<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1996
Commission File No. 0-09482
MYSTIQUE DEVELOPMENTS, INC.
(Name of Small Business Issuer as Specified in its Charter)
WYOMING 83-0246080
(State or other jurisdic- (I.R.S. Employer Iden-
tion of incorporation) tification No.)
organization)
1820 South Elena Avenue, Redondo Beach, California 90277
(Address of Principal Executive Office)
(310) 546-5741
(Issuer's telephone number)
Securities registered under to Section 12(b) of the Exchange Act: None.
Securities registered under to Section 12(g) of the Exchange Act:
COMMON STOCK, $.01 PAR VALUE
Title of Class
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the 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
- ---
Check if disclosure of delinquent filers pursuant to Item 405 of Regulation S-
B is not contained in this form, and no disclosure will be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this form 10-KSB or any amendment to
this Form 10-KSB. [X]
The Issuer's revenues for its most recent fiscal year were $586,442.
As of September 27, 1996, 560,076 shares of common stock $.01 par value were
outstanding. The aggregate market value of voting stock held by
non-affiliates of the Registrant was $.00 based on the closing bid and ask
prices as reported by NASD pink sheets on September 27, 1996.
DOCUMENTS INCORPORATED BY REFERENCE: None.
Transitional Small Business Disclosure format (check one): Yes --- No X
<PAGE>
PART I
ITEM 1. BUSINESS
(a) BUSINESS DEVELOPMENT.
Mystique Developments, Inc. (formerly Score Exploration Corporation)
("Mystique" or the "Company"), with its mailing address at 1820 South Elena
Avenue, Redondo Beach, California 90277, telephone number (310)546-5741, was
incorporated as a Wyoming corporation on November 7, 1979. Mystique was
organized for the purpose of engaging in oil and gas activities including
exploring for and development and production of oil and gas reserves.
(b) BUSINESS OF ISSUER
GENERAL
Mystique engages in the business of developing and acquiring proved,
undeveloped oil and gas reserves and produces and sells crude oil and natural
gas in the United States.
Management's primary objective is the acquisition of interests in proven
undeveloped oil and gas properties in exchange for cash, services or shares of
Mystique's equity securities. Management plans to provide merchant banking
services to other oil and gas companies, by offering these companies an
inventory of properties with proved but undeveloped reserves that will be
developed as the upward price cycle of oil and gas unfolds.
PROPERTY ACQUISITION AND SALES
Mystique attempts to acquire developed and undeveloped oil and gas properties
through the acquisition of direct mineral interests or through the acquisition
of financially troubled companies. When acquiring mineral interests, the
objective often is to sell the properties for more than the price paid and/or
retain an overriding royalty interest or working interest.
EQUIPMENT, PRODUCTS AND RAW MATERIALS
Mystique owns no drilling rigs, and drilling, if any, is done by independent
contractors, typically on a footage or day rate basis, as to which Mystique
may bear the risks of fire, blowout or other catastrophe to its property.
Mystique's principal products are crude oil and natural gas. Crude oil and
natural gas are sold to various purchasers including pipeline companies which
service the areas in which Mystique's producing wells are located. Mystique's
business is seasonal in nature, to the extent that weather conditions at
certain times of the year may affect its access to oil and gas properties and
the demand for natural gas.
The existence of commercial oil and gas reserves is essential to the ultimate
realization of value from properties, and thus may be considered a raw
material essential to Mystique's business. The acquisition, development,
production and sale of oil and gas is subject to many factors which are
outside Mystique's control. These factors include national and international
economic conditions, availability of drilling rigs, casing, pipe and other
fuels, and the regulation of prices, production, transportation, and marketing
by federal and state governmental authorities. Mystique acquires oil and gas
properties from landowners, other owners of interests in such properties, or
2
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governmental entities. For information relating to specific properties of
Mystique, see Item 2. Mystique currently is not experiencing any difficulty
in acquiring necessary supplies or services nor is it experiencing any
difficulty selling its products.
COMPETITION
The oil and gas business is highly competitive. Mystique's competitors
include major companies, independents and individual producers and operators.
Of Mystique's numerous competitors throughout the country, most are larger and
have substantially greater financial resources than Mystique. Oil and gas, as
a source of energy, must compete with other sources of energy such as coal,
nuclear power, synthetic fuels and other forms of alternate energy. Domestic
oil and gas must also compete with foreign sources of oil and gas, the supply
and availability of which have at times depressed domestic prices. Mystique
has an insignificant competitive position in the oil and gas industry.
The general economic conditions in the United States and the recession in the
oil and gas industry during the past several years have intensified the search
for capital necessary for participation in the oil and gas business. This
shortage of capital has had the effect of curtailing the operations of many
smaller independent companies with limited resources, including Mystique.
GOVERNMENTAL AND ENVIRONMENTAL LAWS
Mystique's activities are subject to extensive federal, state and local laws
and regulations controlling not only the exploration for oil and gas, but also
the possible effect of such activities upon the environment. Existing, as
well as, future legislation and regulations could cause additional expense,
capital expenditures, restrictions and delays in the development of
properties, the extent of which cannot be predicted. Since inception,
Mystique has not made any material expenditures for environmental control
facilities and does not expect to make any material expenditures during the
current and following fiscal year.
EMPLOYEES
As of June 30, 1996, the Company had one part-time employee. The Company
employs consultants as needed.
ITEM 2. PROPERTIES
(a) OFFICE FACILITIES. The Company's principal offices are located at 1820
South Elena Avenue, Redondo Beach, California 90277.
(b) OIL AND GAS PROPERTIES. Mystique holds interests in producing oil and
gas leaseholds as of June 30, 1996, as follows:
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Producing Properties Non-Producing Properties
Gross Net Gross Net
State Acres Acres Acres Acres
- ------------ ------ ----- --------- ---------
California 40 1 -- --
Colorado 60 2 -- --
Mississippi 40 8 -- --
New Mexico 80 4 -- --
North Dakota 760 6 -- --
Oklahoma 1940 147 -- --
Texas 480 6 -- --
Wyoming 9520 294 -- --
Canada 1840 673 -- --
----- ---- -------- ---------
Total 15480 1141 -- --
_________________
Net acres represent the gross acres in a lease or leases multiplied by
Mystique's working interest in such lease or leases.
(b)(1)(A) PROVED AND PROVED DEVELOPED RESERVES. The following table sets
forth the total proved and proved developed oil or gas reserves of Mystique
for the fiscal years ended June 30, 1996 and June 30, 1995. The reserve
estimates and related values were prepared by Mystique.
All such reserves are located in the continental United States and Canada.
1996 1995
Oil Gas Oil Gas
(Bbls) (MCF) (Bbls) (MCF)
------- --------- ------ ------
Proved Reserves 54,600 1,366,100 64,100 21,800
Proved Developed
Reserves 54,600 1,366,100 64,100 21,800
________________
(b)(1)(B) FUTURE NET REVENUES. The following table sets forth the present
value of estimated future net revenues generated by the sale of these
estimated reserves utilizing a discount rate of 10% per annum and holding the
sales price of oil and gas constant:
1996 1995
-------- --------
Proved Reserves $795,000 $275,000
Proved Developed
Reserves $795,000 $275,000
No major discovery, price change or other favorable or adverse event has
occurred since June 30, 1996, which is believed to have caused a material
change in the proved reserves of the Company.
(b)(2) RESERVES REPORTED TO OTHER AGENCIES. There have been no reserve
estimates filed with any other United States federal authority or agency.
(b)(3)(a) NET OIL AND GAS PRODUCTION. The following table sets forth the net
quantities of oil (including condensate and natural gas liquids) and gas
produced during the fiscal years ended June 30, 1996 and June 30, 1995.
4
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1996 1995
----- -----
Oil (Bbls) 4,300 4,200
Gas (MCF) 3,400 2,700
The following table sets forth the average sales price and production cost per
unit of production for the fiscal years ended June 30, 1996 and June 30, 1995.
<TABLE>
<CAPTION>
1996 1995
------ ------
<C> <S> <S>
Average Sales Price: Per
Equivalent Barrel of Oil<FN1> $16.73 $18.52
Average Production (Lifting)
Costs: Per Equivalent
Barrel of Oil<FN1> $14.67 $13.20
- ---------------
<FN>
<FN1>
Natural gas equivalents are determined using a ratio of six MCF of natural
gas to one BBL of crude oil.
</FN>
</TABLE>
During the periods covered by the foregoing tables, Mystique was not a party
to any long-term supply or similar agreements with foreign governments or
authorities in which Mystique acted as a producer.
(b)(4) PRODUCING WELLS AND ACREAGE. The following table sets forth
Mystique's total gross and net productive oil and gas wells and developed
acreage as of June 30, 1996:
<TABLE>
A. Productive Wells<FN1>
<CAPTION>
OIL GAS
STATE GROSS<FN2> NET<FN3> GROSS<FN2> NET<FN3>
- ------------ --------- ------- --------- -------
<C> <S> <S> <S> <S>
California -- -- 1 .1
Colorado 2 .1 -- --
Mississippi 1 .2 -- --
New Mexico 3 .2 -- --
North Dakota 8 .1 -- --
Oklahoma 8 .4 -- --
Texas 3 .1 -- --
Wyoming 48 1.6 -- --
Canada 1 .4 -- --
-- --- -- --
Total 74 3.1 1 .1
_________________
<FN>
<FN1>
Productive wells are producing wells and wells capable of production including
wells that are shut in.
<FN2>
A gross well is a well in which a working interest is owned. The number of
gross wells is the total number of wells in which a working interest is owned.
5
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<FN3>
A net acre is deemed to exist when the sum of the fractional ownership working
interest owned in gross wells equals one. The number of net wells is the sum
of fractional working interests owned in gross wells expressed as whole
numbers and fractions thereof.
</FN>
</TABLE>
B. DEVELOPED ACREAGE.
State Gross Acres Net Acres
------------ ----------- ---------
California 40 1
Colorado 60 2
Mississippi 40 8
New Mexico 80 4
North Dakota 760 6
Oklahoma 1940 147
Texas 480 6
Wyoming 9520 294
Canada 1840 673
----- ----
Total 15480 1141
(b)(5) UNDEVELOPED PROPERTIES. Mystique had no interest in undeveloped
acreage.
Mystique's oil and gas properties are in the form of mineral leases. As is
customary in the oil and gas industry, a preliminary investigation of title is
made at the time of acquisition of undeveloped properties. Title
investigations are generally completed, however, before commencement of
drilling operations. Mystique believes that its methods of investigating are
consistent with practices customary in the industry and that it has generally
satisfactory title to the leases covering its proved reserves.
(b)(6) DRILLING ACTIVITY. The Company drilled no productive or dry
exploratory or development wells during the fiscal year ended June 30, 1996 or
1995.
(b)(7) DELIVERY COMMITMENTS. Mystique is not obligated to provide a fixed
and determinable quantity of oil and gas in the future pursuant to existing
contracts or agreements.
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
During the fiscal year covered by this Annual Report, no matter was submitted
to a vote of Mystique's security holders through the solicitation of proxies
or otherwise.
6
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PART II
ITEM 5. MARKET FOR COMPANY'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS.
PRICE RANGE OF COMMON STOCK
The Common Stock of Mystique has been traded over-the-counter. The following
table sets forth the high and low bid prices of the Common Stock in the
over-the-counter market for the periods indicated. The bid prices represent
prices between dealers, who do not include retail markups, markdowns or
commissions, and may not represent actual transactions. Public trading in the
Common Stock of Mystique is minimal.
Quarter Ended Bid High Bid Low
September 30, 1994 No Bid No Bid
December 31, 1994 No Bid No Bid
March 31, 1995 No Bid No Bid
June 30, 1995 No Bid No Bid
September 30, 1995 No Bid No Bid
December 31, 1995 No Bid No Bid
March 31, 1996 No Bid No Bid
June 30, 1996 No Bid No Bid
The number of record holders of Common Stock of Mystique as of September 1,
1996, was approximately 2,800. Additional holders of Mystique's Common Stock
hold such stock in street name with various brokerage firms.
Holders of Common Stock are entitled to receive dividends as may be declared
by the Board of Directors out of funds legally available therefor. No
dividends have been declared to date by Mystique, nor does Mystique anticipate
declaring and paying cash dividends in the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
LIQUIDITY AND CAPITAL RESOURCES.
During this fiscal year the Company has provided consulting services and
received producing oil and gas properties for those services. At June 30,
1996, the Company has working capital of $12,068. The Company plans to
continue to provide consulting services and to acquire producing oil and gas
properties. The Company has no commitments for any capital improvements,
however subject to financing, a major improvement project for the Canadian
property is planned for the next fiscal year.
During the fiscal year ended June 30, 1996, operating activities used
$13,231 in cash, a decrease of $28,227 over the previous fiscal year. This
decrease in cash used is due mainly to payments of lease operating costs.
During the fiscal year ended June 30, 1996, investing activities provided
$10,665 in cash, an increase of $8,577 over the previous fiscal year. This
increase is due to additional sale of producing properties in 1995.
In September, 1996, the old officers and directors resigned and new
officers and directors were appointed. Mystique Resources Company also gave
an option for 225,000 shares to two of the new officers.
7
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RESULTS OF OPERATIONS - 1996
During the fiscal year ended June 30, 1996, oil and gas sales were $81,865, a
decrease of $4,882 over the previous fiscal year. This decrease is due to the
decrease in the average sale price per equivalent barrel of oil to $16.73 from
$18.52 in the previous year. During the fiscal year ended June 30, 1996,
lease operating costs were $71,803 an increase of $17,184 from the previous
fiscal year. This increase is due to an increase in major workover costs,
which resulted in an increase in the average production cost per equivalent
barrel of oil to $14.67 from $13.20 in the previous year. During the fiscal
year ended June 30, 1996, depreciation, depletion and impairments were $32,686
a decrease of $2,507 over the previous year. During the fiscal year ended
June 30, 1996, production taxes were $4,868, a decrease of $1,260 over the
previous year. This decrease is due to lower production in 1996 in states
with higher taxes. During the fiscal year ended June 30, 1996, general and
administrative expenses were $47,094, an increase of $20,034 from the
previous year. This increase is due primarily to increase in accounting
fees. During the fiscal year ended June 30, 1996, other income was ($15,054)
a decrease of $21,145 over the previous year. This decrease is due to a loss
on property sales and less interest income.
RESULTS OF OPERATIONS - 1995
During the fiscal year ended June 30, 1995, oil and gas sales were $86,747, an
increase of $31,519 over the previous fiscal year. This increase is due to
the acquisition of producing properties and an increase in the average sale
price per equivalent barrel of oil to $18.52 from $14.93 in the previous year.
During the fiscal year ended June 30, 1995, lease operating costs were $54,619
a decrease of $712 from the previous fiscal year. This decrease is due to a
reduction in major workover costs and a decrease in the average production
cost per equivalent barrel of oil to $13.20 from $14.96 in the previous year.
During the fiscal year ended June 30, 1995, depreciation, depletion and
impairments were $35,193 an increase of $17,638 over the previous year. This
increase is due to additional property base. During the fiscal year ended
June 30, 1995, production taxes were $6,128, an increase of $3,247 over the
previous year. This increase is due to the acquisition of properties in other
states. During the fiscal year ended June 30, 1995, general and
administrative expenses were $27,060, an increase of $14,936 from the
previous year. This increase is due to increase in salaries. During the
fiscal year ended June 30, 1995, other income was $6,091 an increase of $5,861
over the previous year. This increase is due to property sales, settlement of
accounts payable and interest.
EFFECT OF CHANGES IN PRICES.
Changes in prices during the past few years have been a significant factor in
the oil and gas industry. The price received for the oil and gas produced by
Mystique fluctuated significantly during the last three years. Changes in the
price that Mystique receives for its oil and gas are set by market forces
beyond Mystique's control as well as governmental intervention. The recent
volatility and uncertainty in oil and gas prices make it more difficult for a
company like Mystique to increase its oil and gas asset base and become a
significant participant in the oil and gas industry.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Included at Pages 16 through 28 hereof.
8
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ITEM 8. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Mystique has not had any reported or material disagreement with its
accountants on any matter of accounting principles, practices or financial
statement disclosure.
9
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PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICER OF MYSTIQUE.
(a) IDENTIFICATION OF DIRECTORS. The following table sets forth the names
and ages of all Directors of Mystique as of September 27, 1996, indicating all
positions and offices with Mystique held by each such person, and any periods
during which he has served as a Director.
PERIOD SERVED AS DIRECTOR
NAME POSITION OF MYSTIQUE
- ---------------- -------- ----------------------------
Kim Fuerst Director September 1, 1996 to Present
Faisal Chaudhary Director September 1, 1996 to Present
J. Samuel Butler Director September 1, 1996 to Present
Mystique's Directors hold office until the next annual meeting of Mystique's
shareholders. There is no arrangement or understanding between any Director
of Mystique and any other person or persons pursuant to which such Director
was or is to be selected as a Director or a nominee for Director.
(b) IDENTIFICATION OF EXECUTIVE OFFICERS. The following table sets forth the
names and ages of all Executive Officers of Mystique, indicating all positions
and offices with Mystique held by each such person, and the period during
which he has served as such.
ALL OFFICES PERIOD SERVED AS
NAME AGE WITH COMPANY OFFICER OF MYSTIQUE
- ---------------- -- ------------- -------------------
Kim Fuerst 45 President September, 1996 to
Present
Faisal Chaudhary 21 Secretary and September, 1996 to
Treasurer Present
Mystique's Executive Officers hold office until the next annual meeting of
Directors of Mystique. There is no arrangement or understanding between any
Executive Officer and any other person or pursuant to which such Executive
Officer was selected as an Officer of Mystique.
(c) IDENTIFICATION OF CERTAIN SIGNIFICANT EMPLOYEES. Mystique does not
employ persons, other than the above-named Officers, who make or are expected
to make significant contributions to the business of Mystique.
(d) FAMILY RELATIONSHIPS. There is no family relationship between any
Director or Executive Officer of the Company or persons chosen to become
Directors or Executive Officers.
(e)(1) BUSINESS EXPERIENCE. Following is a brief account of the business
experience during the past five years of each Director and Executive Officer
of Mystique indicating his principal occupation and employment during that
period, and, the name and principal business of any organization in which such
occupations and employment were carried on.
10
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KIM FUERST, 45, President and Director, since September 1996. From 1994 to
1996 he was a Vice President of Van Kasper and Company, an investment banking
firm. From 1989 to 1994 he served in various capacities at Great Northern Gas
Company including Vice President of Finance and as a Director. From 1982 to
1990 he was President and Chief Operating Officer of Karen Oil Company which,
during this period, drilled over 100 wells and operated those wells that were
producing wells. Over the past 25 years he has worked in a variety of energy
related positions, both as an independent producer and as investment banker.
FAISAL CHAUDHARY, 21, Secretary, Treasurer and Director, is a graduate of
Chapman University with a degree in Commerce. He is working on his degree in
Law on a part time basis.
J. SAMUEL BUTLER, 51, Director, Formed Trinity Petroleum Management, LLC in
1996 and serves as President and Chief Executive Officer. From 1989 to 1994,
he served as Director, President and Chief Executive Officer Sterling Energy
Corp. and the Chief Executive Officer of Sheffield Exploration from September
1990 to May 1996. Also during the period of September 1989 to December 1994,
Mr. Butler was a founding principal in Petrie Parkman & Co., an investment
banking firm specializing in upstream energy financing. Previously, he was
President and Chief Operating Officer of Columbus Energy Corp. (Denver,
Colorado) from 1985 to 1989, and today, continues to serve as a director
Columbus. Mr. Butler joined the predecessor of Columbus, Consolidated Oil and
Gas, Inc., in 1974 and held the position of Vice President of Exploration,
Senior Vice President of Oil and Gas Operations and Executive Vice President
and Chief Operating Officer. After receiving a degree in Petroleum
Engineering from the Colorado School of Mines, Mr. Butler pursued graduate
studies in the field of Mineral Economics at that institution. He is a past
Director of the Independent Petroleum Association of America and past Director
of the Independent Petroleum Association of the Mountain States.
(2) DIRECTORSHIPS. Except as described above, Mystique has no Director who
is also a director of any other company with a class of securities registered
pursuant to Section 15(d) of that Act or any company registered as an
investment company under the Investment Company Act of 1940.
(f) INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS. No event has occurred during
the past five years which is material to any evaluation of the ability or
integrity of any Director or has any Officer or Director been subject to:
(i) A petition under the Bankruptcy Act or any state insolvency law
filed by or against, a receiver or any other person;
(ii) Any criminal proceeding;
(iii) Any other material proceeding required to be disclosed pursuant to
Regulation S-K, Item 401(f).
ITEM 10. EXECUTIVE COMPENSATION.
(a) CASH COMPENSATION. The following table sets forth all information
regarding the executive compensation paid or distributed to, or accrued for
the account of each executive officer of Mystique whose total remuneration
exceeded $60,000.
<TABLE>
SUMMARY COMPENSATION TABLE<FN1>
<CAPTION>
11
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Long Term Compensation
Annual Compensation Awards Payouts
Other All
Name and Annual Restricted Options/ Other
Principal Compen- Stock SARS LTIP
Compen-
Position Year Salary Bonus sation Award(s) (Number) Payouts sation
<C> <S> <S> <S> <S> <S> <S> <S> <S>
Dennis R. Staal, 1996 $19,250 -- -- $1,750<FN2> -- -- --
Former President 1995 $21,200 -- -- -- -- -- --
___________
<FN>
<FN1>
No Officer or Director of Mystique received more than $60,000 during the
fiscal year
ended June 30, 1996.
<FN2>
7,000 shares of common stock valued at $.25 per share were issued in August
for this
year's services.
</FN>
</TABLE>
(b) COMPENSATION PURSUANT TO PLANS. The Company has no plans pursuant to
which cash or non-cash compensation was paid or distributed during fiscal year
ended June 30, 1996, or is proposed to be paid or distributed in the future.
(c) COMPENSATION OF DIRECTORS. The Directors of Mystique who do not receive
annual salaries from Mystique, receive fees of $100 per Board Meeting attended
in person, and reimbursement for travel expenses. These fees may be increased
or decreased from time to time by a majority vote of the Board of Directors.
Other than the fees mentioned above, no consulting fees, finder's fees or
commissions were paid to Directors of the Company during the fiscal year ended
June 30, 1996.
(d) TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENT. Mystique
has no compensation plan or arrangement with any of its current or former
Officers or Director which results or will result from the resignation,
retirement or any other termination by such individual of employment with
Mystique.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
(a) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS. The following table
sets forth the number and percentages of shares of Mystique's $.01 par value
Common Stock (its only class of voting securities) owned beneficially by any
person, who as of September 27, 1996, is known to Mystique to be the
beneficial owner of 5% or more of the issued and outstanding Common Stock
other than the Officers and Directors listed below.
Amount of
Name and Address of Beneficial Percent
Title of Class of Beneficial Owner Ownership of Class
- -------------- -------------------------- ------------- --------
$.01 Par Value Mystique Resources Company 261,019 46.6%
Common Dennis R. Staal, President
Stock 1975 E. Otero Lane
Littleton, CO 80122
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(b) SECURITY OWNERSHIP OF MANAGEMENT. The following table sets forth the
number of percentage of shares of Company's $.01 par value Common Stock (its
only class of equity securities outstanding) owned beneficially by each
Director of Mystique, and by all Directors and Officers of Mystique as a
group, as of September 27, 1996:
<TABLE>
<CAPTION>
Amount & Nature
Name of of Beneficial Percent
Beneficial Owner Ownership<FN1> of Class
- ---------------- --------------- --------
<C> <S> <S>
Kim Fuerst 112,500 <FN2> 20.1%
Faisal Chaudhary 112,500 <FN2> 20.1%
J. Samuel Butler -0- -0-%
All Officers and
Directors as a Group
(3 Persons) 225,000 40.2%
_______________
<FN>
<FN1>
Each of the individuals named own all of the shares listed of Mystique's
Common Stock directly and of record unless otherwise indicated.
<FN2>
Includes 225,000 shares of stock owned by Mystique Resources Company of which
Mr. Fuerst and Mr. Chaudhary have an option to acquire.
</FN>
</TABLE>
(c) CHANGES IN CONTROL. There are no arrangements, known to the Company,
including any pledge by any person of securities of Mystique or any of its
parents, the operation of which may at a subsequent date result in a change of
control of Mystique, except that Kim Fuerst and Faisal Chaudhary have an
option to acquire up to 225,000 shares of stock from Mystique Resources
Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
TRANSACTIONS WITH MANAGEMENT AND OTHERS. No Director or Officer of Mystique,
nominee for election as a Director, security holder who is known to Mystique
to own of record or beneficially more than 5% of any class of Company's voting
securities, or any relative or spouse of any of the foregoing persons, or any
relative of such spouse, who has the same home as such person or who is a
director or officer of any parent or subsidiary of Mystique, has had any
transaction or series of transactions exceeding $60,000, since the
beginning of Mystique's last fiscal year, or has any presently proposed
transaction, to which Mystique was or is to be a party, in which any of such
persons had or is to have any direct or indirect material interest, except the
following.
The Company's management has plans to increase the profitability, cash flows
and producing assets of the Company. The following related party transactions
were designed for that purpose.
13
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The Company is 46% owned by Mystique Resources Company which is owned 100% by
Pamden, Ltd. A family partnership controlled by the former President of the
Company. Mystique Resources Company paid the Company consulting fees of
$10,000 for the year ended June 30, 1995, by exchanging the fees for producing
properties valued at $35,000. Mystique Resources Company also owed the
Company $4,066. During the years ended June 30, 1996 and 1995 the Company had
net oil and gas sales to Mystique Resources Company of $28,808 and $39,206 and
incurred lease operating expense of $30,284 and $37,110 respectively.
The former President owed the Company $2,000 at June 30, 1996, for a loan. The
Company owed the former President $15,000 in accrued salary at June 30, 1996.
During the year the Company received $490,000 in property in exchange for a
receivable from a company of which the former President is now an officer.
Transactions With Promoters. Not applicable.
14
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PART IV
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) Documents filed as part of this Report:
(1) The following Financial Statements are filed as part of this
Report:
Page
Independent Accountant's Report . . . . . . . . . . . . . . . . 16
Balance Sheet as of June 30, 1996. . . . . . . . . . . . . . . 17
Statements of Operations for the years ended June 30, 1996 and
1996. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Statement of Changes in Stockholders Equity for the years ended
June 30, 1996 and 1995. . . . . . . . . . . . . . . . . . . . . 19
Statements of Cash Flows for the years ended June 30, 1996
and 1995. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Notes to Financial Statements . . . . . . . . . . . . . . . . . 22
All Financial Statement Schedules are omitted because they are not required,
are inapplicable or the information is included in the financial statements or
notes thereto.
<TABLE>
(3) Exhibits.
Page<FN1>
<C> <S> <S>
3. Articles of Incorporation and Bylaws<FN2>. . . . . . --
3.1 Articles of Amendment<FN2>. . . . . . . . . . . . . . --
4. Instruments Defining the Rights of Security Holders,
Including Indentures<FN2> . . . . . . . . . . . . . . --
___________
<FN>
<FN1>
Page number in sequential numbering system (required on manually signed copy
only).
<FN2>
Previously filed as exhibits to Mystique's Form 10-K for the fiscal year ended
May 31, 1983.
</FN>
</TABLE>
15
<PAGE>
INDEPENDENT ACCOUNTANT'S REPORT
Board of Directors
Mystique Developments, Inc.
Littleton, Colorado
We have audited the accompanying balance sheet of Mystique Developments,
Inc. as of June 30, 1996, and the related statements of operations,
stockholder's equity, and cash flows for the years ended June 30, 1996 and
1995. 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 audits 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 Mystique
Developments, Inc. as of June 30, 1996, and the results of its operations and
cash flows for the years ended June 30, 1996 and 1995, in conformity with
generally accepted accounting principles.
/s/ Coopers & Lybrand, L.L.P.
Coopers & Lybrand, L.L.P.
Denver, Colorado
16
<PAGE>
October 3, 1996
MYSTIQUE DEVELOPMENTS, INC.
Balance Sheet
As of June 30, 1996
ASSETS
1996
Current Assets:
Cash $ 24,971
Accounts receivable-trade 10,553
Accounts receivable-related party 6,066
Total current assets 41,590
Property and equipment, at cost using
successful efforts method, net 698,046
$739,636
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 14,522
Accounts payable-related party 15,000
29,522
Stockholders' Equity:
Common stock, $.01 par value: authorized
75,000,000 shares; issued and outstanding
550,076 at June 30, 1996 and 1995 5,500
Additional paid-in capital 1,866,868
Accumulated deficit (1,162,254)
710,114
$ 739,636
See accompanying notes to financial statements
17
<PAGE>
MYSTIQUE DEVELOPMENTS, INC.
Statement of Operations
Years Ended June 30, 1996 and 1995
1996 1995
Operating Revenue:
Oil and gas sales $ 81,865 $ 86,747
Management and consulting
fees 500,377 15,500
Property operations fee 4,200 3,150
586,442 105,397
Operating costs and expenses:
Lease operating costs 71,803 54,619
Depreciation and depletion 16,092 21,913
Impairments 16,594 13,280
Production taxes 4,868 6,128
General and administrative expenses 47,094 27,060
156,451 123,000
Operating income (loss) 429,991 (17,603)
Other Income (expense):
Interest income 494 1,486
Other income -- 2,517
Gain (loss) on sale of assets (15,548) 2,088
(15,054) 6,091
Income(loss) before income taxes 414,937 (11,512)
Income taxes -- --
Net income (loss) $414,937 $(11,512)
Net income (loss) per common share $ .75 $ (.02)
Weighted average common shares outstanding 550,076 550,076
See accompanying notes to financial statements.
18
<PAGE>
MYSTIQUE DEVELOPMENTS, INC.
Statement of Stockholders' Equity
Years Ended June 30, 1996 and 1995
Common Stock Additional
Number of Paid-In Accumulated
Shares Issued Amount Capital Deficit
Balance, June 30, 1994 550,076 $ 5,500 $1,866,868 $(1,565,679)
Net loss -- -- -- ( 11,512)
Balance, June 30, 1995 550,076 5,500 1,866,868 (1,577,191)
Net income -- -- -- 414,937
Balance, June 30, 1996 550,076 $ 5,500 $1,866,868 $(1,162,254)
See accompanying notes to financial statements.
19
<PAGE>
MYSTIQUE DEVELOPMENTS, INC.
Statements of Cash Flows
Years Ended June 30, 1996 and 1995
1996 1995
Cash Flows from operating activities:
Cash received from customers $ 88,983 $ 93,024
Cash paid to suppliers & employees (102,708) (82,031)
Interest income 494 1,486
Other income -- 2,517
Net cash provided by (used in)
operating activities (13,231) 14,996
Cash flows from investing activities:
Proceeds from sale of assets 10,665 2,088
Net cash provided by (used in)
investing activities 10,665 2,088
Net increase (decrease) in cash and
cash equivalents (2,566) 17,084
Cash and cash equivalents at beginning of year 27,537 10,453
Cash and cash equivalents at end of year $ 24,971 $ 27,537
Reconciliation of net income to net cash
used in operating activities:
Net income (loss) $414,937 $(11,512)
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation, depletion and impairments 32,686 35,193
(Gain) loss on sale of assets 15,548 (2,088)
Revenues exchanged for assets (490,000) (10,000)
Loan to stockholder exchanged for
compensation -- 20,000
Change in other assets 523 --
(Increase) decrease in accounts receivable (7,459) (2,373)
(Decrease) increase in accounts payable 20,534 (14,224)
$(13,231) $14,996
See accompanying notes to financial statements.
20
<PAGE>
MYSTIQUE DEVELOPMENTS, INC.
Statements of Cash Flows
Years Ended June 30, 1996 and 1995
Supplemental schedule of non-cash investing and financing activities:
In 1996 the Company exchanged $490,000 in accounts receivable for producing
properties valued at $490,000.
In 1995 the Company exchanged $44,106 in accounts receivable from a related
partyfor producing properties valued at $44,016 and settlement of a $20,000
note for Dennis R. Staal's services.
21
<PAGE>
MYSTIQUE DEVELOPMENTS, INC.
Notes to Financial Statements
NOTE 1: SIGNIFICANT ACCOUNTING POLICIES
GENERAL
The Company operates principally in the exploration, development and
production of oil and gas properties and consulting in the oil and gas
industry.
PROPERTY AND EQUIPMENT
The Company uses the successful efforts method of accounting for oil and gas
producing activities. Under this method, the costs of unsuccessful
exploratory wells, delay rentals, and dry hole contributions are expensed as
incurred. Lease acquisition costs and costs of drilling and equipping
productive exploratory wells and all development wells are capitalized.
Depreciation and depletion of producing properties and equipment is computed
by the unit-of-production method using management estimates or independent
engineer's estimates of unrecovered proved producing oil and gas reserves.
The total capitalized costs for individual proved oil and gas properties is
limited to the estimated future net revenues from production of proved
reserves. A recoverability test "ceiling test" of proved properties is
performed on an undiscounted basis, net of income taxes, on a well by well
basis. An impairment amount equal to all costs above ceiling is charged to
operations during the period. Other equipment is depreciated by use of
accelerated methods using estimated asset lives of 3 to 7 years. When assets
are retired or otherwise disposed of, the cost and accumulated depletion,
depreciation or impairment are removed from the accounts and any resulting
gain or loss is reflected in operations in the period realized.
No accrual has been provided for estimated future abandonment costs as
management estimates that the salvage value will approximate such costs.
INCOME TAXES
The Company uses the liability method of accounting for income taxes. Under
the liability method, income taxes are recorded for future events at tax rates
in effect when the balances are expected to be settled.
EARNINGS PER COMMON SHARE
The earnings per share is based on the weighted-average number of shares of
common stock outstanding.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all highly
liquid debt instruments purchased with a maturity of three months or less to
be cash equivalents.
RISKS AND UNCERTAINTIES
Historically, the market for oil and gas has experienced significant price
fluctuations. Increases or decreases in prices received could have a
significant impact on the Company's future results of operations.
22
<PAGE>
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 and disclousure of
contingent asset and liabilities at the date of the financial statements and
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
NOTE 2. PROPERTY AND EQUIPMENT
Property and equipment at June 30, 1996 consist of the following:
Accumulated
Depreciation
And Valuation
Cost Depletion Allowance Net
Producing oil and gas prop-
erties $804,373 $76,579 $29,874 $697,920
Other equipment at cost 802 676 -- 126
$805,175 $77,255 $29,874 $698,046
In 1996 the Company acquired an interest in one shut-in property for $490,000
in exchange for consulting and finders fees.
In 1995 the Company acquired interests in ten producing properties for
$44,016 in exchange for consulting work for Mystique Resources Company, a
related party. These properties were recorded using the fair market value as
of the date of the transaction.
NOTE 3. INCOME TAXES
The following reconciles the tax provision with the expected provision using
the statutory rates.
For the years ended June 30,
1996 1995
Expected federal income tax benefit (expense) (141,079) 3,914
Expected state income tax benefit (expnese) (13,693) 338
Valuation allowance 154,772 (4,252)
Income Tax Provision -- --
In both 1996 and 1995, no income tax provision or benefit was recognized due
to net operating losses utilized during the year.
Deferred income taxes reflect the impact of temporary differences between
amounts of assets and liabilities for financial reporting purposes and such
amounts as measured by tax laws. The tax effect of the temporary differences
and carryforwards giving rise to the Company's deferred tax assets and
liabilities at June 30, 1996 are as follows:
23
<PAGE>
June 30, 1996
Deferred tax assets:
Oil and gas properties $ 11,053
Net operating loss and tax credit carryforwards 378,625
Total $389,678
Valuation allowance (376,081)
Deferred tax assets 13,597
Deferred tax liabilities:
Depletion, depreciation and amortization
of property and equipment $(13,597)
Deferred tax liabilities (13,597)
Net Deferred Tax Assets --
SFAS No. 109 requires that a valuation allowance be provided if it is more
likely than not that some portion or all of a deferred tax asset will not be
realized. The Company's ability to realize the benefit of its tax assets will
depend on the generation of future taxable income through profitable
operations and expansion of the Company's oil and gas producing properties.
The market, capital, and environmental risks associated with that growth
requirement are considerable resulting in the Company's conclusion that a full
valuation allowance be provided, except to the extent that the benefit of
operating loss carryforwards can be used to offset future reversals of
existing deferred tax liabilities.
At June 30, 1996, the Company had tax basis net operating loss carryforwards
available to offset future taxable income of $961,988, which expires from 1997
to 2010. The Company also has investment tax credit carryforwards of $34,907
which expire from 1997 to 2000.
NOTE 4. MAJOR CUSTOMERS
The following are considered major customers which account for ten percent or
more of total operating revenues in 1996 and 1995 (excluding related party
management and consulting fees).
Percentage
1996 1995
Texaco Oil Company 26% 11%
Penroc Oil Corporation 25 16
Conoco Oil Company 13 12
Mystique Resources Company 35 46
NOTE 5. RELATED PARTIES
The Company is 46% owned by Mystique Resources Company which is owned 100% by
Pamden, Ltd. a family partnership controlled by the former President of the
Company. Mystique Resources Company paid the Company consulting fees of
$10,000 for the year ended June 30, 1995, by exchanging the fees for producing
24
<PAGE>
properties valued at $35,000. Mystique Resources Company also owed the
Company $4,066 for expenses at June 30, 1996. During the years ended June
30, 1996 and 1995 the Company had net oil and gas sales to Mystique Resources
Company of $28,808 and $39,206 and incurred lease operating expense of
$30,284 and $37,110 respectively. The former President owed the Company
$2,000 at June 30, 1996, for a loan. The Company owes the President $15,000 in
accrued salary at June 30, 1996. During the year the Company received $490,000
in property in exchange for a receivable from a company, which at the time of
the transaction was an unrelated party, however, the former President is now
an officer.
NOTE 6: SUPPLEMENTARY OIL AND GAS INFORMATION (Unaudited)
Capitalized costs relating to oil and gas producing activities at June 30,
1996 and 1995 are as follows:
1996 1995
Proved oil and gas properties 804,373 325,038
Less accumulated depreciation,
depletion and valuation 106,453 58,444
Net capitalized costs $697,920 $266,594
Costs incurred in oil and gas property acquisition, exploration, and
development activities for the years ended June 30, 1996 and 1995 are as
follows:
1996 1995
Acquisition of properties:
Proved $490,000 $ 44,016
Unproved -- --
Exploration costs -- --
Development costs -- --
Results of operations for oil and gas producing activities for the years ended
June 30, 1996 and 1996 are as follows:
1996 1995
Revenues $ 81,865 $ 86,747
Production Costs 76,671 60,747
Exploration expenses -- --
Depreciation, depletion
and impairments 32,686 35,193
$109,357 $ 95,940
Results of operations from
producing activities (excluding
corporate overhead and interest
costs) $(27,492) $ (9,193)
The following information relates to the Company's estimates of proved
reserves of oil and gas, changes in proved reserves of oil and gas,
25
<PAGE>
standardized measure of discounted future net cash flows and changes therein
relating to proved oil and gas reserves. All reserves are located in the
United States and Canada.
Reserves:
The estimates of the Company's proved oil and gas reserves and the changes in
those reserves include only "proved developed" reserves. Proved developed
reserves are reserves which can be expected to be recovered from existing
wells using existing equipment and operating methods. The Company does not
consider it feasible to estimate proved undeveloped reserves and has made no
evaluation of them.
The estimates of proved reserves for 1996 and 1995 were determined by the
Company's management and take into account the effect of past performance and
existing economic conditions. Reserve estimates vary from year to year
because they are based upon judgmental factors involved in interpreting and
analyzing roduction performance, geological and engineering data and changes
in prices,
operating costs, and other economic, regulatory and operating conditions.
Changes in such factors can have a significant impact on the estimated future
recoverable reserves and estimated future net revenue by changing the economic
life of the properties.
The Company considers these reserve estimates to be reasonable in light of
past operating results and other data available. However, there can be no
assurance that actual production in the future will not vary substantially
from such estimates.
Proved reserves of oil and gas at June 30, 1996 and 1995 are as follows:
1996 1995
Oil Gas Oil Gas
(BBLS) (MCFS) (BBLS) (MCFS)
Proved developed
reserves 54,600 1,366,100 64,100 21,800
Changes in net proved reserves of oil and gas for the years ending June 30,
1996 and 1995 are as follows:
1996 1995
Oil Gas Oil Gas
(BBLS) (MCFS) (BBLS) (MCFS)
Beginning 64,100 21,800 58,300 56,000
Revision of Previous Estimate 9,500 200 1,500 (33,700)
Sale of Reserves (14,700) -- ( 1,100) ( --)
Purchases of Reserves
in place -- 1,347,500 9,600 2,200
Discoveries -- -- -- --
Production (4,300) (3,400) ( 4,200) (2,700)
Ending 54,600 1,366,100 64,100 21,800
26
<PAGE>
STANDARDIZED MEASURE OF FUTURE NET CASH FLOWS
Statement of Financial Accounting Standards No. 69 prescribes guidelines for
computing a standardized measure of future net cash flows and changes therein
relating to estimated proved reserves. The Company has followed these
guidelines which are briefly discussed below.
Future cash inflows and future production and development costs are determined
by applying year-end process and costs to the estimated quantities of oil and
gas to be produced. Estimated future income taxes are computed using current
statutory income tax rates including consideration for estimated future
statutory depletion and investment tax credits. The resulting future net cash
flows are reduced to present value amounts by applying a 10% annual discount
factor.
The assumptions used to compute the standardized measure are those prescribed
by the Financial Accounting Standards Board and, as such, do not necessarily
reflect the present worth. The limitations inherent in the reserve quantity
estimation process, as discussed previously, are equally applicable to the
standardized measure computations since these estimates are the basis for the
valuation process.
Standardized measure of discounted future net cash flows and changes therein
relating to proved oil and gas reserves at June 30, 1996 and 1995 are as
follows:
1996 1995
Future cash inflows $2,533,000 $1,182,000
Future production costs (1,367,000) ( 747,000)
Future net cash flows 1,166,000 435,000
Less 10% annual discount for esti-
mated timing of cash flows ( 371,000) ( 160,000)
Standardized measure of discounted
future net cash flows $ 795,000 $ 275,000
No future income tax provision is made due to the company's tax loss
carryforward.
The following are principal sources of change in the standardized measure of
discounted future net cash flows during the years ending June 30, 1996 and
1995:
1996 1995
Sales of oil and gas produced,
net of production cost (5,000) $ (26,000)
Net changes in prices (19,000) 23,400
Extensions and discoveries
less related costs -- --
Revisions of previous
quantity estimates 37,000 ( 18,700)
Accretion of discount 28,000 25,300
Sale of reserves (36,000) ( 3,000)
Purchase of reserves in place 497,000 36,200
Other, primarily changes in
production costs 18,000 (15,200)
Increase (decrease) $520,000 $ 22,000
27
<PAGE>
NOTE 8 -- NEW ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board issued 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 No.
121"). The standard requires the recognition of an impairment loss on certain
identifiable intangible assets and long-lived assets in use or held for
disposal when events or circumstances indicate the carrying value of these
assets may not be recoverable or exceeds their fair value. The Company is
required to adopt this statement in Fiscal 1997. At this time, the Company
does not expect the adoption of SFAS No. 121 to have a material impact on the
Company's financial position or results of operations.
28
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned thereunto duly authorized.
MYSTIQUE DEVELOPMENTS, INC.
Dated: October 3, 1996 By /s/ Kim Fuerst
Kim Fuerst, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dated indicated.
Dated: October 3, 1996 By /s/ Kim Fuerst
Kim Fuerst, President and Principal
Executive Officer
Dated: October 3, 1996 By /s/ Faisal Chaudhary
Faisal Chaudhary, Director
Dated: October 3, 1996 By /s/ J. Samuel Butler
J. Samuel Butler, Director
Dated: October 3, 1996 By /s/ Dennis R. Staal
Dennis R. Staal, Principal Financial
and Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
balance sheet and statements of operations found on pages 17 and 18 of
the Company's Form 10-KSB for the fiscal year ended June 30, 1996, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 24,971
<SECURITIES> 0
<RECEIVABLES> 16,619
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 41,590
<PP&E> 805,175
<DEPRECIATION> (107,129)
<TOTAL-ASSETS> 739,636
<CURRENT-LIABILITIES> 29,522
<BONDS> 0
0
0
<COMMON> 5,500
<OTHER-SE> 704,614
<TOTAL-LIABILITY-AND-EQUITY> 739,636
<SALES> 81,865
<TOTAL-REVENUES> 586,442
<CGS> 71,803
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 84,648
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 414,937
<INCOME-TAX> 0
<INCOME-CONTINUING> 414,937
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 414,937
<EPS-PRIMARY> .75
<EPS-DILUTED> .75
</TABLE>
