<PAGE> 1
U. S. 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 January 31, 1998
----------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
--------------- ----------------
Commission File No. 33-2249-FW
MILLER PETROLEUM, INC.
----------------------
(Name of Small Business Issuer in its Charter)
TENNESSEE 75-2072206
--------- ----------
(State or Other Jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
3651 Baker Highway
Huntsville, Tennessee 37756
----------------------------
(Address of Principal Executive Offices)
Issuer's Telephone Number: (423) 663-9457
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 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.
(1) Yes X No (2) Yes X No
--- --- --- ---
<PAGE>
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the Issuer has filed all documents and reports required to be
filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a Plan confirmed by a court. Yes No X
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the Registrant's classes
of common stock, as of the latest practicable date:
March 12, 1998
6,609,703
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The Financial Statements of the Registrant required to be filed with
this 10-QSB Transition Report were prepared by management and commence on the
following page, together with related Notes. In the opinion of management,
the Financial Statements fairly present the financial condition of the
Registrant.
<TABLE>
MILLER PETROLEUM, INC.
Consolidated Balance Sheets
<CAPTION>
ASSETS January 31, April 30,
1998 1997
Unaudited
<S> <C> <C>
CURRENT ASSETS
Cash $108,143 $64,531
Accounts receivable - trade, net 317,946 149,459
Total Current Assets 426,089 213,990
FIXED ASSETS
Machinery and equipment 1,555,654 481,862
Vehicles 274,789 227,537
Buildings 184,624 173,375
Office Equipment 54,851 27,272
Less: accumulated depreciation (546,809) (466,819)
Total Fixed assets 1,523,109 443,227
OIL AND GAS PROPERTIES 2,208,213 275,500
OTHER ASSETS
Land 661,967 11,500
Investments 38,717 17,436
Inventory 413,667 354,163
Total Other Assets 1,114,351 383,099
TOTAL ASSETS $5,271,762 $1,315,816
CURRENT LIABILITIES
Accounts payable - trade $35,457 $96,277
Accounts and notes payable -
affiliate 1,243,600 16,090
Accrued expenses 62,922 16,963
Notes payable - current portion 505,672 254,449
Total Current Liabilities 1,847,651 383,779
LONG-TERM LIABILITIES
Notes payable 455,810 142,573
Notes payable - shareholders 984,656
Total Long-Term Liabilities 1,440,466 142,573
Total Liabilities 3,288,117 526,352
STOCKHOLDERS' EQUITY
Common Stock: 500,000,000
shares authorized at
$0.0001 par value, 6,609,703
and 6,055,000 shares
issued and outstanding 661 606
Additional paid-in capital 1,665,084 684,532
Note receivable - shareholder - (304,355)
Retained earnings 317,900 408,681
Total Stockholders' Equity 1,983,645 789,464
TOTAL LIABILITIES AND
STOCKHOLDERS'S EQUITY $5,271,762 $1,315,816
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<TABLE>
MILLER PETROLEUM, INC.
Consolidated Statements of Operations
(UNAUDITED)
<CAPTION>
Three Months Nine Months
Ended
January 31, 1998
<S> <C> <C>
REVENUES
Service and drilling revenue $198,886 $492,330
Oil and gas revenue 166,638 250,140
Retail sales 31 43,431
Other revenue 133,471 155,739
Total Revenue 499,026 941,640
COSTS AND EXPENSES
Cost of oil and gas sales 87,507 220,622
Selling, general and
administrative 105,596 261,386
Salaries and wages 157,350 344,043
Depreciation, depletion and
amortization 80,396 147,026
Total Costs and Expenses 430,849 973,077
INCOME (LOSS) FROM OPERATIONS 68,177 (31,437)
OTHER INCOME (EXPENSE)
Interest income 4,259 14,823
Interest expense (49,841) (74,167)
Total Other Income (Expense) (45,582) (59,344)
INCOME TAXES 0 0
NET INCOME (LOSS) 22,595 (90,781)
NET EARNING (LOSS) PER SHARE 0.00 (0.01)
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 6,560,345 6,383,670
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<TABLE>
MILLER PETROLEUM, INC.
Consolidated Statement of Stockholders' Equity
(UNAUDITED)
<CAPTION>
Note
Additional Receivable
Common Shares Paid-in Retained From
Shares Amount Capital Earnings Stockholder Total
<S> <C> <C> <C> <C> <C> <C>
Balance
April 30, 1996 3,501,197 $350 $263,583 $356,688 - $620,621
Common stock
issued for
acquisition of
subsidiary 2,081,338 208 314,990 - - 315,198
Recapitalization 167,465 17 (17) - - -
Common stock
issued for cash
at $1,83 per share 55,000 6 100,644 - - 100,650
Common stock
issued for services
rendered 250,000 25 5,332 - - 5,357
Payment for note
receivable from
stockholder - - - - (304,355)(304,355)
Net income for the
year ended
April 30, 1997 - - - 51,993 - 51,993
Balance
April 30, 1997 6,055,000 606 684,532 408,681(304,355) 789,464
Net note receivable
from shareholder
with note payable
to shareholder - - - - 304,355 304,355
Common stock
issued for cash
at approximately
$1.75 336,222 34 586,984 - - 587,018
per share
Common stock
issued for
equipment
at $1.80 per
share 144,444 14 259,986 - - 260,000
Common stock issued
in AKS acquisition
at $2.00 per share 45,000 5 89,995 - - 90,000
Common stock issued
to pay note payable
at $1.50 per share 29,037 3 43,587 - - 43,590
Net loss for the nine
months ended
January 31, 1998 - - - (90,781) - (90,781)
Balance
January 31, 1998 6,609,703 662 1,665,084 317,900 0 1,983,646
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
<TABLE>
MILLER PETROLEUM, INC.
Consolidated Statement of Cash Flows
(UNAUDITED)
<CAPTION>
Three Months Nine Months
Ended
January 31, 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $22,595 ($90,781)
Adjustments to Reconcile Net Income to
Net Cash Provided (Used) by Operating
Activities:
Depreciation, depletion and amortization 80,396 147,026
Disposition of equipment and property - 4,306
Changes in Operating Assets and Liabilities:
Decrease (increase) in accounts
receivable (191,415) (168,487)
Decrease (increase) in inventory (35,988) (59,504)
Increase (decrease) in accounts payable (37,188) (60,820)
Increase (decrease) in accrued expenses 48,366 45,959
Net Cash Provided (Used) by Operating
Activities (113,234) (182,301)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (623,748) (809,872)
Purchase of land (150,467) (650,467)
Purchase of investments (16,476) (21,281)
Purchase of oil and gas properties (1,778,594) (1,995,443)
Net Cash Provided (Used) by Investing
Activities (2,569,285) (3,477,063)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments from notes receivable 0 52,138
Sale of common stock 43,590 720,607
Proceeds from borrowings 2,761,154 3,005,733
Payments for notes payable (66,890) (75,502)
Net Cash Provided (Used) by Financing
Activities $2,737,854 $3,702,976
NET INCREASE IN CASH $55,335 $43,612
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 52,808 64,531
CASH AND CASH EQUIVALENTS,
END OF PERIOD $108,143 $108,143
CASH PAID FOR
Interest $49,841 $74,167
Income taxes - -
NON-CASH FINANCING ACTIVITIES:
Common stock issued for equipment $90,000 $350,000
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
MILLER PETROLEUM, INC.
Notes to the Consolidated Financial Statements
January 31, 1998 and April 30,1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Certain information and footnote disclosures normally included in the
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these
financial statements be read in conjunction with the Registrant's April 30,
1997 Annual Report on Form 1OKSB. The results of operations for the period
ended January 31, 1998 are not necessarily indicative of operating results for
the full year.
On December 16,1997, the Company purchased 100% of the assets of AKS Energy
Corporation of Corbin, Kentucky. The total purchase price was $2,308,207, of
which $1,731,155 was for reserves. Miller paid $1,910,000 in cash, issued
$90,000 worth of common stock, and assumed debt of $308,207.
The consolidated financial statements and other information furnished herein
reflect all adjustment which are, in the opinion of management of the
Registrant, necessary for a fair presentation of the results of the interim
periods covered by this report.
NOTE 2 - RELATED PARTY TRANSACTIONS
During the nine months ended January 31, 1998, the Company purchased real
property from a major shareholder's wife. The property is located in
Huntsville, Tennessee and is currently used as an office, shop and equipment
yard by the Company. The appraisal price is $550,000 The Company paid $82,470
cash, assumed a $39,906 note payable with the First National Bank of Oneida,
and issued a note payable for $377,624 to the seller. The note is secured by
the real property and bears 7% interest. An annual payment of $92,019 plus
interest is due beginning August 1,1998. The total purchase price of the above
real property is $500,000.
The Company purchased drilling equipment from a shareholder for the sum of
$360,000. Payment was made with a combination of cash and the issuance of
common shares in the Company, $100,000 in cash and 144,444 shares of common
stock was issued for the balance of $260,000. The equipment was appraised at
$383,000.
The Company issued a note receivable of $860,000 at eight percent with a seven
year term to a investor. The note included 688,000 warrants which can
exercised during the term of the note receivable for $1.25 per share.
Furthermore, the ratio of warrants to common stock as of the date of the note
receivable will be maintained.
The Company has issued notes receivable that mature in six months to the above
mentioned investor and Mr. Herman Gettelfinger, a Director of this
Company, for $710,000 and $525,000 respectively. The Company is seeking to
refinance said notes on a long-term basis. However, the Company will be able
to "rollover" said notes until permanent financing is obtained.
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation.
Plan of Operation
- -----------------
During the next 12 months, Miller intends to commence full scale
development of its oil and gas leases. The Company plans a thirty well
drilling program on the northern portion of its "Koppers Lease" in Campbell
County, Tennessee, to develop gas reserves from the Devonian Shale and Big
Lime formations. (It has been estimated that the Devonian Shale in the
Appalachian Basin, discovered in the early part of this century, has produced
on the order of 2 TCF of gas.) Industry partners have agreed to participate
for a 25% working interest with the Company retaining a 75% working interest
in the wells. Drilling depth will average 3,000 feet.
Additionally, Miller plans to drill five wells on its newly acquired
AKS Energy, ("SMEPA"), leasehold in Kentucky to assess and develop several
promising reservoirs discovered by AKS Energy prior to its sale. One outside
operated direct offset well to the "SMEPA Lease" has a cumulative production
of over 1 BCF since 1965 and is still producing. Other producing wells in this
offsetting field have cumulative production to date of over 350 MMCF each.
Miller is currently remapping the entire acreage position, including
lineaments, to better assess this potential.
A coalbed methane, (CBM), core is also scheduled this spring to
assess the CBM potential of the "SMEPA Lease". (To date, no CBM reserves have
been booked.) Gross coal thicknesses of over 14' have been logged in the field
with natural gas shows documented in all wells drilled in recent years. Gross
coal isopachous mapping has estimated 650 million tons of coal underlying
natural surface drainage over the entire lease. Assuming a gas content of 200
SCF/ton, the total coalbed methane in place would be 130 BCF. Given a recovery
factor of 60% with a drainage area of 80 acres per well as estimated by
operators of CBM fields within 70 miles of the property, CBM development will
provide very favorable economics to Miller. Full field development would yield
a theoretical ultimate recovery of 78 BCF. With positive results from the core
data, industry partners will be solicited to participate in the development of
these reserves.
Another five wells are slated to further the development of the
Jellico Mountain member of the Big Lime in Campbell County, Tennessee. Several
wells drilled to date have tested in excess of 1 to 2 MMCFD open flow with one
well initially producing in excess of 600 MCFD in the line. Four additional
wells are scheduled to be brought on line in the next quarter with completion
of a 4.4 mile pipeline. Part of this development will be through the Company's
joint venture with Delta Producers, Inc., of Greenville, Mississippi.
Miller continues to divest and upgrade its inventory of rolling
stock. The Company is currently in negotiations to sell two of its
Ingersoll-Rand RD-10 tophead drive drilling rigs and replace them with a newer
Ingersoll-Rand model RD-20. The newer equipment will provide Miller with the
ability to drill current objectives more efficiently while allowing for the
capability to target deeper prospects as they are identified.
Miller continues to be leader in information technology, utilizing
the latest computer graphics and analytical tools for geologic exploration,
drilling and development. The Company's Geology and Exploration Department has
already identified several previously unknown geologic features that
management feel could hold significant hydrocarbon reserves. It is Millers'
intention to test the most promising prospects over the next twelve months.
Miller continues to analyze exiting oil and gas production
properties brought to market. Prospects identified for sale at or below
Miller's targeted finding costs that enhance Miller's strategic advantages
will be aggressively pursued for acquisition.
Deloy Miller, CEO, stated, "We now have the technical and managerial
staff in place to begin exploitation of our strong acreage position. Our
command of these areas is unparalleled. With the completion of our
capitalization, we will be poised for explosive growth over the next few
months."
Results of Operations
- ---------------------
During the nine months ended January 31, 1998, the Company
received total revenues of $941,640, including service and drilling revenue of
$492,330 and oil and gas revenue of $250,140. Total costs and expenses during
this period were $973,077, and the Company had a net loss from operations of
$31,437. Net loss during the six month period ended October 31, 1997, was
$90,781, or $0.01 per share.
On December 29, 1997, Ronnie Griffith was appointed President of
Miller Petroleum. Mr. Griffith founded Griffith Well Services in 1983 to
provide well services to the booming oil and gas industry in the southern
Appalachian Basin. Griffith Well Services grew to five service rigs, surviving
and prospering during the turbulent ups and downs of the industry. In
December, 1992, Griffith Well Services was merged with AKS Energy with Mr.
Griffith taking the position of Vice President, Exploration and Development.
There, he supervised the drilling and completion of 250 oil and gas wells and
the installation and operation of seven compressor stations and 70 miles of
pipeline. In addition to supervisory duties, he lead the negotiation of
acquisitions, bank financing, gas contracts, lease agreements, and,
ultimately, the sale of the company. In 1995, he was awarded the position of
President, AKS Energy Co. Mr. Griffith attended Knoxville Business College.
Mr. Griffith has been active in the Appalachian Basin for over 17 years.
Deloy Miller, former President, assumed the position of CEO and
Chairman of the Board of Directors.
Miller purchased 100% of the assets of AKS Energy Corporation, a
subsidiary of Arakis Energy Corporation of Calgary, Canada, on December 16,
1997 for $2,308,207, of which $1,731,155 was for reserves. See Form 8-K
Current Report filed on or about March 17, 1998.
Liquidity
- ---------
The Company as of January 31, 1998 had cash of $108,143, with
current liabilities of $1,847,651.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None; not applicable.
Item 2. Changes in Securities.
None; not applicable.
Item 3. Defaults Upon Senior Securities.
None; not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
None; not applicable.
Item 5. Other Information.
None; not applicable.
Item 6. Exhibits and Reports on Form 8-K.*
(a) Exhibits.
None.
(b) Reports on Form 8-K.
Filed on or about March 17, 1998.
* A summary of any Exhibit is modified in its entirety by reference to the
actual Exhibit.
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.
MILLER PETROLEUM, INC.
Date: 3/13/98 By:/s/Deloy Miller
----------------- -----------------------------
Deloy Miller, President and
Director
Date: 3/13/98 By:/s/Lawrence L. LaRue
----------------- -----------------------------
Lawrence L. LaRue,
Secretary/Treasurer and Director
Date: 3/13/98 By:/s/Herman Gettelfinger
----------------- -----------------------------
Herman Gettelfinger, Director
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-END> JAN-31-1998
<CASH> 108143
<SECURITIES> 0
<RECEIVABLES> 317946
<ALLOWANCES> 0
<INVENTORY> 413667
<CURRENT-ASSETS> 426089
<PP&E> 2069918
<DEPRECIATION> 546809
<TOTAL-ASSETS> 5271762
<CURRENT-LIABILITIES> 1847651
<BONDS> 0
0
0
<COMMON> 661
<OTHER-SE> 1982984
<TOTAL-LIABILITY-AND-EQUITY> 5271762
<SALES> 43431
<TOTAL-REVENUES> 941640
<CGS> 220622
<TOTAL-COSTS> 973077
<OTHER-EXPENSES> 59344
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 74167
<INCOME-PRETAX> (90781)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (90781)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
