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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 DECEMBER 31, 1997
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 (IRS Employer Identification No.)
incorporation)
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 [ ] No [X]
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 1, 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. CONDENSED FINANCIAL STATEMENTS
Condensed Balance Sheets
As of December 31, 1997 3
Condensed Statements of Operations
For the three and six months ended December 31, 1997 and 1996 5
Condensed Statement of Cash Flows
For the three and six months ended December 31, 1997 7
Notes to Condensed Unaudited Financial Statements 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS 9
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 10
ITEM 2. CHANGES IN SECURITIES 10
ITEM 5. OTHER INFORMATION 10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 11
SIGNATURES 11
2
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PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
ROSELAND OIL AND GAS, INC.
CONDENSED BALANCE SHEET
For the Period Ending December 31, 1997 and June 30, 1997
Unaudited
(in thousands, except per share amounts)
ASSETS
<TABLE>
<CAPTION>
Period Ending Period Ending
December 31, 1997 June 30, 1997
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1 $ 19
Accounts receivable 151 148
Notes Receivable (current portion) 0 2
Inventory 31 14
-------- --------
CURRENT ASSETS 183 183
-------- --------
PROPERTY AND EQUIPMENT, AT COST:
Oil and gas properties $ 3,146 $ 2,977
Real Estate holdings-Buildings 0 210
Office and other equipment 72 71
-------- --------
TOTAL PROPERTY AND EQUIPMENT 3,218 3,258
Less accumulated depreciation,
depletion, and amortization 885 866
-------- --------
NET PROPERTY AND EQUIPMENT 2,333 2,392
-------- --------
OTHER ASSETS:
Other 600 544
-------- --------
TOTAL OTHER ASSETS 600 544
-------- --------
TOTAL ASSETS $ 3,116 $ 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
For the Period Ending December 31, 1997 and June 30, 1997
Unaudited
(in thousands, except per share amounts)
LIABILITIES & STOCKHOLDERS EQUITY
<TABLE>
<CAPTION>
Period Ending Period Ending
December 31, 1997 June 30, 1997
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt $ 23 $ 76
Accounts Payable 188 93
Oil and gas revenues payable 0 1
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TOTAL CURRENT LIABILITIES 211 170
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Oil and gas revenue payable $ 4 $ 0
Other 98 215
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TOTAL LONG-TERM LIABILITIES 102 215
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STOCKHOLDERS EQUITY
Series A preferred stock, par value $.01 per share
authorized 10,000,000 shares, issued -0- shares $ 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 (21) 69
Treasury stock (25,340 shares),at cost (54) (54)
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TOTAL STOCKHOLDERS' EQUITY 2,803 2,734
------- -------
TOTAL LIABILITY & STOCKHOLDERS' EQUITY $ 3,116 $ 3,119
------- -------
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</TABLE>
THE ACCOMPANYING NOTES ARE PART OF THESE FINANCIAL STATEMENTS
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ROSELAND OIL AND GAS, INC.
STATEMENTS OF OPERATION
For the Three Months Ended December 31, 1997 and 1996
Unaudited
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
For the Three For the Three
Months Ending Months Ending
December 31, 1997 December 31, 1996
<S> <C> <C>
REVENUE:
Oil and gas sales $ 45 $ 82
Overhead recovery fees 0 22
----------- -----------
TOTAL REVENUES 45 104
COSTS AND EXPENSES:
Oil and gas production, operating
and development costs 35 31
Selling, general and administrative expenses 16 35
Depreciation, depletion and amortization 24 30
----------- -----------
TOTAL COSTS AND EXPENSES 75 96
OPERATING INCOME (LOSS) $ (30) $ 8
NON-OPERATING INCOME (EXPENSES):
Gain (loss) on sale of assets (28) 0
Other income (37) 0
----------- -----------
TOTAL NON-OPERATING INCOME (EXPENSE) (65) 0
INCOME (Loss) BEFORE PROVISION FOR INCOME TAXES $ (95) $ 12
(PROVISION) BENEFIT FOR INCOME TAXES 26 (3)
----------- -----------
NET INCOME (LOSS) $ (69) $ 9
EARNINGS (LOSS) PER COMMON SHARE: $ 0 $ 0
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: 17,530,847 5,030,847
</TABLE>
THE ACCOMPANYING NOTES ARE PART OF THESE FINANCIAL STATEMENTS
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ROSELAND OIL AND GAS, INC.
STATEMENTS OF OPERATION
For the Six Months Ended December 31, 1997 and 1996
Unaudited
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
For the Six For the Six
Months Ending Months Ending
December 31, 1997 December 31, 1996
<S> <C> <C>
REVENUE:
Oil and gas sales $ 85 $ 159
Overhead recovery fees 4 61
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TOTAL REVENUES 89 220
COSTS AND EXPENSES:
Oil and gas production, operating
and development costs $ 54 $ 73
Selling, general and administrative expenses 46 71
Depreciation, depletion and amortization 48 65
----------- -----------
TOTAL COSTS AND EXPENSES 148 209
OPERATING INCOME (LOSS) $ (59) $ 11
NON-OPERATING INCOME (EXPENSES):
Gain (loss) on sale of assets (28) 5
Other income (37) (1)
----------- -----------
TOTAL NON-OPERATING INCOME (EXPENSE) (65) 4
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES $ (90) $ 15
(Provision) Benefit For Income Taxes 24 (4)
----------- -----------
NET INCOME (LOSS) $ (66) $ 11
EARNINGS (LOSS) PER COMMON SHARE: $ 0 $ 0
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: 17,530,847 5,030,847
</TABLE>
THE ACCOMPANYING NOTES ARE PART OF THESE FINANCIAL STATEMENTS
6
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ROSELAND OIL AND GAS, INC.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS
ENDED DECEMBER 31, 1997
UNAUDITED
<TABLE>
<CAPTION>
Six Months Ended Six Months Ended
December 31, 1997 December 31, 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (66) $ 15
Adjustments to reconcile net income (loss)
to cash provided (used) by operating activities:
Depreciation, depletion and amortization 48 65
(Increase) decrease in deposits 72 0
Provision (benefit) for deferred income tax (24) 0
Net Change in assets and liabilities:
(Increase) decrease in accounts receivable 129 (22)
(Increase) decrease in notes receivable 13 0
(Increase) decrease in other assets (41) (45)
Increase (decrease) in accounts payable 69 (3)
Increase (decrease) in other accounts payable (18) 0
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES $ 82 $ 10
CASH FLOWS FROM INVESTING ACTIVITIES:
Changes to oil & gas properties $ (413) $ 68
Changes in other assets 207 (122)
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES $ (206) $ (54)
CASH FLOWS FROM FINANCING ACTIVITIES:
Changes in common stock $ 649 $ 0
Changes in preferred stock (200) 0
Changes in long term debt (148) (10)
Increase (decrease) in paid-in-capital (295) 0
(Increase) decrease in notes receivable 0 37
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES $ 6 $ 27
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ (18) $ (17)
CASH BEGINNING OF PERIOD 19 19
CASH AT END OF PERIOD $ 1 $ 2
</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 DECEMBER 31, 1997
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 six months ended
December 31, 1997, contained herein.
The financial statements included herein as of December 31, 1997, and the
three and six month periods ended December 31, 1997 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 DECEMBER 31, 1997 COMPARED TO THREE MONTHS ENDED
DECEMBER 31, 1996.
Gross revenues for the three months ended December 31 decreased from
$104,000 in 1996 to $45,000 in 1997 primarily due to the disposal of several
wells in 1996 and early 1997, as the wells were reaching their economic limit
and commercial viability.
Oil and gas production, operating and development costs increased from
$31,000 (38% of oil and gas sales) in the three months ended December 1996 to
$35,000 (77% of oil and gas sales) in the three months ended December 31, 1997.
The increase in costs was attributable to the remedial workover of several wells
and the recording of previously deferred costs. Selling, general and
administrative expenses decreased from $35,000 in the three months ended
December 31, 1996 to $16,000 in the three months ended December 31, 1997 due to
management's implementation of cost controls.
Operating income decreased from $8,000 in the three months ended December
31, 1996 to a loss of ($30,000) in the three months ended December 31, 1997 due
to the reduced production resulting from the disposal of several wells as
discussed above and to specific costs directly attributable to the change in
operations pursuant to the sale of the company.
8
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SIX MONTHS ENDED DECEMBER 31, 1997 COMPARED TO SIX MONTHS ENDED DECEMBER 31,
1996.
Gross revenues for the six months ended December 31 decreased from $220,000
in 1996 to $89,000 in 1997 primarily due to the disposal of several wells in
1996 and early 1997, as the wells were reaching their economic limit and
commercial viability.
Oil and gas production, operating and development costs decreased from
$73,000 (46% of oil and gas sales) in the six months ended December 1996 to
$54,000 (64% of oil and gas sales) in the six months ended December 31, 1997.
The reduction in costs was attributable to the reduced number of wells in
operation. Selling, general and administrative expenses decreased from $71,000
in the six months ended December 31, 1996 to $46,000 in the six months ended
December 31, 1997 due to management's implementation of cost controls.
Operating income decreased from $11,000 in the six months ended December
31, 1996 to a loss of ($59,000) in the six months ended December 31, 1997 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 $24,000 for the first half of
fiscal 1998 as compared to no benefit or provision for the first half of fiscal
1997.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1997, the Company received $38,000 from its operating
activities. Long term debt was $121,000 of which $23,000 was classified as
current. This compares to total long term debt of $214,903 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 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.
ITEM 2. CHANGES IN SECURITIES
On September 5, 1997 Roseland filed an amendment to its 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 to 50,000,000.
In December 1997, the Company issued 12,500,000 shares of its common stock
to certain purchasers pursuant to a Stock Purchase Agreement as described in
"Item 5. Other Information" in reliance on the exemption contained in Rule 506
under the Securities Act of 1933, as amended.
9
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ITEM 5. OTHER INFORMATION
In December 1997, the Company entered into a Stock Purchase Agreement (the
"Agreement") with Calvin Wallen III or his designees, William Bruggeman and Ruth
Bruggeman, and Diversified Dynamics, Inc. (together, the "Buyers"). Pursuant to
the Agreement, the Registrant issued (i) 7,000,000 shares of its common stock to
Calvin Wallen III; (ii) 2,500,000 shares of common stock to Earthstock
Resources, Inc., all of the shares of which are owned by Mr. Wallen; (iii)
2,500,000 shares of common stock to William Bruggeman and Ruth Bruggeman as
joint tenants with rights of survivorship; and (iv) 500,000 shares of common
stock to Diversified Dynamics, which is controlled by the Bruggemans. Based on
information set forth in the Company's Annual Report on Form 10-K for the fiscal
year ended June 30, 1997 (the "Form 10-K"), the 12,500,000 shares (the "Shares")
issued represent approximately 71.3% of the issued and outstanding shares of
common stock of the Company, with the shares issued to Mr. Wallen and his
affiliates representing approximately 54.2% of the issued and outstanding shares
of common stock of the Company. In addition, Mr. Bruggeman and his affiliates
previously owned an additional 749,694 shares of the Company common stock, or
4.3% of the issued and outstanding shares of common stock of the Company. In
exchange for the issuance of the Shares, the Buyers conveyed to the Company the
interests in the oil and gas properties owned by the Buyers and listed on Annex
D to the Agreement, as well as the Buyers' entire interest in any contracts,
leases, records and insurance policies affecting such interests (the
"Consideration").
In connection with the Agreement, as of December 10, 1997, Joseph T.
Howard, Robert Anderson and John W. Peterson resigned as directors and/or
executive officers of the Company. On such date, Calvin Wallen III, Rob
Lindermanis and Stacey Hacker were appointed to serve as additional directors of
the Company (together with William G. Vandever and Gene C. Howard, each of who
continue to serve as directors), and Calvin Wallen III was elected to serve as
the Company's President.
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
10
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(a) Exhibits
Exhibit 10.1 Stock Purchase Agreement, dated December 1, 1997, between the
Company and Calvin Wallen III or his designees, William Bruggeman and Ruth
Bruggeman, and Diversified Dynamics, Inc. (incorporated by reference to exhibit
2.1 of the Company's Current Report on Form 8-K filed December 23, 1997).
Exhibit 27 Financial Data Schedule.
(b) Reports on Form 8-K
The following report on Form 8-K was filed by the Company during the second
quarter of fiscal 1998:
Date of Report Item Reported Financial Statements Filed
-------------- ------------- --------------------------
December 23, 1997 Item 1,2 None
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: May 11, 1998 BY: /s/ Calvin A. Wallen
---------------------------------
Calvin A. Wallen III, President
(Principal Executive, Financial
and Accounting Officer)
11
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<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 1
<SECURITIES> 0
<RECEIVABLES> 151
<ALLOWANCES> 0
<INVENTORY> 31
<CURRENT-ASSETS> 183
<PP&E> 3,218
<DEPRECIATION> 885
<TOTAL-ASSETS> 3,116
<CURRENT-LIABILITIES> 211
<BONDS> 0
0
0
<COMMON> 877
<OTHER-SE> 1,926
<TOTAL-LIABILITY-AND-EQUITY> 3,116
<SALES> 45
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<CGS> 75
<TOTAL-COSTS> 140
<OTHER-EXPENSES> 0
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