UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended January 31, 2004
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
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Commission File No. 33-2249-FW
MILLER PETROLEUM, INC.
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(Exact name of small business issuer as specified in its Charter)
TENNESSEE 62-1028629
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(State or Other Jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
3651 Baker Highway
Huntsville, Tennessee 37756
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(Address of principal executive offices)
(423) 663-9457
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Issuer's telephone number
N/A
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Not applicable.
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APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date:
March 15, 2004
8,578,856 Common Shares
Transitional Small Business Issuer Format Yes X No
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The Financial Statements of Miller Petroleum, Inc., a Tennessee
corporation (the "Company"), required to be filed with this Quarterly Report
were prepared by management and reviewed by Charles M. Stivers, Certified
Public Accountant of Manchester, Kentucky and commence on the following page,
together with related Notes. In the opinion of management, the Financial
Statements fairly present the financial condition of the Registrant.
MILLER PETROLEUM, INC.
Consolidated Balance Sheets
ASSETS
January 31, April 30,
2004 2003
Unaudited
CURRENT ASSETS
Cash $ 91,486 $ 77,364
Investments 0 12,812
Accounts receivable - trade-, net 319,690 318,443
Inventory 534,260 534,260
Prepaid expenses 58,589 29,410
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Total Current Assets 1,004,025 972,289
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FIXED ASSETS
Machinery and equipment 1,036,802 1,416,709
Vehicles 408,801 408,801
Buildings 313,335 313,335
Office Equipment 72,549 74,379
Less: accumulated depreciation (927,981) (954,163)
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Total Fixed assets 903,506 1,259,061
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OIL AND GAS PROPERTIES 2,383,018 2,116,026
(On the basis of successful ---------- ----------
efforts accounting)
PIPELINE FACILITIES 193,936 235,104
OTHER ASSETS
Land 511,500 511,500
Investments 500 500
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Total Other Assets 512,000 512,000
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TOTAL ASSETS $4,996,485 $5,094,480
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade $ 547,420 $ 464,515
Accrued expenses 80,572 84,191
Notes payable - current portion 1,630,076 511,824
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Total Current Liabilities 2,258,068 1,060,530
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LONG-TERM LIABILITIES
Notes payable - related 1,526 24,317
Notes payable 540,886 1,737,478
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Total Long-Term Liabilities 542,412 1,761,795
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Total Liabilities 2,800,480 2,822,325
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STOCKHOLDERS' EQUITY
Common Stock: 500,000,000 shares
authorized at $0.0001 par value,
8,578,856 and 8,578,856 shares
issued and outstanding 858 858
Additional paid-in capital 3,884,144 3,884,144
Retained Earnings (1,688,997) (1,612,847)
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Total Stockholders' Equity 2,196,005 2,272,155
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TOTAL LIABILITIES AND
STOCKHOLDERS'S EQUITY $4,996,485 $5,094,480
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
MILLER PETROLEUM, INC.
Consolidated Statements of Operations
(UNAUDITED)
For the Three Months Ended For the Nine Months Ended
January 31 January 31
2004 2003 2004 2003
REVENUES
Oil and gas revenue $ 207,448 $ 157,034 $ 568,637 $ 477,416
Service and drilling revenue 238,579 169,952 1,061,710 839,162
Retail sales 298 7,500 6,939 10,200
Sale of equipment 0 0 0 73,703
Other revenue 35,824 6,450 37,324 127,357
--------- --------- ----------- ---------
Total Revenue 482,149 340,936 1,674,610 1,527,838
--------- --------- ----------- ----------
COSTS AND EXPENSES
Cost of oil and gas sales 70,406 64,859 409,591 299,635
Selling, general and
administrative 131,683 99,649 400,288 401,433
Salaries and wages 130,923 181,177 523,000 601,829
Depreciation, depletion and
amortization 107,286 83,176 285,196 245,538
--------- --------- ----------- ----------
Total Costs and Expenses 440,298 428,861 1,618,075 1,548,435
--------- --------- ----------- ----------
INCOME (LOSS) FROM OPERATIONS 41,851 (87,925) 56,535 (20,597)
--------- --------- ----------- ----------
OTHER INCOME (EXPENSE)
Interest income 509 475 1,690 1,343
Interest expense (39,188) (44,726) (134,375) (148,015)
--------- --------- ----------- ----------
Total Other Income
(Expense) (38,679) (44,251) (132,685) (146,672)
--------- --------- ----------- ----------
NET INCOME (LOSS) $ 3,172 $ 132,176) $ (76,150) $ (167,269)
========= ========= =========== ==========
NET EARNING (LOSS) PER SHARE 0.00 0.02 0.00 (0.02)
========= ========= =========== ==========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 8,578,856 8,578,856 8,578,856 8,578,856
========= ========= =========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
Page 4
MILLER PETROLEUM, INC
Consolidated Statement of Stockholders' Equity
(UNAUDITED)
Additional
Common Shares Paid-in Retained
Shares Amount Capital Earnings Total
Balance
April 30, 2002 8,578,856 $858 $3,884,144 ($1,188,418) $2,696,584
Net loss for the
twelve months ended
April 30, 2003 ($424,429) ($424,429)
Balance
April 30, 2003 8,578,856 $858 $3,884,144 ($1,612,847) $2,272,155
Net loss for the
nine months ended
January 31, 2004 ($76,150) ($76,150)
Balance --------- ---- ---------- ----------- ----------
January 31, 2004 8,578,856 $858 $3,884,144 ($1,688,997) $2,196,005
========= ==== ========== =========== ==========
The accompanying notes are an integral part of these consolidated financial
statements
Page 5
MILLER PETROLEUM, INC.
Consolidated Statement of Cash Flows
(UNAUDITED)
Nine Months Nine Months
Ended January 31,
2004 2003
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ (76,150) $ (167,269)
Adjustments to Reconcile Net Income to
Net Cash Provided (Used) by Operating
Activities:
Depreciation, depletion and amortization 285,196 245,538
Gain on sale of equipment (58,388) (73,703)
Changes in Operating Assets and Liabilities:
Decrease (increase) in accounts receivable (1,247) 7,234
Decrease (increase) in inventory 0 7,500
Decrease (increase) in prepaid expenses (29,179) (78,715)
Increase (decrease) in accounts payable 82,905 (120,803)
Increase (decrease) in accrued expenses (3,619) (19,134)
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Net Cash Provided (Used) by Operating
Activities 199,518 (199,352)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (84,193) (135,458)
Purchase of oil and gas properties (340,072) (61,007)
Sale of equipment 340,000 99,500
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Net Cash Provided (Used) by Investing
Activities (84,265) (96,965)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable (501,793) (133,401)
Proceeds from borrowing 400,662 429,048
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Net Cash Provided (Used) by Financing
Activities (101,131) 295,647
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NET INCREASE IN CASH 14,122 (670)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 77,364 76,394
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CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 91,486 $ 75,724
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CASH PAID FOR
INTEREST $ (134,375) $ (148,015)
INCOME TAXES 0 0
The accompanying notes are an integral part of these consolidated financial
statements.
Page 6
MILLER PETROLEUM, INC.
Notes to the Consolidated Financial Statements
(1) 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, 2003 Annual Report on Form 1OKSB. The results of
operations for the period ended January 31, 2004 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.
(2) RELATED PARTY TRANSACTIONS
On May 1, 2002, the Company executed a promissory note for $50,000 in
favor of Herman Gettelfinger, a director. The note was for a period of
one month with an interest rate of eight percent and may be renewed on
the same terms at the option of the holder.
(3) New Accounting Pronouncements
In 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 143,
"Accounting for Asset Retirement Obligations" SFAS No. 143 addresses
financial accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and the associated asset
retirement cost. This statement requires companies to record the
present value of obligations associated with the retirement of tangible
long-lived assets in the period in which it is incurred. The liability
is capitalized as part of the related long-lived assets carrying amount.
Over time, accretion of the liability is recognized as an operating
expense and the capitalization cost is depreciated over the expected
useful life of the related asset. The Company's asset retirement
obligations relate primarily to the plugging, dismantlement, removal
site reclamation and similar activities of its oil and gas properties.
Prior to adoption of this statement, such obligations were accrued
ratably over the productive lives of the assets through its
depreciation, depletion and amortization for oil and gas properties
without recording a separate liability for such amounts. Management
does not believe that adoption of this standard has a material impact in
financial positions of results of operation.
In July 2002, FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities. The standard requires companies to
recognize costs associated with exit or disposal activities when they
are incurred rather than at the date of commitment to an exit or
disposal plan. Examples of costs covered by the standard include lease
termination costs and certain employee severance costs that are
associated with restructuring, discontinued operation, plant closing, or
other exit or disposal activity. Previous accounting guidance was
provided by EITF Issue No. 94-3, "Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)." Statement 146
replaces Issue 94-3. Statement 146 is to be applied prospectively to
exit or disposal activities initiated after December 31, 2002. The
Company does not currently have any plans for exit or disposal
activities, and therefore does not expect this standard to have a
material effect on the Company's consolidated financial statements upon
adoption.
In November 2002, the FASB issued FASB Interpretation ("FIN") No. 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others", which
clarifies disclosure and recognition/measurement requirements related to
certain guarantees. The disclosure requirements are effective for
financial statements issued after December 15, 2002 and the
recognition/measurement requirements are effective on a prospective
basis for guarantees issued or modified after December 31, 2002. The
application of the requirements of FIN 45 did not have a impact on our
financial position or results of operations.
In December 2002, the FASB issued SFAS No. 148, Accounting of Stock-
Based Compensation Transition and Disclosure an amendment of FASB
Statement No. 123 ("Statement 148"). This amendment provides two
additional methods of transition for a voluntary change to the fair
value based method of accounting for stock-based employee compensation.
Additionally, more prominent disclosures in both annual and interim
financial statements are required for stock-based employee compensation.
The transition guidance and annual disclosure provisions of Statement
148 are effective for fiscal years ending after December 15, 2002. The
interim disclosure provisions are effective for financial reports
containing financial statements for interim periods beginning after
December 15, 2002. The adoption of Statement 148 did not have a impact
on the Company's consolidated financial statements.
In January 2003, the FASB issued FASB Interpretation No. (FIN) 46,
"Consolidation of Variable Interest Entities." This interpretation of
Accounting Research Bulletin No. 51 "Consolidated Financial Statements"
consolidation by business enterprises of variable interest entities
which possess certain characteristics. The Interpretation requires that
if a business enterprise has a controlling financial interest in a
variable interest entity, the assets, liabilities, and results of the
activities of the variable interest entity must be included in the
consolidated financial statements with those of the business enterprise.
This Interpretation applies immediately to variable interest entities
created after January 31, 2003 and to variable interest entities in
which an enterprise obtains an interest after that date. We do not have
any ownership in any variable interest entities as of March 31, 2003.
We will apply the consolidation requirement of FIN 46 in future periods
if we should own any interest in any variable interest entity.
Item 2. Management's Discussion and Analysis or Plan of Operation.
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Miller Petroleum has more than 50,000 acres under lease in Tennessee.
About 95% of these leases are held by production. Most of its current oil and
gas production is from the Big Lime Formation. However, there are more than
100 development drilling locations that target the Chattanooga Shale as well
as the Big Lime Formation.
Currently, Miller is offering ten well drilling programs to "accredited
investors' or "sophisticated investors" to spread the risk and facilitate
investor returns. The Company will sell up to a 75% working interest to
investors while retaining a 25% working interest. Each program will be made
up of four Chattanooga Shale wells on its Koppers North acreage, five wells on
its Koppers South gas cap and one exploratory well on certain structures in
the Eastern Overthrust belt.
In June of 2001, the Company made a conventional Big Lime gas discovery,
on the Lindsay Land Company lease jointly owned by Delta Producers, Inc. and
Miller. Currently there are six producing wells on this property. There are
at a minimum ten additional drill sites on this 4,000 acres lease which is
situated near Caryville, Tennessee.
Miller is continuing its leasing efforts in the East Tennessee portion
of the Eastern Overthrust Belt. Acreage is being leased on selected large
structures. Two test wells are being planned on one of these large structures
to test the Trenton, Stones River, and upper Knox formations. Knox wells in
the Overthrust have reserves in excess of two Bcf gas per well.
Liquidity and Capital Resources
-------------------------------
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, in particular sales of working interests in wells that we
drill; receipts from the private placement of our securities; and loans.
We believe that our current cash flow will be sufficient to support our
cash requirements for development and production over the next 12 months.
Results of Operations
---------------------
The Company had revenues of $482,149 for the third quarter of fiscal
2004, up from the $340,936 in revenues recognized during the third quarter of
fiscal 2003.
Oil and gas revenue for the current quarter was $207,448 up from $157,034
in the third quarter of fiscal 2003. This increase was due primarily to
natural gas sales from the Lindsay Land Company lease and higher oil and
natural gas prices.
Service and drilling revenue for the third quarter was $238,579 up
from $169,952 for the same quarter last year. This increase was due to the
increased drilling activity.
During the current quarter, retail sales were $298 compared to $7,500
during the third quarter of fiscal 2003. This decrease was due to a decrease
in activities.
The Company's net income for the current quarter was $3,172, up from a
net loss of $(132,176)for the same quarter of fiscal 2003. This increase was
due to an increase in drilling activity and oil and gas prices.
Cost of oil and gas sales for the third quarter of fiscal 2004 was
$70,406, up from $64,859 in the same quarter of fiscal 2003, due primarily
to the decrease down in drilling activity.
Selling, general and administrative expenses were $131,683, up from
$99,649 in the third quarter of fiscal 2003. This increase was primarily due
to increases in insurance, legal and professional expenses.
Salaries and wages for the current quarter were $130,923, down from
$181,177 in the third quarter of fiscal 2003.
Depreciation, depletion and amortization for the third quarter of
fiscal 2004 was $107,286 up from $83,176 in the third quarter of 2003. This
increase was due to a increase in drilling activities.
Item 3. Controls and Procedures
-----------------------
Within the 90-day period prior to the filing of this report, we carried
out an evaluation, under the supervision and with the participation of our
principal executive officer and principal financial officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures. Based on this evaluation, our principal executive officer and
principal financial officer concluded that our disclosure controls and
procedures are effective in timely alerting them to material information
required to be included in our periodic SEC reports. It should be noted that
the design of any system of controls is based on in part upon certain
assumptions about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated goals under all
potential future conditions, regardless of how remote. In addition, we
reviewed our internal controls, and there have been no significant changes in
our internal controls or in other factors that could significantly affect
those controls subsequent to the date of their last evaluation.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
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None.
Item 2. Changes in Securities.
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None.
Item 3. Defaults Upon Senior Securities.
--------------------------------
None; not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
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None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.*
(a) Exhibits.
31.1 302 Certification of Chief Executive Officer
31.2 302 Certification of Chief Financial Officer
32 906 Certification
(b) Reports on Form 8-K.
None.
* A summary of any Exhibit is modified in its entirety by reference to the
actual Exhibit.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Date: March 15, 2004 MILLER PETROLEUM, INC.
By:/s/Deloy Miller
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Deloy Miller
Chief Executive Officer
Date: March 15, 2004 By:/s/Deloy Miller
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Deloy Miller,
Acting As Chief Financial Officer