U. S. Securities and Exchange Commission
Washington, D. C. 20549
FORM 10-KSB-A3
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended April 30, 2001
[ ] 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.
(Name of Small Business Issuer 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)
Issuer's Telephone Number: (423) 663-9457
N/A
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(Former Name or Former Address, if changed since last Report)
Securities Registered under Section 12(b) of the Exchange Act: None.
Securities Registered under Section 12(g) of the Exchange Act: None.
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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.
(1) Yes X No (2) Yes X No
--- --- --- ---
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [ ]
State Issuer's revenues for its most recent fiscal year:
April 30, 2001 - $3,154,830.
State the aggregate market value of the common voting stock held by
non-affiliates computed by reference to the price at which the stock was sold,
or the average bid and asked prices of such stock, as of a specified date
within the past 60 days.
June 29, 2001 - $4,815,341. There are approximately 3,566,919 shares of
common voting stock of the Registrant held by non-affiliates. On June 29,
2001 the average bid and asked price was $1.35.
(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PAST FIVE YEARS)
Not Applicable.
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
State the number of shares outstanding of each of the Issuer's classes of
common equity, as of the latest practicable date:
June 29, 2001
8,328,656
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DOCUMENTS INCORPORATED BY REFERENCE
A description of "Documents Incorporated by Reference" is contained in Item 13
of this Report.
Transitional Small Business Issuer Format Yes X No
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PART I
Item 1. Description of Business.
Business Development
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The predecessor of Miller Petroleum, Inc. (the "Company") was
founded in 1967 by Deloy Miller, as a sole proprietorship. On January 22,
1978, the Company was incorporated under the laws of the State of Tennessee.
For the Company's early business development, see Form 10KSB for the fiscal
year ended April 30, 2000, which was filed with the Securities and Exchange
Commission on August 14, 2001, and subsequently amended. These filings are
available on the Commission's web site: www.sec.gov.
During the past three years, the Company concentrated on oil and gas
development, exploration and production. The Company has oil and/or gas
production in six Tennessee counties: Campbell, Fentress, Hancock, Morgan,
Overton and Scott.
Currently, the Company has more than 40,000 acres under lease in
Tennessee and continues to seek the acquisition of additional strategic
acreage. We also owned 40,000 acres in Kentucky, which we recently sold as
discussed below. Although it engages in a minimum of contract drilling, it
has kept drilling rigs, service rigs, trucks and bulldozers to drill, service
and maintain its own wells. Miller continues to use the latest technology,
utilizing computer graphics and analytical tools for geologic exploration,
drilling and development.
Pursuant to a Purchase and Sale Agreement that we entered into with
NAMI Resources Company, LLC, a Kentucky limited liability company, on August
31, 2000, we sold to NAMI resources our interest in certain oil and gas wells,
leases covering about 40,000 acres in Kentucky, inventory and related
equipment located in Kentucky. The sale closed on September 6, 2000. NAMI
Resources Company, LLC paid the Company $2,000,000 and assumed a production
payment to Cabot Oil and Gas, Inc. of $102,237 and received our interest in
certain oil and gas wells, oil and gas leases, inventory and related equipment
plus a production receivable from Southern Gas of $123,832. The net to the
Company was $1,978,405.
We sold these assets because they were located approximately two to
three hours from our present principal operations in East Tennessee. Our
Board of Directors believed that the cost, expense and manpower involved in
managing the assets at this distance was too high and interfered with our
principal focus in East Tennessee.
We had previously sold to NAMI Resources gas that was produced
from oil and gas wells that were among these assets. NAMI Resources had no
other material relationship with us, and the NAMI Resources agreement
was negotiated at "arms length."
We used about $1,780,000 of the purchase price to pay a note that we
owed to BankOne. The remaining amount has been allocated to working capital.
The Company continues to focus on the development, drilling and
production of natural gas in eastern Tennessee. Miller's exploration efforts
will primarily be in the East Tennessee portion of the Eastern Overthrust
Belt. Knox Dolomite wells in this field have reserves in excess of 2 Bcf per
well. Swan Creek is also producing substantial amounts of oil from a separate
shallow reservoir.
All officers and directors with the exception of John Bonar
were reappointed for the fiscal year that began May 1, 2001 and continue to
serve as of June 30, 2001.
Mr. Ernest F. Payne was appointed Vice President of Field Operations
on May 21, 2001, which is subsequent to the period covered by this Report.
Business
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The Company's operations include the operation of oil and gas
wells, acquisition and development of oil and gas leases, rebuilding and sales
of oil field equipment and the organization of joint venture drilling programs
with industry partners.
The Company has acquired and operates the following properties:
(1)Koppers Lease or "ARCO/GULF Farmout".
The largest acreage block owned by the Company is in Campbell
County, Tennessee. This acreage was acquired through a farmout agreement with
ARCO/Gulf. The Company owns a 100% working interest of 27,000 acres, more or
less. This lease provides for a landowner royalty of 12.5% and an overriding
royalty interest of 7.5% with an 80% working interest. The lease is split
into two parcels. An 8,000 acre northern parcel borders the Kentucky state
line and a 19,000 acre parcel has its southern edge under the city of
Lafollette, Tennessee. Currently, there are six producing oil wells on the
southern tract of this lease. The sixth well (Tennessee Mining, Inc. #22B,
drilled in August of 2000, has produced 8,039 barrels of oil through June 30,
2001. This lease is being held by production. Plans call to drill at least
four more wells during fiscal 2002.
(2) Delta Producers, Inc. joint venture.
The Company continues its joint venture with Delta Producers, Inc.
of Greenville, Mississippi ("Delta Producers"). Currently, the parties are
jointly producing twelve gas wells in the Jellico, Tennessee area northwest of
the Pine Mountain Thrust Fault. Miller Petroleum has a 25% working interest in
the above gas wells. The twelve wells are located upon several oil and gas
leases consisting of 2,000 acres more or less (collectively the "Delta
leases") Each of these leases is subject to a 12.5% landowner's royalty.
We acquired a 50% working interest in the 8,000 acre Elk Valley Iron
and Coal lease in Campbell and Scott counties, Tennessee from Delta Producers,
Inc. In 1999, Miller agreed to provide the geology, engineering and its
drilling expertise for its interest in the lease and to jointly develop the
lease with Delta. This lease provides for a landowner's royalty of 12.5% and
an overriding royalty interest of 6.25%. During November and December, 2000,
two shallow wells were drilled on this lease. One of these wells, the Ketchen
#16 well, tested more than 200 Mcf of natural gas open flow at a depth of
about 1300 feet on the Pennsylvania Sands Formation. We are in the process of
permitting three more wells on the Ketchen lease and drilling will begin in
January or February of 2002.
Miller Petroleum and Delta Producers have committed to drill three
wells on the 4,000 acre Lindsey Land Company lease in Campbell County near
Caryville, Tennessee. This lease provides for a landowner's royalty of 12.5%.
We have surveyed the well locations and permitted the wells with the Tennessee
Oil and Gas Board. Currently, we have drilled and logged the first and second
wells, the Lindsey Land Co. #9 and #10, and moving the drilling equipment to
the third well, the Lindsey Land Co. #12. Both the Lindsey Land Co. #9 & #10
wells tested more than 200 Mcf of natural gas open flow from the Big Lime
Formation, their shut-in pressure was approximately 780 psi. We have a 50%
working interest in the Lindsey Land Company lease.
(3) Miscellaneous oil and gas leases and wells.
The Company has several small leases in Campbell, Fentress, Morgan
and Overton Counties, Tennessee totaling approximately 2,500 acres. Each of
these leases is subject to a 12.5% to 20% landowner's royalty. There are
twelve producing oil wells and fifteen producing natural gas wells on these
miscellaneous leases.
(4) Tengasco Farmout and nearby area.
The Company continues to develop the farmout it acquired from
Tengasco, Inc. in September of 1999. The farmout locations are adjacent to or
in the much-publicized Swan Creek field in Hancock County, Tennessee.
The Company has drilled four successful Knox Dolomite wells in the
Swan Creek field proper. A fifth Knox well drilled on this farmout by Miller
has resulted in a new field discovery on a separate structure from Swan Creek.
In August of 2000, Miller Petroleum, Inc. drilled its first oil well
under the Tengasco Farmout. The Dewey Sutton #1 well currently is producing
12 barrels of oil per day from the Trenton Formation. Since the Dewey Sutton
well was drilled, the Company has drilled and completed the Worlie Purkey #2
and the Cheryl Smith #1 wells which are producing oil from the Trenton
Formation. The R.D. Helton #2 had a good show of oil in the Stones River
Formation and is scheduled to be completed as soon as possible.
As of June 29, 2001, the Company has drilled eleven wells in this
area. Eight of the wells were drilled under the Tengasco Farmout and 3 on the
293-acre Worlie Purkey lease. Five successful Knox Dolomite gas wells and
three producing oil wells. Two additional oil wells and one gas well are
scheduled for completion. Miller Petroleum jointly with Tengasco has completed
a gas well acquired from Chevron in the Knox formation.
One of the above oil wells scheduled for completion is the Rose #1 well.
Although the Rose #1 well was not as successful as expected, we plan to drill
the Rose #2 in late November, 2001, and to complete both wells by the end of
2001.
Tengasco completed its pipeline and began buying limited amounts of
natural gas on March 8, 2001. Miller's first sales to Tengasco were from the
Worlie Purkey #1 well in April of 2001. In May, the Worlie Purkey #3 began
selling to Tengasco. During the latter part of June, we began selling from
the Jeff Johnson #1 well.
For the month of July, 2001, Tengasco purchased approximately 60% of our
net natural gas production, or 5,687 Mcf. Nami purchased 27% of our natural
gas production, or 2,507 Mcf, and Delta and Citizens purchased 12% and 1% or
1,141 Mcf and 101 Mcf, respectively.
We continue to focus on the development, drilling and production on
natural gas in eastern Tennessee. Our exploration efforts will primarily be
in the East Tennessee portion of the Eastern Overthrust Belt. According to
the reserve report prepared by Coburn Petroleum Engineering as of April 30,
2001, our interests in the Knox Dolomite wells in this field have reserves
averaging about 1.3 billion cubic feet per well. This reserve report also
estimates net production in 2001 of 11,543 barrels of oil for two wells in
which we have interests. These wells are located in the Trenton Formation, a
separate shallow reservoir.
Principal Products or Services and Markets
The Company drills, produces and markets natural gas and oil.
The demand for these products continues to increase as population and industry
conversions expand. Direct statewide purchasers of oil at the well site are
by South Kentucky Purchasing Company, a refinery located in Somerset,
Kentucky.
Natural gas has multiple markets throughout the eastern United
States through gas transmission lines. Access to these markets is presently
provided by four companies in north eastern Tennessee. Delta Natural Gas
Company purchases the Company's natural gas that is produced from the "Delta
Leases". CNR (formerly ALAMCO) has recently completed a new gas pipeline with
connections to the major east-west gas transmission lines and markets. Local
markets are served by Citizens Gas Utility District with surplus gas being
placed in storage facilities or transported to East Tennessee Natural Gas
serving Tennessee and Virginia. During the past year, the NAMI Resources
Company, LLC began purchasing gas from the Company's wells in the Jellico
Field. NAMI is sending this gas north through Delta Natural Gas and its KA-1
line.
Reserve Analysis
Coburn Petroleum Engineering of Tulsa, Oklahoma, performed a reserve
analysis on our leases as of April 30, 2001. Based on the data and parameters
provided, the wells evaluated should recover about 884,759 barrels of oil, or
Bbls, and 27,746,871 thousand cubic feet, or Mcf, of natural gas. Of this
gross production, the interests appraised will recover 379,337 Bbls of oil and
11,765,300 Mcf of natural gas. Of these latter amounts, a total of 71,334
Bbls of oil and 231,372 Mcf of natural gas were proved developed producing;
108,197 Bbls of oil and 6,800,451 Mcf of gas were proved developed shut-in;
and 199,806 Bbls of oil and 4,733,480 Mcf of natural gas were proved but
undeveloped.
The net reserves should yield an un-discounted future net income of
$64,356,698 after royalties, operating costs, development costs and severance
and ad valorem taxes, but before federal and state income taxes. The present
value of this future net income is $37,195,877 when discounted at 10%. The
reserves presented in this report were evaluated according to the standards
recommended by the Securities and Exchange Commission. The report assumes
constant oil and gas pricing and the use of a 10% discount factor to estimate
present value of the future net income.
It is the opinion of Coburn that the above-described reserve and
revenue estimates are in the aggregate reasonable and were prepared in
accordance with generally accepted petroleum engineering and evaluation
principles. Coburn does not own any direct or indirect financial interest in
Miller Petroleum, Inc. and its oil and gas properties and interest. Coburn's
fee is not contingent upon its work or report.
Distribution Methods of Products or Services.
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Crude oil is contained in tanks at the well site until the
purchaser retrieves it by truck. Natural gas is delivered to the purchaser
via gathering lines into the main gas transmission line. Gas purchasers in
the area include Tengasco, Inc.; Delta Natural Gas Company, Inc.; NAMI
Resources Company, LLC; CNR and Citizens Gas Utility District. Crude oil is
purchased by South Kentucky Purchasing Company of Somerset, Kentucky.
Management anticipates that the Company's products will be sold to one of
these companies, however, no assurance can be given that the Company will be
able to make such sales or that if it does, it will be able to receive a price
that is sufficient to make its operations profitable.
Status of Any Publicly Announced New Product or Service
The Company does not have any publicly announced new product or
service; nor does it anticipate any in the foreseeable future.
Competitive Business Conditions, Competitive Position in the Industry and
Methods of Competition
The Company's oil and gas exploration activities in the State of
Tennessee will be undertaken in a highly competitive and speculative business.
In seeking any other suitable oil and gas properties for acquisition, the
Company will be competing with a number of other companies located in the
State of Tennessee and elsewhere, including large oil and gas companies and
other independent operators with greater financial resources.
At the local level, the Company has several competitors in the
area of its acreage blocks in the State of Tennessee, three of which may be
deemed to be significant. These are CNR, Champ Oil, John Henry Oil and
Anderson Oil and Gas. Given the Company's relatively large acreage holdings
in the area and the estimated proven undeveloped reserves, management believes
that the Company could increase substantially the amount of hydrocarbons it
sells in the immediate area; however, the Company's operations will be subject
to numerous risk factors and no assurance of this can be given. See the
caption "Risk Factors" of this Report.
Management does not foresee any difficulties in procuring logging,
cementing and well treatment services in the area of its operations. The
experience of management has been that, in most instances, logging equipment
will be available with less than a one-day waiting period. Cementing services
generally have the same waiting period. Well treatment services may have a
waiting period of 7 to fourteen days. However, several factors, including
increased competition in the area, may limit the availability of logging
equipment, cementing and well treatment services; such an event may have a
significant adverse impact on the profitability of the Company's operations.
The Company has its own drilling and service rigs with the
employees necessary to do all other services required to drill and produce gas
and oil wells.
The prices of the Company's products are controlled by the world
oil market and the United States natural gas market; thus, competitive pricing
behaviors in this regard are considered unlikely; however, competition in the
oil and gas exploration industry exists in the form of competition to acquire
the most promising acreage blocks and obtaining the most favorable prices for
transporting the product. Management believes that the Company is well
positioned in these areas because of the transmission lines that run through
and adjacent to the properties that it leases and because it holds relatively
large acreage blocks in what management believes are promising areas.
Sources and Availability of Raw Materials and Names of Principal Suppliers
The Company's operations are not dependent on the acquisition of
any raw materials. See the caption "Competitive Business Conditions,
Competitive Position in the Industry and Methods of Competition," above.
Dependence on One or a Few Major Customers
The Company will be dependent on local purchasers of hydrocarbons
in the areas where its properties are located for sales of its products. The
six purchasers in the areas of the Company's operations are Citizens Gas
Utility District, Delta, CNR, NAMI Resources, Tengasco and South Kentucky.
The loss of one or more purchasers with whom the Company may contract may have
a substantial adverse impact on the Company's sales and on its ability to
operate profitably.
We have agreements to sell all of our natural gas. In August, 2001,
the weighted average price of our natural gas, after transportation costs, was
$2.43 per MCF.
Currently, we are selling natural gas to the following purchasers:
(1) Citizens Gas Utility District is purchasing natural gas from Miller's
wells in Scott County, Tennessee. Citizens is paying $4.00 per Mcf less
transportation costs. Sales to Citizens are less than 1% of our total natural
gas sales.
(2) NAMI Resources Company, LLC is purchasing our gas from the Jellico Field.
The sales price is the Columbia Appalachian Monthly Contract Index less
transportation and marketing costs. Sales to NAMI at the present time are
approximately 70% of total natural gas sales.
(3) Tengasco, Inc. purchases natural gas from wells in the Swan Creek Field.
Tengasco, Inc. is paying the New York Mercantile Exchange first of the month
posting plus $0.10 less transportation charges. Sales to Tengasco are about 8
or 9 percent of total natural gas sales.
(4) Delta Natural Gas purchased the gas produced from the joint venture with
Delta Producers, Inc. The sales price is Inside F.E.R.C.'s Gas Market Report
first of the month index for Tennessee Gas Pipeline Co. - La. & Offshore
without adjustment for BTU level less transportation charges. Delta Natural
purchases approximately 20% of total natural gas sales.
The Company sells all of its crude oil to South Kentucky Purchasing
Company of Somerset, Kentucky. South Kentucky's purchase price is based on
postings for the Illinois Basin.
Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements or
Labor Contracts, including Duration
Royalty agreements relating to oil and gas production are standard
in the industry. The amount of the Company's royalty payments varies from
lease to lease. See the caption "Business," above. The amounts of the
royalties on each of the Company's leases are listed on the attached Lease
Schedules. See the Exhibit Index, Item 13 of this Report.
Need for Governmental Approval of Principal Products or Services
None of the principal products or services offered by the Company
require governmental approval; however, permits are required for drilling oil
or gas wells. See the caption "Effect of Existing or Probable Governmental
Regulations on Business," below.
Effect of Existing or Probable Governmental Regulations on Business
Exploration and production activities relating to oil and gas
leases are subject to numerous environmental laws, rules and regulations. The
federal Clean Water Act requires the Company to construct a fresh water
containment barrier between the surface of each drilling site and the
underlying water table. This involves the insertion of a seven-inch diameter
steel casing into each well, with cement on the outside of the casing. The
cost of compliance with this environmental regulation is approximately $10,000
per well.
The State of Tennessee also requires oil and gas drillers to
obtain a permit for their activities and to post with the Tennessee Gas and
Oil Board bonds to ensure that each well is reclaimed and properly plugged
when it is abandoned. The Reclamation Bonds cost $1,500 per well. Cost for
the Plugging Bonds are $2,000 per well or $10,000 for ten wells. Currently,
the Company has several of the $10,000 plugging bonds. For most of the
reclamation bonds, the Company has deposited a $1,500 Certificate of Deposit
with the Oil and Gas Board.
The Company's operations are also subject to laws and regulations
requiring removal and cleanup of environmental damages under certain
circumstances. Laws and regulations protecting the environment have generally
become more stringent in recent years, and may in certain circumstances impose
"strict liability," rendering a corporation liable for environmental damages
without regard to negligence or fault on the part of such corporation. Such
laws and regulations may expose the Company to liability for the conduct of
operations or conditions caused by others, or for acts of the Company which
were in compliance with all applicable laws at the time such acts were
performed. The modification of existing laws or regulations or the adoption
of new laws or regulations relating to environmental matters could have a
material adverse effect on the Company's operations. In addition, the
Company's existing and proposed operations could result in liability for
fires, blowouts, oil spills, discharge of hazardous materials into surface and
subsurface aquifers and other environmental damage, any one of which could
result in personal injury, loss of life, property damage or destruction or
suspension of operations.
The Company has in place an Emergency Action and Environmental
Response Policy Program. This program details the appropriate response to any
emergency that management believes to be possible in the Company's area of
operations.
The Company believes it is presently in compliance with all
applicable federal, state and local environmental laws, rules and regulations;
however, continued compliance (or failure to comply) and future legislation
may have an adverse impact on the Company's present and contemplated business
operations.
The foregoing is only a brief summary of some of the existing
environmental laws, rules and regulations to which the Company's business
operations are subject, and there are many others, the effects of which could
have an adverse impact on the Company. Future legislation in this area will
no doubt be enacted and revisions will be made in current laws. No assurance
can be given as to what effect these present and future laws, rules and
regulations will have on the Company's current future operations.
Research and Development
With the exception of the payment to Coburn Petroleum Engineering
for its engineering study, the Company has not expended any material amount
in research and development activities during the last fiscal year. Research
done in conjunction with its exploration activities consists primarily of
conducting geological research. This work falls under the job description of
the Company's geologist and will not cost anything more than his standard
salary.
Cost and Effects of Compliance with Environmental Laws
See the caption "Effect of Existing or Probable Governmental
Regulations on Business" of this Report.
Number of Total Employees and Number of Full-Time Employees
The Company presently has 18 full-time employees and 1 part-time
employees. When it commences its full-scale drilling program as discussed
under the heading "Management's Discussion and Analysis or Plan of Operation,"
the Company plans to have up to 24 full-time employees, including officers,
and 1 part-time employee.
Risk Factors
-------------
Our present and intended business operations are highly speculative and
involve substantial risks. Only investors who can bear the risk of losing
their entire investment should consider buying our shares. You should
consider and be aware of the following risks:
General Risks Related To Our Business.
--------------------------------------
It will be harder for us to develop oil and gas reserves if we do not
raise additional money.
-----------------------
We will require about $2,500,000 in additional funding to realize our
future goals of conducting the oil and gas exploration operations on
properties under lease and acquiring additional oil and gas properties for
development. We will need to continue to raise funding through equity or debt
financing, which may be very difficult for our highly speculative enterprise.
We can not assure you that any additional funding will be available to us, or
if it is available, that the terms of the funding will be satisfactory to us.
If we fail in these efforts, our business may also fail.
Our business may fail if we do not succeed in our efforts to develop and
replace oil and gas reserves.
-----------------------------
Management believes that our future success will depend upon our ability
to find, acquire and develop additional economically recoverable oil and gas
reserves. Our proved reserves will generally decline as they are produced,
except to the extent that we conduct revitalization activities, or acquire
properties containing proved reserves, or both. To increase reserves and
production, we must continue our development drilling and re-completion
programs, identify and produce previously overlooked or bypassed zones in
shut-in wells, acquire additional properties or undertake other replacement
activities. Our current strategy is to increase our reserve base, production
and cash flow through the development of our existing oil and gas fields and
selective acquisitions of other promising properties where we can use new,
existing technology. Despite our efforts, our planned revitalization,
development and acquisition activities may not result in significant
additional reserves, and we may not be able to discover and produce reserves
at economical exploration and development costs.
Our revenues may be less than expected if our oil and gas reserve
estimates are inaccurate.
-------------------------
Oil and gas reserve estimates and the present values attributed to these
estimates are based on many engineering, geological characteristics and
operational assumptions that generally are derived from limited data. Common
assumptions include such matters as the anticipated future production from
existing and future wells, future development and production costs and the
ultimate hydrocarbon recovery percentage. As a result, oil and gas reserve
estimates and present value estimates are frequently revised to reflect
production data obtained after the date of the original estimate. If reserve
estimates are inaccurate, production rates may decline more rapidly than
anticipated, and future production revenues may be less than estimated. In
addition, significant downward revisions of reserve estimates may hinder our
ability to borrow funds in the future, or may hinder other financing
arrangements that we may consider.
In addition, any estimates of future net revenues and their present
value are based on period ending prices and on cost assumptions that only
represent our best estimate. If these estimates of quantities, prices and
costs prove inaccurate and we are unsuccessful in expanding our oil and gas
reserves base, or if oil and gas prices decline or become unstable, we may
have to write down the capitalized costs associated with our oil and gas
assets. We will also largely rely on reserve estimates when we acquire
producing properties. If we overestimate the potential oil and gas reserves
of a property to be acquired, or if our subsequent operations on the property
are not successful, the acquisition of the property could result in
substantial losses.
Our future success will depend on the price of oil and gas.
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Our revenues come from the sale of oil and gas. If oil and gas prices go
below our costs and expenses of operating our company, we will lose money.
Sustained financial losses would probably force us to cease operations.
Oil and gas operations involve many physical hazards.
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Natural hazards, such as excessive underground pressures, may cause
costly and dangerous blowouts or make further operations on a particular well
financially or physically impractical. Similarly, the testing and re-
completion of oil and gas wells involves a high degree of risk arising from
operational failures, such as blowouts, fires, pollution, collapsed casing,
loss of equipment and numerous other mechanical and technical problems. Any
of these hazards may result in substantial losses to us or liabilities to
third parties. These could include claims for bodily injuries, reservoir
damage, loss of reserves, environmental damage and other damages to people or
property. Any successful claim against us would probably require us to spend
large amounts on legal fees and any successful claim may make us liable for
substantial damages.
Our dependence on outside equipment and service providers may hurt our
profitability.
--------------
We need to obtain logging equipment and cementing and well treatment
services in the area of our operations. Several factors, including increased
competition in the area, may limit their availability. Longer waits and
higher prices for equipment and services may reduce our profitability.
You will not be able to elect our directors or officers.
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Deloy Miller, our President and CEO, currently owns about 53% of our
outstanding common stock. He can effectively elect all of our directors, who
in turn elect all of our executive officers, without regard to the votes of
other stockholders. If the warrant holders exercise all of the outstanding
warrants and retain voting control of the shares underlying these warrants,
Mr. Miller would own about 47% of the then-outstanding shares. Although he
would not have absolute voting control, he would still be in a position to
exert substantial influence on the election of all directors, who in turn
elect all of the officers. You will have little or no ability to influence
the direction of Miller Petroleum.
The intense competition in our industry will make it harder for us to
succeed.
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Our oil and gas exploration activities are centered in a highly
competitive industry. We will be competing in every facet of our intended
business with other companies that may include multinational oil and gas
companies and other large independent operators with much greater financial
resources than we have. Management does not believe that our competitive
position in the oil and gas industry will be significant.
If we lose the services of Deloy Miller or Lawrence L. LaRue, our
operations may suffer.
----------------------
We are substantially dependent upon the continued services of Deloy
Miller, our President, CEO and a director, and Lawrence L. LaRue, our
Secretary/Treasurer and a director. Messrs. Miller and LaRue have been with
us since our inception. The relationships that these persons have formed in
our industry and in the local area where our principal operations are
conducted are invaluable, and could be lost to us without their services.
Messrs. Miller and LaRue are in good health; however, their retirement,
disability or death would seriously hurt on our business operations. If their
services become unavailable, we will have to retain other qualified personnel.
We may not be able to recruit and hire other qualified people on acceptable
terms. We do not have employment contracts with Mr. Miller or Mr. LaRue.
Similarly, the oil and gas exploration industry requires the use
of personnel with substantial technical expertise. If our current technical
personnel become unavailable, we will need to hire qualified personnel to take
their place. If we are not able to recruit and hire new people on mutually
acceptable terms, our operations will suffer.
Compliance with governmental regulations can be costly and can limit our
planned operations.
-------------------
We face many state and federal laws, rules and regulations covering the
safety of our operations, environmental conditions and other facets of our
business. These laws, rules and regulations can be expensive and may
seriously limit our ability to conduct our intended business operations. See
the heading "Effect of Existing or Probable Governmental Regulations on
Business" under the caption "Description of Business."
Risks Related To Our Common Stock.
----------------------------------
The sale of already outstanding shares of our common stock could hurt our
common stock market price.
--------------------------
All of our outstanding common stock is eligible for public sale under
Rule 144 of the Securities Act of 1933. On January 17, 2001, the Company
filed Form SB2 with the Securities and Exchange Commission, (subsequently
amended on June 19, 2001) to register 2,761,152 previously issued common
shares and shares underlying warrants. The selling stockholders may sale the
shares of common stock being registered for resale under our prospectus. Any
of these sales could significantly decrease the market price of our common
stock. These sales could also severely limit our ability to obtain the
necessary debt or equity funding for our current and intended business
operations.
The limited trading volume in our common stock, and general market
volatility, may depress our stock price.
----------------------------------------
The public market and trading volume for our common stock are limited and
volatile. Where the volume is limited, any unusual increase in the volume is
likely to decrease the market price of our common stock. The common stock
that we are registering and that the selling stockholders will offer and sell
under our prospectus will greatly increase the number of shares available for
public trading. This alone could significantly decrease the current market
price for our common stock.
In addition, the stock markets have had extreme price and volume
fluctuations. These broad market fluctuations, as well as general economic and
political conditions, may also reduce the market price of our common stock.
Indemnification of Directors, Officers, Employees and Agents.
Section 48-18-502 of the Tennessee Business Corporation Act allows a
corporation to indemnify any director in any civil or criminal proceeding
(other than a proceeding by or in the right of the corporation in which the
director was adjudged liable to the corporation or any other proceeding in
which he or she was adjudged liable on the basis that he or she improperly
received a personal benefit) by reason of service as a director if the person
to be indemnified conducted himself or herself in good faith and in a manner
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe the conduct was unlawful. Section 48-18-507
extends certain indemnification rights to officers, employees and agents of a
corporation as well. The foregoing is only a brief summary of the right of
indemnification allowed a corporation under the Tennessee Business Corporation
Act, and is modified in its entirety by this reference. The Board of
Directors of the Company has adopted these provisions to indemnify its
directors, executive officers and agents.
Item 2. Description of Property.
---------------------------------
The Company owns an office and yard on 14 acres situated in
Huntsville, Tennessee. An additional 1,600 square feet of office space was
added during 1998.
For a description of the Company's oil and gas leases, see the section
captioned "Business".
Item 3. Legal Proceedings.
---------------------------
On or about January 20, 2000, the Company filed a complaint against
Blue Ridge Group, Inc. in the Chancery Court of Hawkins County at Rogersville,
Tennessee, Case No. 13951, asserting that Blue Ridge had breached a Footage
Drilling Contract with the Company. Miller asserted that Blue Ridge had
breached the said contract by quitting the job without drilling to the
required depth, failing to drill a straight hole, and by damaging the well
bore by failing to conduct its operations in a good and workmanlike manner in
accordance with good industry practice. The Company has asked that it be
awarded its initial payment of $37,000.00 to Blue Ridge, damages occasioned by
the improper deviation of the hole from the vertical plane; damages for the
cost of re-drilling and/or re-working the hole, damages allowed by the parties
contract, further and equitable relief to which it may be entitled, and to
assess the costs of this cause, including Miller's discretionary costs, to
Blue Ridge.
The Blue Ridge action is pending and the Company believes that its
contract with the plaintiff was breached. However, a decision for the
defendant would not have a material effect on the Company.
Item 4. Submission of Matters to a Vote of Security Holders.
-------------------------------------------------------------
On July 23, 2001, a majority of the Company's security holders
voted to retain the present directors for another year and to retain the
present auditor, Charles M. Stivers CPA of Manchester, Kentucky.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.
Market Information
------------------
The Company's common stock is traded on the OTC Bulletin Board of
the National Association of Securities Dealers, Inc. ("NASD"); however, the
market for shares of the Company's common stock is extremely limited. No
assurance can be given that the present market for the Company's common stock
will continue or will be maintained, and the sale of the Company's
unregistered" and "restricted" common stock pursuant to Rule 144 as outlined
under the caption "Recent Sales of Unregistered Securities" of this Report may
have a substantial adverse impact on any such public market. See the Risk
Factor entitled "Future Sales of Common Stock," herein.
The Company's common stock is quoted on the OTC Bulletin Board. The
high and low bid prices for these shares of common stock of the Company during
the past three years are as follows:
Bid
Quarter ending: High Low
July 31, 1998 $3.25 $2.4375
October 31, 1998 $2.50 $1.50
January 31, 1999 $2.00 $1.03125
April 30, 1999 $2.00 $1.50
July 31, 1999 $2.00 $1.375
October 31, 1999 $1.4375 $0.875
January 31, 2000 $1.125 $0.75
April 30, 2000 $2.125 $0.625
July 31, 2000 $1.01 $0.625
October 31, 2000 $1.6875 $0.625
January 31, 2001 $1.8125 $0.8125
April 30, 2001 $2.25 $1.375
These bid prices were obtained from the National Quotation Bureau,
Inc. ("NQB") and do not necessarily reflect actual transactions, retail
markups, mark downs or commissions.
Holders
-------
The number of record holders of the Company's common stock as of
July 5, 2001, 1999, was 285; this number does not include an indeterminate
number of stockholders whose shares are held by brokers in street name.
Dividends
---------
There are no present material restrictions that limit the ability of
the Company to pay dividends on common stock or that are likely to do so in
the future. The Company has not paid any dividends with respect to its common
stock, and does not intend to pay dividends in the foreseeable future.
Recent Sales of Unregistered Securities.
----------------------------------------
We have sold the following "restricted securities" since April 2,
1998:
Common Stock.
-------------
Aggregate
Name or Group Number of Shares Date Consideration
------------- ---------------- ---- -------------
Herman Gettelfinger 36,364 4/2/98 Bonus for services
valued at $1.10 per
share
Herman Gettelfinger 29,037 4/2/98 Payoff of $43,555
note payable
W. Baxter Lee, III 100,000 8/4/98 $218,750
James D. Lackie 50,000 8/4/98 $109,375
Profit Sharing Plan
Five accredited 60,500 10/19/98 $121,000
investors
Target Market 10,000 12/4/98 Services valued at
Development, Inc. $1.80 per share
Don R. Miller 10,000 12/14/98 Services valued at
$1.80 per share
20 employees 2,000 12/14/98 Services valued at
$1.80 per share
Six accredited 28,556 12/18/98 $ 51,400.80
investors
Five employees 14,433 1/29/99 Services valued at
$1.80 per share
M. E. Ratliff 25,000 6/11/99 $ 25,000
Charles E. Quin, Sr. 3,135 7/29/99 $ 5,000
M. E. Ratliff 150,000 9/14/99 $150,000
Charles Barker 1,000 9/14/99 Services valued at
$1.00 per share
Lawrence LaRue 10,000 2/16/00 Services valued at
$1.00 per share
Jeff Brockman 3,000 7/18/00 Services valued at
$1.00 per share
Lori Ann Nunn 2,500 7/18/00 Services valued at
$1.00 per share
Raymond D. Cohn 50,000 7/18/00 $ 45,000
13 investors 475,000 11/10/00 $475,000
Richard Belz 25,000 12/18/00 $ 25,000
Raymond D. Cohn 50,000 12/18/00 $ 50,000
Three accredited 525,000 12/18/00 $525,000
investors
16 employees 3,200 12/21/00 Services valued at
$1.00 per share
Terry Goff 23,000 3/7/01 One Energy Industries
compressor package
(1) Issued on various dates during our fiscal year ended April 30, 1998.
(2) The Company issued warrants to purchase up to 953,400 shares of
common stock, as partial consideration for a loan in the amount of
$860,000. See the caption "Certain Relationships and Related
Transactions."
(3) Issued on various dates during our fiscal year ended April 30, 1999.
(4) Our Board of Director's consent accepting subscriptions was signed
December 12, 2000, but the Subscription Agreements were signed over a
period of three months.
We issued all of these securities to persons who were either
"accredited investors," or "sophisticated investors" who, by reason of
relationship to us, education, business acumen, experience or other factors,
were fully capable of evaluating the risks and merits of an investment in our
company; and each had prior access to all material information about us. We
believe that the offer and sale of these securities was exempt from the
registration requirements of the Securities Act of 1933, pursuant to Sections
4(2) and 4(6) thereof, and Regulation D thereof and from various similar state
exemptions.
We have taken the following factors into account in determining the
valuations of these shares: (i) the fact that the shares are "restricted";
(ii) the limited market for our common stock on the OTC Bulletin Board of the
NASD; (iii) the low book value per share ($0.3475 at April 30, 2001); and
(iv) our history of financial losses ($936,193 and $483,295 during the fiscal
years ended April 30, 1999, and 2000, respectively).
Warrants.
---------
Wm. Baxter Lee III 953,400 12/16/96 (1)
Raymond Cohn 12,500 8/10/00 (2)
Daniel Page 1,000,000 10/11/00 (3)
Basic Investors, Inc. 100,000 12/08/00 (4)
Lawrence L. LaRue 12,500 12/15/00 (5)
Teresa Cotton 5,000 12/15/00 (5)
Gary Bible 6,000 1/09/01 (5)
(1) These warrants were granted to Mr. Lee as partial consideration for
a subordinated loan of $860,000. These warrants are exercisable at a price of
$1.25 per share, and expire on December 12, 2004. The number of shares that
can be purchased is variable due to a provision in the Warrant Agreement that
allows Mr. Lee to purchase up to 10.53 percent of the shares of common stock
outstanding.
(2) These warrants were granted to Mr. Cohn as partial consideration for
his purchase of 50,000 "unregistered" and "restricted" shares of our common
stock, as discussed under the heading "Common Stock," above. These warrants
are exercisable at a price of $1.00 per share, and expire on July 17, 2003.
During the third year of the warrants, Miller Petroleum may call them at a
price of $0.001 per warrant at any time that its common stock has traded at
$2.00 for 30 consecutive days, with volume of not less than 5,000 shares per
day.
(3) Granted to Mr. Page for his service as an investor relations
consultant. The warrants are exercisable for a period of two years,
commencing August 3, 2000. The first 250,000 warrants are exercisable at a
price of $1.00 per share; the next 250,000 warrants are exercisable at $1.50
per share; and the two remaining 250,000 share tranches are exercisable for
$2.00 per share and $2.50 per share, respectively. The warrants may be
exercised in lots of 25,000 or more.
(4) Granted to Basic Investors for its service as a business consultant
from December 8, 2000, until February 1, 2001. The warrants are exercisable
for a period of three years, commencing December 8, 2000, at a price of $2.00
per share and may be called if Miller Petroleum's common stock trades at 150%
of the exercise price for five consecutive days.
(5) Granted as bonuses to: Mr. LaRue, the Secretary/Treasurer and a
director; Ms Cotton, an employee; and Mr. Bible, a Vice President. Each of
these warrants is exercisable at a price of $1.00 per share. Mr. LaRue's and
Ms. Cotton's warrants expire on December 15,2003, and Mr. Bible's warrants
expire January 9, 2004. During the third year of the warrants, Miller
Petroleum may call them at a price of $0.001 per warrant at any time that its
common stock has traded at $2.00 for 30 consecutive days, with volume of not
less than 5,000 shares per day.
We issued all of these securities to persons who were either
"accredited investors," or "sophisticated investors" who, by reason of
relationship to us, education, business acumen, experience or other factors,
were fully capable of evaluating the risks and merits of an investment in our
company; and each had prior access to all material information about us. We
believe that the offer and sale of these securities was exempt from the
registration requirements of the Securities Act of 1933, pursuant to Sections
4(2) and 4(6) thereof, and Regulation D of the Securities Exchange Act of 1934
and from various similar state exemptions.
Options.
---------
Herman Gettelfinger 100,000 01/29/97 (1)
Roy Greenwood 50,000 01/29/97 (1)
Lawrence LaRue 100,000 01/29/97 (1)
Ronnie Lewis 40,000 01/29/97 (1)
Deloy Miller 100,000 01/29/97 (1)
Teresa Cotton 20,000 01/29/97 (1)
Herbert J. White 100,000 01/29/97 (1)
Gary Bible 40,000 09/15/97 (2)
Lawrence LaRue 20,177 07/30/97 (3)
Melvin Myers 2,000 02/06/98 (4)
Steve Letner 2,000 02/06/98 (4)
Steve Burchfield 4,000 02/06/98 (4)
M.E. Ratliff 150,000 04/10/01 (5)
(1) These options were granted pursuant to an Incentive Stock Option Plan
for employees and directors with an effective date of January 29, 1997. These
options are exercisable at a price of $0.575 per share, and expire on January
29, 2002.
(2) These options were granted to Dr. Gary G. Bible pursuant to an
Employee Stock Option dated September 15, 1997. These options are exercisable
at a price of $1.75 per share, and expire on September 15, 2005.
(3) These options were granted to Lawrence L. LaRue pursuant to an
Employee Stock Option dated July 30, 1997. These options are exercisable at a
price of $1.50 per share, and expire on July 30, 2005.
(4) These options were granted to three employees pursuant to an Employee
Stock Option dated February 6, 1998. These options are exercisable at a price
of $1.00 per share, and expire on February 6, 2006.
(5) These options were granted to Mr. Ratliff as partial consideration
for a loan guarantee dated April 10, 2000. These options are exercisable at a
price of $1.00 per share, and expire on August 15, 2001.
Item 6. Management's Discussion and Analysis or Plan of Operation.
-------------------------------------------------------------------
Miller Petroleum has more than 40,000 acres held by production in
Tennessee. This acreage is made up primarily of development drilling
locations. It produces both gas and oil, mainly from the Mississippian age Big
Lime Formation. The existing properties contain a minimum three-year
inventory of conventional drilling locations. The company is also actively
pursuing the acquisition of additional high potential acreage in eastern
Tennessee. A recent "high volume" (Tennessee Mining, Inc. #22B, drilled in
August of 2000, has produced 8,039 barrels of oil through June 30, 2001)
development oil well drilled on one of these properties showed that the oil
reservoir has not yet been pressure depleted. The company plans to drill an
additional four to five oil wells on this lease, as well as begin the
exploitation of its gas cap. Miller Petroleum is also in the process of
leasing an additional 4,700-acre block of property that directly offsets this
oil field. All 45,000 Tennessee acres are presently being evaluated for their
CBM potential. A well drilled in June of 2001 by the company encountered 13
coal seams below 750 feet depth on a 5,000-acre lease that the company has
recently acquired. These coal seams reach a maximum thickness of six feet and
are presently being evaluated for their CBM potential. In addition, this well
has made a conventional Big Lime gas discovery, and a second location of the
lease has already been staked. The company has drilled two CBM test wells on
another 8,000-acre block of company leases, which are strategically located
near an existing pipeline. The second well has found an apparent commercial,
conventional natural gas discovery. Three locations have been staked
offsetting this well, and Miller Petroleum plans to begin a
development-drilling program that will be able to quickly market the produced
gas.
Miller Petroleum's exploration effort is being concentrated in the
East Tennessee portion of the Eastern Overthrust Belt. Knox Dolomite wells in
this field have reserves in excess of two Bcf gas per well. Swan Creek Field
is already producing substantial amounts of oil from two separate shallower
reservoirs.
Miller Petroleum has obtained a 20-well farmout from Tengasco,
Inc. in the Swan Creek Field area. On this farmout and a Swan Creek lease,
Miller has drilled four successful Knox Dolomite wells in Swan Creek Field
proper, and development drilling is continuing. A fifth Knox well drilled by
Miller has resulted in a new field discovery on a separate structure from Swan
Creek. The Company is presently staking a second Knox test on this feature
that will be located higher on structure. This well will also continue the
evaluation of the Trenton oil discovery found on this structure.
The Dewey Sutton #1 was the first well that established oil
production for Miller Petroleum on the Swan Creek farmout. This well was
drilled in August of 2000 and is presently producing 12 BOPD. The initial
offset to this well has been successfully stimulated and is currently awaiting
production facilities. Four of the five Knox wells that the company has
drilled in Swan Creek have encountered oil shows in the shallower Trenton and
Stones River Formations indicating an oil field that extends over this
structure, and Miller Petroleum plans to continue the development of its
share of these reserves.
At this time Miller Petroleum management has identified 12
additional structures similar to Swan Creek Field in the Tennessee portion of
the Eastern Overthrust Belt. The company is presently acquiring leases over
two of these structures. Miller plans to test these structures as
aggressively as possible while continuing to identify additional targets in
the Eastern Overthrust Belt.
Results of Operations
---------------------
Miller Petroleum increased its proved reserves from 294,188 barrels
of oil and 8,197,450 Mcf of gas at the end of the fiscal year ended April 30,
2000, to 379,337 barrels of oil and 11,765,303 Mcf gas at the end of fiscal
2001. This is an increase of 29% in oil and 44% in gas. We were able to
increase the proved reserves while selling all of our oil and gas properties
in Kentucky.
During fiscal 2001, future cash flows discounted 10% after income
taxes from proved reserves increased from $7,176,895 to $28,493,674. This is
an increase of approximately 337%.
Our oil and gas revenue was $628,344 for fiscal 2001, down from
$863,422 for fiscal 2000. Although oil and gas prices increased in fiscal
2001, we were not able to make up for lost production due to the sale of our
oil and gas properties in Kentucky.
During fiscal 2001, service and drilling revenue was $2,274,364, up
from $431,980 for fiscal 2000. These revenues stemmed from dramatic increases
in service and drilling activity in fiscal 2001. Increased oil and gas prices
caused the higher service and drilling activity.
Retail sales increased from $44,497 in fiscal 2000, to $91,848 in
fiscal 2001. The principal reason for the increase was increased activity in
oil and gas.
During fiscal 2001, other revenue was $160,274, down from $573,244
in fiscal 2000. During fiscal 2000, Miller Petroleum sold most of its excess
operating equipment. In fiscal 2000, we also sold the Kentucky oil and gas
properties and $36,370 in excess operating equipment.
Gross revenue for fiscal 2001 was $3,154,830, up from $1,913,143 for
fiscal 2000, due to the reasons stated above.
Cost of sales increased from $785,553 in fiscal 2000 to $1,107,662
for fiscal 2001. A major increase in our drilling activity caused this
increase.
Selling, general and administrative expenses were $570,006, up from
$384,653 in fiscal 2000. These increases were also due to the increase in
drilling activity.
Salaries and wages increased to $661,861 from $399,165 for fiscal
2000. This increase was brought about by the increase in drilling activity.
Depreciation, depletion and amortization decreased to $327,182 from
$479,472 for fiscal 2000. The decrease was due to the sale of our Kentucky
oil and gas properties.
Income from operations for fiscal 2001 was $488,119, up from a loss
of $135,700 in fiscal 2000.
Interest expense decreased from $354,039 in fiscal 2000 to $235,900
in fiscal 2001. The primary reason for the decrease was the payoff of our loan
from Bank One.
Net income was $254,402, up from a net loss of $483,295 in fiscal
2000. The direct reason for the increase was increased service and drilling
revenue and the indirect reason was the increase in crude oil and natural gas
prices.
During fiscal 2000, Miller Petroleum produced 226,372 million
British Thermal Units of natural gas, with an average price of $2.39 per
million BTU's. Production declined to 71,201 million BTU's in fiscal 2001,
but the average price per million BTU's was $3.79. The production decline in
fiscal 2001 was due the sale of our oil and gas properties in Kentucky. The
following tables reflect our production figures for the fiscal years ended
April 30, 1999, 2000 and 2001:
AVERAGE NET AVERAGE
FISCAL YEAR NETMBTU/GAS SALES PRICE BARRELS/OIL PRICE OIL
----------- ----------- ----------- ----------- ----------
1999 247,740 $1.92/MMBTU 8,647 $10.62
2000 226,372 $2.39/MMBTU 9,203 $20.27
2001 71,201 $3.79/MMBTU 12,342 $25.96
Average production cost for 1999 and 2000 was $4.75, decreasing to $4.60
per barrel of oil in 2001. The average production cost for 1999 and 2000 was
$0.60 per MCF of gas. This figure increased to $0.65 per MCF in 2001.
1999 2000 2001
---- ---- ----
Net Productive Wells 30.25 29.66 34.10
Developed Acreage 1,456 1,476 1,876
Undeveloped Acreage 78,900 82,600 44,124
Net Productive Exploratory Wells 0 0.8125 0
Net Dry Exploratory Wells 0 0.5 0.4375
Net Productive developmental Wells 1.7 0.5 4.435
Net Dry Developmental Wells 0.82 0 0
During fiscal 2001, we drilled 12 wells, with net productive
development wells of 4.435 wells and net dry exploratory wells of 0.4375. Nine
of the wells were in the Swan Creek Field area; one oil well was on our
Koppers South tract; and two wells were on the Elk Valley Iron and Coal lease.
Liquidity.
----------
During the fiscal years ended April 30, 2000, and 2001, our
principal sources of liquidity were revenue from the production of oil and gas
and the sale of approximately 50% of the working interests in the wells we
drill. We have benefitted from the recent increases in natural gas prices.
Private placements of our common stock have been our principal external
sources of liquidity.
We also borrow funds to finance equipment purchases. On September
7, 2001, which is subsequent to the period covered by this Report, we executed
two promissory notes, each for $250,000. The notes are in favor of Sherri Ann
Parker Lee and William Parker Lee, respectively. The notes are due August 31,
2003, and bear interest at the rate of 10% during the first year and 7% during
the second year. Each note is payable quarterly in arrears, beginning
November 31, 2001. Any amounts not paid when due will bear interest after
maturity at the lesser of 20% per annum or the maximum rate allowable under
applicable law. The notes are secured by five gas wells in the Swan Creek
field.
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.
Cash and cash equivalents at April 30, 2001, increased by $184,994
from April 30, 2000, due primarily to the sale of 1,146,600 shares of common
stock, increases in the price for crude oil and natural gas and the increase
in our drilling activity.
We believe that our current cash flow will be sufficient to support
our cash requirements of about $2,500,000 for development and production over
the next 12 months.
Item 7. Financial Statements.
------------------------------
MILLER PETROLEUM, INC.
CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2001 and 2000
CONTENTS
Report of Independent Certified Public Accountants F-2
Consolidated Balance Sheet F-3
Consolidated Statements of Operations F-5
Consolidated Statements of Stockholders' Equity F-6
Consolidated Statements of Cash Flows F-8
Notes to the Consolidated Financial Statements F-10-22
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Miller Petroleum, Inc.
Huntsville, Tennessee
We have audited the accompanying consolidated balance sheets of Miller
Petroleum, Inc. and subsidiaries as of April 30, 2001 and 2000 the
related consolidated statements of operations, stockholders' equity, and cash
flows for the years then ended. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall consolidated financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Miller
Petroleum, Inc. and subsidiaries as of April 30, 2001 and 2000, and the
results of their operations and their cash flows for the years then
ended. In conformity with generally accepted accounting principles.
Charles M. Stivers
Certified Public Accountant
Manchester, Kentucky
July 16, 2001
MILLER PETROLEUM, INC.
Consolidated Balance Sheet
ASSETS
April 30 April 30
2001 2000
CURRENT ASSETS
Cash $ 224,550 $ 39,556
Accounts receivable 1,143,300 781,311
Inventory (Note 1) 439,113 484,549
Prepaid expenses 74,011 27,988
Total Current Assets 1,880,974 1,333,404
FIXED ASSETS (Note 1)
Machinery and equipment 1,249,511 1,343,962
Vehicles 438,851 326,916
Buildings 313,335 313,335
Office equipment 87,172 76,270
Less:
accumulated depreciation (881,690) (833,519)
Total Fixed Assets 1,207,179 1,226,964
OIL AND GAS PROPERTIES
(Notes 2 and 8) 1,050,687 2,311,825
(On the basis of successful
effort's accounting)
PIPELINE FACILITIES (Note 2) 336,635 411,906
OTHER ASSETS
Land 511,500 511,500
Investments 500 500
Organization Costs 119 178
Total Other Assets 512,119 512,178
TOTAL ASSETS $ 4,987,594 $ 5,796,277
The accompanying notes are an integral part of these consolidated
financial statements.
MILLER PETROLEUM, INC.
Consolidated Balance Sheet
LIABILITIES AND STOCKHOLDERS' EQUITY
April 30 April 30
2001 2000
CURRENT LIABILITIES
Accounts payable - trade $ 134,275 $ 402,330
Accrued expenses 91,910 50,795
Notes payable -
current portion (Note 4) 577,270 2,636,835
Total Current Liabilities 803,455 3,089,960
LONG-TERM LIABILITIES
Notes payable -
related (Notes 4 and 5) 89,968 35,633
Notes payable (Note 4) 1,207,530 1,142,898
Total Long-Term Liabilities 1,297,498 1,178,531
Total Liabilities 2,100,953 4,268,491
STOCKHOLDER'S EQUITY
Common Stock: 500,000,000
shares authorized at
$0.0001 par value,
8,218,656 and 7,100,691
shares issued and outstanding 822 711
Additional paid-in capital 3,566,480 2,462,138
Retained earnings (680,661) (935,063)
Total Stockholder's Equity 2,886,641 1,527,786
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $ 4,987,594 $ 5,796,277
The accompanying notes are an integral part of these consolidated
financial statements.
MILLER PETROLEUM, INC.
Consolidated Statements of Operations
For the Years Ended
April 30,
2001 2000
REVENUES
Oil and gas revenue $ 628,344 $ 863,422
Service and
drilling revenue 2,274,364 431,980
Retail sales 91,848 44,497
Other revenue 160,274 573,244
Total Revenue 3,154,830 1,913,143
COSTS AND EXPENSES
Cost of oil and gas sales 1,107,662 785,553
Selling, general
and administrative 570,006 384,653
Salaries and wages 661,861 399,165
Depreciation, depletion
and amortization 327,182 479,472
Total Costs and Expenses 2,666,711 2,048,843
INCOME (LOSS)
FROM OPERATIONS 488,119 (135,700)
OTHER INCOME (EXPENSE)
Interest income 2,183 6,444
Interest expense (235,900) (354,039)
Total Other Income
(Expense) (233,717) (347,595)
INCOME TAXES (Note 1) - -
NET INCOME (Loss) $ 254,402 $ (483,295)
NET INCOME (Loss) PER
SHARE $ 0.03 $ (0.06)
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 7,566,248 7,012,110
The accompanying notes are an integral part of these consolidated
financial statements.
MILLER PETROLEUM, INC.
Consolidated Statements of Stockholders' Equity
Additional
Common Shares Paid-in
Shares Amount Capital
Balance,
April 30, 1999 6,921,556 $ 692 $ 2,271,157
Common stock
issued for cash
at $1.00 per share 185,000 19 184,981
Common stock
issued for cash
at $1.59 per share 3,135 - 5,000
Common stock
issued for cash
at $1.00 per share 1,000 - 1,000
Net loss for
the year ended
April 30, 2000 - - -
Balance,
April 30, 2000 7,110,691 $ 711 $ 2,462,138
MILLER PETROLEUM, INC.
Consolidated Statements of Stockholders' Equity
(Continued)
Note
Receivable
Retained From
Earnings Stockholder Total
Balance,
April 30, 1999 $(451,768) - $ 1,820,081
Common Stock
issued for cash
at $1.0 per share - - 185,000
Common stock
issued for cash
at $1.59 per share - - 5,000
Common stock
issued for cash
at $1.00 per share - - 1,000
Net loss for
the year ended
April 30, 2000 $ (483,295) - $ (483,295)
Balance,
April 30, 2000 $ (935,063) - $1,527,786
The accompanying notes are an integral part of these consolidated
financial statements.
MILLER PETROLEUM, INC.
Consolidated Statement of Stockholders' Equity
Additional
Common Shares Paid-in
Shares Amount Capital
Balance
April 30, 2000 7,110,691 $ 711 $ 2,462,138
Common stock
issued for cash at
at $1.00 per share 1,077,600 108 1,077,492
Common stock
issued for cash
at $.90 per share 50,000 5 44,995
Common stock
issued for services
at $1.00 per share 5,500 1 5,499
Common stock
issued for equipment
at $1.00 per share 23,000 2 22,998
Common stock
repurchased for
$2.00 per share (45,000) (5) (89,995)
Common stock
repurchased for
$1.60 per share (3,135) - (5,000)
Warrants (1,123,500)
issued for services 48,353
Net income for the
year ended
April 30, 2001 - - -
Balance,
April 30,2001 8,218,656 $ 822 $ 3,566,480
MILLER PETROLEUM, INC.
Consolidated Statement of Stockholder's Equity
(Continued)
Note
Receivable
Retained From
Earnings Stockholder Total
Balance,
April 30, 2000 $ (935,063) - $ 1,527,786
Common Stock
issued for cash at
$1.00 per share - - 1,077,600
Common stock
issued for cash at
$.90 per share - - 45,000
Common stock
issued for services
at $1.00 per share - - 5,500
Common stock
issued for equipment
at $1.00 per share - - 23,000
Common stock
repurchased for
$2.00 per share - - (90,000)
Common stock
repurchased for
$1.60 per share - - (5,000)
Warrants (1,123,500)
issued for services - - 48,353
Net income for the
year ended
April 30, 2001 254,402 - 254,402
Balance,
April 30, 2001 $ (680,661) $ - $ 2,886,641
The accompanying notes are an integral part of these consolidated
financial statements.
MILLER PETROLEUM, INC.
Consolidated Statements of Cash Flows
For the Years Ended
April 30,
2001 2000
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (Loss) $ 254,402 $ (483,295)
Adjustments to Reconcile
Net Income to Net Cash
Provided (Used) by
Operating Activities:
Depreciation, depletion
and amortization 327,182 479,472
Allowance for bad debt 0 20,533
Common stock and warrants
Issued for services 53,853 1,000
Gain on sale of
Equipment and Oil
and Gas Property (123,904) 0
Changes in Operating Assets
and Liabilities:
Decrease (increase)
in accounts receivable (361,989) (484,441)
Decrease (increase) in inventory 45,436 (11,963)
Decrease (increase) in
organization costs 59 0
Decrease (increase) in
Prepaid expenses (46,023) 0
Increase (decrease) in
accounts payable (268,055) 67,123
Increase (decrease) in
accrued expenses 41,115 2,755
Net Cash Provided (Used)
by Operating Activities (77,924) (408,816)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Equipment (230,137) (11,013)
Sale of oil and gas properties 1,874,423 0
Purchase of oil and gas properties (595,351) (47,792)
Sale of Equipment 103,982 224,076
Purchase of pipeline 0 (2,239)
Net Cash Provided (Used)
by Investing Activities 1,152,917 163,032
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on Notes Payables (2,110,665) (384,812)
Sale of common stock 1,151,100 190,000
Repurchase of common stock (95,000) 0
Proceeds from borrowings 164,566 417,714
Net Cash Provided (Used) by
Financing Activities $ (889,999) $ 222,902
The accompanying notes are an integral part of these consolidated
financial statements
MILLER PETROLEUM, INC.
Consolidated Statements of Cash Flows
For the Years Ended
April 30,
2001 2000
NET INCREASE (DECREASE) IN CASH $ 184,994 $ (22,882)
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 39,556 62,438
CASH AND CASH EQUIVALENTS,
END OF YEAR $ 224,550 $ 39,556
CASH PAID FOR:
Interest $ (235,900) $(354,039)
Income Taxes $ - $ -
NON-CASH FINANCING ACTIVITIES:
Common stock issued for services $ 5,500 $ 1,000
The accompanying notes are an integral part of these consolidated
financial statements.
MILLER PETROLEUM, INC.
Notes to the Consolidated Financial Statements
April 30, 2001 and 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Organization
The financial statements presented are those of Miller Petroleum, Inc.
(formerly Triple Chip Systems, Inc.) (the Company). The Company was
incorporated in the State of Delaware on November 12, 1985 for the
purpose of searching out a business acquisition. On January 10, 1997, Triple
Chip Systems, Inc. changed its name to Miller Petroleum, Inc. in conjunction
with the merger with Miller Petroleum, Inc. The Company is no longer
considered a development stage company as defined by SFAS No. 7.
The Subsidiaries
----------------
Miller Petroleum, Inc. (pre-merger) (Miller) was incorporated under the
laws of the State of Tennessee on January 24, 1978, for the purpose of
acquiring gas and oil contracts.
Miller Services, Inc. (Services) was incorporated under the laws of the
State of Tennessee on October 16, 1987, for the purpose of drilling and
servicing oil and gas wells.
Energy Cell, Inc. (Cell) was incorporated under the laws of the State of
Tennessee on October 20, 1987, for the purpose of searching out and
acquiring or participating in a business or business opportunity.
On May 1, 1996, Services and Cell were merged into Miller in a business
combination accounted for as a pooling of interests.
On January 10, 1997, Triple Chip Systems, Inc. and Miller Petroleum
completed an Agreement and Plan of Reorganization whereby the Company issued
5,582,535 shares of its common stock in exchange for all of the outstanding
common stock of Miller.
Immediately prior to the Agreement and Plan of Reorganization, the
Company had 167,465 shares of common stock issued and outstanding.
The acquisition was accounted for as a recapitalization of Miller
because the shareholders of Miller controlled the Company after the
acquisition. Therefore, Miller is treated as the acquiring entity. There was
no adjustments to the carrying value of the assets or liabilities of Miller
in the exchange. The Company is the acquiring entity for legal purposes
and Miller is the surviving entity for accounting purposes. On May 6, 1996,
the shareholders of the Company authorized a reverse stock split of 1 for
200. All references to shares of common stock have been retroactively
restated.
MILLER PETROLEUM, INC.
Notes to the Consolidated Financial Statements
April 30, 2001 and 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
b. Accounting Method
The Company's financial statements are prepared using the accrual method
of accounting. The successful efforts method of accounting is used for oil
and gas property acquisitions, exploration and production activities as
defined by the Securities and Exchange Commission, whereby all costs incurred
in connection with the properties, productive or nonproductive, are
capitalized. Capitalized costs related to proved properties and estimated
future costs to be incurred in the development of proved reserves are
amortized using the unit-of-production method. Capitalized costs are tested
whenever events or changes in circumstances indicate the carrying amount may
not be recoverable by comparison to the present value of future net revenues
from proved reserves. Any capitalized costs in excess of the present value of
future net revenues from proved reserves, adjusted for the cost of certain
unproved properties, are expensed in the year in which such an excess occurs.
The Company has elected an April 30 year end.
c. Impairment of Long-Lived Assets and Long-Lived Assets to be disposed
of.
Management believes that none of its long-lived assets are impaired, and
the accompanying financial statements reflect no charges or allowances for
impairment.
d. Income per Share of Common Stock
The income per share of common stock is based on the weighted average
number of shares issued and outstanding during the year.
e. Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
f. Principles of Consolidation
The consolidated financial statements include the accounts of the
Company, and its wholly-owned subsidiaries, Miller Petroleum, Inc., Miller
Services, Inc., Energy Cell, Inc., and MPC, Inc. All significant intercompany
transactions have been eliminated.
MILLER PETROLEUM, INC.
Notes to the Consolidated Financial Statements
April 30, 2001 and 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
g. Fixed Assets
Fixed assets are stated at cost. Depreciation and amortization are
computed using the straight-line method for financial reporting purposes and
accelerated methods for income tax purposes.
The estimated useful lives are as follows:
Lives
Class (Years)
- ---------------------------------------------------------------
Building 40
Machinery and equipment 5-10
Vehicles 5-7
Office equipment 5
Depreciation expense for the years ended April 30, 2001 and 2000 was
$227,725 and $240,857 respectively.
h. Revenue Recognition
Revenues are recognized when the gas products are delivered to
customers. In the movement of natural gas, it is common for differences to
arise between volumes of gas contracted or nominated, and volume of gas
actually received or delivered.
These solutions are the result of certain attributes of the natural gas
commodity and the industry itself. Consequently, the credit given to
the Company by a pipeline for volumes received from producers may be
different than volumes actually delivered by a pipeline. When all
necessary information, such as the final pipeline statement for receipts and
deliveries are available, these differences are resolved by the Company.
The Company records imbalances based on amounts received and classifies
the imbalances as adjustments to the trade accounts receivable or trade
accounts payable, as appropriate.
MILLER PETROLEUM, INC.
Notes to the Consolidated Financial Statements
April 30, 2001 and 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
i. Inventory
Inventory consists of crude oil and used equipment. Used equipment is
purchased by the Company for resale. When used equipment purchases are
made by the Company the cost is applied only to the marketable portion of the
equipment. The inventory balance was $439,113 at April 30, 2001.
j. Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liability at the date of the financial
statements and the amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
k. Reclassification
Certain April 30, 2000 balances have been reclassified to conform with
the April 30, 2001 financial statement presentation.
l. New Accounting Pronouncements
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities" As amended by SFAS No. 137 and 138, is effective for all fiscal
years beginning after June 15, 2000. This statement requires recognition of
all derivative contracts as either assets or liabilities in the balance
sheet and the measurement of them at fair value. If certain conditions are
met, a derivative may be specifically designated as a hedge, the objective of
which is to match the timing of any gains or losses on the hedge with the
recognition of (i) the changes in the fair value of the hedged asset or
liability that are attributable to the hedged risk or (ii) the earnings
effect of the hedged forecasted transaction. For a derivative not designated
as a hedging forecasted transaction. For a derivative not designated as a
hedging instrument, the gain or loss is recognized in income in the period of
change. Historically, the Company has not entered into any material
derivative contracts either to hedge existing risks or for speculative
purposes.
In December 1999, the SEC issued Staff Accounting Bulletin ("SAB") No.
101 "Revenue Recognition in Financial Statements" which outlines the basic
criteria that must be met to recognize revenue and provides guidance for
presentation of revenue and for disclosure related to revenue
recognition policies in financial statements filed with the SEC. Adoption of
SAB No. 101 did not have a material impact on the Company's financial
position or its results or operations.
m. Major Customers
Miller Petroleum Inc. depends upon local purchasers of hydrocarbon in
the areas where their properties are located. They have three major
customers. The loss of one or more purchasers may substantially reduce
their sales and ability to operate profitably. These major customers are:
Citizens Gas Utility District
Citizens accounted for $345,252 of Miller's total revenue which is
10.9436% of Miller's total revenue. Citizens purchased most of Miller's gas
last year. This year, however, Miller's does not anticipate Citizens to
purchase the same amount as last year and expects Citizens to purchase a
lesser amount.
Tengasco, Inc.
Tengasco accounted for $589,182 of Miller's total revenue which was
18.6756% of Miller's total revenue. Additionally, Tengasco purchased a 50%
working interest in most of Miller's wells. Tengasco is anticipated to
account for a greater percentage of Miller's total revenues this year.
South Kentucky Purchasing Co.
South Kentucky accounted for $354,696 of Miller's total revenue which was
11.2430% of Miller's total revenue. South Kentucky purchases all of Miller's
crude oil.
MILLER PETROLEUM, INC.
Notes to the Consolidated Financial Statements
April 30, 2001 and 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
n. Income taxes
No provision for taxes has been made, due to current operating losses
carryforwards.
NOTE 2 - OIL AND GAS PROPERTIES - PIPELINE FACILITIES
The Company uses the successful efforts method of accounting for oil and
gas producing activities. Costs to acquire mineral interests in oil and gas
properties, to drill and equip exploratory wells that find proved
reserves, and to drill and equip development wells are capitalized. Costs to
drill exploratory wells that do not find proved reserves, geological and
geophysical costs, and costs carrying and retaining unproved properties
are expensed. The Company amortizes the oil and gas Properties using the
unit-of-production method. The Company capitalized $595,351 of oil and
gas properties for the year ended April 30, 2001 and recorded $99,457 and
$238,615 of amortization expense for the years ended April 30, 2001 and 2000,
respectively.
NOTE 3 - COMMON STOCK REPURCHASES
Common stock repurchases were made pursuant to an Agreement that the
Company would buy the shares back if the average market price for Miller
Petroleum, Inc.'s common shares did no average $2.00 or more for the month of
December, 1999. The average market price was less that $2.00 for the state
period.
MILLER PETROLEUM, INC.
Notes to the Consolidated Financial Statements
April 30, 2001 and 2000
NOTE 4 - LONG-TERM DEBT
The Company had the following debt obligations at April 30, 2001:
April 30,
2001
---------
Note payable to Home Federal Bank secured by
Equipment bearing interest at 9.75% due in
Monthly payments with final payment due
In August 2005. 49,033
Note payable to Individual unsecured at 7.00%
with payments due yearly with the principle due
May of 2002. 89,968
Note payable to First National Bank of Oneida
secured by equipment bearing interest at 9.00%
due on June 30, 2001. 222,567
Note payable to First National Bank of Oneida
secured by stock at 9.50% due on June 30, 2001. 225,000
Note payable to Individual bearing interest at
8.00% and requiring interest payments quarterly
with principle due in January 2006. 860,000
Note payable to Individual bearing interest at
8.00% with principle due in December 2005. 180,000
Note payable to Talisman Energy for repurchase
of stock with payments of $10,000 due monthly
with final payment due August 2001. 40,000
Balance Forward $ 1,666,568
MILLER PETROLEUM, INC.
Notes to the Consolidated Financial Statements
April 30, 2001 and 2000
NOTE 4 - LONG-TERM DEBT
The Company had the following debt obligations at April 30, 2001
(Continued):
April 30,
2001
---------
Balance Forward $ 1,666,568
Line of credit payable to First National Bank
of the Cumberlands secured by equipment and
inventory bearing interest at 10.50% due
on demand on October 10, 2002. 85,461
Note payable to Community Trust Bank secured
by real property bearing interest at 8.50%
requiring monthly principle and interest
payments of $1,389 due in April 2004. 122,739
Total notes payable 1,874,768
Less current maturities (577,270)
Notes payable - long-term $ 1,297,498
Maturities of long-term debt are as follows:
Year Ending April 30, Amount
- --------------------- --------
2001 $ 577,270
2002 125,492
2003 24,807
2004 24,807
2005 and thereafter 1,122,392
Total $ 1,874,768
MILLER PETROLEUM, INC.
Notes to the Consolidated Financial Statements
April 30, 2001 and 2000
NOTE 5 - RELATED PARTY TRANSACTIONS
The Company has a note payable to Sharon Miller (Deloy Miller's wife a
majority stockholder), for $89,968 at April 30, 2001. The note is
payable with principle payments of $89,968 due in May 2002.
The note is for the purchase of property located in Huntsville,
Tennessee and currently houses the principal executive offices, shop and
equipment yard. The appraisal of the property was $550,000. The company
paid $82,470 cash, assumed a $39,906 note payable with the First National Bank
of Oneida, and issued a note payable to Mrs. Miller for $377,624.
The Company issued a note receivable of $860,000 on March 16, 1998 at 8%
with a eight year term to Baxter Lee, III, of Knoxville, Tennessee.
This note receivable was issued to raise working capital.
NOTE 6 - WARRANTS
Miller Petroleum issued 953,400 warrants to Baxter Lee III. The
warrants were issued along with the note receivable dated March 16, 1998 and
can be exercised for $1.25 per share, and expire on December 12, 2004. The
number of shares that can be purchased is based on a provision in the Warrant
Agreement that allows him to purchase up to 10.53% of common stock outstanding
On August 10, 2000, Miller Petroleum issued 12,500 warrants to Raymond
R. Cohn, a stockholder. The warrants are exercisable for 12,500 shares of
common stock at $1.00, and expire on July 17, 2003.
The warrants are callable during the third year at a price of $0.001 per
warrant, traded at $2.00 for 30 consecutive days at no less than 5,000
shares per day.
On August 3, 2000 Miller Petroleum issued 1,000,000 warrants to Daniel
Page for services as a consultant. The warrants are exercisable for a period
of two years, commencing August 3, 2000. The first 250,000 warrants are
exercisable at a price of $1.00 per share; the next 250,000 warrants are
exercisable at $1.50 per share; and the two remaining 250,000 shares are
exercisable for $2.00 and $2.50 per share, respectively. These warrants were
issued for services valued at $43,750. They will be reflected on the
financial statements as an amortization expense over a two year period.
On December 8, 2000, Miller Petroleum issued 100,000 warrants to Basic
Investors, Inc. for services as a business consultant. The warrants are
exercisable for a period of three years, commencing December 8, 2000, at
a price of $2.00 per share and may be called if Miller Petroleum's common
stock trades at 150% of the exercisable price for five consecutive days. These
warrants were issued for services valued at $3,500. They will be reflected on
the financial statements an an amortization expense over a three year period.
On December 15, 2000, Miller Petroleum issued 12,500 and 5,000 warrants
to Lawrence L. Larue, CFO and Secretary/Treasurer and Teresa Cotton
employee respectively. These warrants are exercisable at a price of $1.00 per
share and expire on December 15, 2003. During the third year of the warrants
Miller Petroleum may call them at a price of $0.001 per warrant at any time
that its common stock has traded at $2.00 for 30 consecutive days. These
warrants were issued with a value of $788 and were shown as an expense on the
current year financial statements.
On January 9, 2001, Miller Petroleum issued 6,000 warrants to Gary Bible
a vice-president. These warrants are exercisable at $1.00 per share and
expire on January 9, 2004. These warrants were issued with a value of $315 and
were shown as an expense on the current year financial statements.
All warrants must be adjusted in the event of any forward or reverse
split of outstanding common stock. The warrants have no voting rights or
liquidation preferences, and unless exercised in accordance with the
particular warrant.
NOTE 7 - SIGNIFICANT EVENTS
The company entered into a Sale Agreement with Nami Resources Company,
LLC, a Kentucky limited liability company on August 31, 2000. The company
sold to Nami Resources their interests in certain oil and gas wells, leases
covering about 40,000 acres in Kentucky, inventory and related equipment
located in Kentucky. The sale closed on September 6, 2000. Nami Resources
Company, LLC. Paid the company $2,000,000 and assumed a production payment to
Cobat Oil and Gas, Inc. of $102,237 and received Miller Petroleum, Inc.
interest in certain oil and gas wells, oil and gas leases, inventory and
related equipment plus a production receivable form Southern Gas of $123,832.
The net sales price to the Company was $1,978,405.
NOTE 8 - S.F.A.S. 69 SUPPLEMENTAL DISCLOSURES (Unaudited)
(1) Capitalized Costs Relating to
Oil and Gas Producing Activities
April 30,
2001 2000
Proved oil and gas properties
and related lease equipment:
Developed $1,630,867 $2,988,426
Non-developed 31,053 31,053
1,661,920 3,019,479
Accumulated depreciation and depletion (611,233) (707,654)
Net Capitalized Costs $1,050,687 $2,311,825
MILLER PETROLEUM, INC.
Notes to the Consolidated Financial Statements
April 30, 2001 and 2000
(2) Costs Incurred in Oil
and Gas Property Acquisition,
Exploration, and Development
Activities
April 30,
2001 2000
------------
Acquisition of Properties Proved and Unproved $ 0 $ 0
Exploration Costs - -
Development Costs 595,351 47,792
Total $ 595,351 $ 47,792
Note 8 - S.F.A.S. 69 SUPPLEMENTAL DISCLOSURES (Unaudited)
(3) Results of Operations for
Producing Activities
April 30,
2001 2000
Production revenues $2,902,708 $1,295,402
Production costs 1,107,662 785,553
Depreciation and depletion 99,457 186,346
Results of operations for
producing activities
(excluding corporate overhead
and interest costs) $1,695,589 $ 323,503
MILLER PETROLEUM, INC.
Notes to the Consolidated Financial Statements
April 30, 2001 and 2000
(4) Reserve Quantity Information
The following table summarizes proved reserves as reported by Coburn Petroleum
Engineering:
Net Values Oil-Gas
Undiscounted Discounted
Future Future Net
Category Oil-Bbls Gas-Mcf Net Income Income @ 10%
-------- -------- ------- ---------- --------
Pvd. Devl. Prod. 71,334 231,372 $ 2,235,075 $ 1,493,786
Pvd. Devl. Shut In 108,197 6,800,451 $32,790,030 $20,166,544
Pvd. Undeveloped 199,806 4,733,480 $24,293,269 $15,535,547
------- --------- ----------- -----------
Total 379,337 11,765,303 $59,318,374 $37,195,877
The following schedule estimates of proved oil and natural gas reserves
attributable to the Company. Proved reserves are estimated quantities
of oil and natural gas which geological and engineering data demonstrate with
reasonable certainty to be recoverable in future years from known
reservoirs under existing economic and operating conditions. Proved -
developed reserves are those which are expected to be recovered through
existing wells with existing equipment and operating methods. Reserves are
stated in barrels of oil (Bbls) and thousands of cubic feet of natural gas
(Mcf). Geological and engineering estimates of proved oil and natural gas
reserves at one point in time are highly interpretive, inherently imprecise
and subject to ongoing revisions that may be substantial in amount. Although
every reasonable effort is made to ensure that the reserve estimates reported
represent the most accurate assessments possible, these estimates are by
their nature generally less precise that other estimates presented in
connection with financial statement disclosures.
NOTE 8 - S.F.A.S. SUPPLEMENTAL DISCLOSURES (Unaudited)
Oil (bbls) Gas (Mcf)
---------- ---------
Proved reserves
Balance, April 30, 1999 120,151 9,443,127
Discoveries and extensions 173,648 855,614
Revisions of previous estimates 10,839 (1,877,873)
Productions (10,450) (223,418)
Balance, April 30, 2000 294,188 8,197,450
Discoveries and extensions 52,100 773,000
Sales of previous reserves (69,760) (1,724,450)
Revisions of previous estimates 115,151 4,590,504
Production (12,342) (71,201)
Balance, April 30, 2001 379,337 11,765,303
Proved developed producing
reserves at April 30, 2001 71,334 231,372
Proved developed producing
reserves at April 30, 2000 120,540 2,034,416
MILLER PETROLEUM, INC.
Notes to the Consolidated Financial Statements
April 30, 2001 and 2000
NOTE 8 - S.F.A.S. 69 SUPPLEMENTAL DISCLOSURES (Unaudited)
The reserve and engineering reports performed for the Company by Coburn
Petroleum Engineering of Tulsa, Oklahoma, an independent engineering
consulting firm reported the discounted net present value of the reserves
which is future cash flows less future production costs, severance taxes, and
development costs discounted at 10% before federal income taxes. The term
Standardized Measure of Discounted Future Net Cash Flow is a measure of
discounted net present value of the reserves less federal income taxes.
The following schedule presents the standardized measure of estimated
discounted future net cash flows from the Company's proved developed
reserves for the years ended April 30, 2001 and 2000. Estimated future cash
flows were based on independent reserves evaluation from Coburn Petroleum
Engineering. Because the standardized measure of future net cash flows was
prepared using the prevailing economic conditions existing at April 30, 2001
and 2000, it should be emphasized that such conditions continually change.
Accordingly, such information should not serve as a basis in making any
judgement on the potential value of the Company's recoverable reserves or in
estimating future results to operations.
MILLER PETROLEUM, INC.
Notes to the Consolidated Financial Statements
April 30, 2001 and 2000
NOTE 8 - S.F.A.S. 69 SUPPLEMENTAL DISCLOSURES (Unaudited)
Standardized measures of discounted future net cash flows:
April 30,
2001 2000
Future cash flows $ 69,227,195 $ 26,552,579
Future production costs
and taxes (8,547,321) (2,992,328)
Future development costs (1,361,500) (890,000)
Future income tax expense (18,478,757) (2,587,009)
Future cash flows before
income taxes 40,839,617 20,083,242
Discount at 10% for timing
of cash flows (14,576,646) (12,906,347)
Discounted future net cash flows
from proved reserves $ 26,262,971 $ 7,176,895
Of the Company's total proved reserves as of April 30, 2001 and 2000,
approximately 48% and 26%, respectively, were classified as proved developed
producing, 11% and 1%, respectively, were classified as proved developed
non-producing and 41% and 73%, respectively, were classified as proved
undeveloped. All of the Company's reserves are located in the
continental United States.
The following table sets forth the changes in the standardized measure
of discounted future net cash flows from proved reserves for April 30, 2001
and 2000.
April 30,
2001 2000
Balance, beginning of year $ 7,176,895 $ 4,100,452
Sales, Net of production costs
and taxes (6,240) (5,098)
Discoveries and extensions 1,820 2,340
Changes in prices and production
costs 42,157,947 8,391,758
Revisions of quantity estimates (3,496,730) (7,083,044)
Development costs incurred 595,351 47,792
Net changes in income taxes (17,461,269) (837,378)
Changes in future development
costs (471,500) 2,566,000
Changes in production rates
and other (2,600) (5,927)
Balances, end of year $28,493,674 $ 7,176,895
MILLER PETROLEUM, INC.
Notes to the Consolidated Financial Statements
April 30, 2001 and 2000
Estimated future net cash flows represent and estimate of future net
revenues from the production of proved reserves using current sales prices,
along with estimates of the operating costs, production taxes and future
development and abandonment costs (less salvage value) necessary to produce
such reserves. The average prices used at April 30, 2001 and 2000 were $24.00
and $21.75 per barrel of oil and $5.10 and $2.28 per mcf gas, respectively.
No deduction has been made for depreciation, depletion or any indirect costs
such as general corporate overhead or interest expense.
Operating costs and production taxes are estimated based on current
costs with respect to producing gas properties. Future development costs are
based on the best estimate of such costs assuming current economic and
operating conditions.
Income tax expense is computed based on applying the appropriate
statutory tax rate to the excess of future cash inflows less future production
and development costs over the current tax basis of the properties involved,
less applicable carry forwards, for both regular and alternative minimum tax.
The future net revenue information assumes no escalation of costs or
prices, except for gas sales made under terms of contracts which include fixed
and determinable escalation. Future costs and prices could significantly
vary from current amounts and, accordingly, revisions in the future could be
significant.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
---------------------
Charles M. Stivers, Certified Public Accountant, of Manchester,
Kentucky, was engaged on or about March 19, 1998, by the Board of
Directors of the Company to audit the financial statements of the Company. He
continues as the auditor for the Company and audited the financial statements
that accompany this Report.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.
Identification of Directors and Executive Officers
--------------------------------------------------
The following table sets forth the names of all current directors
and executive officers of the Company. These persons will serve until the
next annual meeting of stockholders (to be held at such time as the Board of
Directors shall determine) or until their successors are elected or appointed
and qualified, or their prior resignation or termination.
Date of Date of
Positions Election or Termination
Name Held Designation or Designation
Deloy Miller Director, 12/96 *
815 Southlake Drive President 12/99 *
Oneida, TN 37841 CEO 12/97 *
Lawrence L. LaRue Secretary/ 12/96 *
432 Brewstertown Road Treasurer 12/96 *
Sunbright, TN 37872 Director 4/97 *
CFO 4/01 *
Herbert J. White Director and 4/97 *
P.O. Box 1868 Vice President 4/97 *
Fairfield Glade, TN 38557
Herman Gettelfinger Director 4/97 *
641 Atlantic Ave.
Knoxville, TN 37917
John N. Bonar Vice President 11/97 09/00
50 Rivers Run Way
Oak Ridge, TN 37830
Gary G. Bible Vice President 9/97 *
232 West Seneca Circle
Oneida, TN 37841
Ernest F. Payne Vice President 5/01 *
446 Southlake Drive
Oneida, TN 37841
* These persons presently serve in the capacities indicated opposite
their respective names.
Term of Office
--------------
The term of office of the current directors shall continue until the
annual meeting of stockholders, which is to be held at such time as the Board
of Directors shall determine. The annual meeting of the Board of Directors
immediately follows the annual meeting of stockholders, at which officers for
the coming year are elected.
Business Experience
-------------------
Deloy Miller Mr. Miller is 54 years of age. Mr. Miller, Chairman
and CEO, is a seasoned gas and oil professional with more than 30 years of
experience in the drilling and production business in the Appalachian basin.
During his years as a drilling contractor, he acquired extensive geological
knowledge of Tennessee and Kentucky and received training in the reading of
well logs. A native Tennessean, Miller is credited with being the leader in
converting the Appalachian Basin from cable tool drilling to air drilling,
using the Ingersoll-Rand T3 Drillmaster rigs. The introduction of air
drilling sparked the 1969 drilling boom and Miller soon became a successful
drilling contractor in the southern Appalachian basin. He served two terms
as president of the Tennessee Oil & Gas Association and in 1978 the
organization named Miller the Tennessee Oil Man of the Year. He continues to
serve on the board of that organization. Mr. Miller was appointed by the
Governor of Tennessee to be the petroleum industry's representative on the
Tennessee Oil & Gas Board, the state agency that regulates gas and oil
operations in the state.
Lawrence L. LaRue. Mr. LaRue is 61 years of age. Mr. LaRue joined
the Miller organization in March of 1983 as an accountant. During his
18 years with the Company, he has acquired an extensive knowledge of all
aspects of oil and gas accounting and tax law. He was appointed
Secretary/Treasurer in 1985 and CFO in April of 2001. His duties include the
supervision of the office, all clerical functions, and the preparation of
corporate and partnership income tax returns. Mr. LaRue obtained his BS
Degree in Business Administration with honors from Tennessee Technological
University. As a Certified Public Accountant licensed to practice in the
State of Tennessee, his current civic duties include consultation to the
Morgan County, Tennessee E-911 Board.
Herbert J. White. Mr. White, age 75, is Development Engineer for
the company has 44 years of petroleum related experience. After earning his
BS degree from North Texas University, he became an engineer with Halliburton,
handling Louisiana Gulf Coast and offshore operations and serving in
Australia. In 1975 he joined Petroleum Development Corporation, a West
Virginia-based public company, supervising engineering and operations in
Southern Appalachian basin. He also has experience in Devonian Shale
production, enhanced recovery and coal degasification. Miller Petroleum and
its predecessor corporation have employed Mr. White as a Petroleum Engineer
since July of 1985. In April, 1997, he became a director and Vice President of
Development Engineering for Miller Petroleum.
Herman Gettelfinger. Mr. Gettelfinger, age 68, is member of our
Board of Directors, Herman Gettelfinger is a co-owner of Kelso Oil Company,
Knoxville Tennessee and has been the President of Kelso since 1960. Kelso is
one of eastern Tennessee's largest distributors of motor oils, fuels and
lubricants to the industrial and commercial market. Mr. Gettelfinger has been
active in the gas and oil drilling and exploration business for more than 35
years and has been associated with Miller Petroleum for more than 25 years.
Dr. Gary Bible was appointed Vice President of Geology on September
15, 1997. Dr. Bible is 51 years of age. Dr. Bible came from Alamco, where he
had served since May of 1991 as Manager of Geology and Senior Geologist. Dr.
Bible earned his BS Degree in Geology from Kent State University and his MSc.
and PhD. Degrees in Geology from Iowa State University. He is a proven
hydrocarbon finder who drilled his first successful wildcat as a Trainee
Geologist. Dr. Bible brings to the Company 20 years experience as a Petroleum
Geologist. In addition, Dr. Bible has spent more than 10 years in the
Appalachian Basin in the exploration and development of reserves in the Big
Lime, Devonian Shale and in deeper horizons. He is credited with managing a
drilling program at Alamco that kept its finding cost the lowest in the
nation.
Ernest F. Payne. Mr. Payne, age 54, was appointed Vice President of
Field Operations on May 21, 2001. Mr. Payne rejoined the Miller Team after
serving as Project Manager and Superintendent for Youngquist Brothers of Fort
Myers, Florida from early 1994 through May of 2001. Mr. Payne has 20 years
experience in oil and gas well design and stimulations as well as supervising
the operation of drilling and workover rigs. He earned a B.S. in engineering
at Tennessee Technological University. He originally joined Miller in the
early 70's and was the general manager for 17 years. He directed the
operation of 18 drilling and workover rigs. In the mid 1980's he formed his
own company and managed large drilling jobs in Florida and Puerto Rico until
joining Youngquist.
Committees
There are no established committees.
Family Relationships
There are no family relationships between any director or
executive officer of the Company or any person nominated to become such.
Involvement in Certain Legal Proceedings
----------------------------------------
Except as indicated below and to the knowledge of management, during
the past five years, no present or former director, person nominated to become
a director, executive officer, promoter or control person of the Company:
(1) Was a general partner or executive officer of any business
by or against which any bankruptcy petition was filed, whether at the time of
such filing or two years prior thereto;
(2) Was convicted in a criminal proceeding or named the subject
of a pending criminal proceeding (excluding traffic violations and other minor
offenses);
(3) Was the subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining him from or otherwise
limiting, the following activities:
(i) Acting as a futures commission merchant, introducing
broker, commodity trading advisor, commodity pool
operator, floor broker, leverage transaction merchant,
associated person of any of the foregoing, or as an
investment adviser, underwriter, broker or dealer in
securities, or as an affiliated person, director or
employee of any investment company, bank, savings and
loan association or insurance company, or engaging in
or continuing any conduct or practice in connection
with such activity;
(ii) Engaging in any type of business practice; or
(iii) Engaging in any activity in connection with the
purchase or sale of any security or commodity or in
connection with any violation of federal or state
securities laws or federal commodities laws;
(4) Was the subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any federal or state authority
barring, suspending or otherwise limiting for more than 60 days the right of
such person to engage in any activity described above under this Item, or to
be associated with persons engaged in any such activity;
(5) Was found by a court of competent jurisdiction in a civil
action or by the Securities and Exchange Commission to have violated any
federal or state securities law, and the judgment in such civil action or
finding by the Securities and Exchange Commission has not been subsequently
reversed, suspended, or vacated; or
(6) Was found by a court of competent jurisdiction in a civil
action or by the Commodity Futures Trading Commission to have violated any
federal commodities law, and the judgment in such civil action or finding by
the Commodity Futures Trading Commission has not been subsequently reversed,
suspended or vacated.
Compliance with Section 16(a) of the Exchange Act
-------------------------------------------------
The Company has no securities registered under Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"); it files
reports under Section 15(d) thereof. Accordingly, the Company's directors,
executive officers and 10% stockholders are not required to file statements of
beneficial ownership of securities under Section 16(a) of the Exchange Act.
Item 10. Executive Compensation.
Cash Compensation
-----------------
Deloy Miller is to be paid an annual salary of $120,000 as
compensation for service as CEO and Director of the Company.
Lawrence LaRue is to be paid an annual salary of $60,000 for his
service as Secretary/Treasurer and director of the Company.
Herbert J. White is to be paid an annual salary of $6,100 for his
services as Vice President and Director of the Company. Mr. White is
considered part-time and is paid $150 per day for his services.
Gary G. Bible is to be paid an annual salary of $78,100 for his
services as Vice President of Geology.
The following table sets forth the aggregate cash compensation
paid by the Company for services rendered during the periods indicated to its
directors and executive officers:
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Secur-
ities All
Name and Year Other Rest- Under- LTIP Other
Principal Ended Salary Bonus Annual rictedlying Pay- Comp-
Position April 30 ($) ($) Compen-Stock Optionsouts ensat'n
-----------------------------------------------------------------
Deloy Miller
President,
Director, 1999 122,307 0 0 100 0 0 0
CEO 2000 119,999 0 0 0 0 0 0
2001 120,499 0 0 200 0 0 0
Lawrence
LaRue CFO/ 1999 61,154 0 0 5,100 0 0 0
Secretary/ 2000 60,000 0 0 10,000 0 0 0
Treasurer, 2001 60,500 0 0 200 0 0 12,500 (*)
Director
Herbert J. 1999 9,700 0 0 100 0 0 0
White, VP, 2000 3,500 0 0 0 0 0 0
Director 2001 6,100 0 0 200 0 0 0
Herman 1999 0 0 500 0 0 0 0
Gettelfinger 2000 0 0 0 0 0 0 0
Director 2001 0 0 500 0 0 0 0
Gary G. 1999 72,366 0 0 100 0 0 0
Bible, VP 2000 71,000 0 0 0 0 0 0
2001 71,000 0 0 200 0 0 6,000 (*)
John Bonar 1999 73,894 0 0 100 0 0 0
VP 2000 72,500 0 0 0 0 0 0
2001 33,462 0 0 0 0 0 0
(*) Warrants were granted as a bonus.
Compensation of Directors
The Board of Directors has resolved to compensate the members of the
Board of Directors for attendance at meetings at the rate of $500 per day. We
do not reimburse our directors for travel expenses that they incur to attend
meetings. During the fiscal year ended April 30, 2000, we did not have any
formal meetings of our Board of Directors. We obtained written consents of
the Board of Directors for all matters requiring Board action. During the
fiscal year ended April 30, 2001, we held only one formal Board meeting, on
April 25, 2001.
Herbert J. White, our Vice President of Development Engineering, is
paid by the day for his engineering services. During the fiscal year ended
April 30, 2000, we paid Mr. White $100 per day, plus expenses. His total fees
during that period were $3,500. In September, 2000, we increased Mr. White's
daily compensation to $150 per day worked. During the fiscal year ended April
30, 2001, Mr. White's total fees were $6,100.
Employment Contracts
There are presently no employment contracts relating to any member
of management; however, depending upon the Company's operations and
requirements, the Company may offer long term contracts to directors,
executive officers or key employees in the future.
Termination of Employment and Change of Control Arrangement
John Bonar was terminated in September of 2000.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
------------------------------------------------------------------------
Security Ownership of Certain Beneficial Owners
-----------------------------------------------
The following tables set forth the share holdings of the Company's
directors and executive officers and those persons who own more than 5% of the
Company's common stock as of the date hereof, with these computations being
based upon 8,328,656 shares of common stock being outstanding.
Directors and Executive Officers
Number of Shares Percent
Name and Address(1) Title Beneficially Owned of Class
Deloy Miller Director, 4,419,343 (1) 53%
815 South Lake Drive and CEO
Oneida, TN 37841
Lawrence L. LaRue CFO, Secretary/ 98,677 (2) 1%
432 Brewstertown Road Treasurer
Sunbright, TN 37872 Director
Herbert J. White Vice President/Director 300 (3) -0-
P.O. Box 1868
Fairfield Glade, TN
38557
Herman Gettelfinger Director 236,901 (4) 3%
641 Atlantic Ave.
Knoxville, TN 37917
Gary Bible Vice President 6,516 (5) -0-
323 Seneca Circle
Oneida, TN 37841
All executive officers and directors
as a group 4,761,737 57%
(1) Does not include options for 100,000 shares.
(2) Does not include options for 120,177 shares and warrants for 12,500
shares.
(3) Does not include options for 100,000 shares.
(4) Does not include options for 100,000 shares.
(5) Does not include options for 40,000 shares and warrants for 6,000 shares.
Each of these persons presently serves in the capacities indicated.
Five Percent Stockholders
Number of Shares Percent
Name and Address Title Beneficially Owned of Class
Deloy Miller Director 4,419,343 (1) 53%
815 South Lake Drive and CEO
Oneida, TN 37841
Daniel Page 484,900 (2) 5.82%
P.O. Box 689
Crossville, TN 38557
(1) Does not include options for 100,000 shares.
(2) Does not include warrants for 1,000,000 shares.
Changes in Control
------------------
Except as indicated below, to the knowledge of the Company's
management, there are no present arrangements or pledges of the Company's
securities which may result in a change in control of the Company. See the
foregoing tables regarding "Directors and Executive Officers" and "Five
Percent Stockholders."
Item 12. Certain Relationships and Related Transactions.
--------------------------------------------------------
Transactions with Management and Others
---------------------------------------
The Company has a note payable to Sharon Miller (Deloy Miller's wife
a majority stockholder), for $89,968 at April 30, 2001. The note is payable
with principle payments of $89,968 due in May 2002.
The note is for the purchase of property located in Huntsville,
Tennessee and currently houses the principal executive offices, shop and
equipment yard. The appraisal of the property was $550,000. The company paid
$82,470 cash, assumed a $39,906 note payable with the First National Bank of
Oneida, and issued a note payable to Mrs. Miller for $377,624.
The Company issued a note receivable of $860,000 on March 16, 1998
at 8% with a eight year term to Baxter Lee, III, of Knoxville, Tennessee.
This note receivable was issued to raise working capital.
Certain Business Relationships
------------------------------
Other than the transactions disclosed in the previous section, there
have been no material transactions, series of similar transactions or
currently proposed transactions, to which the Company or any of its
subsidiaries was or is to be a party, in which the amount involved exceeds
$60,000 and in which any director or executive officer or any security holder
who is known to the Company to own of record or beneficially more than 5% of
the Company's common stock, or any member of the immediate family of any of
the foregoing persons, had a material interest.
Indebtedness of Management
--------------------------
Other than the transactions disclosed in the previous section, there
have been no material transactions, series of similar transactions or
currently proposed transactions, to which the Company or any of its
subsidiaries was or is to be a party, in which the amount involved exceeds
$60,000 and in which any director or executive officer or any security holder
who is known to the Company to own of record or beneficially more than 5%of
the Company's common stock, or any member of the immediate family of any of
the foregoing persons, had a material interest.
Parents of the Issuer
---------------------
Except to the extent that Deloy Miller may be deemed to be a
parent of the Company by virtue of his ownership of a majority of its issued
and outstanding shares, the Company has no parents.
Transactions with Promoters
---------------------------
Other than the Note, there have been no material transactions,
series of similar transactions, currently proposed transactions, or series of
similar transactions, to which the Company or any of its subsidiaries was or
is to be a party, in which the amount involved exceeds $60,000 and in which
any promoter or founder or any member of the immediate family of any of the
foregoing persons, had a material interest.
Item 13. Exhibits and Reports on Form 8-K.
Reports on Form 8-K*
-------------------
Current Report on Form 8-K, filed February 24, 1997
Current Report on Form 8-K-A1, filed March 19, 1998
*These documents and related exhibits have previously been filed with the
Securities and Exchange Commission and are incorporated herein by this
reference.
Exhibit
Exhibits* Number
-------- -------
(i)
Subsidiaries of the Company **
Financial Data Schedule **
Koppers Lease Schedule **
Delta Leases Schedule **
(ii) Where Incorporated
In This Report
------------------
None.
*A summary of any Exhibit is modified in its entirety by reference to the
actual Exhibit.
**These documents and related exhibits have previously been filed with the
Securities and Exchange Commission and are incorporated herein by this
reference.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
MILLER PETROLEUM, INC.
Date: 11/21/2001 By /s/ Deloy Miller
---------------- ---------------------------
Deloy Miller, CEO and
Director
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Report has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated:
MILLER PETROLEUM, INC.
Date: 11/21/2001 By /s/ Deloy Miller
---------------- ---------------------------
Deloy Miller, CEO and
Director
Date: 11/21/2001 By /s/ Lawrence LaRue
---------------- ---------------------------
Lawrence LaRue, CFO, Secretary/
Treasurer and Director
Date: 11/21/2001 By /s/ Herman Gettelfinger
---------------- ---------------------------
Herman Gettelfinger, Director