. Michael G. Maguire has been appointed as President and
Chairman of the Board of the Company effective as of September 1, 1998. Since
1992, Mr. Maguire has been President, Chief Executive Officer and Chief
Financial Officer of West Texas Recovery, Inc., an oil and gas well owner and
operator.
Item 6. Exhibits And Reports On Form 8-K
(a) Exhibits
The exhibits included in the Company's Annual Report on Form
10-KSB for the fiscal year ended April 30, 1998 are incorporated
herein by reference.
27.1 Financial Data Schedule
(b) Reports On Form 8-K
None.
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 INTERNATIONAL, INC.
Date: September 21, 1998 By: /S/ MICHAEL G. MAGUIRE
________________________________
Michael G. Maguire, President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-END> JUL-31-1998
<CASH> 26,403
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 26,403
<PP&E> 1,675,816
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,702,219
<CURRENT-LIABILITIES> 512,119
<BONDS> 0
0
1,350,000
<COMMON> 11,086
<OTHER-SE> (170,986)
<TOTAL-LIABILITY-AND-EQUITY> 1,702,219
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 20,599
<TOTAL-COSTS> 20,599
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (20,599)
<INCOME-TAX> 0
<INCOME-CONTINUING> (20,599)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (72,734)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
