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 May 31 , 1998
Commission File Number 01-19001
MILLER DIVERSIFIED CORPORATION
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(Exact Name of Registrant as Specified in its Charter)
Nevada 84-1070932
--------------------------- ---------------------
(State or other jurisdiction (I.R.S. Employer
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
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(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 July 22,
1998, 6,364,640.
Transitional Small Business Disclosure Format: YES NO X
----- -----
<PAGE>
Item 1 - Financial Statements
MILLER DIVERSIFIED CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
May 31, August 31,
1998 1997
- --------------------------------------------------------------------------------
ASSETS
Current Assets:
Cash $ 68,010 $ 359,278
Trade accounts receivable 886,940 483,888
Trade accounts receivable - related parties -- 55,685
Account receivable - related party 80,470 8,897
Income tax refunds receivable -- 94,761
Inventories 1,230,729 466,449
Prepaid expenses 14,324 19,337
Current portion of notes receivable-
related party -- 250,000
- --------------------------------------------------------------------------------
Total Current Assets 2,280,473 1,738,295
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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 559,248 525,320
- --------------------------------------------------------------------------------
Total Property and Equipment 1,139,030 1,204,468
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Other Assets:
Securities available for sale 16,382 29,313
Notes receivable - related party 300,000 300,000
Note receivable 65,000 --
Other investments 118,418 --
Deferred income taxes 176,962 176,962
Deposits and other 15,885 1,500
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Total Other Assets 692,647 507,775
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TOTAL ASSETS $ 4,112,150 $ 3,450,538
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Continued on next page.
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<PAGE>
MILLER DIVERSIFIED CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS - Continued
- -------------------------------------------------------------------------------
May 31, August 31,
1998 1997
- -------------------------------------------------------------------------------
LIABILITIES
Current Liabilities:
Cash overdraft $ 2,757 $ --
Notes payable 474,024 --
Trade accounts payable 604,552 418,686
Accrued expenses 28,432 17,061
Accrued income taxes payable 6,195 --
Customer advance feed contracts 52,906 14,907
Customer advance feed contracts - related parties -- 40,892
Current portion of capital lease
obligations-related party 24,284 28,637
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Total Current Liabilities 1,193,150 520,183
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Capital Lease Obligations - related party 993,564 1,015,914
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Total Liabilities 2,186,714 1,536,097
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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 (3,718) 9,213
Retained Earnings 576,825 552,899
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Total Stockholders' Equity 1,925,436 1,914,441
TOTAL LIABILITIES AND STOCKHOLDERS' EQUIT $ 4,112,150 $ 3,450,538
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See Accompanying Notes to Unaudited Consolidated Financial Statements.
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<PAGE>
MILLER DIVERSIFIED CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS
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Nine Months Ended May 31,
1998 1997
- --------------------------------------------------------------------------------
Revenues:
Feed and other sales $ 7,417,840 $ 7,119,214
Feedlot services 1,235,426 1,730,534
Other 19,158 61,510
Interest 21,077 18,361
Interest on note receivable related party 19,750 11,250
Gain on sale of assets 6,282 --
- --------------------------------------------------------------------------------
Total Revenues 8,719,533 8,940,869
- --------------------------------------------------------------------------------
Costs and Expenses
Cost of feed and other sales 6,844,964 6,582,429
Cost of feedlot services 1,091,950 1,575,622
Selling, general and administrative 649,746 560,979
Interest 17,687 10,485
Interest on capital leases - related party 85,065 88,313
Loss on sale of assets -- 178,452
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Total Costs and Expenses 8,689,412 8,996,280
- --------------------------------------------------------------------------------
Earnings (Loss) before Income Taxes 30,121 (55,411)
Income Taxes Expense (Benefit) 6,195 (325,924)
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NET EARNINGS $ 23,926 $ 270,513
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EARNINGS PER COMMON SHARE AND
COMMON EQUILAVENT SHARE $ Nil $ 0.04
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Weighted Average Number of Common and
Common Equivalent Shares Outstanding 6,364,640 6,364,640
- --------------------------------------------------------------------------------
See Accompanying Notes to Unaudited Consolidated Financial Statements.
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<PAGE>
MILLER DIVERSIFIED CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS
- -------------------------------------------------------------------------------
Three Months Ended May 31,
1998 1997
- -------------------------------------------------------------------------------
Revenues:
Feed and other sales $ 2,959,877 $ 2,414,806
Feedlot services 457,456 613,178
Other 6,561 15,192
Interest 12,095 4,480
Interest on note receivable related party 4,500 3,750
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Total Revenues 3,440,489 3,051,406
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Costs and Expenses
Cost of feed and other sales 2,733,804 2,205,699
Cost of feedlot services 439,777 547,756
Selling, general and administrative 170,619 165,544
Interest 16,004 (512)
Interest on capital leases - related party 28,105 29,138
Loss on sale of assets -- 178,452
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Total Costs and Expenses 3,388,309 3,126,077
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Earnings (Loss) before Income Taxes 52,180 (74,671)
Income Taxes Expense (Benefit) 11,524 (329,631)
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NET EARNINGS $ 40,656 $ 254,960
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EARNINGS PER COMMON SHARE AND
COMMON EQUIVALENT SHARE $ 0.01 $ 0.04
- -------------------------------------------------------------------------------
Weighted Average Number of Common and
Common Equivalent Shares Outstanding 6,364,640 6,364,640
- -------------------------------------------------------------------------------
See Accompanying Notes to Unaudited Consolidated Financial Statements.
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<PAGE>
MILLER DIVERSIFIED CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
Nine Months Ended May 31, 1998 1997
- --------------------------------------------------------------------------------
Cash Flows from Operating Activities:
Cash received from customers $ 8,312,297 $ 9,085,358
Cash paid to suppliers and employees (9,320,719) (8,808,882)
Interest received 41,525 29,611
Interest paid (96,672) (100,432)
Tax refunds received 94,761 --
Taxes paid -- (93,000)
- --------------------------------------------------------------------------------
Net Cash Provided (Utilized) by Operating
Activities (968,808) 112,655
- --------------------------------------------------------------------------------
Cash Flows From Investing Activities:
Acquisition of property and equipment (1,933) (13,864)
Proceeds from sale of property and equipment -- 645,893
Acquisition of other investments (118,418) --
Loans to unrelated parties (65,000) --
Loans to related parties -- (300,000)
Collections on loans to related parties 250,000 --
- --------------------------------------------------------------------------------
Net Cash Provided by Investing Activities 64,649 332,029
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Cash Flows From Financing Activities:
Proceeds from notes payable 2,130,458 1,213,000
Principal payments on:
Short-term notes payable (1,656,434) (1,373,000)
Capital lease obligations - related party (20,899) (38,365)
Net increase (decrease) in short-term cattle financing 157,009 (275,637)
Increase in bank overdraft 2,757 19,135
- --------------------------------------------------------------------------------
Net Cash Provided (Utilized) by Financing
Activities 612,891 (454,867)
- --------------------------------------------------------------------------------
Net Decrease in Cash (291,268) (10,183)
Cash, Beginning of Period 359,278 86,551
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Cash, End of Period $ 68,010 $ 76,368
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Continued on next page.
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<PAGE>
MILLER DIVERSIFIED CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
- --------------------------------------------------------------------------------
Nine Months Ended May 31, 1998 1997
- --------------------------------------------------------------------------------
RECONCILIATION OF NET EARNINGS TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
Net earnings $ 23,926 $ 270,513
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Loss on sale of property and equipment -- 178,452
Depreciation and amortization expense 61,567 79,838
Decrease in deferred income taxes -- (238,000)
Changes in assets and liabilities net of
short-term cattle financing:
(Increase) decrease in:
Trade accounts receivable (394,692) 16,996
Trade accounts receivable - related party 31,874 79,536
Accounts receivable - related party (71,573) 35,914
Income taxes receivable 94,761 (94,345)
Inventories (905,838) (33,091)
Prepaid expense 5,013 151
Deposits and other (14,385) (30,000)
Increase (decrease) in:
Trade accounts payable and accrued expenses 197,237 (48,571)
Income taxes payable 6,195 (86,579)
Customer advance feed contracts (2,894) 157,104
Customer advance feed contracts-related parties -- (175,263)
- -------------------------------------------------------------------------------
Net Cash Provided (Utilized) by Operating
Activities $ (968,809)$ 112,655
- -------------------------------------------------------------------------------
See Accompaning Notes to Unaudited Consolidated Financial Statements.
Continued on next page
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<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
May 30, 1998
Equity Securities $20,100 $16,382 $ -- $ 3,618
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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, account
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 May 31, 1998 and August 31, 1997, the
consolidated statements of earnings for the three months and nine months ended
May 31, 1998 and 1997 and consolidated statements of cash flows for the nine
months ended May 31, 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 nine months period ended May 31,
1998 are not necessarily indicative of the results to be expected for the year.
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<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 nine months of the fiscal year
ended May 31, 1998, compared to the same periods the year before is as follows:
----------------------------------------------------------------
Nine Months Ended May 31 Increase
1998 1997 (Decrease)
----------------------------------------------------------------
First quarter $ 43,165 $ 31,524 $ 11,641
Second quarter $(59,895) $(15,972) $(43,923)
Third quarter $ 40,656 $254,960 ($214,304)
Six month total $ 23,926 $270,512 ($246,586)
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:
----------------------------------------------------------------
Nine Months Ended May 31 Increase
1998 1997 (Decrease)
----------------------------------------------------------------
First quarter 15,721 16,377 (656)
Second quarter 16,131 15,616 515
Third quarter 16,798 16,656 142
Nine months combined 16,038 16,038 --
Although there was no change in the average head numbers for the nine
months ended May 31, 1998 compared to the previous year, the timing of the
variations did have a minor impact on earnings as described below.
Another factor that affected earnings for the nine months ended May 31,
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
break-even 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
-9-
<PAGE>
the period ended May 31, 1998, the Company had 3,074 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 nine months ended May
31, 1998 over the same period the previous year of about $510,000 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 May 31, 1997,
therefore less charges and payments have been made. This later start was created
by the prevailing market prices and customer commitments.
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:
----------------------------------------------------------------------
Nine Months Ended May 31 Increase
1998 1997 (Decrease)
----------------------------------------------------------------------
Feed and other sales $7,417,840 $7,119,214 $ 298,626
Cost of feed and
other sales 6,844,964 6,582,429 262,535
----------------------------------------------------------------------
Gross profit $ 572,876 $ 536,785 $ 36,091
Gross profit percentage 7.7% 7.5% 0.2%
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 $36,091 increase in gross profit from feed and other sales for the
period ended May 31, 1998 from the same period the previous year is a result of
changes in three variables described above. For the period ended May 31, 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 nine months ended May
31, 1997. As a result of a more stabilized market, this adjustment was not
necessary during the period ended May 31, 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 May 31, 1998 are sales of
$854,708 and cost of sales of $903,746 for slaughter cattle that were owned and
sold by the Company; there were no similar sales or costs of sales included the
period ended May 31, 1997.
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<PAGE>
Without the loss associated with the slaughter cattle sales, the gross
profit for feed and other sales increases to $621,884 or 9.5%.
The following is a brief summary of the gross profit and gross profit
percentages on sales of feedlot services:
----------------------------------------------------------------------
Nine Months Ended May 31, Increase
1998 1997 (Decrease)
----------------------------------------------------------------------
Sales of feedlot services $1,235,426 $1,730,534 $ (495,108)
Cost of feedlot services 1,091,950 1,575,622 (483,672)
----------------------------------------------------------------------
Gross profit $ 143,476 $ 154,912 $ (11,436)
Gross profit percentage 11.6% 9.0% 2.7%
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 May 31, 1998 increased $25,329 or 4.9% from
the same period the prior year even though there was no change in the average
head numbers due to procedural changes as described previously. Grain processing
charges decreased $10,167 or 2.9% for the period ended May 31, 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 May 31, 1998 is 16.3% compared to 18.0% for the same period the
previous year.
The cost of feedlot services consists largely of feedlot operating
expenses. The total cost of feedlot services decreased $483,672 for the period
ended May 31, 1998 compared to the same period the prior year. If the fall calf
program costs are excluded, the feedlot operating expenses increased $27,282 for
the period ended May 31, 1998 compared to the same period the prior year. Even
though there was no change in the average head days, changes in the types of
ingredients used in the rations has required additional equipment rental,
equipment fuel and repair costs.
Other revenues decreased $42,352. 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
$26,300 in rental fees for the period ended May 31, 1997. Due to corresponding
reductions in management, sales and administrative 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.
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<PAGE>
Interest income increased $2,716 or 14.8% for the period ended May 31, 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 $88,767 for the
period ended May 31, 1998 over the same period the prior year. During the period
ended May 31, 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 $43,600 in general and administrative
costs that were directly associated with management and operation of the
property. year. The balance of the increase in selling, general, and
administrative expenses are various increases and decreases in several accounts.
Interest expense increased $7,201 for the period ended May 31, 1998 over
the same period the prior year. This is the result of increased borrowings that
were necessary to fund the increased level of inventories as described below.
The majority of the increases in inventories were funded by the cash received
from the sale of the Thornton, Colorado property, as described previously.
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
May 31, 1998, income taxes increased $332,119 from the same period the prior
year while pretax income increased $85,532. During the period ended May 31,
1997, the Company recorded a deferred income tax benefit of $238,000 and current
benefit of $73,000 that were associated with the sale of the Thornton property.
Liquidity and Capital Resources
For the nine months ended May 31, 1998, operating activities required
$968,808 more than were internally-generated compared to a surplus $112,655 for
the same period the previous year, an increase of $1,081,463. Cash received from
customers for the period decreased $773,061 but cash paid to suppliers and
employees increased $511,837, for a total cash decrease of $1,284,898. Interest
received for the period increased $11,914, while interest paid decreased $3,760
for a total cash increase of $15,674. For the period ended May 31, 1997, net
income tax payments totaled $93,000 compared to tax refunds and benefits of
$94,761 received for the period ended May 31, 1998, a net cash increase of
$1,761.
-12-
<PAGE>
For the nine months ended May 31, 1998 the net cash that was provided by
investing operations was $64,649 compared the same period the previous year of
$332,029, resulting in a net cash decrease of $267,380. For the period ended May
31, 1998, the Company acquired other investments for $118,418; during the same
period the previous year the Company sold property and equipment for $645,893.
During the period ended May 31, 1998, the Company collected $250,000 on a loan
to a related party and made cattle related loans to an unrelated third party for
$65,000; during the same period the previous year, the Company made a loan to a
related party of $300,000.
The net cash provided by financing activities was $612,891 for the nine
months ended May 31, 1998, an increase in cash of $1,067,758 compared to the
cash utilization of $454,867 for the same period the prior year. The change in
net borrowings over repayments of notes resulted in a $314,024 increase in funds
provided for the nine months ended May 31, 1998 compared to the same period the
previous year. Net short-term cattle financing for the nine months ended May 31,
1998 provided $157,009 compared to the utilization of funds the same period the
prior year of $275,637, an increase in funds provided of $432,646.
The Company's working capital (current assets minus current liabilities)
decreased by $130,789 for the nine months ended May 31, 1998 from $1,218,112 at
August 31, 1997 to $1,087,323 at May 31, 1998.
Total Current Assets increased from $1,738,295 at August 31, 1997 to
$2,280,473 at May 31, 1998. Total Current Liabilities increased $672,966 from
$520,183 at August 31, 1997 to $1,193,149 at May 31, 1998. Although there are
increases and decreases in all components, the major change that is not
attributable to being a point in time variance is the increase in inventories as
described below. This increase is the primary cause for the decrease in cash and
increase in notes payable.
Inventories increased $764,280 due to an increase in the level of company
owned feeder cattle being fed for slaughter. At May 31, 1998, this inventory
totaled $996,579 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.
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 May 31, 1998).
There was no outstanding balance at May 31, 1998 which meant that the Company
could generate an additional $300,000 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 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.
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<PAGE>
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 May 31, 1998).
There was an outstanding balance at May 31,1998 of $424,000 which meant that the
Company could generate an additional $426,000 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 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 May 31, 1998). There was no
outstanding balance at May 31, 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 noted 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 May 31, 1998). There was an outstanding balance at May 31, 1998
of $50,024 which meant that MFI could borrow up to $249,976 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 has no material commitments for capital expenditures at May 31,
1998.
Management believes it has adequate financial resources to conduct
operations at present and reasonably anticipated levels.
-14-
<PAGE>
PART II OTHER INFORMATION
Items 1 through 5 None.
Item 6 (b) - Exhibits and Reports on Form 8-K
On July 2, 1998 the Company filed a Form 8-K concerning the Agreement and
Plan of Exchange (the "Agreement") with Miller Feed Lots, Inc. (MFL) dated June
22, 1998. The Agreement calls for the Company to issue up to 15,000,000 shares
of its common stock to the shareholders of MFL and MFL will become a wholly
owned subsidiary of the Company. The transaction is subject to stockholder
approval. A copy of the Agreement was filed with the Form 8-K.
-15-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has fuly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MILLER DIVERSIFIED CORPORATION
(Registrant)
Date: July 22, 1998 /s/ JAMES E. MILLER
-----------------------------------
James E. Miller
President, Chief Executive
Officer,
Chief Financial Officer
Date: July 22, 1998 /s/ STEPHEN R. STORY
-----------------------------------
Stephen R. Story
Secretary-Treasurer
-16-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-QSB
FOR THE NINE MONTHS ENDED MAY 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-END> MAY-31-1998
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0
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</TABLE>
