<PAGE>
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 October 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 62-1028629
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(State or Other Jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
3651 Baker Highway
Huntsville, Tennessee 37756
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(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:
October 31, 1998
6,856,567
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The Financial Statements of the Registrant required to be filed with
this 10-QSB Quarterly 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
October 31 April 30,
1998 1998
Unaudited
<S> <C> <C>
CURRENT ASSETS
Cash - $66,709
Accounts receivable - trade, net 448,306 333,251
Total Current Assaft 448,306 399,960
FIXED ASSETS
Machinery and equipment 1,548,142 1,445,099
Vehicles 317,765 317,765
Buildings 312,989 257,223
Office Equipment 71,882 61,067
Less: accumulated depreciation (656,879) (573,047)
Total Fixed assets 1,593,899 1,508,107
OIL AND GAS PROPERTIES 2,450,846 2,205,644
PIPELINE FACILITIES 467,710 45,457
OTHER ASSETS
Land 511,500 511,500
Investments 16,784 16,784
Inventory 461,675 507,271
Organization Costs 223 223
Total Other Assets 990,182 1,035,778
TOTAL ASSETS $5,950,943 $5,194,946
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade $446,366 $189,734
Accrued expenses 42,303 36,997
Notes payable - current portion 351,419 161,772
Total Current Liabilities 840,088 388,503
LONG-TERM LIABILITIES
Notes payable - related 131,337 126,796
Notes payable 2,715,991 2,489,476
Total Long-Term Liabilities 2,847,328 2,616,272
Total Liabilities 3,687,416 3,004,775
STOCKHOLDERS' EQUITY
Common Stock: 500,000,000 shares authorized at
$0.0001 par value, 6,856,567 and 6,646,067 shares
issued and outstanding 686 666
Additional paid-in capital 2,154,184 1,705,080
Retained earnings 108,657 484,425
Total Stockholders' Equity 2,263,527 2,190,171
TOTAL LIABILITIES AND STOCKHOLDERS'S EQUITY $5,950,943 $5,194,946
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<TABLE>
MILLER PETROLEUM, INC.
Consolidated Statements of Operations
(UNAUDITED)
<CAPTION>
Three Months Six Months
Ended
October 31, 1998
<S> <C> <C>
REVENUES
Service and drilling revenue $552,568 $881,882
Oil and gas revenue 159,810 282,992
Retail sales 3,450 10,807
Other revenue 13,464 13,490
Total Revenue 729,292 1,189,171
COSTS AND EXPENSES
Cost of sales 276,766 515,662
Selling, general and administrative 141,960 282,790
Salaries and wages 214,934 416,779
Depreciation, depletion and amortization 97,827 176,277
Total Costs and Expenses 731,487 1,391,508
INCOME (LOSS) FROM OPERATIONS (2,195) (202,337)
OTHER INCOME (EXPENSE)
Interest income 3,669 8,480
Interest expense (79,601) (181,911)
Total Other Income (Expense) (75,932) (173,431)
INCOME TAXES 0 0
NET INCOME (LOSS) (78,127) (375,768)
NET EARNING (LOSS) PER SHARE (0.01) (0.06)
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 6,856,567 6,826,317
</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, 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
Common stock issued
as bonus at $ 1.10
per share 36,364 4 39,996 - - 40,000
Net income for the
year ended
April 30, 1998 - - - 75,744 - 75,744
Balance
April 30,1998 6,646,067 666 1,705,080 484,425 0 2,190,171
Common stock
issued for cash at
approximately $2.19 150,000 15 328,110 - - 328,125
per share
Common stock
issued for cash at
approximately $2.00 60,500 5 120,994 - - 120,999
per share
Net loss for the six
months ended
October 31, 1998 (375,768) - (375,768)
6,856,567 $686 $2,154,184 $108,657 $ 0 $2,263,527
</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 Six Months
Ended
October 31, 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($78,127) ($375,768)
Adjustments to Reconcile Net Income to Net Cash
Provided (Used) by Operating Activities:
Depreciation, depletion and amortization 97,827 176,277
Disposition of equipment and property (8,626) (8,626)
Changes in Operating Assets and Liabilities:
Decrease (increase) in accounts receivable (107,608) (115,055)
Decrease (increase) in inventory - 45,596
Increase (decrease) in accounts payable 322,513 256,632
Increase (decrease) in accrued expenses 811 5,306
Net Cash Provided (Used) by Operating Activities 226,790 (15,638)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (72,758) (169,624)
Purchase of investments (142) -
Purchase of oil and gas properties (139,536) (329,021)
Purchase of pipeline (173,843) (422,253)
Net Cash Provided (Used) by Investing Activities (386,279) (920,898)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable (34,773)(1,359,297)
Sale of common stock 120,999 449,124
Proceeds from borrowings 0 1,780,000
Net Cash Provided (Used) by Financing Activities $86,226 $869,827
NET INCREASE IN CASH ($73,263) ($66,709)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 73,263 66,709
CASH AND CASH EQUIVALENTS,
END OF PERIOD $0 $0
CASH PAID FOR
Interest ($79,602) ($181,912)
Income taxes - -
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
MILLER PETROLEUM, INC.
Notes to the Consolidated Financial Statements
October 31, 1998 and April 30, 1998
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,
1998 Annual Report on Form 1OKSB. The results of operations for the period
ended October 31, 1998 are not necessarily indicative of operating results for
the full year.
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 six months ended October 31, 1998, the Company secured a $10
million master note line of credit with Bank One Texas NA in Houston. a draw
on said note was used to pay off a loan from a director of $525,000.
This was the only related party transaction.
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
Plan of Operation
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KENTUCKY
Miller Petroleum, Inc., completed a 4.2 mile 6@ and 4@ pipeline servicing one
existing Big Lime well and five coalbed methane (CBM) wells in the
northwestern portion of their South Mississippi Electric Power Association
(SMEPA) leasehold. Miller believes this project to be the first commercial
CBM field in the state of Kentucky. These wells were drilled by Miller to the
shallow Pennsylvanian coals with an estimated finding cost less than
$0.25/MCF. No water production has been noted to date. The wells produce
naturally open-hole without tubing. In-house geology has determined a
potential of 350 additional drill locations with recoverable reserves for the
project estimated up to 69 BCF. Production began October 24th, with four CBM
wells producing a total 200 MCFD. The Big Lime well, SMEPA #10, was put on
line at 120 MCFD against 400 psi flowing tubing pressure.
In addition to the CBM prospects, Miller believe there exists an additional 40
to 45 deeper Big Lime/Big Six targets. Directly offsetting their acreage are
three wells completed to these deeper horizons in the late 1950=s. Production
records beginning in 1965 indicate one well cumulating over 1 BCF, one over
370 MMCF, and one over 350 MMCF to date.
Plans are being made to drill another five CBM wells in December.
TENNESSEE
The Jellico Field averaged 928 MCFD for the month of October, with seven wells
producing into the new 6 1/2 mile 6@ pipeline. All but one well is producing
without stimulation. The Sharp #1 was stimulated with a two stage foamed acid
treatment in October and tested 1.3 MMCFD after treatment. It was put on line
October 18th at 285 MCFD.
Three additional wells were drilled in the Jellico Field, the Sowder #1, the
Medical Investors Group #1 and the J.L. Davis #1. All three are awaiting
stimulation before being put on line. The Robert Cox #4 is scheduled for a
two stage combination foamed sand and foamed acid job late in December or
early January.
Liquidity and Capital Resources
- -------------------------------
Investments during the first six months of the Company=s fiscal year included
the addition of $329,021 to oil and gas properties, $169,264 in equipment and
$422,253 for a pipeline completion in Tennessee and a pipeline addition in
Kentucky.
Cash and cash equivalents at October 31, 1998 decreased $66,709 from the April
30, 1998 balance due primarily to the investing activities noted above and a
payment on notes payable.
The Company believes that its current cash flow will be sufficient to support
their cash requirements for the next twelve months.
Results of Operations
- ---------------------
The Company had revenues of $729,292 for the second quarter of its fiscal
year, up from the $413,961 in revenues recognized during its first quarter.
The increase was due primarily due to drilling and natural gas sales in the
Jellico, Tennessee area.
Earnings before depreciation, depletion and amortization for the second
quarter were $19,700.
Year 2000 Compliance
- --------------------
The Company believes that its internal system of personal computers is Year
2000 compliant. It has no other computer systems. Management has confirmed
with its bank and its insurer that those entities' computer systems are Year
2000 compliant.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None; not applicable.
Item 2. Changes in Securities.
Pursuant to a Consent of Directors dated October 9, 1998, the
Company issued 60,500 shares of "unregistered" and "restricted" common stock
to the following persons: John R. Fiser (20,000 shares); T. S. Ballance (5,500
shares); Paul G. Hibben, Jr. (10,000 shares); Sherlene Hibben (5,000 shares);
and Christopher J. Gettelfinger (20,000 shares). Pursuant to a Consent of
Directors dated November 20, 1998 (which is subsequent to the period covered
by this Report), the Company caused 10,000 "unregistered" and "restricted"
shares of common stock to be issued to Target Market Development, Inc., in
consideration of services rendered.
The offers and sales of these securities are believed to have been
exempt from the registration requirements of Section 5 of the Securities Act
of 1933 pursuant to Section 4(2) thereof, and from similar states' securities
laws, rules and regulations requiring the offer and sale of securities by
available state exemptions from such registration.
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.
* 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: 12/10/98 By/s/Ronnie Griffith
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Ronnie Griffith, President and
Director
Date: 12/10/98 By/s/Lawrence L. LaRue
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Lawrence L. LaRue, Secretary/
Treasurer and Director
Date: 12/10/98 By/s/Deloy Miller
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Deloy Miller, CEO
and Director
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1999
<PERIOD-END> OCT-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 448306
<ALLOWANCES> 0
<INVENTORY> 461675
<CURRENT-ASSETS> 448306
<PP&E> 2250778
<DEPRECIATION> 656879
<TOTAL-ASSETS> 5950943
<CURRENT-LIABILITIES> 840088
<BONDS> 0
0
0
<COMMON> 686
<OTHER-SE> 2262841
<TOTAL-LIABILITY-AND-EQUITY> 5950943
<SALES> 10807
<TOTAL-REVENUES> 1189171
<CGS> 515662
<TOTAL-COSTS> 1391508
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 181911
<INCOME-PRETAX> (375768)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (375768)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
</TABLE>
