UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D. C. 20549
FORM
10-QSB
x
QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT
OF
1934
For
the
quarterly period ended January 31, 2008
o
TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT
OF
1934
For
the
transition period from _______________ to ___________________
Commission
File No. 33-2249-FW
MILLER
PETROLEUM, INC.
(Exact
name of small business issuer as specified in its Charter)
TENNESSEE
|
|
62-1028629
|
(State
or Other Jurisdiction of
|
|
(I.R.S.
Employer I.D. No.)
|
incorporation
or organization)
|
|
|
3651
Baker Highway
Huntsville,
Tennessee 37756
_________________________________
(Address
of principal executive offices)
(423)
663-9457
Issuer's
telephone number
N/A
____________________________________________________________
(Former
name, former address and former fiscal year if changed from last
report.)
Check
whether the issuer: (1) has 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. YES x NO o
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act) YES o NO x
As
of
January 31, 2008, the Registrant had a total of 14,466,856 shares of Common
Stock, $.0001 par value, outstanding.
Transitional
Small Business Disclosure Format (check one): YES o NO x
Miller
Petroleum, Inc.
Form
10-QSB
For
the Quarter Ended January 31, 2008
Table
of Contents
PART
1-FINANCIAL INFORMATION
|
|
|
|
|
|
|
Item
1. Condensed
Consolidated Financial Statements
|
|
|
|
|
|
|
Condensed
Consolidated Balance Sheets as of January 31, 2008 (Unaudited)
and April
30, 2007
|
|
3-4
|
|
|
|
|
Condensed
Consolidated Statements of Operations for the Three Months Ended
January
31, 2008 and 2007 (Unaudited) and the Nine Months Ended January
31, 2008
and 2007 (Unaudited)
|
|
5
|
|
|
|
|
Condensed
Consolidated Statement of Stockholders’ Deficit for the Nine Months Ended
January 31, 2008 (Unaudited)
|
|
6
|
|
|
|
|
Condensed
Consolidated Statements of Cash Flows for the Nine Months Ended
January
31, 2008 and 2007 (Unaudited)
|
|
7
|
|
|
|
|
Notes
to Condensed Consolidated Financial Statements (Unaudited)
|
|
8
|
|
|
|
|
Item
2. Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
|
13
|
|
|
|
|
Item
3. Controls
and Procedures
|
|
17
|
|
|
|
|
PART
II - OTHER INFORMATION
|
|
|
|
|
|
|
Item
1. Legal
Proceedings
|
|
17
|
|
|
|
|
SIGNATURES
|
|
|
18
|
MILLER
PETROLEUM, INC.
Consolidated
Balance Sheets
|
|
January
31
|
|
April
30
|
|
|
|
2008
|
|
2007
|
|
|
|
Unaudited
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
13,980
|
|
$
|
|
|
Accounts
receivable
|
|
|
92,289
|
|
|
67,276
|
|
Accounts
receivable - related parties
|
|
|
194,976
|
|
|
180,699
|
|
Note
receivable
|
|
|
7,900
|
|
|
7,900
|
|
Inventory
|
|
|
190,142
|
|
|
114,691
|
|
Total
Current Assets
|
|
|
499,287
|
|
|
370,566
|
|
|
|
|
|
|
|
|
|
FIXED
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Machinery
and equipment
|
|
|
843,736
|
|
|
912,592
|
|
Vehicles
|
|
|
287,995
|
|
|
344,427
|
|
Buildings
|
|
|
315,835
|
|
|
315,835
|
|
Office
Equipment
|
|
|
30,083
|
|
|
30,083
|
|
|
|
|
1,477,649
|
|
|
1,602,937
|
|
Less:
accumulated depreciation
|
|
|
(820,531
|
)
|
|
(862,717
|
)
|
Total
Fixed assets
|
|
|
657,118
|
|
|
740,220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OIL
AND GAS PROPERTIES
|
|
|
1,769,214
|
|
|
1,462,439
|
|
(On
the basis of successful efforts accounting)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PIPELINE
FACILITIES
|
|
|
-
|
|
|
181,597
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
ASSETS
|
|
|
|
|
|
|
|
Investments
in joint venture at cost
|
|
|
-
|
|
|
801,319
|
|
Land
|
|
|
496,500
|
|
|
496,500
|
|
Investments
|
|
|
500
|
|
|
500
|
|
Well
equipment and supplies
|
|
|
427,948
|
|
|
427,948
|
|
Cash
- restricted
|
|
|
83,000
|
|
|
83,000
|
|
|
|
|
|
|
|
|
|
Total
Other Assets
|
|
|
1,007,948
|
|
|
1,809,267
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
3,933,567
|
|
$
|
4,564,089
|
|
See
notes
to consolidated financial statements.
MILLER
PETROLEUM, INC.
Consolidated
Balance Sheets
|
|
January
31
|
|
April
30
|
|
|
|
2008
|
|
2007
|
|
|
|
Unaudited
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank
overdraft
|
|
$
|
-
|
|
$
|
16,933
|
|
Accounts
payable - trade
|
|
|
269,201
|
|
|
276,783
|
|
Accounts
payable - related parties
|
|
|
167,816
|
|
|
88,809
|
|
Accrued
expenses
|
|
|
189,748
|
|
|
93,874
|
|
Notes
payable - related parties
|
|
|
80,200
|
|
|
114,500
|
|
Current
portion of notes payable
|
|
|
262,189
|
|
|
202,234
|
|
Liability
for stock repurchase
|
|
|
4,350,000
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Total
Current Liabilities
|
|
|
5,319,154
|
|
|
793,133
|
|
|
|
|
|
|
|
|
|
LONG-TERM
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes
payable
|
|
|
|
|
|
|
|
Other
|
|
|
333,641
|
|
|
326,880
|
|
Total
Long-Term Liabilities
|
|
|
333,641
|
|
|
326,880
|
|
|
|
|
|
|
|
|
|
Total
Liabilities
|
|
|
5,652,795
|
|
|
1,120,013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TEMPORARY
EQUITY
|
|
|
-
|
|
|
4,350,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PERMANENT
STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock: 500,000,000 shares authorized at
$0.0001 par value, 11,566,856 and 11,466,856
|
|
|
|
|
|
|
|
shares
issued and outstanding
|
|
|
1,156
|
|
|
1,146
|
|
Additional
paid-in capital
|
|
|
7,995,007
|
|
|
7,936,724
|
|
Unearned
compensation
|
|
|
(1,406,285
|
)
|
|
(1,587,033
|
)
|
Accumulated
deficit
|
|
|
(8,309,106
|
)
|
|
(7,256,761
|
)
|
Total
Stockholders’ Deficit
|
|
|
(1,719,228
|
)
|
|
(905,924
|
)
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES, TEMPORARY EQUITY AND
PERMANENT STOCKHOLDERS' DEFICIT
|
|
$
|
3,933,567
|
|
$
|
4,564,089
|
|
See
notes
to consolidated financial statements.
MILLER
PETROLEUM, INC.
Consolidated
Statements of Operations
(UNAUDITED)
|
|
For
the Three Months Ended
|
|
For
the Nine Months Ended
|
|
|
|
January
31
|
|
January
31
|
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil
and gas revenue
|
|
$
|
181,582
|
|
$
|
110,162
|
|
$
|
492,044
|
|
$
|
373,195
|
|
Service
and drilling revenue
|
|
|
63,455
|
|
|
89,887
|
|
|
190,445
|
|
|
740,412
|
|
Total
Revenue
|
|
|
245,037
|
|
|
200,049
|
|
|
682,489
|
|
|
1,113,607
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COSTS
AND EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of oil and gas revenue
|
|
|
13,537
|
|
|
12,118
|
|
|
51,698
|
|
|
41,051
|
|
Cost
of service and drilling revenue
|
|
|
58,512
|
|
|
161,093
|
|
|
249,169
|
|
|
735,562
|
|
Selling,
general and administrative
|
|
|
413,972
|
|
|
472,932
|
|
|
1,179,858
|
|
|
1,031,026
|
|
Depreciation,
depletion and amortization
|
|
|
57,350
|
|
|
29,403
|
|
|
167,598
|
|
|
120,153
|
|
Total
Costs and Expense
|
|
|
543,371
|
|
|
675,546
|
|
|
1,648,323
|
|
|
1,927,792
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS
FROM OPERATIONS
|
|
|
(298,334
|
)
|
|
(475,497
|
)
|
|
(965,834
|
)
|
|
(814,185
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSE)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Income
|
|
|
991
|
|
|
9,716
|
|
|
1,703
|
|
|
10,002
|
|
Gain
on sale of equipment
|
|
|
-
|
|
|
|
|
|
89,369
|
|
|
|
|
Interest
expense
|
|
|
(23,859
|
)
|
|
(2,527
|
)
|
|
(119,290
|
)
|
|
(13,783
|
)
|
Loan
Fees and Warrants
|
|
|
(15,000
|
)
|
|
(40,000
|
)
|
|
(58,293
|
)
|
|
(79,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Other Income (Expense)
|
|
|
(37,868
|
)
|
|
(32,811
|
)
|
|
(86,511
|
)
|
|
(82,781
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS
|
|
$
|
(336,202
|
)
|
$
|
(508,308
|
)
|
$
|
(1,052,345
|
)
|
$
|
(896,966
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC
& DILUTED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS PER SHARE
|
|
$
|
(0.02
|
)
|
$
|
(0.04
|
)
|
$
|
(0.07
|
)
|
$
|
(0.06
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE NUMBER OF SHARES
OUTSTANDING
|
|
|
14,466,856
|
|
|
14,366,856
|
|
|
14,431,349
|
|
|
14,366,856
|
|
See
notes
to consolidated financial statements.
MILLER
PETROLEUM, INC
Consolidated
Statement of Permanent Stockholders' Deficit
(UNAUDITED)
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
Common
|
|
Shares
|
|
Paid-in
|
|
Unearned
|
|
Accumulated
|
|
|
|
|
|
Shares
|
|
Amount
|
|
Capital
|
|
Compensation
|
|
Deficit
|
|
Total
|
|
Balance,
April 30, 2007
|
|
|
11,466,856
|
|
$
|
1,146
|
|
$
|
7,936,724
|
|
$
|
(1,587,033
|
)
|
$
|
(7,256,761
|
)
|
$
|
(905,924
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
of unearned compensation
|
|
|
|
|
|
|
|
|
|
|
|
180,748
|
|
|
|
|
|
180,748
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of warrants for financing cost
|
|
|
|
|
|
|
|
|
24,293
|
|
|
|
|
|
|
|
|
24,293
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of stock for financing cost
|
|
|
100,000
|
|
|
10
|
|
|
33,990
|
|
|
|
|
|
|
|
|
34,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the nine months ended
January 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,052,345
|
)
|
|
(1,052,345
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
January 31, 2008
|
|
|
11,566,856
|
|
$
|
1,156
|
|
$
|
7,995,007
|
|
$
|
(1,406,285
|
)
|
$
|
(8,309,106
|
)
|
$
|
(1,719,228
|
)
|
See
notes
to consolidated financial statements.
MILLER
PETROLEUM, INC.
Consolidated
Statement of Cash Flows
(UNAUDITED)
|
|
For
the Nine
|
|
For
the Nine
|
|
|
|
Months
Ended
|
|
Months
Ended
|
|
|
|
January
31, 2008
|
|
January
31, 2007
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
Net
Loss
|
|
$
|
(1,052,345
|
)
|
$
|
(896,966
|
)
|
Adjustments
to Reconcile Net Loss to Net Cash Provided (Used) by Operating
Activities:
|
|
|
|
|
|
|
|
Depreciation,
depletion and amortization
|
|
|
167,598
|
|
|
120,153
|
|
Gain
on sale of equipment
|
|
|
(89,369
|
)
|
|
9,852
|
|
Amortization
of unearned compensation
|
|
|
180,748
|
|
|
|
|
Issuance
of stock for financing cost
|
|
|
34,000
|
|
|
284,823
|
|
Warrant
costs
|
|
|
24,293
|
|
|
79,000
|
|
Changes
in Operating Assets and Liabilities:
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(39,290
|
)
|
|
410,844
|
|
Unbilled
service and drilling cost
|
|
|
|
|
|
76,944
|
|
Inventory
|
|
|
(75,451
|
)
|
|
9,077
|
|
Bank
overdraft
|
|
|
(16,933
|
)
|
|
15,460
|
|
Accounts
payable
|
|
|
71,425
|
|
|
(144,079
|
)
|
Accrued
expenses
|
|
|
95,874
|
|
|
31,836
|
|
Net
Cash Provided (Used) by Operating Activities
|
|
|
(699,450
|
)
|
|
(3,056
|
)
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
Purchase
of Equipment
|
|
|
|
|
|
(122,924
|
)
|
Proceeds
from sale of equipment
|
|
|
104,603
|
|
|
90,000
|
|
Proceeds
from sale of wells and pipeline
|
|
|
576,500
|
|
|
|
|
Net
Cash Provided (Used) by Investing Activities
|
|
|
681,103
|
|
|
(32,924
|
)
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
Payments
on notes payable
|
|
|
(285,873
|
)
|
|
(21,620
|
)
|
Proceeds
from borrowing
|
|
|
318,200
|
|
|
22,500
|
|
Change
in note receivable
|
|
|
|
|
|
35,100
|
|
Net
Cash Provided by Financing Activities
|
|
|
32,327
|
|
|
35,980
|
|
|
|
|
|
|
|
|
|
NET
INCREASE (DECREASE) IN CASH
|
|
|
13,980
|
|
|
0
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS, BEGINNING OF PERIOD
|
|
|
0
|
|
|
0
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS, END OF PERIOD
|
|
$
|
13,980
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
CASH
PAID FOR
|
|
|
|
|
|
|
|
INTEREST
|
|
$
|
40,668
|
|
$
|
13,783
|
|
INCOME
TAXES
|
|
|
|
|
$
|
$
0
|
|
See
notes
to consolidated financial statements.
MILLER
PETROLEUM, INC.
Notes
to the Condensed Consolidated Financial Statements
(1) INTERIM
REPORTS / GOING CONCERN
The
condensed consolidated financial statements have been prepared assuming the
Company will continue as a going concern. However, in addition to successive
losses for three years, declining revenues, a net loss of $1,052,345 for
the
nine months ended January 31, 2008, and net deficit of $1,719,228, on February
7, 2008, the Company was also ordered under binding arbitration to redeem
2.9
million shares of stock owned by Wind City and previously carried on the
Company’s books as temporary equity in the amount of $4,350,000 (See Note 4).
Management believes that the Company will therefore need total additional
financing of approximately $5,000,000 to effect the repurchase and continue
to
operate as planned during the year subsequent to January 31, 2008. Management
is
exploring various financing opportunities in this regard; however, there
can be
no assurance that we will be able to obtain financing sufficient to repurchase
such shares. These conditions raise substantial doubt about the Company’s
ability to continue as a going concern.
Management
is currently in negotiations with two companies that have the resources to
provide the capital to buy back the stock and to provide us with additional
drilling capital to drill the 22,000 acre Koppers South Field. These
negotiations have been hampered by the fact that the leases have not been
reassigned to us. The Arbitrator’s Award requires that the leases be returned to
us, which will help us obtain the necessary capital. There is no assurance
that
these negotiations will be successful.
Certain
information and footnote disclosures normally included in the financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these financial statements
be read in conjunction with the Registrant's April 30, 2007 Annual Report on
Form 10-KSB. The results of operations for the period ended January 31, 2008
are
not necessarily indicative of operating results for the full year. In the
opinion of management, all adjustments (consisting of only normal recurring
accruals) considered necessary for a fair presentation have been included.
(2) PARTICIPANT
RECEIVABLES AND RELATED PARTY RECEIVABLES
Participant
and related party receivables consist of receivables contractually due from
our
various joint venture partners in connection with routine exploration,
betterment and maintenance activities. Our collateral for these receivables
generally consists of lien rights over the related oil producing properties
at
both April 30, 2007 and January 31, 2008. Approximately $193,000 included
in the
balance sheet among Related Party Receivables is due from Wind Mill Oil &
Gas, LLC, a related party. See Note 4 regarding the status of the Wind Mill
Joint Venture.
(3) LONG-TERM
DEBT, WARRANTS, LOAN FEES AND RESTRICTED CASH
The
Company had the following debt obligations at January 31, 2008 and April
30,
2007
|
|
January
31, 2008
|
|
April
30, 2007
|
|
Notes
Payable - Related Parties:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note
payable to the Company’s CEO and Chairman of the Board of Directors, Deloy
Miller, secured by equipment and truck titles, interest at 10.750%,
due
April 18, 2008
|
|
$
|
80,200
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
Note
payable to board member Herman Gettlefinger, unsecured, dated
February 21,
2007, bearing interest at 11% and due November 1, 2007. This note
was paid December 14, 2007
|
|
|
0
|
|
|
42,000
|
|
|
|
|
|
|
|
|
|
Note
payable to Sharon Miller, Unsecured, dated April 5, 2007 to May
17, 2007,
bearing interest at 11%, due November 1, 2007. This note was paid
December
14, 2007
|
|
|
0
|
|
|
72,500
|
|
|
|
|
80,200
|
|
|
114,500
|
|
MILLER
PETROLEUM, INC.
Notes
to the Condensed Consolidated Financial Statements
(3) LONG-TERM
DEBT, WARRANTS, LOAN FEES AND RESTRICTED CASH (CONTINUED)
Notes
Payable - Other
Note
payable to American Fidelity Bank, secured by a trust deed on property,
bearing interest at prime, due in monthly payments of $2,500, with
the
final payment due in August 2008
|
|
|
343,641
|
|
|
344,114
|
|
|
|
|
|
|
|
|
|
Note
payable to Jade Special Strategy, LLC, unsecured, dated March 7,
2007,
bearing interest based on a sliding scale approximating 120% and
due April
30, 2008, and now accruing interest at 12% (see note
below)
|
|
|
110,000
|
|
|
110,000
|
|
|
|
|
|
|
|
|
|
Note
payable to Jade Special Strategy, LLC, unsecured, dated April 17,
2007,
bearing interest based on a sliding scale approximating 120% and
due April
30, 2008, and now accruing interest at 12% (see note
below)
|
|
|
40,000
|
|
|
40,000
|
|
|
|
|
|
|
|
|
|
Note
Payable to Jade Special Strategy, LLC, unsecured, dated August
2, 2007,
bearing interest based on a sliding scale approximating 120% and
due April
30, 2008, and now accruing interest at 12% (see note
below)
|
|
|
65,000
|
|
|
0
|
|
|
|
|
|
|
|
|
|
Note
payable to Petro Capital Securities, unsecured, dated May 24, 2007,
bearing interest at 10% and due June 30, 2008
|
|
|
35,000
|
|
|
35,000
|
|
|
|
|
|
|
|
|
|
Note
payable to Delta Producers, dated June 20, 2007, due July 20, 2007,
with
interest at 11%, the note is in default
|
|
|
2,189
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
595,830
|
|
|
529,114
|
|
|
|
|
|
|
|
|
|
Total
Notes Payable
|
|
|
676,030
|
|
|
643,614
|
|
Less
current maturities on related party notes payable
|
|
|
80,200
|
|
|
114,500
|
|
Less
current maturities on other notes payable
|
|
|
262,189
|
|
|
202,234
|
|
Notes
Payable - Long-term
|
|
|
333,641
|
|
|
326,880
|
|
Note:
On
February 14, 2008 Jade Special Strategy, LLC agreed to extend the notes to
April
30, 2008 at a nominal interest rate of 18% per annum, the re-pricing of 200,000
warrants from $0.33 and $0.29 to $0.01, and the issuance of an additional
100,000 warrants at par value. The options represent loan fees and will be
valued at approximately $59,000. This amount will be included as a component
of
interest expense during the fourth quarter of the Company’s year ending April
30, 2008.
Accordingly,
the maturities reflected above represent the maturities of the debt entered
into
subsequent to January 31, 2008.
(4) WIND
MILL
OIL & GAS, LLC JOINT VENTURE, ARBITRATION, SUBSEQUENT EVENT AND
RECLASSIFICATIONS
On
December 23, 2005 the Company executed an LLC agreement (the “Agreement”) with
Wind City Oil & Gas, LLC (“Wind City”) to form Wind Mill Oil & Gas, LLC
(“Wind Mill”), the primary purpose of which was to develop the Company’s
existing oil and gas leases, including but not limited to its Koppers South
prospect. According to terms of the Agreement, the Company’s contribution to
Wind Mill consisted of substantially all of its undeveloped properties (listed
as Exhibit A in the Agreement). The Agreement included a provision providing
for
the purchase by Wind Mill of 2.9 million shares of the Company’s stock at a
price of $4.35 million. Upon Wind City seeking dissolution of the joint venture
in accordance with terms of the Agreement’s unwind provision this stock was
subject to a put, provided the exercise of the put fell within certain time
restrictions. Accordingly, the Company classified the stock issued to Wind
City
as temporary equity on its balance sheet. The Company’s contribution of its
undeveloped leases was reclassified at cost on its balance sheet as its
investment in the Joint Venture.
MILLER
PETROLEUM, INC.
Notes
to the Condensed Consolidated Financial Statements
(4) WIND
MILL
OIL & GAS, LLC JOINT VENTURE (CONTINUED)
Under
the
Joint Venture, from May 1, 2006 to April 30, 2007, the Company received $353,640
of salary reimbursements and drilling and service revenue of $534,944. From
May
1, 2007 to January 31, 2008, the Company received no salary reimbursements
or
service and drilling revenue.
In
August
and September 2006, Wind City commenced litigation to unwind the Agreement.
Issues surrounding the timeliness and propriety of Wind City’s actions and their
legal effect eventually led the court in which Wind City commenced litigation
to
direct the parties to submit the matter to arbitration. The Company, reflecting
its belief in the legal merits of its case, continued to classify, at cost,
its
investment in the leases as an investment in the Joint Venture and Wind City’s
outstanding stock as temporary equity.
The
arbitration was held in Knoxville, Tennessee on January 17 and 18, 2008.
The
Arbitrator’s Decision and Award in connection therewith is dated March 7, 2008.
The Arbitrator determined that Wind City properly and timely terminated the
Operating Agreement between the parties with respect to Wind Mill. The
Arbitrator also rendered an award that ordered and directed that Wind City
deliver to the Company the assets listed in Exhibit A of the Operating Agreement
simultaneously with the delivery by the Company to Wind City of a stock
re-purchase agreement that provides for the repurchase by the Company of the
shares for $4,350,000 to be paid (3) months after the date of execution of
such
re-purchase agreement. The assets to be returned to the Company consist of
seven
parcels of land, excluding certain wells already drilled together with an offset
of 40 acres of land surrounding each such well. All other claims by both parties
asserting various damages were denied by the Arbitrator. Wind
City
has filed papers with the court seeking to confirm in part and vacate in part
the Award of the Arbitrator. Wind City seeks to vacate that portion of the
Award
directing the return of the aforesaid assets to the Company.The Company
plans to timely file documents required to confirm the Arbitrator’s
Award.
Matters
submitted for resolution to the arbitrator but left undecided included the
appropriate interest rate applying to the $4.35 million debt. The Operating
Agreement specified interest toll at 1.5% per annum, and Wind City has alleged
a
“scrivener’s error” pertaining to this rate.
As
a
result of the arbitration and to reflect the Company’s intentions, the Company
has reclassified the stock held by Wind City as short-term debt, at its face
value, or $4.35 million. Accordingly, the investment in the joint venture has
also been reclassified to investment in oil & gas properties on the
Company’s January 31, 2008 balance sheet. All known and estimated expenses
pertaining to the arbitration have been reflected in the Company’s operations as
of January 31, 2008.
Penalty
warrants for 120,000 common shares at a price of $1.15 per share, and a
five-year term were issued during the nine months ended January 31, 2008. The
warrants were valued at $15,000.
The
Company presents “basic” earnings (loss) per share and, if applicable, “diluted”
earnings per share pursuant to the provisions of Statement of Financial
Accounting Standards No. 128. The calculation of diluted earnings per share
is
similar to that of basic earnings per share, except that the denominator is
increased to include the number of additional common shares that would have
been
outstanding if all potentially dilutive common shares, such as those issuable
upon the exercise of stock options and warrants, were issued during the period.
Since the Company had a net loss for the nine month periods ended January 31,
2008 and 2007, and for the year ended April 30, 2007, the assumed effects from
the exercise of outstanding options and warrants would have been anti-dilutive,
and, therefore only basic earnings per share is presented.
(6) RECENT
ACCOUNTING PRONOUNCEMENTS
In
June
2006, FIN 48, “Accounting
for Uncertainty in Income Taxes,”
an
interpretation of SFAS No. 109, clarifies the accounting for uncertainties
in
income taxes recognized in an enterprise’s financial statements. The
Interpretation requires that we determine whether it is more likely than not
that a tax position will be sustained upon examination by the appropriate taxing
authority. If a tax position meets the more likely than not recognition
criteria, FIN 48 requires the tax position be measured at the largest amount
of
benefit greater than fifty percent (50%) likely of
being
realized upon ultimate settlement. This accounting standard is effective for
fiscal years beginning after December 15, 2006. The effect of adopting FIN
48
did not have a material affect on our financial position and results of
operations.
MILLER
PETROLEUM, INC.
Notes
to the Condensed Consolidated Financial Statements
(6) RECENT
ACCOUNTING PRONOUNCEMENTS (CONTINUED)
In
September 2006, the Staff of the SEC issued Staff Accounting Bulletin No. 108,
“Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements” (“SAB No. 108”). SAB No. 108
provides guidance on the consideration of the effects of prior year
misstatements in quantifying current year misstatements for the purpose of
determining whether the current year’s financial statements are materially
misstated. SAB 108 is effective for the Company’s fiscal year
2007
annual financial statements. The adoption of SAB 108 did not have an impact
on
our financial position, results of operations or cash flows.
In
September 2006, the FASB issued Statement No. 157, “Fair Value Measurements”
(“SFAS 157”). This standard defines fair value, establishes the framework for
measuring fair value in accounting principles generally accepted in the United
States and expands disclosure about fair value measurements. This pronouncement
applies under other accounting standards that require or permit fair value
measurements. Accordingly, this statement does not require any new fair value
measurement. This statement is effective for fiscal years beginning after
November 15, 2007 and interim periods within those fiscal years. We are
currently evaluating the requirements of SFAS No. 157 and have not yet
determined the impact on our financial statements.
In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities—including an amendment of FAS 115 (“SFAS
No.159”). SFAS No. 159 allows companies to choose, at specified election dates,
to measure eligible financial assets and liabilities at fair value that are
not
otherwise required to be measured at fair value. Unrealized gains and losses
shall be reported on items for which the fair value option has been elected
in
earnings at each subsequent reporting date. SFAS No. 159 also establishes
presentation and disclosure requirements. SFAS No. 159 is effective for fiscal
years beginning after November 15, 2007 and will be applied prospectively.
We
are currently evaluating the impact of adopting SFAS No. 159 on our financial
position, results of operations or cash flows.
In
December 2006, the FASB issued FASB Staff Position No. EITF 00-19-2, Accounting
for Registration Payment Arrangements, (“FSP No. EITF 00-19-2”), which addresses
an issuer’s accounting for registration payment arrangements. FSP No. EITF
00-19-2 specifies that the contingent obligation to make future payments or
otherwise transfer consideration under a registration payment arrangement,
whether issued as a separate agreement or included as a provision of a financial
instrument or other agreement, should be separately recognized and measured
in
accordance with FASB Statement No. 5, Accounting for Contingencies. The
guidance in FSP No. EITF 00-19-2 amends FASB Statements No. 133, Accounting
for Derivative Instruments and Hedging Activities, and No. 150, Accounting
for Certain Financial Instruments with Characteristics of both Liabilities
and
Equity, and FASB Interpretation No. 45, Guarantor’s Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others, to include scope exceptions for registration payment
arrangements. FSP No. EITF 00-19-2 further clarifies that a financial instrument
subject to a registration payment arrangement should be accounted for in
accordance with other applicable generally accepted accounting principles (GAAP)
without regard to the contingent obligation to transfer consideration pursuant
to the registration payment arrangement. FSP No. EITF 00-19-2 shall be effective
immediately for registration payment arrangements and the financial instruments
subject to those arrangements that are entered into or modified subsequent
to
the date of issuance of FSP No. EITF 00-19-2. For registration payment
arrangements and financial instruments subject to those arrangements that were
entered into prior to the issuance of FSP No. EITF 00-19-2, this guidance shall
be effective for financial statements issued for fiscal years beginning after
December 15, 2006, and interim periods within those fiscal years. We
adopted FSP No. EITF 00-19-2 effective January 1, 2007. We have not had any
transactions subject to EITF 00-19-2 since its adoption, so there has been
no
material impact to the Company’s financial position, results of operations or
cash flows.
MILLER
PETROLEUM, INC.
Notes
to the Condensed Consolidated Financial Statements
(7) LITIGATION
/ GOING CONCERN
The
outcome of our current litigation with Wind City could have a material adverse
effect on our financial condition.
As
previously discussed in Notes 1 and 4, Wind City Oil & Gas, LLC has filed
suit to force the exercise of the put provision of the stock purchase agreement.
In accordance with the arbitration award as discussed in Note 4, we are required
to re-purchase the shares; accordingly, since we will likely have a significant
cash flow shortfall, we will require additional financing in order to effectuate
the re-purchase. There is no assurance that such financing will be obtained
on
favorable terms, or at all. In such event, our financial condition could be
materially adversely affected and our ability to continue as a going concern
could be jeopardized.
(8) SALE
OF
GAS WELLS AND PIPELINE
On
September 14, 2007 we entered into an option to sell our interest in eight
gas
wells, a pipeline to service the wells and certain right-of-ways for a total
consideration of $576,500. We transferred approximately 320 acres of leases
in
this transaction. The buyers paid $50,000 for the option. The transaction closed
December 14, 2007, and we received approximately $526,500 of additional proceeds
at the closing.
Item
2 Management’s
Discussion and Analysis of Financial Condition and Results of Operations
Introduction
The
following discussion is intended to facilitate an understanding of our business
and results of operations and includes forward-looking statements that reflect
our plans, estimates and beliefs. It should be read in conjunction with our
audited consolidated financial statements and the accompanying notes to the
consolidated financial statements included herein. Our actual results could
differ materially from those discussed in these forward-looking
statements.
Overview
We
are
actively engaged in the exploration, development, production and acquisition
of
crude oil and natural gas primarily in eastern Tennessee. During 2006 the
Company conducted significant operations in conjunction with its partner Wind
City Oil & Gas, LLC (“Wind City”) under a Joint Venture (“Wind Mill”)
agreement, the primary purpose of which was to develop the Company’s existing
oil and gas leases, including but not limited to its Koppers South prospect.
According to terms of the Agreement, the Company’s contribution to Wind Mill
consisted of substantially all of its undeveloped properties (listed as Exhibit
A in the Agreement). The Agreement included a provision providing for the
purchase by Wind Mill of 2.9 million shares of the Company’s stock at a price of
$4.35 million. Upon Wind City seeking dissolution of the joint venture in
accordance with terms of the Agreement’s unwind provision this stock was subject
to a put option, provided the exercise of the put fell within certain time
restrictions. Accordingly, the Company classified its stock issued to Wind
City
as temporary equity on its balance sheet. The Company’s contribution of its
undeveloped leases was reclassified at cost on its balance sheet as its
investment in the Joint Venture.
In
August
and September 2006, Wind City commenced litigation to unwind the Agreement.
Issues surrounding the timeliness and propriety of Wind City’s actions and their
legal effect eventually led the court in which Wind City commenced litigation
to
direct the parties to submit the matter to arbitration. The Company, reflecting
its belief in the legal merits of its case, continued to classify, at cost,
its
investment in the leases as an investment in the Joint Venture and Wind City’s
outstanding stock as temporary equity.
The
arbitration was held in Knoxville, Tennessee on January 17 and 18, 2008.
The
Arbitrator’s Decision and Award in connection therewith is dated March 7, 2008.
The Arbitrator determined that Wind City properly and timely terminated the
Operating Agreement between the parties with respect to Wind Mill. The
Arbitrator also rendered an award that ordered and directed that Wind City
deliver to the Company the assets listed in Exhibit A of the Operating Agreement
simultaneously with the delivery by the Company to Wind City of a stock
re-purchase agreement that provides for the repurchase by Miller of the shares
for $4,350,000 to be paid three (3) months after the date of execution of such
re-purchase agreement. The assets to be returned to the Company consist of
seven
parcels of land, excluding certain wells already drilled together with an offset
of 40 acres of land surrounding each such well. All other claims by both parties
asserting various damages were denied by the Arbitrator. Wind City has filed
papers with the court seeking to confirm in part and vacate in part the Award
of
the Arbitrator. Wind City is seeking to vacate that part of the Award that
directs the return of the aforesaid assets to the Company. The Company plans
to
timely file documents required to confirm the Arbitrator’s Award.
Matters
submitted for resolution to the arbitrator but left undecided included the
appropriate interest rate applying to the $4.35 million debt. The Operating
Agreement specified interest toll at 1.5% per annum, and Wind City has alleged
a
“scrivener’s error” pertaining to this rate
Our
present financial condition precludes us from being able to repurchase the
shares under the put. We are exploring various financing opportunities in this
regard; however, there can be no assurance that we will be able to obtain
financing sufficient to repurchase such shares. In the event that we are unable
to obtain financing on acceptable terms sufficient to consummate the repurchase,
our business and financial condition could be materially adversely affected
and
our ability to continue operations as a going concern could be
jeopardized.
Liquidity
and Capital Resources
Cash
used
by operating activities was $699,450 for the nine months ended January 31,
2008,
an increase of $696,394 over cash used by operating activities for the nine
months ended January 31, 2007 of $3,056. Our principal source of liquidity
has
been oil and gas revenues, loans from related parties and directors, private
placement transactions of our common stock, and participation with investors
in
various oil and gas wells. During the current quarter we sold gas wells and
a
pipeline for $576,500. The increase in oil and gas prices along with our
opportunity under the arbitrators’ decision to regain our rights to
approximately 45,000 acres under lease in Tennessee enhances our ability to
attract investors and to pursue joint ventures in oil and gas.
On
December 23, 2005 we entered into the Wind Mill Oil & Gas LLC Agreement
(“Wind Mill”) and also sold 2,900,000 shares of common stock to Wind City Oil
& Gas, LLC (“Wind City”) for $4,350,000. These funds were used to pay off
the $4,150,000 of loans and to provide some working capital. Wind City also
contributed $10,000,000 to Wind Mill and we contributed oil and gas leases
as
part of the Wind Mill agreement. For the nine months ended January 31, 2007
we
received $353,640 of administrative salary reimbursements and revenue of
$506,615 for various labor, parts and use of equipment. The cessation of
operations with Wind Mill has had a major impact on our cash flow.
Our
long-term cash flows are subject to a number of variables including the level
of
production and prices as well as various economic conditions that have
historically affected the oil and gas business. A material drop in oil and
gas
prices or a reduction in production and reserves would reduce our ability to
fund capital expenditures, service new debt, meet financial obligations and
remain profitable. We operate in an environment with numerous financial and
operating risks, including, but not limited to, the inherent risks of the search
for, development and production of oil and gas, the ability to buy properties
and sell production at prices which provide an attractive return and the highly
competitive nature of the industry. Our ability to expand our reserve base
is,
in part, dependent on obtaining sufficient capital through internal cash flow
or
the issuance of debt or equity securities. There can be no assurance that
internal cash flow and other capital sources will provide sufficient funds
to
maintain capital expenditures that we believe are necessary to offset future
declines in production and proved reserves.
Results
of Operations
Three
Months Ended January 31, 2008 compared to Three Months Ended January 31,
2007
|
|
For
the Three Months Ended
|
|
Increase
/
|
|
|
|
January
31
|
|
(Decrease)
|
|
|
|
2008
|
|
2007
|
|
2007
to 2008
|
|
REVENUES
|
|
|
|
|
|
|
|
|
|
|
Oil
and gas revenue
|
|
$
|
181,582
|
|
$
|
110,162
|
|
$
|
71,420
|
|
Service
and drilling revenue
|
|
|
63,455
|
|
|
89,887
|
|
|
(26,432
|
)
|
Total
Revenue
|
|
|
245,037
|
|
|
200,049
|
|
|
44,988
|
|
|
|
|
|
|
|
|
|
|
|
|
COSTS
AND
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
Cost
of oil and gas revenue
|
|
|
13,537
|
|
|
12,118
|
|
|
1,419
|
|
Cost
of service and drilling revenue
|
|
|
58,512
|
|
|
161,093
|
|
|
(102,581
|
)
|
Selling,
general and administrative
|
|
|
413,972
|
|
|
472,932
|
|
|
(58,960
|
)
|
Depreciation,
Depletion and amortization
|
|
|
57,350
|
|
|
29,403
|
|
|
27,947
|
|
Total
Costs and Expenses
|
|
|
543,371
|
|
|
675,546
|
|
|
(132,175
|
)
|
|
|
|
|
|
|
|
|
|
|
|
INCOME
(LOSS)
FROM
OPERATIONS
|
|
|
(298,334
|
)
|
|
(475,497
|
)
|
|
177,163
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME
(EXPENSE)
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
991
|
|
|
9,716
|
|
|
(8,725
|
)
|
Interest
expense
|
|
|
(23,859
|
)
|
|
(2,527
|
)
|
|
(21,332
|
)
|
Loan
fees and warrants
|
|
|
(15,000
|
)
|
|
(40,000
|
)
|
|
25,000
|
|
Total
Other Income (Expense)
|
|
|
(37,868
|
)
|
|
(32,811
|
)
|
|
(5,057
|
)
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME
(LOSS)
|
|
$
|
(336,202
|
)
|
$
|
(508,308
|
)
|
$
|
172,106
|
|
Revenue
Oil
and
gas revenue was $181,582 for the three months ended January 31, 2008 as compared
to $110,162 for the three months ended January 31, 2007, an increase of $71,420.
This resulted from the rise in the price of oil and increased
production.
Service
and drilling revenue was $63,455 for the three months ended January 31, 2008
as
compared to $89,887 for the three months ended January 31, 2007, a decrease
of
$26,432. This resulted from a decrease in drilling activity due to the
litigation with Wind Mill Oil & Gas, LLC.
Cost
and Expense
The
cost
of oil and gas revenue was $13,537 for the three months ended January 31, 2008
as compared to $12,118 for the three months ended January 31, 2007, an increase
of $1,419. This resulted from the cost associated with increased
production.
The
cost
of service and drilling revenue was $58,512 for the three months ended January
31, 2008 as compared to $161,093 for the three months ended January 31, 2007,
a
decrease of $102,581. This was due to the decrease in drilling activities due
to
the litigation with Wind Mill Oil & Gas, LLC. Additionally, the Company
incurred significant indirect labor included in costs of service and drilling
revenue in 2006 connected with the termination of the joint venture for which
there were minimal corresponding revenues.
Selling,
general and administrative expense was $413,972 for the three months ended
January 31, 2008 as compared to $472,932 for the three months ended January
31,
2007, a decrease of $58,960. This resulted from a decrease in consulting, legal
and professional fees.
Depreciation,
depletion and amortization was $57,350 for the three months ended January 31,
2008 as compared to $29,403 for the three months ended January 31, 2007, an
increase of $27,947. This was due to an increase in oil and gas
production.
Interest
expense was $23,859 for the three months ended January 31, 2008 as compared
to
$2,527 for the three months ended January 31, 2007, an increase of $21,332.
This
resulted from the interest on additional borrowings during the period ended
January 31, 2008.
Nine
Months Ended January 31, 2008 compared to Nine Months Ended January 31,
2007
|
|
For
the Nine Months Ended
|
|
Increase
/
|
|
|
|
January
31
|
|
(Decrease)
|
|
|
|
2008
|
|
2007
|
|
2007
to 2008
|
|
REVENUES
|
|
|
|
|
|
|
|
|
|
|
Oil
and gas revenue
|
|
$
|
492,044
|
|
$
|
373,195
|
|
$
|
118,849
|
|
Service
and drilling revenue
|
|
|
190,445
|
|
|
740,412
|
|
|
(549,967
|
)
|
Total
Revenue
|
|
|
682,489
|
|
|
1,113,607
|
|
|
(431,118
|
)
|
|
|
|
|
|
|
|
|
|
|
|
COSTS
AND
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
Cost
of oil and gas revenue
|
|
|
51,698
|
|
|
41,051
|
|
|
10,647
|
|
Cost
of service and drilling revenue
|
|
|
249,169
|
|
|
735,562
|
|
|
(486,393
|
)
|
Selling,
general and administrative
|
|
|
1,179,858
|
|
|
1,031,026
|
|
|
148,832
|
|
Depreciation,
Depletion and amortization
|
|
|
167,598
|
|
|
120,153
|
|
|
47,445
|
|
Total
Costs and Expenses
|
|
|
1,648,323
|
|
|
1,927,792
|
|
|
(279,469
|
)
|
|
|
|
|
|
|
|
|
|
|
|
INCOME
(LOSS)
FROM
OPERATIONS
|
|
|
(965,834
|
)
|
|
(814,185
|
)
|
|
(151,649
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME
(EXPENSE)
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
1,703
|
|
|
10,002
|
|
|
(8,299
|
)
|
Gain
on sale of equipment
|
|
|
89,369
|
|
|
-
|
|
|
89,369
|
|
Interest
expense
|
|
|
(119,290
|
)
|
|
(13,783
|
)
|
|
(105,507
|
)
|
Loan
fees and warrants
|
|
|
(58,293
|
)
|
|
(79,000
|
)
|
|
35,707
|
|
Total
Other Income (Expense)
|
|
|
(86,511
|
)
|
|
(82,781
|
)
|
|
11,270
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME
(LOSS)
|
|
$
|
(1,052,345
|
)
|
$
|
(896,966
|
)
|
$
|
(140,379
|
)
|
Revenue
Oil
and
gas revenue was $492,044 for the nine months ended January 31, 2008 as compared
to $373,195 for the nine months ended January 31, 2007, an increase of $118,849.
This resulted from the rise in the price of oil and increased
production.
Service
and drilling revenue was $190,445 for the nine months ended January 31, 2008
as
compared to $740,412 for the nine months ended January 31, 2007, a decrease
of
$549,967. This resulted from a decrease in drilling activity, due to litigation
with Wind Mill Oil & Gas, LLC.
Cost
and Expense
The
cost
of oil and gas revenue was $51,698 for the nine months ended January 31, 2008
as
compared to $41,051 for the nine months ended January 31, 2007, an increase
of
$10,647. This increase resulted from the cost associated with
production.
The
cost
of service and drilling revenue was $249,169 for the nine months ended January
31, 2008 as compared to $735,562 for the nine months ended January 31, 2007,
a
decrease of $486,393. This was due to the decrease in drilling activities due
to
the litigation with Wind Mill Oil & Gas, LLC.
Selling,
general and administrative expense was $1,179,858 for the nine months ended
January 31, 2008 as compared to $1,031,026 for the nine months ended January
31,
2007, an increase of $148,832. This is due to the termination of salary
reimbursements by Wind Mill Oil & Gas, LLC. For the nine months ended
January 31, 2007 Wind Mill reimbursed the Company for $353,640 of
salaries.
Depreciation,
depletion and amortization was $167,598 for the nine months ended January 31,
2008 as compared to $120,153 for the nine months ended January 31, 2007, an
increase of $47,445. This resulted from an increase in oil and gas
production.
Interest
expense was $119,290 for the nine months ended January 31, 2008 as compared
to
$13,783 for the nine months ended January 31, 2007, an increase of $105,507.
This resulted from the interest on additional borrowings during the period
ended
January 31, 2008.
Gain
on
sale of equipment was $89,369 for the nine months ended January 31, 2008 as
compared to $0 for the nine months ended January 31, 2007, an increase of
$89,369. This resulted from equipment sold during the current
period.
Item
3 Controls
and Procedures
An
evaluation was performed under the supervision and with the participation of
our
management, including our Chief Executive Officer and Chief Financial Officer,
of the effectiveness of our disclosure controls and procedures (as defined
in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as
of
the end of the period covered by this report. Based on the evaluation and
communication from Rodefer Moss & Co, PLLC, our registered public
accountants, to our Audit Committee in March 2008 that identified an issue
with
respect to our disclosure controls and procedures, our Chief Executive Officer
and Chief Financial Officer concluded that our disclosure controls and
procedures are not effective.
The
ineffective disclosure controls and procedures consist of deficiencies with
respect to the authorization, recording, processing, summarizing and reporting
of non-cash transactions. Specifically, certain stock issuances relating to
outstanding notes payable were not properly recorded.
As
a
result of the identified ineffective disclosure controls and procedures, in
preparing our financial statements for the quarter ended January 31, 2008,
we
performed additional analysis and other post-close procedures to ensure that
such financial statements were stated fairly in all material respects in
accordance with U.S. generally accepted accounting principles.
PART
II -
OTHER INFORMATION
Item
1 Legal
Proceedings
The
arbitration relating to the pending litigation with Wind City was held in
Knoxville, Tennessee on January 17 and 18, 2008. The Arbitrator’s Decision and
Award in connection therewith is dated March 7, 2008.
The
Arbitrator determined that Wind City properly and timely terminated the
Operating Agreement between the parties with respect to Wind Mill. The
Arbitrator also rendered an award that ordered and directed that Wind City
deliver to Miller the assets listed in Exhibit A of the Operating Agreement,
simultaneously with the delivery by Miller to Wind City of a stock re-purchase
agreement that provides for the re-purchase by the Company of the shares for
$4,350,000 to be paid three (3) months after the date of the execution of such
re-purchase agreement. The assets to be returned to the Company consist of
seven
parcels of land, excluding certain wells already drilled, together with 40
acres
of land surrounding each such well.
All
other
claims by both parties asserting various damages were denied by the Arbitrator.
Wind
City
has filed papers with the court seeking to confirm in part and vacate in part
the Award of the Arbitrator. Wind City seeks to vacate that part of the
Award that directs the return of the aforesaid assets to the Company.
The Company intends to seek confirmation of the Arbitration
Award.
SIGNATURES
In
accordance with the requirements of the Exchange Act, the registrant duly caused
this report to be signed on its behalf by the undersigned thereunto duly
authorized.
|
|
|
|
MILLER
PETROLEUM, INC.
|
|
|
|
Date:
March 21, 2008 |
By: |
/s/
DELOY MILLER |
|
Deloy
Miller
Chief
Executive Officer, principal executive
officer
|
|
|
|
Date:
March 21, 2008 |
By: |
/s/
LYLE
H. COOPER |
|
Lyle
H. Cooper
Chief
Financial Officer, principal financial and
accounting
officer
|