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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly Report Under Section 13 or 15(d) of The Securities Exchange Act
of 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934
For the transition period from ____________ to _____________
COMMISSION FILE NUMBER 0-9355
ROSELAND OIL AND GAS, INC.
(Exact name of registrant as specified in its charter)
OKLAHOMA 87-0352095
(State or other jurisdiction of incorporation) (IRS Employer Identification No.)
1720 NORTHWEST HIGHWAY, SUITE 320
GARLAND, TX 75041
(Address of principal executive offices)
(972) 686-0369
(Issuer's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the
preceding 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 [ ]
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
COMMON STOCK, $.05 PAR VALUE - 17,530,847 SHARES AS OF MAY 31, 1998.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
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ROSELAND OIL AND GAS, INC.
TABLE OF CONTENTS
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Condensed Balance Sheets As of March 31, 1998 3
Statements of Operations
For the three and nine months ended March 31, 1998 and 1997 5
Statement of Cash Flows
For the nine months ended March 31, 1998 and 1997 7
Notes to Unaudited Financial Statements 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS 8
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 9
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 10
SIGNATURES 10
</TABLE>
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ROSELAND OIL AND GAS, INC.
CONDENSED BALANCE SHEET
March 31, 1998 and June 30, 1997
(in thousands, except per share amounts)
ASSETS
<TABLE>
Unaudited Audited
March 31, 1998 June 30, 1997
-------------- -------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ (1) $ 19
Accounts receivable 142 148
Notes Receivable (current portion) 0 2
Inventory 0 14
------ ------
CURRENT ASSETS 141 183
------ ------
PROPERTY AND EQUIPMENT, AT COST:
Oil and gas properties $3,147 $2,977
Real Estate holdings-Buildings 0 210
Office and other equipment 72 71
Less accumulated depreciation,
depletion, and amortization 910 866
------ ------
NET PROPERTY AND EQUIPMENT 2,309 2,392
------ ------
OTHER ASSETS:
Other 631 544
------ ------
TOTAL OTHER ASSETS 631 544
------ ------
TOTAL ASSETS $3,081 $3,119
------ ------
------ ------
</TABLE>
(continued)
THE ACCOMPANYING NOTES ARE PART OF THESE FINANCIAL STATEMENTS
3
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ROSELAND OIL AND GAS,INC.
CONDENSED BALANCE SHEET
March 31, 1998 and June 30, 1997
(in thousands, except per share amounts)
LIABILITIES & STOCKHOLDERS EQUITY
<TABLE>
Unaudited Audited
March 31, 1998 June 30, 1997
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt $ 23 $ 76
Accounts payable 124 93
Oil and gas revenues payable 0 1
Accrued liabilities 100 0
-------- --------
TOTAL CURRENT LIABILITIES 247 170
-------- --------
Oil and gas revenue payable $ 0 $ 0
Notes Payable 93 215
-------- --------
TOTAL LONG-TERM LIABILITIES 93 215
-------- --------
STOCKHOLDERS' EQUITY
Series A preferred stock, par value $.01 per share
authorized 10,000,000 shares, no shares issued $ 0 $ 0
Common stock, $.05 par value, authorized
50,000,000 shares, issued 17,530,847 shares 877 252
Additional paid-in capital 1,891 2,395
Stock subscribed - to be issued 110 72
Retained earnings (83) 69
Treasury stock (25,340 shares) at cost (54) (54)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 2,741 2,734
-------- --------
TOTAL LIABILITY & STOCKHOLDERS' EQUITY $ 3,081 $ 3,119
-------- --------
-------- --------
</TABLE>
THE ACCOMPANYING NOTES ARE PART OF THESE FINANCIAL STATEMENTS
4
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ROSELAND OIL AND GAS, INC.
STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 1998 and 1997
Unaudited
(in thousands, except per share amounts)
<TABLE>
For the Three For the Three
Months Ended Months Ended
March 31, 1998 March 31, 1997
<S> <C> <C>
REVENUE:
Oil and gas sales $ 30 $ 88
Overhead recovery fees 0 27
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TOTAL REVENUES 30 115
COSTS AND EXPENSES:
Oil and gas production, operating
and development costs 14 43
Selling, general and administrative expenses 52 38
Depreciation, depletion and amortization 24 11
----------- ----------
TOTAL COSTS AND EXPENSES 90 92
OPERATING INCOME (LOSS) $ (60) $ 23
NON-OPERATING INCOME (EXPENSES):
Gain (loss) on sale of assets 0 0
Other income 1 0
----------- ----------
TOTAL NON-OPERATING INCOME (EXPENSE) 1 0
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES $ (59) $ 23
(PROVISION) BENEFIT FOR INCOME TAXES 15 0
----------- ----------
NET INCOME (LOSS) $ (44) $ 23
EARNINGS (LOSS) PER COMMON SHARE: $ 0 $ 0
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: 17,530,847 4,550,847
</TABLE>
THE ACCOMPANYING NOTES ARE PART OF THESE FINANCIAL STATEMENTS
5
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ROSELAND OIL AND GAS, INC.
STATEMENTS OF OPERATIONS
For the Nine months Ended March 31, 1998 and 1997
Unaudited
(in thousands, except per share amounts)
<TABLE>
For the Nine For the Nine
Months Ended Months Ended
March 31, 1998 March 31, 1997
<S> <C> <C>
REVENUE:
Oil and gas sales $ 115 $ 247
Overhead recovery fees 5 88
----------- ----------
TOTAL REVENUES 120 335
COSTS AND EXPENSES:
Oil and gas production, operating
and development costs $ 71 $ 116
Selling, general and administrative expenses 102 109
Depreciation, depletion and amortization 72 76
----------- ----------
TOTAL COSTS AND EXPENSES 245 301
OPERATING INCOME (LOSS) $ (125) $ 34
NON-OPERATING INCOME (EXPENSES):
Gain (loss) on sale of assets (27) 5
Other income (0) (1)
----------- ----------
TOTAL NON-OPERATING INCOME (EXPENSE) (27) 4
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES $ (152) $ 38
(Provision) Benefit For Income Taxes 40 0
----------- ----------
NET INCOME (LOSS) $ (112) $ 38
EARNINGS (LOSS) PER COMMON SHARE: $ 0 $ .01
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: 17,530,847 4,550,847
</TABLE>
THE ACCOMPANYING NOTES ARE PART OF THESE FINANCIAL STATEMENTS
6
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ROSELAND OIL AND GAS, INC.
STATEMENTS OF CASH FLOWS
UNAUDITED
<TABLE>
For the Nine For the Nine
Months Ended Months Ended
March 31, 1998 March 31, 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (112) $ 38
Adjustments to reconcile net income (loss)
to cash provided (used) by operating activities:
Depreciation, depletion and amortization 72 76
Provision (benefit) for deferred income tax (40) 0
Net Change in assets and liabilities:
(Increase) decrease in accounts receivable 6 17
(Increase) decrease in notes receivable 2 0
(Increase) decrease in other assets (14) (16)
Increase (decrease) in accounts payable 31 (16)
Increase (decrease) in other accounts payable 46 0
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES $ (9) $ 99
CASH FLOWS FROM INVESTING ACTIVITIES:
Changes to oil & gas properties $ (170) $ (120)
Changes in other assets 122 0
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES $ (48) $ (120)
CASH FLOWS FROM FINANCING ACTIVITIES:
Changes in common stock $ 663 $ 0
Changes in preferred stock 0 0
Changes in long term debt (122) 6
Increase (decrease) in paid-in-capital (504) 0
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES $ 37 $ 6
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ (20) $ (15)
CASH BEGINNING OF PERIOD 19 19
CASH AT END OF PERIOD $ (1) $ 4
</TABLE>
THE ACCOMPANYING NOTES ARE PART OF THESE FINANCIAL STATEMENTS
7
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ROSELAND OIL AND GAS, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
AS OF MARCH 31, 1998
UNAUDITED
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies followed by Roseland Oil and Gas, Inc. (the
"Company" or "Roseland") are set forth in Note 2 to the Company's financial
statements in its June 30, 1997 Form 10-KSB and should be read in conjunction
with the consolidated financial statements for the three and nine months
ended March 31, 1998, contained herein.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested that
these condensed financial statements be read in conjunction with the
financial statements and notes thereto included in the Company's June 30,
1997 audited financial statements. The results of operations for the periods
ended March 31, 1998 and 1997 are not necessarily indicative of the operating
results for the full year.
The financial statements included herein as of March 31, 1998, and the
three and nine month periods ended March 31, 1998, have been prepared by the
Company, without an audit, pursuant to generally accepted accounting
principles for interim financial information and the rules and regulations of
the Securities and Exchange Commission. The Company believes that the
disclosures are adequate to make the information presented not misleading.
The information presented reflects all adjustments (consisting solely of
normal recurring adjustments) which are, in the opinion of management,
necessary for a fair statement of results for the period.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998, COMPARED TO THREE MONTHS ENDED
MARCH 31, 1997
Gross revenues for the three months ended March 31, decreased from
$88,000 in 1997 to $30,000 in 1998 primarily due to the disposal of several
wells in 1996 and early 1997, as the wells were reaching their economic
limit. An additional decrease in gross revenues is attributable to severely
decreasing oil prices and moderately declining gas prices in the three months
ended March 31, 1998.
Oil and gas production, operating and development costs decreased from
$43,000 (49% of oil and gas sales) in the three months ended March 31, 1997
to $14,000 (47% of oil and gas sales) in the three months ended March 31,
1998. The decrease in costs was attributable to a reduction in remedial
workovers or major repairs on the wells for the three months ended March 31,
1998. Selling, general and administrative expenses increased from $38,000 in
the three months ended March 31, 1997, to $52,000 in the three months ended
March 31, 1998, due to specific consulting agreements.
Operating income decreased from $23,000 in the three months ended March
31, 1997, to a loss of $60,000 in the three months ended March 31, 1998, due
to the reduced production.
8
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NINE MONTHS ENDED MARCH 31, 1998, COMPARED TO NINE MONTHS ENDED MARCH 31, 1997
Gross revenues for the nine months ended March 31, decreased from
$335,000 in 1997 to $120,000 in 1998 primarily due to the disposal of several
wells in 1996 and early 1997, as the wells were reaching their economic limit
and decreasing prices of oil and gas.
Oil and gas production, operating and development costs decreased from
$116,000 (47% of oil and gas sales) in the nine months ended March 31, 1997,
to $71,000 (62% of oil and gas sales) in the nine months ended March 31,
1998. The reduction in costs was attributable to the reduced number of wells
in operation. Selling, general and administrative expenses decreased from
$109,000 in the nine months ended March 31, 1997, to $102,000 in the nine
months ended March 31, 1998, due to management's implementation of cost
controls.
Operating income decreased from $34,000 in the nine months ended March
31, 1997, to a loss of $125,000 in the nine months ended March 31, 1998, due
to the reduced production as a result of the disposal of several wells as
discussed above.
The Company has an income tax benefit of $40,000 for the first nine
months of fiscal 1998 as compared to no benefit or provision for the same
period in fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company's working capital needs have been satisfied
through its operating revenues and from borrowed funds and placements of the
Company's securities. Working capital at March 31, 1998 was a deficit of
$106,000 compared to $13,000 at June 30, 1997. This change is primarily
attributed to the decrease in cash from $19,000 at June 30, 1997 to a cash
deficit of $1,000 at March 31, 1998, and an increase in accounts payable from
$93,000 as of June 30, 1997 to $124,000 as of March 31, 1998. The Company
anticipates meeting its working capital needs during the remainder of the
current fiscal year with revenues from operations. As of March 31, 1998, the
Company had total assets of $3,081,000 and total stockholders' equity of
$2,741,000 compared to total assets of $3,119,000 and total stockholders'
equity of $2,734,000 at June 30, 1997. This represents a $38,000 (1%)
decrease in total assets and a $7,000 (.3%) increase in total stockholders'
equity for the period. For this same period, cash decreased from $19,000 to
a cash deficit of $1,000 and total current assets decreased 23% primarily
attributed to reducing the Company's notes payable. In the opinion of
management, inflation has not had a material effect on the operations of the
Company.
As of March 31, 1998, the Company used $9,000 from its operating
activities. Long term debt was $116,000 of which $23,000 was classified as
current. This compares to total long term debt of $291,000 as of June 30,
1997, of which $76,000 was classified as current.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
First National Bank of Oklahoma (the "Bank") has filed a lawsuit in the
Kay County District Court in Oklahoma against two of the Company's directors,
Gene Howard and Bill Vandever, alleging that the directors breached their
fiduciary duties to the Bank as a creditor of Hiland Properties, Inc., a
wholly-owned subsidiary of the Company ("Hiland"). The case is styled First
National Bank of Oklahoma v. Nora Gordon, et al. In a prior Texas bankruptcy
court proceeding involving Hiland, the Bank failed to timely assert its
rights as a creditor of Hiland. Following bankruptcy court approval of the
Hiland settlement and distribution of its properties, the Bank filed suit in
the bankruptcy court to set aside the settlement. The bankruptcy court
dismissed the Bank's claims. Subsequently, the Bank filed the lawsuit in
Oklahoma state court against the directors alleging breach of their fiduciary
duties owed to the bank as a creditor of Hiland. The directors have moved to
transfer this suit to the Texas bankruptcy court. The
9
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Oklahoma court has not yet ruled on this motion. The Company may be required
to indemnify the directors for defense costs and for any judgment against the
directors. The amount sought by the Bank is $65,000 plus interest, plus
legal costs. The Company believes the claims are without merit and intends
to vigorously defend the suit.
On February 4, 1998, in the 236th District Court, Tarrant County, Texas,
Regal Petroleum Services, Inc. ("Regal") filed suit against the Company. As
of March 31, 1998, the Company had not been served with this lawsuit.
Regal's lawsuit against the Company alleges breach of contract, for which
Regal is seeking the recovery of unspecified monetary damages. Regal is
alleging that the Company breached a (i) Well Operation and Distribution
Agreement, (ii) Participation Agreement, and (iii) Letter Agreement. The
Company disputes Regal's legal right to recover the amount of money the
Company believes Regal is seeking to recover. In the ongoing transition
resulting from the change in control of the Company, the Company has
commenced an evaluation of the business and legal aspects of the Company's
relationship with Regal. The Company intends to vigorously defend against
this suit.
SAFE HARBOR STATEMENTS UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
This report contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1993, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Such forward-looking statements
are based on current expectations that involve a number of risks and
uncertainties that could cause actual results to differ materially from the
results discussed in the forward-looking statements. Generally,
forward-looking statements include words or phrases such as "management
anticipates", "the Company believes", "the Company anticipates" and words and
phrases of similar impact. The forward-looking statements are made pursuant
to safe harbor provisions of the Private Securities Litigation Reform Act of
1995. The factors that could cause actual results to differ materially from
the forward-looking statements include, but are not limited to: (i) industry
conditions and competition, (ii) the cyclical nature of the industry, (iii)
domestic and worldwide supplies and demand for oil and gas, (iv) operational
risks and insurance, (v) environmental liabilities which may arise in the
future which are not covered by insurance or indemnity, (vi) the impact of
current and future laws and government regulations, as well as repeal or
modification of same, affecting the oil and gas industry and the Company's
operations in particular, (vii) production levels and other activities of
OPEC and other oil and gas producers, and the impact that the above factors
and other events have on the current and expected future pricing of oil and
natural gas, and (viii) the risks described from time to time in the
Company's reports to the Securities and Exchange Commission.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27 Financial Data Schedule.
(b) Reports on form 8-K
No report on Form 8-K was filed by the Company during the third quarter
of fiscal 1998.
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ROSELAND OIL AND GAS, INC.
DATE: July 14, 1998 BY: /s/ Calvin A. Wallen III
-------------------------------------
Calvin A. Wallen III, President
(Principal Executive, Financial and
Accounting Officer)
10
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ROSELAND
OIL & GAS, INC. FINANCIAL STATEMENTS FOR THE PERIOD ENDED MARCH 31, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> (1)
<SECURITIES> 0
<RECEIVABLES> 142
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 141
<PP&E> 3219
<DEPRECIATION> 910
<TOTAL-ASSETS> 3081
<CURRENT-LIABILITIES> 247
<BONDS> 0
0
0
<COMMON> 877
<OTHER-SE> 2204
<TOTAL-LIABILITY-AND-EQUITY> 3081
<SALES> 30
<TOTAL-REVENUES> 31
<CGS> 14
<TOTAL-COSTS> 90
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (59)
<INCOME-TAX> 15
<INCOME-CONTINUING> (44)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (44)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
