<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
Annual Report Under Section 13 or 15(d) of
The Securities Exchange Act of 1934 (Fee Required)
For the Fiscal Year Ended June 30, 1997
Commission File Number 0-9355
ROSELAND OIL AND GAS, INC.
(Exact name of registrant as specified in its charter)
1724 East 15th Street
Tulsa, Oklahoma 74104
Telephone: (918) 742-0028
Incorporated in the State of Oklahoma
IRS No. 87-0352095
Securities registered pursuant to Section 12(g) of the Exchange Act:
CLASS OUTSTANDING AT JUNE 30, 1997
Common Stock (par value $.05 per share) 5,030,847
Market Value at June 30, 1997 was approximately $ 251,547.
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 there is no disclosure of delinquent filers in response 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. [ ]
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ROSELAND OIL AND GAS, INC. FORM 10-KSB
YEAR ENDED JUNE 30, 1997
Index
Item PAGE
PART I
1. Business of the Company......................................1
2. Properties...................................................8
3. Legal Proceedings............................................9
4. Submission of Matters to a Vote of Security Holders........9
PART II
5. Market for Registrant's Common Equity and Related
Security Holder Matters............................................9
6. Management Discussion and Analysis of Financial
Conditions and Results of Operations..............................10
7. Financial Statements.........................................13
8. Changes and Disagreements with Accountants on
Accounting and Financial Disclosure............................ 14
PART III
9. Directors, Executive Officers, Promoters and
Control Persons.................................................. 15
10. Executive Compensation..................................... 16
11. Security Ownership of Certain Beneficial
Owners and Management.............................................17
12. Certain Relationships and Related Transactions..............19
Signatures........................................................20
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ITEM 1. BUSINESS OF THE COMPANY
GENERAL DEVELOPMENT OF THE BUSINESS
Roseland Oil and Gas, Inc. (the "Company" or the "Registrant") was
incorporated on October 17, 1978 in the State of Texas. In
March 1980 the registrant was merged into a public Utah corporation with the
surviving entity being Roseland Oil and Gas, Inc. a Utah corporation.
The Company's shareholders approved a change in the state of incorporation
from Utah to Oklahoma. At that time the Company relocated its corporate
offices from Houston, Texas to Tulsa, Oklahoma. At a special shareholders
meeting in August 1991, the shareholders elected a new Board of Directors
after the resignation of three of the four previous board members and the
Board, in turn, elected new Officers resulting in a change of management
control.
In August 1991, EntreCap International Inc.("EntreCap") a Delaware
Corporation acquired 1 million shares of the company's common stock. In
addition, EntreCap exchanged its stock ownership in a wholly owned
subsidiary, HiLand Properties, Inc. ("HiLand") a Texas Corporation 999 for 3
million shares of the Company's Series A Preferred stock and 1,180,117
additional restricted shares of the Company's common stock. Subsequently,
on August 22, 1993 an agreement was entered into by the Company to
exchange its subsidiary, HiLand Properties, Inc., for all the issued and
outstanding stock held by EntreCap International, Inc. both common and
preferred, plus other specified assets and discontinue this acquisition.
(See Discontinued Operating Section)
The Company is engaged in the acquisition, development, operation and
management of domestic oil and natural gas properties in Texas, Oklahoma,
Arkansas, Louisiana, Mississippi and Utah. The Company is also involved in
gas gathering and processing.
The company intends to continue an active program of acquiring additional
oil and gas properties. The objective is to continue to accumulate a large
portfolio of oil and gas properties and/or oil and gas companies.
PROPERTY ACQUISITIONS AND DISPOSITIONS
In August 1991 certain of the Company's oil and gas properties were
exchanged with Normandy. The Company exchanged certain of its producing
oil and gas properties located in Utah with estimated net reserves
of 88,140 BBL of oil and 320,228 MCF of gas with a discounted value
of $371,939 at June 30, 1991 for certain producing oil and gas
properties owned by Normandy located in Texas having estimated net
reserves of 21,709 BBL of oil and 269,570 MCF of gas with a discounted
value of 319,874 at June 30, 1991 as determined by Coburn Petroleum
Engineering ("Coburn") an independent petroleum engineering firm. The
exchange facilitated consolidation of the Company's property operations
(See description of properties in the State of Texas).
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The Company has significant proved undeveloped reserves on various leases
which management intends to further develop to a proved producing status.
These activities will be financed through Company's cash flow and external
sources, ie. bank financing, sale of debt or equity to investors.
Effective September 1991, the Company acquired a 50% working interest in an
oil and gas well located in Canadian County, Oklahoma with estimated net
reserves of 8,500 BBL of oil and 743,400 MCF of gas with a discounted value
of $257,400, based on an evaluation by Coburn Engineering, for approximately
$35,000. The company acquired the property from Mr. Frank W. Cole a
director of the Company and Chairman of Normandy (See "Related Party
Transactions").
The registrant acquired various interests in approximately 31 oil and gas
wells located in Oklahoma with estimated net reserves of 21,700 BBL of oil
and 119,085 MCF of gas with a discounted value of $243,171 based on an
evaluation by Coburn Engineering of approximately $155,000 in November
1991 for $20,000 in cash and the assumption of a note and mortgage of
approximately $135,000 from Orenco Associates.
In December 1991 the company acquired various interests in approximately 47
gas wells from Fort Worth Basin Petroleum located predominantly in Texas with
estimated net reserves of 1,330,625 MCF of gas with a discounted value
of $226,800 based on an evaluation by Coburn Engineering, in exchange for
approximately 423,000 shares of Normandy common stock held by the
Company. The stock was exchanged on the basis of a valuation of $1.00 per
share as provided by the August 1991 stock purchase agreement between
Normandy, EntreCap, and the Company. The $1.00 per share agreed valuation
was in excess of the market value at the time of the exchange.
In June 1992, the Company acquired 122,510 shares of common stock of
Philadelphia Mortgage Trust ("PMT"), a real estate investment trust,
representing approximately 35% of the outstanding common shares. The
investment was valued at $121,369 and was received as partial consideration
for the sale of commercial rental real estate. (See Subsequent Events)
In November 1992, the Company acquired certain producing oil and gas
properties in Pawnee County, Oklahoma having estimated net reserves of
24,000 barrels of oil with a discounted value of $101,000 in exchange for
$50,000 paid in cash and 75,000 newly-issued shares of the Company's
common stock. In connection with the transaction the Company
borrowed $50,000 from Philadelphia Mortgage Trust ("PMT") which is owned
40% by HiLand. The Company gave PMT a note for $50,000. The note, which
bears interest at 15% calls for 36 installments of $1,733 and a final
installment of $2,000.
In January 1993, the Company purchased the building where it previously
leased office space. The purchase price of the 2,000 square foot facility
was approximately $200,000. The Company assumed a mortgage on the
property of approximately $ 121,000 and issued 789,288 shares of restricted
common stock. The property was purchased from Margaret Vandever, the
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wife of William G. Vandever, President, Chief Executive Officer and a
Director of the Company. The purchase price and terms constituted fair
market value had the property been purchased from an unrelated third party.
In January 1993, the Company purchased an interest in an oil and gas lease in
Creek County, Oklahoma from South Central Energy for approximately
$65,000. The Company issued 644,490 shares of restricted common stock to
South Central Energy as full payment for the interest in the lease. South
Central Energy is owned by Margaret Vandever and Belva Howard. Margaret
Vandever is the wife of William G. Vandever. Belva Howard is the wife of Gene
C. Howard, a Director of the Company and partner in the law firm of Howard
and Widdows, counsel to the Company.
In March 1993, the Company purchased a 22.5 % interest in a gas pipeline
located in Comanche Co., Oklahoma for $24,000 cash and 48,000 shares of
restricted common stock, from Frank W. Cole, a Director of the Company.
Effective January 1, 1993 the Registrant acquired 8 oil and gas wells and a
gas gathering system located in Texas from Houston Operating Company ("HOC").
The properties have been, and will continue to be operated by a third party.
HOC is a majority owned subsidiary of Normandy Oil and Gas ("Normandy")
which was the parent company of the Registrant prior to August 1991.
The acquired properties have estimated net reserves of 61,500 Bbl of oil and
3,166,000 mcf of gas with a discounted value of $1,272,000. The purchase
price for the assets acquired, net of liabilities assumed was $1,195,000. HOC
received $100,000 cash at closing, a promissory note from the Registrant for
$100,000 to be paid in 20 monthly installments, 200,000 shares of
the Registrant's Series A preferred stock with a liquidation value of $1.00
per share, 572,423 shares of Normandy common stock which Normandy
guaranteed the value to be at least $1.00 per share and the assumption by the
Registrant of approximately $317,000 of liabilities related to the properties
acquired. The $100,000 cash paid at closing was borrowed by the Registrant
from a commercial bank.
During the years ended June 30, 1995, the Company, in a number of separate
transactions, acquired producing oil and gas properties and increased its
interest in a number of existing producing oil and gas properties. These
acquisitions are not considered to be significant, either individually or
in the aggregate.
During the third quarter of 1996, the Company entered into an agreement with
unrelated third party to sell certain oil and gas properties located in
Texas and Oklahoma. The total of the sale was $147,031. In management's
opinion, the properties were reaching their economic limit.
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EXPLORATION AND DEVELOPMENT
During the last four years, the Company has not drilled any new wells. In
1996, the Company began developing a drilling program to commence in fiscal
1997 to drill two (2) wells and recomplete one (1) well on their Palo Pinto
county, Texas leases to develop the upside potential and onsite drilling
potential of over 1,000 acres.
CUSTOMERS AND MARKETS
The Company does not refine or process the oil it produces. The
Company's oil production is sold to unaffiliated oil and gas purchasing
companies in the area where it is produced. Production is transported by
trucks and pipelines. Crude oil and condensate are sold under
short-term contracts at competitive field prices posted by major purchasers
of crude in the area. Most of the Company's natural gas is sold on the "spot
market". The Company may sell increasing volumes of gas on the spot market
if no alternative market exists for its gas. In addition, many of the
Company's gas contracts incorporate "market-out" provisions which permit
the gas purchaser to terminate the contract (or reopen negotiations on
the price set forth therein) if the contract price exceeds market price.
Furthermore, many of the Company's gas contracts provide for annual
(or more frequent) redetermination of the purchase price.
The availability of a ready market for oil and gas discovered or otherwise
owned or acquired by the Company depends on many factors beyond its
control, including the extent of domestic production and imports of oil and
gas, the proximity and capacity of natural gas pipelines and other
transportation facilities, fluctuating demand for oil and gas, the marketing
of competitive fuels and the effects of state and federal regulation of oil
and gas production and sales.
During the last five years the oil and gas industry has been adversely
affected by a number of circumstances. Among these are a surplus of oil
and natural gas, which has led to declining oil and gas prices. Since
December 1980, the average posted field prices for oil has declined from a
high of approximately $39 per barrel to approximately $12 per barrel in 1994.
Spot market prices for crude oil have been and may be expected to be
volatile over time. At June 30, 1995 the average spot market price for
crude oil was approximately $16.50 per barrel.
Reduced market demand for natural gas has resulted from competition from
alternative energy sources, increased importation of foreign gas (primarily
from Canada), conservation efforts, lower demand by industrial users, weather
conditions and the consequent oversupply of domestic gas. Current market
conditions have led to a decline in natural gas prices which may continue in
the future. There currently exists a nationwide surplus of natural gas
relative to demand which may be exacerbated by increasing exportation of
natural gas by Canada. In addition, Mexico may increase its exports of
natural gas to the United States which could have an adverse impact on the
Company's gas markets.
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COMPETITION
The oil and gas exploration and development industry had been highly
competitive, particularly with respect to the acquisition of desirable
undeveloped oil and gas leases. However, due to the deterioration in prices
and demand for oil and gas, demand for oil and gas leases has dropped
significantly. Competitors include the major oil companies, independent
oil and gas concerns, and individual producers and operators, many of whom
have financial resources, staff and facilities substantially greater than
those of the Company. In times of high drilling activity, exploration for
and production of oil and gas may be affected by the availability of the
equipment and supplies and by competition for drilling rigs. The Company
cannot predict the effect these factors will have on its operations. All
of the Company's drilling is conducted by third parties. The demand for
drilling rigs and equipment has declined sharply due to the decline in the
number of oil and gas wells being drilled. This has led to an overall
decline in prices being paid to drillers and the related cost of exploration.
The principal means of competition in oil and gas exploration and development
are product availability and price.
OPERATING HAZARDS AND UNINSURED RISKS
The Company's operations are subject to the risks normally associated with
the exploration for, and the production of oil and gas, including blowouts,
cratering, pollution and fires, any of which could result in damage to, or
destruction of oil and gas wells or production facilities, suspension of
operations or damage to persons or property. Although the Company carries
insurance coverage which management believes to be adequate, the Company
is not fully insured against certain of these risks and is not insured at all
against other of these risks, either because insurance is not available or
because management elects not to insure due to high premium costs, or
because the insurance is not necessary in the judgement of management.
The occurrence of an event not fully insured against could have a material
adverse effect on the Company's financial position.
ACQUISITION RISKS
Although the Company presently intends to continue its pursuit of potentially
attractive acquisitions of financially-distressed entities, there can be no
assurance that the Company will continue this means of acquiring oil and gas
properties in the future. As such, these acquisitions presume certain
additional risks and may result in potentially higher costs that may
not be known at the time of such acquisition and may not be ultimately
recoverable. Such acquisitions have included companies, which, among other
things are in or about to file bankruptcy, have highly leveraged assets and
posses no management or employees. Future acquisitions of this kind by the
Company will depend on the relative cost of acquisitions compared to the cost
of drilling for resources, the success of the Company's drilling operations
if any, the market demand for oil and gas, the availability of satisfactory
acquisition candidates and the cash and credit facilities available to the
Company. Due to the decline in oil and gas prices, particularly the sharp
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decline in oil prices in 1986 and the increasing difficulty in securing
additional credit lines from bank lenders, the Company may have to seek
alternative financing methods and may have to curtail its acquisition
activities if alternative financing is not available.
REGULATION
The Company's operations are affected from time to time in varying degrees by
political developments and federal and state laws and regulations. The
states in which the Company conducts its oil and gas activities regulate the
production and sale of oil and natural gas. They also regulate drilling and
completion activities, spacing of wells, prevention of waste and many
other aspects of the Company's day to day operations.
NATURAL GAS PRICING AND REGULATION
The transportation and sale of natural gas by the Company are also subject to
various Federal regulations, principally by the Federal Energy Regulatory
Commission ("FERC"), under the authority of the Natural Gas Act and the
Natural Gas Policy Act of 1978 ("NGPA"). Certain matters with respect to
FERC and NGPA are subject to administrative review and court appeal.
Whether the sale price of natural gas produced by the Company is regulated
or unregulated, local marketing conditions prevailing at the time of sale
will influence the price obtainable by the Company for such gas.
Additionally, market conditions may reduce the volume of natural gas the
Company could produce. In fact, prices being paid as of the date hereof
to the Company for its gas production are generally lower than the maximum
lawful amount.
PROPOSED LEGISLATION
A number of legislative proposals have been and most likely will continue to
be introduced at the federal level with respect to pricing and other factors
relating to natural gas. If enacted into law, these proposals could
significantly affect all segments of the natural gas industry, including the
contractual relationship between natural gas suppliers and pipeline
companies. However, at the present time, it is impossible to predict whether
any such legislation will be enacted or, if so, to what extent it may affect
the operations of the Company.
Proposals have been made recently in Congress to limit the State's rights to
govern prorationing. The States of Oklahoma, Louisiana, and Texas have most
recently reduced the daily allowable production of natural gas by 50% from
wells located within each of these states. Congress has recently proposed
several pieces of legislation limiting the State's ability to control
prorationing within wells produced in inter-state commerce. One purpose of
such proposed legislation would be to limit the positive impact of the states
regulating production in order to bolster the market price received by the
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producer for natural gas. It would be very difficult to determine the actual
impact of the proposed legislation on the current price received for natural
gas on the spot market. The passage of such legislation at this time is
uncertain.
Proposals have been made recently in Congress to levy an excise tax on the
importation of crude oil and/or refined crude products. One purpose of such
a ax would be to place a floor on domestic crude oil prices thereby
benefitting domestic producers. The prospects for such legislation are
uncertain at this time.
ENVIRONMENTAL LAWS
The Company's activities are subject to existing federal and state laws and
regulations governing environmental quality and pollution control. Such laws
and regulations may substantially increase the costs of exploration,
development or production of oil and gas may prevent or delay the
commencement or continuation of a given operation. The Company's
management believes that its present operations comply with applicable
environmental legislation and regulations, that the existence of such
regulations has had no material effect on the Company's operations to date,
and that the cost of such compliance will not be material in the future.
The Company is not aware of any potential liability under any environmental
regulations with respect to its oil and gas or real estate properties.
STATE REGULATION
In most, if not all, areas where the Company conducts activities, there are
statutory provisions regulating the production of oil and natural gas. These
provisions allow administrative agencies to promulgate rules in connection
with the operation and production of both oil and gas wells, such as the
method of developing new fields, spacing of wells, prevention and clean-up
of pollution, maximum daily production allowables from both oil and gas
wells based on a market demand or a conservation basis and other matters.
EMPLOYEES
As of June 30, 1997 the Company had three employees located at the
Tulsa office with one contract field personnel. From time to time the
Company utilizes the services of consulting geologists, engineers, landsmen
and accountants and attorneys.
FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES
All of the Company's properties and operations are located and conducted in
the United States. The Company has no foreign operations.
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ITEM 2. PROPERTIES
The Company's oil and gas producing properties are located in Texas,
Oklahoma, Arkansas, Mississippi and Utah. The Company has no foreign
operations or properties.
The Company's interest in producing and non-producing properties are in the
form of working, royalty and over-riding royalty interests.
The following sets forth information with respect to the Company's oil and
gas properties as of June 30, 1997.
OIL AND GAS RESERVES
The following table shows the estimated quantities of oil and natural gas
available to be produced from the Company's net proved reserves during the
periods shown:
Period ending Proved Reserves
June 30, 1997 Oil (bbls) Gas (mcf)
54,338 8,198,818
Estimated future net revenues from oil and gas reserves:
$8,302,443
==========
Present value of estimated future proved producing net revenue:
(discounted 10%) $ 413,362
==========
Estimated present value of proved undeveloped oil and gas reserves:
(discounted 10%) $7,889,081
==========
These estimates of future net revenues from proved oil and gas reserves were
calculated using a year-end price of $16.70/bbl of oil escalating to $22.60
and $1.17/mcf escalating to $2.29/mcf of gas with a decline ranging from
4 to 40 percent.
The Company has undeveloped acreage of approximately 1,500 acres
offsetting existing producing wells. The Company has no delivery
commitments with respect to the oil and gas produced.
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REAL PROPERTY OWNED BY THE COMPANY
In January 1993, the Company purchased the building where it previously
leased office space. The purchase price of the 2,000 square foot facility was
approximately $200,000. The Company assumed a mortgage on the property
of approximately $ 121,000 and issued 789,288 shares of restricted common
stock. The property was purchased from Margaret Vandever, the wife of William
G. Vandever, President, Chief Executive Officer and a Director of the
Company. The purchase price and terms constituted fair market value had the
property been purchased from an unrelated third party.
ITEM 3. LEGAL PROCEEDINGS
An action was filed against certain directors of a former subsidiary of
Roseland Oil and Gas, Inc. alleging that the settlement entered into
breached a duty to the creditors of that subsidiary and the directors are
liable for the debt of this creditor. Roseland Oil and Gas, Inc. has an
indemnification agreement to pay defense and pay judgment of the directors
since the settlement was directed by Roseland Oil and Gas, Inc. The amount
in question is $65,000 plus interest, plus cost of defense. Roseland Oil
and Gas, Inc.'s attorneys have advised that Roseland Oil and Gas, Inc.'s
exposure beyond the costs of defense, is minimal.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SECURITY HOLDERS
MATTERS
The common stock of the Company has been traded in the over-the-counter
market since 1980. In 1986 the Company elected to become a non-reporting
company, therefore the stock has been thinly traded.
The Company currently has a Registration Statement on Form 10 on file with
the Securities and Exchange Commission. Final acceptance of the Registration
Statement, was acquired on August 1, 1995.
Effective November 23, 1991 the Board of Directors approved a reverse stock
split whereby one new common share of the Company's stock was issued for
each five shares of the outstanding common stock.
On August 31, 1995, Roseland executed an agreement with Philadelphia
Mortgage Trust (PMT) giving them an option to purchase all or any part of the
122,510 number of shares owned by Roseland for two years from August 31,
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1996, PMT exercised its option and made a down payment of $23,560 and
executed a note in the amount of $50,000 payable at the rate of $5,000
a month leaving a current balance due of $50,000 which has been paid in
full. The Company has taken a book loss on the total sale of $47,863.
The PMT stock was unrelated to the purpose of the Company and was a
non-producing asset.
As of June 30, 1996, the Company sold, under a Limited Offering Memorandum,
270,000 shares of common stock at $0.50 per share and 270,000 warrants at
$0.05 per share which carried a three year option to purchase stock at
$.50 per share. Also, 27,000 warrants, at the same terms, were issued as
compensation for selling the stock. the stock was sold to ten individuals
and had no material affect or modified any class of the Company's securities.
A Form D was filed with the Securities Exchange Commission.
On October 1, 1996, an agreement was entered into with the holder of Series A
Preferred Stock in the amount of 200,000 shares to convert those shares to
common stock at $0.50 per share or 400,000 shares of common stock. This
transaction has been sent to the transfer agent. In additional, $35,000 in
accrued dividends on the Preferred Stock of 200,000 shares were converted to
common stock at $0.50 per share equalling 70,000 shares.
In May of 1997 the Company's Limited Offering Memorandum was extended to
200,000 shares of common stock at $.50 per share and 200,000 Warrants at
$.05 per share which carried a three (3) year option to purchase stock at
$.50 per share. The stock was sold to ten (10) indivuduals and had no
material affect or modified any class of the Company's securities. A Form D
was filed with the Securities Exchange Commission.
As of June 30, 1997 there were approximately 950 holders of the Company's
common stock. There have been no dividends paid on the Company's
common stock.
On September 5, 1997 Roseland amended it's Certificate of Incorporation with
the Secretary of State of Oklahoma to increase the aggregate number of
authorized shares of common stock from 10,000,000 shares to 50,000,000
shares.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
FISCAL 1997 COMPARED TO FISCAL 1996
Oil and gas revenues decreased from $387,783 in 1996 to $281,349 in 1997.
This 27.4% decrease is attributable to decreased production from existing
properties and from properties sold during the year and the decrease
in natural gas price. Capital expenditures on new leases during the fourth
quarter ended June 30, 1997 are not expected to produce revenues until
October 1997.
<PAGE> 10
Production, operating, and development expenses decreased from $174,119
(45% of oil and gas sales) in 1996 to $143,772 (51% of oil and gas sales) in
1997. The increase in costs as a percentage of oil and gas sales was brought
about by improved cost control during the year. General and administrative
expenses decreased from $131,027 or 34% of oil and gas revenue in 1996 to
$120,820 or 43% of oil and gas revenues in 1997 due primarily to cost
effectiveness.
Depreciation, depletion and amortization decreased from $166,068 in 1996 to
$81,618 in 1997 as a result of selling marginal or unprofitable wells, as
well as reclassification of acreage to "Non Producing Properties" for
material amounts of properties reserved for future developmental drilling
programs.
Operating income changed from a gain of $107,224 in 1996 to a gain of
$48,586 in 1997. Non-operating income decreased from $35,644 in 1996 to
$(9066) in 1997 due primarily to gains on sale of marginal wells in 1997.
Income from continuing operations decreased from $71,580 in 1996 to $39,520
in 1997. Net income decreased from a gain of $71,580 in 1996 to a gain of
$39,520 in 1997.
FISCAL 1996 COMPARED TO FISCAL 1995
Oil and gas revenues decreased from $543,422 in 1995 to $387,783 in 1996.
This 29% decrease is attributable to decreased production from existing
properties and from properties sold during the year. Capital expenditures on
new leases during the fourth quarter ended June 30, 1996 are not expected to
produce revenues until October 1996.
Production, operating, and development expenses decreased from $315,604
(58% of oil and gas sales) in 1995 to $174,119 (45% of oil and gas sales) in
1996. The decrease in costs as a percentage of oil and gas sales was brought
about by improved cost control during the year. General and administrative
expenses decreased from $168,945 or 31% of oil and gas revenuein 1995 to
$131,027 or 34% of oil and gas revenues in 1996 due primarily to cost
effectiveness.
Depreciation, depletion and amortization decreased from $210,703 in 1995 to
$166,068 in 1996 as a result of selling marginal or unprofitable wells.
Operating income changed from a gain of $58,593 in 1995 to a gain of
$107,224 in 1996. Non-operating income increased from $72,012 in 1995 to a
loss of $35,644 in 1996 due primarily to a change from a gain on sale of
assets in 1995 of $46,203 to a net loss on sales of $16,428 in 1996.
(See Item, this page, concerning sale of PMT stock). Income from continuing
operations decreased from $130,605 in 1995 to $71,580 in 1996. Net income
decreased from a gain of $130,605 in 1995 to a gain $71,580 in 1996.
<PAGE> 11
LIQUIDITY AND CAPITAL RESOURCES
The working capital decreased $6,746 from a $7,240 at June 30, 1996 to $494
at June 30, 1997. Future working capital will be supplied from oil and gas
operations and borrowings as needed.
The Company's operating activities used cash flows of $330,536 in 1997
compared to using cash flows of $246,007 in 1996. The increase in operating
cash flows is attributable to reduced payments of payables and debt, net of
proceeds from sale of PMT stock and decreased revenues resulting from sales
of marginal wells.
The investing activities of the Company used $122,372 in 1997 compared to
using $46,751 in 1996. Principal uses in both years were the purchase of
property and equipment.
The Company's financing activities used $122,372 of cash flows in 1997 which
is attributable primarily to payment on debt of $177,835.
The Company has no material capital expenditures planned other than future
acquisitions of oil and gas properties. Such acquisitions would be funded by
a combination of internally generated funds and additional borrowings. The
Company expects that current revenues from oil and gas production, overhead
recovery fees and the collection of non-oil and gas related receivables will
provide sufficient cash flow for operations.
<PAGE> 12
ITEM 7. FINANCIAL STATEMENTS
(a) 1. Financial Statements: Page
ROSELAND OIL AND GAS, INC.
As of June 30, 1997 and 1996, and the years
ended June 30, 1997, 1996, and 1995
Report of Independent Accountants............................. F-1
Consolidated Balance Sheets
Assets........................................................ F-2
Liabilities & Stockholders Equity............................. F-3
Consolidated Statements of Operations..........................F-4
Consolidated Statements of Changes in
Stockholder's Equity.......................................... F-5
Consolidated Statements of Cash Flows..........................F-6
Notes to Consolidated Financial Statements.....................F-7
2. Financial Statement Schedules
Schedule Description Page
II Amounts receivable from related parties
And Underwriter, Promoters, etc. F-17
IV Indebtedness of and to Related Parties -
Not Current F-18
V Property, Plant and Equipment F-19
VI Accumulated Depreciation,
Depletion and Amortization F-20
<PAGE> 13
ROSELAND OIL AND GAS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997, 1996 AND 1995
1. Background and General
Roseland Oil and Gas, Inc. is engaged in domestic crude oil and natural gas
exploration, development and production, with primary emphasis on the
production of oil and gas reserves through acquisitions of proved, producing
oil and gas properties in the states of Texas, Oklahoma, Arkansas, Louisiana,
Mississippi and Utah.
Roseland Oil and Gas, Inc. ("Company") was incorporated in the state of Texas
in October, 1978. In March, 1980, the Company was merged into a public Utah
corporation with the surviving entity being Roseland Oil and Gas, Inc., a
Utah corporation. In August of 1991, the Company relocated its corporate
offices from Houston, Texas to Tulsa, Oklahoma.
2. Significant Accounting Policies
Poperty and Equipment - The Company follows the successful efforts method
of accounting for its oil and gas producing activities. Under the successful
efforts method, the Company capitalizes all oil and gas leasehold acquisition
costs, consisting principally of acquisition costs of proved producing oil
and gas properties, including wells and related equipment and facilities. For
unproved properties, leasehold impairment is recognized based upon an
individual property assessment and exploration experience. Upon discovery of
commercial reserves, such leasehold costs are transferred to proved
properties.
Geological and geophysical expenses, delay rentals, production costs and
overhead are charged against income as incurred. Exploratory drilling costs
are capitalized when incurred. If exploratory wells are determined to be
unsuccessful, applicable costs are expensed. Costs incurred to drill and
equip developmental wells, including unsuccessful developmental wells, are
capitalized.
Well workover projects which entail drilling to a deeper producing formation
or plugging back to a more shallow producing formation ("recompletions")
increase the production potential of reserves and are capitalized. In
addition, well workovers which are required on newly acquired oil and gas
properties in order to restore efficient and/or commercial production are
capitalized. All other workover costs are expensed as incurred. These costs
include those for depending existing producing wells within the same
producing formation when such operations are conducted for the purpose of
restoring efficient operating conditions as well as the other repairs,
<PAGE> F-7
2. Significant Account Policies Cont.
reconditioning or reworking costs of wells already drilled and operating.
Depreciation, depletion and amortization of the costs of proved producing oil
and gas properties, with the exception of lease and well equipment, are
determined by the units-of-production method based on quantities produced as
a percent of estimated proved recoverable reserves. Depreciation of lease and
well equipment is computed on the straight-line method over estimated useful
lives ranging from five to ten years. Depreciation, depletion and
amortization of producing oil and gas properties amounted to $81,618, and
$166,080 for the years ended June 30, 1997, and 1996, respectively.
When the complete units of depreciable property are retired or sold, the
asset cost and related accumulated depreciation and depletion are eliminated
with any gain or loss reflected in income. When less than complete units of
depreciable property are retired or sold, the difference between asset cost
and sales price or salvage value is charged or credited to accumulated
depreciation and depletion.
Buildings and related improvements leased on operating leases or held for
lease are depreciated on the straight-line method over their estimated useful
lives of forty years.
Office and other equipment are depreciated on the straight-line method over
estimated useful lives ranging from five to seven years. Depreciation and
amortization of office and other equipment amounted to $8,602, and $12,164
for the years ended June 30, 1997, and 1996, respectively.
Income Taxes - Effective July 1, 1991, the Company adopted Statement of
Financial Accounting Standard No. 109 (SFAS No. 109), "Accounting for
Income Taxes", which changed the criteria for measuring the provisions for
income taxes and recognizing deferred tax liabilities or assets in the
statement of financial position. Deferred tax liabilities or assets arise
from differences between the tax basis of an asset or liability and its
reported amount in the consolidated balance sheet. The amount of deferred
tax liabilities or assets is calculated by applying the provisions of
enacted tax law to determine the amount of taxes payable or refundable
currently or in future years.
Earnings (Loss) Per Common Share - Primary and fully diluted earnings (loss)
per common share are computed by dividing net income, adjusted for
dividends on preferred stock, by the weighted average number of common and
common equivalent shares outstanding during the year. Outstanding stock
warrants are considered common stock equivalents and are included in the
calculation of earnings (loss) per common share when the effect would be
<PAGE> F-8
2. Significant Accounting Policies Cont.
dilutive. Primary and fully diluted earnings (loss) per common share are the
same for all periods presented.
The weighted average number of common and common equivalent shares
outstanding was 5,896,847; 5,552,736 and 5,402,210 for the years ended June
30, 1997, 1996 and 1995, respectively.
Concentration of Credit Risk - Financial instruments which potentially
subject the Company to a concentration of credit risk consists primarily of
trade accounts receivable with a variety of local, national, international
oil and natural gas companies. Such credit risks are considered by
management to be limited due to the financial resources of the oil and
natural gas companies.
Cash Equivalents - For purposes of the consolidated statements of cash flow,
the Company considers all certificates of deposit and other securities or
debt instruments with maturities of three months or less, when purchased, to
be cash equivalents.
3. Acquisitions
In December 1993 the Company acquired a certain producing oil and gas
property in Goliad County, Texas having estimated net oil reserves of 20,161
barrels oil and estimated net gas reserves of 82,442 mcf with a discounted
value of $126,975 in exchange for $60,550 paid in cash.
In January 1994 the company acquired certain oil and gas properties relative
to its A.M.I. agreement with Frank W Cole which is not considered material.
In February 1994 the Company acquired certain producing and non-producing
oil and gas properties located in Goliad County, Texas having estimated net
gas reserves of 79,945 mcf with a discounted value of $51,767 and an interest
in a pipeline connected to these wells in exchange for $16,920 paid in cash.
4. Marketable Securities
None.
<PAGE> F-9
5. Long-Term Debt
At June 30, 1997 and 1996, long-term debt to banks and others was comprised
of the following:
9% mortgage on office building, due in 2016. $112,243
Farmers & Merchants Bank 5,312
Note payable to Minneapolis Group (See item #7, par. 4) 116,000
--------
TOTAL $233,555
On February 24, 1995, the Company secured a loan from Stillwater National
Bank of Tulsa, Oklahoma for $200,000. The express purpose of this loan is to
increase the Company's income and reserves by purchasing proved producing
oil and gas leases and workovers on existing wells. This note was paid off in
August of 1995.
Principal installments due on long-term debt during each of the five fiscal
years subsequent to June 30, 1997 are as follows:
1998 21,857
1999 24,298
2000 26,825
2001 29,615
--------
TOTAL $102,595
6. Stockholders' Equity
In August, 1991, the Company changed its state of incorporation from Utah to
Oklahoma and, in connection therewith, increased the authorized capital of
the Company to 50,000,000 shares of $0.01 par value common stock and
10,000,000 shares of $0.01 par value preferred stock. As a result of the
change from no par to $0.01 par, common stock was reduced and additional
paid-in capital increased by $334,216.
A new class of warrants designated as "Class A Warrants" were issued to each
record holder of common stock as of July 12, 1991, as a dividend at the rate
of two warrants for each share of common stock owned. The warrants are
exercisable at $2.50 per share beginning on April 30, 1992 and rising $0.50
per share at the beginning of each of the next four years thereafter and
expire on April 29, 1997. The warrants are callable in total by the Company
at a specified redemption price of $0.50 per warrant during a call period
lasting 10 days immediately succeeding a period during which the closing
price for the Company's common stock has exceeded the exercise price of the
warrants for each of ten consecutive business days. At June 30, 1992, the
Company had outstanding warrants to purchase approximately 902,000 shares,
and a like amount of the Company's unissued common stock has been reserved
for the possible exercise of the warrants.
<PAGE> F-10
7. Related Party Transactions
In January 1993, the Company purchased the building where it previously
leased office space. The purchase price of the 2,000 square foot facility was
approximately $200,000. The Company assumed a mortgage on the property
of approximately $ 121,000 and issued 789,288 shares of restricted common
stock. The property was purchased from Margaret Vandever, the wife of William
G. Vandever, President, Chief Executive Officer and a Director of the
Company. The purchase price and terms constituted fair market value had the
property been purchased from an unrelated third party.
In January 1993, the Company purchased an interest in an oil and gas lease in
Creek County, Oklahoma from South Central Energy for approximately
$65,000. The Company issued 644,490 shares of restricted common stock to
South Central Energy as full payment for the interest in the lease. South
Central Energy is owned by Margaret Vandever and Belva Howard. Margaret
Vandever is the wife of William G. Vandever. Belva Howard is the wife of Gene
C. Howard, a Director of the Company and partner in the law firm of Howard
and Widdows, counsel to the Company.
8. Subsequent Events
Negotiations are in progress with third parties for an interest in a drilling
prospect in exchange for Roseland Stock. This would substantially impact
control of the company. There are no agreements in place and no assurance
that an agreement may or may not be entered into.
As certain wells on Roseland's Palo Pinto County, Texas properties were
becoming non-productive due to depletion and due to Roseland's lack of cash
flow, certain outside investors were sought to pay the cost of re-working
certain zones that were never produced. These investors include certain
officers, shareholders and employees providing the necessary capital on a
cost plus basis. Roseland received a management fee based upon cost and
retained a 25% working interest without any cost to the tanks.
On September 5, 1997 Roseland amended it's Certificate of Incorporation with
the Secretary of State of Oklahoma to increase the aggregate number of
authorized shares of common stock from 10,000,000 shares to 50,000,000
shares.
<PAGE> F-11
9. Income Taxes
The provision for income taxes for the years ended June 30, 1997, 1996 and
1995 is comprised of the following:
1997 1996 1995
Current $ 0 $ 0 $ 0
Deferred 0 0 0
$ 0 $ 0 $ 0
===== ===== =====
Deferred income taxes reflect the tax impact of temporary differences
between the amount of assets and liabilities for financial reporting purposes
and such amount as measured by tax laws and regulations.
A reconciliation of the United States (U.S.) Federal statutory rate to the
Company's effective tax rate for the years ended June 30, 1997, 1996 and 1995
is as follows:
1997 1996 1995
U.S. Federal statutory r 34.0% 34.0% (34.0%)
Effective lower tax brackets
on the first $100,000 of
taxable income (7.5) (7.5) (7.5)
State income taxes, net of
U.S. Federal tax benefit 2.8 2.8 2.8
Utilization of investment
tax credits (10.0) (10.0) (10.0)
Percentage depletion (3.3) (3.3) (3.3)
Alternative minimum tax - - -
Other (0.1) (0.1) (0.1)
Effective tax rates 15.9% 15.9% 15.9%
10. Commitments
In November 1991, the Company entered into employment contracts with its
two principal officers, contracting employment with those individuals for a
primary term in excess of seven years through fiscal 1999. Compensation
arrangements for the employment provide for aggregate annual base
compensation of at least $78,000 throughout the term of the contracts. Each
of the contracts also provides for bonus compensation, on an annual or
quarterly basis, based on an aggregate 6% of the net pre-tax cash flow from
operations, excluding HiLand Properties, Inc., up to $1.0 million, and 7.5% of
net pre-tax cash flow from operations over $1.0 million.
<PAGE> F-12
11. Supplemental Income Statement Information
During the year ended June 30, 1997, maintenance and repairs expense was
$19,606, oil and gas production and severance tax expense was $16,230 and
ad valorem tax expense was $11,878.
12. Oil and Gas Producing Activities (Unaudited)
The following supplemental historical and reserve information is presented
pursuant to the disclosure requirements promulgated by the Securities and
Exchange Commission and Financial Accounting Standards Board Statement
No. 69, "Disclosures about Oil and Gas Producing Activities."
Costs incurred - Costs (capitalized and expensed) incurred in oil and gas
property acquisition, exploration and development activities for the years
ended June 30, 1997, 1996 and 1995 were as follows:
1997 1996 1995
Property acquisition $ - $ - $ -
Exploration $ - $ - $ -
Development $ 242,419 $ 193,782 $ 163,785
--------- --------- ---------
TOTAL $ 242,419 $ 193,782 $ 163,785
Capitalized costs - The aggregate amounts of capitalized costs relating to
oil and gas producing activities and the aggregate amounts of the related
accumulated depreciation, depletion and amortization at June 30, 1997, 1996
and 1995 were as follows:
1997 1996 1995
Proved properties $2,276,014 $2,832,693 $2,895,555
Unproved properties 701,188 - -
---------- ---------- ----------
TOTAL $2,977,202 $2,832,693 $2,895,555
Accumulated depreciation,
depletion and amortization 776,547 796,606 821,933
---------- --------- ----------
$2,200,655 $2,036,087 $2,073,622
========== ========== ==========
<PAGE> F-13
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS
The names and ages of all Directors and Executive Officers of the Company as
of June 30, 1997 are:
NAME AGE POSITION DATE OF APPOINTMENT
William G. Vandever 72 Chairman of the Board, August 15, 1991
President and Chief Class II
Executive Officer
Joseph T. Howard 40 Executive Vice President August 15, 1991
Secretary, Director Class III
Gene C. Howard 71 Director August 15, 1991
Class I
Robert Anderson 46 Director July 19, 1996
Class I
John W. Peterson 72 Director April 9, 1992
Class III
The Corporation's Board of Directors is divided into three (3) classes, with
each class as nearly equal in number to all other classes as the then total
number of directors constituting the entire board permits. The term of each
class is three (3) years, and expires on a staggered three-year basis with
all classes. The first class ("Class I") consists of two (2)+ Directors
who are nominated for election to a three year term at the 1995 Annual
Meeting of Shareholders expiring in 1995; the second class ("Class II")
consists of one (1)+ Directors and the term of office of each Director in
such class expires in 1997.
Officers of the Company hold office until the meeting of the Board of
Directors after the next Annual Meeting of Shareholders or until removed by
the Board of Directors. There are no arrangements or understandings among
the Officers and Directors pursuant to which any of them were elected as
Officers and Directors.
<PAGE> 14
The following information is a brief account of business experience for the
past five (5) years of the individuals listed above:
William G. Vandever has served as the Chairman of the Board, Chief Executive
Officer and President of Roseland since August 1991. His business
experience as a Corporate Chief Executive includes oil and gas, banking,
finance, real estate, retailing and insurance. Over the past 15 years, he
has drilled over 200 wells in Oklahoma, Texas, Kansas, Arkansas and Ohio.
He served as President of Professional Investors Life Insurance Company
("PILIC"), Bonneville Life Insurance Company, Thurston Fire and Casualty
Company, and Progress Life and Accident Company, all insurance companies
based in Tulsa, Oklahoma from 1990 - 1992. PILIC was sold to a third party.
Mr. Vandever served as a director of EntreCap from 1991 to August 1992
and as a director of Hinderliter Industries, Inc. from 1991 until
August 1992. For more than the past five (5) years Mr. Vandever has served
as an Officer and/or director of Kansas Energy Corporation, Mohawk Oil and
Gas Corporation, Tulsa Petroleum Corporation, and William G.Vandever Company,
Inc.
Joseph T. Howard has served as Executive Vice President of Roseland since
August, 1991. Mr. Howard was Chief Financial Officer of American Canopy
Corporation, a small manufacturing company based in Oklahoma City,
Oklahoma from November 1988 until August 1990, when he resigned. American
Canopy filed for Bankruptcy under Chapter 11 in the Northern District of
Oklahoma on April 11, 1991, and was transferred on May 9,1991, to the
Western District of Oklahoma and converted to a Chapter 7, and was closed on
September 19, 1991. Mr. Howard was employed by and served on the Board of
Directors of Professional Investors Life Insurance Company, a privately held
insurance company based in Tulsa, Oklahoma, and Bonneville Life Insurance
Company, Thurston Fire and Casualty Company and Progress Life and Accident
Company. PILIC was sold to a third party. From October, 1987 to
September 1989, Mr. Howard was the Director of corporate affairs for
Hinderliter Industries, Inc. Mr. Howard was the owner and operator of Howard
Oil Properties, Inc., an oil and gas property consulting firm, from May 1986,
to October 1987. Mr. Howard is the son of Gene C. Howard.
Gene C. Howard is the Senior Partner of the law firm of Howard and Widdows,
P.C., of Tulsa, Oklahoma, and has been engaged primarily in the private
practice of law over the past 35 years. Mr. Howard served in the Oklahoma
State Senate from 1964-1982 and was President Pro Tem from 1975-1981.
Chairman of the Board of Farmers and Exchange Bank from 1972-199??
Board of Directors of Local Federal Bank of Oklahoma. In addition, he is a
Director of the Oklahoma State and Education Employment Group Insurance
Board and presently acts as Chairman of this Board. Mr. Howard served as
Director of Entrecap and Hinderliter from 1991 to August of 1992. He is also
a Chairman of the Board of Philadelphia Mortgage Trust. The firm of Howard
and Widdows, P.C. represents PMT.
<PAGE> 15
Robert Anderson is the President and CEO of Access Wear Plus based in
Minneapolis. Prior to forming Access Wear Plus in 1993, Mr. Anderson was
Investment Registered Representative from 1976 to 1987 with Midland
Management Corp. where he held the position of Vice President of Energy
Investments, responsible for structuring investment programs for
the oil and gas industry. From 1987 to 1993, he was a Stockbroker with
Westonka Investments. Mr. Anderson is currently a Regional Director of
Access Development Corporation based in Salt Lake City. Mr. Anderson
attended Mesa College, Mesa, Arizona and the University of Minnesota, St.
Paul, Minnesota. He is a member of the Univerity of Minnesota M Club.
John W. Peterson has been in the practice of law since 1972 to present. He
was an FBI agent from 1951 to 1956; an attorney in the Legal Department of
Continental Oil Company and a Vice President from 1956 to 1964; Regional
Counsel for General Electric Corporation 1964 to 1968; partner of Harry
Helmslee 1970 to 1972; Director of EntreCap International since October
1990 to 1992; Director of Hinderliter Industries 1990 to 1992.
ITEM 10. EXECUTIVE COMPENSATION
In November 1991 the Company entered into an employment agreement with
William G. Vandever for a term of seven (7) years which provides for a base
salary of $72,000 together with a bonus equal to 4% of net pre-tax cash flow
from operations up to $1.0 million and 5% of net pre-tax cash flow from
operations excluding HiLand Properties over $1.0 million. Additionally,
the agreement provided for the issuance of 60,000 restricted common shares
of the Company valued at $0.10 per share, the trading price as of the date of
issue.
In November 1991 the Company entered into an employment agreement with
Joseph T. Howard for a term of seven (7) years which provides for a base
salary of $45,000 together with a bonus equal to 2% of the net pre-tax cash
flow from operations up to $1.0 million and 2.5% of the net pre-tax cash flow
from operations excluding HiLand Properties over $1.0 million. Additionally,
the agreement provided for the issuance of 60,000 restricted common shares of
the Company valued at $0.10 per share, the trading price as of the date of
issue.
<PAGE> 16
CASH
NAME POSITION YEAR COMPENSATION
William G. Vandever Chairman of the Board 1997 40,500
President, CEO
NOTE: Accrued and unpaid compensation: 1995 13,992
1996 15,093
1997 31,500
The Company pays each of its non-management Directors $250 per meeting
plus the reimbursement of out-of-pocket travel costs incurred in attending a
meeting. Additionally, Directors are paid $125 for each telephone or
committee meeting attended. These fees were waived by the directors in the
physical year of 1997.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth as of June 30, 1997 with respect to each
person known to the Company to be the owner and beneficial owner
(as that term is used in Rule 13D-3 under the Securities Exchange Act of 1934)
of more than 5% of the common stock and Series A Preferred stock outstanding,
(1) the number of shares owned and beneficially owned (including shares such
persons have a right to acquire within 60 days) and (2) the percent of the
outstanding shares of common stock and Series A Preferred stock owned and
beneficially owned (computed in accordance with such rule) by such persons
(assuming acquisitions of shares which such persons have a right to acquire).
Except as otherwise indicated in the footnotes below, each of the persons
named below has sole voting and investment power with respect to the shares
of stock beneficially owned by them.
Name of Number of Shares Percent
Title of Beneficial Beneficially of
Class Owner Owned Class (1)
Common Belva Howard(2) 322,245 6.40%
4740 S. Yorktown
Tulsa, OK 74105
Margaret G. Vandever(3) 1,041,533 20.70%
1724 E. 15th St.
Tulsa, OK 74104
<PAGE> 17
(1) Based on 5,030,847 shares of common stock outstanding.
(2) Includes 50,000 shares owned by Mrs. Howard's husband of which Mrs.
Howard disclaims beneficial ownership.
(3) Includes 210,00 shares owned by Mrs. Vandever's husband of which Mrs.
Vandever disclaims beneficial ownership.
(4) On September 20, 1996, Roy Rimmer exchanged his preferred shares for
common shares and simultaneously sold those shares to outside parties.
Concurrently, the notes outstanding to HOC in the amount of $116,000 were
acquired by these same parties which is convertable to common stock at $0.50
per share up to September 15, 1998. This transaction has no effect
on the company or its financial statements.
The following table shows, as of June 30, 1997, the total number of shares of
Common stock beneficially owned by each officer or director and by all
executive officers and directors as a group and the percent of the
outstanding shares of such class owned. Each such person has sole voting and
investment power with respect to such shares, except as noted below.
Name of Number of Shares Percent
Title of Beneficial Beneficially of
Class Owner Owned Class (1)
Common William G. Vandever(2) 1,251,533 24.88%
Gene C. Howard(3) 322,245 6.40%
John W. Peterson
Joseph T. Howard 210,000 4.17%
Robert Anderson 89,000 1.77%
All officers and
directors as a group
(4 persons) 1,872,778 37.23%
(1) Based on 5,030,847 shares of common stock outstanding.
(2) Includes 1,041,533 shares of common stock owned by Mr. Vandever's wife,
of which Mr. Vandever disclaims beneficial ownership.
(3) Includes 322,245 shares of common stock owned by Mr. Howard's wife, of
which Mr. Howard disclaims beneficial ownership.
(4) Includes 210,000 shares of common stock owned by Howard and Leavitt,
P.C. of which Mr. Howard ownes 50%.
<PAGE> 18
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In January 1993, the Company purchased the building where it previously
leased office space. the purchase price of the 2,200 square foot facility
was approximately $200,000. The Company assumed a mortgage on the property
of approximately $121,000 and issued 789,288 shares of restricted common
stock. The property was purchased from Margaret Vandever, the wife of
William Vandever, President, Chief Executive Officer and a Director of the
Company. The purchase price and terms constituted fair market value had the
property been purchased from an unrelated third party.
In January 1993, the Company purchased an interest in an oil and gas lease in
Creek County, Oklahoma from South Central Energy for approximately
$65,000. The Company issued 644,490 shares of restricted common stock to
South Central Energy as full payment for the interest in the lease. South
Central Energy is owned by Margaret Vandever and Belva Howard. Margaret
Vandever is the wife of William G. Vandever. Belva Howard is the wife of
Gene C. Howard, a Director of the Company and partner in the law firm of
Howard and Widdows, counsel to the Company.
<PAGE> 19
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, in
Tulsa, Oklahoma, on the 23rd day of October, 1997.
ROSELAND OIL AND GAS, INC.
By: /s/ William G. Vandever
William G. Vandever
Chairman of the Board and
Chief Executive Officer
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 indicated on the 23rd day of
October , 1997.
Name:
/S/WILLIAM G. VANDEVER /S/GENE C. HOWARD
William G. Vandever Gene C. Howard,
Chairman of the Board, Director
Chief Executive Officer
and President
/S/JOSEPH T. HOWARD
Joseph T. Howard
Executive Vice President,
Secretary, Director
/S/ROBERT ANDERSON
Robert Anderson, Director
<PAGE> 20
ROSELAND OIL AND GAS, INC.
BALANCE SHEET
JUNE 30, 1997 AND 1996
ASSETS 1997 1996
Current Assets:
Cash and cash equivalents $ 19,145 $ 18,651
Accounts receivable:
Trade 147,857 217,830
Related Parties 0 0
Notes Receivable:
Trade 1,500 10,252
Related Parties 0 40,000
Inventory 14,194 40,202
__________ __________
Total Current Assets $ 182,696 $ 326,935
__________ __________
Property and equipment, at cost
Oil and gas properties (successful efforts method):
Proved properties (including wells and related
equipment and facilities) $2,977,202 $2,832,693
Real Estate holdings
Buildings 210,000 210,000
Office and other equipment 71,537 69,228
__________ __________
Total property and equipment 3,258,739 3,111,921
Less accumulated depreciation, depletion,
and amortization 865,829 879,710
__________ __________
Net Property and Equipment 2,392,910 2,232,211
__________ __________
Other Assets:
Marketable equity securities of related parties
at lower of cost or market $ 0 $ 0
Notes Receivable; less current portion 0 0
Other 543,322 543,497
__________ _________
Total other assets 543,322 543,497
__________ _________
Total Assets $3,118,928 $3,103,137
========== ==========
(continued)
The acompanying notes are part of these financial statements.
<PAGE> F-2
ROSELAND OIL AND GAS, INC.
BALANCE SHEET
JUNE 30, 1997 AND 1996
LIABILITIES & STOCKHOLDERS EQUITY 1997 1996
Current Liabilities:
Current portion of long-term debt $ 76,440 $ 75,090
Accounts Payable 92,725 114,404
Oil and gas revenues payable 1,205 26,979
Accrued income taxes 0 0
Other accrued liabilities 0 765
___________ __________
Total Current Liabilities 170,370 217,238
Long-term Debt, less current portion:
Oil and gas revenue payable $ 0 $ 0
Other 214,903 243,667
__________ __________
Total Long-term Debt 214,903 243,667
___________ ___________
Deferred Income taxes $ 0 $ 0
Stockholders Equity
Series A preferred stock, par
value $.01 per share authorized 10,000,000
shares, issued 200,000 shares $ 0 $ 2,000
Common stock, $.05 par value,
authorized 10,000,000 shares,
issued 5,030,149 shares 252,108 228,607
Additional paid-in capital 2,394,834 2,383,715
Stock Subscribed - to be issued 71,500 0
Retained earnings 69,090 64,570
Treasury stock
(25,340 and 206,393 shares), at cost (53,877) (53,877)
___________ ___________
Total Stockholders' Equity 2,733,655 2,625,015
___________ ___________
Total Liability & Stockholders' Equity $3,118,928 $3,102,643
========== ==========
The accompanying notes are part of these financial statements.
<PAGE> F-3
ROSELAND OIL AND GAS, INC.
STATEMENTS OF OPERATION
Years ended June 30, 1997, 1996, 1995
Revenues: 1997 1996 1995
Oil and gas sales $ 281,349 $ 387,783 $ 543,422
Rental Income from operating leases 8,028 8,591 38,456
Overhead recovery fees 105,419 182,064 171,968
Other 0 0 0
__________ __________ ___________
Total Revenues 394,796 578,438 753,846
Costs and Expenses:
Oil & gas prod, op & dev costs $ 143,772 $ 174,119 $ 315,604
Abandoned leases 0 0 0
Selling, general and administrative exp 120,820 131,027 168,945
Depreciation, depletion and amortization 81,618 166,068 210,703
__________ __________ ________
Total Costs and Expenses 346,210 471,214 695,252
Operating Income (Loss): $ 48,586 $ 107,224 $ 58,593
Non-operating Income (Expenses):
Interest Income $ 346 $ 4,374 $ 2,984
Gain (loss) on sale of assets 5,523 (16,428) 46,203
Other income ( 1,427) ( 5,136) 49,451
Interest expense (13,508) (18,454) (26,625)
Litigation costs 0 0 0
----------- ----------- ---------
( 9,066) ( 35,644) 72,013
Income (loss) from continuing operations
Before provision for income taxes $ 3,9520 71,580 $ 130,605
Provision (benefit) for income taxes 0 0 0
___________ __________ __________
Income from continuing operations $ 39,520 $ 71,580 $ 130,605
Discontinued operations (note 9)
Loss from operations (less applicable income taxes of $(322,563)
Gain on disposal 0 0 0
____________ __________ __________
Net Income (loss) $ 39,520 $ 71,580 $ 130,605
Earnings (loss) per common share:
Continuing operations Income (loss) $0.01 $0.02 $0.01
Net income (loss) per share
continuing operations $0.01 $0.02 $0.01
Discontinued operations
Loss from operations 0 0 0.00
Gain on disposal 0 0 0.10
Net income (loss) per share $0.01 $0.02 $0.10
The accompanying notes are part of these financial statements
<PAGE> F-4
<TABLE>
ROSELAND OIL AND GAS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
June 30, 1997, 1996 and 1995
<CAPTION>
Cumulative Common Common Additional STOCK PREFERRED TOTAL
Preferred Shares Stock Paid-In RETAINED SUBSCRIPTION DIVIDEND TREASURY STOCKHOLDERS'
Stock Outstandig Par Value Capital EARNINGS RECEIVABLE PAYABLE STOCK EQUITY
---------- ---------- ---------- ----------- ---------- ------------ -------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1992 $ 30,000 $ 4,242,430 $ 212,122 $ 4,201,914 $ 573,081 $ (109,216) $ 0 $ (53,877 $ 4,854,024
Reverse Adjustment 0 0 0 0 0 0 0 0 0
Purchase of Bluehawk,
Fields, December 31, 1992 0 75,000 3,750 33,750 0 0 0 0 37,500
Purchase of Building 0 789,280 39,464 39,464 0 0 0 0 78,928
Issuance of common
stock for services 0 610,000 30,500 0 0 0 0 0 30,500
Purchase of Peterson
Fields, January 31, 1993 0 644,500 32,225 32,225 0 0 0 0 64,450
Transfer of HOC
Wells, January 31, 1993 2,000 0 0 198,000 0 0 0 0 200,000
Retire 183,000 shares 0 (183,000) (9,150) (9,150) 0 0 0 0 (18,300)
Preferred Dividend to Entrecap 0 0 0 0 0 0 (435,689) 0 (435,689)
Stock Subscription Receivable 0 0 0 0 0 (128,284) 0 0 (128,284)
Dividend of PMT stock 0 0 0 151,000 0 0 0 0 151,000
Net Income, year
ended June 30, 1993 0 0 0 0 (1,306,848) 0 0 0 (1,306,848)
__________ ___________ _______ ___________ ___________ ___________ _________ ____________________
Balance, June 30, 1993 $ 32,000 $ 6,178,210 $ 308,911 $ 4,647,203 $( 733,767) $(237,500)$(435,689) $(53,877) $ 3,527,281
Purchse of well 0 24,000 1,200 4,800 0 0 0 0 6,000
Correct Transfer
Agent error 0 97,060 4,853 0 0 0 0 0 4,853
Retire 17,000 shares 0 (17,000) (850) 0 0 0 0 0 (850)
Net Income, Year
ended, June 30, 1994 0 0 0 0 624,150 0 0 0 624,150
Settlement of Entrecap
Bankruptcy, 8/22/93 (30,000) (1,980,121) (99,006) (2,388,438) 0 237,500 435,689 0 (1,844,255)
__________ __________ __________ _____________________ ___________ ___________________ ___________
Balance, June 30, 1994 $ 2,000 $ 4,302,149 $ 215,108 $2,263,565 $(109,617) $ 0 $ 0 $(53,877) $ 2,318,179
Preferred dividend 0 0 0 0 (20,000) 0 0 0 (20,000)
Net Income, year
ended June 30, 1995 0 0 0 0 130,605 0 0 0 130,605
__________ __________ ___________ __________ __________ __________ ________ __________ _________
Balance June 30, 1995 $ 2,000 $ 4,302,149 $ 215,103 $2,263,565 $ 988 $ 0 $ 0 $ (53,877) $ 2,427,784
Preferred dividend 0 0 0 0 (7,998) 0 0 0 ( 7,998)
Sale of stock-
Private Placements 0 270,000 13,499 120,150 0 0 0 0 133,649
Net income, year
ended June 30, 1996 0 0 0 71,580 71,580 0 0 0 71,580
---------- ---------- ---------- ----------- ---------- ----------- ------ ---------- ----------
Balance June 30, 1996 $ 2,000 $ 4,572,149 $ 228,607 $2,383,715 $ 64,570 $ 0 $ 0 $(53,877) $ 2,625,015
========== ========== =========== ========== ========== ========== ======= ========= ===========
Preferred dividend 0 0 0 0 (35,000) 0 35,000 0 0
Conversion of referred
to common (2,000) 400,000 20,000 13,500 0 0 0 0 31,500
Conversion of Dividend
Pay to Stock 0 58,698 3,500 4,769 0 0 (35,000) 0 (26,731)
Sale of Stock -
private placements 0 0 0 0 0 71,500 0 0 71,500
Sale of stock
10% Commission 0 0 0 (7,150) 0 0 0 0 (7,150)
Net income, year
ended June 30, 1997 0 0 0 0 39,520 0 0 0 39,520
---------- ----------- ---------- ---------- ----------- ---------- ------- -------- ----------
Balance June 30, 1997 $ 0 $ 5,030,847 $ 252,107 $2,394,834 $ 69,090 $ 71,500 $ 0 $(53,877) $2,733,654
====================================================================================================
The accompaning notes are a part of these financial statements
</TABLE>
<PAGE> F -5
ROSELAND OIL AND GAS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended June 30, 1997, 1996, 1995
1997 1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 39,520 $ 71,580 $ 130,605
Adjustments to reconcile net income (loss)
to cash provided (used) by operating
activities:
Depreciation, depletion and amortization 81,618 166,068 210,703
Abandonment of oil and gas properties
(Gain) loss from sale of assets (5,523) 16,428 (46,202)
Provision (benefit) for deferred income tax
Change in assets and liabilities
(Increase) in accounts receivable 69,973 (14,981) (29,118)
(Increase) in notes receivable 48,752 8,548 46,102
(Increase) decrease in current assets 144,239 (11,287) (42,588)
(Increase) decrease in other assets 175 265,912 (95,511)
Increase (decrease) in accounts payable (21,679) (126,807) 73,273
Increase (decrease) in oil and gas
revenues payable (25,774) (129,732) (90,903)
Increase (decreased) in accrued and
deferred income taxes 0 0 (32,143)
Income (decrease) in other accrued
liabilities (765) 278 (230)
Net cash provided (used) by operating
activities $ 330,536 $ 246,007 $ 101,199
Cash flows from investing activities:
Proceeds from disposal property and equipment $ 120,047 $ 147,031 $ 141,591
Purchase of property and equipment (242,419) (193,782) (119,015)
Loans to related parties 0 0 0
Net cash provided (used) by investing
activities $(122,372)$ (46,751)$ 22,576
Cash flows from financing activities:
Issuance of common stock $ 64,350 $ 133,650 $ 0
Retirement of common stock (230,533) 0 0
Issuance of preferred stock 0 0 0
Dividend payment 0 (11,000) (20,000)
Additional debt 136,348 52,510 0
Payments on debt (177,835) (367,176) (109,768)
Net cash provided (used) by financing
activities $(207,670)$(192,016)$(129,768)
Net increase (decrease) in cash and
cash equivalents $ 494 $ 7,240 $ (5,992)
Cash and cash equivalents, beginning of year 18,651 11,411 17,402
Cash and cash equivalents, end of year $ 19,145 $ 18,651 $ 11,410
The accompanying notes are part of these financial statements
<PAGE> F-6
Results of Operations - The results of operations from oil andgas producing
activities for the years ended June 30, 1997, 1996 and 1995 were as follows:
1997 1996 1995
-------- -------- --------
Revenues from unaffiliated customers $386,768 $569,847 $715,390
-------- -------- --------
Production costs 143,772 174,119 315,604
Exploration expenses 0 0 0
Abandonments 0 0 0
Depreciation, depletion and
amortization 81,618 166,068 210,703
------- ------- -------
225,390 340,187 526,307
------- ------- -------
Results before income taxes 161,378 229,660 189,083
Provision for income taxes 0 0 0
------- -------- -------
Results of operations (excluding
corporate overhead and interest
expenses) $161,378 $229,660 $189,083
======== ======== ========
<PAGE> F-14
Estimated quantities of proved oil and gas reserves - The following estimates
of changes in the Company's net proved developed and undeveloped oil and
natural gas reserves during the years June 30, 1997, 1996 and 1995 were made
by an independent reservoir engineer. Reserves estimates are based on
a complex and highly interpretive process which is subject to continuous
revisions as additional production and development drilling information
becomes available. The quantities reported below are only those amounts
which the Company can reasonably expect to recover from known reservoirs
under existing economic and operating conditions using current prices and
operating conditions using current prices and operating costs. All oil and
gas reserves reported are located in the United States, principally in the
states of Texas and Oklahoma. The Company does not have any long term supply
contracts with foreign government or reserves of equity investees.
<TABLE>
<CAPTION>
Oil and
Natural Gas Condensate
(MCF) (Bbls)
Proved developed and
undeveloped reserves: 1997 1996 1995 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
Beginning of year $8,509,748 $3,611,014 $2,548,727 $103,178 $104,614 $ 89,714
Revisions of previous
estimates (23,473) 6,182,646 1,373,635 (18,351) 26,871 10,344
Purchases of reserves
in place 0 0 109,536 0 0 26,245
Extensions and
discoveries 0 0 0 0 0 0
Production (285,640) (282,897) (259,798) (22,919) (10,467) (12,937)
Sales of reserves
in place (1,817) (1,001,015) (160,906) (7,570) (17,840) (8,752)
End of year $8,198,818 $8,509,748 $3,611,014 $ 54,338 $103,178 $104,614
Proved developed
reserves:
Beginning of year $8,509,748 $3,611,014 $2,548,727 $103,178 $104,614 $ 87,535
End of year 819,818 8,509,748 3,611,014 54,388 103,178 104,614
</TABLE>
<PAGE> F-15
Standardizing measure of discounted future net cash flows relating to proved
reserves - The standardized measure of discounted future net cash flows was
calculated by applying current year-end prices, considering fixed and
determinable price changes only to the extent provided by contractual
arrangements or law, estimated future production, less future expenditures
(based on current costs) to be incurred in developing proved undeveloped and
proved producing oil and gas reserves, and future income taxes. The
resulting future net cash flows were discounted using a rate of 10% per
annum. (1)
The standardized measure of discounted net cash flow amounts contained in
the following tabulation does not purport to represent the fair market value
of the Company's oil and gas properties. No value has been given to unproved
properties and reserves not yet established as proved by drilling or
producion history. There are significant uncertainties inherent in
estimating timing and amount of future costs. In addition, the method of
valuation utilized, based on current prices and costs and the use of
10% discount rate, is not necessarily appropriate for determining fair
value. (2)
The following is the estimated standardized measure relating to proved oil
and gas reserves at June 30, 1997, 1996, and 1995: (1)
1997 1996 1995
Future cash inflows $20,052,787 $20,471,326 $ 5,469,778
Future production costs (3,377,904) (3,377,904) (1,791,360)
Future development costs (2,032,525) (2,032,525) (100,000)
Future severance tax expenses (1,526,523) (1,526,523) (394,843)
Future net cash flows $13,115,835 $13,534,374 $ 3,183,575
Ten percent annual discount
for estimated timing of net
cash flows $ 4,813,392 $ 4,813,392 $ 1,238,237
Standardized measure of
discounted future net
cash flows $ 8,302,443 $ 8,720,982 $ 1,945,338
Following is an analysis of changes in the estimated standardized measure of
proved producing during the years ended June 30, 1997, 1996, 1995: (2)
1997 1996 1995
Standardized measure, beginning
of year $ 831,900 $1,662,798 $2,403,704
Sales of oil and gas produced (281,348) (387,783) (543,422)
Net changes in prices and
production costs $ 0 $ (174,119) $ (315,604)
Extensions and discoveries $ 0 $ 0 $ 0
Revisions of previous quantity
estimates $ 18,922 $ (83,877) $ 34,510
Accretion of discounts $ 0 $ 0 $ 0
Net change in income taxes $ 0 $ 0 $ 0
Purchases of reserves in place $ 0 $ 0 $ 271,597
Sales of reserves in place $ (156,112) $ (185,119) $ (192,987)
Other $ 0 $ 0 $ 0
Standardized measure,
end of year $ 413,362 $ 831,900 $1,662,798
<PAGE> F-16
<TABLE>
ROSELAND OIL AND GAS, INC.
SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITER,
PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
YEARS ENDED JUNE 30, 1997, 1996 AND 1995
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
Balance at Deductions Balance at
Year Ended beginning Amounts Amounts end of year
June 30, Name of Debtor of year Additions Collected Written off Current Not Current
<S> <C> <C> <C> <C> <C>
1997
1996 Philadelphia Mortgage Trust $ 254,283 $254,283
1995 Philadelphia Mortgage Trust $ 280,881 $ 26,598 $58,800 $195,483
1994 Philadelphia Mortgage Trust $ 309,992 (a) $ 29,111 $58,800 $222,081
(a) Mortgage note receivable on sale of Oklahoma City property
</TABLE>
<PAGE> F-17
<TABLE>
ROSELAND OIL AND GAS, INC.
SCHEDULE IV - INDEBTEDNESS OF AND TO RELATED PARTIES - NOT CURRENT
YEAR ENDED JUNE 30, 1997
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F COLUMN G COLUMN H COLUMN I
Indebtedness of Indebetedness
Balance at Balance Balance at Balance
Name Beginning at End Beginning at End
of Person of Year Additions Deductions of Year of Year Additions Deductions of Year
Year ended June 30, 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Houston Oper. Co.
Loan Buy-Out 0 121,922 3,162 118,760
Year ended June 30, 1996
</TABLE>
<PAGE> F-18
<TABLE>
ROSELAND OIL AND GAS, INC. AND SUBSIDIARY
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
YEARS ENDED JUNE 30, 1997,1996, AND 1995
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
Balance at Balance at
Beginning Additions Other End
Description of Year at Cost Retirements Changes of Year
<S> <C> <C> <C> <C> <C>
Year ended June 30, 1997:
Proved oil and gas properties $ 2,611,557 $ 242,419 $ (97,909) $(701,188) $ 2,054,879
Unproved oil and gas properties 701,188 701,188
Gas Gathering System 221,136 221,136
Property on operating leases and
held for leases:
Land
Buildings
Office and other equipment 69,228 2,308 71,536
Office Building 210,000 210,000
----------- -------- ------------ --------- -----------
$3,111,921 $ 244,729 $ (97,909) $ 0 $ 2,258,739
Year ended June 30, 1996:
Proved oil and
gas properties $2,647,554 $ 181,104 $ 253,601 $ 36,500 $ 2,611,557
Unproved oil and
gas properties
Gas Gathering System 248,000 9,636 (36,500)(c) 221,136
Property on operating
leases and held for leases:
Land
Buildings
Office and other equipment 66,186 3,042 69,228
Office Building 210,000 210,000
---------- -------- ------------ ----------- ----------
$3,171,740 $193,782 $ 253,601 $ 0 $ 3,111,921
Year ended June 30, 1995:
Proved oil and gas
properties 2,814,511 169,470 336,427 (43,671)(a) 2,647,554
Unproved oil and
gas properties
Gas Gathering System 248,000 248,000
Property on operating
leases and held for leases:
Land (660,000)(b)
Buildings (1,951,563)(b)
Office and other equipment 66,186 66,186
Office Building 210,000 210,000
---------- -------- --------- ----------- -----------
$3,338,697 $169,470 $336,427 $(2,655,234) $ 3,171,740
</TABLE>
<PAGE> F-19
<TABLE>
ROSELAND OIL AND GAS, INC. AND SUBSIDIARY
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF
PROPERTY, PLANT AND EQUIPMENT
YEARS ENDED JUNE 30, 1996, 1995, AND 1994
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
Additions
Balance at Charged to Balance at
Beginning Costs and Other End
Description of Year Expenses Retirements Changes of Year
<S> <C> <C> <C> <C> <C>
Year ended June 30, 1997:
Proved oil and gas properties $796,606 $ 73,161 $ 95,498 $774,269
Property on operating leases and
held for leases:
Office Building 21,244 6,666 27,910
Office and other equipment 61,860 1,791 63,651
------- ------- --------- -------- --------
$879,710 $ 81,618 $ 95,498 $ 0 $865,830
Year ended June 30, 1996:
Proved oil and gas properties 821,933 126,162 151,489 796,606
Property on operating leases and
held for leases:
Office Building 14,577 6,667 21,244
Office and other equipment 56,363 5,497 61,860
------- ------- --------- -------- --------
$892,873 $138,326 $151,489 $ 0 $879,710
Year ended June 30, 1995:
Proved oil and gas properties $876,058 $160,467 $214,590 $ 0 $821,933
Property on operating leases and
held for leases:
Office Building 7,911 6,666 14,577
Office and other equipment 50,865 5,498 0 0 56,363
Year ended June 30, 1992: -------- -------- -------- -------- ---------
Proved oil and gas properties $934,834 $172,631 $214,590(a) $ 0 $892,873
</TABLE>
<PAGE> F-20
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of Roseland Oil & Gas, Inc.
We have audited the accompanung consolidated balance sheet of Roseland Oil
and Gas, Inc. as of June 30, 1997 and 1996 and the related consolidated
statements of operations, changes in Stockholders equity and cash flows, and
the schedules listed in Item 7 of this Form 10-K for the years then ended.
These consolidated fiinancial statements and schedules are the
responsibilities of the Company's management. Our responsibility is to
express and opinion on these financial statements based on our audit.
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 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 belive that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Roseland
Oil and Gas, Inc. as of June 30, 1997, and 1996, and the consolidated
financial statement schedules referred to above, when considered in relation
to the basic financial statements taken as a whole, present fairly, in all
material respects, the information required to be included therin.
Wm Matthews, C.P.A.,S.C.
Elm Grove, Wisconsin
September 28, 1997
/s/Wm Matthews
- --------------
<PAGE> F-1
