<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 January 31, 1999
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
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Commission File No. 33-2249-FW
MILLER PETROLEUM, INC.
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(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
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Not applicable.
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:
January 31, 1999
6,907,123
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The Financial Statements of Miller Petroleum, Inc., a Tennessee
corporation (the "Company"), required to be filed with this 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
January 31, April 30,
1999 1998
Unaudited
<S> <C> <C>
CURRENT ASSETS
Cash $44,342 $66,709
Accounts receivable - trade-, net 358,376 333,251
402,718 399,960
FIXED ASSETS
Machinery and equipment 1,577,692 1,445,099
Vehicles 317,765 317,765
Buildings 313,335 257,223
Office Equipment 73,172 61,067
Less: accumulated depreciation (699,886) (573,047)
Total Fixed assets 1,582,078 1,508,107
OIL AND GAS PROPERTIES 2,522,539 2,205,644
PIPELINE FACILITIES 464,230 45,457
OTHER ASSETS
Land 511,500 511,500
Investments 500 16,784
Inventory 464,504 507,271
Organization Cos. 223 223
Total Other Assets 976,727 1,035,778
TOTAL ASSETS $5,948,292 $5,194,946
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable - trade $347,715 $189,734
Accrued expenses 62,688 36,997
Notes payable - current portion 391,534 161,772
Total Current Liabilities 801,937 388,503
LONG-TERM LIABILITIES
Notes payable - related 133,668 126,796
Notes payable 2,927,127 2,489,476
Total Long-Term Liabilities 3,060,795 2,616,272
Total Liabilities 3,862,732 3,004,775
STOCKHOLDERS' EQUITY
Common Stock: 500,000,000 shares
authorized at $0.0001 par value,
6,907,123 and 6,646,067 shares
issued and outstanding 691 666
Additional paid-in capital 2,245,178 1,705,080
Retained Earnings (160,309) 484,425
Total Stockholders' Equity 2,085,560 2,190,171
TOTAL LIABILITIES AND
STOCKHOLDERS'S EQUITY $5,948,292 $5,194,946
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<TABLE>
MILLER PETROLEUM, INC.
Consolidated Statements of Operations
(UNAUDITED)
Three Months Nine Months
Ended
January 31, 1999
<S> <C> <C>
REVENUES
Service and drilling revenue $265,951 $1,147,833
Oil and gas revenue 175,463 458,455
Retail sales 38,500 49,307
Other revenue 4,241 17,731
Total Revenue 484,155 1,673,326
COSTS AND EXPENSES
Cost of sales 219,701 735,363
Selling, general and administrative 160,811 443,601
Salaries and wages 184,616 601,395
Depreciation, depletion and amortization 109,795 286,072
Total Costs and Expenses 674,923 2,066,431
INCOME (LOSS) FROM OPERATIONS (190,768) (393,105)
OTHER INCOME (EXPENSE)
Interest income 3,632 12,112
Interest expense (81,831) (263,742)
Total Other Income (Expense) (78,199) (251,630)
INCOME TAXES 0 0
NET INCOME (LOSS) (268,967) (644,735)
NET EARNING (LOSS) PER SHARE (0.04) (0.10)
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 6,776,595 6,749,660
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<TABLE>
MILLER PETROLEUM, INC.
Consolidated Statement of Stockholders' Equity
(UNAUDITED)
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
$2.19 per share 150,000 15 328,110 - - 328,125
Common stock
issued for cash at
$2.00 per share 60,500 5 120,994 - - 120,999
Common stock
issued for cash at
$1.80 per share 28,556 3 51,397 51,400
Common stock
issued for services
at $1.80 per share 22,000 2 39,598 - - 39,600
Net loss for the nine
months ended
January 31, 1999 (644,735) (644,735)
Balance
January 31, 1999 6,907,123 $691 $2,245,179 $(160,310) $0 $2,085,560
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
<TABLE>
MILLER PETROLEUM, INC.
Consolidated Statement of Cash Flows
(UNAUDITED)
Three Months Nine Months
Ended
January 31, 1999
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($268,967) ($644,735)
Adjustments to Reconcile Net Income to
Net Cash Provided (Used) by Operating
Activities:
Depreciation, depletion and amortization 109,795 286,072
Disposition of equipment and property 14,420
Changes in Operating Assets and Liabilities:
Decrease (increase) in accounts receivable 89,930 (25,125)
Decrease (increase) in inventory (2,829) 42,767
Increase (decrease) in accounts payable (98,651) 157,981
Increase (decrease) in accrued expenses 20,385 25,691
Net Cash Provided (Used) by Operating
Activities (150,337) (142,929)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (31,185) (215,864)
Disposal of investments 16,284 16,284
Purchase of oil and gas properties (130,481) (455,244)
Purchase of pipeline (4,520) (439,022)
Net Cash Provided (Used) by Investing
Activities (149,902) (1,093,846)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable (40,486) (1,419,783)
Sale of common stock 90,999 540,123
Proceeds from borrowings 294,068 2,094,068
Net Cash Provided (Used) by Financing
Activities $344,581 $1,214,408
NET INCREASE IN CASH $44,342 ($22,367)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 0 66,709
CASH AND CASH EQUIVALENTS,
END OF PERIOD $44,342 $44,342
CASH PAID FOR
Interest $81,831 $263,742
Income taxes - -
NON-CASH FINANCING ACTIVITIES:
Common stock issued for services $36,000 $36,000
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
MILLER PETROLEUM, INC.
Notes to the Consolidated Financial Statements
January 31, 1999 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 January 31, 1999 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 nine months ended January 31, 1999, 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.
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Item 2. Management's Discussion and Analysis or Plan of Operation.
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Plan of Operation
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Total gas sales from the Company's Stoney Fork Field in southeastern
Kentucky during the third quarter were at their highest level since the
Company acquired the field in December, 1997. Likewise, third quarter gas
sales from the Company's Jellico Field and pipeline in Tennessee were 33%
higher than second quarter sales.
Wet, spring-like conditions have delayed drilling and field
operations for the third quarter ending January 31, 1999. However, a total of
four coalbed methane ("CBM") wells were drilled in Kentucky and one
conventional well was drilled in Tennessee.
KENTUCKY
The Company drilled four CBM wells in its Stoney Fork Field in
December, 1998 and January, 1999. Of these new wells, one was put on
production January 13, 1999. There are now a total of six CBM wells producing
and three awaiting hook-up in the Stoney Fork Field. Negotiations are now
underway to acquire additional offsetting acreage for future development. CBM
production now accounts for 26% of the Company's Kentucky production.
TENNESSEE
The Robert Cox #4 well was stimulated with a two stage combination
foamed sand and foamed acid job on December 31, 1998, and put in line January
4, 1999. Production was enhanced 1400% after stimulation despite a problem
with the flowline early in the month. This was only the second well in the
new Jellico Pipeline system to be stimulated. A total of eight wells now
produce through the Jellico Pipeline, with an additional six wells waiting on
hook-up. Of these, six wells are scheduled for stimulation.
The Davis 1B well was drilled to 1950'TD in the Big Lime February
11, 1999, which is after the period covered by this Report. Natural shows of
gas were noted in the Big Lime. This well is scheduled for stimulation in the
fourth quarter.
Liquidity and Capital Resources
- -------------------------------
Investments during the third quarter of the Company's fiscal year
included the addition of $455,244 to oil and gas properties, $215,864 in
equipment and $439,022 for a pipeline completion in Tennessee and a pipeline
addition in Kentucky.
Cash and cash equivalents at January 31, 1999, decreased by $22,367
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 its cash requirements for the next 12 months.
Results of Operations
- ---------------------
The Company had revenues of $484,155 for the third quarter of its
fiscal year, down from the $729,292 in revenues recognized during the second
quarter. The decrease was due primarily due to less drilling and reduced
natural gas prices.
The Company's net loss before depreciation, depletion and
amortization for the third quarter was $159,172.
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 system
are Year 2000 compliant.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
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None; not applicable.
Item 2. Changes in Securities.
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During the quarterly period ended January 31, 1999, the Company
issued the following "unregistered" and "restricted" shares of common stock:
Name Date Number of Shares Consideration
- ---- ---- ---------------- -------------
Target Market
Development, Inc. 11-20-98 10,000 Services
Don Miller 12-3-98 10,000 Services
(1) 12-3-98 2,000 Services
Terrie J. Cross 12-14-98 2,223 $ 4,001
Cameron Cross 12-14-98 1,111 $ 2,000
Dawn C. Stacy 12-14-98 1,111 $ 2,000
Rachael A. Stacy 12-14-98 1,111 $ 2,000
Troy B. Perin 12-14-98 8,000 $14,400
Bruce Coffey 12-14-98 15,000 $27,000
(1) One hundred "unregistered" and "restricted" shares were issued to
each of the Company's 20 employees, for a total of 2,000 shares.
The offer and sales of these securities are believed to have been
exempt from the registration requirement of Section 5 of the Securities Act of
1933 pursuant to Section 4 (2) thereof, and from similar states' securities
laws, rules and regulations.
Item 3. Defaults Upon Senior Securities.
--------------------------------
None; not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
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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.
None.
* 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: 3-12-99 By: /s/ Ronnie Griffith
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Ronnie Griffith, President and
Director
Date: 3-12-99 By: /s/ Lawrence L. LaRue
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Lawrence L. LaRue,
Secretary/Treasurer and Director
Date: 3-12-99 By: /s/ Deloy Miller
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Deloy Miller, CEO and Director
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-1999
<PERIOD-END> JAN-31-1999
<CASH> 44342
<SECURITIES> 0
<RECEIVABLES> 358376
<ALLOWANCES> 0
<INVENTORY> 464504
<CURRENT-ASSETS> 402718
<PP&E> 5268733
<DEPRECIATION> 699886
<TOTAL-ASSETS> 5948292
<CURRENT-LIABILITIES> 801937
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0
0
<COMMON> 691
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<TOTAL-LIABILITY-AND-EQUITY> 5948292
<SALES> 38500
<TOTAL-REVENUES> 484155
<CGS> 219701
<TOTAL-COSTS> 674923
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<INTEREST-EXPENSE> 81831
<INCOME-PRETAX> (268967)
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<NET-INCOME> (268967)
<EPS-PRIMARY> (.04)
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</TABLE>
