SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15 (d)
of the Securities and Exchange Act of 1934
For the Quarter Ended February 28, 1998
Commission File Number 01-19001
MILLER DIVERSIFIED CORPORATION
----------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Nevada 84-1070932
------------------------ ---------------------
(State or other jurisdic- (I.R.S. Employer
tion of incorporation or Identification Number)
organization)
Mailing Address:
P. O. Box 937
La Salle, Colorado 80645
23360 Weld County Road 35
La Salle, Colorado 80645
(Address of Principal Executive Office)
(970) 284-5556
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
----- -----
Number of shares of Common Stock, par value $.0001, outstanding on April 10,
1998, 6,364,640.
Transitional Small Business Disclosure Format: YES NO X
----- -----
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
MILLER DIVERSIFIED CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
- -------------------------------------------------------------------------------
February 28, August 31,
1998 1997
- -------------------------------------------------------------------------------
ASSETS
Current Assets:
Cash $ 31,723 $ 359,278
Trade accounts receivable 723,674 483,888
Trade accounts receivable - related parties 3,473 55,685
Account receivable - related party 14,042 8,897
Income tax refunds receivable 5,329 94,761
Inventories 1,715,402 466,449
Prepaid expenses 31,086 19,337
Current portion of notes receivable-
related party -- 250,000
- -------------------------------------------------------------------------------
Total Current Assets 2,524,729 1,738,295
- -------------------------------------------------------------------------------
Property and Equipment:
Feedlot facilities under capital lease
- related party 1,497,840 1,497,840
Equipment 77,453 77,453
Equipment under capital leases - related party 30,649 64,092
Leasehold improvements 92,336 90,403
--------- ---------
1,698,278 1,729,788
Less: Accumulated depreciation and amortization 540,045 525,320
- -------------------------------------------------------------------------------
Total Property and Equipment 1,158,233 1,204,468
- -------------------------------------------------------------------------------
Other Assets:
Securities available for sale 18,969 29,313
Notes receivable - related party 300,000 300,000
Deferred income taxes 176,962 176,962
Deposits and other 1,500 1,500
- -------------------------------------------------------------------------------
Total Other Assets 497,431 507,775
- -------------------------------------------------------------------------------
TOTAL ASSETS $ 4,180,393 $ 3,450,538
- -------------------------------------------------------------------------------
Continued on next page.
<PAGE>
MILLER DIVERSIFIED CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS - Continued
------------------------------------------------------------------------------
February 28, August 31,
1998 1997
------------------------------------------------------------------------------
LIABILITIES
Current Liabilities:
Cash overdraft $ 124,309 $ --
Notes payable 523,084 --
Trade accounts payable 340,764 418,686
Accrued expenses 21,458 17,061
Customer advance feed contracts 259,411 14,907
Customer advance feed contracts - related parties -- 40,892
Current portion of capital lease
obligations-related party 24,285 28,637
- -------------------------------------------------------------------------------
Total Current Liabilities 1,293,311 520,183
- -------------------------------------------------------------------------------
Capital Lease Obligations - related party 999,715 1,015,914
- -------------------------------------------------------------------------------
Total Liabilities 2,293,026 1,536,097
- -------------------------------------------------------------------------------
Commitments
STOCKHOLDERS' EQUITY
Preferred Stock -- --
Common Stock, par value $.0001 per share; 25,000,000
shares authorized; 6,364,640 issued and outstanding 636 636
Additional Paid-In Capital 1,351,693 1,351,693
Unrealized Gain (Loss) on Securities Available for sale (1,131) 9,213
Retained Earnings 536,169 552,899
- -------------------------------------------------------------------------------
Total Stockholders' Equity 1,887,367 1,914,441
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,180,393 $ 3,450,538
================================================================================
See Accompanying Notes to Unaudited Consolidated Financial Statements.
<PAGE>
MILLER DIVERSIFIED CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS
- -------------------------------------------------------------------------------
Six Months Ended February 28,
1998 1997
- -------------------------------------------------------------------------------
Revenues:
Feed and other sales $ 4,457,963 $ 4,704,409
Feedlot services 777,970 1,117,356
Interest 8,981 13,781
Interest on note receivable related party 15,250 7,500
Other 18,880 46,418
- -------------------------------------------------------------------------------
Total Revenues 5,279,044 5,889,464
- -------------------------------------------------------------------------------
Costs and Expenses
Cost of feed and other sales 4,111,160 4,376,730
Cost of feedlot services 652,173 1,027,866
Selling, general and administrative 479,126 395,435
Interest 1,684 10,998
Interest on capital leases - related party 56,960 59,175
- -------------------------------------------------------------------------------
Total Costs and Expenses 5,301,103 5,870,204
- -------------------------------------------------------------------------------
Earnings (Loss) before Income Taxes (22,059) 19,260
Income Taxes Expense (Benefit) (5,329) 3,708
- -------------------------------------------------------------------------------
NET EARNINGS $ (16,730)$ 15,552
- -------------------------------------------------------------------------------
EARNINGS PER COMMON SHARE AND
COMMON EQUILAVENT SHARE $ Nil $ Nil
- -------------------------------------------------------------------------------
Weighted Average Number of Common and
Common Equilavent Shares Outstanding 6,364,640 6,793,702
- -------------------------------------------------------------------------------
See Accompanying Notes to Unaudited Consolidated Financial Statements.
<PAGE>
MILLER DIVERSIFIED CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS
- -------------------------------------------------------------------------------
Three Months Ended February 28,
1998 1997
- -------------------------------------------------------------------------------
Revenues:
Feed and other sales $ 2,360,584 $ 2,106,218
Feedlot services 422,522 666,262
Interest 6,712 9,964
Interest on note receivable related party 7,000 3,750
Other 11,444 21,265
- -------------------------------------------------------------------------------
Total Revenues 2,808,262 2,807,459
- -------------------------------------------------------------------------------
Costs and Expenses
Cost of feed and other sales 2,206,046 1,964,480
Cost of feedlot services 369,566 636,248
Selling, general and administrative 292,122 202,496
Interest 1,519 2,582
Interest on capital leases - related party 28,329 29,565
- -------------------------------------------------------------------------------
Total Costs and Expenses 2,897,582 2,835,371
- -------------------------------------------------------------------------------
Earnings (Loss) before Income Taxes (89,320) (27,912)
Income Taxes Benefit (29,425) (11,940)
- -------------------------------------------------------------------------------
NET EARNINGS $ (59,895)$ (15,972)
- -------------------------------------------------------------------------------
EARNINGS PER COMMON SHARE AND
COMMON EQUILAVENT SHARE $ Nil $ Nil
- -------------------------------------------------------------------------------
Weighted Average Number of Common and
Common Equilavent Shares Outstanding 6,364,640 6,793,702
- -------------------------------------------------------------------------------
See Accompanying Notes to Unaudited Consolidated Financial Statements.
<PAGE>
MILLER DIVERSIFIED CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
Six Months Ended February 28, 1998 1997
- -------------------------------------------------------------------------------
Cash Flows from Operating Activities:
Cash received from customers $ 5,270,850 $ 7,116,576
Cash paid to suppliers and employees (6,570,716) (5,976,370)
Interest received 24,231 21,281
Interest paid (57,340) (71,806)
Taxes received (paid) 94,761 (93,000)
- --------------------------------------------------------------------------------
Net Cash Provided (Used) by Operating Activities (1,238,214) 996,681
- --------------------------------------------------------------------------------
Cash Flows From Investing Activities:
Acquisition of property and equipment (1,933) (11,331)
Collections on loans to related parties 250,000 --
- --------------------------------------------------------------------------------
Net Cash Provided (Used) by Investing Activities 248,067 (11,331)
- --------------------------------------------------------------------------------
Cash Flows From Financing Activities:
Proceeds from notes payable 903,083 1,138,000
Principal payments on:
Short-term notes payable (380,000) (1,298,000)
Capital lease obligations - related party (14,748) (25,583)
Net increase (decrease) in short-term cattle financing 29,950 (305,275)
Increase in cash overdraft 124,307 54,458
- --------------------------------------------------------------------------------
Net Cash Provided (Used) by Financing Activities 662,592 (436,390)
- --------------------------------------------------------------------------------
Net Increase (Decrease) in Cash (327,555) 548,960
Cash, Beginning of Period 359,278 86,551
- --------------------------------------------------------------------------------
Cash, End of Period $ 31,723 $ 635,511
- -------------------------------------------------------------------------------
Continued on next page.
<PAGE>
MILLER DIVERSIFIED CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
- --------------------------------------------------------------------------------
Six Months Ended February 28, 1998 1997
- --------------------------------------------------------------------------------
RECONCILIATION OF NET EARNINGS TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
Net earnings (loss) $ (16,730)$ 15,552
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization expense 42,364 53,052
Changes in assets and liabilities net of
short-term cattle financing:
(Increase) decrease in:
Trade accounts receivable (215,975) 168,173
Trade accounts receivable - related party 28,401 82,918
Accounts receivable - related party (5,145) --
Income taxes receivable 89,432 (2,714)
Inventories (1,278,901) (85,510)
Prepaid expense (11,748) (16,610)
Increase (decrease) in:
Trade accounts payable and accrued expenses (73,524) 163,254
Income taxes payable -- (86,579)
Customer advance feed contracts 244,504 1,099,531
Customer advance feed contracts-related parties (40,892) (102,228)
- -------------------------------------------------------------------------------
Net Cash Provided (Used) by Operating Activities $ (1,238,214)$ 966,681
- -------------------------------------------------------------------------------
See Accompaning Notes to Unaudited Consolidated Financial Statements.
<PAGE>
MILLER DIVERSIFIED CORPORATION AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Securities Available for Sale:
--------------------------------------------------------------------------
Amortized Estimated Gross - Unrealized
Cost Market Value Gains Losses
--------------------------------------------------------------------------
August 31, 1997
Equity Securities $20,100 $29,313 $ 9,213 $ --
November 30, 1997
Equity Securities $20,100 $19,404 $ -- $ 696
February 28, 1998
Equity Securities $20,100 $18,969 $ -- $ 1,131
In the Consolidated Statements of Cash Flow, the phrase "Short-term cattle
financing" includes changes in feeder cattle inventory held for sale to
customers, accounts receivable for feeder cattle sold to customers, accounts
payable for feeder cattle held for sale to customers, and accounts payable to
customers for slaughter cattle sold. The transactions from which these amounts
are derived do not have a material reflection of the operations of the Company,
and are thus only summarized.
The consolidated balance sheets as of February 28, 1998 and August 31, 1997, the
consolidated statements of earnings for the three months and six months ended
February 28, 1998 and 1997 and consolidated statements of cash flows for the six
months ended February 28, 1998 and 1997 have been prepared by the Company,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted as allowed by the rules and
regulations of the Securities and Exchange Commission.
In preparation of the above-described financial statements, all adjustments of a
normal and recurring nature have been made. The Company believes that the
accompanying unaudited financial statements contain all adjustments necessary to
present fairly the results of operations and cash flows for the periods
presented. Further, management believes that the disclosures are adequate to
make the information presented not misleading. It is suggested that these
financial statements be read in conjunction with the annual financial statements
and the notes thereto. The operations for the six months period ended February
28, 1998 are not necessarily indicative of the results to be expected for the
year.
<PAGE>
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
A summary of the net earnings (loss) for the six months of the fiscal year
ended February 28, 1998, compared to the same periods the year before is as
follows:
----------------------------------------------------------------
Six Months Ended February 28 Increase
1998 1997 (Decrease)
----------------------------------------------------------------
First quarter $ 43,165 $ 31,524 $ 11,641
Second quarter $(59,895) $(15,972) $(43,923)
Six month total $(16,730) $ 15,552 $(32,282)
The most significant factor that affects operating results is the average
head numbers of cattle per day ("average head days") in the Company's feedlot
because feed is sold and feedlot services are rendered to the cattle owners.
Sales of feed and feedlot services account for 95% or more of the Company's
revenues. The average head days for the periods being compared were as follows:
----------------------------------------------------------------
Six Months Ended February 28 Increase
1998 1997 (Decrease)
----------------------------------------------------------------
First quarter 15,721 16,377 (656)
Second quarter 16,131 15,616 515
Six months combined 15,751 15,821 (70)
The 70, or .4%, decrease in average head days, had a minor impact in
several areas, as described below.
Another factor that affected earnings for the six months ended February 28,
1998 and 1997, and that did or will impact average head numbers and earnings
later in the fiscal year, is the Company's "fall calf program". As a service to
customers, the Company purchases for them calves weaned in the fall and places
them with local farmer-feeders who feed and care for the calves until the
following February through April when the cattle are transferred to the
Company's feedlot. These fall calf programs are undertaken on essentially a
breakeven basis; that is, the amounts paid to the farmer-feeders are about the
same as the amounts charged to the customers. The Company offers this service to
improve replacements in February through April when cattle placements are
usually low. The revenues are recorded as sales of feedlot services and the
costs as the cost of feedlot services. Therefore, a high volume in the fall calf
program can reduce the gross profit percentage on sales of feedlot services. For
the period ended February 28, 1998, the Company had 2,903 head in its fall calf
program as compared to 4,146 head the previous year. This resulted in a decrease
in the sales and costs of the fall calf program for the six months ended
February 28, 1998 over the same period the previous year of about $432,700 and
had a significant impact of the increase in the gross profit percentage from
sales of feedlot services as noted below. Although a majority of the decrease in
the fall calf program is associated with the decrease in the number of head on
the program, some of the decrease can be attributed to the fact that the
placements in the current year started later than in the period ended February
28, 1997, therefore less charges and payments have been made. This later start
was created by the prevailing market prices and customer commitments.
<PAGE>
Other key factors that affect earnings are the gross profit percentages on
feed and other sales, and on feedlot services. The following is a brief summary
of gross profit and gross profit percentages on feed and other sales:
----------------------------------------------------------------------
Six Months Ended February 28 Increase
1998 1997 (Decrease)
----------------------------------------------------------------------
Feed and other sales $4,457,963 $4,704,409 $ (246,446)
Cost of feed and
other sales 4,111,160 4,376,730 (265,570)
----------------------------------------------------------------------
Gross profit $ 346,803 $ 327,679 $ 19,124
Gross profit percentage 7.8% 7.0% .8%
A variety of feed ingredients are combined in varying percentages and sold
as various rations. The ingredients are separately marked up so the gross profit
percentage on feed sales is affected by three variables:
(1) the type and quantity of individual rations sold
(2) management's discretionary pricing decisions
(3) feed ingredients sold under customer advance feed contracts which are
not subject to management's discretionary pricing decisions
The $19,124 increase in gross profit from feed and other sales for the
period ended February 28, 1998 from the same period the previous year is a
result of changes in three variables described above. For the period ended
February 28, 1998, more rations were sold which contained a higher percentage of
ingredients that contribute higher gross margins to the gross profit due to
their lower cost and/or markup. In an effort to maintain a competitive edge in
the industry by keeping feeding costs down, as well as build goodwill with its
customers, management lowered the markup on corn for a portion of the six months
ended February 28, 1997. As a result of a more stabilized market, this
adjustment was not necessary during the period ended February 28, 1998.
Management is not anticipating the continuance of this lower markup policy into
the balance of the fiscal year. Management has implemented procedures by which
certain feedlot services are expected to generate additional revenues. Included
in the feed and other sales and costs of sales amounts for the period ended
February 28, 1998 are sales of $265,574 and cost of sales of $303,071 for
slaughter cattle that were owned and sold by the Company; there were no similiar
sales or costs of sales included the period ended February 28, 1997. Without the
loss associated with the slaughter cattle sales, the gross profit for feed and
other sales increases to $384,300 or 9.3%.
The following is a brief summary of the gross profit and gross profit
percentages on sales of feedlot services:
----------------------------------------------------------------------
Six Months Ended February 28, Increase
1998 1997 (Decrease)
----------------------------------------------------------------------
Sales of feedlot services $ 777,970 $1,117,356 $ (339,386)
Cost of feedlot services 652,173 1,027,866 (375,693)
----------------------------------------------------------------------
Gross profit $ 125,797 $ 89,490 $ 36,307
Gross profit percentage 16.2% 8.0% 8.2%
Sales of feedlot services consist primarily of yardage (pen rent)
charged to the owners of the cattle on feed and grain processing charged for the
processing of certain feed ingredients before they can be fed to the cattle.
Yardage charges for the period ended February 28, 1998 increased $61,699 or
19.1% from the same period the prior year even though there was a decrease in
the head numbers due to procedural changes as described previously. Grain
processing charges increased $31,594 or 13.9% for the period ended February 28,
1998 due to the mix of ingredients as described above.
As previously noted, the sales and cost of sales for the fall calf program
are also included in the sales and cost of sales of feedlot services. If the
fall calf program sales and costs are excluded, the gross profit percentage for
the period ended February 28, 1998 is 19.6% compared to 16.3% for the same
period the previous year.
<PAGE>
The cost of feedlot services consists largely of feedlot operating
expenses. The total cost of feedlot services decreased $375,693 for the period
ended February 28, 1998 compared to the same period the prior year. If the fall
calf program costs are excluded, the increase for the period ended February 28,
1998 compared to the same period the prior year is $57,056. Even though there
was a minor decrease in average head days, changes in the types of ingredients
used in the rations has required additional equipment rental, equipment fuel and
repair costs. This increase is approximately $36,500. The balance of the change
is due to increases and decreases in various expenses.
Other revenues decreased $27,538. This decrease is primarily the result of
sale of the Company's Thornton, Colorado property in May 1997. The property had
been used for boarding horses, from which the Company received approximately
$18,500 in rental fees for the period ended February 28, 1997. Due to
corresponding reductions in management, sales and adminstrative costs,
management does not expect the loss of revenue from the discontinued operations
to have a negative effect on the Company's earnings. The balance of the increase
is the result of increases and decreases in various secondary revenue producing
activities.
Interest income increased $7,750 or 103.3% for the period ended February
28, 1998 over the same period the prior year due to the Company's "carrying" or
financing greater amounts of customer feeding charges.
Selling, general, and administrative expenses increased $83,691 for the
period ended February 28, 1998 over the same period the prior year. During the
the period ended February 28, 1998, the Company had entered into an agreement
with a customer who had the potential of feeding a considerable amount of cattle
at the Company's feedlot. This agreement called for the Company to participate
in the profits and losses of the cattle fed by the customer at the Company's
feedlot. Due to the depressed cattle market during the time the cattle included
in this agreement were ready and were marketed the Company recorded, as its
share of the losses in these cattle, an expense of $110,046. As a result of the
discontinuation of the operations at the Thornton, Colorado property, as noted
above, the Company realized a reduction of $29,800 in general and administrative
costs that were directly associated with management and operation of the
property. The Company incurred $16,200 in customer death loss adjustments,
compared to $8,300 the same period the previous year, an increase of $7,900.
These adjustments, although not required, were made to customers for the purpose
of creating goodwill and/or when management felt that death losses incurred by a
customer were extraordinary in nature. Legal and accounting fees increased
$5,700 for the period ended February 28, 1998 over the same period the prior
year. The balance of the increase in selling, general, and administrative
expenses are various increases and decreases in several accounts.
Interest expense decreased $9,314 for the period ended February 28, 1998
over the same period the prior year. This is the result of reduced borrowings.
The need to borrow funds was reduced due to the use of the cash received from
the sale of the Thornton, Colorado property, as described previously, for
operations.
Income taxes are directly related to the net earnings before income taxes
and certain assumptions that are made with the estimations. For the period ended
February 28, 1998, income taxes decreased $9,037 from the same period the prior
year while pretax income decreased $41,319.
<PAGE>
Liquidity and Capital Resources
For the six months ended February 28, 1998, operating activities required
$1,238,214 more than were internally-generated compared to a surplus $996,681
for the same period the previous year, an increase of $2,234,895. Cash received
from customers for the period decreased $1,845,726, but cash paid to suppliers
and employees increased $594,346, for a total cash decrease of $2,440,072.
Interest received for the period increased $2,950, while interest paid decreased
$14,466 for a total cash increase of $17,416. For the period ended February 28,
1997, net income tax payments totalled $93,000 compared to tax refunds and
benefits of $94,761 received for the period ended February 28, 1998, a net cash
increase of $187,761.
For the six months ended February 28, 1998 the net cash that was provided
by investing operations was $248,067 compared to the net cash required by
investing operations the same period the previous year of $11,331, resulting in
a net cash increase of $259,398. For the period ended February 28, 1998,
acquisition of property and equipment decreased $9,398 and $250,000 was
collected on loans to a related party.
The net cash provided by financing activities was $662,592 for the six
months ended February 28, 1998, an increase in cash of $1,098,982 from $436,390
cash used by financing activities for the same period the prior year. The change
in net borrowings over repayments of notes and other obligations resulted in a
$1,831,918 decrease in funds provided for the six months ended February 28, 1998
compared to the same period the previous year. Net short-term cattle financing
for the six months ended February 28, 1998 provided $29,950 compared to the use
of funds the same period the prior year of $305,275, an increase in funds
provided of $335,225. The increase in the cash overdraft for the period ended
February 28, 1998, provided an additional $124,307.
The Company's working capital (current assets minus current liabilities)
decreased by $13,306 for the six months ended February 28, 1998 from $1,218,112
at August 31, 1997 to $1,233,418 at February 28, 1998. There were offsetting
increases and decreases to several current assets and current liabilities as
shown on the consolidated balance sheets.
Trade accounts receivable increased by $239,786 during the six months ended
February 28, 1998. Feedlot sales accounts receivable increased $203,007 due to
primarily to an increase in the amount of customers's accounts that are "carried
or financed by the Company as noted above. The decrease in trade accounts
receivable from related parties is due to the increase in sales to related
parties.
Inventories increased $1,248,953 due to an increase in the level of company
owned feeder cattle being fed for slaughter. At February 28, 1998, this
inventory totaled $1,252,711 compared to a $0 inventory at August 31, 1997. This
increase is the result of management's decision to feed more Company owned
cattle to reduce the amount of participating agreements, which are agreements
the Company enters into with a customer in which the Company participates in the
profits and losses of the customer's feeding program, and to lessen the impact
of major customers. Inventory of feeder cattle held for resale to customers of
decreased $29,947 from a balance of $215,546 at august 31, 1997 to $185,599 at
February 28, 1998. The inventory level of feed ingredients on hand decreased
$26,190. The amount of feed ingredient inventories on hand and feeder cattle
held for resale to customers at any given time will fluctuate depending on such
variables as anticipated weather conditions, consumption levels, delivery
schedules, and the number of various ingredients being fed. These fluctuations
are the result of normal operations.
<PAGE>
The decrease in trade accounts payable of $77,922 was due to normal
business transactions.
The Company has a revolving line of credit of $300,000 from a local branch
of a credit services company that matures December 1, 1998 and bears interest at
approximately 1.0% over the prime rate (actual rate of 9.00% at February 28,
1998). There was an outstanding balance at February 28, 1998 of $250,196 which
meant that the Company could generate an additional $49,804 cash if needed under
this line of credit. The note is secured by feed accounts receivable, feed
inventories, and equipment. The Company also has a non-revolving line of credit
of $850,000 from the same local branch of a credit services company for the
purpose of owning and feeding cattle to slaughter. This line of credit also
matures December 1, 1998 and bears interest at approximately 1.0% over the prime
rate (actual rate of 9.00% at February 28, 1998). There was no outstanding
balance at February 28, 1998 which meant that the Company could generate an
additional $850,000 cash if needed under this line of credit. The note is
secured by specific cattle and cross collateralized with the revolving line of
credit note above. The Company has another revolving line line of credit of
$2,000,000 from the same local branch of a credit services company for the
purpose of financing qualified customers' cattle feeding programs. This line of
credit also matures December 1, 1998 and bears interest at approximately 1.0%
over the prime rate (actual rate of 9.00% at February 28, 1998). There was no
outstanding balance at February 28, 1998. The Company did not have any requests
from customers to provide this service which meant that the Company could not
generate any additional cash under this line of credit. The note is secured by
specific customers' cattle and cross collateralized with the revolving lines of
credit note above. Miller Feeders, Inc. (MFI) has a $300,000 revolving line of
credit at the same local branch of a credit services company for the procurement
of feeder cattle for resale to customers. The line of credit matures on December
1, 1998 and bears interest at approximately 1.0% over the prime rate (actual
rate of 9.00% at February 28, 1998). There was an outstanding balance at
February 28, 1998 of $272,871 which meant that MFI could borrow up to $27,129 to
purchase feeder cattle for resale to customers. The line is secured by feeder
cattle inventories and feeder cattle accounts receivable and is cross
collateralized with the Company's lines of credit noted above.
The Company had no material commitments for capital expenditures at
February 28, 1998.
Management believes it has adequate financial resources to conduct
operations at present and reasonably anticipated levels.
<PAGE>
PART II OTHER INFORMATION
Items 1 through 6 None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MILLER DIVERSIFIED CORPORATION
(Registrant)
Date: April 13, 1998 /s/ JAMES E MILLER
-------------------------------
James E. Miller
President,
Chief Executive Officer,
Chief Financial Officer
Date: April 13, 1998 /s/ STEPHEN R. STORY
-------------------------------
Stephen R. Story
Secretary-Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM FORM 10-QSB FOR THE
SIX MONTHS ENDED FEBRUARY 28, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-END> FEB-28-1998
<CASH> 31,723
<SECURITIES> 18,969
<RECEIVABLES> 727,147
<ALLOWANCES> 0
<INVENTORY> 1,715,402
<CURRENT-ASSETS> 2,524,729
<PP&E> 1,698,278
<DEPRECIATION> 540,045
<TOTAL-ASSETS> 4,180,393
<CURRENT-LIABILITIES> 1,293,311
<BONDS> 0
0
0
<COMMON> 636
<OTHER-SE> 1,886,731
<TOTAL-LIABILITY-AND-EQUITY> 4,180,393
<SALES> 4,457,963
<TOTAL-REVENUES> 5,279,044
<CGS> 4,111,160
<TOTAL-COSTS> 652,173
<OTHER-EXPENSES> 479,126
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 58,644
<INCOME-PRETAX> (22,059)
<INCOME-TAX> (5,329)
<INCOME-CONTINUING> (16,730)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (16,730)
<EPS-PRIMARY> (0.003)
<EPS-DILUTED> (0.003)
</TABLE>
