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 December 31, 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 of incorporation) (IRS Employer Identification No.)

                                 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 registrant is a shell company. 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 February 9, 2007
      ------------                          -------------------------------
     $.05 par value                                     54,872,768



    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 Accountant's Report ...................................1

            Condensed Balance Sheets
            As of December 31, 2006 (unaudited) and June 30, 2006..............2

            Condensed Statements of Operations, (unaudited)
            For the three months ended December 31, 2006 and 2005..............4

            Condensed Statement of Operations, (unaudited)
            For the six months ended December 31, 2006 and 2005..........      5

            Condensed Statements of Cash Flows, (unaudited)
            For the six months ended December 31, 2006 and 2005..........      6

            Notes to Condensed Financial Statements......................      7

Item 2.   Management's Discussion and Analysis...........................     12

Item 3.   Controls and Procedures........................................     13


                           PART II - OTHER INFORMATION

Item 1.   Legal Proceedings..............................................     13

Item 2.   Unregistered Sales of Equity Securities And Use of Proceeds....     13

Item 6.   Exhibits ......................................................     14

Signatures...............................................................     16

Certifications...........................................................     18




<PAGE>

                         PART I - FINANCIAL INFORMATION

Item 1.   Financial Statements

                         INDEPENDENT ACCOUNTANT'S REPORT


The Stockholders and Board of Directors
Cubic Energy, Inc.


We have reviewed the  accompanying  condensed  balance sheets as of December 31,
2006, and the related condensed  statements of operations,  and of cash flows of
Cubic Energy,  Inc. for the three-month and six-month periods ended December 31,
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
February 12, 2007





                                      -1-
<PAGE>

                               CUBIC ENERGY, INC.
                            CONDENSED BALANCE SHEETS

                                     ASSETS

                                               (Unaudited)
                                              Dec. 31, 2006   June 30, 2006
                                              -------------   -------------
Current assets:
  Cash and cash equivalents                   $   3,117,155   $     259,157
  Accounts receivable                                71,644          41,680
  Prepaid drilling costs                            240,353         264,223
  Prepaid and other assets                                0         243,100
                                              -------------   -------------
  Total current assets                        $   3,429,152   $     808,160

Property and equipment (at cost):

  Oil and gas properties, full cost method:
    Proved properties (including wells and
    related equipment and facilities)         $   7,473,881   $   6,679,730
  Unproven properties                             7,065,759       6,780,530
  Office and other equipment                          8,905           7,876
                                              -------------   -------------
                                              $  14,548,545   $  13,468,136
Less accumulated depreciation, depletion
  and amortization                                1,737,068       1,648,581
                                              -------------   -------------
                                              $  12,811,477   $  11,819,555
Other Assets:
  Deferred loan costs - net                   $     257,344   $     318,999
  Other                                                   0          25,000
  Restricted cash                                   405,726         401,723
                                              -------------   -------------
                                              $     663,070   $     745,722
                                              -------------   -------------

TOTAL ASSETS                                  $  16,903,699   $  13,373,437
                                              =============   =============








            See accompanying notes to condensed financial statements.

                                      -2-
<PAGE>

                               CUBIC ENERGY, INC.
                            CONDENSED BALANCE SHEETS

                      LIABILITIES AND STOCKHOLDERS' EQUITY

                                             (Unaudited)
                                            Dec. 31, 2006    June 30, 2006
                                            -------------    -------------
Current liabilities:
  Current portion of long-term debt         $   1,000,000    $     500,000
    Accounts payable and accrued expenses         251,934          165,628
  Due to affiliates                                58,159        1,499,762
  Note payable to affiliate                     1,300,000                0
                                            -------------    -------------
Total current liabilities                   $   2,610,093    $   2,165,390
                                            -------------    -------------

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

Long-Term Liabilities
  Long-term debt - net of discounts         $   3,576,013    $   3,854,641
    Note payable to affiliate                           0        1,300,000
                                            -------------    -------------
                                            $   3,576,013    $   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 53,480,768 shares at
    December 31, 2006 and 42,450,768
    shares at June 30, 2006                 $   2,674,040        2,122,540

  Additional paid-in capital                   22,941,283       17,452,784

  Accumulated deficit                         (14,897,730)     (13,521,918)
                                            -------------    -------------

Stockholders' equity                        $  10,717,593    $   6,053,406
                                            -------------    -------------

                                            $  16,903,699    $  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
                                             Dec. 31, 2006    Dec. 31, 2005
                                             -------------    -------------
Revenue:
  Oil and gas sales                          $      86,263    $     163,851
                                             -------------    -------------

Total revenue                                $      86,263    $     163,851
                                             -------------    -------------

Costs and expenses:
  Oil and gas production, operating and
    development costs                        $      88,944    $      90,235
     General and administrative expenses           353,173          665,670
  Depreciation, depletion and amortization          37,099           70,110
                                             -------------    -------------

Total costs and expenses                     $     479,216    $     826,015
                                             -------------    -------------

Operating income (loss)                      $    (392,953)   $    (662,164)
                                             -------------    -------------

Non-operating income (expense):
  Gain (loss) on sales of securities         $           0    $           0
  Other income                                       2,784                0
  Interest expense                                (323,588)         (53,274)
  Amortization of loan costs                       (30,828)          (7,799)
                                             -------------    -------------

Total non-operating income (expense)         $    (351,632)   $     (61,073)
                                             -------------    -------------

Income (loss) before taxes:                  $    (744,585)   $    (723,237)
                                             -------------    -------------

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

Net income (loss)                            $    (744,585)   $    (723,237)
                                             =============    =============

Net gain (loss) per common share
  - basic and diluted                        $      (0.016)   $      (0.020)
                                             =============    =============

Weighted average common shares outstanding
  - basic and diluted                           46,967,725       35,635,409
                                             =============    =============




            See accompanying notes to condensed financial statements.

                                      -4-
<PAGE>

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

                                              For the Six      For the Six
                                             Months Ended     Months Ended
                                             Dec. 31, 2006    Dec. 31, 2005
                                             -------------    -------------
Revenue:
  Oil and gas sales                          $     218,369    $     310,033
                                             -------------    -------------

Total revenue                                $     218,369    $     310,033
                                             -------------    -------------

Costs and expenses:
  Oil and gas production, operating and
    development costs                        $     188,575    $     168,728
    General and administrative expenses            612,853          774,567
  Depreciation, depletion and amortization          88,486          140,840
                                             -------------    -------------

Total costs and expenses                     $     889,914    $   1,084,135
                                             -------------    -------------

Operating income (loss)                      $    (671,545)   $    (774,102)
                                             -------------    -------------

Non-operating income (expense):
  Gain (loss) on sales of securities         $           0    $           0
  Other income                                       4,531                0
  Interest expense                                (647,144)        (106,627)
  Amortization of loan costs                       (61,655)         (15,604)
                                             -------------    -------------

Total non-operating income (expense)         $    (704,268)   $    (122,231)
                                             -------------    -------------

Income (loss) before taxes:                  $  (1,375,813)   $    (896,333)

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

Net income (loss)                            $  (1,375,813)   $    (896,333)
                                             =============    =============

Net gain (loss) per common share
  - basic and diluted                        $       (0.03)   $      (0.025)
                                             =============    =============

Weighted average common shares outstanding
  - basic and diluted                          45,813,866      35,398,896
                                             ============    ============




            See accompanying notes to condensed financial statements.

                                      -5-
<PAGE>
<TABLE>
<CAPTION>

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

                                                      For the Six      For the Six
                                                     Months Ended     Months Ended
                                                     Dec. 31, 2006    Dec. 31, 2005
                                                     -------------    -------------
<S>                                                  <C>              <C>
Cash flows from operating activities:
Net income (loss)                                    $  (1,375,813)   $    (896,333)
Adjustments to reconcile net income (loss)
  to cash provided (used) by operating activities:
  Depreciation, depletion and amortization                 371,514          193,869
  Stock grant expense                                      243,100          483,570
  Stock issued for interest                                      0           34,525
Net change in assets and liabilities:
  (Increase) decrease in accounts receivable               (29,963)         (31,253)
  (Increase) decrease in prepaid and other                       0          (55,300)
  Increase (decrease) in loan from affiliate                30,810            3,567
  Increase (decrease) in accounts payable and
    accrued liabilities                                     86,306          100,865
                                                     -------------    -------------
Net cash provided (used) by operating activities     $    (674,046)   $    (166,490)
                                                     -------------    -------------


Cash flows from investing activities:
  Acquisition of oil & gas properties                $  (1,079,381)   $     (46,291)
  Purchase of office equipment                              (1,029)          (3,003)
  Income in restricted cash                                 (4,003)
Payments from advances on development costs             (1,323,543)        (687,705)
                                                     -------------    -------------
Net cash provided (used) by investing activities     $  (2,407,956)   $    (736,999)
                                                     -------------    -------------


Cash flows from financing activities:
  Issuance of common stock, net                      $   6,040,000    $   1,770,424
  Repayment of advances                                   (100,000)               0
                                                     -------------    -------------
                                                     $   5,940,000    $   1,770,424
                                                     -------------    -------------
Net increase (decrease) in cash and
  cash equivalents                                   $   2,857,998    $     866,935
                                                     -------------    -------------

Cash at beginning of period                                259,157          257,253
                                                     -------------    -------------
Cash at end of period                                $   3,117,155    $   1,124,188
                                                     =============    =============
</TABLE>




            See accompanying notes to condensed financial statements.

                                      -6-
<PAGE>

                               CUBIC ENERGY, INC.

                          NOTES TO FINANCIAL STATEMENTS
                             AS OF DECEMBER 31, 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 December 31, 2006, and for the
three-month  and six- month periods ended December 31, 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 with certain investors that are
unaffiliated  with the Company.  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.


                                      -7-
<PAGE>

On December 15, 2006, the Company entered into  Subscription  and  Registrations
Rights  Agreements (the  "Subscription  Agreements") with certain investors (the
"Investors").  One of the Investors,  William Bruggeman (and entities affiliated
with him) was the beneficial owner, prior to this transaction,  of approximately
23.0% of the common stock of the Company.  Another Investor,  Bob Clements, is a
director of the Company.  The remaining  Investors had no material  relationship
with Company.

Pursuant  to  the   Subscription   Agreements,   the  Investors  paid  aggregate
consideration of $3,940,000 to the Company for 7,880,000 shares of the Company's
common stock and warrants exercisable into 3,940,000 shares of common stock. The
warrants are exercisable through November 30, 2011, at $0.70 per share.

The shares and warrants were issued by the Company in reliance upon an exemption
from  registration  set  forth  in  Regulation  D  and/or  Section  4 (2) of the
Securities Act of 1933, as amended,  which exempts transactions by an issuer not
involving a public offering.

Stock Grants:

On December 29, 2005, the  shareholders  of the Company  approved the 2005 Stock
Option Plan (the "Plan") and 3,750,000 shares of common stock were reserved,  of
which 1,169,000 shares have been issued through December 31, 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 was  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 December 31, 2006.

On January 10 and  January  18,  2007,  the  Company  issued  489,500 and 52,500
un-registered  shares,  respectively,   to  the  officers,  directors,  and  key
employees of the Company  pursuant to the Plan. As of such dates,  the aggregate
market value of the common stock  granted was $391,600 and $42,000  based on the
last sale price on the OTC Bulletin  Board of the Company's  common stock.  Such
amounts will be amortized to  compensation  expense on a quarterly  basis during
calendar year 2007, beginning with the quarter ending March 31, 2007.

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.


                                      -8-
<PAGE>

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  December  31, 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 $30,828 for the quarter
ended December 31, 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 not 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 December 31, 2006.

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.

As has been  previously  disclosed,  on September 19, 2006,  the Lender 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, and the sections
in which the wells were drilled.

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 some 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.


                                      -9-
<PAGE>

The Lender  sent a letter  dated  December  4, 2006  stating  that the  curative
measures taken to cure this title default are  insufficient and that the Company
remains in default.  This letter  demands that the Company pay default  interest
[17.5%,  a 5%  increase  over the  current  interest  rate]  while such  default
remains.

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 curative  actions  resolved any default within the applicable  cure
period. The Company timely responded to the September 19, 2006 default notice to
that effect.

In addition,  the December 4, 2006 letter  stated that the Company is in default
for failing to retain a third-party  engineer to provide a June 30, 2006 reserve
report  for the  Company's  Texas  properties.  These  properties  represent  an
extremely  small value of the  Company's  total  proved  reserves as of June 30,
2006.

On January 15, 2007, the Company delivered to the Lender a June 30, 2006 reserve
report for the  Company's  Texas  properties  which  management  believes  fully
complies with the requirements of the Credit Agreement.

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.

On February 2, 2007, the Tauren Note was retired  pursuant to a provision in the
note that required payment from the proceeds of an equity  offering.  The equity
offering that occurred in December,  2006, (see Stock Issuance elsewhere herein)
was sufficient to facilitate such repayment.





                                      -10-
<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.















                                      -11-
<PAGE>

Item 2.   Management's Discussion and Analysis

Results of Operations:

Three Months Ended December 31, 2006 Compared To Three Months Ended December 31,
2005:

Oil and gas sales  decreased 47% to $86,263 for the quarter  ended  December 31,
2006 from  $163,851 for the quarter  ended  December 31, 2005  primarily  due to
lower gas prices and volumes.

Oil and gas  production,  operating and  development  costs decreased to $88,944
(103% of oil and gas sales) for 2006 from $90,235 (55% of oil and gas sales) for
2005 mainly due to a decrease  in  swabbing  and  wireline  services,  partially
offset by increases in saltwater disposal costs and ad valorem taxes.

General and  administrative  expenses  decreased  47% to $353,173  for 2006 from
$665,670  in 2005  primarily  as a result of a $362,020  decrease in stock grant
compensation allocation for the quarter.

Depreciation, depletion, and amortization decreased 47% to $37,099 for 2006 from
$70,110 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 and a decrease
in total production.

Interest  expense  increased to $323,588 in 2006 from $53,274 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.

Six Months  Ended  December 31, 2006  Compared to Six Months Ended  December 31,
2005:

Oil and gas sales  decreased  30% to $218,369 for the six months ended  December
31, 2006 from $310,033 for the six months ended  December 31, 2005 primarily due
to lower gas prices and volumes.

Oil and gas production,  operating and  development  costs increased to $188,575
(86% of oil and gas sales) for 2006 from $168,728 (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  decreased  21% to $612,853  for 2006 from
$774,567  in  2005  primarily  due  to  a  $240,470   decrease  in  stock  grant
compensation  allocation  for the  period,  partially  offset by an  increase in
salaries and compensation as a result of an increase in the number of employees.

Depreciation, depletion, and amortization decreased 37% to $88,486 for 2006 from
$140,840 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  and a
decrease in total production.

Interest expense  increased to $647,144 in 2006 from $106,627 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.


                                      -12-
<PAGE>

Liquidity and Capital Resources:

During the six months ended  December  31,  2006,  the Company used cash flow in
operating  activities of $(674,046).  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 $819,059 at December 31,
2006 from  $(1,357,230)  at June 30, 2006,  primarily due to an increase in cash
and cash equivalents resulting from the issuance of common stock. On July 28 and
December 15, 2006, we raised  $2,100,000 and $3,940,000,  respectively,  through
the private placement of common stock.

The Company plans to fund its  development and  exploratory  activities  through
cash provided  from  operations  and the issuance of  additional  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 2007.
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.

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 existing cash
and cash  provided  by  operations  and  curtail  its  planned  development  and
exploratory activities.

As has been  previously  disclosed,  on September 19, 2006,  the Lender 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, and the sections
in which the wells were drilled.

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 some deep ownership rights with respect to a portion of certain leases
in Sections 20, 29 and 30 of Township 14N Range 15W.


                                      -13-
<PAGE>

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.

The Lender  sent a letter  dated  December  4, 2006  stating  that the  curative
measures taken to cure this title default are  insufficient and that the Company
remains in default.  This letter  demands that the Company pay default  interest
[17.5%,  a 5%  increase  over the  current  interest  rate]  while such  default
remains.

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 curative  actions  resolved any default within the applicable  cure
period. The Company timely responded to the September 19, 2006 default notice to
that effect.

In addition,  the December 4, 2006 letter  stated that the Company is in default
for failing to retain a third-party  engineer to provide a June 30, 2006 reserve
report  for the  Company's  Texas  properties.  These  properties  represent  an
extremely  small value of the  Company's  total  proved  reserves as of June 30,
2006.

On January 15, 2007, the Company delivered to the Lender a June 30, 2006 reserve
report for the  Company's  Texas  properties  which  management  believes  fully
complies with the requirements of the Credit Agreement.

Item 3.   Controls and Procedures

Our principal executive and financial officer have concluded that our disclosure
controls and procedures under Rule 13a-15 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 changes in internal  controls or other factors
that could significantly affect these internal controls.





                                      -14-
<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 2.   Unregistered Sales of Equity Securities and Use of Proceeds

The  information  required is set forth in the Company's Form 8-K filed December
19, 2006.

Item 6.   Exhibits

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















                                      -15-
<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:  February 14, 2007                         /s/ Calvin A. Wallen, III
                                                 -------------------------------
                                                 Calvin A. Wallen, III, CEO


Date:  February 14, 2007                         /s/ James L. Busby
                                                 -------------------------------
                                                 James L. Busby, CFO















                                      -16-