UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                   FORM 10-QSB

              [X] Quarterly Report under Section 13 or 15(d) of The
                         Securities Exchange Act of 1934

                For the Quarterly Period Ended September 30, 2006

                          Commission File Number 0-9355

                               CUBIC ENERGY, INC.
             (Exact name of registrant as specified in its charter)

           Texas                                           87-0352095
(State or other jurisdiction                   (IRS Employer Identification No.)
    of incorporation)
                                 9870 Plano Road
                                Dallas, TX 75238
                    (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 [X] No [ ]

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).

                                 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                          Outstanding at September 30, 2006
    --------------                         ---------------------------------
    $.05 par value                                    45,600,768

    Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]



<PAGE>

                               CUBIC ENERGY, INC.

                                TABLE OF CONTENTS

                         PART 1 - FINANCIAL INFORMATION

ITEM 1. Financial Statements

        Independent Accountants' Report........................................1

        Condensed Balance Sheets
        As of September 30, 2006 (unaudited) and June 30, 2006...............2,3

        Condensed Statements of Operations, (unaudited)
        For the three months ended September 30, 2006 and 2005.................4

        Condensed Statements of Cash Flows, (unaudited)
        For the three months ended September 30, 2006 and 2005.................5

        Notes to Condensed Financial Statements..........................6,7,8,9

ITEM 2. Management's Discussion and Analysis...............................10,11

ITEM 3.  Controls and Procedures..............................................12


                           PART II - OTHER INFORMATION

ITEM 1. Legal Proceedings.....................................................13

ITEM 6.  Exhibits ............................................................13


SIGNATURES....................................................................14

CERTIFICATION.....................................................15, 16, 17, 18








<PAGE>

                          PART I. FINANCIAL INFORMATION

                         INDEPENDENT ACCOUNTANTS' REPORT


The Stockholders and Board of Directors
Cubic Energy, Inc.


We have reviewed the  accompanying  condensed  balance sheet as of September 30,
2006, and the related condensed  statements of operations,  and of cash flows of
Cubic Energy,  Inc. for the  three-month  periods  ended  September 30, 2006 and
2005.  These  financial  statements  are  the  responsibility  of the  Company's
management.

We conducted our reviews in accordance  with the standards of the Public Company
Accounting  Oversight  Board  (United  States).  A review of  interim  financial
information consists principally of applying analytical  procedures to financial
data and making  inquiries of persons  responsible  for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with the  standards  of the  Public  Company  Accounting  Oversight  Board,  the
objective  of which is the  expression  of an opinion  regarding  the  financial
statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should
be made to the  accompanying  financial  statements for them to be in conformity
with accounting principles generally accepted in the United States of America.

We have  previously  audited,  in  accordance  with the  standards of the Public
Company Accounting  Oversight Board (United States),  the balance sheet of Cubic
Energy,  Inc. as of June 30, 2006,  and the related  statements  of  operations,
stockholders'  equity and cash flows for the year then ended;  and in our report
dated  September  8,  2006,  we  expressed  an  unqualified   opinion  on  those
statements.




                                                    PHILIP VOGEL & CO. PC

                                                    /s/ Philip Vogel & Co. PC
                                                    -------------------------

                                                    Certified Public Accountants


Dallas, Texas
November 13, 2006




                                      - 1 -

<PAGE>

ITEM 1. FINANCIAL STATEMENTS

                               CUBIC ENERGY, INC.
                            CONDENSED BALANCE SHEETS

                                     ASSETS

                                                    (Unaudited)
                                                  Sept. 30, 2006   June 30, 2006
                                                  --------------   -------------

Current assets:
  Cash and cash equivalents                       $      243,781   $     259,157
  Accounts receivable                                     48,822          41,680
    Prepaid drilling costs                               257,891         264,223
    Prepaid expenses                                     121,550         243,100
                                                  --------------   -------------
    Total current assets                          $      672,044   $     808,160

Property and equipment (at cost):
  Oil and gas properties, full cost method:
    Proved properties (including wells and
    related equipment and facilities)             $    7,079,513   $   6,679,730
    Unproven properties                                6,818,678       6,780,530
  Office and other equipment                               8,905           7,876
                                                  --------------   -------------
                                                  $   13,907,096   $  13,468,136
Less accumulated depreciation, depletion
  and amortization                                $    1,699,969   $   1,648,581
                                                  --------------   -------------
                                                  $   12,207,127   $  11,819,555
Other Assets:
    Deferred loan costs - net                     $      288,171   $     318,999
    Other                                                      0          25,000
    Restricted cash                                      403,375         401,723
                                                  --------------   -------------
                                                  $      691,546   $     745,722

TOTAL ASSETS                                      $   13,570,717   $  13,373,437
                                                  --------------   -------------



















            See accompanying notes to condensed financial statements.

                                      - 2 -

<PAGE>

                               CUBIC ENERGY, INC.
                            CONDENSED BALANCE SHEETS

                      LIABILITIES AND STOCKHOLDERS' EQUITY

                                                  (Unaudited)
                                                Sept. 30, 2006    June 30, 2006
                                                --------------    -------------

Current liabilities:
  Current portion of long-term debt             $      750,000    $     500,000
  Accounts payable and accrued expenses                181,107          165,628
  Due to affiliates                                    102,105        1,499,762
                                                --------------    -------------
Total current liabilities                       $    1,033,212    $   2,165,390
                                                --------------    -------------

Non-current liabilities:
  Deferred income taxes                         $            0    $           0
                                                --------------    -------------

Long-Term Liabilities
  Long-term debt - net of discounts             $    3,715,327    $   3,854,641
    Note payable to affiliate                        1,300,000        1,300,000
                                                --------------    -------------
                                                $    5,015,327    $   5,154,641

Commitments and contingencies

Stockholders' Equity:

  Preferred stock - $.01 par value,
    authorized 10,000,000 shares,
    issued: none                                $            0    $           0
                                                --------------    -------------

  Common stock - $.05 par value,
    Authorized 100,000,000 shares,
    issued 45,600,768 shares at
    September 30, 2006 and 42,450,768
    shares at June 30, 2006                          2,280,040        2,122,540

  Additional paid-in capital                        19,395,283       17,452,784

  Accumulated deficit                              (14,153,145)     (13,521,918)
                                                --------------    -------------

Stockholders' equity                            $    7,522,178    $   6,053,406
                                                --------------    -------------

                                                $   13,570,717    $  13,373,437
                                                ==============    =============









            See accompanying notes to condensed financial statements.

                                      - 3 -

<PAGE>

                               CUBIC ENERGY, INC.
                       CONDENSED STATEMENTS OF OPERATIONS
                                   (Unaudited)

                                               For the Three     For the Three
                                                Months Ended      Months Ended
                                               Sept. 30, 2006    Sept. 30, 2005
                                               --------------    --------------

Revenue:
  Oil and gas sales                            $      132,106    $      146,182
                                               --------------    --------------

Total revenue                                  $      132,106    $      146,182
                                               --------------    --------------

Costs and expenses:
  Oil and gas production, operating and
    development costs                          $       99,631    $       78,493
  General and administrative
    expenses                                          259,680           108,897
  Depreciation, depletion and
    amortization                                       51,387            70,730
                                               --------------    --------------

Total costs and expenses                       $      410,698    $      258,120
                                               --------------    --------------

Operating income (loss)                        $     (278,592)   $     (111,938)
                                               --------------    --------------

Non-operating income (expense):
  Gain (loss) on sales of securities           $            0    $            0
  Other income                                          1,747                 0
  Interest expense                                   (323,556)          (53,353)
  Amortization of loan costs                          (30,827)           (7,805)
                                               --------------    --------------

Total non-operating income (expense)           $     (352,636)   $      (61,158)
                                               --------------    --------------

Income (loss) before taxes:                    $     (631,228)   $     (173,096)

Provision for (benefit of) income taxes                     0                 0
                                               --------------    --------------

Net income (loss)                              $     (631,228)   $     (173,096)
                                               ==============    ==============

Net gain (loss) per common share
  - basic and diluted                          $       (0.014)   $       (0.005)
                                               ==============    ==============

Weighted average common shares outstanding
  - basic and diluted                              44,660,007        35,162,383
                                               ==============    ==============






            See accompanying notes to condensed financial statements.

                                      - 4 -
<PAGE>
<TABLE>
<CAPTION>

                               CUBIC ENERGY, INC.
                       CONDENSED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

                                                     For the Three     For the Three
                                                      Months Ended      Months Ended
                                                     Sept. 30, 2006    Sept. 30, 2005
                                                     --------------    --------------
<S>                                                  <C>               <C>
Cash flows from operating activities:
Net income (loss)                                    $     (631,228)   $     (173,096)
Adjustments to reconcile net income (loss)
  to cash provided (used) by operating activities:
  Depreciation, depletion and amortization                  192,902            97,247
  Stock issued for compensation                             121,550                 0
  Stock issued for interest                                       0            34,525
Net change in assets and liabilities:
  (Increase) decrease in accounts receivable                 (7,141)          (67,916)
  Increase (decrease) in loan from affiliate               (100,408)           (5,383)
  Increase (decrease) in accounts payable and
    accrued liabilities                                      15,479             1,905
  Increase (decrease) in deferred taxes                           0                 0
                                                     --------------    --------------
Net cash provided (used) by operating activities     $     (408,846)   $     (112,718)
                                                     --------------    --------------


Cash flows from investing activities:
  Acquisition of oil & gas properties                $     (437,932)   $      (14,419)
  Purchase of Office Equipment                               (1,029)             (407)
  Increase in restricted cash                                (1,653)                0
  Payments from advances on development costs            (1,165,916)           27,746
                                                     --------------    --------------
Net cash provided (used) by investing activities     $   (1,606,530)   $       12,920
                                                     --------------    --------------

Cash flows from financing activities
  Issuance of common stock                           $    2,100,000    $            0
  Repayment of advances                                    (100,000)                0
                                                     --------------    --------------
Net cash provided by financing activities            $    2,000,000                 0

Net increase (decrease) in cash and
    cash equivalents                                 $      (15,376)   $      (99,798)
                                                     --------------    --------------

Cash at beginning of period                                 259,157           257,253
                                                     --------------    --------------
Cash at end of period                                $      243,781    $      157,455
                                                     ==============    ==============
</TABLE>








            See accompanying notes to condensed financial statements.

                                      - 5 -

<PAGE>

                               CUBIC ENERGY, INC.
                          NOTES TO FINANCIAL STATEMENTS
                            AS OF SEPTEMBER 30, 2006
                                   (Unaudited)


SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation:

The accounting policies followed by Cubic Energy, Inc., a Texas corporation (the
"Company" or "Cubic"),  are set forth in the Company's financial statements that
are a part of its June 30, 2006,  Form 10-KSB and should be read in  conjunction
with the financial statements contained herein.

The financial  information included herein as of September 30, 2006, and for the
three-month  periods ended  September 30, 2006,  and 2005,  have been  presented
without an audit,  pursuant  to  accounting  principles  for  interim  financial
information generally accepted in the United States of America, and the rules 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 periods.

Earnings per share:

The Company has adopted the  provisions  of Statement  of  Financial  Accounting
Standards  (SFAS)  No.  128,   Earnings  per  Share.   SFAS  No.  128  reporting
requirements  replace  primary and  fully-diluted  earnings per share (EPS) with
basic and diluted EPS. Basic EPS is calculated by dividing net income (available
to  common  stockholders)  by the  weighted  average  number  of  common  shares
outstanding  for the period.  Diluted EPS reflects the  potential  dilution that
could  occur  if  securities  or other  contracts  to issue  common  stock  were
exercised or converted into common stock.

Stock Issuance:

On July 28, 2006,  Cubic entered into and consummated  transactions  pursuant to
Subscription and Registration Rights Agreements (the "Subscription  Agreements")
with certain investors that are unaffiliated with the Company (the "Investors").
Pursuant  to  the   Subscription   Agreements,   the  Investors  paid  aggregate
consideration of $2,100,000 to the Company for 3,000,000 shares of the Company's
common stock and warrants exercisable into 1,500,000 shares of common stock. The
warrants are  exercisable  through July 31, 2011, at $.70 per share. In addition
to reimbursement of certain expenses  incurred in connection with this offering,
the  Company  agreed to pay 2% of the  aggregate  consideration,  in cash,  plus
150,000 shares of common stock valued at $.70 per share, to a placement agent.




                                      - 6 -

<PAGE>


Stock Grants:

On December 29, 2005, the  shareholders of the Company approved the Director and
Officer Compensation Plan (the "Plan") and 3,750,000 shares of common stock were
reserved, of which 1,169,000 shares have been issued through September 30, 2006.

On January 5, 2006,  the  Company  issued  572,000  un-registered  shares to the
officers and directors of the Company pursuant to the Plan. As of such date, the
aggregate  market  value of the common stock  granted was $486,200  based on the
last sale price on the OTC Bulletin  Board of the Company's  common stock.  Such
amount is being  amortized to  compensation  expense on a quarterly basis during
calendar  year 2006.  Accordingly,  $121,550 has been  recorded as  compensation
expense and is included  in general and  administrative  expense for the quarter
ended September 30, 2006.

Long-Term Debt and Warrants:

On February 6, 2006, Cubic entered into a Credit Agreement with Petro Capital V,
L.P.  (the  "Lender")  pursuant  to which the  Lender  advanced  to the  Company
$5,500,000.  The  indebtedness  bears  interest  at a rate of 12.5%  per  annum,
matures on February 6, 2009, and is secured by  substantially  all of the assets
of the  Company.  Approximately  $1.8  million of the funded  amount was used to
retire the 7% Senior Secured Convertible  Debentures that were due September 30,
2009. In connection  with the funding  under the Credit  Agreement,  the Company
issued to the Lender and Petro Capital Securities, LLC, warrants, with five-year
expirations,   for  the  purchase  of  up  to  1,833,334  and  250,000   shares,
respectively, of Company common stock at an exercise price of $1.00 per share.

The Company  allocated  the proceeds from the issuance of the senior debt to the
warrants and the senior debt based on their  relative  fair market values at the
date of issuance.  The value assigned to the warrants of $1,203,752 was recorded
as an increase in additional  paid in capital.  The assignment of a value to the
warrants  results in a loan  discount  being  recorded.  The  discount  is being
amortized  over the original  three-year  term of the senior debt as  additional
interest  expense.  Amortization  for the quarter  ended  September 30, 2006 was
$110,686.

Cubic  incurred  loan costs of $483,643  on the  issuance of the senior debt and
warrants.  The  amount  allocable  to the  senior  debt  of  $367,586  has  been
capitalized   and  is  being  amortized  over  the  term  of  the  senior  debt.
Amortization  of loan costs for the new senior  debt was $30,827 for the quarter
ended September 30, 2006.

The terms of the Credit Agreement among other things,  prohibit the Company from
merging with another company or paying dividends, limit additional indebtedness,
sales of assets and  investments  and require the  maintenance of a Fixed Charge
Coverage Ratio, as measured at the end of any four consecutive  fiscal quarters,
and being first  measured on June 30,  2007,  to be less than 1.30 to 1.00.  The
agreement also requires the Company to maintain a Minimum  Tangible Net Worth of
$3,000,000  and  requires  the  Company to  maintain a debt  service  account of
$400,000 until the ratio of EBITDA (as defined) to interest  expense equals 2.00
to 1.00 for three consecutive months. Such debt service account is classified as
restricted cash under other assets in the accompanying  balance sheet as of June
30, 2006 and September 30, 2006.




                                      - 7 -


<PAGE>

Quarterly  principal  payments of $250,000 are due beginning March 31, 2007, and
continue  through  December 31, 2008, with the remainder of the outstanding loan
balance  due  February  6, 2009.  The  Company  has the  option,  under  certain
conditions,  to defer the first two quarterly  payments  through the issuance of
warrants to purchase 300,000 shares of the Company's common stock.

On September  19,  2006,  the Lender  issued a letter  claiming  defaults  under
various sections of the Credit Agreement. The alleged defaults related primarily
to then unresolved  imperfections in title concerning the S.E. Johnson 20 #1 and
S.E. Johnson 29 #1 wells.

In Louisiana,  where the Company's  properties are located,  title imperfections
are  encountered in the ordinary  course of business.  Prior to drilling a well,
the  operator   typically   obtains  a  drillsite   title  opinion  to  gain  an
understanding  of, and limited  assurance  as to, the  ownership  of the subject
well. The drillsite title opinion is not  comprehensive and does not ensure good
title.  Following the drilling of a well,  and if the well is successful  and is
expected to be completed for  production,  the operator  typically will obtain a
division  order title opinion that is more  rigorous  than the  drillsite  title
opinion.  The division  order title opinion is expected to provide good, but not
absolute,  assurance as to the title of the subject  well.  In any event,  title
issues  arise in the ordinary  course of business  and the operator  attempts to
work with all impacted parties to resolve the issues.

In the  case  of the  aforementioned  two  S.E.  Johnson  wells,  after  lengthy
investigation, management came to believe that the Company had good title to the
wells down to a depth of 6,464 feet;  however, it appeared the Company might not
have all rights below this depth.  Although the division order title opinion for
these wells had not yet been received, the Company came to believe a third party
had deep  ownership  rights  with  respect  to a portion  of  certain  leases in
Sections 20, 29 and 30 of Township 14N Range 15W. The Company then  negotiated a
farmout agreement with that third party, protecting the rights of the Company in
those two S.E. Johnson wells. Additionally, Tauren Exploration, Inc. ("Tauren"),
the party that  originally  sold the  rights in the  subject  properties  to the
Company,  executed a Letter Agreement as of September 20, 2006, such that in the
event that there is an acreage variance in the above-referenced sections, Tauren
will assign to the Company  that number of acres in Sections 4, 5, 6, 7 and 8 of
Township 14N Range 15W to offset any such variance.

Management  does  not  believe  that  it  was  ever  in  default  of  any of the
requirements of the Credit Agreement specified by the Petro Capital letter dated
September  19,  2006.  Moreover,  even if a  default  had  occurred,  management
believes  the  foregoing  curative  actions  resolved  any  default  within  the
applicable cure period.  The Company timely  responded to the September 19, 2006
default notice to that effect.

Related Party Transaction:

On February 6, 2006, the Company  entered into a Purchase  Agreement with Tauren
Exploration,  Inc. ("Tauren"),  an entity wholly owned by Calvin Wallen III, the
Company's Chairman of the Board and Chief Executive Officer, with respect to the
purchase by the Company of certain  Cotton Valley  leasehold  interests  held by
Tauren.  In  connection  with this  purchase,  the  Company  issued to Tauren an
unsecured  12.5%  promissory  note in the  amount of  $1,300,000,  which note is
convertible  into Company common stock at a conversion  price of $0.80 per share
(the "Tauren Note").

On November 10, 2006, the maturity of the Tauren Note was extended to October 5,
2007. In connection with the extension of the Tauren Note, the Company issued to
Tauren warrants, with three-year  expirations,  for the purchase of up to 50,000
shares of Company common stock at an exercise price of $0.70 per share.

                                      - 8 -

<PAGE>

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
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 10-KSB for
the fiscal year ended June 30, 2006.

























                                      - 9 -

<PAGE>

                  ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS

Results of Operations:

Three Months Ended September 30, 2006 Compared To
Three Months Ended September 30, 2005

Oil and gas sales  decreased 10% to $132,106 for the quarter ended September 30,
2006 from  $146,182 for the quarter  ended  September  30, 2005 due to lower gas
prices.

Oil and gas  production,  operating and  development  costs increased to $99,631
(75% of oil and gas sales) for 2006 from  $78,493 (54% of oil and gas sales) for
2005  mainly due to an increase  in  workover  costs and salt water  hauling and
disposal costs.

General and  administrative  expenses  increased  138% to $259,680 for 2006 from
$108,897 in 2005  primarily as a result of a $121,550  charge  relating to stock
grants  to  officers  and  directors  and due to an  increase  in  salaries  and
compensation as a result of an increase in the number of employees.

Depreciation, depletion, and amortization decreased 27% to $51,387 for 2006 from
$70,730 for 2005. The decrease was primarily due to a reduction in the DD&A rate
per MCFE which resulted from an increase in oil and gas reserves.

Interest  expense  increased to $323,556 in 2006 from $53,353 in 2005 due to the
increase  in the  amount of  outstanding  debt as a result of the  borrowing  of
$5,500,000 pursuant to the debt issue on February 6, 2006.

Liquidity and Capital Resources:

During the quarter  ended  September  30,  2006,  the Company  used cash flow in
operating  activities of $(408,846).  Cash flow from  operations is dependent on
our  ability to increase  production  through our  development  and  exploratory
activities and the price received for oil and natural gas.

The Company's working capital (deficit) increased to $(361,168) at September 30,
2006 from $(1,357,230) at June 30, 2006,  primarily due to a decrease in amounts
due to affiliates.  On July 28, 2006, we raised  $2,100,000  through the private
placement  of common  stock.  This  funding  significantly  reduced  the working
capital deficit.

The Company plans to fund its  development and  exploratory  activities  through
cash provided from operations and the issuance of debt or equity securities.

The  Company  cannot be  certain  that the funds  which will be  available  from
operating cash flow and the issuance,  if any, of debt or equity securities will
be adequate to fully fund the projected  capital  expenditures  for fiscal 2006.
Additionally,  because future cash flows and the  availability of borrowings are
subject  to a number of  variables,  such as  prevailing  prices of oil and gas,
actual production from existing and newly-completed wells, the Company's success
in developing and producing new reserves,  and the  uncertainty  with respect to
the amount of funds which may  ultimately  be required to finance the  Company's
development  and  exploration  program,  there  can  be no  assurance  that  the
Company's  capital  resources  will  be  sufficient  to  sustain  the  Company's
development and exploratory activities.


                                     - 10 -

<PAGE>

Although the Company believes it will be able to obtain funds pursuant to one or
more of the above-mentioned alternatives,  management cannot be assured that any
such capital  resources  will be  available to the Company.  If we are unable to
obtain such capital  resources on a timely basis, the Company may not be able to
maintain a level of liquidity  sufficient to meet its obligations as they mature
or to implement its capital expenditures or develop its assets.

The Company is also subject to a senior secured  credit  agreement that requires
quarterly  principal  payments of $250,000 beginning March 31, 2007. The Company
has the  option,  under  certain  conditions,  to defer the first two  quarterly
payments.  If the Company is unable to refinance  this senior debt,  the Company
may be required to make the quarterly principal payments out of cash provided by
operations and curtail its planned development and exploratory activities.

On September 19, 2006, Petro Capital V, L.P.,  issued a letter claiming defaults
under various  sections of the Credit  Agreement.  The alleged  defaults  relate
primarily to unresolved imperfections in title concerning the S.E. Johnson 20 #1
and S.E. Johnson 29 #1 wells.

In Louisiana,  where the Company's  properties are located,  title imperfections
are  encountered in the ordinary  course of business.  Prior to drilling a well,
the  operator   typically   obtains  a  drillsite   title  opinion  to  gain  an
understanding  of, and limited  assurance  as to, the  ownership  of the subject
well. The drillsite title opinion is not  comprehensive and does not ensure good
title.  Following the drilling of a well,  and if the well is successful  and is
expected to be completed for  production,  the operator  typically will obtain a
division  order title opinion that is more  rigorous  than the  drillsite  title
opinion.  The division  order title opinion is expected to provide good, but not
absolute,  assurance as to the title of the subject  well.  In any event,  title
issues  arise in the ordinary  course of business  and the operator  attempts to
work with all impacted parties to resolve the issues.

In the  case  of the  aforementioned  two  S.E.  Johnson  wells,  after  lengthy
investigation, management came to believe that the Company had good title to the
wells down to a depth of 6,464 feet;  however, it appeared the Company might not
have all rights below this depth.  Although the division order title opinion for
these wells had not yet been received,  the Company came to believe that a third
party had deep  ownership  rights with respect to a portion of certain leases in
Sections 20, 29 and 30 of Township 14N Range 15W. The Company then  negotiated a
farmout agreement with that third party, protecting the rights of the Company in
those two S.E. Johnson wells. Additionally, Tauren Exploration, Inc. ("Tauren"),
the party that  originally  sold the  rights in the  subject  properties  to the
Company,  executed a Letter Agreement as of September 20, 2006, such that in the
event that there is an acreage variance in the above-referenced sections, Tauren
will assign to the Company  that number of acres in Sections 4, 5, 6, 7 and/or 8
of Township 14N Range 15W to offset any such variance.

Management  does  not  believe  that  it  was  ever  in  default  of  any of the
requirements of the Credit Agreement specified by the Petro Capital letter dated
September  19,  2006.  Moreover,  even if a  default  has  occurred,  management
believes  the  foregoing  curative  actions  resolved  any  default  within  the
applicable cure period.  The Company timely  responded to the September 19, 2006
default notice to that effect.






                                     - 11 -

<PAGE>

ITEM 3.    CONTROLS AND PROCEDURES

Our principal  executive and financial  officer have  concluded,  based on their
evaluation  as of a date within 90 days  before the filing of this Form  10-QSB,
that our disclosure  controls and procedures under Rule 13a-14 of the Securities
Exchange Act of 1934 are effective to ensure that information we are required to
disclose in the reports we file or submit  under the  Exchange  Act is recorded,
processed,  summarized  and reported  within the time  periods  specified in the
SEC's rules and forms,  and include  controls and procedures  designed to ensure
that  information we are required to disclose in such reports is accumulated and
communicated  to  management,  including our  principle  executive and financial
officers,   as  appropriate  to  allow  timely  decisions   regarding   required
disclosure.  Subsequent to our evaluation,  there were no significant changes in
internal  controls  or other  factors  that  could  significantly  affect  these
internal controls.



























                                     - 12 -

<PAGE>

                           PART II - OTHER INFORMATION


ITEM 1. Legal Proceedings

There are no legal  proceedings  to which the Company is a party or to which its
properties are subject which are in the opinion of management,  likely to have a
material  adverse  effect on the  Company's  results of  operations or financial
condition.

ITEM 5. Other Information

On November 10, 2006, the maturity of the Tauren Note was extended to October 5,
2007. In connection with the extension of the note, the Company issued to Tauren
warrants, with three-year  expirations,  for the purchase of up to 50,000 shares
of Company common stock at an exercise price of $0.70 per share.

ITEM 6. Exhibits

         10.1     Third Amendment to Promissory  Note,  dated November 10, 2006,
                  by and between,  Cubic  Energy,  Inc. and Tauren  Exploration,
                  Inc.
         10.2     Warrant issued to Tauren Exploration,  Inc. dated November 10,
                  2006.
         31.1     Rule 13a-14(a)/15d-14(a) Certification
         31.2     Rule 13a-14(a)/15d-14(a) Certification
         32.1     Section 1350 Certification
         32.2     Section 1350 Certification





















                                     - 13 -

<PAGE>

                                   SIGNATURES

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.
                                                      (Registrant)


Date: November 13, 2006                                /s/ Calvin A. Wallen, III
                                                      --------------------------
                                                      Calvin A. Wallen, III, CEO


Date: November 13, 2006                                /s/ James L. Busby
                                                      --------------------------
                                                      James L. Busby, CFO















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