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 July 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:
September 14, 2004
8,953,856 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 Butch Grubb, Certified
Public Accountant of London, 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
July 31, April 30,
2004 2004
Unaudited
CURRENT ASSETS
Cash $ 114,142 $ 73,416
Accounts receivable - trade-, net 305,452 313,137
Inventory 494,853 494,853
Prepaid expenses 14,633 39,808
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Total Current Assets 929,080 921,214
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FIXED ASSETS
Machinery and equipment 1,036,802 1,036,802
Vehicles 385,465 385,465
Buildings 313,335 313,335
Office Equipment 72,549 72,549
Less: accumulated depreciation (932,534) (905,531)
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Total Fixed assets 875,617 902,620
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OIL AND GAS PROPERTIES 2,745,165 2,638,005
(On the basis of successful ---------- ----------
efforts accounting)
PIPELINE FACILITIES 215,549 218,637
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 $5,277,411 $5,192,476
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade $ 528,992 $ 586,234
Accrued expenses 116,160 116,022
Notes payable - current portion 1,609,829 1,628,153
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Total Current Liabilities 2,254,981 2,330,409
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LONG-TERM LIABILITIES
Notes payable - related 46,618 15,230
Notes payable 523,218 528,522
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Total Long-Term Liabilities 569,836 543,752
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Total Liabilities 2,824,817 2,874,161
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STOCKHOLDERS' EQUITY
Common Stock: 500,000,000 shares
authorized at $0.0001 par value,
8,953,856 and 8,578,856 shares
issued and outstanding 868 858
Additional paid-in capital 3,980,135 3,884,144
Retained Earnings (1,528,409) (1,566,687)
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Total Stockholders' Equity 2,452,594 2,318,315
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TOTAL LIABILITIES AND
STOCKHOLDERS'S EQUITY $5,277,411 $5,192,476
========== ==========
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
July 31
2004 2003
REVENUES
Oil and gas revenue $ 226,944 $ 205,976
Service and drilling revenue 31,813 308,103
Retail sales 27,900 2,960
Sale of equipment 6,500 0
Other revenue 649 1,500
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Total Revenue 293,806 518,539
COSTS AND EXPENSES
Cost of oil and gas sales 42,151 171,659
Selling, general and
administrative 92,744 103,625
Salaries and wages 33,706 193,520
Depreciation, depletion and
amortization 41,056 90,727
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Total Costs and Expenses 209,657 559,531
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INCOME (LOSS) FROM OPERATIONS 84,149 (40,992)
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OTHER INCOME (EXPENSE)
Interest income 59 4,465
Interest expense (45,930) (56,302)
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Total Other Income (Expense) (45,871) (51,837)
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NET INCOME (LOSS) $ 38,278 $ (92,829)
============ ============
NET EARNING (LOSS) PER SHARE 0.01 0.01
============ ============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 8,953,856 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, 2004 8,578,856 $858 $3,884,144 ($1,566,687) $2,318,315
Net income for the
three months ended
July 31, 2004 375,000 $10 $95,991 $38,278 $134,279
Balance --------- ---- ---------- ----------- ----------
July 31, 2004 8,953,856 $868 $3,980,135 ($1,528,409) $2,452,594
========= ==== ========== =========== ==========
The accompanying notes are an integral part of these consolidated financial
statements
Page 5
MILLER PETROLEUM, INC.
Consolidated Statement of Cash Flows
(UNAUDITED)
Three Months Three Months
Ended July 31,
2004 2003
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 38,278 $ (92,829)
Adjustments to Reconcile Net Income to
Net Cash Provided (Used) by Operating
Activities:
Depreciation, depletion and amortization 41,056 90,727
Gain on sale of equipment 0 (22,564)
Changes in Operating Assets and Liabilities:
Decrease (increase) in accounts receivable 7,685 (79,207)
Decrease (increase) in investments 0 12,812
Decrease (increase) in prepaid expenses 25,175 474
Increase (decrease) in accounts payable (57,242) 107,334
Increase (decrease) in accrued expenses 138 7,187
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Net Cash Provided (Used) by Operating
Activities 55,090 23,934
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of oil and gas properties (118,125) (44,601)
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Net Cash Provided (Used) by Investing
Activities (118,125) (44,601)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable (23,628) (19,232)
Proceeds from borrowing 31,388 50,000
Net proceeds from issuance of common stock 96,001
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Net Cash Provided (Used) by Financing
Activities 103,761 30,768
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NET INCREASE (DECREASE) IN CASH 40,726 10,101
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 73,416 77,364
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CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 114,142 $ 87,465
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CASH PAID FOR
INTEREST $ (45,930) $ (56,302)
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, 2004 Annual Report on Form 1OKSB. The results of
operations for the period ended July 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
None
(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 90% 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 to twenty 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 eight to fifteen Chattanooga Shale wells on its Koppers
North acreage, three to 5 wells on its Koppers South gas cap and one
exploratory well on the Harriman Prospect.
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 the property. There are at
a minimum twenty five 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.
Liquidity and Capital Resources
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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
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The Company had revenues of $293,806 for the first quarter of fiscal
2005, down from the $518,539 in revenues recognized during the first quarter
of fiscal 2004.
Oil and gas revenue for the current quarter was $226,944 up from $205,976
in the first quarter of fiscal 2004. 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 first quarter was $31,813 down
from $308,103 for the same quarter last year. This decrease was due to
decreased drilling activity.
During the current quarter, retail sales were $27,900 compared to $2,960
during the first quarter of fiscal 2004. This increase was due to increased
sales.
The Company's net income for the current quarter was $38,278, up from a
net loss of $(92,829)for the same quarter of fiscal 2004. This increase was
due to better management and increase in oil and gas prices.
Cost of oil and gas sales for the first quarter of fiscal 2005 was
$42,151, down from $171,659 in the same quarter of fiscal 2004, due primarily
to better management.
Selling, general and administrative expenses were $92,744, down from
$103,625 in the first quarter of fiscal 2004. This decrease was primarily due
to decreases in insurance, legal and professional expenses.
Salaries and wages for the current quarter were $33,706, down from
$193,520 in the first quarter of fiscal 2004.
Depreciation, depletion and amortization for the first quarter of
fiscal 2005 was $41,056 down from $90,727 in the first quarter of 2004. This
decrease was due to decreases in depreciation expense.
Item 3. Controls and Procedures
-----------------------
As of the end of the period covered by this Quarterly Report, we carried
out an evaluation, under the supervision and with the participation of our
Chief Executive Officer and Chief Financial Officer, of the effectiveness of
our disclosure controls and procedures. Based on this evaluation, our Chief
Executive Officer and Chief 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 Securities and Exchange
Commission reports. It should be noted that the design of any system of
controls is based 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 over financial
reporting, and there have been no changes in our internal controls or in other
factors in the last fiscal quarter that has materially affected or is
reasonably likely to materially affect our internal control over financial
reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
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None
Item 2. Changes in Securities and Small Business Issuer Purchases of Equity
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.
None.
(b) Reports on Form 8-K.
None.
* A summary of any Exhibit is modified in its entirety by reference to the
actual Exhibit.
SIGNATURES
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: September 14, 2004 MILLER PETROLEUM, INC.
By:/s/Deloy Miller
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Deloy Miller
Chief Executive Officer
Date: September 14, 2004 By:/s/Charles M. Stivers
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Charles M. Stivers,
Chief Financial Officer