As filed with the Securities and Exchange Commission on November 21, 2001.
Registration No. 333-53856
==============================================================================
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
(AMENDMENT NO. 8)
MILLER PETROLEUM, INC.
----------------------
(Name of small business issuer in its charter)
Tennessee 7389 62-1028629
--------- ---- ----------
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
3651 Baker Highway
Huntsville, Tennessee 37756
(423) 663-9457
--------------
(Address and telephone number of principal executive offices)
3651 Baker Highway
Huntsville, Tennessee 37756
----------------------------
(Address of principal place of business
or intended principal place of business)
Deloy Miller
3651 Baker Highway
Huntsville, Tennessee 37756
(423) 663-9457
--------------
(Name, address and telephone number of agent for service)
Copies to:
Branden T. Burningham, Esq.
455 East 500 South, Suite 205
Salt Lake City, Utah 84111
(801) 363-7411
Approximate date of proposed sale to the public: As soon as practicable after
the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933 (the "Securities Act"), other than securities offered only in
connection with dividend or interest reinvestment plans, check the following
box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ]
If this Form is a post effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
If this Form is a post effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box: [ ]
==============================================================================
CALCULATION OF REGISTRATION FEE
Title of
Each Proposed Proposed
Class of Maximum Maximum
Securities Amount of Offering Aggregate Amount of
to be shares to be Price per Offering Registration
Registered Registered Share (1) Price (1) Fee
==============================================================================
Common Stock (1) 1,625,152 $1.375 $2,234,584 $ 621.21
Common Stock (1)(2) 286,000 $1.00 $ 286,000 $ 79.51
Common Stock (1((3) 250,000 $1.50 $ 375,000 $ 104.25
Common Stock (1)(4) 350,000 $2.00 $ 700,000 $ 194.60
Common Stock (1)(5) 250,000 $2.50 $ 625,000 $ 173.75
TOTALS 2,761,152 $4,220,584 $1,173.32
==============================================================================
(1) These shares are registered on behalf of the selling stockholders and the
offering price and gross offering proceeds are estimated solely for the
purpose of calculating the registration fee in accordance with Rule 457
under the Securities Act on the basis of the average of the bid and asked
price of our common stock as quoted on the OTC Electronic Bulletin Board of
the National Association of Securities Dealers, Inc. (the "NASD") on the date
immediately prior to the filing of this registration statement.
(2) Represents shares issuable upon exercise of warrants issued by us having
an exercise price of $1.00 per share.
(3) Represents shares issuable upon exercise of warrants issued by us having
an exercise price of $1.50 per share.
(4) Represents shares issuable upon exercise of warrants issued by us having
an exercise price of $2.00 per share.
(5) Represents shares issuable upon exercise of warrants issued by us having
an exercise price of $2.50 per share.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES
AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
CROSS REFERENCE SHEET
Form SB-2 Item No. and Caption Prospectus Caption
------------------------------- ------------------
Item 1. Front of Registration Statement and Outside Front Cover
Outside Front Cover Page of Prospectus
Item 2. Inside Front and Outside Back Cover Pages Inside Front and Outside
of Prospectus Back Cover Pages
Item 3. Summary Information and Risk Factors Prospectus Summary; Risk
Factors
Item 4. Use of Proceeds Use of Proceeds
Item 5. Determination of Offering Price Outside Front Cover
Item 6. Dilution Dilution
Item 7. Selling Security Holders Selling Stockholders
Item 8. Plan of Distribution Outside Front Cover Page;
Plan of Distribution
Item 9. Legal Proceedings Legal Proceedings
Item 10.Directors, Executive Officers, Promoters Directors, Executive
and Control Persons Officers, Promoters
and Control Persons
Item 11.Security Ownership of Certain Beneficial Security Ownership of
Owners and Management Certain Beneficial
Owners and Management
Item 12.Description of Securities Outside Front Cover Page;
Description of Securities
Item 13.Interest of Named Experts and Counsel Interest of Named Experts
and Counsel
Item 14.Disclosure of Commission Position on Disclosure of Commission
Indemnification for Securities Act on Indemnification for
Liabilities Securities Act
Liabilities
Item 15.Organization Within the Last Five Years Not Applicable
Item 16.Description of Business Description of Business
Item 17.Management's Discussion and Analysis Management's Discussion
or Plan of Operation and Analysis or Plan of
Operation
Item 18.Description of Property Prospectus Summary;
Description of Business;
Item 19.Certain Relationships and Certain Relationships and
Transactions Related Transactions
Item 20.Market for Common Equity and Related Market for Common Equity
Stockholder Matters and Related Stockholder
Matters
Item 21.Executive Compensation Executive Compensation
Item 22.Financial Statements Financial Statements
Item 23.Changes in and Disagreements with Not Applicable
Accountants on Accounting
and Financial Disclosure
PROSPECTUS
MILLER PETROLEUM, INC.
2,761,152 Shares of Common Stock Offered by Selling Stockholders
This prospectus covers an aggregate of 2,761,152 shares of our common
stock that the selling stockholders may sell. We have filed it with the
Securities and Exchange Commission as part of a registration statement that
you may examine in the Securities and Exchange Commission's EDGAR Archives.
Our common stock is quoted on the OTC Bulletin Board of the NASD under
the symbol "MILL." On October 18, 2001, the bid price of our common stock as
quoted on the OTC Bulletin Board was $0.69.
These securities involve a high degree of risk. See the caption "Risk
Factors," beginning on page 4 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved any of these securities or passed upon
the adequacy or accuracy of the Prospectus. Any representation to the
contrary is a criminal offense.
The date of this prospectus is __________, 2001.
1
TABLE OF CONTENTS
Prospectus Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Forward-Looking Information . . . . . . . . . . . . . . . . . . . . . . 8
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Determination of Offering Price and Dilution. . . . . . . . . . . . . . 8
Selling Security Holders . . . . . . . . . . . . . . . . . . . . . . . .9
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . 11
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Directors, Executive Officers, Promoters and Control Persons . . . . . 15
Security Ownership of Certain Beneficial Owners and Management . . . . 18
Description of Securities . . . . . . . . . . . . . . . . . . . . . . .19
Interest of Named Experts and Counsel . . . . . . . . . . . . . . . . .21
Disclosure of Commission Position on Indemnification for Securities . .21
Act Liabilities
Description of Business . . . . . . . . . . . . . . . . . . . . . . . 23
Management's Discussion and Analysis or Plan of Operation . . . . . . .33
Certain Relationships and Related Transactions . . . . . . . . . . . . 37
Market for Common Equity and Related Stockholder Matters . . . . . . . 38
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . 40
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 44
Changes in and Disagreements with Accountants on Accounting and . . . .74
Financial Disclosure
Available Information . . . . . . . . . . . . . . . . . . . . . . . . .74
Dealer Prospectus Delivery Obligations . . . . . . . . . . . . . . . . 75
2
PROSPECTUS SUMMARY
MILLER PETROLEUM, INC.
----------------------
The Company
-----------
You should carefully read our entire prospectus and consolidated
financial statements and related notes. Unless the context requires
otherwise, "we," "us," "our" and similar terms, as well as references to
"Miller," refer to Miller Petroleum, Inc., a Tennessee corporation.
Our business includes the operation of gas and oil wells, the acquisition
and development of gas and oil leases, rebuilding and sales of oil field
equipment and the organization of joint venture drilling programs
with industry partners.
We own the building where our principal executive offices are located.
The building consists of approximately 4,000 square feet of office space and
an equipment yard on 14 acres situated at 3651 Baker Highway, Huntsville,
Tennessee. Our telephone number is (423) 663-9457.
The Offering
------------
Securities offered by us . . . .None.
Securities that may be sold
by our stockholders . . . . . . 2,761,152 shares of our common stock.
Use of proceeds . . . . . . . . We will not receive any money from the
selling stockholders when they sell shares of
our common stock; however, we may receive up
to $1,986,000 from the exercise of
outstanding warrants to acquire shares that
are being registered. As of the date of this
prospectus, none of these warrants has been
exercised, and the exercise price of over half
of the warrants is higher than the present
market price of our common stock.
Offering Price . . . . . . . . .Market prices prevailing at the time of sale,
at prices related to the prevailing market
prices, at negotiated prices or at fixed
prices, all of which may change.
Transfer Agent . . . . . . . . .Interwest Transfer Company, 1981 East Murray-
Holladay Road, Salt Lake City, Utah 84117,
Telephone No. 801-272-9294, serves as the
transfer agent and registrar for our
outstanding securities.
We have agreed to pay all costs and expenses relating to the registration
of our common stock. The selling stockholders will be responsible for any
related commissions, taxes, attorney's fees and other charges relating to the
offer or sale of these securities. The selling stockholders may sell their
common stock through one or more broker/dealers, and these broker/dealers may
receive compensation in the form of underwriting discounts, concessions or
commissions from the selling stockholders as they shall agree.
3
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.
Additional funding may not be available to us. Even if it is available, the
terms of the funding may not be satisfactory to us. If we fail in these
efforts, our business may also fail.
We have experienced losses on our operations during two of the past three
fiscal years.
-------------
We had losses from operations that we conducted during the years ended
April 30, 2000 and 1999. During fiscal 2000, our loss from operations was
$135,700 on gross revenues of $2,048,843, while we incurred losses of $605,776
in fiscal 1999 on gross revenues of $2,613,188. This history of losses
creates uncertainty about our ability to make a profit in the future.
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. In addition, our exploration
costs for additional reserves may increase.
4
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 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.
-----------------------------------------------------------
Our revenues come from the sale of oil and gas. Because the price of oil
and gas is very volatile, we may be able to recover it at prices that are
greater than our recovery costs. 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.
-----------------------------------------------------
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.
5
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. We may not be able to obtain these
items in a timely and cost-effective manner. 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.
--------------------------------------------------------
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 43% 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.
--------
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
Chief Financial Officer, 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.
6
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 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.
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. In addition, 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.
7
FORWARD-LOOKING INFORMATION
---------------------------
This prospectus contains "forward-looking" information within the meaning
of the Private Securities Litigation Reform Act of 1995. Forward-looking
statements contained in this prospectus involve known and unknown risks,
uncertainties and other factors that could cause actual results, financial or
operating performance to differ from the future results, financial or
operating performance or achievements expressed or implied by these
forward-looking statements. You should carefully read the this prospectus and
the risks factors outlined above, along with the more detailed information,
financial statements and the notes to the financial statements appearing
elsewhere in this prospectus before you decide whether to purchase the common
stock described in this prospectus.
USE OF PROCEEDS
---------------
We will not receive any part of the proceeds from sale of our common
stock. However, we will receive $1,986,000, if all of the warrants are
exercised. As of the date of this prospectus, none of these warrants has been
exercised.
We plan to use the proceeds from the exercise of the warrants only for
working capital and not for the payment of outstanding debt.
DETERMINATION OF OFFERING PRICE AND DILUTION
--------------------------------------------
We will not receive any money from the selling stockholders when they
sell their shares of common stock, though we will receive funds from any
exercise of the warrants. The selling stockholders may sell all or any part
of their shares in private transactions or in the over-the-counter market at
prices related to the prevailing prices of our common stock at the time of
negotiation. Because we cannot accurately predict the prices of these sales,
we cannot accurately estimate the amount of any dilution that may result from
the purchase price of any of these shares. "Dilution" is the difference
between the price paid for the shares and our "net tangible book value." The
net tangible book value of our common stock on July 31, 2001, was
$2,831,981 or $0.34 per share, based upon 8,328,656 outstanding shares. Net
tangible book value per share is determined by subtracting our total
liabilities from our total tangible assets and dividing the remainder by the
number of shares of common stock outstanding. These computations do not
include the estimated expenses of this offering of approximately $60,000. The
offer and sale by the selling stockholders of outstanding common stock, or of
those shares underlying the warrants, will not affect the net tangible book
value of our common stock, after taking into account the payment for the
exercise of the warrants.
Any public market for our common stock may not equal or exceed the sales
price of the shares of common stock that our stockholders sell. Purchasers of
our shares face the risk that their shares will not be worth what they paid
for them.
8
SELLING SECURITY HOLDERS
------------------------
The following table shows the following information about the
selling stockholders:
The number of shares of our common stock that each selling stockholder
beneficially owned as of January 15, 2001;
The number of shares covered by this prospectus; and
The number of shares to be retained after this offering, if any.
Common Stock (1)
----------------
Number and Number and
Percentage of Percentage of
Outstanding Shares Number of Shares Outstanding Shares
Name of Selling Owned Prior to Registered in Beneficially Owned
Stockholder the Offering the Offering after the Offering
----------- ------------ ------------ ------------------
Ronnie Griffith (2) 1,852 (0.02%) 1,852(1) -0- (0%)
M. E. Ratliff 175,000 (1.9%) 175,000(1) -0- (0%)
Charles Barker 1,000 (0.01%) 1,000(1) -0- (0%)
Jeff Brockman 23,000 (0.2%) 23,000(1) -0- (0%)
Lori Ann Nunn 5,833 (0.06%) 2,500(1) 3,333 (0.04%)
Raymond D. Cohn 62,500 (0.7%) 62,500(1)(3) -0- (0%)
Shannon A. Boruff, 112,000 (1.2%) 104,000(1) 8,000 (0.09%)
Scott Boruff and/or
c/f Alec Ralston
Boruff and Raquel
Celine Boruff
Celeina Rhea
Houston 129,428 (1.4%) 110,000(1) 19,428 (0.2%)
& Noah Houston
Deangela Jones 28,000 (0.3%) 28,000(1) -0- (0%)
Brittany Rhea
Thompson 12,000 (0.1%) 12,000(1) -0- (0%)
Linda Terry 40,000 (0.4%) 40,000(1) -0- (0%)
Gary Bible (4) 6,300 (0.07%) 6,200(1)(3)(4) 100 (0.001%)
Steve Burchfield 300 (0.003%) 200(1)(4) 100 (0.001%)
Roger Butler 300 (0.003%) 200(1)(4) 100 (0.001%)
Teresa Cotton 6,300 (0.07%) 5,200(1)(3)(4) 1,100 (0.01%)
Roy Greenwood 300 (0.003%) 200(1)(4) 100 (0.001%)
Shawna Harness 200 (0.002%) 200(1)(4) -0- (0%)
Lawrence L.
LaRue (5) 111,177 (1.2%) 12,700(1)(3)(4) 98,477 (1.1%)
Steve Letner 300 (0.003%) 200(1)(4) 100 (0.001%)
Ronnie Lewis 300 (0.003%) 200(1)(4) 100 (0.001%)
Deloy Miller (6) 4,419,343 (47.4%) 200(1)(4) 4,419,143 (47.4%)
Melvin Myers 300 (0.003%) 200(1)(4) 100 (0.001%)
Mark Spurling 200 (0.002%) 200(1)(4) -0- (0%)
Herbert J. White (7) 300 (0.003%) 200(1)(4) 100 (0.001%)
Daniel Williams 200 (0.002%) 200(1)(4) -0- (0%)
Robert H. Wood,
Jr. 100,000 (1.1%) 100,000(1) -0- (0%)
Clifford Pugh 25,000 (0.3%) 25,000(1) -0- (0%)
9
Charlie L. Haynes 50,000 (0.5%) 50,000(1) -0- (0%)
Morris Graham 25,000 (0.3%) 25,000(1) -0- (0%)
Gary Purcell 50,000 (0.5%) 50,000(1) -0- (0%)
Deloy L. Brown and 50,000 (0.5%) 50,000(1) -0- (0%)
Nancy Brown
Tyler C. McCain 25,000 (0.3%) 25,000(1) -0- (0%)
Ed G. Lane 25,000 (0.3%) 25,000(1) -0- (0%)
Victor I. Dodson 25,000 (0.3%) 25,000(1) -0- (0%)
Ron S. Lingerfelt 25,000 (0.3%) 25,000(1) -0- (0%)
Lambert F. Haug 25,000 (0.3%) 25,000(1) -0- (0%)
Donna Jean
Jefferson 25,000 (0.3%) 25,000(1) -0- (0%)
Clark Trust
Desmond Craig
Brooks 25,000 (0.3%) 25,000(1) -0- (0%)
Richard Belz 25,000 (0.3%) 25,000(1) -0- (0%)
U S Trust of
New York
TTEE FBO Raymond D.
Cohn IRA 50,000 (0.5%) 50,000(1) -0- (0%)
Theodore Lamb 25,000 (0.3%) 25,000(1) -0- (0%)
L.E. Smith 50,000 (0.5%) 50,000(1) -0- (0%)
Daniel Page 1,450,000 (15.5%) 1,450,000(1)(3) -0- (0%)
Basic Investors,
Inc. 100,000 (1.1%) 100,000(3)(8) -0- (0%)
--------- --------- ------
7,311,433 (78.4%) 2,761,152 4,550,281 (48.8%)
(1) We assume no purchase in this offering by the selling stockholders of
any shares of our common stock.
(2) Mr. Griffith is a former President and director of Miller Petroleum.
(3) Includes 1,136,000 shares underlying warrants, and assumes that all
warrants are exercised and all common stock owned and/or received on the
exercise of the warrants is sold. The warrant holders are: Raymond Cohn,
12,500 warrants; Daniel Page, 1,000,000 warrants; Basic Investors, Inc.,
100,000 warrants; Lawrence L. LaRue, 12,500 warrants; Teresa Cotton, 5,000
warrants; and Gary Bible, 6,000 warrants.
(4) Represents shares granted to our employees as a Christmas bonus in
December, 2000.
(5) Mr. LaRue is the Chief Financial Officer, Secretary/Treasurer and a
director of Miller Petroleum.
(6) Mr. Miller is the Chief Executive Officer and a director of Miller
Petroleum.
(7) Mr. White is the Vice President and a director of Miller Petroleum.
(8) No director, executive officer or any "associate" of any director or
executive officer has any interest, direct or indirect, by security holdings
or otherwise, in the selling stockholder.
10
PLAN OF DISTRIBUTION
--------------------
We are registering the shares of our common stock covered by this
prospectus.
We will pay the costs, expenses and fees of registering our common stock.
All of the selling stockholders will be responsible for any related
commissions, taxes, attorney's fees and other charges that each may incur in
the offer or sale of these securities.
The selling stockholders may sell our common stock at market prices
prevailing at the time of the sale, at prices related to the prevailing market
prices, at negotiated prices or at fixed prices, any of which may change.
They may sell some or all of their common stock through:
ordinary broker's transactions, which may include long or short
sales;
purchases by brokers, dealers or underwriters as principal and
resale by those purchasers for their own accounts under this
Prospectus;
market makers or into an existing market for our common stock;
transactions in options, swaps or other derivatives; or
any combination of the selling options described in this
Prospectus, or by any other legally available means.
Long sales are sales of shares that the seller owns at the time of the
sale. Short sales are sales of shares that the seller has borrowed, and which
must be "covered" through the subsequent purchase of the number of shares that
the seller has already sold. Short sellers' goal is to purchase the shares at
a lower price than the price at which they sold them. Because a long seller
already owns the shares that he is selling, he does not need to cover his
position. A large volume of selling, whether long or short, would tend to
reduce the price for our common stock, because of the large supply of shares
coming into the market. Conversely, short covering may lift the price for our
stock, because of the increased demand for the shares.
In addition, the selling stockholders may enter into hedging transactions
with broker/dealers, who may engage in short sales of our common stock in the
course of hedging the positions they assume. Finally, they may enter into
options or other transactions with broker/dealers that require the delivery of
our common stock to those broker/dealers. Subsequently, the shares may be
resold under this prospectus.
In their selling activities, the selling stockholders will have to comply
with applicable provisions of the Securities Exchange Act of 1934, and its
rules and regulations, including Regulation M. These rules and regulations
may limit the timing of purchases and sales of our common stock by the selling
stockholders.
11
The selling stockholders and any broker/dealers involved in the sale or
resale of our common stock may qualify as "underwriters" within the meaning of
Section 2(11) of the Securities Act of 1933. In addition, the broker/dealers'
commissions, discounts or concessions may qualify as underwriters'
compensation under the Securities Exchange Act of 1934. If any broker/dealer
or selling stockholder qualifies as an "underwriter," it will have to deliver
our prospectus as required by Rule 154 of the Securities Act of 1933. In
addition, any broker/dealer that participates in a distribution of these
shares will not be able to bid for, purchase or attempt to induce any person
to bid for or purchase any of these shares as long as the broker/dealer is
participating in the distribution. The ability of participating
broker/dealers to stabilize the price of our shares will also be restricted.
If the selling stockholders sell our shares to or through brokers,
dealers or agents, they may agree to indemnify these brokers, dealers or
agents against liabilities arising under the Securities Act of 1933 or the
Securities Exchange Act of 1934. We do not know of any existing arrangements
between the selling stockholders and any other stockholder, broker, dealer,
underwriter or agent relating to the sale or distribution of our common stock.
In addition to selling their common stock under this prospectus, the
selling stockholders may:
transfer their common stock in other ways not involving market
makers or established trading markets, including by gift,
distribution or other transfer; or
sell their "restricted" common stock under Rule 144 of the
Securities Act of 1933, if the transaction meets the requirements of
Rule 144.
We have advised the selling stockholders that during the time they are
engaged in the distribution of our common stock that they own, they must
comply with Rule 10b-5 and Regulation M of the Securities Exchange Act of
1934. They must do all of the following under this Rule and Regulation:
not engage in any stabilization activity in connection with our
common stock;
furnish each broker who may be offering our common stock on their
behalf the number of copies of this Prospectus required by each
broker;
not bid for or purchase any of our common stock or attempt to
induce any person to purchase any of our common stock, other than
as permitted under the Securities Exchange Act of 1934;
not use any device to defraud;
not make any untrue statement of material fact or fail to state
any material fact; and
not engage in any act that would operate as a fraud or deceit upon
any person in connection with the purchase or sale of our shares.
12
To the extent that any selling stockholder may be an "affiliated
purchaser" as defined in Regulation M, it has been further advised of the
requirements of Rule 10b-1, and that it must coordinate its sales under this
prospectus with us for the purposes of Regulation M.
To the extent required by the Securities Act of 1933, a supplemental
prospectus will be filed, disclosing:
the name of any broker/dealers;
the number of securities involved;
the price at which the securities are to be sold;
the commissions paid or discounts or concessions allowed to the
broker/dealers, where applicable;
that the broker/dealers did not conduct any investigation to
verify the information set out in this Prospectus, as supplemented;
and
other facts material to the transaction.
There is no guarantee that any selling stockholder will sell any of our
common stock.
LEGAL PROCEEDINGS
-----------------
On or about January 20, 2000, we filed a complaint against Blue Ridge
Group, Inc. in the Chancery Court of Hawkins County at Rogersville, Tennessee.
The case was designated Case No. 13951. Our complaint asserted that Blue
Ridge had breached a Footage Drilling Contract with us by quitting the job
without drilling to the required depth, by 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. We asked
that we be awarded:
Our initial payment to Blue Ridge of $37,000;
Damages resulting from the improper deviation of the hole from the
vertical plane;
Damages for the cost of re-drilling or re-working the hole;
Damages allowed by the parties' contract;
Further and equitable relief to which we may be entitled; and
Our costs of the lawsuit, including discretionary costs.
13
The Blue Ridge action is still pending. However, an adverse decision
would not materially affect us.
On or about January 19, 2000, we filed a complaint against Ronnie
Griffith, one of our former directors and officers, in the Chancery Court for
Scott County, Tennessee at Huntsville. The case was designated Case No. 8459.
Our complaint asserted that Mr. Griffith had breached his fiduciary duty of
loyalty to us by:
Soliciting our current and prospective customers for another
competing business;
Using our resources, employees, information and time to solicit
customers for the competing business; and
Hiring our employees, who formerly worked under Mr. Griffith's
supervision, to work for the competing business; and
Using Miller's credit cards for personal expenses.
We have asked that Mr. Griffith be restrained from engaging in any
activity that constitutes unfair competition with us or tortious interference
with our business relationships, and that Mr. Griffith not communicate
about our business matters with anyone who was one of our customers during the
time that we employed Mr. Griffith.
We have also asked that we be awarded:
Damages for losses and damages suffered as a result of Mr.
Griffith's breach of fiduciary duty to us;
Damages for use of or conversion of our property, assets or
resources;
Damages for wage disgorgement to the extent that Mr. Griffith
participated in the operation of another business while employed by
us;
Punitive damages for acting maliciously, recklessly, intentionally
or through gross negligence;
For our costs of the lawsuit, including discretionary costs; and
Any other type of damages that we have sustained.
This action was settled on May 5, 2000, by stipulation. The Court
entered an injunction to prevent Mr. Griffith from communicating directly or
indirectly about our business matters with certain of our customers for a
period of one year. We agreed to issue 1,852 shares of our common stock to
Mr. Griffith, and Mr. Griffith agreed to surrender all stock option rights
granted to him as a director and officer. Mr. Griffith returned certain items
of equipment to us, and we returned to Mr. Griffith a compressor that we had
been storing.
14
Other than these actions, we are not party to any pending material legal
proceeding. To the knowledge of management, no federal, state or local
governmental agency is presently contemplating any proceeding against us. No
director, executive officer or other person who may be deemed to be our
"affiliate" or who owns more than five percent of our common stock is a party
adverse to us or has a material interest adverse to us in any proceeding.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
------------------------------------------------------------
The following table sets forth the names of all of our current directors
and executive officers. These persons will serve until the next annual
meeting of our stockholders or until their successors are elected
or appointed and qualified, or their prior resignations or terminations.
Directors and Executive Officers.
---------------------------------
Date of
Initial Date of
Positions Election or Termination
Name Held Designation or Designation
---- ---- ----------- --------------
Deloy Miller Director, 12/96 *
815 South Lake Drive President 12/99 *
Oneida, TN 37841 CEO 12/97 *
Lawrence L. LaRue Secretary/ 12/96 10/01
432 Brewstertown Road Treasurer 12/96 10/01
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 9/00
50 Rivers Run Way
Oak Ridge, TN 37830
Gary G. Bible, Ph.D Vice President 9/97 *
232 West Seneca Circle
Oneida, TN 37841
Teresa Cotton Secretary/ 10/01 *
1228 Cherry Fork Road Treasurer
Helenwood, TN 37765
* These persons presently serve in the capacities indicated opposite
their respective names.
15
Deloy Miller. Mr. Miller, our Chairman and Chief Executive Officer, is
54 years of age. Mr. Miller has 30 years of experience in the oil and gas
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, he has served two terms as President of the Tennessee Oil &
Gas Association, and in 1978, the organization named him the "Tennessee Oil
Man of the Year." He continues to serve on the Board of that organization.
The Governor of Tennessee appointed Mr. Miller to be the petroleum industry's
representative on the Tennessee Oil & Gas Board, the state agency that
regulates oil and gas operations in the state. Mr. Miller has served as a
director and executive officer of our predecessor corporation since its
formation in 1978.
Lawrence L. LaRue. Mr. LaRue is 61 years old. He joined the Miller
organization in March, 1983, as an accountant. During his 17 years with us,
he has acquired an extensive knowledge of all aspects of oil and gas
accounting and tax law. Since becoming Secretary/Treasurer of our predecessor
in 1985, his duties have included 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 74, has 43 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 the southern Appalachian Basin. He also has
experience in Devonian Shale production, enhanced recovery and coal
de-gasification. Miller Petroleum and its predecessor corporation have
employed Mr. White as a Petroleum Engineer since approximately 1985. In
April, 1997, he became a director and Vice President of Development
Engineering for Miller Petroleum.
Herman Gettelfinger. Mr. Gettelfinger, age 68, is a member of our Board
of Directors. He is a co-owner of Kelso Oil Company, of 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 oil
and gas drilling and exploration business for more than 35 years and has been
been involved in drilling wells with us for over 25 years.
Dr. Gary Bible. Dr. Bible, age 51, is our Vice President of Geology.
Dr. Bible earned his BS Degree in Geology from Kent State University and his
MSc. and Ph.D. Degrees in Geology from Iowa State University. He drilled his
first successful wildcat as a Trainee Geologist. Formerly with Phillips
Petroleum Corporation and ALAMCO, Dr. Bible brings us 19 years' experience as
a Petroleum Geologist. In addition, Dr. Bible has spent 10 years in the
Appalachian Basin in the exploration and development of reserves in the Big
Lime, Devonian Shale and in deeper horizons. He has discovered eight new oil
and gas fields in Kentucky and Tennessee. Mr. Bible was hired as Manager of
Geology for ALAMCO in 1991. He left ALAMCO in September of 1997, when he
joined Miller Petroleum. He has been employed as our Vice President of
Geology since then.
16
Teresa Cotton. Ms. Cotton is 39 years old. She joined Miller Petroleum
in August, 1996, and was appointed Secretary/Treasurer on October 1, 2001.
Before joining Miller Petroleum, Ms. Cotton was employed by Halliburton
Services. She has more than 20 years' experience in the oil and gas industry.
Mrs. Cotton, a Tennessee native, is currently enrolled at Roane State
Community College in Huntsville, where she is pursuing a degree in accounting.
Significant Employees.
----------------------
We do not currently have any employees who are not executive officers,
but who are expected to make a significant contribution to our business.
Family Relationships.
---------------------
There are no family relationships between any of our directors or
executive officers.
Involvement in Certain Legal Proceedings.
-----------------------------------------
During the past five years, none of our present or former directors,
executive officers or persons nominated to become directors or executive
officers:
(1) was a general partner or executive officer of any business
against which any bankruptcy petition was filed, either at the time of the
bankruptcy or two years prior to that time;
(2) was convicted in a criminal proceeding or named subject to a
pending criminal proceeding, excluding traffic violations and other minor
offenses;
(3) was subject to any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise
limiting his involvement in any type of business, securities or banking
activities; or
(4) was found by a court of competent jurisdiction in a civil
action, the Commission or the Commodity Futures Trading Commission to have
violated a federal or state securities or commodities law, and the judgment
has not been reversed, suspended or vacated.
17
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
The following tables set forth the share holdings of our directors and
executive officers and those persons who own more than five percent of our
common stock as of the date of the prospectus:
DIRECTORS AND EXECUTIVE OFFICERS
--------------------------------
Number of Shares Percent
Name and Address(1) Title Beneficially Owned of Class(2)
---------------- ----- ------------------ --------
Deloy Miller CEO and 4,419,343 42%
815 South Lake Drive Director
Oneida, TN 37841
Lawrence L. LaRue (3) CFO, Secretary/ 111,177 1%
432 Brewstertown Road Treasurer
Sunbright, TN 37872 Director
Herbert J. White Vice President/Director 300 -0-
P.O. Box 1868
Fairfield Glade, TN
38557
Herman Gettelfinger Director 343,101 3%
641 Atlantic Ave.
Knoxville, TN 37917
Gary Bible (3) Vice President 6,300 -0-
323 Seneca Circle
Oneida, TN 37841
Teresa Cotton Secretary/Treasurer 1,300 -0-
1228 Cherry Fork Road
Helenwood, TN 37765
All executive officers and directors
as a group (Four persons) 4,881,521 46%
(1) These persons presently serve in these capacities for us.
(2) Based upon 10,635,656 outstanding shares, assuming that 1,136,000
shares underlying the warrants of selling stockholders, and 953,400 warrants
held by Baxter Lee III are outstanding, though none of these warrants have
been exercised.
(3) Includes 12,500 shares underlying warrants granted to Mr. LaRue, and
6,000 shares underlying warrants granted to Mr. Bible that are being
registered and may be resold pursuant our Prospectus.
18
FIVE PERCENT STOCKHOLDERS
-------------------------
Number of Shares Percent
Name and Address Title Beneficially Owned (1) of Class
---------------- ----- ------------------ --------
Deloy Miller Director 4,419,343 42%
815 South Lake Drive and CEO
Oneida, TN 37841
Daniel Page Stockholder 1,450,000 14%
3816 Rocky River Street
Las Vegas, NV 89130
Baxter Lee III Stockholder 1,174,612 11%
5555 Cove Island Road
Knoxville, TN 37919
(1) Includes shares underlying warrants to purchase a total of 2,089,400
shares of our common stock, including 1,000,000 such warrants that Daniel Page
owns. See the heading "Warrants" under the caption "Description of
Securities."
Changes in Control.
-------------------
To our knowledge, there are no present arrangements or pledges of our
securities which may result in a change in control of our company.
DESCRIPTION OF SECURITIES
-------------------------
Common Stock.
-------------
Our authorized capital stock consists of 500,000,000 shares of common
stock, $0.0001 par value per share.
Our Articles of Incorporation authorize the Board of Directors to declare
and pay dividends on our common stock out of funds legally available for the
payment of dividends. The holders of our common stock are entitled at all
stockholder meetings to one vote for each share of common stock held. Fully-
paid common stock shall not be liable to any further call or assessment. Our
common stock has no pre-emptive rights, and stockholders are not allowed to
cumulate their votes by multiplying the number of shares owned by the number
of directors being elected and casting all votes for one director.
Our Articles of Incorporation and Bylaws do not contain any provision
that would delay, defer or prevent a change in the control of our company.
19
Warrants.
---------
On December 16, 1997, we issued to Baxter Lee, III, warrants to purchase
up to 688,000 shares of our common stock at a price of $1.25 per share. The
warrants expire on December 12, 2004, and have no call feature. They were
issued in connection with an $860,000 promissory note that we executed in
favor of Mr. Lee. See the caption "Certain Relationships and Related
Transactions."
On August 10, 2000, we issued 12,500 warrants to Raymond R. Cohn, a
stockholder. The warrants are exercisable for 12,500 shares of common stock
at $1.00, for a period of three years.
On December 15, 2000, we issued 17,500 warrants, 12,500 to Lawrence L.
LaRue, and 5,000 to Teresa Cotton, an employee. The warrants are exercisable
for an aggregate of 17,500 shares of common stock at $1.00, for a period of
three years.
On January 9, 2001, we issued 6,000 warrants to Gary Bible. The warrants
are exercisable for 6,000 shares of common stock at $1.00, for a period of
three years.
These warrants are callable during the third year at a price of $0.001
per warrant, at any time that our common stock has traded at $2.00 for 30
consecutive days at not less than 5,000 shares per day. An effective
registration statement covering the shares underlying the warrants must be in
effect at the time that we call any warrant.
On October 11, 2000, we issued 1,000,000 warrants to Daniel Page, a
consultant. The warrants are exercisable as follows:
250,000 shares of common stock at $1.00 for a period of two years;
250,000 shares of common stock at $1.50 for a period of two years;
250,000 shares of common stock at $2.00 for a period of two years;
and
250,000 shares of common stock at $2.50 for a period of two years.
These warrants are callable during the second year at a price of $0.001
per warrant, at any time that our common stock has traded at $2.00 for 30
consecutive days at not less than 5,000 shares per day. An effective
registration statement covering the shares underlying the warrants must be in
effect at the time that we call any warrant.
On December 8, 2000, we issued 100,000 warrants to another consultant,
Basic Investors, Inc. The warrants are exercisable for 100,000 shares of
common stock at $2.00, for a period of three years. These warrants were
issued for services valued in the amount of $3,500 to Miller Petroleum.
These warrants are callable during the third year at a price of $0.001
per warrant, at any time that our common stock has traded at $3.00 for five
consecutive trading days. An effective registration statement covering the
shares underlying the warrants must be in effect at the time that we call any
warrants.
20
All warrants must be adjusted in the event of any forward or reverse
split of our outstanding common stock. The warrants have no voting rights or
liquidation preferences, and unless exercised in accordance with the
particular warrant, no warrant holder has any interest as a stockholder.
INTEREST OF NAMED EXPERTS AND COUNSEL
-------------------------------------
We have included our financial statements as of April 30, 2001 and 2000
in reliance on the report of Charles M. Stivers of Manchester, Kentucky,
independent certified public accountant. Charles M. Stivers has no interest,
direct or indirect, in our company.
Leonard W. Burningham, Esq. and Branden T. Burningham, Esq., lawyers, of
Salt Lake City, Utah, are father and son, associates in the practice of law
and co-counsel for our company. Neither has any interest, direct or indirect,
in our company. Messrs. Burningham and Burningham have prepared the
registration statement and this prospectus and will provide any legal opinions
required with respect to any related matter.
We have not hired any expert or counsel on a contingent basis. Except as
indicated above, no expert or counsel will receive a direct or indirect
interest in our company, and no such person was a promoter, underwriter,
voting trustee, director, officer or employee of our company.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
-----------
Section 48-18-502 of the Tennessee General 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. Indemnification under
Section 48-18-502 is not allowed unless a majority of a quorum of directors
not involved in the proceeding determines that it is permissible because the
director has met the standard of care.
Under Section 48-18-503, a corporation must indemnify a director who was
wholly successful in the defense of any proceeding against reasonable expenses
incurred as part of the defense, unless the corporation's charter provides
otherwise. In addition, Section 48-18-504 allows a corporation to advance a
director's reasonable expenses if:
the director furnishes the corporation with a written affirmation
of his or her good faith belief that he or she has met the
standard of conduct of Section 48-18-502;
21
the director furnishes the corporation with a written undertaking
to repay the advance if it is determined that he or she is not
entitled to indemnification; and
it is determined that the facts then known would not preclude
indemnification under the statute.
Unless the corporation's charter provides otherwise, Section 48-18-505
permits a director to apply for indemnification to the court conducting the
proceeding. The court may order indemnification if it determines that the
director is entitled to mandatory indemnification under Section 48-18-503, or
that he or she is reasonably entitled to indemnification in view of all the
relevant circumstances.
Section 48-18-507 extends indemnification and advanced expense rights to
officers, employees and agents of a corporation as well. In addition, Section
48-18-508 permits a corporation to purchase indemnification insurance on
behalf of its directors, officers, employees and agents.
This is a summary of all material indemnification provisions of the
Tennessee General Corporation Act, and is modified in its entirety by this
reference. Our Board of Directors has adopted these provisions to indemnify
our directors, executive officers and agents.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 or the Securities Exchange Act of 1934 may be permitted to our
directors, executive officers and controlling persons by the foregoing
provisions or otherwise, we have been advised that it is the opinion of the
Securities and Exchange Commission that indemnification is against public
policy as expressed in the Securities Act of 1933, or the Securities Exchange
Act of 1934, and is therefore unenforceable. If a claim for indemnification
against these liabilities, other than our payment of expenses incurred or paid
by any of our directors, executive officers or controlling persons in the
successful defense of any action, suit or proceeding is asserted by the
director, executive officer or controlling person in connection with the
securities being registered, we will, unless in the opinion of our counsel the
matter has been settled by a controlling precedent, submit to a court of
appropriate jurisdiction the question of whether indemnification by us is
against public policy as expressed in the Securities Act of 1933, or the
Securities Exchange Act of 1934, and will be governed by the final
adjudication of that issue.
22
DESCRIPTION OF BUSINESS
-----------------------
Business Development.
---------------------
Corporate History.
------------------
We were founded in 1967 by Deloy Miller, our President and CEO, as a sole
proprietorship, and incorporated in the State of Tennessee under the name
"Miller Contract Drilling, Inc." on January 24, 1978. We are a successor to
or a combination of several Deloy Miller owned enterprises as follows:
On January 24, 1978, Miller Contract Drilling, Inc. was incorporated
as a for profit corporation in the state of Tennessee;
On March 13, 1979, Miller Resources, Inc. merged into us;
On October 31, 1983, Miller Trucking Co., Inc. merged into us;
On February 27, 1984, we changed our name to our current name,
"Miller Petroleum, Inc.";
On April 30, 1985, Miller Enterprises, Inc. merged into us;
On September 12, 1996, we increased the number of shares of our
authorized common stock to 2,000; and
On September 16, 1996, Miller Services, Inc. and Energy Cell, Inc.
merged into us. We merged with these companies in anticipation of
our "going public" as discussed below, because we wanted these
entities to be part of a public corporation. Energy Cell owned
working interests in wells and some oil and gas leases.
Triple Chip Systems, Inc., a Delaware corporation, acquired 100% of our
common stock in a reverse reorganization effective December 20, 1996. On
January 13, 1997, Triple Chip was merged into us and we were the surviving
corporation. As part of the merger, we increased our authorized common stock
to 500,000,000 shares at $0.0001 par value. The purpose of these transactions
was to make us a publicly traded company. Triple Chip was a publicly held
company that had no material assets or operations at the time of the
transactions.
General History.
----------------
In the beginning, we were involved with shallow cable tool oil and gas
drilling. We quickly became an industry leader by adapting an Ingersoll-Rand
T3 Drillmaster for deeper drilling. This modernized the drilling industry
in our area and we became the largest drilling contractor in Tennessee.
By the 1980's, we were active throughout the Appalachian Basin, with
more than 18 drilling rigs working from southern New York to northern Alabama.
Between 1978 and 1983, we drilled more than 4,000 wells under the direction
and control of Deloy Miller. We have drilled more than 65% of the total wells
drilled in the State of Tennessee.
23
During our years as a drilling contractor, we acquired several oil and
gas leases and 50 or more working interests in oil and gas wells. Drilling
activity declined drastically in the late 1980's and we sold or stacked most
of our drilling rigs. In order to survive financially, we began developing
prospects and drilling them with industry partners.
During the early 1990's, drilling activity remained well below normal and
we decided to permanently change our focus to exploration and production,
continuing to develop prospects, actively lease promising areas for oil and
gas, seek out opportunities to purchase oil and gas properties, and drill
promising prospects with industry partners. We have oil or gas production in
the Tennessee counties of Campbell, Fentress, Morgan, Overton, Scott and
Hancock.
We currently have more than 40,000 acres under lease in Tennessee. We
also owned 40,000 acres in Kentucky, which we recently sold as discussed
below. We continue to seek the acquisition of additional strategic acreage.
Although we engage in a minimum of contract drilling, we have kept drilling
rigs, service rigs, trucks and bulldozers to drill, service and maintain our
own wells.
We use the latest computer graphics and analytical tools for geologic
exploration, drilling and development. These tools include:
GeoGraphix geological mapping package - we have a proprietary
database of over 127,000 wells integrated into our software and
continue to add to it as new information becomes available;
Arc View, a state-of-the-art geographical information system; and
X-Map Geographic - Delorme topographical map package, which
handles topographics for the States of Tennessee and Kentucky.
We believe that Miller Petroleum is either the only oil and gas producer
in the area, or was one of the first producers in the area to use these
applications.
Our operations include the operation of gas and oil wells, acquisition
and development of gas and oil leases, rebuilding and sales of oil field
equipment and the organization of joint venture drilling programs with
industry partners.
We have acquired and operate the following properties:
Koppers Lease or "ARCO/GULF Farmout".
Our largest acreage block is in Campbell County, Tennessee. This
acreage was acquired through a farmout agreement with ARCO/Gulf. Miller
Petroleum 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 for us to drill at least four more
wells during fiscal 2002.
24
Delta Producers, Inc. joint venture.
Miller Petroleum 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.
In the summer of 1999, 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. The cost of this interest was paid by Miller
Petroleum agreeing to provide the geology and developmental work on the land.
To date, we have spent about $4,000 on this work. We expect geology and
developmental work to be about $2,500 for each future well. 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, are 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.
Miscellaneous oil and gas leases and wells.
Miller Petroleum 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.
Tengasco Farmout and nearby area.
We continue to develop the farmout that we 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.
25
We have drilled four successful Knox Dolomite wells in the Swan Creek
field proper. A fifth Knox well that we drilled on this farmout 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, we have 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, Miller Petroleum 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. There were 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.
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 us $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.
26
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 have 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.
Principal Products or Services and Markets
------------------------------------------
Miller Petroleum drills, produces and markets natural gas and oil. The
demand for these products continues to increase as population expands and
electricity producers convert from burning coal to burning natural gas.
According to the Annual Energy Outlook 2001, prepared by the Energy
Information Administration, a statistical agency of the U. S. Department of
Energy, consumption of petroleum products is expected to increase from about
38.13 quadrillion British Thermal Units per year in 2001, to about 41.41
quadrillion btu in 2005. The Energy Information Association also estimates
that consumption of natural gas will increase from about 22.56 quadrillion btu
to about 25.88 btu during the same period.
South Kentucky Purchasing Company, a refinery located in Somerset,
Kentucky, makes direct statewide purchases of oil at the well site. 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
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 our wells in the Jellico Field. NAMI is sending this gas north through
Delta Natural Gas and its KA-1 line.
Properties.
-----------
Our operations include the operation of gas and oil wells, the
acquisition and development of gas and oil leases, the rebuilding and sales of
oil field equipment and the organization of joint venture drilling programs
with industry partners. We currently control over 40,000 acres of oil and gas
leasehold interests in Tennessee. Major leases in Tennessee include the
following:
27
A 100% working interest in the Koppers lease, consisting of about
27,000 acres in Campbell County, Tennessee;
A 50% working interest in the 8,000 acre Elk Valley Iron and Coal
lease;
A 50% working interest in the 4,000 acre Lindsey Land Company lease;
and
Various smaller leases in Overton, Fentress, Morgan, Scott, Campbell
and Hancock counties, Tennessee, consisting of leases from two acres to 500
acres.
We also own an office, shop and equipment yard located in
Huntsville, Tennessee. The office consists of 2500 square feet. In 1997, we
created a building addition of 1500 square feet.
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 and
its oil and gas properties and interests. Coburn's fee is not contingent upon
its work or report.
The preparation of reserve reports requires the use of certain
assumptions. Any assumptions used in preparing the reserve report may prove
to be inaccurate. In addition, we may not be able to recover the amounts
of oil and gas or to receive the net profits contained in the report.
28
Distribution Methods of Our Products.
-------------------------------------
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 Delta Natural Gas Company, Inc.; CNR; NAMI Resources; Tengasco;
and Citizens Gas Utility District. Our only crude oil purchaser is South
Kentucky Purchasing Company. Management anticipates that our products will be
sold to one of these companies. However, we may not be able to make such
sales. Even if we do, we may not be able to receive a price that is
sufficient to make our operations profitable.
Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements or
Labor Contracts.
----------------
Royalty agreements relating to oil and gas production are standard
in the industry. The amount of our royalty payments varies from
lease to lease. See the caption "Business," above.
Competitive Business Conditions.
--------------------------------
We will undertake our contemplated oil and gas exploration activities in
a highly competitive and speculative industry. In seeking any other suitable
oil and gas properties for acquisition, we will be competing with numerous
companies located in the State of Tennessee and elsewhere. These competitors
may include multinational oil and gas companies and other large independent
operators with substantially greater financial resources than we have.
However, management believes that our competitive position in the oil and gas
industry in Tennessee will not be significant.
Locally, we have several competitors in the area of our acreage blocks in
the State of Tennessee. Three of these competitors may be deemed to be
significant. These are CNR, Tengasco, Inc. and Anderson Oil and Gas. Given
our relatively large acreage holdings in the area and our estimated proven
undeveloped reserves. We recently began selling gas from four wells through
this pipeline. Our drilling program consists of about 30 wells, of which 20
are on the Tengasco farmout and 10 are on various other leases. We have
drilled six wells on the farmout and four on the other leases, and expect to
complete the drilling program in January, 2002.However, our operations will
face many risks that may hurt our operations. See the caption "Risk Factors."
Management does not foresee any difficulties in procuring logging,
cementing and well treatment services in the area of our 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 seven to 14 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
negatively affect the profitability of our operations.
29
We have our own drilling and service rigs with the employees necessary to
perform all other services required to drill and produce gas and oil wells.
The prices of our products are controlled by the world oil market and the
United States natural gas market, so competitive pricing behaviors 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 to obtain the most favorable prices for transporting the
product. Management believes that we are well positioned in these areas
because of the transmission lines that run through and adjacent to the
properties that we lease, and because we hold relatively large acreage blocks
in what management believes are promising areas. We believe that these
acreage blocks are promising because they are located in areas of known oil
and gas production. However, we face many risks in our chosen industry, and
these properties may never produce oil and gas in commercial quantities. See
the caption "Risk Factors."
Sources and Availability of Raw Materials.
------------------------------------------
Our operations are not dependent on the acquisition of any raw materials.
Dependence on One or a Few Major Customers.
-------------------------------------------
We will depend upon local purchasers of hydrocarbons in the areas
where our properties are located. The five purchasers in our areas of
operations are:
Citizens Gas Utility District;
Delta;
CNR;
NAMI Resouces;
Tengasco; and
South Kentucky.
Miller Petroleum 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 our operations are Citizens Gas Utility District,
Delta, CNR, NAMI Resources, Tengasco and South Kentucky. The loss of one or
more purchasers with whom we may contract may have a substantial adverse
impact on our 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.
The terms of our contracts with our purchasers are:
(1) Citizens Gas Utility District purchases natural gas from our wells
in Scott County, Tennessee. Citizens pays $4.00 per Mcf less transportation
costs. Sales to Citizens are less than one percent of our total natural gas
sales.
30
(2) NAMI Resources Company, LLC purchases our gas from the Jellico
Field. The sales price is the Columbia Appalachian Monthly Contract Index less
transportation and marketing costs. Sales to NAMI are approximately 70 percent
of our total natural gas sales.
(3) Tengasco, Inc. purchases natural gas from wells in the Swan Creek
Field. Tengasco pays the New York Mercantile Exchange first of the month
posting plus $0.10, less transportation charges. Sales to Tengasco are about
8-1/2 percent of our 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 percent of our natural gas.
Miller Petroleum 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. This price can change up to 30 times per
month.
The loss of one or more purchasers may have substantially reduce our
sales and our ability to operate profitably.
Need for Governmental Approval of Principal Products or Services.
-----------------------------------------------------------------
None of the principal products or services that we offer require
governmental approval. However, permits are required for drilling oil
or gas wells.
Effect of Existing or Probable Governmental Regulations on Business.
--------------------------------------------------------------------
Oil and gas exploration and production are governed by many environmental
laws, rules and regulations. The federal Clean Water Act requires us 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. The plugging bonds
cost $2,000 per well or $10,000 for ten wells. We have deposited a $1,500
Certificate of Deposit for most of the reclamation bonds,.
31
The State of Kentucky also requires oil and gas drillers to obtain
a permit for their activities and to post with the Division of Oil and Gas of
the Kentucky Department of Minerals and Mines a bond to ensure that each well
is properly plugged when it is abandoned. These bonds are based on $1 per
foot. The Kentucky Division retains the bond until the subject wells are
plugged.
Laws and regulations also require 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 the corporation. These laws and regulations may expose us to
liability for conditions caused by others, or for our acts even though they
complied with all applicable laws at the time they were performed. The
modification of existing laws or regulations or the adoption of new
environmental laws or regulations could have a material adverse effect on our
operations. In addition, our 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 these events could result in personal injury, loss of life, property damage
or destruction or suspension of operations.
We have in place an Emergency Action and Environmental Response Policy
Program. This program details the appropriate response to any emergency that
management believes could happen in our operations.
We believe we are 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 hurt our present
and planned business operations.
The foregoing is only a brief summary of some of the existing
environmental laws, rules and regulations to which our business operations are
subject, and there are many others, the effects of which could have an adverse
impact on us. Future legislation in this area will no doubt be enacted and
revisions will be made in current laws. We have no way of knowing what effect
these present and future laws, rules and regulations will have on our current
and future operations.
Research and Development Expenses.
----------------------------------
We have not spent any material amount in research and development
activities during the last fiscal year. Most of the research done during our
exploration activities is geological research. This work falls under the job
description of our full-time geologist and will not cost anything more than
his standard salary.
Number of Employees.
--------------------
We presently have 20 full-time employees and one part-time employee.
When we commence our full-scale drilling program in accordance with our
plan of operation, we plan to have up to 24 full-time employees,
including officers, and one part-time employee. None of our employees is
covered by a collective bargaining agreement, and we believe that our
relationship with our employees is excellent.
32
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
---------------------------------------------------------
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. We are also actively pursuing
the acquisition of additional high potential acreage in eastern Tennessee. A
recent "high volume" well, Tennessee Mining, Inc. #22B, drilled in August of
2000, has produced 8,039 barrels of oil through June 30, 2001. A development
oil well drilled on one of these properties showed that the oil reservoir has
not yet been pressure depleted. We plan 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 that we
drilled in June of 2001 encountered 13 coal seams below 750 feet depth on a
5,000-acre lease that we have 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. We
have 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, we have
drilled four successful Knox Dolomite wells in Swan Creek Field proper, and
development drilling is continuing. A fifth Knox well that we drilled has
resulted in a new field discovery on a separate structure from Swan Creek. We
are 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.
33
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 we have 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 we
plan to continue the development of our share of these reserves.
Our management has identified 12 additional structures similar to Swan
Creek Field in the Tennessee portion of the Eastern Overthrust Belt. We are
presently acquiring leases over two of these structures. We plan to test
these structures as aggressively as possible while continuing to identify
additional targets in the Eastern Overthrust Belt.
Results of Operations.
----------------------
Fiscal year ended April 30, 2001.
---------------------------------
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.
34
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.
35
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.
Three months ended July 31, 2001.
---------------------------------
Miller Petroleum reported total revenues of $598,629 during the three
months ended July 31, 2001, a 26% decrease when compared to total revenues of
$808,859 reported in the first quarter of its fiscal quarter ended July 31,
2000.
Service and drilling revenue decreased to $449,866 during the quarterly
period ended July 31, 2001, from $521,948 in the year earlier period. This
decrease was due primarily to mechanical problems with drilling equipment,
which have since been repaired.
Retail sales during the July 31, 2001, quarterly period increased to
$24,184, from $991 in the July 31, 2000 period, due to the increased activity
in oil and gas.
Other revenue declined to $2,693, from $123,904 in the July 31, 2000
period. The larger amount for the 2000 period is due to our sale of our
Kentucky properties.
Total costs and expenses increased to $713,403, from $638,007. This
increase primarily resulted from increased selling, general and administrative
expenses, which went to $218,964, from $106,740 in the July 31, 2000 quarter.
This increase was due to legal and professional fees. Our costs of oil and
gas sales decreased to $219,078 in the quarterly period ended July 31, 2001,
from $253,627 in the year ago period, due to decreased production.
Our income from operations fell to ($114,774) from $170,852, for the
reasons discussed above. Net income fell to ($164,660), from $73,112 in the
quarterly period ended July 31, 2000.
36
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, although
those prices returned to normal levels in September, 2001. 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, 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. Prices have since returned to normal levels.
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.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
Transactions with Management and Others.
----------------------------------------
During quarter ended January 31, 1998, we purchased certain real
property from Deloy Miller's wife. The property is located in Huntsville,
Tennessee and currently houses our principal executive offices, shop and
equipment yard. The appraisal price of the property was $550,000. We paid
$82,470 cash, assumed a $39,906 note payable with the First National Bank of
Oneida, and issued a note payable for $377,624 to Ms. Miller. The note is
secured by the real property and bears 7% interest. An annual payment of
$92,019, plus interest, was paid beginning August 1, 1998. The total purchase
price of the property was $500,000. The balance owed on this note as of July
31, 2001, was $43,614.
37
We issued a note payable of $860,000 at 8% with a seven year term to
Baxter Lee III, of Knoxville, Tennessee. The note included 688,000 warrants,
which can exercised during the term of the note payable for $1.25 per
share. The ratio of warrants to common stock as of the date of the note
payable will be maintained; as a result, Mr. Lee currently has warrants to
purchase 953,400 shares.
Management believes that the terms of the loan from Mr. Lee were as
favorable as we could get from any third party at the time of the loan. At
that time, Mr. Lee was an unaffiliated third party. However, if Mr. Lee were
to exercise his warrants, he would own more than 10% of our outstanding
shares.
Other than these transactions, there have been no material transactions,
series of similar transactions or currently proposed transactions, to which we
or any of our 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 us to own of record or beneficially more than
5% of the our common stock, or any member of the immediate family of any of
the foregoing persons, had a material interest.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
--------------------------------------------------------
Market Information.
-------------------
Our common stock is currently traded on the OTC Bulletin Board of the
NASD. However, the market for our common stock is extremely limited in
volume. The present market for our common stock may not continue or be
maintained, and the sale of "unregistered" and "restricted" common stock
pursuant to Rule 144, or of the shares being registered for resale under this
prospectus by the selling stockholders, may substantially reduce the market
price of our common stock.
38
The quarterly high and low bid prices for our shares of common stock
for our two most recently completed fiscal years are as follows:
Bid
---
Quarter ending: High Low
--------------- ---- ---
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, 2001 $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
July 31, 2001 $1.70 $0.80
These bid prices were obtained from Pink Sheets, LLC, formerly known as
the "National Quotation Bureau, LLC," and do not necessarily reflect actual
transactions, retail markups, mark downs or commissions.
Resales of Restricted Securities.
---------------------------------
Approximately 1,348,265 shares of our common stock are publicly traded.
This number will be increased by the 1,625,152 presently outstanding shares
that may be offered by this prospectus, along with the 1,136,000 shares
underlying the warrants that also may be offered by this prospectus. All of
our other outstanding common stock is eligible for public resale under Rule
144 of the Securities Act of 1933. These sales could substantially decrease
the market price of our common stock. These sales could also severely affect
our ability to raise the necessary debt or equity funding for our current and
intended business operations.
Holders.
--------
As of the date of this prospectus, we have about 285 stockholders. This
figure does not include an indeterminate number of stockholders who may hold
their shares in "street name."
39
Dividends.
----------
We have not declared any cash dividends on our common stock, and do not
intend to declare dividends in the foreseeable future. Management intends to
use all available funds for the development of our plan of operation. There
are no material restrictions limiting, or that are likely to limit, our
ability to pay dividends on our common stock.
EXECUTIVE COMPENSATION
----------------------
Cash Compensation.
------------------
The following table shows the aggregate compensation that we have paid to
directors and executive officers for services rendered during the periods.
SUMMARY COMPENSATION TABLE
--------------------------
Long Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Secur-
ities All
Name and Year Other Rest- Under- LTIP Other
Principal Ended Salary Bonus Annual ricted lying Pay- Comp-
Position April 30 ($) ($) Compen-Stock (1) Optionsouts ensat'n
---------------------------------------------------------------------
Deloy Miller 1999 122,307 0 0 100 0 0 0
President, 2000 119,999 0 0 0 0 0 0
CEO and 2001 120,499 0 0 200 0 0 0
Director
Lawrence L. 1999 61,154 0 0 5,100 0 0 0
LaRue, 2000 60,000 0 0 10,000 (2) 0 0
CFO, 2001 60,500 0 0 200 0 0 0
Secretary/
Treasurer
and Director
Herbert J. 1999 9,700 0 0 100 0 0 0
White, VP 2000 3,500 0 0 0 0 0 0
and 2001 6,100 0 0 200 0 0 12,500
Director(3)
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 (4) 2000 72,500 0 0 0 0 0 0
2001 33,462 0 0 0 0 0 0
40
(1) As of April 30, 2001, the last date of our most recently
completed fiscal year, the values of our directors' and
executive officers' holdings of these restricted shares were as
follows, based on a closing bid price of $1.50 on that date:
Name Number of Shares Value of Shares
---- ---------------- ---------------
Deloy Miller 4,419,343 $6,629,014.50
Lawrence L. LaRue 111,177 $ 166,765.50
Herbert J. White 300 $ 450.00
Herman Gettelfinger 243,101 $ 364,651.50
Gary Bible 6,300 $ 9,450.00
None of these shares is subject to any vesting provision.
(2) On December 15, 2000, we issued to Mr. LaRue warrants to
purchase up to 12,500 shares of our common stock. The warrants
are exercisable at a price of $1.00, for three years.
(3) Mr. White was paid $100 per day for engineering services
provided to us in fiscal 2000.
(4) We no longer employ Mr. Bonar.
In addition to the foregoing, on January 9, 2001, we issued to Gary Bible
warrants to purchase up to 6,000 shares of our common stock at a price of
$1.00. The warrants are exercisable for a period of three years.
Compensation Pursuant to Plans.
-------------------------------
Effective January 29, 1997, we adopted an Incentive Stock Option Plan
which provides for certain employees to purchase shares of our common stock at
a price equal to 115% of the fair market value of our common stock on the date
that the option is granted. The options are exercisable for a period of five
years from the date of the grant. Upon the first anniversary of the granting
of the options, 25% of the options vested, with additional 25% amounts vesting
on each subsequent anniversary of the grant date.
41
As of the date of this prospectus, the following options are
outstanding:
Price Per
Name Number of Shares Price Date of Grant
---- ---------------- ----- -------------
Roy Greenwood 50,000 $0.575 1/29/97
Lawrence LaRue 100,000 $0.575 1/29/97
Ronnie Lewis 40,000 $0.575 1/29/97
Deloy Miller 100,000 $0.575 1/29/97
Herbert White 100,000 $0.575 1/29/97
Ronnie Griffith 100,000 $0.575 1/29/97
Teresa Cotton 20,000 $0.575 1/29/97
Gary G. Bible 40,000 $1.75 (1) 9/15/97
Melvin C. Myers 2,000 $1.00 (1) 2/6/98
Steven W. Letner 2,000 $1.00 (1) 2/6/98
Steven R. Burchfield 4,000 $1.00 (1) 2/6/98
Lawrence LaRue 11,591 $1.50 (1) 4/30/98
Lawrence LaRue 1,776 $1.50 (1) 4/30/99
(1) These options were granted with an exercise price of 115% of the fair
market value of the shares on the date of the grant, and are
exercisable for eight years.
On April 10, 2000, we granted to Michael Ratliff, who is not an
employee, an option to purchase 250,000 shares of our common stock for $1.00
per share, for a period of one year. Mr. Ratliff has exercised options to
purchase 100,000 of these shares. The remaining options expired on August 15,
2001.
Pension Table.
--------------
We have no pension plans.
Other Compensation.
-------------------
We have no other compensation arrangements with any of our directors or
executive officers.
42
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.
Termination of Employment and Change of Control Arrangements.
-------------------------------------------------------------
None; not applicable.
Compliance with Section 16(a) of the Securities Exchange Act of 1934.
---------------------------------------------------------------------
We have no securities registered under Section 12 of the Securities
Exchange Act of 1934. We file reports under Section 15(d) thereof.
Accordingly, our directors, executive officers and 10% stockholders are not
required to file statements of beneficial ownership of securities under
Section 16(a) of the Securities Exchange Act of 1934.
43
MILLER PETROLEUM, INC.
CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2001 and 2000
43
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.
MILLER PETROLEUM, INC.
Consolidated Balance Sheets
ASSETS
July 31, April 30,
2001 2001
Unaudited
CURRENT ASSETS
Cash $ 214,540 $ 224,550
Accounts receivable - trade-, net 942,664 1,143,300
Inventory 439,762 439,113
Prepaid expenses 54,465 74,011
Total Current Assets 1,651,431 1,880,974
FIXED ASSETS
Machinery and equipment 1,185,170 1,249,511
Vehicles 387,315 438,851
Buildings 313,335 313,335
Office Equipment 75,410 87,172
Less: accumulated depreciation (722,805) (881,690)
Total Fixed assets 1,238,425 1,207,179
OIL AND GAS PROPERTIES 1,252,712 1,050,687
(On the basis of successful
efforts accounting)
PIPELINE FACILITIES 317,442 336,635
OTHER ASSETS
Land 511,500 511,500
Investments 500 500
Organization Costs 0 119
Total Other Assets 512,000 512,119
TOTAL ASSETS $4,972,010 $4,987,594
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade $ 271,272 $ 134,275
Accrued expenses 89,022 91,910
Notes payable - current portion 537,039 577,270
Total Current Liabilities 897,333 803,455
LONG-TERM LIABILITIES
Notes payable - related 43,614 89,968
Notes payable 1,199,082 1,207,530
Total Long-Term Liabilities 1,242,696 1,297,498
Total Liabilities 2,140,029 2,100,953
STOCKHOLDERS' EQUITY
Common Stock: 500,000,000 shares
authorized at $0.0001 par value,
8,328,656 and 8,218,656 shares
issued and outstanding 833 822
Additional paid-in capital 3,676,469 3,566,480
Retained Earnings (845,321) (680,661)
Total Stockholders' Equity 2,831,981 2,886,641
TOTAL LIABILITIES AND
STOCKHOLDERS'S EQUITY $4,972,010 $4,987,594
The accompanying notes are an integral part of these consolidated financial
statements.
MILLER PETROLEUM, INC.
Consolidated Statements of Operations
(UNAUDITED)
Three Months Three Months
Ended
July 31,2001 July 31, 2000
REVENUES
Oil and gas revenue $121,886 $162,016
Service and drilling revenue 449,866 521,948
Retail sales 24,184 991
Other revenue 2,693 123,904
Total Revenue 598,629 808,859
COSTS AND EXPENSES
Cost of oil and gas sales 219,078 253,627
Selling, general and administrative 218,964 106,740
Salaries and wages 179,512 181,137
Depreciation, depletion and amortization 95,849 96,503
Total Costs and Expenses 713,403 638,007
INCOME (LOSS) FROM OPERATIONS (114,774) 170,852
OTHER INCOME (EXPENSE)
Interest income 124 113
Interest expense (50,010) (97,853)
Total Other Income (Expense) (49,886) (97,740)
INCOME TAXES 0 0
NET INCOME (LOSS) $(164,660) $ 73,112
NET EARNING (LOSS) PER SHARE $ (0.02) $ 0.01
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 8,273,656 7,116,191
The accompanying notes are an integral part of these consolidated financial
statements.
MILLER PETROLEUM, INC.
Consolidated Statement of Stockholders' Equity
(UNAUDITED)
Additional
Common Shares Paid-in Retained
Shares Amount Capital Earnings Total
Balance
April 30, 2000 7,110,691 $711 $2,462,138 ($935,063) $1,527,786
Common stock
issued for cash at
$1.00 per share 1,077,600 108 1,077,492 - 1,077,600
Common stock
issued for cash at
$0.90 per share 50,000 5 44,995 - 45,000
Common stock
issued for services
at $1.00 per share 5,500 1 5,499 - 5,500
Common stock
issued for equipment
at $1.00 per share 23,000 2 22,998 - 23,000
Common stock
repurchased for
$2.00 per share (45,000) (5) (89,995) - (90,000)
Common stock
repurchased for
$1.60 per share (3,135) - (5,000) - (5,000)
Warrants (1,123,500)
issued for services 48,353 48,353
Net income for the
year ended
April 30, 2001 $254,402 $254,402
Balance
April 30, 2001 8,218,656 $822 $3,566,480 ($680,661) $2,886,641
Common stock
issued for cash at
$1.00 per share 110,000 11 109,989 - 110,000
Net loss for the
three months ended
July 31, 2001 ($164,660) ($164,660)
73,112
Balance
July 31, 2001 8,328,656 $833 $3,676,469 ($845,321)$2,831,981
The accompanying notes are an integral part of these consolidated financial
statements
MILLER PETROLEUM, INC.
Consolidated Statement of Cash Flows
(UNAUDITED)
Three Months Twelve Months
Ended
July 31, 2001 April 31, 2001
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(164,660) $73,112
Adjustments to Reconcile Net Income to
Net Cash Provided (Used) by Operating
Activities:
Depreciation, depletion and amortization 95,849 96,503
Allowance for bad debts 17,233
Common stock issued for services 5,500
Gain on sale of equipment and oil and
gas properties (123,904)
Changes in Operating Assets and Liabilities:
Decrease (increase) in accounts receivable 200,636 (1,568,775)
Decrease (increase) in inventory (649) _
Decrease (increase) in organizational costs 119 59
Decrease (increase) in prepaid expenses 19,546 13,994
Incease (decrease) in accounts payable 136,997 (118,009)
Increase (decrease) in accrued expenses (2,888) 14,254
Net Cash Provided (Used) by Operating
Activities 284,950 (1,590,033)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (66,478) (54,444)
Sale of oil and gas properties 0 1,874,423
Purchase of oil and gas properties (243,449) (139,334)
Sale of equipment 0 103,982
Net Cash Provided (Used) by Investing
Activities (309,927) 1,784,627
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable (145,033) (117,547)
Sale of common stock 110,000 45,000
Repurchase of common stock 0 (90,000)
Proceeds from borrowing 50,000 35,305
Net Cash Provided (Used) by Financing
Activities $ 14,967 ($127,242)
NET INCREASE IN CASH ($10,010) $ 67,352
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 224,550 39,556
CASH AND CASH EQUIVALENTS,
END OF PERIOD $214,540 $106,908
CASH PAID FOR
Interest ($50,009) ($97,853)
Income taxes - -
NON-CASH FINANCING ACTIVITIES:
Common stock and warrants issued for services $ 5,500
The accompanying notes are an integral part of these consolidated financial
statements.
MILLER PETROLEUM, INC.
Notes to the Consolidated Financial Statements
(1) Certain information and footnote disclosures normally included in the
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these financial statements be read in conjunction with the
Registrant's April 30, 2001 Annual Report on Form 1OKSB. The results of
operations for the period ended July 31, 2001 are not necessarily
indicative of operating results for the full year.
The consolidated financial statements and other information furnished
herein reflect all adjustment which are, in the opinion of management of
the Registrant, necessary for a fair presentation of the results of the
interim periods covered by this report.
(2) RELATED PARTY TRANSACTIONS
None.
(3) SFAS No. 133. "Accounting for Derivative Instruments and Hedging
Activities," as amended, is effective for all fiscal years beginning
after June 15, 2000 (as amended by FAS 138). 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 aderivative 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.
The adoption of the new standard on January 1, 2001 did not affect the
Company's financial statements.
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 provided
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 of operations.
In July 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard (SFAS) No. 141, "Business Combinations"
and SFAS No. 142. "Goodwill and Other Intangible Assets". SFAS No. 141
addresses the initial recognition and measurement of goodwill and other
intangible assets acquired in a business combination and SFAS No. 142
addresses this initial recognition and measurement of intangible assets
acquired outside of a business combination whether acquired individually
or with a group of other assets. These standards require all future
business combinations to be accounted for using the purchase method of
accounting. Goodwill will no longer be amortized but instead will be
subject to impairment tests at least annually. The Company is required
to adopt SFAS No. 141 and 142 on a prospective basis as of January 1,
2002, however, certain provisions of these new Standards may also apply
to any acquisitions concluded subsequent to June 30, 2001. Presently,
the adoption of these new standards is not expected to have a material
impact on the Company's financial condition or results of operations.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
----------
On or about March 19, 1998, our Board of Directors engaged Charles M.
Stivers, Certified Public Accountant, of Manchester, Kentucky, to audit our
financial statements. He continues as our auditor for fiscal 2002.
AVAILABLE INFORMATION
---------------------
We file periodic reports with the Securities and Exchange Commission.
You may inspect and copy these documents at the Public Reference Room of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549. Please call the Securities and Exchange Commission at
1-800-SEC-0330 for additional information. Our Securities and Exchange
Commission filings are also available on its web site: http://www.sec.gov.
We have filed a registration statement with the Securities and Exchange
Commission on Form SB-2, under the Securities Act of 1933, with respect to the
securities described in this prospectus. This prospectus is filed as part of
the registration statement. It does not contain all of the information set
forth in the registration statement and the exhibits and schedules filed with
it. For further information about us and the common stock described by this
prospectus, we refer you to the registration statement and to the exhibits and
schedules filed with it. You may inspect or copy these documents at the
Public Reference Branch or on the Securities and Exchange Commission's web
site.
You may wish to examine our 8-K Current Report dated September 6, 2000,
for further information on the sale of our Kentucky assets to NAMI Resources.
You may also wish to examine our 8-K Current Report dated December 12,
2000, for further information about our most recent private placement of
securities. The purchasers of these securities are part of the group of
selling stockholders, and the securities purchased on this offering are part
of the securities being registered for resale pursuant to the prospectus.
74
DEALER PROSPECTUS DELIVERY OBLIGATION
-------------------------------------
Until _______________, all dealers that effect transactions in these
securities, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealers' obligation to
deliver a prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
75
------------------------------------------------------------------------------
------------------------------------------------------------------------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors And Officers.
------------------------------------------
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. Our Board of
Directors has adopted these provisions to indemnify its directors, executive
officers and agents.
Item 25. Other Expenses of Issuance And Distribution.
--------------------------------------------
The following table sets forth the expenses which we expect to incur in
connection with the registration of the shares of common stock being
registered by this Registration Statement. All of these expenses, except for
the Commission registration fee, are estimated:
Securities and Exchange Commission registration fee........$ 1,173.32
Legal fees and expenses....................................$50,000.00
Accounting fees............................................$ 3,500.00
Printing and engraving expenses............................$ 1,000.00
Blue Sky Filings...........................................$ 4,000.00
Transfer agent fees........................................$ 500.00
Miscellaneous..............................................$ 500.00
Total.................................................$60,673.32
Item 26. Recent Sales of Unregistered Securities.
----------------------------------------
We have sold the following "restricted securities" during the past three
calendar years.
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 La Rue 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 2,600 12/21/00 Services valued at
$1.00 per share
Terry Goff 23,000 3/7/01 One Energy Industries
compressor package
Joe Armstrong 10,000 5/16/01 $ 10,000
Michael Ratliff 100,000 6/22/01 Exercise of options
at $1.00 per share
Nancy Gettelfinger 100,000 10/1/01 Exercise of option at
$0.579 per share
Tengasco, Inc. 150,000 10/16/01 Equipment valued at
$150,000
(1) Issued on various dates during our fiscal year ended April 30, 1998.
(2) We issued warrants to purchase up to 688,000 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
Rule 506 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 ($0.348 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.
---------
Raymond Cohn 12,500 8/10/00 (1)
Daniel Page 1,000,000 10/11/00 (2)
Basic Investors, Inc. 100,000 12/08/00 (3)
Lawrence L. LaRue 12,500 12/15/00 (4)
Teresa Cotton 5,000 12/15/00 (4)
Gary Bible 6,000 1/09/01 (4)
(1) 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.
(2) Granted to Mr. Page for his service as an investor relations
consultant. The estimated value of these services was $35,000. 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.
(3) Granted to Basic Investors for its service as a business consultant
from December 8, 2000, until February 1, 2001. The estimated value of the
services was $3,500. The warrants are exercisable 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.
(4) Granted as bonuses to: Mr. LaRue, the CFO, 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.
Item 27. Exhibits
--------
The following exhibits are filed as a part of this Registration
Statement:
3.1 Charter of Miller Contract Drilling, Inc., filed January 24, 1978*
3.2 Articles of Merger between Miller Resources, Inc. and Miller Contract
Drilling, Inc., filed March 13, 1979*
3.3 Articles of Merger between Miller Trucking Co., Inc. and Miller Contract
Drilling, Inc., filed October 31, 1983*
3.4 Articles of Amendment of the Charter of Miller Contract Drilling, Inc.,
changing its name to Miller Petroleum, Inc., filed February 27, 1984*
3.5 Articles of Merger between Miller Enterprises, Inc. and Miller
Petroleum, Inc., filed April 30, 1985*
3.6 Articles of Amendment to the Charter of Miller Petroleum, Inc.,
increasing the number of shares authorized to 2,000, filed on September
12, 1996*
3.7 Articles of Merger between Miller Services, Inc., Energy Cell, Inc. and
Miller Petroleum, Inc., filed on September 16, 1996*
3.8 Certificate of Ownership and Merger and Articles of Merger between
Triple Chip Systems, Inc., a Delaware corporation and Miller Petroleum,
Inc., a Tennessee Corporation, filed on January 13, 1997*
3.9 By-Laws*
5 Opinion of Branden T. Burningham, Esq.
regarding legality*
10.1 Purchase and Sale Agreement with NAMI Resources, LLC*
Exhibit A-Definitions
Exhibit B-Leases
Exhibit C-Interest in Leases
Exhibit D-Wells
Exhibit E-Compressors
Exhibit F-Assigned Contracts
Exhibit G-Allocation of Purchase Price
Exhibit H-Form of Assignment
Exhibit I-Contractual Agreements
Exhibit J-Acknowledged Assignments
10.2 Form of Subscription Agreement for December, 2000, private placement*
10.3 Farmout Agreement with Tengasco, Inc.*
10.4 Incentive Stock Option Plan*
23.1 Consent of Branden T. Burningham, Esq.*
23.2 Consent of Charles M. Stivers, C.P.A.*
23.3 Consent of Coburn Petroleum Engineering*
27 Financial Data Schedule*
* These documents and related exhibits have previously been filed
with the Securities and Exchange Commission as exhibits to the
Registrant's Registration Statement on Form SB-2, which was filed
on January 17, 2001 (File No. 333-53856), and amendments thereto,
and are incorporated herein by this reference.
Item 28. Undertakings
------------
We hereby undertakes:
(1) To file, during any period in which it offers or sells securities,
a post-effective amendment to this Registration Statement to:
(i) include any Prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) reflect in the Prospectus any facts or events which,
individually or together, represent a fundamental change in the information in
the registration statement; and, notwithstanding the foregoing, any increase
or decrease in volume of securities offered, if the total dollar value of
securities offered would not exceed that which was registered, and any
deviation from the low or high end of the estimated maximum offering range may
be reflected in the form of Prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in the volume and price
represent no more than a 20% change in the maximum aggregate offering price
set forth in the "Calculation of Registration Fee" table in the effective
Registration Statement; and
(iii) include any additional or changed material information
on the plan of distribution.
(2) For determining liability under the Securities Act, to treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time shall be deemed to be
the initial bona fide offering.
(3) To file a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of the offering.
(4) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to our directors, executive officers
and controlling persons the foregoing provisions or otherwise, we have been
advised that in the opinion of the Securities and Exchange Commission that
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. If a claim for indemnification against
these liabilities, other than our payment of expenses incurred or paid by any
of our directors, executive officers or controlling persons in the successful
defense of any action, suit or proceeding, is asserted by the director,
executive officer or controlling person in connection with the securities
being registered, we will, unless in the opinion of our counsel the matter has
been settled by a controlling precedent, submit to a court of appropriate
jurisdiction the question whether indemnification by us is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of that issue.
SIGNATURES
----------
In accordance with the requirements of the Securities Act, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements of filing of Form SB-2 and authorized this
registration statement to be signed on its behalf by the undersigned in the
City of Huntsville, State of Tennessee, on November 21, 2001.
MILLER PETROLEUM, INC.
Date: 11/21/2001 By /s/ Deloy Miller
---------------- ---------------------------
Deloy Miller, CEO and
Director
In accordance with the requirements of the Securities Act, this
registration statement was signed by the following persons in the
capacities and on the dates stated.
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 and
Director
Date: 11/21/2001 By /s/ Herbert J. White
---------------- ---------------------------
Herbert J. White, Vice
President and Director