Does it work in virtual machine?

Cubic definitely works in a Virtual Machine. You probably did not allocate enough virtual disk space. In my experience with Virtual Box, you probably want to have at least 25GB of disk space. This will allow you enough space to install the Guest OS in Virtual Box, enough space to store the original *.iso file, enough space for packages and files installed into the chroot environment in Cubic, and enough space to generate the customized *.iso. (Also, I usually give the virtual machine 5096 GB of virtual memory).

Take a look at this question...
https://answers.launchpad.net/cubic/+question/671105

I did have a look and repeated the process of starting Cubic form the command line. In my case it stops right before getting into chroot environment and the cause seems to be missing stuff:

Prepare chroot environment
    Execute synchronously.................. mount --bind /dev
                                            "/iso/Server_14.04.5_LTS/squashfs-
                                            root/dev"
    Set a new process for thread id........ 140026566760192
    The new process id is.................. 17962
    Execute synchronously.................. mount --bind /run
                                            "/iso/Server_14.04.5_LTS/squashfs-
                                            root/run"
    Set a new process for thread id........ 140026566760192
    The new process id is.................. 17963
    Execute synchronously.................. mount --types proc proc
                                            /iso/Server_14.04.5_LTS/squashfs-
                                            root/proc
    Set a new process for thread id........ 140026566760192
    The new process id is.................. 17964
    Execute synchronously.................. mount --types sysfs sys
                                            /iso/Server_14.04.5_LTS/squashfs-
                                            root/sys
    Set a new process for thread id........ 140026566760192
    The new process id is.................. 17965
    Execute synchronously.................. mount --types devpts pts
                                            /iso/Server_14.04.5_LTS/squashfs-
                                            root/dev/pts
    Set a new process for thread id........ 140026566760192
    The new process id is.................. 17966
    Exception encountered in thread........ 140026566760192
    Ignore exception?...................... No
    The tracekback is...................... Traceback (most recent call last):
                                            File
                                            "/usr/share/cubic/transition.py",
                                            line 95, in run self.action()
                                            File
                                            "/usr/share/cubic/transition.py",
                                            line 332, in action self) File
                                            "/usr/share/cubic/transitions.py",
                                            line 797, in transition__from__new_p
                                            roject_page__to__terminal_page u
                                            tilities.prepare_chroot_environment(
                                            thread) File
                                            "/usr/share/cubic/utilities.py",
                                            line 1481, in
                                            prepare_chroot_environment with
                                            open(filepath, 'w') as file:
                                            FileNotFoundError: [Errno 2] No such
                                            file or directory:
                                            '/iso/Server_14.04.5_LTS/squashfs-
                                            root/var/lib/dbus/machine-id'
    Finished running thread with id........ 140026566760192

I've checked and dbus folder doesn't exist at all.

This doesn't look right...

Would you please open a bug for this?
(I think you can simply click the "Create bug report" link on this page).

Please include as much detail as you can:

What OS and version is your host machine.
What OS and version is your guest virtual machine?
How much space and memory you have for your virtual machine?
Which disgribution amd version of Ubuntu are you trying to customize using Cubic?

Done: https://bugs.launchpad.net/cubic/+bug/1802685

Thanks for your attention and support, much appreciated.

Fix released in release branch revision 44.