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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 March 31, 2000
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
CUBIC ENERGY, INC.
(Exact name of registrant as specified in its charter)
Texas 87-0352095
(State or other (IRS Employer
jurisdiction 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)
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 March 31, 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 I - Financial Information
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ITEM 1. Financial Statements
Balance Sheets 3
As of March 31, 2000, (unaudited) and June 30, 1999
Statement of Operation, unaudited
For the three months ended March 31, 2000 and 1999 5
Statements of Operation, unaudited
For the nine months ended March 31, 2000 and 1999 6
Statements of Cash Flows, unaudited 7
For the nine months ended March 31, 2000 and 1999
Notes to Unaudited Financial Statements 8
ITEM 2. Management's Discussion and Analysis 9
PART II -- Other Information
ITEM 1. Legal Proceedings 10
ITEM 5. Other Information 10
SIGNATURES 10
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CUBIC ENERGY, INC.
BALANCE SHEET
MARCH 31, 2000 AND JUNE 30, 1999
ASSETS
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<CAPTION>
March 31, 2000 June 30, 1999
(unaudited)
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Current Assets:
Cash and cash equivalents $ 3,353 $ 1,374
Accounts receivable 10,629 23,600
Marketable securities 20 101,711
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Current assets 14,002 126,685
Property and equipment, at coast
Oil and gas properties 1,559,575 1,559,573
Office and other equipment 910 910
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Total property and equipment 1,560,485 1,560,483
Less accumulated depreciation
depletion and amortization 183,935 179,228
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Net property and equipment 1,376,550 1,381,255
Other Assets: 22,297 29,545
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TOTAL ASSETS $ 1,412,849 $ 1,537,485
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THE ACCOMPANYING NOTES ARE PART OF THESE FINANCIAL STATEMENTS
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CUBIC ENERGY, INC
BALANCE SHEET
MARCH 31, 2000 AND JUNE 30,1999
LIABILITIES & STOCKHOLDERS EQUITY
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March 31,2000 June 30,1999
(unaudited)
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Current Liabilities:
Accounts payable $ 83,060 $ 67,946
Accrued liabilities 0 26,155
Due to affiliates 572,884 456,351
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Total current liabilities 655,944 550,452
Long term debt 0 118,760
Stockholders'equity:
Common stock, $.05 par value, authorized
50,000,000 shares, issued 18,917,949 and
18,917,949 shares 945,898 911,918
Additional paid in capital 3,049,692 2,817,138
Stock subscribed and paid - to be issued 0 120,000
Accumulated deficit (3,204,270) (2,946,869)
Accumulated other comprehensive income (33,914) (33,914)
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Total stockholders' equity 756,905 868,273
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 1,412,849 $ 1,537,485
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THE ACCOMPANYING NOTES ARE PART OF THESE FINANCIAL STATEMENTS
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CUBIC ENERGY, INC
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
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For the Three For the Three
Months Ended Months Ended
March 31, 2000 March 31, 1999
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Revenue
Oil and gas sales $ 15,018 $ 10,505
Other 1,227 0
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Total revenue 16,245 10,505
Cost and expenses:
Oil and gas production, operating
and development cost 9,872 12,444
Selling, general and administrative expense 41,100 60,745
Depreciation, depletion and amortization 4,080 8,184
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Total cost and expenses 55,052 81,373
Operating income (loss) (38,807) (70,868)
Non-operating income (expense):
Interest income 0 0
Gain (loss) on sale of assets 0 0
Other income (loss) 0 0
Interest expense 184 3,088
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Total non operating income (expense) 184 3,088
Net income (loss) before income tax (38,991) (73,956)
(Provision) benefit for income taxes 0 0
Net income (Loss) $ (38,991) $ (73,956)
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THE ACCOMPANYING NOTES ARE PART OF THESE FINANCIAL STATEMENTS
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CUBIC ENERGY, INC
STATEMENT OF OPERATION
FOR THE NINE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
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For the Nine For the Nine
Months Ended Months Ended
March 31, 2000 March 31,1999
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Revenue:
Oil and gas sales $ 56,768 $ 45,419
Other 2,604 0
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Total revenue 59,372 45,419
Cost and expenses:
Oil and gas production, operating
and development cost 25,635 67,682
Selling, general and administrative expense 231,091 367,449
Depreciation, depletion and
amortization 11,954 24,504
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Total cost and expenses 213,628 459,635
Operating income (loss) (209,308) (414,216)
Non-operating income (expense):
Interest income 0 0
Gain (loss) on sale of assets 41,590 (346,848)
Other income (loss) 0 196,491
Interest expense 6,503 9,825
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Total non operating income (expense) 48,093 (160,182)
Net income (loss) before income tax (257,401) (574,398)
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(Provision) benefit for income taxes 0 0
Net income (Loss) $ (257,401) $ (574,398)
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</TABLE>
THE ACCOMPANYING NOTES ARE PART OF THESE FINANCIAL STATEMENTS
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CUBIC ENERGY, INC
STATEMENT OF CASH FLOW
FOR THE NINE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
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For the Nine For the Nine
Months Ended Months Ended
March 31, 2000 March 31, 1999
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Cash flows from operating activities:
Net income (loss) $ (257,401) $ (574,398)
Adjustments to reconcile net income (loss)
to cash provided (used) by operating activities:
Depreciation, depletion and amortization 11,955 24,504
Provision (gain) loss for deferred income tax 0 0
Net change in assets and liabilities:
(Increase) decrease in accounts receivable 12,971 31,394
(Increase) decrease in notes receivable 0 0
(Increase) decrease in other assets 101,691 34,959
Increase (decrease) in loan from affiliate 116,533 180,015
Increase (decrease) in accounts payable and
accrued liabilities (11,041) (117,943)
Increase (decrease) in other accounts payable 0 0
Net cash provided (used) by operating activities (25,292) (421,469)
Cash flows from investing activities:
Changes to oil & gas properties 0 286,027
Changes in other assets 0 0
Net cash provided (used) by investing activities 0 286,027
Cash flows form financing activities:
Affiliate loan 0 0
Changes in common stock 146,031 144,750
Changes in debt (118,760) 0
Net cash provided (used) by investing activities 27,271 144,750
Net increase (decrease) in cash and cash equivalents
Cash beginning of period 1,374 303
Cash at end of period $ 3,353 $ 9,611
</TABLE>
THE ACCOMPANYING NOTES ARE PART OF THESE FINANCIAL STATEMENTS
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CUBIC ENERGY, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
AS OF MARCH 31, 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 and nine months ended March
31, 2000 contained herein.
The financial statements included herein as of March 31, 2000, three and
nine month period ended March 31, 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 MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED
MARCH 31, 1999
Gross revenues for the three months ended March 31 increased from $10,505 in
1999 to $15,018 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 decreased from
$12,444 (118.5% of oil and gas sales) in the three months ended March 31, 1999
to $9,872 (65.7% of oil and gas sales) in three months ended March 31, 2000.
The decrease in costs was attributable to the reduced number of producing
wells. Selling, general and administrative expenses decreased from $60,745 in
the three months ended March 31, 1999 to $41,100 in three months ended March
31, 2000.
Operating income increased from a loss of $73,956 in the three months ended
March 31, 1999 to a loss of $38,991 in the three months ended March 31, 2000
due to disposal of several producing wells and increases in oil and gas
production and prices.
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NINE MONTHS ENDED MARCH 31, 2000 COMPARED TO NINE ENDED MARCH 31, 1999
Gross revenues for the nine months ended March 31 increased from $45,419 in
1999 to $59,768 in 2000 primarily due to the disposal of oil and gas wells and
increased oil and gas production and prices.
Oil and gas production, operating and development cost decreased from
$67,682 (149%) of oil and gas sales) in the nine months ended March 31, 1999
to $25,635 (45.2% of oil and gas sales) in the nine months ended March 31,
2000. The decrease in costs was attributable to the reduced number of
producing wells. Selling, general and administrative expenses decreased from
$367,449 in nine months ended March 31, 1999 to $231,091 in the nine months
ended March 31, 2000.
Operating income (loss) improved from a loss of $574,398 in the nine months
ended March 31, 1999 to a loss of $257,401 in the nine months ended March 13,
2000 due primarily to the reduced selling, general and administrative costs,
and reduced oil and gas production, operating and development costs resulting
from the disposal of several wells and increases in oil and gas production and
pricing.
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.
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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.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEDINGS
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 plans to vigorously pursue this action.
ITEMS 5. OTHER INFORMATION
In August 1999, the shareholders of the Company approved the reincorporation
of the Company in the state of Texas pursuant to a reincorporation merger
between the Company (formerly known as Roseland Oil and Gas, Inc. an Oklahoma
corporation) and a wholly-owned subsidiary, Cubic Energy, Inc., a Texas
corporation. This reincorporation was finalized in the fourth quarter of 1999.
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.
CUBIC ENERGY, INC.
DATE: May 16, 2000 BY: /s/ Calvin A. Wallen III, President
Calvin A. Wallen III, President
(Principal Executive, Financial and
Accounting Officer)
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