UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8K
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
Item 1. Change in Control of Registrant.
On April 10, 1997, Natural Gas Technologies, Inc., a Texas
corporation ("NGT"), acquired 203,041,517 shares of the $.01 par
value common stock ("Common Stock") of the Registrant. This
represents 81 percent of the issued and outstanding stock of the
Registrant. NGT acquired these shares upon conversion of a
Restated Convertible Promissory Note dated as of February 4, 1997
(the "Note"), in the principal amount of $100,000. Pursuant to
the terms of the Note, $100,000 previously loaned by NGT to the
Registrant and held in escrow was paid to Lyric and the Note was
cancelled upon issuance of the foregoing shares. The source of
the $100,000 loaned funds was a loan to NGT from Brent Wagman,
NGT's President.
Also on April 10, 1997, the Registrant filled two vacancies
on the Board of Directors with persons designated by NGT. The
Board now consists of three Directors: G.E. Stahl, who was
previously the sole Director, Brent Wagman and Warren Donahue.
Mr. Wagman and Mr. Donahue are directors of NGT and were
appointed to the Registrant's Board pursuant to an undertaking in
the Note for the Registrant to appoint two Directors designated
by NGT upon conversion of the Note.
Previously, no single person or voting group controlled the
Registrant.
Item 2. Acquisition or Disposition of Assets.
The Registrant has entered into a letter of intent dated
January 2, 1997 and modified March 17, 1997 (the "Letter of
Intent") with NGT for a share exchange transaction ("Share
Exchange"). The reason for the Share Exchange is to carry out
the Registrant's Plan of Operation to acquire an operating
company.
NGT is an independent company engaged in the exploration,
development and production of oil and gas. Its principle
executive offices are located at 16775 Addison Road, Suite 300,
Dallas, Texas 75248, (915) 713-6050. It was incorporated in
Texas in 1993 and currently has interests in a total of 17 wells
located across four estates in Coke, Runnels and Coleman Counties
in west central Texas. As of the end of NGT's last fiscal year
(April 30, 1996), it had proved and developed reserves of 298,303
barrels of oil and 211,048 MMCF (millions of cubic feet) of
natural gas. In addition, NGT holds an option expiring in July
1997 to acquire a lease underlying an approximately 1,100 acre
water-flood project in North-Central Texas. NGT currently plans
to exercise this option prior to expiration and anticipates that
this acquisition will very substantially increase its proven and
developed reserves.
Pursuant to the Letter of Intent, NGT made the $100,000 loan
described in Item 1 above. As a result of the conversion of that
loan, the Share Exchange transaction is now probable to occur,
although it does remain conditional upon final documentation
therefor.
The Share Exchange is expected to commence after the
approval by the Registrant's shareholders of (i) a one share for
231.2433 share reverse stock split; (ii) the authorization of
10,000,000 share of no par value preferred stock, 9,597 of which
shall be designated as Series 1994-A Preferred Stock and 66,365
shall be designated as Series 1994-B Preferred Stock; and (iii)
amendments to the Registrant's Articles of Incorporation to
change the name of the Registrant to Natural Gas Technologies,
Inc., to eliminate the liability of officers and directors to the
corporation and its shareholders for monetary damages from
certain breaches of fiduciary duty as permitted by Colorado law
and to reduce the shareholder voting requirement for certain
fundamental corporate actions as permitted by Colorado law.
Approval for these matters will be solicited at a Special Meeting
of the Registrant's shareholders expected to be held at the end
of May 1997. Because of the shares of Common Stock held by NGT,
approval of the foregoing matters will be assured.
The Share Exchange will take place in two stages. The first
stage will occur immediately after the Special Meeting and will
consist of the exchange of approximately 2,357,000 shares of the
authorized but unissued post-reverse split shares of the
Registrant for 3,060,550 NGT common shares, which will constitute
approximately eighty 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. The
Registrant will control NGT upon completion of the first stage.
The second stage will occur upon approval by NGT
shareholders of the exchange of the remaining shares pursuant to
an S-4 Registration Statement 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 the Registrant and further provides for the distribution of
the 878,043 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. It is also contemplated
that the shares issued in the first stage of the Share Exchange
will be registered by such registration statement. NGT has
outstanding 9,597 shares of Series 1994-A preferred shares and
66,365 shares of Series 1994- B preferred shares. These
preferred shares are non-voting and will be converted upon the
second stage of the share exchange into the same number of Series
1994-A and Series 1994-B preferred shares of the Registrant
having substantially similar rights and preferences. As of the
record date, the Series 1994-A Shares of NGT have accrued an
aggregate of $9,175 in dividends and the Series 1994-B Shares of
NGT have accrued an aggregate of $17,150 in dividends. These
amounts will become accumulated but unpaid dividends of the
respective series of preferred stock of the Registrant to be
issued in the exchange. The Registrant intends to surrender the
NGT preferred shares acquired in the Share Exchange. Upon
completion of the Share Exchange, the current shareholders of the
Registrant will hold approximately five percent of the total
outstanding shares of the Registrant on a fully diluted basis and
the shareholders of NGT will hold the remaining 95 percent.
Notwithstanding the foregoing, the shareholders of NGT may
receive a greater interest in the Registrant as a result of
additional issuances of NGT shares for cash and in exchange for
additional oil and gas properties which may occur prior to the
Share Exchange. All such transactions will be subject to the
approval of the Board of Directors of the Registrant.
The Share Exchange is expected to be accounted for as a
purchase. The Share Exchange is structured as a tax-free
reorganization and should not have any tax consequences for the
shareholders of the Registrant or NGT.
Under Colorado law, the Share Exchange may be effected by
resolution of the Board of Directors of the Registrant. Approval
of the shareholders of the Registrant is not required and
Colorado law does not grant dissenter's rights to the
shareholders of the Registrant.
Item 7. Financial Statements and Exhibits.
(a) Financial statements of business acquired.
1. Report of Independent Certified Public Accountants
2. Balance Sheet - 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. Statement of Cash Flows - For the Years Ended
April 30, 1996 and 1995
6. Notes to Financial Statements
Additional financial statements of NGT to be filed by
amendment within sixty days after the date of this report.
(b) Pro forma financial information.
1. Introductory Note to Pro Forma Combined Financial
Statements
2. Pro Forma Balance Sheet - As of January 31, 1997
(Unaudited)
3. Pro Forma Statement of Operations - For the Nine
Months Ended January 31, 1997 (Unaudited)
4. Pro Forma Statement of Operations - For the Year
Ended April 30, 1996 (Unaudited)
5. Notes to Pro Forma Combined Financial Statements
SIGNATURES
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: April 21, 1997 By: /s/ G.E. Stahl
G.E. Stahl, President
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. at April 30, 1994, and the
results of its operations and its cash flows from inception to
April 30, 1994, in conformity with generally accepted accounting
principles.
Robert Early & Company, P.C.
Abilene, Texas
July 30, 1996
NATURAL GAS TECHNOLOGIES, INC.
Balance Sheet
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 (170,583) (24,346)
1,302,750 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 $ 1,318,516 $1,332,036
Liabilities and Stockholders' Equity
Liabilities
Accounts payable $ 15,629 $ 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 34,503 579,012
Notes payable 15,434 -
TOTAL LIABILITIES 49,937 579,012
Redeemable Stock
Preferred stock, Series A
$4.00 par value (500,000 shares
authorized, 9,597 outstanding) 38,388 -
Stockholders's Equity
Preferred stock, Series B
$4.00 par value (500,000 shares
authorized, 210,736 outstanding) 842,944 -
Common stock, $.001 par value
(10,000,000 shares authorized,
2,330,130 and 2,343,562 outstanding) 2,330 2,344
Additional paid-in capital 497,573 473,994
Stock to be issued 579,785 739,897
Prepaid director fees (20,833) (70,833)
Retained earnings/(deficit) (671,608) (392,378)
Total Stockholders' Equity 1,230,191 753,024
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 1,318,516 $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 $ 156,736 $144,014
Other income 28,596 7,769
Total Revenues 185,332 151,783
Expenses:
Production taxes 5,737 7,768
Lease operating expenses 114,410 110,624
Depreciation, depletion
and amortization 146,619 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 436,355 353,232
Income/(Loss) from Operations (251,023) (201,449)
Interest income - 75
Interest expense (28,207) (39,722)
NET (LOSS) $(279,230) $(241,096)
Primary loss per share $ (0.12) $ (0.10)
Weighted average shares
outstanding 2,398,254 2,387,546
Fully diluted loss per share $ (0.11) $ (0.09)
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 - - - -
Sale of option - - - -
Net loss - - - -
BALANCES April 30, 1995 - - - -
Stock issued for:
Cash 9,597 38,388 - -
Oil and gas
interests - - 16,360 65,440
Related party liabi-
lities - - - -
Exchange by Wagman
Petroleum Inc. of
common for preferred - - 194,376 777,504
Net loss - - - -
BALANCES
April 30, 1996 9,597 $ 38,388 210,736 $842,944
STOCK TO BE ISSUED
(Total Value)
For Oil and gas
interests - - 16,360 65,440
For Cash 9,597 38,388 - -
For Services - - - -
Exchange by Wagman
Petroleum Inc.
of common for
preferred - - 194,376 777,504
NATURAL GAS TECHNOLOGIES, INC.
Statement of Changes in Stockholders' Equity
For the years ended April 30, 1996 and 1995 (cont.)
BALANCES
April 30, 1995 9,597 $ 38,388 210,736 $842,944
Liabilities to
related parties - - - -
Liablities to
third parties - - - -
Oil and gas
interests - - - -
Promotional
services - - - -
BALANCES April 30, 1996 - - - -
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 (500,000) (500) 500 -
Sale of option - - 100 -
Net loss - - - (241,096)
BALANCES
April 30, 1995 2,343,562 2,344 473,994 (392,378)
Stock issued for:
Cash 2,667 3 170 -
Oil and gas
interests 337,235 337 635,560 -
Related party liabi-
lities 165,000 165 164,835 -
Exchange by Wagman
Petroleum Inc. of
common for preferred (518,334) (518) (776,986) -
Net loss - - - (279,230)
BALANCES
April 30, 1996 $2,330,130 $2,331 $ 497,573 $(671,608)
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)
STOCK TO BE ISSUED
(Total Value)
Oil and gas
interests $ 337,235 $ 337 $631,628 $697,405
Cash - - 104 38,492
Services 2,667 3 3,997 4,000
Exchange by Wagman
Petroleum Inc.
of common for
preferred (518,334) (518) (776,986) -
BALANCES
April 30, 1995 $842,944 $(178,432) $ ( 178) $(141,257)
Liabilities to
related parties 216,655 217 833,089 433,306
Liablities to
third parties 10,615 11 21,220 21,231
Oil and gas
interests 22,624 23 45,225 45,248
Promotional
services 200,000 200 79,800 80,000
BALANCES
April 30, 1996 $449,894 $ 451 $579,334 $579,785
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 $ (279,230) $ (241,096)
Adjustments to reconcile net income/(loss) to
net cash provided by operations:
Depreciation, depletion and amortization 146,619
23,239
Amortization of directors fees 50,000 50,000
Stock to be issued for services 80,000 -
Expensing
of prepaid offering costs - 35,107
Increase/(decrease) in:
Accounts payable (601) 8,495
Accrued expenses (32,033) 39,646
NET CASH (USED BY) OPERATING ACTIVITIES (35,245) (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 (772) -
NET CASH PROVIDED BY FINANCING ACTIVITIES 57,958 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 and stock to be issued for:
Professional services $ 80,000 $ 4,000
Oil and gas properties 45,248 697,405
Reductions of accounts
and notes payable 619,537 -
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.
Depreciation is calculated on a straight line over the estimated
useful lives of the assets. This is seven years for lease and
well equipment.
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.
Shares to be issued represents shares that the Company has
contractually or otherwise agreed to issue. These have been
included in weighted average earnings per share as of the
effective date of the agreement rather than the date actually
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: CHANGE IN ACCOUNTING ESTIMATE AND TERMINATION OF
AGREEMENT
During the periods presented, Management determined that it had
overestimated the value of the stock it had acquired in
Wagman Petroleum, Inc. 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 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. Prepaid 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 shares
of Preferred and designated it as Series A and Series B. Both of
these series have a nine and one-quarter percent cumulative
annual dividend, 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 this time 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 shares. Accordingly, the directors returned
500,000 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. (The
directors' reduction in shares was the only stock transaction
where shares were actually issued during the year ended April
1995. The remaining shares were actually issued in the year
ended April 1996.)
During the year ended April 1996, WPI exercised an option of its
sale agreement and NGT issued 165,000 shares of common stock for
the benefit of WPI in exchange for reductions in advances,
accrued interest, and $100,000 of the note balance.
Effective in April 1996, NGT approved a request by its president
and WPI to issue 26,661 and 189,994 common shares, respectively,
in exchange for the complete liquidation of unreimbursed
expenses, advances owed, and the remaining note balance due to
WPI. Additionally, NGT negotiated an agreement to pay off
certain offering legal fees via the issue of 10,615 common shares
and 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. (The shares described in this
paragraph were yet to be issued at April 30, 1996 and are so
presented in the Balance Sheet.)
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 500,000 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.
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 was ultimately repaid via the issuance
of common stock along with other indebtedness to WPI in the
amount of $89,997 for a total of 354,994 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 receives NGT's gas production
revenues and offsets them against amounts that NGT owes WPI.
NOTE 5: NOTES PAYABLE
During fiscal 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 percent and was due to
be repaid out of proceeds from a stock offering or from oil and
gas production. It was retired during fiscal 1996 along with its
accrued interest through the issuance of common stock.
During February 1996, the Company borrowed $35,000 from a bank in
order to finance certain reworking expenses. This note bears
interest at 10 1/2 percent 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 fiscal 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. 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: INCOME TAXES
As of April 30, 1996 and 1995, NGT had accumulated deficits of
$670,608 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 281,318
$672,944
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 - 115,410 -
Less
valuation
allowance (149,247) - (115,146) -
Totals $ 769 $ 769 $ 115,410 $ 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 9: SUBSEQUENT EVENTS
The Company is in the process of negotiating an agreement to
acquire/merge with a Florida company whose primary business is
contracting with the state of Florida for soils testing and
removal of contaminated soils. Because of the early stages of
these negotiations, no pro forma combined schedules have been
presented.
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 10: SUPPLEMENTARY INFORMATION RELATING TO OIL AND GAS
PRODUCING ACTIVITIES
The accompanying 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 included 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.
NATURAL GAS TECHNOLOGIES, INC.
Supplementary Information Relating
To Oil and Gas Producing Activities
(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 13,253 -
Revisions of estimates - (68,052)
Production (33,690) (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 (560,223) (40,392)
Extensions & discoveries - (1,515,352)
Changes in estimated
future development costs - (31,885)
Revisions of quantity estimates 7,609 140,705
Accretion of discount 365,674 424,022
Net change in income taxes 62,173 308,062
Changes in production timing and other 3,530 (257,990)
Changes in sales prices - -
Standardized Measure - End of Year $ 2,708,512 $ 2,784,501
PRO FORMA COMBINED FINANCIAL STATEMENTS
Upon completion of final documentation, 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 at least 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 231.2433 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
Accounts receivable - 4,087 - 4,087
Oil and gas properties
(Full cost method) - 1,304,212 - 1,304,212
Other assets - 24,973 - 24,973
TOTAL ASSETS $ - 1,333,509 $ - $1,333,509
LIABILITIES AND
STOCKHOLDERS EQUITY
Liabilities:
Accounts payable and
accrued expenses $ 64,521 $42,731 $(64,521) $ 42,731
Loans from
stockholder - 36,989 - 36,989
Note payable - 20,968 - 20,968
Total Liabilities $ 64,521 100,688 (64,521) 100,688
Redeemable stock
(preferred A) - 38,388 - 38,388
Stockholders equity:
Preferred stock -
series B - 842,944 - 842,944
Common stock 469,584 2,757 (437,341) 35,000
Stock to be issued - 45,248 (45,248) -
Additional paid
in capital 1,690,545 1,031,683(1,677,540) 1,044,688
Retained deficit (2,224,650)(728,199) 2,224,650 (728,199)
Total Stockholders
Equity (64,521)1,194,433 64,521 1,194,433
TOTAL LIABILITIES
AND STOCKHOLDERS
EQUITY $ - $1,333,509 $ - $1,333,509
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 extraordinary items related to agreements
for the acquisition of NGT. The adjustments consist of
eliminating the related party interest along with the
extraordinary gain from debt forgiveness.
Pro Forma Statement of Operations
For the Nine Months Ended January 31, 1997
Lyric Adjust- Pro Forma
Energy NGT ments Combined
REVENUES $ - $56,741 $ - $56,741
Direct Expenses - 52,273 $ - 52,273
Depletion and
Depreciation - 138,916 - 138,916
Other Operating Expenses 114 63,777 - 63,891
Other Expenses (income) 5,928 3,666 5,928 3,666
Income from
Continuing
Operations 6,042 201,891 5,928 202,005
Extraordinary items:
Forgiveness of
debt 464,093 - (464,093) -
Net income $ 458,051 $(201,891) $(458,165) $(202,005)
Loss per share
before extra-
ordinary items $ (0.05)
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 Year Ended April 30, 1996
Lyric Adjust- Pro Forma
Energy NGT ments Combined
REVENUES $ - $ 185,332 $ - $ 185,332
Direct expenses - 120,147 - 120,147
Depletion and
depreciation - 146,619 - 146,619
Other operating
expenses 906 169,589 - 170,495
Other expense
(income) 8,891 28,207 (8,891) 28,207
Income from
continuing
operations (9,797) (279,230) 8,891 (280,136)
Extraordinary items:
Forgiveness
of debt - - - -
Net income $(9,797) $(279,230) $ 8,891 $(280,136)
Loss per share
before extra-
ordinary items $(0.07)
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 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 NGT shares prior to the acquisition.
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 approximately
1,081,000. The subsequent issuance of Lyric shares for the
outstanding NGT shares would result in total outstanding Lyric
shares of 4,024,470 which has been used as the basis for the
earnings per share calculation.