Edgar Filing: MILLER PETROLEUM INC

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 the quarterly period ended October 31, 2006

___________________________

o 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

___________________________

(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 o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) YES o NO x

As of December 15, 2006, the Registrant had a total of 14,366,856 shares of Common Stock, $.0001 par value, outstanding.

Transitional Small Business Disclosure Format (check one): YES o NO x

Miller Petroleum, Inc.

Form 10-QSB

For the Quarter Ended October 31, 2006

Table of Contents

PART 1-FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements

	Condensed Consolidated Balance Sheets as of October 31, 2006(Unaudited)	3-4
	and April 30, 2006

	Condensed Consolidated Statements of Operations for the Three Months
	Ended October 31, 2005 and 2006. (Unaudited) and the Six Months Ended
	October 31, 2005 and 2006 (Unaudited)	5

	Condensed Consolidated Statement of Stockholders’ Equity for the Six Months
	Ended October 31, 2006 (Unaudited)	6

	Condensed Consolidated Statements of Cash Flows for the Six Months Ended
	October 31, 2005 and 2006 (Unaudited)	7

	Notes to Condensed Consolidated Financial Statements (Unaudited)	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of
	Operations	11

Item 3.	Controls and Procedures	14

PART 2-OTHER INFORMATION

Item 3.	Legal Proceedings	14

SIGNATURES

MILLER PETROLEUM, INC.

Consolidated Balance Sheets

	October 31			April 30
	2006			2006
	Unaudited
ASSETS
CURRENT ASSETS

Cash	$	110,748		$
Accounts receivable		68,285			311,286
Accounts receivable - related parties		258,719			347,060
Current portion of note receivable		7,900			43,000
Inventory		126,435			97,388
Unbilled service and drilling cost					76,944
Total Current Assets		572,087			875,678

FIXED ASSETS

Machinery and equipment		912,592			880,904
Vehicles		406,077			321,895
Buildings		315,835			315,835
Office Equipment		30,083			23,028
		1,664,587			1,541,662
Less: accumulated depreciation		(830,547	)		(782,971
Total Fixed assets		834,040			758,691

OIL AND GAS PROPERTIES		1,539,950			1,576,950
(On the basis of successful efforts accounting)

PIPELINE FACILITIES		187,773			193,948

OTHER ASSETS
Investments in joint venture at cost		801,319			801,319
Land		496,500			496,500
Investments		500			500
Well equipment and supplies		429,360			440,712
Cash - restricted		83,000			83,000

Total Other Assets		1,810,679			1,822,031

TOTAL ASSETS	$	4,944,529		$	5,227,298

See notes to consolidated financial statements.

MILLER PETROLEUM, INC.

Consolidated Balance Sheets

	October 31		April 30
	2006		2006
	Unaudited
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES

Bank overdraft	$		$	$ 27,253
Accounts payable - trade		181,995		305,494
Accrued expenses		68,239		43,189
Current portion of notes payable		28,103		16,636

Total Current Liabilities		278,337		392,572

LONG-TERM LIABILITIES

Mortgage payable		315,197		323,898
Total Long-Term Liabilities				323,898

Total Liabilities		593,534			716,470

TEMPORARY EQUITY

Common stock subject to put rights; 2,900,000 shares		4,350,000			4,350,000

PERMANENT STOCKHOLDERS' EQUITY


Common Stock: 500,000,000 shares authorized at $0.0001 par value, 11,466,856 shares issued
and outstanding		1,436			1,146
Additional paid-in capital		6,663,393			6,624,683
Unearned compensation		(562,108	)		(751,990	)
Accumulated deficit		(6,101,726	)		(5,713,011	)
Total Stockholders’ Equity		995			160,828

TOTAL LIABILITIES, TEMPORARY EQUITY
AND PERMANENT STOCKHOLDERS'S EQUITY	$	4,944,529		$	5,227,298

See notes to consolidated financial statements.

MILLER PETROLEUM, INC.

Consolidated Statement s of Operations

(UNAUDITED)

	For the Three Months Ended						For the Six Months Ended
	October 31						October 31
	2006			2005			2006			2005
REVENUES
Oil and gas revenue	$	128,683		$	183,056		$	263,033		$	368,877
Service and drilling revenue		252,957			16,467			650,526			1,314,666
Other revenue					241						287
Total Revenue		381,640			199,764			913,559			1,683,830

COSTS AND EXPENSES

Cost of oil and gas revenue		14,155			21,967			28,935			40,576
Cost of service and drilling revenue		220,013			103,713			574,522			1,065,662
Selling, general and administrative		313,060			275,364			558,096			646,833
Salaries and wages		21,797			102,279						178,695
Depreciation, depletion and amortization		48,473			87,549			90,751			161,767
Total Costs and Expense		617,498			590,872			1,252,304			2,093,533

INCOME (LOSS) FROM OPERATIONS		(235,858	)		(391,108	)		(338,745	)		(409,703	)

OTHER INCOME (EXPENSE)

Interest Income		234			146			286			197
Gain on sale of equipment											300
Interest expense		(6,894	)		(336,412	)		(11,256	)		(507,943	)
Penalty Warrants		(15,000	)					(39,000	)

Total Other Income (Expense)		(21,660	)		(336,266	)		(49,970	)		(507,446	)

NET INCOME (LOSS)	$	(257,518	)	$	(727,374	)	$	(388,715	)	$	(917,149	)

BASIC & DILUTED
NET INCOME (LOSS) PER SHARE	$	(0.02	)	$	(0.08	)	$	(0.03	)	$	(0.10	)

WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING		14,366,856			9,396,856			14,366,856			9,396,035

See notes to consolidated financial statements.

MILLER PETROLEUM, INC.

Consolidated Statement of Permanent Stockholders' Equity

(UNAUDITED)

					Additional
	Common		Shares		Paid-in			Unearned			Accumulated
	Shares		Amount		Capital			Compensation			Deficit			Total

Balance, April 30, 2005		9,396,856	$	939	$	4,495,498						($2,123,077	)	$	2,373,360

Issuance of warrants as prepayment
of financing costs						370,392									370,392

Issuance of warrants for financing
cost penalty						66,000									66,000

Issuance of shares as payment for
services		1,650,000		165		1,682,835			(751,990	)					931,010

Issuance of shares for stock sales
commission		400,000		40		459,960									460,000

Cost of stock sales						(460,000	)								(460,000	)

Exercise of warrants		20,000		2		9,998									10,000

Net loss for the year ended
April 30, 2006												(3,589,934	)		(3,589,934	)

Balance April 30, 2006		11,466,856		1,146		6,624,683			(751,990	)		(5,713,011	)		160,828

To reflect compensation
earned for the six months
ended October 31, 2006									189,882						189,882

Issuance of warrants for
financing cost penalty						39,000									39,000

Net loss for the six months
ended October 31, 2006												(388,715	)		(388,715	)

Balance October 31, 2006		11,466,856	$	1,146	$	6,663,683		$	(562,108	)	$	(6,101,726	)	$	995

See notes to consolidated financial statements.

MILLER PETROLEUM, INC.

Consolidated Statement of Cash Flows

(UNAUDITED)

	For the Six			For the Six
	Months Ended			Months Ended
	October 31, 2006			October 31, 2005

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss	$	(388,715	)	$	(917,149	)
Adjustments to Reconcile Net Loss to Net Cash Provided (Used)
by Operating Activities:
Depreciation, depletion and amortization		90,751			161,767
Gain on sale of equipment					300
Issuance of stock for services		189,882			73,973
Warrant costs		39,000			158,740
Changes in Operating Assets and Liabilities:
Accounts receivable		331,342			324,730
Unbilled service and drilling cost		76,944
Inventory		(17,696	)
Loan fees					(281,897	)
Bank overdraft		(27,253	)
Accounts payable		(123,499	)		(172,935	)
Accrued expenses		25,050			(199,075	)
Net Cash Provided (Used) by Operating Activities		195,806			(1,501,006	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Equipment		(122,924	)		(28,394	)
Net additions to oil and gas properties					(328,155	)
Net Cash Provided (Used) by Investing Activities		(122,924	)		(356,549	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable		(17,310	)		(1,982,059	)
Proceeds from borrowing		20,076			4,150,000
Net proceeds from issuance of common stock					0
Increase in restricted cash					(92,358	)
Change in note receivable		35,100			5,000
Net Cash Provided by Financing Activities		37,866			2,080,583

NET INCREASE (DECREASE) IN CASH		110,748			223,028

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		0			2,362

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	110,748		$	225,390

CASH PAID FOR
INTEREST	$	11,256		$	507,943
INCOME TAXES					0

See notes to consolidated financial statements.

MILLER PETROLEUM, INC.

Notes to the Condensed Consolidated Financial Statements

(1) Interim Reports / Going Concern

The condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. However, in addition to successive losses for three years, declining revenues, a net loss of $(388,715) for the six months ended October 31, 2006, and net equity of $995 as of October 31, 2006, the Company was informed on August 30, 2006 by Wind City Oil & Gas, LLC that, by September 30, 2006, it would exercise its put to return its stock, which had originally been recorded as temporary equity. Wind City has also filed a lawsuit, which is discussed in Notes 4 and 7 of these condensed, consolidated financial statements. Management believes that the Company may therefore need total additional financing of approximately $5,000,000 to effect the repurchase and continue to operate as planned during the twelve month period subsequent to October 31, 2006. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

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, 2006 Annual Report on Form 10-KSB. The results of operations for the period ended October 31, 2006 are not necessarily indicative of operating results for the full year. In the opinion of management, all adjustments (consisting of only normal recurring accruals) considered necessary for a fair presentation have been included.

(2) Participant Receivables and Related Party Receivables

Participant receivable and related party receivables consist of receivables contractually due from our various joint venture partners in connection with routine exploration, betterment and maintenance activities. Our collateral for these receivables generally consists of lien rights over the related oil producing properties. Approximately $249,904 included in the balance sheet among Accounts receivable - related party is due from Wind Mill Oil & Gas, LLC, a related party.

(3) Long-Term Debt, Warrants, Loan Fees And Restricted Cash

Long-term debt consisted of a mortgage loan on our land and building. Interest in the amount of $11,256 was paid on this note for the six months ended October 31, 2006.

(4) Stockholders’ Equity

On December 23, 2005 we entered into a joint venture agreement with Wind City Oil & Gas, LLC to form Wind Mill Oil & Gas, LLC to explore, drill and develop certain oil and gas properties. As part of the agreement, Wind City Oil & Gas, LLC purchased 2,900,000 common shares for $4,350,000 on December 23, 2005. The stock purchase agreement contains a put whereby, under certain conditions, Wind City Oil & Gas, LLC can put the stock back to us until September 30, 2006, thereby requiring us to repurchase the 2,900,000 shares. On August 30, 2006, we received notice from Wind City Oil & Gas LLC that they were seeking to exercise the put provision of the stock purchase agreement. We do not believe that such notice was properly given. On November 6, 2006, Wind City filed a summons and complaint against us in an action in the United States District Court for the Southern District of New York seeking to force the exercise of the put provision of the stock purchase agreement. Because of the uncertainty surrounding the eventual disposition of the case, Management has continued to treat this stock as temporary equity in these financial statements.

MILLER PETROLEUM, INC.

Notes to the Consolidated Financial Statements

(4) Stockholders’ Equity (continued)

Penalty warrants for 240,000 common shares at a price of $1.15 per share, and a five-year term were issued during the six months ended October 31, 2006. The warrants were valued at $39,000.

The Company presents “basic” earnings (loss) per share and, if applicable, “diluted” earnings per share pursuant to the provisions of Statement of Financial Accounting Standards No. 128. The calculation of diluted earnings per share is similar to that of basic earnings per share, except that the denominator is increased to include the number of additional common shares that would have been outstanding if all potentially dilutive common shares, such as those issuable upon the exercise of stock options and warrants, were issued during the period. Since the Company had a net loss for the six months ended October 31, 2006 and for the year ended April 30, 2006, the assumed effects from the exercise of outstanding options and warrants would have been anti-dilutive, and, therefore only basic earnings per share is presented.

(5) Recent Accounting Pronouncements

In February 2006 the FASB issued SFAS No 155 “Accounting for Certain Hybrid Financial Instruments - an amendment of FASB Statements No 133 and 140”. This Statement amends FASB Statements No 133, “Accounting for Derivative Instruments and Hedging Activities” and No 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities”. This Statement revolves around issues addressed in Statement No 133 Implementation Issue No D1, “Application of Statement 133 to Beneficial Interests in Securitized Financial Assets”. This Statement is effective for all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006. Adoption of SFAS No 155 is not expected to have a material effect on the Company’s results of operations, financial condition or cash flows.

In March 2006 the Financial Accounting Standards Board (“FASB”) issued SFAS No 156 “Accounting for Servicing of Financial Assets - an amendment of FASB Statement No 140. SFAS No 156 amends SFAS No 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities”, with respect to accounting for separately recognized servicing assets and servicing liabilities. SFAS No 156 is effective for fiscal years that begin after September 15, 2006, with early adoption permitted as of the beginning of an entity’s fiscal year. The Company does not have any servicing assets or servicing liabilities and, accordingly, the adoption of SFAS No 156 will not have any effect on the results of operations, financial condition or cash flows.

Financial Accounting Standards Board Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109, was issued in July 2006 and will be effective for the Company on January 1, 2007. FIN 48 defines the threshold for recognizing the benefits of uncertain tax return positions in the financial statements. The Company has not yet determined the impact this Interpretation will have on its financial position, results of operations or cash flows.

MILLER PETROLEUM, INC.

Notes to the Consolidated Financial Statements

(6) Related Party Transactions

For the three months ended October 31, 2006 we had revenues from Wind City of $214,216 and salary reimbursement of $136,276. For the six months ended October 31, 2006 we had revenue of $528,743 and salary reimbursement of $353,640.

	3 Months		6 Months
	Ended 10-31-06		Ended 10-31-06

Revenue from Windmill	$	350,492	$	882,383
		350,492		882,383
Salaries QE 07-31-06				(217,364
QE 10-31-06		136,276		(136,276
Revenue	$	214,216	$	528,743

(7) Litigation / Going Concern

The outcome of our current litigation with Wind City could have a material adverse effect on our financial condition.

As previously discussed in Notes 1 and 4, Wind City Oil & Gas, LLC has filed suit to force the exercise of the put provision of the stock purchase agreement. Neither we nor our attorneys believe the notice was properly given in accordance with the agreements; however, if the suit is successful and we are required to repurchase the shares, we would have a significant cash flow shortfall, which would require additional financing arrangements. There is no assurance that such financing could be obtained on favorable terms, or at all. In such event, our financial condition could be materially adversely affected and our ability to continue as a going concern could be jeopardized.

Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction

The following discussion is intended to facilitate an understanding of our business and results of operations and includes forward-looking statements that reflect our plans, estimates and beliefs. It should be read in conjunction with our audited consolidated financial statements and the accompanying notes to the consolidated financial statements included herein. Our actual results could differ materially from those discussed in these forward-looking statements.

Overview

We are actively engaged in the exploration, development, production and acquisition of crude oil and natural gas primarily in eastern Tennessee. In December 2005, we entered into a joint venture agreement with Wind City Oil & Gas, LLC (“Wind City”) to form Wind Mill Oil & Gas, LLC (the “Wind Mill Joint Venture”). We own 49.9% of the Wind Mill Joint Venture and Wind City owns 50.1%. We contributed approximately 43,000 acres, which we held under lease in Tennessee, to the Wind Mill Joint Venture for oil and gas exploration, development and exploitation of undeveloped wells. Wind City contributed $10,000,000. The joint venture will only encompass new drilling projects. We retained our working interest in the developed and producing wells located on such leases. In connection with the development of wells by the Wind Mill Joint Venture, we will also receive reimbursement for certain salaried employees and revenue for providing labor and equipment. Including the leases that were contributed to the Wind Mill Joint Venture, we have approximately 50,000 acres under lease. About 90% of such leases are held by production.

As part of this Joint Venture Agreement, Wind City purchased 2,900,000 shares of our common stock with the right, under certain conditions, to put the stock back to us by September 30, 2006. On August 30, 2006 Wind City notified us of its intent to exercise the put provision of the stock purchase agreement. On November 7, 2006 Wind City filed a lawsuit to force the exercise of the put provision. We do not believe the put was properly exercised and have filed an application to stay the litigation and force arbitration as is required by the agreements.

Our present financial condition precludes us from being able to repurchase the shares under the put if we were to lose the lawsuit. We are exploring various financing opportunities in this regard; however, there can be no assurance that we will be able to obtain financing sufficient to repurchase such shares. In the event that we are unable to obtain financing on acceptable terms sufficient to consummate the repurchase, our business and financial condition could be materially adversely affected.

Liquidity and Capital Resources

Cash provided by operating activities was $195,806 for the six months ended October 31, 2006, an increase of $1,696,812 over cash used by operating activities for the six months ended October 31, 2005 of $1,501,006. Our principal source of liquidity has been oil and gas revenues, loans from related parties and directors, private placement transactions of our common stock, and participation with investors in various oil and gas wells. The increase in oil and gas prices and the fact that we have approximately 50,000 acres under lease in Tennessee enhances our ability to attract investors and to pursue joint ventures in oil and gas.

On December 23, 2005 we entered into the Wind Mill Oil & Gas LLC Agreement (“Wind Mill”) and also sold 2,900,000 shares of common stock to Wind City Oil & Gas, LLC (“Wind City”) for $4,350,000. These funds were used to pay off the $4,150,000 of loans and to provide some working capital. Wind City also contributed $10,000,000 to Wind Mill and we contributed oil and gas leases as part of the Wind Mill agreement. For the six months ended October 31, 2006 we received $353,640 of administrative salary reimbursements and revenue of $412,093 for various labor, parts and use of equipment. The cessation of operations with Wind Mill has had a major impact on our cash flow.

Our long-term cash flows are subject to a number of variables including the level of production and prices as well as various economic conditions that have historically affected the oil and gas business. A material drop in oil and gas prices or a reduction in production and reserves would reduce our ability to fund capital expenditures, service new debt, meet financial obligations and remain profitable. We operate in an environment with numerous financial and operating risks, including, but not limited to, the inherent risks of the search for, development and production of oil and gas, the ability to buy properties and sell production at prices which provide an attractive return and the highly competitive nature of the industry. Our ability to expand our reserve base is, in part, dependent on obtaining sufficient capital through internal cash flow or the issuance of debt or equity securities. There can be no assurance that internal cash flow and other capital sources will provide sufficient funds to maintain capital expenditures that we believe are necessary to offset future declines in production and proved reserves.

Results of Operations

Three Months Ended October 31, 2006 compared to Three Months Ended October 31, 2005

		For the Three Months Ended						Increase /
		October 31						(Decrease)
		2006			2005			2005 to 2006
REVENUES
Oil and gas revenue	$	128,683		$	183,056		$	(54,373	)
Service and drilling revenue		252,957			16,467			236,490
Other revenue					241			(241	)
Total Revenue		381,640			199,764			181,876

COSTS AND EXPENSES
Cost of oil and gas revenue		14,155			21,967			(7,812	)
Cost of service and drilling revenue		220,013			103,713			116,300
Selling, general and administrative		313,060			275,364			37,696
Salaries and wages		21,797			102,279			(80,482	)
Depreciation, Depletion and amortization		48,473			87,549			(39,076	)
Total Costs and Expenses		617,498			590,872			26,626

INCOME (LOSS) FROM OPERATIONS		(235,858	)		(391,108	)		155,250

OTHER INCOME (EXPENSE)
Interest income		234			146			88
Interest expense		(6,894	)		(336,412	)		329,518
Penalty warrants		(15,000	)					(15,000	)
Total Other Income (Expense)		(21,660	)		(336,266	)		314,606

NET INCOME (LOSS)	$	(257,518	)	$	(727,374	)	$	469,856

Revenue

Oil and gas revenue was $128,683 for the three months ended October 31, 2006 as compared to $183,056 for the three months ended October 31, 2005, a decrease of $54,373. This resulted from changing oil vendors such that oil was not collected for approximately one month, requiring a cessation of production.

Service and drilling revenue was $252,957 for the three months ended October 31, 2006 as compared to $16,467 for the three months ended October 31, 2005, an increase of $236,490. This resulted from an increase in drilling activity, however, through the Wind Mill Joint Venture nine wells were drilled during the quarter ended October 31, 2006.

Cost and Expense

The cost of oil and gas revenue was $14,155 for the three months ended October 31, 2006 as compared to $21,967 for the three months ended October 31, 2005, a decrease of $7,812. This decrease resulted from the cost associated with decreased production due to changing oil vendors and no collection of oil for approximately one month.

The cost of service and drilling revenue was $220,013 for the three months ended October 31, 2006 as compared to $103,713 for the three months ended October 31, 2005, an increase of $116,300. This increase is due to the increase in drilling activities.

Selling, general and administrative expense was $313,060 for the three months ended October 31, 2006 as compared to $275,364 for the three months ended October 31, 2005, an increase of $37,696. This increase resulted from a increase in consulting, legal and professional fees and the cessation of payments from Wind Mill Oil & Gas, LLC.

Salaries and wages expense was $21,797 for the three months ended October 31, 2006 as compared to $102,279 for the three months ended October 31, 2005, a decrease of $80,482. This decrease resulted from salary reimbursements from Wind Mill Oil & Gas, LLC.

Depreciation, depletion and amortization was $48,473 for the three months ended October 31, 2006 as compared to $87,549 for the three months ended October 31, 2005, a decrease of $39,076. This resulted from management’s decision to write off $624,255 of well cost at April 30, 2006 with a corresponding decrease in depletion expense.

Interest expense was $6,894 for the three months ended October 31, 2006 as compared to $336,412 for the three months ended October 31, 2005, a decrease of $329,518. This resulted from the Wind City Oil & Gas, LLC stock purchase and the payoff of most notes.

Six Months Ended October 31, 2006 compared to Six Months Ended October 31, 2005

	For the Six Months Ended						Increase /
	October 31						(Decrease)
	2006			2005			2005 to 2006
REVENUES
Oil and gas revenue	$	263,033		$	368,877		$	(105,844	)
Service and drilling revenue		650,526			1,314,953			664,427	)
Total Revenue		913,559			1,683,830			(770,271	)

COSTS AND EXPENSES
Cost of oil and gas revenue		28,935			40,576			(11,641	)
Cost of service and drilling revenue		574,522			1,065,662			(491,140	)
Selling, general and administrative		558,096			646,833			(88,737	)
Salaries and wages					178,695			(178,695	)
Depreciation, Depletion and amortization		90,751			161,767			(71,016	)
Total Costs and Expenses		1,252,304			2,093,533			(841,229	)

INCOME (LOSS) FROM OPERATIONS		(338,745	)		(409,703	)		70,958

OTHER INCOME (EXPENSE)
Interest income		286			197			(89	)
Gain on sale of equipment					300			300
Interest expense		(11,256	)		(507,943	)		(496,687	)
Penalty warrants		(39,000	)					39,000
Total Other Income (Expense)		(49,970	)		(507,446	)		(457,476	)

NET INCOME (LOSS)	$	(388,715	)	$	(917,149	)	$	528,434

Revenue

Oil and gas revenue was $263,033 for the six months ended October 31, 2006 as compared to $368,877 for the six months ended October 31, 2005, a decrease of $105,844. This resulted from changing oil vendors such that oil was not collected for over one month, requiring a cessation of production.

Service and drilling revenue was $650,526 for the six months ended October 31, 2006 as compared to $1,314,953 for the six months ended October 31, 2005, a decrease of $664,427. This resulted from a decrease in drilling activity, however, through the Wind Mill Joint Venture 14 wells were drilled during the six months ended October 31, 2006.

Cost and Expense

The cost of oil and gas revenue was $28,935 for the six months ended October 31, 2006 as compared to $40,576 for the six months ended October 31, 2005, a decrease of $11,641. This decrease resulted from the cost associated with decreased production due to changing oil vendors and no collection of oil for over one month.

The cost of service and drilling revenue was $574,522 for the six months ended October 31, 2006 as compared to $1,065,662 for the six months ended October 31, 2005, a decrease of $491,140. This decrease is due to the decrease in drilling activities since most of the drilling was in Wind Mill.

Selling, general and administrative expense was $558,096 for the six months ended October 31, 2006 as compared to $646,833 for the six months ended October 31, 2005, a decrease of $88,737. A decrease in consulting, legal and professional fees and payments of $42,716 from Wind Mill Oil & Gas, LLC reduced selling, general and administrative expense.

Salaries and wages expense was $0 for the six months ended October 31, 2006 as compared to $178,695 for the six months ended October 31, 2005, a decrease of $178,695. This decrease resulted from salary reimbursements from Wind Mill Oil & Gas, LLC.

Depreciation, depletion and amortization was $90,751 for the six months ended October 31, 2006 as compared to $161,767 for the six months ended October 31, 2005, a decrease of $70,016. This resulted from management’s decision to write off $624,255 of well cost at April 30, 2006 with a corresponding decrease in depletion expense.

Interest expense was $11,256 for the six months ended October 31, 2006 as compared to $507,943 for the six months ended October 31, 2005, a decrease of $496,687. This resulted from the Wind City Oil & Gas, LLC stock purchase and the payoff of most notes.

Item 3 Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer have conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended) as of a date as of the end of the period covered by the report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective in gathering, analyzing and disclosing information needed to satisfy our disclosure obligations under the Securities Exchange Act of 1934.

There was no change in our internal control over financial reporting identified in connection with the evaluation that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 3 Legal Proceedings

Reference is made to the Current Report on Form 8-K filed on November 20, 2006 for a full description of the pending litigation involving Wind City Oil & Gas, LLC.

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 20, 2006	By:	/s/ Deloy Miller
		Deloy Miller
		Chief Executive Officer, principal executive officer


Date: December 20, 2006	By:	/s/ Lyle H. Cooper
		Lyle H. Cooper
		Chief Financial Officer, principal financial and accounting officer