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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, 1998
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934
For the transition period from to
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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 ]
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ROSELAND OIL AND GAS, INC.
TABLE OF CONTENTS
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<CAPTION>
PART I -- Financial Information
ITEM 1. Financial Statements
<S> <C>
Balance Sheets, Unaudited
As of December 31, 1997 3
Statements of Operations, Unaudited
For the three and six months ended December 31, 1998 and 1997 5
Statement of Cash Flows, Unaudited
For the three and six months ended December 31, 1998 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 2. Changes in Securities 9
ITEM 5. Other Information 10
ITEM 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 10
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2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ROSELAND OIL AND GAS, INC.
BALANCE SHEET
December 31, 1998 and June 30, 1998
(Unaudited)
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<CAPTION>
ASSETS
December 31, 1998 June 30, 1998
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 28,090 $ 303
Accounts receivable 25,525 56,930
Marketable securities 97,650 0
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Current Assets 151,265 57,233
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Property and equipment, at cost:
Oil and gas properties 1,202,867 2,314,466
Office and other equipment 909 910
Less accumulated depreciation,
depletion, and amortization 214,834 1,020,503
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Net Property and Equipment 1,203,776 1,294,873
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Other Assets:
Other 0 34,959
Marketable securities 0 96,875
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Total Other Assets 0 131,834
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TOTAL ASSETS $1,140,207 $1,483,940
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THE ACCOMPANYING NOTES ARE PART OF THESE FINANCIAL STATEMENTS
3
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ROSELAND OIL AND GAS,INC.
BALANCE SHEET
December 31, 1998 and June 30, 1998
(Unaudited)
LIABILITIES & STOCKHOLDERS EQUITY
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<CAPTION>
December 31, 1998 June 30, 1998
<S> <C> <C>
Current Liabilities:
Accounts payable 83,588 188,554
Due to affiliates 340,367 196,628
Accrued liabilities 18,816 12,820
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Total Current Liabilities 442,771 398,002
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Notes Payable 118,760 118,760
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Total Long-term Liabilities 118,760 118,760
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Stockholders' Equity
Common stock, $.05 par value, authorized
50,000,000 shares, issued 18,428,347 and 17,730,847 906,518 886,543
Additional paid-in capital 2,841,587 2,636,812
Stock subscribed and paid - to be issued 0 110,000
Accumulated retained deficit (3,131,454) (2,627,427)
Unrealized loss on securities (37,975) (38,750)
Total Stockholders' Equity 578,676 967,178
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Total Liability & Stockholders' Equity $ 1,140,207 $ 1,483,940
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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 December 31, 1998 and 1997
(Unaudited)
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<CAPTION>
For the Period from For the Period from
September 1, 1998 September 1, 1997
to December 31,1998 to December 31, 1997
<S> <C> <C>
REVENUE:
Oil and gas sales $ 12,700 $ 70,337
Rental income from operating leases 0 2,007
Overhead recovery fees 0 26,355
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Total Revenues 12,700 98,699
COSTS AND EXPENSES:
Oil and gas production, operating
and development costs 27,411 35,943
Selling, general and administrative expenses 137,949 30,205
Depreciation, depletion and amortization 8,230 20,405
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Total Costs and Expenses 173,590 86,553
OPERATING INCOME (LOSS) $(160,890) $ 12,146
Non-operating Income (Expenses):
Interest income 0 87
Gain (loss) on sale of assets (342,150) (69,473)
Other income (loss) 196,491 (357)
Interest expense (3,448) (3,377)
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Total Non-Operating Income (Expense) (149,107) (73,120)
Income (Loss) before provision for income taxes $(309,997) $ (60,974)
(Provision) benefit for income taxes 0 0
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Net Income (loss) $(309,997) $ (60,974)
EARNINGS (LOSS) PER COMMON SHARE: $ (.02) $ 0
</TABLE>
THE ACCOMPANYING NOTES ARE PART OF THESE FINANCIAL STATEMENTS
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ROSELAND OIL AND GAS, INC.
STATEMENTS OF OPERATIONS
For the Six Months Ended December 31, 1998 and 1997
(Unaudited)
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<CAPTION>
For the Period For the Period
From July 1, 1998 to From July 1, 1997 to
December 31,1998 December 31, 1997
<S> <C> <C>
REVENUE:
Oil and gas sales $ 34,914 $ 140,674
Rental income from operating leases 0 4,014
Overhead recovery fees 0 52,710
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Total Revenues 34,914 197,398
COSTS AND EXPENSES:
Oil and gas production, operating
and development costs 55,239 71,886
Selling, general and administrative expenses 306,704 60,410
Depreciation, depletion and amortization 16,320 40,810
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Total Costs and Expenses 378,263 173,106
OPERATING INCOME (LOSS) $(343,349) $ (74,407)
Non-operating Income (Expenses):
Interest income 0 174
Gain (loss) on sale of assets (346,848) (138,946)
Other income (loss) 196,491 (714)
Interest expense (6,736) (6,754)
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Total Non-Operating Income (Expense) (157,093) (146,240)
Income (Loss) before provision for income taxes $(500,442) $(220,647)
(Provision) benefit for income taxes 0 0
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Net Income (loss) $(500,442) $(220,647)
EARNINGS (LOSS) PER COMMON SHARE: $ (.03) $ 0
</TABLE>
THE ACCOMPANYING NOTES ARE PART OF THESE FINANCIAL STATEMENTS
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ROSELAND OIL AND GAS, INC.
STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
For the Six For the Six
Months Ended Months Ended
December 31, 1998 December 31, 1997
<S> <C> <C>
Cash Flows From Operating Activities:
Net income (loss) $(500,442) $ (66,000)
Adjustments to reconcile net income (loss) to cash
provided (used) by operating activities:
Depreciation, depletion and amortization 16,320 48,000
Provision for deferred income tax (24,000)
(Gain) loss on Sale of Assets 346,848
Net Change in assets and liabilities:
(Increase) decrease in accounts receivable 31,405 129,000
(Increase) decrease in notes receivable - 13,000
(Increase) decrease in other assets (97,650) (41,000)
Increase (decrease) in accounts payable (104,966) 69,000
Increase (decrease) in other accounts payable 149,735 (18,000)
Converted accounts payable to common stock (69,036) 0
Decrease in deposits 0 72,000
Net Cash Provided (Used) By Operating Activities (227,786) 182,000
Cash flows from investing activities:
Changes to oil & gas properties (413,000)
Changes in other assets 131,834 207,000
Net Cash Provided (Used) By Investing Activities 131,834 (206,000)
Cash flows from financing activities:
Changes in common stock (110,000) 649,000
Changes in preferred stock (200,000)
Loan from affiliate 143,739 0
Changes in long term debt 0 (148,000)
Increase (decrease) in paid-in-capital 0 (295,000)
Exercise of Warrants 90,000 0
Net Cash Provided (Used) By Financing Activities 123,739 6,000
Net increase (decrease) in cash and cash equivalents 27,787 (18,000)
Cash beginning of period 303 19,000
Cash at end of period 28,090 1,000
</TABLE>
THE ACCOMPANYING NOTES ARE PART OF THESE FINANCIAL STATEMENTS
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ROSELAND OIL AND GAS, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
AS OF DECEMBER 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, 1998 Form 10-KSB and should be read in conjunction
with the consolidated financial statements for the three and six months ended
December 31, 1998, contained herein.
The financial statements included herein as of December 31, 1998, 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, 1998 COMPARED TO THREE MONTHS ENDED DECEMBER 31,
1997.
Gross revenues for the three months ended December 31 decreased from
$98,699 in 1997 to $12,700 in 1998 primarily due to the disposal of oil and gas
wells as the wells were reaching their economic limit and commercial viability.
The decrease in revenues also reflects decreasing prices. In December 1998, the
Company also assigned all of its Duvall and Goliad County wells to Regal
Petroleum as settlement of a claim brought by Regal against the Company in
February 1998. See Legal Proceedings.
Oil and gas production, operating and development costs decreased from
$35,943 (51% of oil and gas sales) in the three months ended December 1997 to
$27,411 (216% of oil and gas sales) in the three months ended December 31,
1998. The decrease in costs was attributable to the disposal of oil and gas
assets. Selling, general and administrative expenses increased from $30,205
in the three months ended December 31, 1997 to $137,949 in the three months
ended December 31, 1998 due to increased legal, accounting and audit expenses
attributed to the Company's restatement of prior year financials.
Operating income decreased from $12,146 in the three months ended
December 31, 1997 to a loss of $150,890 in the three months ended
December 31, 1998 resulting from the disposal of several wells and increased
G&A.
8
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SIX MONTHS ENDED DECEMBER 31, 1998 COMPARED TO SIX MONTHS ENDED DECEMBER 31,
1997.
Gross revenues for the six months ended December 31 decreased from $140,674
in 1997 to $34,913 in 1998 primarily due to the disposal of oil and gas wells in
1998.
Oil and gas production, operating and development costs decreased from
$71,886 (51% of oil and gas sales) in the six months ended December 1997 to
$55,238 (158% of oil and gas sales) in the six months ended December 31, 1998.
The reduction in costs was attributable to the reduced number of wells in
operation. Selling, general and administrative expenses increased from $60,410
in the six months ended December 31, 1997 to $306,704 in the six months ended
December 31, 1998 due to increased legal, accounting and audit expenses.
Operating loss increased from $74,407 in the six months ended December 31,
1997 to a loss of ($343,349) in the six months ended December 31, 1998 due to
the reduced production as a result of the disposal of several wells and
increased G&A.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1998, long term debt was $118,760 of which none was
classified as current. This compares to total long term debt of $118,760 as of
June 30, 1998 of which none was classified as current. All of the note holders
have agreed to convert the debt to shares of the Company's common stock. See the
Company's June 30, 1998, Form 10-KSB, Footnote 4.
YEAR 2000
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 above is a
year 2000 readiness disclosure statement pursuant to the Year 2000 Readiness
and Disclosure Act.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On February 4, 1998, in the 236th District Court, Tarrant County, Texas, Regal
Petroleum Services, Inc. ("Regal") filed suit against the Company. Regal's
lawsuit against the Company alleged that the Company was in breach of several
contracts, for which Regal sought money for work performed as operator of wells
in which the Company maintained an interest. All contracts under which Regal
filed suit involved agreements executed by the prior management of the Company.
On December 30, 1998, Regal and the Company executed a final, limited Settlement
Agreement, resolving Regal's claims in this lawsuit. In settlement, the Company
transferred to Regal cash, restricted common shares and warrants with an
expiration date of December 31, 2000, at an exercise price of $1.00 per share.
The management of the Company believes that the settlement procured with Regal
was fair and reasonable to the Company and to its shareholders.
ITEM 2. CHANGES IN SECURITIES
In December 1998, the Company issued 129,000 shares of common stock to Regal
Petroleum for $60,209 of debt and issued 43,000 new warrants at $1.00 per share,
expiring December 31, 2000, as settlement of a claim brought by Regal against
the Company in February 1998. The Company was also notified of warrant holders
election to exercise warrants for 180,000 shares of common stock for $90,000.
The warrants were scheduled to expire December 31, 1998. An additional 8,500
shares of common stock were issued to creditors in settlement of $4,250 owed.
All of the shares were issued under Section 4 (Subsection 2) of the Securities
Act of 1933 and are not registered securities. See Footnote 5 of the Company's
June 30, 1998, Form 10-KSB.
9
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ITEM 5. OTHER INFORMATION
On December 10, 1998, the Company farmed out its' interest in Section 11,
Palo Pinto County Texas to Tauren Exploration, Inc., an affiliate of Calvin
Wallen III, the Company's Chief Executive Officer. The farm out granted
Tauren an 80% net revenue interest, retaining a 7.5% overriding royalty. The
Company retained first rights of purchase of any interest Tauren may
subsequently decide to sell. See the Company's June 30, 1998 Form 10-KSB,
Footnote 7 for further discussion.
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
In October 1998, the Company filed an 8-K as an amendment to the
August 26, 1998 8-K relating to the change in certifying accountants.
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
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Calvin A. Wallen III, President
(Principal Executive, Financial
and Accounting Officer)
10
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 28,090
<SECURITIES> 97,650
<RECEIVABLES> 25,525
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 151,265
<PP&E> 1,202,867
<DEPRECIATION> 214,834
<TOTAL-ASSETS> 1,140,207
<CURRENT-LIABILITIES> 442,771
<BONDS> 0
0
0
<COMMON> 906,518
<OTHER-SE> (327,842)
<TOTAL-LIABILITY-AND-EQUITY> 1,140,207
<SALES> 34,914
<TOTAL-REVENUES> 34,914
<CGS> 55,239
<TOTAL-COSTS> 378,263
<OTHER-EXPENSES> 346,848
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,736
<INCOME-PRETAX> (500,442)
<INCOME-TAX> 0
<INCOME-CONTINUING> (500,442)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (500,442)
<EPS-BASIC> (.03)
<EPS-DILUTED> 0
</TABLE>
