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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 September 30, 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 (IRS Employer
of incorporation) 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 [ ] 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 - 18,238,347 shares as of June 15, 1999.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [ X ]
1
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ROSELAND OIL AND GAS, INC.
TABLE OF CONTENTS
PART I -- Financial Information
<TABLE>
<CAPTION>
ITEM 1. Financial Statements
<S> <C> <C>
Balance Sheets As of September 30, 1998, Unaudited 3
Statements of Operations, Unaudited
For the three months ended September 30, 1998 and 1997 5
Statement of Cash Flows, Unaudited
For the three months ended September 30, 1998 and 1997 6
Notes to Unaudited Financial Statements 7
ITEM 2. Management's Discussion and Analysis 7
PART II -- Other Information
ITEM 2. Changes in Securities 10
ITEM 5. Other Information 10
ITEM 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
</TABLE>
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ROSELAND OIL AND GAS, INC.
BALANCE SHEET
September 30, 1998 and June 30, 1998
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
September 30, 1998 June 30, 1998
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 17,780 $ 303
Accounts receivable 18,854 56,930
Marketable securities 116,250 0
--------- ---------
Current Assets 152,884 57,233
--------- ---------
Property and equipment, at cost:
Oil and gas properties 2,140,852 2,314,466
Office and other equipment 909 910
Less accumulated depreciation,
depletion, and amortization 876,150 1,020,503
--------- ---------
Net Property and Equipment 1,265,611 1,294,873
--------- ---------
Other Assets:
Other 0 34,959
Marketable securities 0 96,875
--------- ---------
Total Other Assets 0 131,834
--------- ---------
TOTAL ASSETS $1,418,495 $1,483,940
========= =========
</TABLE>
THE ACCOMPANYING NOTES ARE PART OF THESE FINANCIAL STATEMENTS
3
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ROSELAND OIL AND GAS,INC.
BALANCE SHEET
September 30, 1998 and June 30, 1998
(Unaudited)
LIABILITIES & STOCKHOLDERS EQUITY
<TABLE>
<CAPTION>
September 30, 1998 June 30, 1998
<S> <C> <C>
Current Liabilities:
Accounts payable 162,275 188,554
Due to affiliates 254,396 196,628
Accrued liabilities 15,540 12,820
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Total Current Liabilities 432,211 398,002
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Notes Payable 118,760 118,760
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Total Long-term Liabilities 118,760 118,760
Stockholders' Equity
Common stock, $.05 par value, authorized
50,000,000 shares, issued 18,110,847 shares
at September 30, 1998 and 17,730,847 at June 30, 1998 905,043 886,543
Additional paid-in capital 2,803,312 2,636,812
Stock subscribed and paid - to be issued 0 110,000
Accumulated retained deficit (2,821,456) (2,627,427)
Unrealized loss on securities (19,375) (38,750)
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Total Stockholders' Equity 867,524 967,178
--------- ---------
Total Liability & Stockholders' Equity $ 1,418,495 $ 1,483,940
========= =========
</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 September 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
For the Period For the Period
From July 1, 1998 to From July 1, 1997 to
September 30, 1998 September 30, 1997
<S> <C> <C>
REVENUE:
Oil and gas sales $ 22,214 $ 70,337
Rental income from operating leases 0 2,007
Overhead recovery fees 0 26,355
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Total Revenues 22,214 98,699
COSTS AND EXPENSES:
Oil and gas production, operating
and development costs 27,828 35,943
Selling, general and administrative expenses 168,755 30,205
Depreciation, depletion and amortization 8,090 20,405
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Total Costs and Expenses 204,673 86,553
OPERATING INCOME (LOSS) $ (182,459) $ 12,146
Non-operating Income (Expenses):
Interest income 0 87
Gain (loss) on sale of assets (4,698) (69,473)
Other income (loss) 0 (357)
Interest expense (3,288) (3,377)
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Total Non-Operating Income (Expense) (7,986) (73,120)
Income (Loss) before provision for income taxes $ (190,445) $ (60,974)
(Provision) benefit for income taxes 0 0
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Net Income (loss) $ (190,445) $ (60,974)
EARNINGS (LOSS) PER COMMON SHARE: $ (.01) $ 0
</TABLE>
THE ACCOMPANYING NOTES ARE PART OF THESE FINANCIAL STATEMENTS
5
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ROSELAND OIL AND GAS, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Three For the Three
Months Ended Months Ended
September 30, 1998 September 30, 1997
<S> <C> <C>
Cash Flows From Operating Activities:
Net income (loss) $(190,445) $ (5,000)
Adjustments to reconcile net income (loss)
to cash provided (used) by operating activities:
Depreciation, depletion and amortization 8,090 0
Provision (gain) loss for deferred income tax 4,698 0
Net Change in assets and liabilities:
(Increase) decrease in accounts receivable 38,076 (3,000)
(Increase) decrease in notes receivable - 0
(Increase) decrease in other assets (116,250) (77,000)
Increase (decrease) in accounts payable (26,279) 83,000
Increase (decrease) in other accounts payable 60,488
Net Cash Provided (Used) By Operating Activities $(221,622) $ (2,000)
Cash flows from investing activities:
Changes to oil & gas properties $(25,000)
Changes in other assets $ 131,834
Net Cash Provided (Used) By Investing Activities $(25,000)
Cash flows from financing activities:
Affiliate loan 57,768 0
Changes in common stock (110,000) $ 33,000
Payments on debt (13,000)
Net Cash Provided (Used) By Financing Activities $ 22,000
Net increase (decrease) in cash and cash equivalents $ (17,477) $ (5,000)
Cash beginning of period 303 19,000
Cash at end of period $ 17,780 $ 4,000
</TABLE>
THE ACCOMPANYING NOTES ARE PART OF THESE FINANCIAL STATEMENTS
6
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ROSELAND OIL AND GAS, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 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, 1998 Form 10-KSB and should be read in conjunction
with the consolidated financial statements for the three months ended
September 30, 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 financial statements
be read in conjunction with the financial statements and notes thereto included
in the Company's June 30, 1998 audited financial statements. The results of
operations for the periods ended September 30, 1998 and 1997 are not necessarily
indicative of the operating results for the full year.
The financial statements included herein as of September 30, 1998, and the
three months ended September 30, 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 SEPTEMBER 30, 1998, COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1997
Gross revenues decreased from $70,337 for the three months ending September 30,
1997 to $22,214 for the three months ending September 30, 1998, primarily due to
the disposal of several wells in September 1998, as the wells were reaching
their economic limit and a decrease in oil and gas prices during the period.
Oil and gas production, operating and development costs decreased from $35,943
(51% of oil and gas sales) in the three months ended September 30, 1997 to
$27,828 (125% of oil and gas sales) in the three months ended September 30,
1998. The decrease in costs was attributable to the sale of assets. Selling,
general and administrative expenses increased from $30,205 in the three months
ended September 30, 1997, to $168,755 in the three months ended September 30,
1998, due to increased legal and audit fees. The Company felt it was obligated
to restate the financial statements to account for prior year disposals of
assets. Due directly to this restatement, additional legal, accounting and audit
expenses were incurred. See the Company's June 30, 1998 Form 10-KSB, Footnote 11
for a discussion of the restatement.
Operating income decreased from $12,146 in the three months ended September 30,
1997 to a loss of $182,459 for the three months ended September 30, 1998,
primarily due to the increased general and administrative costs. In September
1998, the Company divested oil and gas interests resulting in a loss of $4,698
as compared to the loss on sales of assets as of September 30, 1997 of $69,473.
7
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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 September 30, 1998 was a deficit of
$279,327 compared to a deficit of $340,769 at June 30, 1998. This change is
primarily attributed to the reclassification of long term marketable
securities to short term assets because the restricted securities will be
free trading under Rule 144 of the Securities Exchange Act. As of June 30,
1998, the Company had cash of $303 compared to $17,780 at September 30, 1998,
and a decrease in accounts payable from $188,554 as of June 30, 1998 to
$162,275 as of September 30, 1998. As of September 30, 1998, the Company had
total assets of $1,418,495 and total stockholders' equity of $867,524
compared to total assets of $1,483,940 and total stockholders' equity of
$967,178 at June 30, 1998. This represents a $65,445 (4%) decrease in total
assets and a $99,654 (10%) decrease in total stockholders' equity for the
period. In the opinion of management, inflation has not had a material effect
on the operations of the Company. The Company anticipates meeting its working
capital needs during the remainder of the current fiscal year with revenues
from operations, the exercise of outstanding warrants and the private
placement of its securities.
As of September 30, 1998, the Company had long-term debt of $118,760
compared to total long-term debt of $118,760 as of June 30, 1998. None of the
Company's long term debt is classified as current due to agreement by all of the
note holders to convert the debt to common stock. See ITEM 5.
Year 2000 issue (unaudited)
The Company is working to resolve the potential impact of the year 2000 on
the ability of the Company's computerized information systems to accurately
process information that may be date sensitive. Any of the Company's programs
that recognize a date using "00" as the year 1900 rather than the year 2000
could result in errors or system failures. The Company utilizes a number of
computer programs across its entire operation. Management believes that all
of the Company's systems, which are primarily purchased software systems, are
year 2000 compliant and therefore anticipates that this issue will have
minimal impact on the Company's operations and that future costs relating to
year 2000 will be minimal. Because of the unprecedented nature of the year
2000 issue, its effects and the success of related remediation efforts will
not be fully determinable until the year 2000 and thereafter. The following
is a year 2000 readiness disclosure pursuant to the Year 2000 Readiness and
Disclosure Act.
SAFE HARBOR STATEMENT 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 1933, 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 our 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 our
reports filed with the Securities and Exchange Commission.
8
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PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
In August 1998, the Company issued stock certificates representing 200,000
shares of common stock to existing stockholders for which payment had previously
been received. Also in August 1998, the Company issued 180,000 shares of common
stock for services rendered by creditors. All of the shares were issued under
Section 4, Subsection 2 of the Securities Act of 1933 and are not registered.
ITEM 5. OTHER
Marketable Securities
On January 1, 1998 the Company sold all rights in certain oil and gas
properties and gas gathering systems in exchange for 155,000 shares of
common stock of Comanche Energy, Inc. (Comanche). The president of Comanche
is a stockholder and former director of the Company. Management has
classified the securities as available for sale, and they are reported at
fair market value and have been excluded from earnings and reported as a
separate component of shareholders equity.
Long-term debt
At September 30, 1998 and June 30, 1998, long-term debt to banks and others
was comprised of the following:
<TABLE>
<CAPTION>
June 30, 1998 September 30, 1998
<S> <C> <C>
Note payable to Minneapolis Group $ 118,760 $ 118,760
------- -------
</TABLE>
The Minneapolis Group consists of nine individuals all holding promissory
notes dated October 1, 1996 with an interest rate of 10% and various
installment payments, each with a maturity date of April 1, 2002. The notes
are collateralized by various oil and gas properties.
Holders of the promissory notes representing the Minneapolis Group are
entitled, at the holder's option, at any time on or before the date on
which the note is paid in full, to convert the principal amount of the note
into fully paid and non-assessable shares of common stock at a conversion
price of three shares of common stock for each $1.00 of note balance.
As of June 30, 1998 all notes are one year in arrears in principal payments
and are currently in default. As of March 24, 1999, the option to
accelerate the note balance has been waived by all note holders and each
has executed a document of intent to convert the note to stock as described
above. The unpaid balances of these notes are reported in the balance sheet
at June 30, 1998, as long-term debt.
Restatement
Management has determined that its prior year financial statements had
reported assets that had been previously sold or transferred by the
Company. Upon examination, it was determined that certain assets were
improperly included in the Company's prior periods and were inappropriately
included in calculations of assets and depletion deductions within the
Balance Sheet and Statement of Operations. As a result, the accompanying
Financial Statements reflecting balances as of the periods ending
September 30, 1997and June 30, 1997 and for the years then ended have been
restated.
9
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A summary of the effects of the restatement follows:
<TABLE>
<CAPTION>
Total
1995 1996 1997 Adjustment
---- ---- ---- ----------
<S> <C> <C> <C> <C>
Property, Plant & Equipment $(1,078,302) $ (161,721) $ (261,026) $(1,501,049)
Accumulated D D & A 53,063 (130,860) 137,950 60,153
Other Assets (232,857) (97,489) (229,952) (560,298)
Treasury Stock (53,877) 0 0 (53,877)
Retained Earnings 1,311,973 390,070 353,028 2,055,071
--------------------------------------------------------
Loss on Sale of Assets (297,021) (502,679) (283,416) (1,083,116)
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27 Financial Data Schedule.
(b) Reports on Form 8-K
10
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The Company filed an 8-K on August 26, 1998 relating to the change in
the certifying accountants. An amendment to the August 26, 1998 8-K was
filed in October 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 16, 1999 BY: /s/ Calvin A Wallen III
-------------------------------
Calvin A. Wallen III, President
(Principal Executive, Financial and
Accounting Officer)
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 17,780
<SECURITIES> 116,250
<RECEIVABLES> 18,854
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 152,884
<PP&E> 2,140,852
<DEPRECIATION> 876,150
<TOTAL-ASSETS> 1,418,495
<CURRENT-LIABILITIES> 432,211
<BONDS> 0
0
0
<COMMON> 905,043
<OTHER-SE> (37,519)
<TOTAL-LIABILITY-AND-EQUITY> 1,418,495
<SALES> 22,214
<TOTAL-REVENUES> 22,214
<CGS> 27,828
<TOTAL-COSTS> 204,673
<OTHER-EXPENSES> 4,698
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,288
<INCOME-PRETAX> (190,445)
<INCOME-TAX> 0
<INCOME-CONTINUING> (190,445)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (190,445)
<EPS-BASIC> (.01)
<EPS-DILUTED> 0
</TABLE>
