<PAGE>
As filed with the Securities and Exchange Commission on January 17, 2001.
==============================================================================
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
MILLER PETROLEUM, INC.
----------------------
(Name of small business issuer in its charter)
Tennessee 7389 62-1028629
--------- ---- ----------
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
3651 Baker Highway
Huntsville, Tennessee 37756
(423) 663-9457
--------------
(Address and telephone number of principal executive offices)
3651 Baker Highway
Huntsville, Tennessee 37756
----------------------------
(Address of principal place of business
or intended principal place of business)
Deloy Miller
3651 Baker Highway
Huntsville, Tennessee 37756
(423) 663-9457
--------------
(Name, address and telephone number of agent for service)
Copies to:
Branden T. Burningham, Esq.
455 East 500 South, Suite 205
Salt Lake City, Utah 84111
(801) 363-7411
Approximate date of proposed sale to the public: As soon as practicable after
the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933 (the "Securities Act"), other than securities offered only in
connection with dividend or interest reinvestment plans, check the following
box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ]
If this Form is a post effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
If this Form is a post effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box: [ ]
==============================================================================
CALCULATION OF REGISTRATION FEE
Title of
Each Proposed Proposed
Class of Maximum Maximum
Securities Amount of Offering Aggregate Amount of
to be shares to be Price per Offering Registration
Registered Registered Share (1) Price (1) Fee
==============================================================================
Common Stock (1) 1,625,152 $1.375 $2,234,584 $ 621.21
Common Stock (1)(2) 286,000 $1.00 $ 286,000 $ 79.51
Common Stock (1((3) 250,000 $1.50 $ 375,000 $ 104.25
Common Stock (1)(4) 350,000 $2.00 $ 700,000 $ 194.60
Common Stock (1)(5) 250,000 $2.50 $ 625,000 $ 173.75
TOTALS 2,761,152 $4,220,584 $1,173.32
==============================================================================
(1) These shares are registered on behalf of the selling stockholders and the
offering price and gross offering proceeds are estimated solely for the
purpose of calculating the registration fee in accordance with Rule 457
under the Securities Act on the basis of the average of the bid and asked
price of our common stock as quoted on the OTC Electronic Bulletin Board of
the National Association of Securities Dealers, Inc. (the "NASD") on the date
immediately prior to the filing of this registration statement.
(2) Represents shares issuable upon exercise of warrants issued by us having
an exercise price of $1.00 per share.
(3) Represents shares issuable upon exercise of warrants issued by us having
an exercise price of $1.50 per share.
(4) Represents shares issuable upon exercise of warrants issued by us having
an exercise price of $2.00 per share.
(5) Represents shares issuable upon exercise of warrants issued by us having
an exercise price of $2.50 per share.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES
AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
CROSS REFERENCE SHEET
Form SB-2 Item No. and Caption Prospectus Caption
------------------------------ ------------------
Item 1. Front of Registration Statement and Outside Front Cover
Outside Front Cover Page of Prospectus
Item 2. Inside Front and Outside Back Cover Pages Inside Front and Outside
of Prospectus Back Cover Pages
Item 3. Summary Information and Risk Factors Prospectus Summary; Risk
Factors
Item 4. Use of Proceeds Use of Proceeds
Item 5. Determination of Offering Price Outside Front Cover
Item 6. Dilution Dilution
Item 7. Selling Security Holders Selling Stockholders
Item 8. Plan of Distribution Outside Front Cover Page;
Plan of Distribution
Item 9. Legal Proceedings Legal Proceedings
Item 10.Directors, Executive Officers, Promoters Directors, Executive
and Control Persons Officers, Promoters
and Control Persons
Item 11.Security Ownership of Certain Beneficial Security Ownership of
Owners and Management Certain Beneficial
Owners and Management
Item 12.Description of Securities Outside Front Cover Page;
Description of Securities
Item 13.Interest of Named Experts and Counsel Interest of Named Experts
and Counsel
Item 14.Disclosure of Commission Position on Disclosure of Commission
Indemnification for Securities Act on Indemnification for
Liabilities Securities Act
Liabilities
Item 15.Organization Within the Last Five Years Not Applicable
Item 16.Description of Business Description of Business
Item 17.Management's Discussion and Analysis Management's Discussion
or Plan of Operation and Analysis or Plan of
Operation
Item 18.Description of Property Prospectus Summary;
Description of Business;
Item 19.Certain Relationships and Certain Relationships and
Transactions Related Transactions
Item 20.Market for Common Equity and Related Market for Common Equity
Stockholder Matters and Related Stockholder
Matters
Item 21.Executive Compensation Executive Compensation
Item 22.Financial Statements Financial Statements
Item 23.Changes in and Disagreements with Not Applicable
Accountants on Accounting
and Financial Disclosure
<PAGE>
PROSPECTUS
MILLER PETROLEUM, INC.
2,761,152 Shares of Common Stock Offered by Selling Stockholders
This prospectus covers an aggregate of 2,761,152 shares of our common
stock that the selling stockholders may sell. We have filed it with the
Securities and Exchange Commission as part of a registration statement that
you may examine in the Securities and Exchange Commission's EDGAR Archives.
Our common stock is quoted on the OTC Bulletin Board of the NASD under
the symbol "MILL." On January 16,2001, the date immediately prior to the
filing of this registration statement, the average bid price of our common
stock as quoted on the OTC Bulletin Board was $1.375.
These securities involve a high degree of risk. See the caption "Risk
Factors," beginning on page 4 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved any of these securities or passed upon
the adequacy or accuracy of the Prospectus. Any representation to the
contrary is a criminal offense.
The date of this prospectus is __________, 2001.
1
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TABLE OF CONTENTS
Prospectus Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Forward-Looking Information . . . . . . . . . . . . . . . . . . . . . . 8
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Determination of Offering Price and Dilution. . . . . . . . . . . . . . 8
Selling Security Holders . . . . . . . . . . . . . . . . . . . . . . . .9
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . 10
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Directors, Executive Officers, Promoters and Control Persons . . . . . 15
Security Ownership of Certain Beneficial Owners and Management . . . . 17
Description of Securities . . . . . . . . . . . . . . . . . . . . . . .18
Interest of Named Experts and Counsel . . . . . . . . . . . . . . . . .21
Disclosure of Commission Position on Indemnification for Securities . .21
Act Liabilities
Description of Business . . . . . . . . . . . . . . . . . . . . . . . 22
Management's Discussion and Analysis or Plan of Operation . . . . . . .28
Certain Relationships and Related Transactions . . . . . . . . . . . . 30
Market for Common Equity and Related Stockholder Matters . . . . . . . 31
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . 32
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 34
Changes in and Disagreements with Accountants on Accounting and . . . .53
Financial Disclosure
Available Information . . . . . . . . . . . . . . . . . . . . . . . . .53
Dealer Prospectus Delivery Obligations . . . . . . . . . . . . . . . . 53
2
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PROSPECTUS SUMMARY
MILLER PETROLEUM, INC.
----------------------
The Company
-----------
You should carefully read our entire prospectus and consolidated
financial statements and related notes. Unless the context requires
otherwise, "we," "us," "our" and similar terms, as well as references to
"Miller," refer to Miller Petroleum, Inc., a Tennessee corporation.
Our business includes the operation of gas and oil wells, the acquisition
and development of gas and oil leases, rebuilding and sales of oil field
equipment and the organization of joint venture drilling programs
with industry partners.
We own the building where our principal executive offices are located.
The building consists of approximately 4,000 square feet of office space and
an equipment yard on 14 acres situated at 3651 Baker Highway, Huntsville,
Tennessee. Our telephone number is (423) 663-9457.
The Offering
------------
Securities offered by us . . . .None.
Securities that may be sold
by our stockholders . . . . . . 2,761,152 shares of our common stock.
Use of proceeds . . . . . . . . We will not receive any money from the
selling stockholders when they sell shares of
our common stock; however, we may receive up
to $1,986,000 from the exercise of
outstanding warrants to acquire shares that
are being registered. As of the date of this
prospectus, none of these warrants has been
exercised, and the exercise price of over half
of the warrants is higher than the present
market price of our common stock.
Offering Price . . . . . . . . .Market prices prevailing at the time of sale,
at prices related to the prevailing market
prices, at negotiated prices or at fixed
prices, all of which may change.
Transfer Agent . . . . . . . . .Interwest Transfer Company, 1981 East Murray-
Holladay Road, Salt Lake City, Utah 84117,
Telephone No. 801-272-9294, serves as the
transfer agent and registrar for our
outstanding securities.
We have agreed to pay all costs and expenses relating to the registration
of our common stock. The selling stockholders will be responsible for any
related commissions, taxes, attorney's fees and other charges relating to the
offer or sale of these securities. The selling stockholders may sell their
common stock through one or more broker/dealers, and these broker/dealers may
receive compensation in the form of underwriting discounts, concessions or
commissions from the selling stockholders as they shall agree.
3
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RISK FACTORS
------------
Our present and intended business operations are highly speculative and
involve substantial risks. Only investors who can bear the risk of losing
their entire investment should consider buying our shares. Among the risk
factors that you should consider and be aware of are the following:
General Risks Related To Our Business.
--------------------------------------
We have very limited cash resources to allocate to future development of
oil and gas reserves.
---------------------
We will require substantial additional funding to realize our future
goals of conducting the oil and gas exploration operations on properties under
lease and acquiring additional oil and gas properties for development. We
will need to continue to raise funding through equity or debt financing, which
may be very difficult for our highly speculative enterprise. We can not
assure you that any additional funding will be available to us, or if
it is available, that the terms thereof will be satisfactory to us.
We have experienced losses on our operations during the past two fiscal
years and a profit for the first six months of our current year.
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We had losses from operations that we conducted during the years ended
April 30, 2000 and 1999. During fiscal 2000, our loss from operations was
$135,700 on gross revenues of $2,048,843, while we incurred losses of $605,776
in fiscal 1999 on gross revenues of $2,613,188. We have incurred profits
of $286,191 during the first six months of fiscal 2001, ending October 31,
2000, on gross revenues of $1,649,191.
Our intended business operations will require us to spend substantial
money without any assurance of success.
---------------------------------------
We intend to make substantial capital expenditures for the acquisition,
exploration, development and production of our estimated oil and gas reserves.
If present or future revenues were to decrease as a result of lower oil and
gas prices, decreased production or other factors, we may be unable
to proceed with our plans. This would result in a further decrease in
production and revenues. If our cash flow from operations is not sufficient
to satisfy our capital expenditure requirements, we can not guarantee
that we will be able to get enough additional debt or equity financing to meet
these requirements.
4
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Our future success depends heavily on the continued development and
replacement of oil and gas reserves.
------------------------------------
Management believes that our future success will depend upon our ability
to find, acquire and develop additional economically recoverable oil and gas
reserves. Our proved reserves will generally decline as they are produced,
except to the extent that we conduct revitalization activities, or acquire
properties containing proved reserves, or both. To increase reserves and
production, we must continue our development drilling and re-completion
programs, identify and produce previously overlooked or bypassed zones in
shut-in wells, acquire additional properties or undertake other replacement
activities. Our current strategy is to increase our reserve base, production
and cash flow through the development of our existing oil and gas fields and
selective acquisitions of other promising properties where we can use new,
existing technology. We can give no assurance that our planned
revitalization, development and acquisition activities will result in
significant additional reserves, or that we will have success in discovering
and producing reserves at economical exploration and development costs.
While our revenues may increase if prevailing oil and gas prices continue or
increase, our exploration costs for additional reserves may also increase.
Oil and gas reserve estimates are based upon very limited data and are
speculative at best.
--------------------
Oil and gas reserve estimates and the present values attributed to these
estimates are based on numerous engineering, geological and operational
assumptions that generally are derived from limited data. Common assumptions
include such matters as the extent and average thickness of a particular
reservoir, the average porosity and permeability of the reservoir, the
anticipated future production from existing and future wells, future
development and production costs and the ultimate hydrocarbon recovery
percentage. As a result, oil and gas reserve estimates and present value
estimates are frequently revised to reflect production data obtained after the
date of the original estimate. If reserve estimates are inaccurate,
production rates may decline more rapidly than anticipated, and future
production revenues may be less than estimated. In addition, significant
downward revisions of reserve estimates may hinder our ability to borrow funds
in the future, or may hinder other financing arrangements that we may
consider.
In addition, any estimates of future net revenues and their present
value are based on period ending prices and on cost assumptions that only
represent our best estimate. If these estimates of quantities, prices and
costs prove inaccurate and we are unsuccessful in expanding our oil and gas
reserves base, or if oil and gas prices decline or become unstable, we may
have to write down the capitalized costs associated with our oil and gas
assets. We will also largely rely on reserve estimates when we acquire
producing properties. If we overestimate the potential oil and gas reserves
of a property to be acquired, or if our subsequent operations on the property
are not successful, the acquisition of the property could result in
substantial losses.
5
<PAGE>
Oil and gas operations necessarily involve many associated risks.
-----------------------------------------------------------------
Natural hazards, such as excessive underground pressures, may cause
costly and dangerous blowouts or make further operations on a particular well
financially or physically impractical. Similarly, the testing and re-
completion of oil and gas wells involves a high degree of risk arising from
operational failures, such as blowouts, fires, pollution, collapsed casing,
loss of equipment and numerous other mechanical and technical problems. Any
of these hazards may result in substantial losses to us or liabilities to
third parties. These could include claims for bodily injuries, reservoir
damage, loss of reserves, environmental damage and other damages to people or
property.
You will not be able to elect our directors or officers.
--------------------------------------------------------
Deloy Miller, our President and CEO, has substantial voting control of
our company. He can effectively elect all of our directors, who in turn elect
all of our executive officers, without regard to the votes of other
stockholders. If the warrant holders exercise all of the outstanding warrants
and retain voting control of the shares underlying these warrants, Mr. Miller
would not have absolute voting control, but he would still be in a position to
exert substantial influence on the election of all directors, who in turn
elect all of the officers.
Competition in the oil and gas industry is intense and includes some of
the largest companies in the world.
-----------------------------------
Our oil and gas exploration activities are centered in a highly
competitive industry. We will be competing in every facet of our intended
business with other companies that may include multinational oil and gas
companies and other large independent operators with much greater financial
resources than we have. Management does not believe that our competitive
position in the oil and gas industry will be significant.
If we lose the services of Deloy Miller or Lawrence L. LaRue, our
operations may suffer.
----------------------
We are substantially dependent upon the continued services of Deloy
Miller, our President, CEO and a director, and Lawrence L. LaRue, our
Secretary/Treasurer and a director. Messrs. Miller and LaRue have been with
us since our inception. The relationships that these persons have formed in
our industry and in the local area where our principal operations are
conducted are invaluable, and could be lost to us without their services.
Messrs. Miller and LaRue are in good health; however, their retirement,
disability or death would seriously hurt on our business operations. If their
services become unavailable, we will have to retain other qualified personnel.
We may not be able to recruit and hire other qualified people on acceptable
terms.
6
<PAGE>
Similarly, the oil and gas exploration industry requires the use
of personnel with substantial technical expertise. If our current technical
personnel become unavailable, we will need to hire qualified personnel to take
their place. We may not be able to recruit and hire new people on mutually
acceptable terms.
We face substantial governmental regulation, and compliance can be costly
and can limit our planned operations.
-------------------------------------
We face many state and federal laws, rules and regulations covering the
safety of our operations, environmental conditions and other facets of our
business. These laws, rules and regulations may seriously limit our ability
to conduct our intended business operations.
Local and international economic conditions, and international politics
of OPEC, as well as variations in climate, can hurt our operations.
-------------------------------------------------------------------
Our current and future business plans depend, in large part, on
the state of the general economy, both locally and internationally, and the
production schedules of OPEC. Local and international economic downturns,
OPEC pricing and the supply and demand of oil and gas based on unusual
seasonal fluctuations may cause high volatility in prices for oil and gas.
All of these conditions are beyond our control, and can only be anticipated.
Risks Related To Our Common Stock.
----------------------------------
Due to the instability in our common stock price and the limited public
trading volume in our common stock, you may not be able to sell your shares.
----------------------------------------------------------------------------
The public market and trading volume for our common stock are limited and
volatile. Where the volume is limited, any unusual increase in the volume is
likely to decrease the market price of our common stock. The common stock
that we are registering and that the selling stockholders will offer and sell
under our prospectus will greatly increase the number of shares available for
public trading. This alone could significantly decrease the current market
price for our common stock.
In addition, the stock markets have had extreme price and volume
fluctuations. These broad market fluctuations, as well as general economic and
political conditions, may also reduce the market price of our common stock.
The sale of already outstanding shares of our common stock could hurt our
common stock market price.
--------------------------
All of our outstanding common stock is eligible for public sale under
Rule 144 of the Securities and Exchange Commission. In addition, the selling
stockholders may sale the shares of common stock being registered for resale
under our prospectus. Any of these sales could significantly decrease the
market price of our common stock. These sales could also severely limit our
ability to obtain the necessary debt or equity funding for our current and
intended business operations.
7
<PAGE>
FORWARD-LOOKING INFORMATION
---------------------------
This is a summary of the terms of the common stock described in and
offered by this prospectus. It does not contain all of the information that
may be important to you. This prospectus contains "forward-looking"
information within the meaning of the Private Securities Litigation Reform
Act of 1995. Forward-looking statements contained in this prospectus involve
known and unknown risks, uncertainties and other factors that could cause
actual results, financial or operating performance to differ from the future
results, financial or operating performance or achievements expressed or
implied by these forward-looking statements. You should carefully read the
this prospectus and the risks factors outlined above, along with the more
detailed information, financial statements and the notes to the financial
statements appearing elsewhere in this prospectus before you decide whether to
purchase the common stock described in this prospectus.
USE OF PROCEEDS
---------------
We will not receive any part of the proceeds from sale of our common
stock. However, we will receive $1,986,000, if all of the warrants are
exercised. As of the date of this prospectus, none of these warrants has been
exercised.
DETERMINATION OF OFFERING PRICE AND DILUTION
--------------------------------------------
We will not receive any money from the selling stockholders when they
sell their shares of common stock, though we will receive funds from any
exercise of the warrants. The selling stockholders may sell all or any part
of their shares in private transactions or in the over-the-counter market at
prices related to the prevailing prices of our common stock at the time of
negotiation. Because we cannot accurately predict the prices of these sales,
we cannot accurately estimate the amount of any dilution that may result from
the purchase price of any of these shares. "Dilution" is the difference
between the price paid for the shares and our "net tangible book value." The
net tangible book value of our common stock on October 31, 2000, was
$2,167,668 or $0.28 per share, based upon 7,668,056 outstanding shares. Net
tangible book value per share is determined by subtracting our total
liabilities from our total tangible assets and dividing the remainder by the
number of shares of common stock outstanding. These computations do not
include the estimated expenses of this offering of approximately $60,000. The
offer and sale by the selling stockholders of outstanding common stock, or of
those shares underlying the warrants, will not affect the net tangible book
value of our common stock, after taking into account the payment for the
exercise of the warrants.
We can not assure you that any public market for our common stock will
equal or exceed the sales price of the shares of common stock that our
stockholders sell. Purchasers of our shares face the risk that their shares
will not be worth what they paid for them.
8
<PAGE>
SELLING SECURITY HOLDERS
------------------------
The following table shows the following information about the
selling stockholders:
The number of shares of our common stock that each selling stockholder
beneficially owned as of January 15, 2001;
The number of shares covered by this prospectus; and
The number of shares to be retained after this offering, if any.
Common Stock (1)
----------------
Number of Shares Number of Shares Number of Shares
Name of Selling Owned Prior to Registered in Beneficially Owned
Stockholder the Offering the Offering after the Offering
----------- ------------ ------------ ------------------
Ronnie Griffith 1,852 1,852(1) -0-
M. E. Ratliff 175,000 175,000(1) -0-
Charles Barker 1,000 1,000(1) -0-
Jeff Brockman 23,000 23,000(1) -0-
Lori Ann Nunn 5,833 2,500(1) 3,333
Raymond D. Cohn 62,500 62,500(1)(3) -0-
Shannon A. Boruff, 112,000 104,000(1) 8,000
Scott Boruff and/or
c/f Alec Ralston
Boruff and Raquel
Celine Boruff
Celeina Rhea Houston 129,428 110,000(1) 19,428
& Noah Houston
Deangela Jones 28,000 28,000(1) -0-
Brittany Rhea Thompson 12,000 12,000(1) -0-
Linda Terry 40,000 40,000(1) -0-
Gary Bible 6,300 6,200(1)(2)(3) 100
Steve Burchfield 300 200(1)(2) 100
Roger Butler 300 200(1)(2) 100
Teresa Cotton 6,300 5,200(1)(2)(3) 1,100
Roy Greenwood 300 200(1)(2) 100
Shawna Harness 200 200(1)(2) -0-
Lawrence L. LaRue 111,177 12,700(1)(2)(3) 98,477
Steve Letner 300 200(1)(2) 100
Ronnie Lewis 300 200(1)(2) 100
Deloy Miller 4,419,343 200(1)(2) 4,419,143
Melvin Myers 300 200(1)(2) 100
Mark Spurling 200 200(1)(2) -0-
Herbert J. White 300 200(1)(2) 100
Daniel Williams 200 200(1)(2) -0-
Robert H. Wood, Jr. 100,000 100,000(1) -0-
Clifford Pugh 25,000 25,000(1) -0-
9
<PAGE>
Charlie L. Haynes 50,000 50,000(1) -0-
Morris Graham 25,000 25,000(1) -0-
Gary Purcell 50,000 50,000(1) -0-
Deloy L. Brown and 50,000 50,000(1) -0-
Nancy Brown
Tyler C. McCain 25,000 25,000(1) -0-
Ed G. Lane 25,000 25,000(1) -0-
Victor I. Dodson 25,000 25,000(1) -0-
Ron S. Lingerfelt 25,000 25,000(1) -0-
Lambert F. Haug 25,000 25,000(1) -0-
Donna Jean Jefferson 25,000 25,000(1) -0-
Clark Trust
Desmond Craig Brooks 25,000 25,000(1) -0-
Richard Belz 25,000 25,000(1) -0-
U S Trust of New York 50,000 50,000(1) -0-
TTEE FBO Raymond D.
Cohn IRA
Theodore Lamb 25,000 25,000(1) -0-
L.E. Smith 50,000 50,000(1) -0-
Daniel Page 1,450,000 1,450,000(1)(3) -0-
Basic Investors, Inc. 100,000 100,000(3)(4) -0-
--------- --------- ------
7,311,433 2,761,152 4,550,281
(1) We assume no purchase in this offering by the selling stockholders of
any shares of our common stock.
(2) Represents shares granted to our employees as a Christmas bonus in
December, 2000.
(3) Includes 1,136,000 shares underlying warrants, and assumes that all
warrants are exercised and all common stock owned and/or received on the
exercise of the warrants are sold.
(4) No director, executive officer or any "associate" of any director or
executive officer has any interest, direct or indirect, by security holdings
or otherwise, in the selling stockholder.
PLAN OF DISTRIBUTION
--------------------
We are registering the shares of our common stock covered by this
prospectus.
We will pay the costs, expenses and fees of registering our common stock.
All of the selling stockholders will be responsible for any related
commissions, taxes, attorney's fees and other charges that each may incur in
the offer or sale of these securities.
The selling stockholders may sell our common stock at market prices
prevailing at the time of the sale, at prices related to the prevailing market
prices, at negotiated prices or at fixed prices, any of which may change.
They may sell some or all of their common stock through:
10
<PAGE>
ordinary broker's transactions, which may include long or short
sales;
purchases by brokers, dealers or underwriters as principal and
resale by those purchasers for their own accounts under this
Prospectus;
market makers or into an existing market for our common stock;
transactions in options, swaps or other derivatives; or
any combination of the selling options described in this
Prospectus, or by any other legally available means.
In addition, the selling stockholders may enter into hedging transactions
with broker/dealers, who may engage in short sales of our common stock in the
course of hedging the positions they assume. Finally, they may enter into
options or other transactions with broker/dealers that require the delivery of
our common stock to those broker/dealers. Subsequently, the shares may be
resold under this prospectus.
In their selling activities, the selling stockholders will have to comply
with applicable provisions of the Securities Exchange Act of 1934, and its
rules and regulations, including Regulation M. These rules and regulations
may limit the timing of purchases and sales of our common stock by the selling
stockholders.
The selling stockholders and any broker/dealers involved in the sale or
resale of our common stock may qualify as "underwriters" within the meaning of
Section 2(11) of the Securities Act. In addition, the broker/dealers'
commissions, discounts or concessions may qualify as underwriters'
compensation under the Exchange Act. If any broker/dealer or selling
stockholder qualifies as an "underwriter," it will have to deliver our
prospectus as required by Rule 154 of the Securities and Exchange Commission.
In addition, any broker/dealer that participates in a distribution of these
shares will not be able to bid for, purchase or attempt to induce any person
to bid for or purchase any of these shares as long as the broker/dealer is
participating in the distribution. The ability of participating
broker/dealers to stabilize the price of our shares will also be restricted.
If the selling stockholders sell our shares to or through brokers,
dealers or agents, they may agree to indemnify these brokers, dealers or
agents against liabilities arising under the Securities Act or the Exchange
Act. We do not know of any existing arrangements between the selling
stockholders and any other stockholder, broker, dealer, underwriter or agent
relating to the sale or distribution of our common stock.
In addition to selling their common stock under this prospectus, the
selling stockholders may:
transfer their common stock in other ways not involving market
makers or established trading markets, including by gift,
distribution or other transfer; or
11
<PAGE>
sell their common stock under Rule 144 of the Securities and
Exchange Commission, if the transaction meets the requirements of
Rule 144.
We have advised the selling stockholders that during the time they are
engaged in the distribution of our common stock that they own, they must
comply with Rule 10b-5 and Regulation M promulgated by the Securities and
Exchange Commission under the Exchange Act. They must do all of the following
under this Rule and Regulation:
not engage in any stabilization activity in connection with our
common stock;
furnish each broker who may be offering our common stock on their
behalf the number of copies of this Prospectus required by each
broker;
not bid for or purchase any of our common stock or attempt to
induce any person to purchase any of our common stock, other than
as permitted under the Exchange Act;
not use any device to defraud;
not make any untrue statement of material fact or fail to state
any material fact; and
not engage in any act that would operate as a fraud or deceit upon
any person in connection with the purchase or sale of our shares.
To the extent that any selling stockholder may be an "affiliated
purchaser" as defined in Regulation M, it has been further advised of the
requirements of Rule 10b-1, and that it must coordinate its sales under this
prospectus with us for the purposes of Regulation M.
To the extent required by the Securities Act, a supplemental prospectus
will be filed, disclosing:
the name of any broker/dealers;
the number of securities involved;
the price at which the securities are to be sold;
the commissions paid or discounts or concessions allowed to the
broker/dealers, where applicable;
that the broker/dealers did not conduct any investigation to
verify the information set out in this Prospectus, as supplemented;
and
other facts material to the transaction.
There is no guarantee that any selling stockholder will sell any of our
common stock.
12
<PAGE>
LEGAL PROCEEDINGS
-----------------
On or about January 20, 2000, we filed a complaint against Blue Ridge
Group, Inc. in the Chancery Court of Hawkins County at Rogersville, Tennessee.
The case was designated Case No. 13951. Our complaint asserted that Blue
Ridge had breached a Footage Drilling Contract with us by quitting the job
without drilling to the required depth, by failing to drill a straight hole
and by damaging the well bore by failing to conduct its operations in a good
and workmanlike manner in accordance with good industry practice. We asked
that we be awarded:
Our initial payment to Blue Ridge of $37,000;
Damages resulting from the improper deviation of the hole from the
vertical plane;
Damages for the cost of re-drilling or re-working the hole;
Damages allowed by the parties' contract;
Further and equitable relief to which we may be entitled; and
Our costs of the lawsuit, including discretionary costs.
The Blue Ridge action is still pending. However, an adverse decision
would not materially affect on us
On or about January 19, 2000, we filed a complaint against Ronnie
Griffith, one of our former directors and officers, in the Chancery Court for
Scott County, Tennessee at Huntsville. The case was designated Case No. 8459.
Our complaint asserted that Mr. Griffith had breached his fiduciary duty of
loyalty to us by:
Soliciting our current and prospective customers for another
competing business;
Using our resources, employees, information and time to solicit
customers for the competing business; and
Hiring our employees, who formerly worked under Mr. Griffith's
supervision, to work for the competing business; and
Using Miller's credit cards for personal expenses.
We have asked that Mr. Griffith be restrained from engaging in any
activity that constitutes unfair competition with us or tortious interference
with our business relationships, and that Mr. Griffith not communicate
about our business matters with anyone who was one of our customers during the
time that we employed Mr. Griffith.
We have also asked that we be awarded:
Damages for losses and damages suffered as a result of Mr.
Griffith's breach of fiduciary duty to us;
13
<PAGE>
Damages for use of or conversion of our property, assets or
resources;
Damages for wage disgorgement to the extent that Mr. Griffith
participated in the operation of another business while employed by us;
Punitive damages for acting maliciously, recklessly, intentionally
or through gross negligence;
For our costs of the lawsuit, including discretionary costs; and
Any other type of damages that we have sustained.
This action was settled on May 5, 2000, by stipulation. The Court
entered an injunction to prevent Mr. Griffith from communicating directly or
indirectly about our business matters with certain of our customers for a
period of one year. We agreed to issue 1,852 shares of our common stock to
Mr. Griffith, and Mr. Griffith agreed to surrender all stock option rights
granted to him as a director and officer. Mr. Griffith returned certain items
of equipment to us, and we returned to Mr. Griffith a compressor that we had
been storing.
Other than these actions, we are not party to any pending material legal
proceeding. To the knowledge of management, no federal, state or local
governmental agency is presently contemplating any proceeding against us. No
director, executive officer or other person who may be deemed to be our
"affiliate" or who owns more than five percent of our common stock is a party
adverse to us or has a material interest adverse to us in any proceeding.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
------------------------------------------------------------
The following table sets forth the names of all of our current directors
and executive officers. These persons will serve until the next annual
meeting of our stockholders or until their successors are elected
or appointed and qualified, or their prior resignations or terminations.
Directors and Executive Officers.
---------------------------------
<TABLE>
<CAPTION>
Date of Date of
Positions Election or Termination
Name Held Designation or Designation
---- ---- ----------- --------------
<S> <C> <C> <C>
Deloy Miller Director, 12/96 *
815 South Lake Drive President 12/99 *
Oneida, TN 37841 CEO 12/97 *
14
<PAGE>
Lawrence L. LaRue Secretary/ 12/96 *
432 Brewstertown Road Treasurer 12/96 *
Sunbright, TN 37872 Director 4/97 *
Herbert J. White Director and 4/97 *
P.O. Box 1868 Vice President 4/97 *
Fairfield Glade, TN 38557
Herman Gettelfinger Director 4/97 *
641 Atlantic Ave.
Knoxville, TN 37917
John N. Bonar Vice President 11/97 9/00
50 Rivers Run Way
Oak Ridge, TN 37830
Gary G. Bible, Ph.D Vice President 9/97 *
232 West Seneca Circle
Oneida, TN 37841
</TABLE>
* These persons presently serve in the capacities indicated opposite
their respective names.
Deloy Miller Mr. Miller, our Chairman and Chief Executive Officer, is 53
years of age. Mr. Miller is a seasoned gas and oil professional with 30 years
of experience in the drilling and production business in the Appalachian
Basin. During his years as a drilling contractor, he acquired extensive
geological knowledge of Tennessee and Kentucky and received training in the
reading of well logs. A native Tennessean, he is considered the leader in
converting the Appalachian Basin from cable tool drilling to air drilling,
using Ingersoll-Rand T3 Drillmaster rigs. The introduction of air
drilling sparked the 1969 drilling boom, and he soon became a successful
drilling contractor in the southern Appalachian Basin. He has served two
terms as President of the Tennessee Oil & Gas Association, and in 1978, the
organization named him the "Tennessee Oil Man of the Year." He continues to
serve on the Board of that organization. The Governor of Tennessee appointed
Mr. Miller to be the petroleum industry's representative on the Tennessee Oil
& Gas Board, the state agency that regulates oil and gas operations in the
state.
Lawrence L. LaRue. Mr. LaRue is 61 years old. He joined the Miller
organization in March, 1983, as an accountant. During his 17 years with us,
he has acquired an extensive knowledge of all aspects of oil and gas
accounting and tax law. Since becoming Secretary/Treasurer in 1985, his
duties have included the supervision of the office, all clerical functions and
the preparation of corporate and partnership income tax returns. Mr. LaRue
obtained his BS Degree in Business Administration with honors from Tennessee
Technological University. As a Certified Public Accountant licensed to
practice in the State of Tennessee, his current civic duties include
consultation to the Morgan County, Tennessee E-911 Board.
15
<PAGE>
Herbert J. White. Mr. White, age 74, is a Development Engineer for
us. He has 43 years of petroleum related experience. After earning his
BS degree from North Texas University, he became an engineer with Halliburton,
handling Louisiana Gulf Coast and offshore operations and serving in
Australia. In 1975 he joined Petroleum Development Corporation, a West
Virginia-based public company, supervising engineering and operations in
the southern Appalachian Basin. He also has experience in Devonian Shale
production, enhanced recovery and coal de-gasification.
Herman Gettelfinger. Mr. Gettelfinger, age 68, is a member of our Board
of Directors. He is the President and co-owner of Kelso Oil Company, of
Knoxville, Tennessee. Kelso is one of eastern Tennessee's largest
distributors of motor oils, fuels and lubricants to the industrial and
commercial market. Mr. Gettelfinger has been active in the oil and gas
drilling and exploration business for more than 35 years and has been
associated with us for over 25 years.
Dr. Gary Bible, age 51, is our Vice President of Geology. Dr. Bible
earned his BS Degree in Geology from Kent State University and his MSc. and
Ph.D. Degrees in Geology from Iowa State University. He is a proven
hydrocarbon finder who drilled his first successful wildcat as a Trainee
Geologist. Formerly with Phillips Petroleum Corporation and ALAMCO, Dr. Bible
brings us 19 years experience as a Petroleum Geologist. In addition, Dr.
Bible has spent 10 years in the Appalachian Basin in the exploration and
development of reserves in the Big Lime, Devonian Shale and in deeper
horizons. During these last nine years, he has drilled 135 development wells,
87% of which were successful. He has discovered eight new oil and gas fields
in Kentucky and Tennessee, and he is also credited with managing a drilling
program at ALAMCO that kept its finding cost the lowest in the nation.
Significant Employees.
----------------------
We do not currently have any employees who are not executive officers,
but who are expected to make a significant contribution to our business.
Family Relationships.
---------------------
There are no family relationships between any of our directors or
executive officers.
Involvement in Certain Legal Proceedings.
-----------------------------------------
During the past five years, none of our present or former directors,
executive officers or persons nominated to become directors or executive
officers:
(1) was a general partner or executive officer of any business
against which any bankruptcy petition was filed, either at the time of the
bankruptcy or two years prior to that time;
(2) was convicted in a criminal proceeding or named subject to a
pending criminal proceeding, excluding traffic violations and other minor
offenses;
16
<PAGE>
(3) was subject to any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise
limiting his involvement in any type of business, securities or banking
activities; or
(4) was found by a court of competent jurisdiction in a civil
action, the Commission or the Commodity Futures Trading Commission to have
violated a federal or state securities or commodities law, and the judgment
has not been reversed, suspended or vacated.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
The following tables set forth the share holdings of our directors and
executive officers and those persons who own more than five percent of our
common stock as of the date of the prospectus:
DIRECTORS AND EXECUTIVE OFFICERS
--------------------------------
<TABLE>
<CAPTION>
Number of Shares Percent
Name and Address(1) Title Beneficially Owned of Class(2)
---------------- ----- ------------------ --------
<S> <C> <C> <C>
Deloy Miller Director, 4,419,343 47%
815 South Lake Drive and CEO
Oneida, TN 37841
Lawrence L. LaRue (3) Secretary/ 111,177 1%
432 Brewstertown Road Treasurer
Sunbright, TN 37872 Director
Herbert J. White Vice President/Director 300 -0-
P.O. Box 1868
Fairfield Glade, TN
38557
Herman Gettelfinger Director 243,101 3%
641 Atlantic Ave.
Knoxville, TN 37917
Gary Bible (3) Vice President 6,300 -0-
323 Seneca Circle
Oneida, TN 37841
</TABLE>
17
<PAGE>
All executive officers and directors
as a group (3) 4,780,221 51%
(1) These persons presently serve in these capacities for us.
(2) Based upon 9,332,256 outstanding shares, assuming that 1,136,000
shares underlying the warrants of selling stockholders are outstanding, though
none of these warrants have been exercised.
(3) Includes 12,500 shares underlying warrants granted to Mr. LaRue, and
6,000 shares underlying warrants granted to Mr. Bible that are being
registered and may be resold pursuant our Prospectus.
FIVE PERCENT STOCKHOLDERS
-------------------------
<TABLE>
<CAPTION>
Number of Shares Percent
Name and Address Title Beneficially Owned of Class
<S> <C> <C> <C>
Deloy Miller Director 4,419,143 47%
and CEO
</TABLE>
Changes in Control.
-------------------
To our knowledge, there are no present arrangements or pledges of our
securities which may result in a change in control of our company.
DESCRIPTION OF SECURITIES
-------------------------
Common Stock.
-------------
Our authorized capital stock consists of 500,000,000 shares of common
stock, $0.0001 par value per share.
Our Articles of Incorporation authorize the Board of Directors to declare
and pay dividends on our common stock out of funds legally available for the
payment of dividends. The holders of our common stock are entitled at all
stockholder meetings to one vote for each share of common stock held. Fully-
paid common stock shall not be liable to any further call or assessment. Our
common stock has no pre-emptive rights, and stockholders are not allowed to
cumulate their votes by multiplying the number of shares owned by the number
of directors being elected and casting all votes for one director.
18
<PAGE>
Our Articles of Incorporation and Bylaws do not contain any provision
that would delay, defer or prevent a change in the control of our company.
Warrants.
---------
On August 10, 2000, we issued 12,500 warrants to Raymond R. Cohn, a
stockholder. The warrants are exercisable for 12,500 shares of common stock
at $1.00, for a period of three years.
On December 15, 2000, we issued 17,500 warrants, 12,500 to Lawrence L.
LaRue, and 5,000 to Teresa Cotton, an employee. The warrants are exercisable
for an aggregate of 17,500 shares of common stock at $1.00, for a period of
three years.
On January 9, 2001, we issued 6,000 warrants to Gary Bible. The warrants
are exercisable for 6,000 shares of common stock at $1.00, for a period of
three years.
These warrants are callable during the third year at a price of $0.001
per warrant, at any time that our common stock has traded at $2.00 for 30
consecutive days at not less than 5,000 shares per day. An effective
registration statement covering the shares underlying the warrants must be in
effect at the time that we call any warrant.
On October 11, 2000, we issued 1,000,000 warrants to Daniel Page, a
consultant. The warrants are exercisable as follows:
250,000 shares of common stock at $1.00 for a period of two years;
250,000 shares of common stock at $1.50 for a period of two years;
250,000 shares of common stock at $2.00 for a period of two years;
and
250,000 shares of common stock at $2.50 for a period of two years.
These warrants are callable during the second year at a price of $0.001
per warrant, at any time that our common stock has traded at $2.00 for 30
consecutive days at not less than 5,000 shares per day. An effective
registration statement covering the shares underlying the warrants must be in
effect at the time that we call any warrant.
On December 8, 2000, we issued 100,000 warrants to another consultant,
Basic Investors, Inc. The warrants are exercisable for 100,000 shares of
common stock at $2.00, for a period of three years.
These warrants are callable during the third year at a price of $0.001
per warrant, at any time that our common stock has traded at $3.00 for five
consecutive trading days. An effective registration statement covering the
shares underlying the warrants must be in effect at the time that we call any
warrants.
19
<PAGE>
All warrants must be adjusted in the event of any forward or reverse
split of our outstanding common stock. The warrants have no voting rights or
liquidation preferences, and unless exercised in accordance with the
particular warrant, no warrant holder has any interest as a stockholder.
Penny Stock.
------------
Our common stock is "penny stock" as defined in Rule 3a51-1 of the
Securities and Exchange Commission. Penny stocks are stocks:
with a price of less than five dollars per share;
that are not traded on a "recognized" national exchange;
whose prices are not quoted on the NASDAQ automated quotation
system; or
in issuers with net tangible assets less than $2,000,000, if the
issuer has been in continuous operation for at least three
years, or $5,000,000, if in continuous operation for less than
three years, or with average revenues of less than $6,000,000 for
the last three years.
Section 15(g) of the Exchange Act and Rule 15g-2 of the Securities and
Exchange Commission require broker/dealers dealing in penny stocks to provide
potential investors with a document disclosing the risks of penny stocks and
to obtain a manually signed and dated written receipt of the document before
making any transaction in a penny stock for the investor's account. You are
urged to obtain and read this disclosure carefully before purchasing any of
our shares.
Rule 15g-9 of the Securities and Exchange Commission requires
broker/dealers in penny stocks to approve the account of any investor for
transactions in these stocks before selling any penny stock to that investor.
This procedure requires the broker/dealer to:
get information about the investor's financial situation,
investment experience and investment goals;
reasonably determine, based on that information, that transactions
in penny stocks are suitable for the investor and that the
investor can evaluate the risks of penny stock transactions;
provide the investor with a written statement setting forth the
basis on which the broker/dealer made his or her determination;
and
receive a signed and dated copy of the statement from the
investor, confirming that it accurately reflects the investor's
financial situation, investment experience
and investment goals.
Compliance with these requirements may make it harder for our selling
stockholders and other stockholders to resell their shares.
20
<PAGE>
INTEREST OF NAMED EXPERTS AND COUNSEL
-------------------------------------
We have included our financial statements as of April 30, 2000 and 1999
in reliance on the report of Charles M. Stivers of Manchester, Kentucky,
independent certified public accountant. Charles M. Stivers has no interest,
direct or indirect, in our company.
Leonard W. Burningham, Esq. and Branden T. Burningham, Esq., lawyers, of
Salt Lake City, Utah, are father and son, associates in the practice of law
and co-counsel for our company. Neither has any interest, direct or indirect,
in our company. Messrs. Burningham and Burningham have prepared the
registration statement and this prospectus and will provide any legal opinions
required with respect to any related matter.
We have not hired any expert or counsel on a contingent basis. Except as
indicated above, no expert or counsel will receive a direct or indirect
interest in our company, and no such person was a promoter, underwriter,
voting trustee, director, officer or employee of our company.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
-----------
Section 48-18-502 of the Tennessee Business Corporation Act allows a
corporation to indemnify any director in any civil or criminal proceeding
(other than a proceeding by or in the right of the corporation in which the
director was adjudged liable to the corporation or any other proceeding in
which he or she was adjudged liable on the basis that he or she improperly
received a personal benefit) by reason of service as a director if the person
to be indemnified conducted himself or herself in good faith and in a manner
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe the conduct was unlawful. Section 48-18-507
extends certain indemnification rights to officers, employees and agents of a
corporation as well. This is only a brief summary of the right of
indemnification allowed a corporation under the Tennessee Business Corporation
Act, and is modified in its entirety by this reference. Our Board of
Directors has adopted these provisions to indemnify our directors, executive
officers and agents.
Insofar as indemnification for liabilities arising under the Securities
Act or the Exchange Act may be permitted to our directors, executive officers
and controlling persons by the foregoing provisions or otherwise, we have been
advised that it is the opinion of the Securities and Exchange Commission that
indemnification is against public policy as expressed in the Securities Act or
the Exchange Act, and is therefore unenforceable. If a claim for
indemnification against these liabilities, other than our payment of expenses
incurred or paid by any of our directors, executive officers or controlling
persons in the successful defense of any action, suit or proceeding is
asserted by the director, executive officer or controlling person in
21
<PAGE>
connection with the securities being registered, we will, unless in the
opinion of our counsel the matter has been settled by a controlling precedent,
submit to a court of appropriate jurisdiction the question of whether
indemnification by us is against public policy as expressed in the Securities
Act or the Exchange Act and will be governed by the final adjudication of that
issue.
DESCRIPTION OF BUSINESS
-----------------------
Business Development.
---------------------
Corporate History.
------------------
We were founded in 1967 by Deloy Miller, our President and CEO, as a sole
proprietorship, and incorporated in the State of Tennessee under the name
"Miller Contract Drilling, Inc." on January 24, 1978. We are a successor to
or a combination of several Deloy Miller owned enterprises as follows:
On January 24, 1978, Miller Contract Drilling, Inc. was incorporated
as a for profit corporation in the state of Tennessee;
On March 13, 1979, Miller Resources, Inc. merged into us;
On October 31, 1983, Miller Trucking Co., Inc. merged into us;
On February 27, 1984, we changed our name to our current name,
"Miller Petroleum, Inc.";
On April 30, 1985, Miller Enterprises, Inc. merged into us;
On September 12, 1996, we increased the number of shares of our
authorized common stock to 2,000; and
On September 16, 1996, Miller Services, Inc. and Energy Cell, Inc.
merged into us.
Triple Chip Systems, Inc., a Delaware corporation, acquired 100% of our
common stock in a reverse reorganization effective December 20, 1996. On
January 13, 1997, Triple Chip was merged into us and we were the surviving
corporation. As part of the merger, we increased our authorized common stock
to 500,000,000 shares at $0.0001 par value.
General History.
----------------
In the beginning, we were involved with shallow cable tool oil and gas
drilling. We quickly became an industry leader by adapting an Ingersoll-Rand
T3 Drillmaster for deeper drilling. This modernized the drilling industry
in our area and we became the largest drilling contractor in southern
Appalachia.
22
<PAGE>
By the 1980's, we were active throughout the Appalachian Basin, with
more than 18 drilling rigs working from southern New York to northern Alabama.
During this period, we drilled more than 4,000 wells under the direction
and control of Deloy Miller. We have drilled more than 65% of the total wells
drilled in the State of Tennessee.
During the 1990's, we concentrated our efforts on oil and gas exploration
and production. We have oil or gas production in the Tennessee counties of
Campbell, Fentress, Morgan, Overton and Scott.
We currently have more than 40,000 acres under lease in Tennessee. We
also owned 40,000 acres in Kentucky, which we recently sold as discussed
below. We continue to seek the acquisition of additional strategic acreage.
Although we engage in a minimum of contract drilling, we have kept drilling
rigs, service rigs, trucks and bulldozers to drill, service and maintain our
own wells. We continue to be a leader in technology, using the latest
computer graphics and analytical tools for geologic exploration, drilling and
development.
Our operations include the operation of gas and oil wells, acquisition
and development of gas and oil leases, rebuilding and sales of oil field
equipment and the organization of joint venture drilling programs with
industry partners.
Our largest acreage block is in Campbell County, Tennessee. We acquired
this acreage through a farmout agreement with ARCO/Gulf. The total acreage in
this lease is about 27,000 acres, which is split into two parcels. An 8,000
acre northern parcel borders the Kentucky state line, and a 19,000 acre parcel
has its southern edge under the City of Lafollette, Tennessee. Oil wells on
this southern tract hold the entire lease by production.
In 1993, we began a joint venture with Delta Producers, Inc. of
Greenville, Mississippi. We are jointly producing 12 gas wells in the
Jellico, Tennessee area northwest of the Pine Mountain Thrust Fault.
We purchased 100% of the assets of AKS Energy Corporation, a
subsidiary of Arakis Energy Corporation of Calgary, Canada, on December 1,
1997. These assets included over 40,000 acres of leaseholds in the counties
of Leslie, Bell, Knox, Harlan and Clay, Kentucky, and Campbell County,
Tennessee. We acquired 23 wells producing a net 500,000 cubic feet per day
and 12 barrels of oil per day, along with over 17 miles of pipeline. Also
included was an Ingersoll-Rand RD10 drilling rig, four service rigs, support
equipment and a shop and 30 acres of land near Corbin, Kentucky.
In September of 1999, we acquired a farmout from Tengasco, Inc. The
farmout was adjacent to the much-publicized Swan Creek field in Hancock
County, Tennessee. This farmout gave us access to geologic maps, well logs
and seismic data from Tengasco's four-year development of the field. Of the
24 wells drilled by Tengasco, estimated proven reserves total more than 100
billion cubic feet of natural gas and more than 1 million barrels of oil.
We have drilled two successful Knox Dolomite wells in the Swan Creek
field proper. A third Knox well that we drilled on this farmout has resulted
in a new field discovery on a separate structure from Swan Creek.
23
<PAGE>
We continue to focus on the development, drilling and production of
natural gas in eastern Tennessee. Our exploration efforts will primarily be
in the East Tennessee portion of the Eastern Overthrust Belt. Management
feels that this area has tremendous petroleum potential as shown by the
development of the Swan Creek Field. Knox Dolomite wells in this field have
reserves in excess of 2 Bcf per well. Swan Creek is also producing
substantial amounts of oil from a separate shallow reservoir.
Pursuant to a Purchase and Sale Agreement, dated August 31, 2000, between
us and NAMI Resources Company, LLC, a Kentucky limited liability company, we
sold to NAMI Resources our interest in certain oil and gas wells, leases
covering approximately 40,000 acres in Kentucky, inventory and related
equipment situated in Kentucky. The sale closed on September 6, 2000. The
purchase price was $2,000,000, and this sum was paid to us on closing.
We sold these assets because they were located approximately two to three
hours from our present principal operations in East Tennessee. Our Board of
Directors believed that the cost, expense and manpower involved in managing
the assets at this distance was too high and interfered with our principal
focus in East Tennessee.
We had previously sold to NAMI Resources gas that was produced
from oil and gas wells that were among these assets. NAMI Resources had no
other material relationship with us, and the NAMI Resources agreement
was negotiated at "arms length."
We have used about $1,780,000 of the purchase price to pay a note that we
owed to BankOne. The remaining amount has been allocated to working capital.
Business.
---------
Our operations include the operation of gas and oil wells, the
acquisition and development of gas and oil leases, the rebuilding and sales of
oil field equipment and the organization of joint venture drilling programs
with industry partners.
We presently own the following properties:
A 100% working interest in one oil and gas lease on about 27,000
acres in Campbell County, Tennessee. This interest is known as the "Koppers
lease" or the "ARCO\GULF Farmout." The lease provides for a landowner royalty
of 12.5% and an overriding royalty interest of 7.5% with an 80% working
interest. There are five producing oil wells on the southern tract of this
lease; and
A 25% working interest in 12 oil and gas leases on about 2,000 acres
located in Campbell County, Tennessee. These leases are collectively known as
the "Delta leases." Each of these leases is subject to a 12.5% landowner's
royalty.
We currently control over 40,000 acres of oil and gas leasehold interests
in Tennessee.
24
<PAGE>
Principal Products or Services and Their Markets.
-------------------------------------------------
We will drill, produce and market natural gas and oil. The demand for
these products continues to increase as population and industry conversions
expand. South Kentucky Purchasing Company, a refinery located in Somerset,
Kentucky, and Bear Creek Oil Company in Burkesville, Kentucky, are Direct
statewide purchasers of oil at the well site.
Natural gas has multiple markets throughout the eastern United
States through gas transmission lines. Three companies in north central
Tennessee provide access to these markets. Delta Natural Gas Company
purchases the natural gas that we produce on the Delta leases. CNR, formerly
"ALAMCO," has recently completed a new gas pipeline with connections to the
major east-west gas transmission lines and markets. The Citizens Gas Utility
District serves local markets, with surplus gas being placed in storage
facilities or transported to East Tennessee Natural Gas, serving Tennessee and
Virginia. During the past year, the Citizens Gas Utility District began
purchasing gas from our wells in the Jellico Field.
Distribution Methods of Our Products.
------------------------------------
Crude oil is contained in tanks at the well site until the purchaser
retrieves it by truck. Natural gas is delivered to the purchaser via
gathering lines into the main gas transmission line. Gas purchasers in the
area include Delta Natural Gas Company, Inc.; CNR; and Citizens Gas Utility
District. Crude oil purchasers are Bear Creek Oil Company and South
Kentucky Purchasing Company. Management anticipates that our products will be
sold to one of these companies. However, we can not guarantee that we will be
able to make such sales or that if we do, we will be able to receive a price
that is sufficient to make our operations profitable.
Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements or
Labor Contracts.
----------------
Royalty agreements relating to oil and gas production are standard
in the industry. The amount of our royalty payments varies from
lease to lease.
Competitive Business Conditions.
--------------------------------
We will undertake our contemplated oil and gas exploration activities in
a highly competitive and speculative industry. In seeking any other suitable
oil and gas properties for acquisition, we will be competing with numerous
companies located in the State of Tennessee and elsewhere. These competitors
may include multinational oil and gas companies and other large independent
operators with substantially greater financial resources than we have.
However, management believes that our competitive position in the oil and gas
industry in Tennessee will be significant.
25
<PAGE>
Locally, we have several competitors in the area of our acreage blocks in
the State of Tennessee. Three of these competitors may be deemed to be
significant. These are CNR, Tengasco, Inc. and Anderson Oil and Gas. Given
our relatively large acreage holdings in the area and our estimated proven
undeveloped reserves, management believes that we will become the second or
third largest seller of hydrocarbons in the immediate area. However, our
operations will face many risks that may hurt our operations.
Management does not foresee any difficulties in procuring logging,
cementing and well treatment services in the area of our operations. The
experience of management has been that, in most instances, logging equipment
will be available with less than a one-day waiting period. Cementing services
generally have the same waiting period. Well treatment services may have a
waiting period of seven to 14 days. However, several factors, including
increased competition in the area, may limit the availability of logging
equipment, cementing and well treatment services. Such an event may
negatively affect the profitability of our operations.
We have our own drilling and service rigs with the employees necessary to
perform all other services required to drill and produce gas and oil wells.
The prices of our products are controlled by the world oil market and the
United States natural gas market, so competitive pricing behaviors are
considered unlikely. However, competition in the oil and gas exploration
industry exists in the form of competition to acquire the most promising
acreage blocks and to obtain the most favorable prices for transporting the
product. Management believes that we are well positioned in these areas
because of the transmission lines that run through and adjacent to the
properties that we lease, and because we hold relatively large acreage blocks
in what management believes are promising areas.
Sources and Availability of Raw Materials.
------------------------------------------
Our operations are not dependent on the acquisition of any raw materials.
Dependence on One or a Few Major Customers.
-------------------------------------------
We will depend upon local purchasers of hydrocarbons in the areas
where our properties are located. The five purchasers our areas of operations
are:
Citizens Gas Utility District;
Delta;
CNR;
Bear Creek; and
South Kentucky.
26
<PAGE>
The loss of one or more purchasers may have substantially reduce our
sales and our ability to operate profitably.
Need for Governmental Approval of Principal Products or Services.
-----------------------------------------------------------------
None of the principal products or services that we offer require
governmental approval. However, permits are required for drilling oil
or gas wells.
Effect of Existing or Probable Governmental Regulations on Business.
--------------------------------------------------------------------
Oil and gas exploration and production are governed by many environmental
laws, rules and regulations. The federal Clean Water Act requires us to
construct a fresh water containment barrier between the surface of each
drilling site and the underlying water table. This involves the insertion of
a seven-inch diameter steel casing into each well, with cement on the outside
of the casing. The cost of compliance with this environmental regulation is
approximately $10,000 per well.
The State of Tennessee also requires oil and gas drillers to obtain a
permit for their activities and to post with the Tennessee Gas and Oil Board
bonds to ensure that each well is reclaimed and properly plugged when it is
abandoned. The Reclamation Bonds cost $1,500 per well. The plugging bonds
cost $2,000 per well or $10,000 for ten wells. We have deposited a $1,500
Certificate of Deposit for most of the reclamation bonds,.
The State of Kentucky also requires oil and gas drillers to obtain
a permit for their activities and to post with the Division of Oil and Gas of
the Kentucky Department of Minerals and Mines a bond to ensure that each well
is properly plugged when it is abandoned. These bonds are based on $1 per
foot. The Kentucky Division retains the bond until the subject wells are
plugged.
Laws and regulations also require removal and cleanup of environmental
damages under certain circumstances. Laws and regulations protecting the
environment have generally become more stringent in recent years, and may in
certain circumstances impose "strict liability," rendering a corporation
liable for environmental damages without regard to negligence or fault on the
part of the corporation. These laws and regulations may expose us to
liability for conditions caused by others, or for our acts even though they
complied with all applicable laws at the time they were performed. The
modification of existing laws or regulations or the adoption of new
environmental laws or regulations could have a material adverse effect on our
operations. In addition, our existing and proposed operations could result in
liability for fires, blowouts, oil spills, discharge of hazardous materials
into surface and subsurface aquifers and other environmental damage. Any one
of these events could result in personal injury, loss of life, property damage
or destruction or suspension of operations.
We have in place an Emergency Action and Environmental Response Policy
Program. This program details the appropriate response to any emergency that
management believes could happen in our operations.
27
<PAGE>
We believe we are presently in compliance with all applicable federal,
state and local environmental laws, rules and regulations. However, continued
compliance, or failure to comply, and future legislation may hurt our present
and planned business operations.
The foregoing is only a brief summary of some of the existing
environmental laws, rules and regulations to which our business operations are
subject, and there are many others, the effects of which could have an adverse
impact on us. Future legislation in this area will no doubt be enacted and
revisions will be made in current laws. We have no way of knowing what effect
these present and future laws, rules and regulations will have on our current
and future operations.
Research and Development Expenses.
----------------------------------
We have not spent any material amount in research and development
activities during the last fiscal year. Most of the research done during our
exploration activities is geological research. This work falls under the job
description of our full-time geologist and will not cost anything more than
his standard salary.
Number of Employees.
--------------------
We presently have 20 full-time employees and one part-time employee.
When we commence our full-scale drilling program in accordance with our
plan of operation, we plan to have up to 24 full-time employees,
including officers, and one part-time employee.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
---------------------------------------------------------
Plan of Operation.
------------------
We have over 40,000 acres of oil and gas leases held by production in
Tennessee. This acreage produces both gas and oil from the Mississippian age
Big Lime Formation. The properties contain a minimum three-year inventory of
conventional drilling locations.
We are concentrating our exploration effort in the East Tennessee
portion of the Eastern Overthrust Belt. Management feels that this area has
tremendous petroleum potential as shown by the development of Swan Creek
Field. Knox Dolomite wells in this field have reserves in excess of 2 Bcf per
well. Swan Creek Field is also producing substantial amounts of oil from a
separate shallow reservoir.
We have obtained a 20-well farmout from Tengasco in its Swan Creek
Field area, and we have drilled two successful Knox Dolomite gas wells and two
successful oil wells in Swan Creek Field proper. A third Knox well that we
have drilled on this farmout has resulted in a new field discovery on a
separate structure from Swan Creek. Oil was found in a separate reservoir in
this well and plans are underway to develop this oil pool.
28
<PAGE>
Our management has identified 12 additional large structures similar to
Swan Creek Field. We plan to test these structures as aggressively as
possible while continuing to identify additional targets in the Eastern
Overthrust Belt.
We have successfully drilled a well that extends our Koppers South
oil field and we have permitted another Koppers South oil field well. While
the limits of this field have yet to be defined, some of our existing wells
have exceeded 40,000 barrels of oil produced to date. This well is expected
to be completed in the Monteagle lime formation.
We continue to be a leader in information technology, utilizing the
latest computer graphics software from GeoGraphix, a subsidiary of Halliburton
Services. We now have a proprietary database of over 127,000 wells integrated
into our GeoGraphix software and continue to add to this database as new
information becomes available.
Deloy Miller, our President and CEO, states "With a sufficient pipeline
infrastructure, a capable management team and a three year inventory of drill
sites in place, we are poised for strong growth in production, reserves and
profits. Our progress these last two years is a testament to our future."
In addition to an active drilling program, we intend to continue
strategically acquiring leases in promising areas in the State of Tennessee.
We can not assure you that we will be able to identify or acquire any such
leases or that, if we do acquire any such leases, that they will be
profitable.
Results of Operations.
----------------------
We had revenues of $840,332 for the second quarter ended October 31,
2000, of our fiscal year, up from the $808,859 in revenues recognized during
the first quarter. Revenues were $435,135 for the same quarter of 1999.
Our net income was $61,270. Income before depreciation, depletion and
amortization for the first quarter was $139,713. This is the second quarter in
which our operations have been profitable. We incurred a loss of ($26,892)
during the same quarter of 1999.
Increased revenue during fiscal 2001 is due to the successful drilling
program we commenced this year in Campbell, Claiborne and Hancock Counties,
Tennessee.
For the fiscal year ended April 30, 2000, we received total revenues of
$1,913,143, down from $2,007,412 for the previous year.
Depletion, depreciation and amortization increased from $387,072 in 1999
to $479,472 in 2000. This increase was due primarily to the oil and gas wells
drilled during our current fiscal year.
Total costs and expenses decreased from $2,613,186 in 1999 to $2,048,843
in 2000. The decrease in costs was due primarily to a cost control program
and to our controlled drilling program.
29
<PAGE>
For the fiscal year ended April 30, 2000, we incurred a net loss of
($483,295 [$0.06 per share]), compared to net loss of ($936,193 [$0.14 per
share]) in the preceding fiscal year. The net loss before depreciation and
amortization was $3,823.
Liquidity.
----------
We estimate that we will be able to adequately fund our development and
production plans, with the exception of the acquisition of additional
properties, for the next 12 months. Sources of funds for us will be revenue
from operations, receipts from the private placement of our securities and
loans.
Cash and cash equivalents at October 31, 2000, increased by $387,758
from the April 30, 2000, due primarily to sale of 595,000 shares of common
stock, increases in the price for crude oil and natural gas and the increase
in our drilling activity.
We believe that our current cash flow will be sufficient to support our
cash requirements for the next 12 months.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
Transactions with Management and Others.
----------------------------------------
During quarter ended January 31, 1998, we purchased certain real
property from Deloy Miller's wife. The property is located in Huntsville,
Tennessee and currently houses our principal executive offices, shop and
equipment yard. The appraisal price of the property was $550,000. We 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 Ms. Miller. The note is
secured by the real property and bears 7% interest. An annual payment of
$92,019, plus interest, was paid beginning August 1, 1998. The total purchase
price of the property was $500,000. The balance owed on this note as of April
30, 2000, was $127,652.
We issued a note receivable of $860,000 at 8% with a eight year term to
Baxter Lee III, of Knoxville, Tennessee. The note included 688,000 warrants,
which can exercised during the term of the note receivable for $1.25 per
share. The ratio of warrants to common stock as of the date of the note
receivable will be maintained.
Other than these transactions, there have been no material transactions,
series of similar transactions or currently proposed transactions, to which we
or any of our subsidiaries was or is to be a party, in which the amount
involved exceeds $60,000 and in which any director or executive officer or any
security holder who is known to us to own of record or beneficially more than
5% of the our common stock, or any member of the immediate family of any of
the foregoing persons, had a material interest.
30
<PAGE>
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
--------------------------------------------------------
Market Information.
-------------------
Our common stock is currently traded on the OTC Bulletin Board of the
NASD. However, the market for our common stock is extremely limited in
volume. We can not guarantee that the present market for our common stock
will continue or be maintained, and the sale of "unregistered" and
"restricted" common stock pursuant to Rule 144, or of the shares being
registered for resale under this prospectus by the selling stockholders, may
substantially reduce the market price of our common stock.
The quarterly high and low bid prices for our shares of common stock
since public trading of these shares commenced in December, 1996, are as
follows:
Bid
---
Quarter ending: High Low
--------------- ---- ---
December 6, 1996, through
January 31, 1997 $0.25 $0.25
April 30, 1997 $2.875 $1.625
April 30, 1998 $3.25 $3.00
April 30, 1999 $2.63 $2.63
April 30, 2000 $1.375 $1.375
May 1, 2000 through
July 31, 2000 $1.01 $0.625
August 1, 2000 through
October 31, 2000 $1.6875 $0.625
November 1, 2000 through
January 16, 2001 $1.8125 $0.8125
These bid prices were obtained from the National Quotation Bureau,
LLC ("NQB") and do not necessarily reflect actual transactions, retail
markups, mark downs or commissions.
Resales of Restricted Securities.
---------------------------------
Approximately 1,348,265 shares of our common stock are publicly traded.
This number will be increased by the 1,625,152 presently outstanding shares
31
<PAGE>
that may be offered by this prospectus, along with the 1,136,000 shares
underlying the warrants that also may be offered by this prospectus. All of
our other outstanding common stock is eligible for public resale under Rule
144 of the Securities and Exchange Commission. These sales could
substantially decrease the market price of our common stock. These sales
could also severely affect our ability to raise the necessary debt or equity
funding for our current and intended business operations.
Holders.
--------
As of the date of this prospectus, we have about 284 stockholders. This
figure does not include an indeterminate number of stockholders who may hold
their shares in "street name."
Dividends.
----------
We have not declared any cash dividends on our common stock, and do not
intend to declare dividends in the foreseeable future. Management intends to
use all available funds for the development of our plan of operation. There
are no material restrictions limiting, or that are likely to limit, our
ability to pay dividends on our common stock.
EXECUTIVE COMPENSATION
----------------------
Cash Compensation.
------------------
The following table shows the aggregate compensation that we have paid to
directors and executive officers for services rendered during the periods
indicated:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
--------------------------
Long Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Secur-
ities All
Name and Year Other Rest- Under- LTIP Other
Principal Ended Salary Bonus Annual rictedlying Pay- Comp-
Position April 30 ($) ($) Compen-Stock Optionsouts ensat'n
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Deloy Miller1999 122,307 0 0 100 0 0 0
President, 2000 119,999 0 0 0 0 0 0
CEO and
Director
32
<PAGE>
Lawrence L. 1999 61,154 0 0 5,100 0 0 0
LaRue, 2000 60,000 0 0 10,000 0 0 0
Secretary/
Treasurer
and Director
Herbert J. 1999 9,700 0 0 100 0 0 0
White*, VP 2000 3,500 0 0 0 0 0 0
and Director
Herman 1999 0 0 500 0 0 0 0
Gettlefinger2000 0 0 0 0 0 0 0
Director
Gary G. 1999 72,366 0 0 100 0 0 0
Bible, VP 2000 71,000 0 0 0 0 0 0
John Bonar 1999 73,894 0 0 100 0 0 0
VP 2000 72,500 0 0 0 0 0 0
</TABLE>
* Mr. White was paid $100 per day for engineering services
provided to us in fiscal 2000.
Compensation Pursuant to Plans.
-------------------------------
We have no incentive or bonus plans.
Pension Table.
--------------
We have no pension plans.
Other Compensation.
-------------------
We have no other compensation arrangements with any of our directors or
executive officers.
Compensation of Directors.
--------------------------
The Board of Directors has resolved to compensate the members of the
Board of Directors for attendance at meetings at the rate of $500 per day.
Employment Contracts.
---------------------
There are presently no employment contracts relating to any member
of management.
33
<PAGE>
Termination of Employment and Change of Control Arrangements.
-------------------------------------------------------------
None; not applicable.
Compliance with Section 16(a) of the Exchange Act.
--------------------------------------------------
We have no securities registered under Section 12 of the Exchange Act.
We file reports under Section 15(d) thereof. Accordingly, our directors,
executive officers and 10% stockholders are not required to file statements of
beneficial ownership of securities under Section 16(a) of the Exchange Act.
FINANCIAL STATEMENTS
--------------------
(i) Consolidated Financial Statements for the years ended
April 30, 2000 and 1999
Report of Independent Certified Public Accountants
Consolidated Balance Sheet - April 30, 2000 and 1999
Consolidated Statements of Operations for the
Years ended April 30, 2000 and 1999
Consolidated Statements of Stockholders' Equity April 30,
1998 to April 30, 2000
Consolidated Statements of Cash Flows for the
Years Ended April 30, 2000 and 1999
Notes to the Consolidated Financial Statements
(ii) Consolidated Financial Statements
October 31, 2000 and April 30, 2000
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
34
<PAGE>
MILLER PETROLEUM, INC.
CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2000 and 1999
35
<PAGE>
[Charles M. Stivers, C.P.A. letterhead]
STRICTLY CONFIDENTIAL
Board of Directors
Miller Petroleum, Inc.
Huntsville, Tennessee
We are the independent certified public accountants for Miller Petroleum, Inc.
( the "Company") and most recently we issued our audit report dated July 25,
2000, with respect to the Company's consolidated financial statements as part
of and for the year ended April 30, 2000, which report included an explanatory
paragraph regarding the going concern uncertainty.
Since the date of our report, we have met with management and understand that
there have been a number of matters which have had a favorable effect on the
Company's financial condition, including the infusion of additional capital
and the successful completion of drilling of additional commercially viable
wells. In this regard, we have performed selected due diligence procedures on
such matters as they bear upon the Company's liquidity and based thereon, we
advise you that were we to render our audit report on the Company's financial
statements as of this date (as such audit report solely relates to our
consideration of the going concern uncertainty), we would no longer require
the inclusion of the explanatory paragraph regarding the going concern
uncertainty.
We wish to advise you that we have not performed an audit on the Company's
financial statements as of or for any periods subsequent to April 30, 2000,
accordingly, we are unable to and do not provide an opinion or any other form
of assurance with respect to any such periods subsequent to April 30, 2000.
/S/Charles M. Stivers
Charles M. Stivers
Certified Public Accountant
September 26, 2000
36
<PAGE>
<TABLE>
MILLER PETROLEUM, INC.
Consolidated Balance Sheet
<CAPTION>
ASSETS
April 30, April 30,
2000 1999
<S> <C> <C>
CURRENT ASSETS
Cash $ 39,556 $ 62,438
Accounts receivable - trade, net (Note 1) 781,311 317,403
Inventory (Note 1) 484,549 472,586
Prepaid expenses 27,988 25,274
Total Current Assets 1,333,404 877,701
FIXED ASSETS (Note 1)
Machinery and equipment 1,343,962 1,568,038
Vehicles 326,916 316,862
Buildings 313,335 313,335
Office equipment 76,270 75,311
Less: accumulated depreciation (833,519) (719,886)
Total Fixed Assets 1,226,964 1,553,660
OIL AND GAS PROPERTIES (Notes 3 and 7) 2,311,825 2,502,648
PIPELINE FACILITIES (Note 4) 411,906 458,997
OTHER ASSETS
Land 511,500 511,500
Investments 500 500
Organization Costs 178 178
Total Other Assets 512,178 512,178
TOTAL ASSETS $ 5,796,277 $ 5,905,184
LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES
Accounts payable - trade $ 402,330 $ 335,207
Accrued expenses 50,795 48,040
Notes payable - current portion (Note 5) 2,418,566 586,256
Total Current Liabilities 2,871,691 969,503
LONG-TERM LIABILITIES
Notes payable - related (Notes 5 and 6) 127,652 134,738
Notes payable (Note 5) 1,269,148 2,980,862
Total Long-Term Liabilities 1,396,800 3,115,600
Total Liabilities 4,268,491 4,085,103
STOCKHOLDERS EQUITY
Common Stock: 500,000,000 shares
authorized at $0.0001 par value,
7,110,691 shares issued and
outstanding 711 692
Additional paid-in capital 2,462,138 2,271,157
Retained earnings (935,063) (451,768)
Total Stockholders Equity 1,527,786 1,820,081
TOTAL LIABILITIES AND STOCKHOLDERS
EQUITY $ 5,796,277 $ 5,905,184
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
37
<PAGE>
<TABLE>
MILLER
PETROLEUM, INC.
Consolidated Statements of Operations
<CAPTION>
For the Years Ended
April 30,
2000 1999
<S> <C> <C>
REVENUES
Oil and gas revenue $863,422 $742,920
Service and drilling revenue 431,980 1,175,033
Retail sales 44,497 49,707
Other revenue 573,244 39,752
Total Revenue 1,913,143 2,007,412
COSTS AND EXPENSES
Cost of oil and gas sales 785,553 1,195,456
Selling, general and administrative 384,653 582,025
Salaries and wages 399,165 448,635
Depreciation, depletion and amortization 479,472 387,072
Total Costs and Expenses 2,048,843 2,613,188
INCOME (LOSS) FROM OPERATIONS (135,700) (605,776)
OTHER INCOME (EXPENSE)
Interest income 6,444 14,370
Interest expense (354,039) (344,787)
Total Other Income (Expense) (347,595) (330,417)
INCOME TAXES (Note 1) - -
NET INCOME (LOSS) $ (483,295) $ (936,193)
NET INCOME PER SHARE $ (0.06) $ (0.14)
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 7,012,110 6,753,268
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
38
<PAGE>
<TABLE>
MILLER PETROLEUM, INC.
Consolidated Statements of Stockholders Equity
<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, 1998 6,646,067 $ 666 $ 1,705,080 $484,425 $2,190,171
Common stock
issued for cash
at approximately
$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 to employees
at $1.80 per share 11,100 1 19,978 - - 19,979
Net loss for
the year ended
April 30, 1999 - - - (936,193) - (936,193)
Balance,
April 30, 1999 6,921,556 $ 692 $2,271,157 $(451,768) - $1,820,081
Common stock
issued for cash
at $1.00 per
share 185,000 19 184,981 - - 185,000
Common stock
issued for cash
at $1.59 per
share 3,135 - 5,000 - - 5,000
Common stock
issued for service
at $1.00 per
share 1,000 - 1,000 - - 1,000
Net loss for the
year ended
April 30, 2000 - - - (483,295) - (483,295)
Balance,
April 30,2000 7,110,691 $ 711 $2,462,138 $(935,063) 0 $ 1,527,786
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
39
<PAGE>
<TABLE>
MILLER PETROLEUM, INC.
Consolidated Statements of Cash Flows
<CAPTION>
For the Years Ended
April 30,
2000 1999
<S> <C> <C>
CASH FLOWS FROM
OPERATING
ACTIVITIES:
Net income (Loss) $(483,295) $ (936,193)
Adjustments to Reconcile Net Income to Net Cash
Provided (Used) by Operating Activities:
Depreciation, depletion and amortization 479,472 387,072
Allowance for bad debt 20,533 22,938
Common stock issued for services 1,000 65,579
Disposition of Equipment and Property 0 14,420
Changes in Operating Assets and Liabilities:
Decrease (increase) in accounts receivable (484,441) (7,090)
Decrease (increase) in inventory (11,963) 34,685
Decrease (increase) in organization costs 0 45
Increase (decrease) in accounts payable 67,123 145,473
Increase (decrease) in accrued expenses 2,755 11,043
Net Cash Provided (Used) by Operating Activities (408,816) (262,028)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Equipment (11,013) (227,914)
Change in investments 0 16,284
Purchase of oil and gas properties (47,792) (483,350)
Purchase of pipeline (2,239) (446,325)
Net Cash Provided (Used) by Investing
Activities (61,044) (1,141,305)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on Notes Payable (384,812) 0
Proceeds on note receivable 0 (1,392,730)
Sale of common stock 190,000 500,524
Proceeds from borrowings 417,714 2,291,268
Sale of Equipment 224,076 0
Net Cash Provided (Used) by Financing
Activities $ 446,978 $1,399,062
NET INCREASE (DECREASE) IN CASH $ (22,882) $ (4,271)
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 62,438 66,709
CASH AND CASH EQUIVALENTS,
END OF YEAR $ 39,556 $ 62,438
CASH PAID FOR:
Interest $ (354,039) $ (344,787)
Income Taxes $ - $ -
NON-CASH FINANCING ACTIVITIES:
Common stock issued for services $ 1,000 $ 45,600
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
40
<PAGE>
MILLER PETROLEUM, INC.
Notes to the Consolidated Financial Statements
April 30, 2000 and 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Organization
The financial statements presented are those of Miller Petroleum, Inc.
(formerly Triple Chip Systems, Inc.) (the Company). The Company was
incorporated in the State of Delaware on November 12, 1985 for the purpose of
searching out a business acquisition. On January 10, 1997, Triple Chip
Systems, Inc. changed its name to Miller Petroleum, Inc. in conjunction with
the merger with Miller Petroleum, Inc. The Company is no longer considered a
development stage company as defined by SFAS No. 7.
The Subsidiaries
Miller Petroleum, Inc. (pre-merger) (Miller) was incorporated under the
laws of the State of Tennessee on January 24, 1978, for the purpose of
acquiring gas and oil contracts.
Miller Services, Inc. (Services) was incorporated under the laws of the
State of Tennessee on October 16, 1987, for the purpose of drilling and
servicing oil and gas wells.
Energy Cell, Inc. (Cell) was incorporated under the laws of the State of
Tennessee on October 20, 1987, for the purpose of searching out and acquiring
or participating in a business or business opportunity.
On May 1, 1996, Services and Cell were merged into Miller in a business
combination accounted for as a pooling of interests.
On January 10, 1997, Triple Chip Systems, Inc. and Miller Petroleum
completed an Agreement and Plan of Reorganization whereby the Company issued
5,582,535 shares of its common stock in exchange for all of the outstanding
common stock of Miller. Immediately prior to the Agreement and Plan of
Reorganization, the Company had 167,465 shares of common stock issued and
outstanding.
The acquisition was accounted for as a recapitalization of Miller because
the shareholders of Miller controlled the Company after the acquisition.
Therefore, Miller is treated as the acquiring entity. There was no
adjustments to the carrying value of the assets or liabilities of Miller in
the exchange. The Company is the acquiring entity for legal purposes and
Miller is the surviving entity for accounting purposes. On May 6, 1996, the
shareholders of the Company authorized a reverse stock split of 1 for 200.
All references to shares of common stock have been retroactively restated.
41
<PAGE>
b. Accounting Method
The Company's financial statements are prepared using the accrual method
of accounting. The successful efforts method of accounting is used for oil
and gas property acquisitions, exploration and production activities as
defined by the Securities and Exchange Commission, whereby all costs incurred
in connection with the properties, productive or nonproductive, are
capitalized. Capitalized costs related to proved properties and estimated
future costs to be incurred in the development of proved reserves are
amortized using the unit-of-production method. Capitalized costs are annually
subjected to a test of recoverability by comparison to the present value of
future net revenues from proved reserves. Any capitalized costs in excess of
the present value of future net revenues from proved reserves, adjusted for
the cost of certain unproved properties, are expensed in the year in which
such an excess occurs. The Company has elected an April 30, year end.
c. Income per Share of Common Stock
The income per share of common stock is based on the weighted average
number of shares issued and outstanding during the year.
d. Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
e. Principles of Consolidation
The consolidated financial statements include the accounts of the
Company, and its wholly-owned subsidiaries, Miller Petroleum, Inc., and MPC,
Inc. All significant intercompany transactions have been eliminated.
f. Fixed Assets
Fixed assets are stated at cost. Depreciation and amortization are
computed using the straight-line method for financial reporting purposes and
accelerated methods for income tax purposes.
The estimated useful lives are as follows:
Lives
Class (Years)
Building 40
Machinery and equipment 5-10
Vehicles 5-7
Office equipment 5
Depreciation expense for the years ended April 30, 2000 and 1999 was
$240,857 and $200,727 respectively.
g. Revenue Recognition
Revenues are recognized when the gas products are delivered to customers.
In the movement of natural gas, it is common for differences to arise between
volumes of gas contracted or nominated, and volume of gas actually received or
delivered. These solutions are the result of certain attributes of the natural
gas commodity and the industry itself. Consequently, the credit given to the
Company by a pipeline for volumes received from producers may be different
than volumes actually delivered y a pipeline. When all necessary information,
such as the final pipeline statement for receipts and deliveries are
available, these differences are resolved by the Company.
42
<PAGE>
The Company records imbalances based on amounts received and classifies
the imbalances as adjustments to the trade accounts receivable or trade
accounts payable, as appropriate.
h. Accounts Receivable
Accounts receivable are presented at net realizable value. Accounts
receivable are net of an allowance for doubtful accounts of $22,938 at April
30, 1999.
i. Inventory
Inventory consists of used equipment which is purchased by the Company
for resale. When purchases are made by the Company the cost is applied only
to the marketable portion of the equipment. The inventory balance was
$484,549 at April 30, 2000.
j. Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liability at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
k. Reclassification
Certain April 30, 1999 balances have been reclassified to conform with
the April 30, 2000 financial statement presentation.
l. New Accounting Pronouncements
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities" is effective for all fiscal years beginning after June 15, 2000.
This statement requires recognition of all derivative contracts as either
assets or liabilities in the balance sheet and the measurement of them at fair
value. If certain conditions are met, a derivative may be specifically
designated as a hedge, the objective of which is to match the timing of any
gains or losses on the hedge with the recognition of (i) the changes in the
fair value of the hedged asset or liability that are attributable to the
hedged risk or (ii) the earnings effect of the hedged forecasted transaction.
For a derivative not designated as a hedging forecasted transaction. For a
derivative not designated as a hedging instrument, the gain or loss is
recognized in income in the period of change.
m. Income taxes
No provision for taxes has been made, due to current operating losses.
43
<PAGE>
NOTE 2 - GOING CONCERN UNCERTAINTY
The Company has experienced losses totaling $483,295 for the year ended
April 30, 2000. This matter raises substantial doubt about the Company's
ability to continue as a going concern. Management's plans include raising
additional capital in order to drill additional oil and gas wells. The
accompanying financial statements do not include any adjustments relating to
the recoverability and classifications of recorded asset amounts or the
amounts and classifications of liabilities that might be necessary should the
Company be unable to continue as a going concern.
NOTE 3 - BUSINESS ACQUISITION
On December 16, 1997, the Company entered into an asset purchase agreement
acquisition in which certain producing oil and gas properties, leases, and
inventory located in the Kentucky and Tennessee were acquired from AKS Energy
Corporation. The agreement, which was effective as of December 16, 1997,
whereby the Company paid a total of $2,308,207 for the acquisition. The
$2,308,207 purchase price was paid as follows: $1,910,000 paid in cash, 45,000
shares of common stock issued at $2.00 per share, and assumed $308,207 of
liabilities.
NOTE 4 - OIL AND GAS PROPERTIES - PIPELINE FACILITIES
The Company uses the successful efforts method of accounting for oil and
gas producing activities. Costs to acquire mineral interests in oil and gas
properties, to drill and equip exploratory wells that find proved reserves,
and to drill and equip development wells are capitalized. Costs to drill
exploratory wells that do not find proved reserves, geological and geophysical
costs, and costs carrying and retaining unproved properties are expensed. The
Company amortizes the oil and gas properties using the double declining
balance method for 10 years. The Company capitalized $47,792 of oil and gas
properties for the year ended April 30, 2000 and recorded $238,615 and
$186,346 of amortization expense for the years ended April 30, 2000 and 1999,
respectively.
NOTE 5 - LONG-TERM DEBT
The Company had the following debt obligations at April 30, 2000:
April 30,
2000
Line of credit with Bank One of Texas secured by oil
and gas properties and corporate assets, principle paid
at $20,000 per month bearing a prime + 2% interest rate.
$ 1,840,000
Note payable to Individual unsecured at 7.00% interest 127,652
Note payable to First National Bank of Oneida secured
by equipment bearing interest at 9.00%. 216,788
Note payable to First National Bank of Oneida secured
by stock at 9.50%. 250,000
44
<PAGE>
Note payable to Individual bearing interest at 8.00%
and requiring interest payments quarterly 860,000
Note payable to Individual bearing interest at 8.00% 180,000
Line of credit payable to First National Bank of the
Cumberlands secured by equipment and inventory bearing
interest at 10.50% due on demand 105,552
Note payable to Community Trust Bank secured by real
property bearing interest at 8.50% requiring monthly
principle and interest payments of $1,389 128,623
Notes payable to a company secured by a working interest
in oil wells bearing no interest and due in productions
payments 106,751
Total notes payable 3,815,366
Less current maturities (2,418,566)
Notes payable - long-term $ 1,396,800
Maturities of long-term debt are as follows:
Year Ending April 30, Amount
2000 $2,418,566
2001 57,287
2002 57,287
2003 57,287
2004 and thereafter 1,224,939
Total $3,815,366
NOTE 6 - RELATED PARTY TRANSACTIONS
The Company has a note payable to Deloy Miller (majority stockholder) for
$127,652 at April 30, 2000. The note is unsecured and bears interest at 7%
per annum.
NOTE 7 - SFAS 69 SUPPLEMENTAL DISCLOSURES (Unaudited)
(1) Capitalized Costs Relating to
Oil and Gas Producing Activities
April 30,
2000
Proved oil and gas properties
and related lease equipment:
Developed $ 2,988,426
Non-developed 31,053
3,019,479
Accumulated depreciation and depletion (707,654)
Net Capitalized Costs $ 2,311,825
45
<PAGE>
(2) Costs Incurred in Oil and Gas Property
Acquisition, Exploration, and Development Activities
For the
Year Ended
April 30,
2000
Acquisition of Properties Proved and Unproved $ 0
Exploration Costs -
Development Costs 47,792
Total $ 47,792
(3) Results of Operations for
Producing Activities
April 30,
2000 1999
Production revenues $1,295,402 $1,917,953
Production costs 785,553 1,195,456
Depreciation and depletion 186,346 219,131
Results of operations for producing
activities (excluding corporate overhead
and interest costs $ 323,503 503,366
(4) Reserve Quantity Information
The following schedule estimates of proved oil and natural gas reserves
attributable to the Company. Proved reserves are estimated quantities of oil
and natural gas which geological and engineering data demonstrate with
reasonable certainty to be recoverable in future years from known reservoirs
under existing economic and operating conditions. Proved - developed reserves
are those which are expected to be recovered through existing wells with
existing equipment and operating methods. Reserves are stated in barrels of
oil (Bbls) and millions of cubic feet of natural gas (Mcf). Geological and
engineering estimates of proved oil and natural gas reserves at one point in
time are highly interpretive, inherently imprecise and subject to ongoing
revisions that may be substantial in amount. Although every reasonable effort
is made to ensure that the reserve estimates reported represent the most
accurate assessments possible, these estimates are by their nature generally
less precise that other estimates presented in connection with financial
statement disclosures.
46
<PAGE>
Oil (bbls) Gas (Mcf)
Proved reserves
Balance, May 1, 1999 120,151 9,443,127
Discoveries and extensions 173,648 855,614
Acquisitions of proved reserves - -
Revisions of previous estimates (10,061) (2,324,709)
Productions 10,450 223,418
Balance, April 30, 2000 294,188 8,197,450
Proved developed producing
reserves at April 30, 2000 120,540 2,034,416
Proved developed producing
reserves at April 30, 1999 92,250 3,607,828
In addition to the proved developed producing oil and gas reserves
reported in the geological and engineering reports, the Company holds
ownership interests in various proved - undeveloped properties. The reserve
and engineering reports performed for the Company by an independent
engineering consulting firm reflect additional proven reserves equal to
approximately 4 Bcf of natural gas for these undeveloped properties. Although
wells have been drilled and completed in each of these four properties,
certain production and pipeline facilities must be installed before actual gas
production will be able to commence. The most recent development plan for
these properties indicates that facilities installation and commencement of
production will be in 2000. However, such timing as well as the actual
financing arrangements that will be secured by the Company are uncertain at
this time. Therefore, these proven undeveloped reserves are not being
included in the presentation of the oil and gas reserves at April 30, 2000,
nor are such reserves being considered in calculating depreciation, depletion
and amortization expense for the year based on the April 30, 2000 balance of
the proven developed producing reserves set forth above.
The following schedule presents the standardized measure of estimated
discounted future net cash flows from the Company's proved reserves for
the years ended April 30, 2000 and 1999. Estimated future cash flows were
based on independent reserve data. Because the standardized measure of
future net cash flows was prepared using the prevailing economic
conditions existing at April 30, 2000 and 1999, it should be emphasized
that such conditions continually change. Accordingly, such information
should not serve as a basis in making any judgement on the potential
value of the Company's recoverable reserves or in estimating future
results to operations.
Standardized measures of discounted future net cash flows:
April 30,
2000 1999
Future cash flows $ 26,552,579 $ 22,225,310
Future production costs and taxes (2,992,328) (7,056,817)
Future development costs (890,000) (3,456,000)
Future cash flows before
income taxes 22,670,251 11,712,493
Discount 10% for timing of cash flow (14,289,651) (6,788,758)
Discounted future net cash flows
from proved reserves $ 8,380,600 $ 4,923,735
Of the Company's total proved reserves as of April 30, 2000 and 1999,
approximately 26% and 41%, respectively, were classified as proved developed
producing, 1% and 8%, respectively, were classified as proved developed non-
producing and 73% and 51%, respectively, were classified as proved
undeveloped. All of the Company's reserves are located in the continental
United States.
47
<PAGE>
<TABLE>
MILLER PETROLEUM, INC.
Consolidated Balance Sheets
<CAPTION>
ASSETS
October 31, April 30,
2000 2000
Unaudited
<S> <C> <C>
CURRENT ASSETS
Cash $ 427,314 $ 39,556
Accounts receivable - trade-, net 325,508 781,311
Inventory 481,549 484,549
Work in process 175,090
Prepaid expenses 27,988
Total Current Assets 1,409,461 1,333,404
FIXED ASSETS
Machinery and equipment 1,286,450 1,343,962
Vehicles 432,132 326,916
Buildings 313,335 313,335
Office Equipment 82,064 76,270
Less: accumulated depreciation (840,637) (833,519)
Total Fixed assets 1,273,344 1,226,964
OIL AND GAS PROPERTIES 750,764 2,311,825
PIPELINE FACILITIES 370,848 411,906
OTHER ASSETS
Land 511,500 511,500
Investments 500 500
Organization Costs 119 178
Total Other Assets 512,119 512,178
TOTAL ASSETS $4,316,536 $5,796,277
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable - trade $260,279 $402,330
Accrued expenses 58,992 50,795
Notes payable - current portion 504,761 2,418,566
Total Current Liabilities 824,032 2,871,691
LONG-TERM LIABILITIES
Notes payable - related 99,601 127,652
Notes payable 1,225,235 1,269,148
Total Long-Term Liabilities 1,324,836 1,396,800
Total Liabilities 2,148,868 4,268,491
STOCKHOLDERS' EQUITY
Common Stock: 500,000,000 shares
authorized at $0.0001 par value,
7,668,056 and 7,110,691 shares
issued and outstanding 767 711
Additional paid-in capital 2,967,582 2,462,138
Retained Earnings (800,681) (935,063)
Total Stockholders' Equity 2,167,668 1,527,786
TOTAL LIABILITIES AND
STOCKHOLDERS'S EQUITY $4,316,536 $5,796,277
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
48
<PAGE>
<TABLE>
MILLER PETROLEUM, INC.
Consolidated Statements of Operations
(UNAUDITED)
Three Months Six Months
Ended
October 31,2000
<S> <C> <C>
REVENUES
Service and drilling revenue $ 655,342 $1,177,290
Oil and gas revenue 183,355 345,371
Retail sales 135 1,126
Other revenue 1,500 125,404
Total Revenue 840,332 1,649,191
COSTS AND EXPENSES
Cost of sales 345,484 599,111
Selling, general and administrative 131,210 237,950
Salaries and wages 169,856 350,993
Depreciation, depletion and amortization 78,443 174,946
Total Costs and Expenses 724,993 1,363,000
INCOME (LOSS) FROM OPERATIONS 115,339 286,191
OTHER INCOME (EXPENSE)
Interest income 464 577
Interest expense (54,533) (152,386)
Total Other Income (Expense) (54,069) (151,809)
INCOME TAXES 0 0
NET INCOME (LOSS) 61,270 134,382
NET EARNING (LOSS) PER SHARE .01 .02
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 7,392,124 7,116,191
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
49
<PAGE>
<TABLE>
MILLER PETROLEUM, INC.
Consolidated Statement of Stockholders' Equity
(UNAUDITED)
Additional
Common Shares Paid-in Retained
Shares Amount Capital Earnings Total
<S> <C> <C> <C> <C> <C>
Balance
April 30, 1999 6,921,556 $692 $2,271,158 ($451,768) $1,820,082
Common stock
issued for cash at
$1.00 per share 185,000 19 184,981 - 185,000
Common stock
issued for cash at
$1.59 per share 3,135 5,000 - 5,000
Common stock
issued for services
at $1.00 per share 1,000 1,000 - 1,000
Net loss for the
year ended
April 30, 2000 (483,295) (483,295)
Balance
April 30, 2000 7,110,691 $711 $2,462,139 $(935,063) 1,527,787
Common stock
repurchased for
$2.00 per share (45,000) (5) (89,995) (90,000)
Common stock
issued for services
at $1.00 per share 5,500 1 5,499 5,500
Common stock
issued for cash
at $0.90 per share 50,000 5 44,995 45,000
Common stock
repurchased for
$1.60 per share (3,135) 5 (5,000) (5,000)
Common stock
issued for cash
at $1.00 per share 550,000 55 549,945 550,000
Net income for the
six months ended
October 31, 2000 134,382 134,382
Balance
October 31, 2000 7,668,056 $767 $2,967,582 ($800,681)$2,167,669
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
50
<PAGE>
<TABLE>
MILLER PETROLEUM, INC.
Consolidated Statement of Cash Flows
(UNAUDITED)
Three Months Six Months
Ended
October 31, 2000
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 61,270 $134,382
Adjustments to Reconcile Net Income to
Net Cash Provided (Used) by Operating
Activities:
Depreciation, depletion and amortization 78,443 174,946
Allowance for bad debt
Common stock issued for services 5,500
Changes in Operating Assets and Liabilities:
Decrease (increase) in accounts receivable 1,862,533 455,803
Decrease (increase) in inventory 3,000 3,000
Decrease (increase) in work in process (30,278) (175,090)
Increase (decrease) in accounts payable (24,042) (142,051)
Increase (decrease) in prepaid expenses (13,994) (27,988)
Increase (decrease) in accrued expenses (6,057) 8,197
Net Cash Provided (Used) by Operating
Activities 1,930,875 436,699
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (30,997) (68,413)
Purchase of oil and gas properties (262,497) (262,497)
Net Cash Provided (Used) by Investing
Activities (293,494) (330,910)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable (1,952,170) (2,034,411)
Sale of common stock 550,000 595,000
Repurchase of common stock (5,000) (95,000)
Proceeds from borrowing 88,695 88,695
Sale of Oil and Gas Properties 1,600,260
Sale of Equipment 1,500 127,425
Net Cash Provided (Used) by Financing
Activities ($1,316,975) $281,969
NET INCREASE IN CASH $320,406 $387,758
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 106,908 39,556
CASH AND CASH EQUIVALENTS,
END OF PERIOD $427,314 $427,314
CASH PAID FOR
Interest $54,533 $152,386
Income taxes - -
NON-CASH FINANCING ACTIVITIES:
Common stock issued for services $5,500 $ 5,500
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
51
<PAGE>
MILLER PETROLEUM, INC.
Notes to the Consolidated Financial Statements
April 30, 2000 and October 31, 2000
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, 2000 Annual Report on Form 1OKSB. The results of
operations for the period ended October 31, 2000 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
None.
52
<PAGE>
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
----------
On or about March 19, 1998, our Board of Directors engaged Charles M.
Stivers, Certified Public Accountant, of Manchester, Kentucky, to audit our
financial statements. He continues as our auditor for fiscal 2001.
AVAILABLE INFORMATION
---------------------
We file periodic reports with the Securities and Exchange Commission.
You may inspect and copy these documents at the Public Reference Room of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549. Please call the Securities and Exchange Commission at
1-800-SEC-0330 for additional information. Our Securities and Exchange
Commission filings are also available on its web site: http://www.sec.gov.
We have filed a registration statement with the Securities and Exchange
Commission on Form SB-2, under the Securities Act, with respect to the
securities described in this prospectus. This prospectus is filed as part of
the registration statement. It does not contain all of the information set
forth in the registration statement and the exhibits and schedules filed with
it. For further information about us and the common stock described by this
prospectus, we refer you to the registration statement and to the exhibits and
schedules filed with it. You may inspect or copy these documents at the
Public Reference Branch or on the Securities and Exchange Commission's web
site.
You may wish to examine our 8-K Current Report dated September 6, 2000,
for further information on the sale of our Kentucky assets to NAMI Resources.
You may also wish to examine our 8-K Current Report dated December 12,
2000, for further information about our most recent private placement of
securities. The purchasers of these securities are part of the group of
selling stockholders, and the securities purchased on this offering are part
of the securities being registered for resale pursuant to the prospectus.
DEALER PROSPECTUS DELIVERY OBLIGATION
-------------------------------------
Until _______________, all dealers that effect transactions in these
securities, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealers' obligation to
deliver a prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
53
<PAGE>
------------------------------------------------------------------------------
------------------------------------------------------------------------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors And Officers.
------------------------------------------
Section 48-18-502 of the Tennessee Business Corporation Act allows a
corporation to indemnify any director in any civil or criminal proceeding
(other than a proceeding by or in the right of the corporation in which the
director was adjudged liable to the corporation or any other proceeding in
which he or she was adjudged liable on the basis that he or she improperly
received a personal benefit) by reason of service as a director if the person
to be indemnified conducted himself or herself in good faith and in a manner
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe the conduct was unlawful. Section 48-18-507
extends certain indemnification rights to officers, employees and agents of a
corporation as well. The foregoing is only a brief summary of the right of
indemnification allowed a corporation under the Tennessee Business Corporation
Act, and is modified in its entirety by this reference. Our Board of
Directors has adopted these provisions to indemnify its directors, executive
officers and agents.
Item 25. Other Expenses of Issuance And Distribution.
--------------------------------------------
The following table sets forth the expenses which we expect to incur in
connection with the registration of the shares of common stock being
registered by this Registration Statement. All of these expenses, except for
the Commission registration fee, are estimated:
Securities and Exchange Commission registration fee........$ 1,173.32
Legal fees and expenses....................................$50,000.00
Accounting fees............................................$ 3,500.00
Printing and engraving expenses............................$ 1,000.00
Blue Sky Filings...........................................$ 4,000.00
Transfer agent fees........................................$ 500.00
Miscellaneous..............................................$ 500.00
Total.................................................$60,673.32
Item 26. Recent Sales of Unregistered Securities.
----------------------------------------
We have sold the following "restricted securities" during the past three
calendar years:
Common Stock.
-------------
<TABLE>
<CAPTION>
Aggregate
Name or Group Number of Shares Date Consideration
------------- ---------------- ---- -------------
<S> <C> <C> <C>
Common stock issued 336,222 (1) $587,018
for cash at
approximately
$1.75 per share
Common stock issued 144,444 (1) $260,000
for equipment at
$1.80 per share
Common stock issued 45,000 12/15/97 $ 90,000
in AKS acquisition at
$2.00 per share
Common stock issued to 29,037 4/2/98 $ 43,590
pay note payable at
$1.50 per share
Common stock issued as 36,364 4/2/98 $ 40,000
bonus at $1.10 per share
Common stock issued for 150,000 8/4/98 $328,125
cash at $2.19 per share
Common stock issued for 60,500 10/19/98 $120,999
cash at $2.00 per share
Common stock issued for 28,556 12/18/98 $ 51,400
cash at $1.80 per share
Common stock issued for 25,333 (2) $ 45,600
services at $1.80 per
share
Common stock issued to 11,100 (2) $ 19,979
employees at $1.80 per
share
Common stock issued for 5,500 7/18/00 $ 5,500
services at $1.00 per
share
Common stock issued for 50,000 7/18/00 $ 45,000
cash at $0.90 per share
18 subscribers 1,075,000 12/12/00(3) $1,075,000
under Rule 506
offering
Christmas bonus for 2,800 12/12/00 Bonus
14 employees
</TABLE>
(1) Issued on various dates during our fiscal year ended April 30, 1998.
(2) Issued on various dates during our fiscal year ended April 30, 1999.
(3) Our Board of Director's consent accepting subscriptions was signed
December 12, 2000, but the Subscription Agreements were signed over a period
of three months.
Warrants.
---------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Raymond R. Cohn 12,500 8/10/00 (1)
Daniel Page 1,000,000 10/11/00 (2)
Basic Investors, Inc. 100,000 12/08/00 (3)
Lawrence L. LaRue 12,500 12/15/00 (4)
Teresa Cotton 5,000 12/15/00 (4)
Gary Bible 6,000 1/09/01 (4)
</TABLE>
(1) Granted to Mr. Cohn in connection with the purchase of other
securities.
(2) Granted to Mr. Page for his service as an investor relations
consultant for a period of two years commencing August 3, 2000.
(3) Granted to Basic Investors for its service as a business consultant
from December 8, 2000, until February 1, 2001.
(4) Granted as bonuses to: Mr. LaRue, the Secretary/Treasurer and a
director; Ms Cotton, an employee; and Mr. Bible, a Vice President.
We issued all of these securities to persons who were either "accredited
investors," or "sophisticated investors" who, by reason of relationship to us,
education, business acumen, experience or other factors, were fully capable of
evaluating the risks and merits of an investment in our company; and each had
prior access to all material information about us. We believe that the offer
and sale of these securities was exempt from the registration requirements of
the Securities Act, pursuant to Sections 4(2) and 4(6) thereof, and Regulation
D of the Securities and Exchange Commission and from various similar state
exemptions.
Item 27. Exhibits
--------
The following exhibits are filed as a part of this Registration
Statement:
<TABLE>
<CAPTION>
Exhibit
Number Description
------ ------------
<S> <C>
3.1 Charter of Miller Contract Drilling, Inc., filed January 24, 1978
3.2 Articles of Merger between Miller Resources, Inc. and Miller Contract
Drilling, Inc., filed March 13, 1979
3.3 Articles of Merger between Miller Trucking Co., Inc. and Miller Contract
Drilling, Inc., filed October 31, 1983
3.4 Articles of Amendment of the Charter of Miller Contract Drilling, Inc.,
changing its name to Miller Petroleum, Inc., filed February 27, 1984
3.5 Articles of Merger between Miller Enterprises, Inc. and Miller
Petroleum, Inc., filed April 30, 1985
3.6 Articles of Amendment to the Charter of Miller Petroleum, Inc.,
increasing the number of shares authorized to 2,000, filed on September
12, 1996
3.7 Articles of Merger between Miller Services, Inc., Energy Cell, Inc. and
Miller Petroleum, Inc., filed on September 16, 1996
3.8 Certificate of Ownership and Merger and Articles of Merger between
Triple Chip Systems, Inc., a Delaware corporation and Miller Petroleum,
Inc., a Tennessee Corporation, filed on January 13, 1997
3.9 By-Laws
5 Opinion of Branden T. Burningham, Esq.
regarding legality
23 Consent of Branden T. Burningham, Esq.
27 Financial Data Schedule.
99.1 8-K Current Report dated September 6, 2000, regarding
the sale of assets to NAMI Resources Company, LLC.*
* These documents and related exhibits have previously been filed
with the Securities and Exchange Commission and are incorporated
herein by this reference.
Item 28. Undertakings
------------
We hereby undertakes:
(1) To file, during any period in which it offers or sells securities,
a post-effective amendment to this Registration Statement to:
(i) include any Prospectus required by Section 10(a)(3) of
the Securities Act;
(ii) reflect in the Prospectus any facts or events which,
individually or together, represent a fundamental change in the information in
the registration statement; and, notwithstanding the foregoing, any increase
or decrease in volume of securities offered, if the total dollar value of
securities offered would not exceed that which was registered, and any
deviation from the low or high end of the estimated maximum offering range may
be reflected in the form of Prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in the volume and price
represent no more than a 20% change in the maximum aggregate offering price
set forth in the "Calculation of Registration Fee" table in the effective
Registration Statement; and
(iii) include any additional or changed material information
on the plan of distribution.
(2) For determining liability under the Securities Act, to treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time shall be deemed to be
the initial bona fide offering.
(3) To file a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of the offering.
(4) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to our directors, executive officers
and controlling persons the foregoing provisions or otherwise, we have been
advised that in the opinion of the Securities and Exchange Commission that
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. If a claim for indemnification against
these liabilities, other than our payment of expenses incurred or paid by any
of our directors, executive officers or controlling persons in the successful
defense of any action, suit or proceeding, is asserted by the director,
executive officer or controlling person in connection with the securities
being registered, we will, unless in the opinion of our counsel the matter has
been settled by a controlling precedent, submit to a court of appropriate
jurisdiction the question whether indemnification by us is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of that issue.
SIGNATURES
----------
In accordance with the requirements of the Securities Act, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements of filing of Form SB-2 and authorized this
registration statement to be signed on its behalf by the undersigned in the
City of Huntsville, State of Tennessee, on January 17, 2001.
MILLER PETROLEUM, INC.
Date: 1/17/2001 By/s/Deloy Miller
---------------- ---------------------------
Deloy Miller, CEO and
Director
In accordance with the requirements of the Securities Act, this
registration statement was signed by the following persons in the
capacities and on the dates stated.
MILLER PETROLEUM, INC.
Date: 1/17/2001 By/s/Deloy Miller
---------------- ---------------------------
Deloy Miller, CEO and
Director
Date: 1/17/2001 By/s/Lawrence L. LaRue
---------------- ---------------------------
Lawrence LaRue, Secretary/
Treasurer and Director
Date: Jan. 17, 2001 By/s/Herman Gettelfinger
---------------- ---------------------------
Herman Gettelfinger, Director
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
FORM SB-2 REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
MILLER PETROLEUM, INC.
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