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, 2005
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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.
----------------------
(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, 2005
9,253,856 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. In the opinion of management, the Financial
Statements fairly present the financial condition of the Registrant.
MILLER PETROLEUM, INC.
Consolidated Balance Sheets
January 31 April 30
2005 2004
Unaudited As Restated
ASSETS
CURRENT ASSETS
Cash $ 48,722 $ 2,416
Accounts receivable 144,211 117,167
Current portion of note receivable 0 18,875
Inventory 51,250 50,911
Deferred offering costs 88,842 88,842
Prepaid expenses 0 66,590
--------- ----------
Total Current Assets 333,025 344,801
--------- ----------
FIXED ASSETS
Machinery and equipment 1,003,235 1,036,802
Vehicles 341,734 385,465
Buildings 313,335 313,335
Office Equipment 72,549 72,549
Less: accumulated depreciation (927,880) (905,531)
---------- ----------
Total Fixed assets 802,973 902,620
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OIL AND GAS PROPERTIES 3,176,644 2,638,005
(On the basis of successful ---------- ----------
efforts accounting)
PIPELINE FACILITIES 209,386 218,637
OTHER ASSETS
Land 511,500 511,500
Investments 500 500
Equipment held for sale 443,942 443,942
Long-term notes receivable - Meyers 0 56,338
Cash - restricted 69,000 71,000
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Total Other Assets 1,024,942 1,083,280
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TOTAL ASSETS $5,546,970 $5,187,343
========== ==========
See notes to consolidated financial statements.
Miller Petroleum, Inc.
Consolidated Balance Sheets
January 31 April 30
2005 2004
Unaudited As Restated
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade $ 297,692 $ 335,556
Accrued expenses 160,831 116,011
Current portion of notes payable -
Related parties 1,434,000 1,360,000
Other 127,023 176,624
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Total Current Liabilities 2,019,546 1,988,191
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LONG-TERM LIABILITIES
Notes payable-Related parties 244,139 269,230
Other 543,788 616,739
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Total Long-Term Liabilities 787,927 885,969
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Total Liabilities 2,807,473 2,874,160
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STOCKHOLDERS' EQUITY
Common Stock: 500,000,000 shares
authorized at $0.0001 par value,
9,173,856 and 8,378,856 shares
issued and outstanding 917 838
Additional paid-in capital 4,534,920 4,173,998
Retained Earnings (1,796,340) (1,861,653)
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Total Stockholders' Equity 2,739,497 2,313,183
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TOTAL LIABILITIES AND
STOCKHOLDERS'S EQUITY $5,546,970 $5,187,343
========== ==========
See notes to 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
Restated Restated
2005 2004 2005 2004
REVENUES
Oil and gas revenue $ 238,790 $ 207,448 $ 601,240 $ 568,637
Service and drilling revenue 29,514 238,579 90,865 1,061,710
Retail sales 455 298 35,947 6,939
Other revenue 45 35,824 30,873 37,324
--------- --------- ---------- ----------
Total Revenue 268,804 482,149 758,925 1,674,610
---------- --------- ---------- ----------
COSTS AND EXPENSES
Cost of oil and gas sales 38,890 70,406 115,525 409,591
Selling, general and
administrative 74,706 156,683 200,696 425,288
Salaries and wages 82,884 130,923 180,658 523,000
Depreciation, depletion and
amortization 63,330 118,123 152,659 306,870
--------- --------- -------- ---------
Total Costs and Expense 259,810 476,135 649,538 1,664,749
--------- --------- -------- ---------
INCOME (LOSS) FROM OPERATIONS 8,994 6,014 109,387 9,681
--------- --------- --------- ---------
OTHER INCOME (EXPENSE)
Interest income 429 509 674 1,690
Sale of Equipment 56,149 0 98,638 0
Interest expense (47,255) (39,188) (143,386) (134,375)
---------- --------- --------- ---------
Total Other Income (Expense) 9,323 (38,679) (44,074) (132,685)
---------- --------- --------- ---------
NET INCOME (LOSS) $ 18,317 $ (32,665) $ 65,313 $(122,824)
========= ========= ========= =========
NET EARNING (LOSS) PER SHARE
BASIC 0.00 0.00 0.01 (0.01)
========= ========= ========= =========
BASIC 9,273,856 8,378,856 9,119,793 8,378,856
========= ========= ========= =========
DILUTED 0.00 0.00 0.01 (0.01)
DILUTED 9,273,856 8,378,856 9,051,074 8,378,856
========= ========= ========= =========
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
as previously stated 8,578,856 $858 $3,884,144 $(1,188,418) $2,696,584
Effect of restatement (450,000) (45) (237,455) (237,500)
--------- ----- ---------- ----------- ----------
Restated balance,
April 30, 2002 8,128,856 813 3,884,144 (1,425,873) 2,459,084
Issuance of shares for
cash 85,000 9 47,491 - 47,500
Issuance of shares for
consulting 80,000 8 69,236 - 69,244
Net loss for the year
ended April 30, 2003 - - - (424,429) (424,429)
Restated balance,
April 30, 2003 8,293,856 830 4,000,871 (1,850,302) 2,151,399
--------- ----- --------- ---------- ---------
Issuance of shares in
connection with deferred
offering 85,000 8 88,834 - 88,842
Issuance of warrants as
prepayment of financing
costs - - 59,293 - 59,293
Issuance of options
for services - - 25,000 - 25,000
Net income for the year
ended April 30, 2004 - - - (11,351) (11,351)
Restated balance,
April 30, 2004 8,378,856 838 4,173,998 (1,861,653) 2,313,183
--------- ----- ---------- ----------- ----------
Common Stock
issued for cash 295,000 29 95,972 - 96,001
Common Stock
issued for leases 500,000 50 264,950 - 265,000
Net income for the
Nine months ended
January 31, 2005 - - - 65,313 65,313
Balance --------- ---- ---------- ----------- ----------
January 31, 2005 9,173,856 $917 $4,534,920 ($1,796,340) $2,739,497
========= ==== ========== =========== ==========
The accompanying notes are an integral part of these consolidated financial
statements
Page 5
MILLER PETROLEUM, INC.
Consolidated Statement of Cash Flows
(UNAUDITED)
As Restated
For The Nine For The Nine
Months Ended Months Ended
January 31, January 31,
2005 2004
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 65,313 $ (122,824)
Adjustments to Reconcile Net Income to
Net Cash Provided (Used) by Operating
Activities:
Depreciation, depletion and amortization 152,659 306,870
Gain on sale of equipment 6,665 (58,388)
Options issued in exchange for services 0 25,000
Changes in Operating Assets and Liabilities:
Decrease (increase) in accounts receivable 48,169 (1,247)
Decrease (increase) in inventory (339) 0
Decrease (increase) in prepaid expenses 66,590 (29,179)
Increase (decrease) in accounts payable (37,864) 82,905
Increase (decrease) in accrued expenses 44,820 (3,619)
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Net Cash Provided (Used) by Operating
Activities 346,013 199,518
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment 0 (84,193)
Purchase of oil and gas properties (324,065) (340,072)
Sale of equipment 0 340,000
Decrease in restricted cash 2,000 3,000
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Net Cash Provided (Used) by Investing
Activities (322,065) (81,265)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable (122,552) (501,793)
Proceeds from borrowing 48,909 400,662
Net proceeds from issuance of common stock 96,001 0
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Net Cash Provided (Used) by Financing
Activities 22,358 (101,131)
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NET INCREASE (DECREASE) IN CASH 46,306 17,122
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 2,416 3,364
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CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 48,722 $ 20,486
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CASH PAID FOR
INTEREST $ (143,386) $ (134,375)
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 January 31, 2005 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) NOTE 2 RESTATEMENT OF FINANCIAL STATEMENTS
The Company previously issued its financial statements as of and for the
year ended April 30, 2004, which were included in its Form 10KSB filed
on July 29, 2004. The filing included a report, dated July 20, 2004,
which expressed an unqualified opinion on those statements by
independent accountants who had not registered with the Public Companies
Accounting Oversight Board (PCAOB). Additionally, the report, failed
to note the conduct of the audit in accordance with the standards of the
PCAOB. Because of these failures, the Company's financial reporting was
not in compliance with rules established by the Securities Exchange
Commission, and accordingly, the Company engaged other auditors to
conduct a PCAOB-compliant audit of its April 30, 2004 financial
statements. The Company issued the resulting financial statements on
Form 10KSB/A on February 15, 2005.
In connection with the PCAOB-compliant audit of the 2004 financial
statements, management identified errors in amounts previously reported
in the Company's financial statements for the years ended April 30,
2002, 2003 and 2004. The Company made an error in failing to record, in
total, bad debt expense of approximately $237,500 in relation to the
non-payment of a stockholder receivable in 2002, resulting in a
misstatement of retained earnings in 2002, 2003 and 2004. In 2004 the
Company's previously issued financial statements failed to include
compensation and interest expense of approximately $57,000 in connection
with issuances of options and warrants. This filing, therefore,
reflects the effects of restatements identified as of April 30, 2004,
including additional amortization of prepaid financing costs of
approximately $22,000 in the first two quarters of the year ending April
30, 2005 and amortization of approximately $21,000 in the two quarters
ended January 31, 2004.
(3) RELATED PARTY TRANSACTIONS
The Company has a note payable to Sharon Miller (wife of Deloy Miller, a
majority stockholder) for $15,230 at April 30, 2004. The note is
payable with a principle payment of $15,230 due in May 2005. The note
is the balance remaining on the original purchase of the property that
houses the Company's offices.
The Company issued a note payable of $1,110,000 and $250,000 on August
13, 2003 at 9% with a one year term to Sherri Ann Parker Lee and William
Parker Lee respectively. This note payable was issued to raise working
capital.
The related party notes are due to members of the Company's board of
directors or their immediate families.
(4) NEW ACCOUNTING PRONOUNCEMENTS
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.
----------------------------------------------------------
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
-------------------------------
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
plan to drill; 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 $268,804 for the third quarter of fiscal 2005,
down from the $482,149 in revenues recognized during the third quarter of
fiscal 2004.
Oil and gas revenue for the current quarter was $238,790 up from $207,448
in the third quarter of fiscal 2004. This increase was due primarily to price
increases.
Service and drilling revenue for the third quarter was $29,514 down from
$238,579 for the same quarter last year. This decrease was due to
decreased drilling activity.
Sale of equipment and Other revenue for the third quarter were $ 56,149 and
$45 respectively up from $0 for the third quarter of 2004. This increase was
due to oil and gas price increases which in term increased equipment sales.
During the current quarter, retail sales were $455 compared to $298 during the
third quarter of fiscal 2004. This increase was due to increased retail
sales.
The Company's net income for the current quarter was $18,317, up from a net
loss of $(32,665) for the same quarter of fiscal 2004.
Cost of oil and gas sales for the third quarter of fiscal 2005 was $38,890,
down from $70,406 in the same quarter of fiscal 2004, due primarily to less
employees and better management.
Selling, general and administrative expenses were $74,706, down from $156,683
in the third 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 $82,884, down from $130,923 in
the third quarter of fiscal 2004.
Depreciation, depletion and amortization for the third quarter of fiscal 2005
was $63,330 down from $118,123 in the third quarter of 2004. This decrease was
due to decreases in depreciation expense.
Stockholders' Equity
--------------------
The Company had the following issuances of stock for the nine months ended
January 31, 2005.
Issuance Name Date Shares Amount
Ratliff Farms, Inc. 05-18-04 200,000 50,000
Plumbroke Farms, Inc. 06-21-04 75,000 30,000
Lambert Haug 07-26-05 20,000 16,000
295,000 96,000
Ratliff Farms, Inc. 09-28-04 500,000 265,000
(For Leases)
Item 3. Internal Controls
-----------------
Standard No. 2 issued by the Public Company Accounting Oversight Board
(PCAOB No. 2) which governs the reporting requirements for Section 404 of the
Sarbanes-Oxley Act of 2002 (SOX 404) was issued in the spring of 2004.
Specific implementation requirments and guidance continue to be developed. The
Company is in the initial stages of conducting its assessment of internal
control over financial reporting as required by SOX 404. However, the guidance
on PCAOB No.2 indicates that materiality levels for defining significant
deficiencies and material weaknesses are lower than initially expected and
lower than historical guidance. Accordingly, it is likely that the Company
will be unable to achieve the level of compliance contemplated in SOX 404 to
receive an unmodified opinion on its internal control over financial reporting
from its external auditors.
In the opinion of management, the accompanying unaudited condensed financial
statements reflect all adjustments, consisting of normal recurring accruals,
necessary to present fairly the financial position of the Company as of
January 31, 2005, its results of operations for the nine and three months
ended January 31, 2005 and 2004, its changes in stockholders' equity for the
nine months ended January 31, 2005 and its cash flows for the nine months
ended January 31, 2005 and 2004. Pursuant to the rules and regulations of the
Unites States Securities and Exchange Commission (the SEC), certain
information and disclosures normally included in financial statements prepared
in accordance with accounting principles generally accepted in the United
States of America have been condensed in or omitted from these financial
statements unless significant changes have taken place since the end of the
most recent fiscal year. Accordingly, these unaudited condensed consolidated
financial statements should be read in conjunction with the audited financial
statements as of April 30, 2004 and for the years ended April 30, 2004 and
2003 and the notes thereto (the Audited Financial Statements) and the other
information included in the Company's Annual Report on Form 10-KSB (the Form
10-KSB) for the year ended April 30, 2004 that was previously filed with the
SEC.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
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None.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
------------------------------------------------------------
None.
Item 3. Defaults Upon Senior Securities.
--------------------------------
None; not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
None.
Item 5. Other Information.
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None.
Item 6. Exhibits.
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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 22, 2005 MILLER PETROLEUM, INC.
By:/s/Deloy Miller
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Deloy Miller
Chief Executive Officer
Date: March 22, 2005 By:/s/Charles M. Stivers
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Charles M. Stivers,
Chief Financial Officer