UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
x Quarterly Report Under Section 13 or 15(d) Of the Securities Exchange Act of 1934
For Quarter Ended November 30, 2006
o Transition Report Pursuant to Section 13 or 15(d) Of the Securities Exchange Act of 1934 for the
Transition period from to
Commission file number 01-19001
MILLER DIVERSIFIED
(Exact name of registrant as specified in its charter)
NEVADA |
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84-1070932 |
(State or other jurisdiction of |
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(I.R.S. Employer |
incorporation or organization) |
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Identification No.) |
Mailing Address:
P.O. Box 237
La Salle, Colorado 80645
23360 Weld County Road 35
La Salle, Colorado 80645
(Address of principal executive offices)
(970) 284-5556
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes o No x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).
Yes x No o
As of January 9, 2008, there were 6,404,640 shares of common stock, $.0001 par value, issued and outstanding.
Miller Diversified Corporation
Form 10-QSB
November 30, 2006
TABLE OF CONTENTS
PART 1. FINANCIAL INFORMATION |
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PART II. OTHER INFORMATION |
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2
MILLER DIVERSIFIED CORPORATION
November 30, 2006
(Unaudited)
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Assets |
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Cash |
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$ |
212 |
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Liabilities and Shareholders’ Deficit |
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Liabilities: |
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Accounts payable |
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$ |
129,809 |
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Indebtedness to related party (Note 2) |
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316,090 |
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Note payable to related party (Note 2) |
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262,000 |
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Accrued interest payable to related party (Note 2) |
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59,257 |
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Total liabilities |
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767,156 |
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Shareholders’ deficit: |
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Preferred stock, $2.00 par value; 1,000,000 shares authorized, -0- shares issued and outstanding |
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— |
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Common stock, $.0001 par value; 25,000,000 shares authorized, 6,404,640 shares issued and outstanding |
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640 |
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Additional paid-in capital |
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1,354,389 |
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Retained deficit |
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(2,121,973 |
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Total shareholders’ deficit |
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(766,944 |
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Total liabilities and shareholders’ deficit |
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$ |
212 |
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See accompanying notes to financial statements
3
MILLER DIVERSIFIED CORPORATION
(Unaudited)
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For The Three Months Ended |
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November 30 |
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2006 |
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2005 |
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Operating expenses: |
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Selling, general and administrative |
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$ |
134,051 |
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$ |
49,930 |
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Contributed rent (Note 2) |
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300 |
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300 |
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Total operating expenses |
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134,351 |
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50,230 |
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Loss from operations |
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(134,351 |
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(50,230 |
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Other expense: |
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Interest expense (Note 2) |
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(4,913 |
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(4,899 |
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Loss before income taxes |
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(139,264 |
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(55,129 |
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Provision for income taxes (Note 3) |
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— |
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— |
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Net loss |
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$ |
(139,264 |
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$ |
(55,129 |
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Basic and diluted loss per common share |
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$ |
(0.02 |
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$ |
(0.01 |
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Basic and diluted weighted average common shares outstanding |
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6,404,640 |
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6,404,640 |
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See accompanying notes to financial statements
4
MILLER DIVERSIFIED CORPORATION
(Unaudited)
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For The Three Months Ended |
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November 30 |
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2006 |
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2005 |
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Cash flows from operating activities: |
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Net loss |
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$ |
(139,264 |
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$ |
(55,129 |
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Adjustments to reconcile net loss to net cash used by operating activities: |
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Contributed rent |
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300 |
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300 |
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Changes in assets and liabilities: |
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Increase in accounts payable |
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97,412 |
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(9,634 |
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Increase in accounts payable to related parties |
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36,621 |
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59,550 |
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Increase in accrued interest payable to related party |
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4,913 |
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4,899 |
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Net cash used in operating activities |
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(18 |
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(14 |
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Net change in cash |
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(18 |
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(14 |
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Cash, beginning of period |
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230 |
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281 |
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Cash, end of period |
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$ |
212 |
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$ |
267 |
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Supplemental disclosure of cash flow information: |
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Cash paid during the period for: |
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Income taxes |
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$ |
— |
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$ |
— |
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Interest |
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$ |
— |
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$ |
— |
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See accompanying notes to financial statements
5
MILLER DIVERSIFIED CORPORATION
Notes to condensed Financial Statements
(Unaudited)
The condensed financial statements presented herein have been prepared by the Company in accordance with the accounting policies in its Form 10-KSB with financial statements dated August 31, 2006, and should be read in conjunction with the notes thereto.
In the opinion of management, the accompanying condensed financial statements contain all adjustments (consisting only of normal recurring adjustments) which are necessary to provide a fair presentation of operating results for the interim periods presented. Certain information and footnote disclosures, normally included in the financial statements prepared in accordance with generally accepted accounting principles, have been condensed or omitted. The results of operations presented for the three months ended November 30, 2006 are not necessarily indicative of the results to be expected for the year.
Financial data presented herein are unaudited.
During the three months ended November 30, 2006, Miller Feed Lots, Inc (“MFL”), our affiliate, paid $30,371 of expenses on behalf of the Company. The affiliate also provided administrative services during the three months ended November 30, 2006, valued at $6,250 based on our Board of Directors estimate on time and effort. At November 30, 2006, we were indebted to our affiliate in the amount of $316,090, which is included as indebtedness to related party in the accompanying unaudited condensed financial statements.
MFL contributed the use of facilities to the Company during the periods ended November 30, 2006 and 2005. The fair value of the facilities was estimated in good faith by management at $100 per month and is included in the accompanying financial statements as contributed rent expense with a corresponding credit to additional paid-in capital.
The Company records its income taxes in accordance with Statement of Financial Accounting Standard No. 109, “Accounting for Income Taxes”. The Company incurred net operating losses during the periods shown on the condensed financial statements resulting in a deferred tax asset, which was fully allowed for, therefore the net benefit and expense result in $0 income taxes.
The Company was recently a defendant in the lawsuit styled Srebnik, et al. v. Norman Dean, et al., case no. 05-CV-01086-WYD-MJW, filed on November 21, 2005.
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The lawsuit, brought by several shareholders, alleged that the Company and its directors, accountants and attorneys violated several provisions of the Securities and Exchange Act of 1934 by issuing the 2002 and 2003 financial statements and the 2003 proxy statement seeking approval of the September 19, 2003 sale of the Company’s assets to MFL. The lawsuit also alleged several derivative state law claims against the directors of the Company.
The Company and its directors vigorously defended the lawsuit through the discovery and expert designation phases, and believed there were meritorious defenses to the remaining claims. However, to avoid the cost and uncertainty of further litigation, on June 1, 2007, the Company and the other defendants entered into a Stipulation and Settlement Agreement with the Plaintiffs which resolved all claims against all parties for payment to Plaintiffs of $395,000 and certain assurances by the Company regarding its corporate governance, including the resignation of Clark Miller as a director and the appointment of plaintiff Daryl Dinkla as his replacement. The Company’s portion of the settlement is $135,000. The Company’s directors also agreed to cancel $300,000 in debt owed by the Company to MFL.
The Court granted preliminary approval of the settlement on June 6, 2007. The final hearing on the fairness of the settlement agreement was held on August 10, 2007. At the hearing, the Court approved the settlement agreement and subsequently dismissed all of Plaintiffs’ claims with prejudice.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF OPERATION
Introduction
The Company was engaged in commercial cattle feeding operations from 1987 through 2003. Due to recurring operating losses, in October, 2003 the Company entered into an agreement to sell substantially all of its assets to Miller Feedlots, Inc. (“MFL”). Since the sale of its assets, the Company has not engaged in business operations. The Company’s financial statements reflect the cost of certain litigation which was commenced in November 2005 and was settled in August, 2007. Such litigation is summarized below in “PART II - ITEM 1. Legal Proceedings.”
The Company intends to identify and evaluate opportunities to acquire or enter into a merger agreement with one or more operating company. In the event the Company completes any such acquisition or merger transaction, then the Company’s future operating results and financial condition will be determined by the business activities, financial condition and operating results of the acquired business.
Forward-Looking Statement Notice
When used in this report, the words may, will, expect, anticipate, continue, estimate, project, intend, and similar expressions are intended to identify forward-looking statements within the meaning of Section 27a of the Securities Act of 1933 (“Securities Act”) and Section 21e of the Securities Exchange Act of 1934 (“1934 Act”) regarding events, conditions, and financial trends that may affect the Company’s future plans of operations, business strategy, operating results, and financial position. Persons reviewing this report are cautioned that any forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties and that actual results may differ materially from those included within the forward-looking statements because of various factors. Such factors are discussed under the Item 2. Management’s Discussion and Analysis of Operation, and also include general economic factors and conditions that may directly or indirectly impact the Company’s financial condition or results of operations.
Results of Operations
The Company has had no revenue from operations since approximately November 30, 2001. The Company had a net loss from operations of $139,264 for the fiscal quarter ending November 30, 2006. This compares to a net loss from operations of $55,129 for the fiscal quarter ending November 30, 2005. The net loss in each period was comprised primarily of general and administrative expenses.
Liquidity and Capital Resources
Working capital on November 30, 2006 was ($766,944) compared to ($496,288) at November 30, 2005. This decrease is attributable to the net loss for the period. The Company will be required to raise additional capital prior to engaging in any business operations.
Current assets of $212 at November 30, 2006 consisted of cash, as compared with cash of $267 at November 30, 2005. Current liabilities increased by $270,601 to $767,156. This increase relates primarily to the funding of professional, legal and accounting fees by MFL on behalf of the Company, which amount is included in accounts payable - related party.
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ITEM 3. CONTROLS AND PROCEDURES.
The Company sold substantially all of its assets and terminated its active business operations during the fiscal quarter ended November 30, 2003. As of the end of the quarter ended May 31, 2004, the Company conducted an evaluation, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, of the Company’s disclosure controls and procedures (as defined in Rules 13a - 15(e) and 15d - 15(e) under the 1934 Act). Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures had not been effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the 1934 Act is recorded, processed, summarized and reported within the time period specified in the Securities and Exchange Commission rules and forms; specifically, disclosure controls and procedures relative to off balance sheet arrangements and guarantees were not effective. Consequently, the Company instituted procedures to ensure that off balance sheet arrangements and guarantees relating to cattle feeding arrangements between the Company and its customers are properly disclosed in the financial statements and public filings. The Company thereby effected a change in its internal control over financial reporting beginning with the Company’s November 30, 2003 fiscal quarter. With the disposal of the Company’s cattle feeding business, specific controls relating to cattle feeding arrangements will no longer be necessary for the Company’s public filings. General controls over off-balance sheet arrangements and guarantees, however, will remain in effect.
PART II - OTHER INFORMATION
As of the date of this report, neither the Company nor its assets is subject to any pending legal proceeding.
On November 21, 2005, Charles M. Srebnik, JoAnn Srebnik, Michelle Srebnik, Lee Srebnik, Gary Devonport, Aimee Devonport, Allison Okon, individually and as trustee for the Matthew Okon Trust, and Daryl Dinkla, individually and derivatively on behalf of the Company (collectively “Plaintiffs”), commenced a civil action in the U.S. District Court, District of Colorado (“Civil Action”) against the Company’s officers and directors, consisting of Norman M. Dean, James E. Miller, and Clark A. Miller, MFL, and the Company’s independent accountants and outside legal counsel, consisting of Anderson & Whitney, P.C., Comiskey & Company, Professional Corporation, and Sherman & Howard L.L.C. (collectively “Defendants”). In the Civil Action, Plaintiffs asserted a number of individual claims and derivative claims that alleged, in part, that the officers and directors breached their fiduciary duties to the Company and its shareholders by fraudulently representing the legality, terms, and results pertaining to the Asset Purchase Agreement dated September 19, 2003 between the Company and MFL. The Company and its directors filed a motion to dismiss the Civil Action which resulted in the dismissal of ten of Plaintiffs’ fourteen claims. Two additional claims were voluntarily dismissed by Plaintiffs. On June 1, 2007, the parties entered into a Stipulation and Settlement Agreement which resolved all claims against all parties. Terms of the settlement include payment of $395,000 to plaintiffs and certain assurances by the Company regarding its corporate governance, including the resignation of Clark Miller as a director and the appointment of plaintiff Daryl Dinkla as his replacement. The Company’s portion of the settlement payment was $135,000. The directors of the Company also agreed to cancel $300,000 in debt owed by the Company to them.
The Court granted preliminary approval of the settlement on June 6, 2007. The final hearing on the fairness of the settlement agreement was held on August 10, 2007. At the hearing, the Court approved the settlement agreement and dismissed all of Plaintiffs’ claims with prejudice.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
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None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
A. Exhibits.
Exhibit 31 - Certification pursuant to section 302 for Principal
Executive Officer and Principal Financial Officer.
Exhibit 32 - Certification pursuant to section 906 for Principal
Executive Officer and Principal Financial Officer.
B. Report on Form 8-K. No reports on Form 8-K were filed by the Company during the quarter ended November 30, 2006.
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SIGNATURES
In accordance with the requirements of the 1934 Act, the registrant has caused this report to be signed on behalf of the undersigned, thereunto duly authorized.
Signature |
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Title |
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Date |
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/s/ James E. Miller |
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James E. Miller |
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President, Principal Executive Officer |
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January 14, 2008 |
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and Principal Financial Officer |
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/s/ Clark A. Miller |
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Clark A. Miller |
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Secretary, Treasurer, and Principal |
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January 14, 2008 |
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Accounting Officer |
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