STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended October 31, 2005
---------------------------
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from _______________ to ___________________
Commission File No. 33-2249-FW
MILLER PETROLEUM, INC.
(Exact name of small business issuer as specified in its Charter)
TENNESSEE 62-1028629
--------- ----------
(State or Other Jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
3651 Baker Highway
Huntsville, Tennessee 37756
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(Address of principal executive offices)
(423) 663-9457
--------------------------
Issuer's telephone number
N/A
------------------------------------------------------------
(Former name, former address and former fiscal year if changed from last
report.)
Check whether the issuer: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the issuer was required to file such reports) and (2) has
been subject to such filing requirements for the past 90 days. YES |X| NO |_|
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act) YES |_| NO |X|
As of December 15, 2005, the Registrant had a total of 9,396,856 shares of
Common Stock, $.0001 par value, outstanding.
Transitional Small Business Disclosure Format (check one): YES |_| NO |X|
Miller Petroleum, Inc.
Form 10-QSB
For the Quarter Ended October 31, 2005
Table of Contents
PART 1-FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of October 31, 2005(Unaudited)
and April 30, 2005 2
Condensed Consolidated Statements of Operations for the Three Months
Ended October 31, 2004 and 2005. (Unaudited) and the Six Months Ended
October 31, 2004 and 2005 (Unaudited) 4
Condensed Consolidated Statement of Stockholders' Equity for the Six Months
Ended October 31, 2005 5
Condensed Consolidated Statements of Cash Flows for the Six Months Ended
October 31, 2004 and 2005 (Unaudited) 6
Notes to Condensed Consolidated Financial Statements (Unaudited) 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations 9
Item 3. Controls and Procedures 11
PART II-OTHER INFORMATION
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 11
Item 6. Exhibits
SIGNATURES
MILLER PETROLEUM, INC.
Consolidated Balance Sheets
October 31 April 30
2005 2005
Unaudited
ASSETS
CURRENT ASSETS
Cash $ 225,390 $ 2,362
Accounts receivable 170,622 182,951
Participant receivables 337,059 0
Current portion of note receivable 42,000 47,000
Inventory 67,389 67,389
Deferred offering costs 88,842 88,842
Prepaid expenses 211,652 0
Loan Fees 281,897 0
----------- -----------
Total Current Assets 1,424,851 388,544
FIXED ASSETS
Machinery and equipment 970,842 941,601
Vehicles 333,583 333,583
Buildings 313,335 313,335
Office Equipment 77,404 72,549
Less: accumulated depreciation (978,173) (939,579)
----------- -----------
Total Fixed assets 716,991 721,489
OIL AND GAS PROPERTIES 3,146,987 2,941,832
(On the basis of successful
efforts accounting)
PIPELINE FACILITIES 200,123 206,298
OTHER ASSETS
Land 496,500 496,500
Investments 500 500
Equipment held for sale 431,462 431,462
Cash - restricted 163,358 71,000
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Total Other Assets 1,091,820 999,462
----------- -----------
TOTAL ASSETS $ 6,580,772 $ 5,257,625
=========== ===========
See notes to consolidated financial statements.
2
MILLER PETROLEUM, INC.
Consolidated Balance Sheets
October 31 April 30
2005 2005
Unaudited
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade $ 157,685 $ 330,620
Accrued expenses 25,231 224,306
Current portion of notes payable 4,172,290 0
----------- -----------
Total Current Liabilities 4,355,206 554,926
LONG-TERM LIABILITIES
Notes payable-Related parties 0 1,673,693
Other 324,990 655,646
----------- -----------
Total Long-Term Liabilities 324,990 2,329,339
Total Liabilities 4,680,196 2,884,265
----------- -----------
STOCKHOLDERS' EQUITY
Common Stock: 500,000,000 shares
authorized at $0.0001 par value,
9,396,856 shares
issued and outstanding 939 939
Additional paid-in capital 5,865,890 4,495,498
Unearned compensation (926,027) 0
Retained Earnings (3,040,226) (2,123,077)
----------- -----------
Total Stockholders' Equity 1,900,576 2,373,360
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS'S EQUITY $ 6,580,772 $ 5,257,625
=========== ===========
See notes to consolidated financial statements.
3
MILLER PETROLEUM, INC.
Consolidated Statements of Operations
(UNAUDITED)
For the Three Months Ended For the Six Months Ended
October 31 October 31
As Restated As Restated
2005 2004 2005 2004
REVENUES
Oil and gas revenue $ 183,056 $ 135,506 $ 368,877 $ 362,450
Service and drilling revenue 16,467 29,538 1,314,666 61,351
Retail sales 0 7,592 0 35,492
Other revenue 241 30,179 287 30,828
----------- ----------- ----------- -----------
Total Revenue 199,764 202,815 1,683,830 490,121
COSTS AND EXPENSES
Cost of sales 125,680 34,484 1,106,238 76,635
Selling, general and
administrative 275,364 33,246 646,833 235,990
Salaries and wages 102,279 64,068 178,695 97,774
Depreciation, depletion and
amortization 87,549 43,165 161,767 84,221
----------- ----------- ----------- -----------
Total Costs and Expense 590,873 174,963 2,093,533 494,620
----------- ----------- ----------- -----------
INCOME (LOSS) FROM OPERATIONS (391,108) 27,852 (409,703) (4,499)
OTHER INCOME (EXPENSE)
Interest Income 146 186 197 245
Gain on sale of equipment 0 35,989 300 42,489
Interest expense (336,412) (61,201) (507,943) (118,131)
----------- ----------- ----------- -----------
Total Other Income (Expense) (336,266) (25,026) (507,446) (75,397)
NET INCOME (LOSS) $ (727,374) $ 2,826 $ (917,149) $ (79,896)
=========== =========== =========== ===========
BASIC & DILUTED
NET INCOME (LOSS) PER SHARE $ (0.08) $ 0.00 $ (0.10) $ (0.01)
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 9,396,856 8,863,856 9,396,856 8,727,035
See notes to consolidated financial statements.
4
MILLER PETROLEUM, INC
Consolidated Statement of Stockholders' Equity
(UNAUDITED)
Additional
Common Shares Paid-in Unearned Retained
Shares Amount Capital Compensation Earnings Total
Restated balance,
April 30, 2005 9,396,856 $ 939 $ 4,495,498 ($2,123,077) $ 2,373,360
Issuance of warrants 370,392 370,392
As prepayment of
Financing costs
Issurance of shares 1,000,000 (926,027) 73,973
as payments of
services
Net loss for the
six months ended
October 31, 2005 (917,149) (917,149)
----------- ----------- ----------- ----------- ----------- -----------
Restated balance,
October 31, 2005 9,396,856 $ 939 $ 5,865,890 ($ 926,027) ($3,040,226) $ 1,900,576
=========== =========== =========== =========== =========== ===========
See notes to consolidated financial statements.
5
MILLER PETROLEUM, INC.
Consolidated Statement of Cash Flows
(UNAUDITED)
As Restated
For the Six For the Six
Months Ended Months Ended
October 31, 2005 October 31, 2004
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (917,149) $ (79,896)
Adjustments to Reconcile Net Loss to
Net Cash Provided (Used) by Operating
Activities:
Depreciation, depletion and amortization 161,767 106,221
Gain on sale of equipment 300 2,877
Issuance of stock for services 73,973 110,000
Accretion of warrant costs 158,740
Changes in Operating Assets and Liabilities:
Decrease (increase) in accounts receivable 12,329 95
Decrease.(increase) in participant receivables (337,059) --
Decrease (increase) in loan fees (281,897) 0
Decrease (increase) in prepaid expenses 0 39,808
Increase (decrease) in accounts payable (172,935) (60,549)
Increase (decrease) in accrued expenses (199,075) 9,767
--------------- ---------------
Net Cash Provided (Used) by Operating
Activities (1,501,006) 128,323
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Equipment (28,394) 0
Net additions to oil and gas properties (328,155) (230,375)
--------------- ---------------
Net Cash Used by Investing
Activities (356,549) (230,375)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable (1,982,059) (56,281)
Proceeds from borrowing 4,150,000 45,934
Net proceeds from issuance of common stock 0 96,001
Increase in restricted cash (92,358) 0
Change in note receivable 5,000 0
--------------- ---------------
Net Cash Provided by Financing
Activities 2,080,583 85,654
--------------- ---------------
NET INCREASE (DECREASE) IN CASH) 223,028 (16,398)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 2,362 73,416
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 225,390 $ 57,018
--------------- ---------------
CASH PAID FOR
INTEREST $ (136,229) $ (96,131)
INCOME TAXES 0 0
See notes to consolidated financial statements.
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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, 2005 Annual
Report on Form 10-KSB. The results of operations for the period ended October
31, 2005 are not necessarily indicative of operating results for the full year.
In the opinion of management, the consolidated financial statements and other
information furnished herein reflect all adjustments in fiscal year 2005
consisting of normal recurring accruals which are necessary for a fair
presentation of the results of the interim periods covered by this report.
(2) RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS
Our Consolidated Financial Statements for the quarter ended October 31,
2004 are restated in this Form 10-QSB to reflect a $22,000 amortization of
prepaid financing costs and $110,000 in selling, general and administrative
expenses to record stock issued for services. The effect of the restatements on
net loss was to increase net loss by $132,000 for the quarter ended October 31,
2004.
(3) LONG-TERM DEBT, WARRANTS, LOAN FEES AND RESTRICTED CASH
On May 9, 2005, we entered into a credit agreement, under which terms, we
received $4,150,000 in debt financing under two convertible promissory notes of
$3,150,000 and $ 1,000,000, respectively. Repayment must be made on or before
June 30, 2006, with monthly interest only payments during the interim. These
notes are convertible into common stock at the lesser price of $1.50 per share
or the price of common stock issued to investors in our planned equity offering.
The lenders were also granted registration rights to any shares issued on
conversion of the notes.
In connection with the loan, we incurred fees of $523,523, which are being
amortized to interest expense over the life of the loan. Accordingly, $120,813
and $241,626 in amortization of these fees is included in interest expense for
the three and six months ended October 31, 2005, respectively.
The notes are secured by all of our assets and a security interest in a
debt service account provided for by the agreement, under which $160,000 was
placed in escrow to provide the lenders a reserve for future interest payments.
The account is subject to draw-downs under specified conditions, and its balance
of $ 85,358 is included on the balance sheet among restricted cash at October
31, 2005.
To secure the funding, an aggregate total of 1,000,000 non-callable five
year warrants exercisable at $0.50 per share, were also issued, with
Registration rights requiring us to register the common stock into which the
warrants can be converted. The warrants were recorded, at fair value, as
$370,392 of prepaid financing costs. Fair value was computed as the estimated
present value at grant date of the warrants using the Black-Scholes
option-pricing model with the following assumptions: expected volatility of 50%;
a risk free interest rate of 4.50% and an expected option life of 2 year, six
months. The options will be amortized to interest expense over the term of the
loan which is payable on June 30, 2006. Interest expense connected with warrants
was $158,740 and $79,370 for the six and three months ended October 31, 2005.
The balance in the amount of $211,652 is included on the accompanying balance
sheet at October 31, 2005, among prepaid expenses.
(4) STOCKHOLDERS' EQUITY
As of September 8, 2005, we agreed to exchange 600,000 and 400,000 shares
of our restricted common stock in return for consulting services to be provided
over a two year period until September 8, 2007. Accordingly, the Company
credited Additional Paid in Capital and debited Unearned Compensation for
$1,000,000 to reflect the fair value of its shares as of September 8, 2005.
Amortization of unearned compensation of $73,973 was reflected in general and
administrative expense for the fifty-four days through October 31, 2005.
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(5) PARTICIPANT RECEIVABLES
Participant receivable consist of receivables contractually due from our
various joint venture partners in connection with routine exploration,
betterment and maintenance activities. The balance in participant receivables
over 90 days old is $32,356. Our collateral for these receivables generally
consists of lien rights over the related oil producing properties.
(6) RECENT ACCOUNTING PRONOUNCEMENTS
In March 2004, The Emerging Issues Task Force ("EITF") reached a consensus
that mineral rights, as defined in EITF Issue No. 04-02, Whether Mineral Rights
are "Tangible or Intangible Asset," are tangible assets and that they should be
removed as examples of intangibles assets in SFAS Nos. 141 and 142. The FASB has
recently ratified this consensus and directed the FASB staff to amend SFAS Nos.
141 and 142 through the issuance of FASB Staff Positions FSP FAS 141-1 and FSP
FAS 142-1. Historically we have included the cost of such mineral rights as
tangible assets, which is consistent with the EITF's consensus. As such, EITF
04-02 did not affect our Consolidated Financial Statements.
In December 2004, The FASB issued SFAS No. 123R, "Share-Based Payment."
This statement is a revision to SFAS No. 123, "Accounting for Stock-Based
Compensation" and supersedes APB Opinion No. 25, "Accounting for Stock Issued to
Employees." This statement establishes standards for the accounting for
transactions in which an entity exchanges its equity instruments for goods or
services, primarily focusing on the accounting for transactions. Companies will
be required to measure the cost of employee services received in exchange for an
award of equity instruments based on the grant date fair value of the award
(with limited exceptions). That cost will be recognized over the period during
which an employee is required to provide service, the requisite service period
(usually the vesting period), in exchange for the award. The grant date fair
value of employee share options and similar instruments will be estimated using
option-pricing models.
If an equity award is modified after the grant date, incremental
compensation cost will be recognized in an amount equal to the excess of the
fair value of the modified award over the fair value of the original award
immediately before the modifications for small business issuers. SFAS No. 123R
will be effective for periods beginning after December 15, 2005. Accordingly, we
will adopt SFAS No. 123R in our fourth quarter of fiscal 2006. We are currently
evaluating the provisions of SFAS No. 123R and has not determined the impact
that this Statement will have on its results of operations or financial
position.
In April 2005, the FASB issued Staff Interpretation No. 19-1 ("FSP FAS
19-1") "Accounting for Suspended Well Costs," which provides guidance on the
accounting for exploratory well costs and proposes an amendment to FASB
Statement No. 19 FASB 19, Financial Accounting and Reporting By Oil and Gas
Producing Companies. The guidance in FSP FAS 19-1 applies to enterprises that
use the successful efforts method of accounting as described in FASB 19 and
currently we have no exploration activities; therefore, the guidance in FSP FAS
19-1 does not impact the consolidated financial position, result of operations
or cash flows.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
We have more than 43,000 acres under lease in Tennessee. About 90% of
these leases are held by production. Most of our current oil and gas production
is from the Big Lime Formation. However, there are more than 160 development
drilling locations that target the Devonian (Chattanooga Shale) as well as the
Big Lime Formation.
We completed the drilling and fracing of the first five wells on the
Koppers North and Carden Prospect in Campbell County, Tennessee. These are the
Koppers 6A and 7A and the Carden 1A, 2A and 3A. The wells have been drilled to
approximately 3000 feet in depth, to fully penetrate a thickened Devonian Shale,
with up to 828 feet of potential hydrocarbon entry. Average open flows are 130
Mcf per day of natural gas each. Gathering lines have been installed to begin
immediate gas sales.
8
We are engaging in drilling and development on the Koppers North and
Carden in a joint venture with Golden Triangle Energy (GTC), Inc., Houston,
Texas and Norwest Energy NL, Perth, Australia. We will serve as operator and
retain a twenty percent carried net revenue interest for the first twenty wells
and a twenty five percent working interest in the remaining wells drilled by the
joint venture.
In June 2001, we made a conventional Big Lime gas discovery, on the
Lindsay Land Company lease that we jointly own with Delta Producers, Inc.
Currently there are six producing wells on the property. Two wells were drilled
in June, 2005 the Lindsay #16 and #17. These wells fully penetrated the Big Lime
and Devonian Shale to depths of approximately 4700 feet. The Lindsay #17 has
been foam fraced in the Devonian Shale and will be fraced in the Big Lime when
testing is completed in the shale. There are at a minimum twenty three
additional drill sites on this 3,400 acre lease which is situated near
Caryville, Tennessee.
We are continuing our leasing efforts in the Eastern Tennessee portion of
the Eastern Overthrust Belt, which runs from Eastern Canada through Appalachia
into Alabama. Acreage is being leased there in selected areas.
Liquidity and Capital Resources
During the fiscal years ended April 30, 2004 and 2005, our principal
sources of liquidity were revenue from the production of oil and gas, the sale
of drilling contracts and the proceeds from our $4,150,000 debt financing in May
of 2005. Previously, private placements of our common stock had been our
principal external sources of liquidity. In fiscal year 2004, our access to
funding depended upon borrowing transactions with related parties and directors.
In 2005 with the increase in the volatility of markets for petroleum products
our access to sources of funds was enhanced. Accordingly subsequent to our year
end, on May 9, 2005 we entered into a credit agreement with Prospect Energy
Corporation, Inc and Petro Capital III, LP. Under the agreement, we received an
aggregate of $4,150,000 in debt financing under two convertible promissory notes
with Prospect and Petro, for $3,150,000 and $1,000,000, respectively. Proceeds
from this borrowing were used to satisfy substantially all then existing
obligations existing at the balance sheet date. Remaining funds after retirement
of debt were used to institute the drilling program. The notes are interest only
accruing at 12%, payable on June 30, 2006. The notes are convertible into common
stock at the lesser of $1.50 or the price at which common stock will be issued
to investors in our planned equity offering.
Results of Operations
Six Months Ended October 31, 2005 compared to Six Months Ended October 31, 2004
We had revenues of $1,683,830 for the six months ended October 31, 2005,
up from $490,121 in revenue recognized during the first six months of fiscal
2004. This is primarily attributable to our institution of turn-key drilling
program on the Koppers North tract which produced additional revenue for the
first six months of fiscal 2005.
Our oil and gas revenue for the first six months of fiscal 2005 was
$368,877, up from $362, 450 in the first six months of fiscal 2004. This
increase was due primarily to an increase in natural gas and oil prices as
offset by normal decline curves.
Service and drilling revenue for the first six months of fiscal 2005 was
$1,314,666 up from $61,351 for the same six months last fiscal year. This
increase was due to increased drilling activity associated with our turn-key
drilling contracts and joint venture agreements.
9
During the current six months, retail sales were $0 compared to $35,492
during the same six months of fiscal 2004. This relates to equipment that is
sold off of our lot, in discrete quantities, which by its nature tends to give
rise to variances.
Our net loss for the current six months was $917,149 up from a net loss of
$79,896 for the same six months of fiscal 2004. This change was due primarily to
increased business expense and professional fees and costs associated with loan
closing costs and the amortization of warrants associated with the loan. We feel
these costs will be offset by the increased drilling activity associated with
our new drilling efforts.
Costs of sales for the first six months of fiscal 2005 was $1,106,238 up
from $76,635 in the same period of fiscal 2004 due primarily to additional
expenses associated with our drilling program.
Selling and general administrative expenses were $646,833, up from
$235,990, in the same six months of fiscal 2004. This increase was primarily due
to increases in legal and professional expenses, an overall upgrade in our
financial reporting capabilities and expenses of stock issued for services.
Salaries and wages for the first six months of fiscal 2005 were $178,695,
up from $97,774, in the same six months of fiscal 2004. This was due to the
expenditures of staff time in administrative functions rather than on
capitalized oil and gas well projects.
Depreciation, depletion and amortization for the first six months of
fiscal 2005 was $161,767, up from $84,221 in the same period of fiscal 2004.
This increase was due to increases in depletion expense in the fourth quarter of
2004, which resulted from the reclassification of certain properties from proved
undeveloped to probable and/or possible.
Three Months Ended October 31, 2005 compared to Three Months Ended October 31,
2004
We had revenues of $199,764 for the second quarter of fiscal 2005, down
from the $202,815 in revenue recognized during the second quarter of fiscal
2004. The change was due to a combination of increased revenue from oil and gas
sales and a decrease in other revenues.
Our oil and gas revenue for the current quarter was $183,056, up from
$135,506 in the second quarter of fiscal 2004. This increase was due primarily
to an increase in natural gas and oil prices.
Service and drilling revenue for the second quarter of fiscal 2005 was
$16,467, down from $29,538 for the same quarter last year. This decrease was due
to decreased drilling activity associated with our turn-key drilling contracts
and the joint venture agreements.
During the current quarter, retail sales were $0 compared to $7,592 during
the first quarter of fiscal 2004. This relates to equipment that is sold off of
our lot, in discrete quantities, which by its nature tends to give rise to
variances.
Our net loss for the current quarter was $727,374, up from a net income of
$2,826 for the same quarter of fiscal 2004. This change was due primarily to
increased interest expense, depletion expense and professional fees and costs
associated with loan closing costs and the amortization of warrants associated
with the loan. We feel these costs will be offset by the increased drilling
activity and reserve growth associated with new drilling efforts.
Cost of sales for the second quarter of fiscal 2005 was $125,680 up from
$34,484 in the same quarter of fiscal 2004, due primarily to additional expenses
associated with our drilling program.
10
Selling, general and administrative expenses were $275,364, up from
$33,246 in the second quarter of fiscal 2004. This increase was primarily due to
increases in legal and professional expenses, an overall upgrade in our
financial reporting capabilities, and expenses of stock issued for ser vices.
Salaries and wages for the current quarter were $102,279, up from $64,068
in the second quarter of fiscal 2004. This was due to expenditures of staff time
in administrative functions rather than on capitalized oil and gas well
projects.
Depreciation, depletion and amortization for the second quarter of fiscal
2005 was $87,549, up from $43,165 in the second quarter of fiscal 2004. This
increase was due to increases in depletion expense, which resulted from the
reclassification of certain properties from proved undeveloped to probable
and/or possible.
Item 3. Controls and Procedures
Our Chief Executive Officer and our Chief Financial Officer have conducted
an evaluation of the effectiveness of our disclosure controls and procedures as
of the quarter ended October 31, 2005. Based on this evaluation, our Chief
Executive Officer concluded that our disclosure controls and procedures were
effective to provide reasonable assurance that information required to be
disclosed by us in reports that we file or submit under the Security Exchange
Act of 1934, (the "Act"), is recorded, processed, summarized and reported within
the time periods specified in the SEC's rules and forms and to ensure that
information required to be disclosed by us in the reports that we file under the
Act is accumulated and communicated to management, including our certifying
officers, as appropriate, to allow timely decisions regarding required
disclosures.
PART II - OTHER INFORMATION
Item 3. Unregistered Sales of Equity Securities and Use of Proceeds
We have sold the following securities within the past three years without
registering them under the Securities Act. Each of these securities was sold
without registration under the Securities Act of 1933, as amended, in reliance
on Section 4(2) of the Securities Act of 1933, as amended, and/or Regulation D
of the Securities Act of 1933, as amended.
On September 8, 2005, we agreed to issue 600,000 shares of common stock to
Growth Management in consideration Of consulting services valued at $ 600,000.
On September 8, 2005, we agreed to issue 400,000 shares of common stock to Scott
Boruff in consideration Of consulting services valued at $ 400,000.
On May 9, 2005, we entered into a credit agreement "Credit Agreement with
Prospect Energy Corporation, a Maryland Corporation ("Prospect Energy") and
Petro Capital III, L.P., a Texas limited liability company ("Petro Capital"),
collectively referred to as the "selling shareholders," with MPC, Inc., our
wholly owned subsidiary as guarantor, for the issuance and sale of senior
secured convertible promissory notes ("senior secured notes") in the aggregate
principal amount of $4,150,000 and accruing interest at 12% per annum. The
senior secured notes are convertible into common stock, par value $0.0001 per
share at the lesser price of $1.50 our planned per share our price of the common
stock, par value $0.0001 per share at the lesser price of $1.50 our planned per
share or the price of common stock issued to investors should we engage in a
planned equity financing. In addition, we issued to the selling shareholders
five year warrants to purchase an aggregate of 1,000,000 shares of our common
stock, par value $0.0001 per share at an exercise price of $0.50 per share.
Proceeds from this borrowing were used to retirement of all existing debt at the
quarter ended July 31, 2005 and to institute the drilling program.
On April 2, 2004, we issued 200,000 shares to Ratliff Farms, Inc. in a private
placement for an aggregate consideration of $50,000.
11
On August 13, 2003, warrants were granted to Sherri Ann Parker Lee and William
Parker Lee in the amount of 1,110,000 and 250,000 respectively, as partial
consideration for a subordinated loan in the amount of $1,360,000. These
warrants were exercisable at a price of $0.80 per share and expired on January
1, 2005 without being exercised.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
31.1 Certification of the Chief Executive Officer required by Rule
13a-14(a) or Rule 15d-14(a).
31.2 Certification of the Chief Financial Officer required by Rule
13a-14(a) or Rule 15d-14(a).
31.3 Certification of Chief Executive Officer required by Rule
13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350.
31.4 Certification of the Chief Financial Officer required by Rule
13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350.
12
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
MILLER PETROLEUM, INC.
Date: December 15, 2005
By: /s/ Deloy Miller
----------------------------
Deloy Miller
Chief Executive Officer
Date: December 15, 2005 By: /s/ Charles M. Stivers
----------------------------
Charles M. Stivers
Chief Financial Officer
13