UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly Export Under Section 13 or 15(d) of The Securities Exchange Act of
1934
For the Quarterly Period Ended September 30, 2000
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
CUBIC ENERGY, INC.
(Exact name of registrant as specified in its charter)
Texas 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)
Roseland Oil and Gas, Inc.
(Former name, former address and former fiscal year,
if changed since last report)
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 - 18,917,949 shares as of September 30, 2000
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [x]
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CUBIC ENERGY, INC.
(Formerly Roseland Oil and Gas, Inc.)
TABLE OF CONTENTS
PART 1 - Financial Information
ITEM 1. Financial Statements
Balance Sheets
As of September 30, 2000, (unaudited) and June 30, 2000 3, 4
Statement of Operations, unaudited
For the three months ended September 30, 2000 and 1999 5
Statements of Cash Flows, unaudited
For the three months ended September 30, 2000 and 1999 6
Notes to Unaudited Financial Statements 7
ITEM 2. Management's Discussion and Analysis 7, 8
PART II - Other Information
ITEM 1. Legal Proceedings 9
SIGNATURES 9
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CUBIC ENERGY, INC
BALANCE SHEET
September 30, 2000 and June 30, 2000
(Unaudited)
ASSETS
For the period ended For the period ended
September 30,2000 June 30,2000
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 602 $ 20
Accounts receivable 19,045 8,416
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Current assets 19,647 8,436
Property and equipment, at cost
Oil and gas properties 1,254,646 1,607,893
Office and other equipment 909 910
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Total property and equipment 1,255,555 1,608,803
Less accumulated depreciation,
depletion and amortization 140,368 211,567
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Net property and equipment 1,395,923 1,397,236
Other Assets: 0 0
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TOTAL ASSETS $1,415,569 $1,405,672
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THE ACCOMPANYING NOTES ARE PART OF THESE FINANCIAL STATEMENTS
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CUBIC ENERGY, INC
BALANCE SHEET
September 30, 2000 and June 30, 2000
(Unaudited)
LIABILITIES & STOCKHOLDERS EQUITY
For the period ended For the period ended
September 30, 2000 June 30, 2000
<S> <C> <C>
Current Liabilities:
Accounts payable $ 41,098 $ 49,369
Due to affiliates 722,741 680,977
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Total current liabilities 763,840 730,346
Stockholders' equity:
Common stock, -$.05 par value, authorized
50,000,000 shares, issued 18,917,947 shares
in 2000 and 18,238,347 shares in 1999
Additional paid in capital 945,848 945,848
Accumulated deficit 3,049,242 3,049,242
(3,343,360) (3,319,764)
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Total stockholders' equity 651,730 675,326
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 1,415,570 $ 1,405,672
============ ============
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THE ACCOMPANYING NOTES ARE PART OF THESE FINANCIAL STATEMENTS
4
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CUBIC ENERGY, INC
STATEMENT OF OPERATIONS
For the Three Months Ended September 30, 2000 and 1999
(Unaudited)
For the Three For the Three
Months Ended Months Ended
September 30,2000 September 30, 1999
<S> <C> <C>
Revenue:
Oil and gas sales $ 24,630 $ 18,668
Other 0 4
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Total revenue 24,630 18,672
Costs and expenses:
Oil and gas production, operating
and development costs 17,703 7,191
Selling, general and administrative expense 29,210 93,643
Depreciation, depletion and amortization 1,313 3,947
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Total costs and expenses 48,226 104,781
Operating income (loss) (23,596) (86,109)
Non-operating income (expenses):
Interest income 0 0
Gain (loss) on sales of securities and assets 0 0
Other income (loss) 0 0
Interest expense 0 62
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Total non-operating income (expenses) 0 62
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Net income (loss) before income tax (23,596) (86,171)
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(Provision) benefit for income taxes 0 0
Net income (Loss) $ (23,596) $ (86,171)
============= =============
Net loss per common share - basic and diluted
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THE ACCOMPANYING NOTES ARE PART OF THESE FINANCIAL STATEMENTS
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<CAPTION>
CUBIC ENERGY, INC
STATEMENT OF CASH FLOWS
For the Three Months Ended September 30, 2000 and 1999
(Unaudited)
STATEMENT OF CASH FLOWS
For the Three For the Three
Months Ended Months Ended
September 30,2000 September 30,1999
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (23,596) $ (86,171)
Adjustments to reconcile net income (loss)
to cash provided (used) by operating activities:
Depeciation, depletion and amortization 1,313 3,947
Provision (gain) loss for deferred income tax 0 0
Net change in assets and liabilities:
(Increase) decrease in accounts receivable (10,629) 1,159
(Increase) decrease in notes receivable 0 0
(Increase) decrease in other assets 0 55,398
Increase (decrease) in loan from affiliate 0 48,792
Increase (decrease) in accounts payable and
accrued liabilities (8,270) (3,979)
Increase (decrease) in other accounts payable 0
Net cash provided (used) by operating activities (41,182) 19,146
Cash flows from investing activities:
Changes to oil & gas properties 0 0
Changes in other assets 0 0
Net cash provided (used) by investing activities 0 0
Cash flows from financing activities:
Affiliate loan 41,764 0
Changes in common stock 0 0
Changes in debt 0 0
Net cash provided (used) by investing activities 41,764 0
Net increase (decrease) in cash and cash equivalents $ 19,146
Cash beginning of period 20 1,374
Cash at end of period $ 602 $ 20,520
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THE ACCOMPANYING NOTES ARE PART OF THESE FINANCIAL STATEMENTS
7
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CUBIC ENERGY, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2000
(Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies followed by Cubic Energy, Inc., Texas corporation
(the "Company" or "Cubic"), formerly known as Roseland Oil and Gas, Inc., an
Oklahoma corporation, are set forth in Note 2 to the Company's financial
statements in its June 30, 1998 Form 10KSB and should be read in conjunction
with the financial statements for the three months ended September 30, 2000
contained herein.
The financial statements included herein as of September 30, 2000, three
month period ended September 30, 2000 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
Exchanges 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, 2000 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1999
Gross revenues for the three months ended September 30 increased from
$18,672 in 1999 to $24,630 in 2000 due to the disposal of oil and gas wells and
increases in oil and gas production and prices.
Oil and gas production, operating and development costs increased from
$7,191 (38.5% of oil and gas sales) in the three months ended September 30, 1999
to $17,703 (71.0% of oil and gas sales) in three months ended September 30,
2000. The increase in costs was attributable to the reworking of producing wells
to increase production. Selling, general and administrative expenses decreased
from $104,781 in the three months ended September 30, 1999 to $46,323 in three
months ended September 30, 2000.
Operating income decreased from a loss of $86,109 in the three months ended
September 30, 1999 to a loss of $23,596 in the three months ended September 30,
2000 due to a decrease in accounting and legal fees, and increases in oil and
gas production and prices.
8
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Liquidity and Capital Resources
As of October 01, 1999, long-term debt of $118,760 was converted to common
stock. This leaves no outstanding long-term debt as of March 31, 2000 as
compared to the total long- term debt of $118,760 as of June 30, 1999 of which
none was classified as current. See the Company's June 30, 1999 Form 10KSB,
Footnote 4.
Year 2000 issue
The Company worked 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 1900 rather that the year 2000 would result
in errors or systems failures. The Company utilizes a number of computer
programs across its entire operation. As management still believes that all of
the Company's systems, which are primarily purchased software systems, are year
2000 compliant and as no material problem related to the year 2000 issue have
been reported to date, the Company 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 Company believes that it
has taken all reasonable steps to ensure Year 2000 readiness. Its ability to
meet the projected goals, including the cost of addressing the Year 2000 issue
and the dates upon which compliance will be attained, depends on the Year 2000
readiness of its key suppliers and customers and the successful development and
implementation of contingency plans. Although these and other unanticipated Year
2000 issues could still have an adverse effect on the results of operations or
financial condition of the Company, it is not possible to estimate the extent of
the impact at this time. The foregoing is a year 2000 readiness disclosure
update pursuant to the Year 2000 Readiness and Disclosure Act.
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 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
"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's 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, including the Company's Annual Report Form 10KSB for
the fiscal year ended June 30, 1999.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In the spring of 1999, the Company became aware of the claim of Clifford Kees,
Jr. ("Kees"), a geologist, to a 1% overriding royalty interest in the Company's
oil and gas properties located in the Reagan Sections 11 and 12, Palo Pinto
County, Texas. Kees filed an assignment in Palo Pinto County, Texas, after
December 1, 1997, upon which Kees bases his claims. The Company, after its
initial investigation, disputes Kees' legal rights to the overriding royalty and
has filed suit to challenge this royalty as described below.
William Vandever, during the period of time in which he served as the President
and Chief Executive Officer of the Company, purportedly granted some
preferential rights with respect to 75% of the Reagan leases in Section 11, Palo
Pinto County, Texas, to participants (including Kees and Vandever himself) in
the re-work of the Reagan #2-11 well. Mr. Vandever also purportedly granted the
same rights to himself as a participant. The Company discovered this in March,
1999. Claims related to preferential rights with regard to the Reagan lease in
Section 11 could materially and adversely affect the financial condition and the
outlook of the Company. Based upon information obtained by the Company, the
Company has filed suit in the 29th Judicial District Court in Palo Pinto County,
Texas, styled "Roseland Oil and Gas, Inc. v. William Vanderver, et al." against
Kees, Venderver and various persons, seeking a judicial determination that all
grants of preferential rights in the Reagan Section 11 are void. This lawsuit
was filed on April 26, 1999. The Company is vigorously pursuing this action.
CUBIC ENERGY, INC.
DATE: November 10, 2000 BY: /s/ Calvin A. Wallen III, President
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Calvin A. Wallen III, President
(Principal Executive, Financial and
Accounting Officer)
