Glen Rose Petroleum 10QSB 2007 Q3 Quarterly report (small business)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-QSB

Mark One

x	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended December 31, 2006; or

o	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ________________ to ________ ___________.

Commission File No. 0-9997

United Heritage Corporation

(Exact name of registrant as specified in charter)

Utah		87-0372826
(State or other jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization)

200 North Loraine, Suite 400, Midland, Texas 79701

(Address of principal executive offices)

(432) 686-2618

(Registrant's telephone number, including area code)

(Former name, former address and former fiscal year if changed since last report)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes o No

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o Yes x No

The number of shares of common stock, $0.001 par value, outstanding at February 13, 2007, was 6,446,850 shares.

Transitional Small Business Format

(Check one) Yeso Nox

UNITED HERITAGE CORPORATION—FORM 10-QSB

CONTENTS

		Page Number
Part I - Financial Information

Item 1 - Financial Statements

Consolidated Condensed Balance Sheets
at December 31, 2006 (unaudited) and March 31, 2006 (audited)		1-2

Consolidated Condensed Statements of Income (unaudited)
for the three and nine months ended December 31, 2006
and December 31, 2005		3

Consolidated Condensed Statements of Cash Flows (unaudited)
for the nine months ended December 31, 2006 and
December 31, 2005		4

Notes to Consolidated Condensed Financial Statements		5-19

Forward-Looking Statements		20

Item 2 - Management’s Discussion and Analysis
Or Plan of Operation		21-34

Item 3 - Controls and Procedures		34

Part II - Other Information

Item 1 - Legal Proceedings		35

Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds		35

Item 3 - Defaults upon Senior Securities		35

Item 4 - Submission of Matters to a Vote of Security Holders		35

Item 5 - Other Information		35

Item 6- Exhibits		35

Signatures		36

Certifications

Part I, Item 1. Financial Statements

UNITED HERITAGE CORPORATION

CONSOLIDATED CONDENSED BALANCE SHEETS

	December 31, 2006			March 31, 2006
	(UNAUDITED)
ASSETS
CURRENT ASSETS
Cash	$	171,388		$	76,366
Trade accounts receivable		109,928			60,269
Inventory		62,921			48,626
Prepaid expenses		8,063			47,530
Total current assets		352,300			232,791

OIL AND GAS PROPERTIES, accounted for
using the full cost method, net of accumulated
depletion and depreciation of $2,507,951
at December 31, 2006 and $2,048,818 at
March 31, 2006
Proved		14,709,444			9,435,979
Unproved		5,781,645			5,781,645
		20,491,089			15,217,624

PROPERTY AND EQUIPMENT, at cost
Equipment, furniture and fixtures		76,030			74,244
Vehicles		196,876			57,603
		272,906			131,847
Less accumulated depreciation		(152,830	)		(120,657	)
		120,076			11,190

TOTAL ASSETS	$	20,963,465		$	15,461,605

See notes to consolidated condensed financial statements

Part I, Item 1. Financial Statements—Continued

UNITED HERITAGE CORPORATION

CONSOLIDATED CONDENSED BALANCE SHEETS

	December 31, 2006			March 31, 2006
	(UNAUDITED)
LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable	$	2,062,386		$	1,248,763
Accounts payable, related party		762,088			405,000
Accrued expenses		942,742			344,684
Total current liabilities		3,767,216			1,998,447


LONG-TERM LIABILITIES
Asset retirement obligation		278,914			266,512
Note payable, related party		6,802,505			1,413,003
Total long-term liabilities		7,081,419			3,677,962


SHAREHOLDERS' EQUITY
Preferred stock, $.001 par value,
5,000,000 shares authorized, none issued
Common stock, $.001 par value,
125,000,000 shares authorized; 6,446,850 shares
issued and outstanding:		6,447			6,447
Additional paid-in capital		43,682,809			43,341,208
Accumulated deficit		(33,574,426	)		(31,564,012	)
Total Shareholders’ Equity		10,114,830			11,783,643

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	20,963,465		$	15,461,605

See notes to consolidated condensed financial statements

Part I, Item 1. Financial Statements—Continued

UNITED HERITAGE CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)

	THREE MONTHS ENDED December 31,						NINE MONTHS ENDED December 31,
	2006			2005			2006			2005
OPERATING REVENUES
Oil and gas sales	$	253,904		$	181,436		$	909,995		$	484,267
Processed meat products		-			-			-			8,694
TOTAL OPERATING REVENUES		253,904			181,436			909,995			492,961

OPERATING COSTS AND EXPENSES
Production and operating		406,736			85,799			1,040,920			254,156
Processed meat products		-			-			-			15,996
Selling		-			-			-			-
Depreciation and depletion		156,621			234,881			503,293			688,321
General and administrative		172,557			247,463			1,080,449			727,634
Impairment of oil & gas properties		-			-			-			23,199,110
TOTAL OPERATING COSTS AND EXPENSES		735,914			568,143			2,624,662			24,885,217

LOSS FROM OPERATIONS		(482,010	)		(386,707	)		(1,714,667	)		(24,392,256	)

OTHER INCOME (EXPENSE)
Miscellaneous income		-			-			-			7,804
Gain on forgiveness of debt		-			116,457			-			116,457
Loss on notes receivable		-			(87,500	)		-			(87,500	)
Interest income		-			-			-			-
Interest expense		(145,140	)		(65,654	)		(295,747	)		(218,372	)
Loss before income tax		(627,150	)		(423,404	)		(2,010,414	)		(24,573,867	)

INCOME TAX BENEFIT		-			-			-			8,049,925

NET LOSS	$	(627,150	)	$	(423,404	)	$	(2,010,414	)	$	(16,523,942	)

Loss per share (basic)	$	(0.10	)	$	(0.07	)	$	(0.32	)	$	(2.94	)

Weighted average number of shares (basic)		6,446,850			6,375,454			6,446,850			5,628,099

See notes to consolidated condensed financial statements

Part I, Item 1. Financial Statements—Continued

UNITED HERITAGE CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

	NINE MONTHS ENDED December 31,
	2006			2005
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(2,010,414	)	$	(16,523,942	)
Adjustments to reconcile net loss
to net cash provided by (used in) operating activities:
Depreciation and depletion		503,293			688,321
Ceiling test impairment of oil and gas properties		-			23,199,110
Deferred compensation and consulting		-			5,250
Recognition of services performed for stock		-			105,358
Stock options issued for services		341,601			4,462
Write off of notes receivable		-			87,500
Changes in assets and liabilities:
Accounts receivable		(49,659	)		42,639
Inventory		(14,295	)		5,887
Other current assets		39,467			16,889
Deferred tax		-			(8,049,925	)
Accounts payable and accrued expenses		1,768,769			(282,378	)
Net cash provided by (used in) operating activities		578,762			(700,829	)

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of lease rights		-			625,000
Additions to oil and gas properties		(5,732,183	)		(490,620	)
Additions to equipment		(141,059	)		-
Net cash provided by (used in) investing activities		(5,873,242	)		134,380

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings, related party		5,389,502			80,900
Payments on note payable, related party		-			(3,203,994	)
Proceed from issuance of common
stock to Lothian Oil Inc.		-			3,444,000
Proceeds from issuance of common stock upon
exercise of warrants		-			311,850
Net cash provided by financing activities		5,389,502			632,756

Increase in cash and cash equivalents		95,022			66,307

Cash at beginning of period		76,366			7,151

Cash at end of period	$	171,388		$	73,458

See notes to consolidated condensed financial statements

UNITED HERITAGE CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete consolidated financial statements.

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine-month period ended December 31, 2006 are not necessarily indicative of the results that may be expected for the year ending March 31, 2007. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-KSB for the year ended March 31, 2006.

Our financial statements have been prepared on a going concern basis which contemplates the realization of assets and the liquidation of liabilities in the ordinary course of business. We have incurred substantial losses from operations and we have a working capital deficit which raises substantial doubt about our ability to continue as a going concern. We sustained a net loss of $2,010,414 for the nine month period ended December 31, 2006 and a net loss of $17,371,395 for the fiscal year ended March 31, 2006 and, as of the same periods, we had an accumulated deficit of $33,574,426 and $31,564,012, respectively. Even if the merger with Lothian is consummated, we are not certain that we will be able to obtain the financing we need to develop our properties and alleviate doubt about our ability to continue as a going concern.

NOTE 2 - RESTATEMENT OF HISTORICAL FINANCIAL STATEMENTS

In April 2006, the Company retained independent petroleum engineers to evaluate its properties. Based on this review and internal assessments, the Company concluded that a downward revision of its stated proved reserves, from 36,492,693 Boe to 1,056,317 Boe, should have been reflected in the March 31, 2005 fiscal year and prior periods. The Company concluded that a revision of the historical proved reserve estimates included in the historical supplemental oil and gas producing disclosures was required. Quantities of estimated proved reserves are used in determining depletion and impairment based on the ceiling limitation. The revisions of historical reserve estimates required the restatement of the Company’s financial statements for the fiscal years ending March 31, 2000 to March 31, 2005 and the first three quarters of the fiscal year ended March 31, 2006.

The revision to the reserve estimates and the recalculation of the ceiling limitations for the restated financial statements required the Company to record impairment to its proved properties of $948,898 in the fiscal year ended March 31, 2002.

UNITED HERITAGE CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 2 - RESTATEMENT OF HISTORICAL FINANCIAL STATEMENTS - continued

In addition to the restatements required as a result of the reserve revisions, the Company determined that approximately $76,822 of merger costs and $34,131 of vehicle costs net of accumulated depreciation were inappropriately included in the Company’s proven properties in the March 31, 2005 financial statements and prior years. The Company determined that a revision of the historical financial statements for these reclassifications was required to determine the appropriate depletion and impairment based on the ceiling limitation.

Reserve Restatement

The reserve restatement resulted in the following revisions to our estimated proved reserves as of:

	March 31,
	2005				2004
	As Reported		As Restated		As Reported		As Restated
Estimated Proved Reserves (Unaudited):
Oil (Bbls)		35,225,600		567,189		27,592,015		575,783
Gas (Mcf)		7,602,559		2,934,765		1,507,510		3,097,811
Oil and Gas (Boe)		36,492,693		1,056,317		27,843,267		1,092,085
Estimated Proved Developed Reserves (Unaudited):
Oil (Bbls)		5,629,000		567,189		6,702,230		575,783
Gas (Mcf)		2,538,000		2,934,765		1,507,510		3,097,811
Oil and Gas (Boe)		6,052,000		1,056,317		6,953,482		1,092,085

Financial Restatement

The cumulative impact of the restatement on the Company’s shareholders’ equity as of March 31, 2005 was a reduction of $1,800,873.

The Company’s historical consolidated statements of operations for the year ended March 31, 2005 and for each of the quarters in that year and the first three quarters of the fiscal year ended March 31, 2006 reflect the effects of the restatement on the calculation of historical depletion. The Company did not amend its Annual Report on Form 10-KSB filed for the year ended March 31, 2005 or the Quarterly Reports on Form 10-QSB filed for any periods prior to March 31, 2006. The financial statements and related information contained in those reports should no longer be relied upon. A summary of the effects of the restatement on reported amounts for the year ended March 31, 2005 and the quarters ended June 30, 2005, September 30, 2005 and December 31, 2005 is presented below. The information presented represents only those statement of operations, balance sheet and cash flow statement line items affected by the restatement.

UNITED HERITAGE CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 2 - RESTATEMENT OF HISTORICAL FINANCIAL STATEMENTS - continued

	Year ended March 31, 2005
	As Reported			As Restated
Statement of Operations:
Depreciation and depletion	$	90,741		$	280,273
Total operating costs and expenses		1,581,328			1,770,860
Loss from operations		(1,043,092	)		(1,232,624	)
Income before income tax		(813,195	)		(1,002,727	)
Income tax		-			-
Net loss		(813,195	)		(1,002,727	)
Basic and diluted loss per share		(0.17	)		(0.21	)

	Year ended March 31, 2005
	As Reported			As Restated
Statement of Cash Flows:
Net loss	$	(813,195	)	$	(1,002,727	)
Depreciation, depletion and amortization		90,741			280,273

	March 31, 2005
	As Reported			As Restated
Balance Sheet:
Prepaid expenses	$	48,374		$	125,195
Proved oil and gas properties		38,565,819			2,301,263
Accumulated depletion		204,706			1,026,934
Unproved oil and gas properties		834,579			35,215,630
Vehicles		22,045			57,603
Accumulated depreciation		85,637			115,384
Total assets		39,683,457			37,882,584
Accumulated deficit		(12,391,744	)		(14,192,617	)
Total liabilities and shareholders' equity		39,683,457			37,882,584

UNITED HERITAGE CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 2 - RESTATEMENT OF HISTORICAL FINANCIAL STATEMENTS - continued

	Quarters Ended (Unaudited)
	June 30, 2005						September 30, 2005						December 31, 2005
	As Reported			As Restated			As Reported			As Restated			As Reported			As Restated
Statement of Operations:
Depreciation and depletion	$	11,734		$	64,005		$	14,187		$	389,435		$	21,269			234,880
Ceiling test impairment		-			-			-			23,199,110			-			-
Total operating costs and expenses		271,475			323,746			418,970			23,993,328			354,531			568,142
Loss from operations		(144,392	)		(196,663	)		(234,528	)		(23,808,886	)		(173,095	)		(386,706	)
Income tax		-			-			-			8,049,925			-			-
Net loss		(219,013	)		(271,284	)		(304,821	)		(15,829,254	)		(209,792	)		(423,403	)
Basic and diluted loss per share		(0.04	)		(0.05	)		(0.06	)		(2.98	)		(0.03	)		(0.07	)

	Quarters Ended (Unaudited)
	June 30, 2005						September 30, 2005						December 31, 2005
	As Reported			As Restated			As Reported			As Restated			As Reported			As Restated
Statement of Cash Flows:
Net loss	$	(219,013	)	$	(271,284	)	$	(304,821	)	$	(15,865,481	)	$	(209,792	)	$	(386,706	)
Depreciation, depletion and amortization		11,734			64,005			14,187			389,435			21,269			234,880
Ceiling test impairment		-			-			-			23,199,110			-			-
Deferred tax		-			-			-			(8,049,925	)		-			-

	Quarters Ended (Unaudited)
	June 30, 2004						September 30, 2004						December 31, 2004						March 31, 2005
	As Reported			As Reported			As Reported			As Reported			As Reported			As Reported			As			As Reported
Statement of Operations:
Depreciation and depletion	$	20,966		$	60,942		$	20,982		$	60,363		$	21,792		$	57,671		$	27,001			101,297
Total operating costs and expenses		645,549			685,525			352,333			391,714			288,068			323,947			295,378			369,674
Loss from operations		(483,839	)		(523,815	)		(236,438	)		(275,819	)		(153,614	)		(189,493	)		(169,201	)		(243,497	)
Income tax		-			-			-			-			-			-			-			-
Net income (loss)		(559,743	)		(599,719	)		(316,444	)		(355,825	)		(232,508	)		(268,387	)		295,500			221,204
Basic and diluted earnings (loss) per share		(0.13	)		(0.14	)		(0.06	)		(0.07	)		(0.05	)		(0.05	)		0.06			0.05

	Quarters Ended (Unaudited)
	June 30, 2004						September 30, 2004						December 31, 2004						March 31, 2005
	As Reported			As Restated			As Reported			As Restated			As Reported			As Restated			As		As Restated
Statement of Cash Flows:
Net income (loss)	$	(559,743	)	$	(599,719	)	$	(316,444	)	$	(355,825	)	$	(232,508	)	$	(268,387	)	$	295,500	$	221,204
Depreciation, depletion and amortization		20,966			60,942			20,982			60,363			21,792			57,671			27,001		101,297

UNITED HERITAGE CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 3 - CHANGE IN ACCOUNTING PRINCIPLE

Effective April 1, 2006, the Company adopted Statement of Financial Accounting Standard No. 123(R), Share-Based Payment, (“SFAS No. 123(R)”), using the modified prospective transition method. SFAS No. 123(R) requires equity-classified share-based payments to employees, including grants of employee stock options, to be valued at fair value on the date of grant and to be expensed over the applicable vesting period. Under the modified prospective transition method, share-based awards granted or modified on or after April 1, 2006 are recognized in compensation expense over the applicable vesting period. Also, any previously granted awards that are not fully vested as of April 1, 2006 are recognized as compensation expense over the remaining vesting period. No retroactive or cumulative effect adjustments were required upon the Company’s adoption of SFAS No. 123(R).

Prior to adopting SFAS No. 123(R), the Company accounted for its employee stock options using the intrinsic-value based method prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, (“APB No. 25”) and related interpretations. This method required compensation expense to be recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price.

Had the Company elected the fair value provisions of SFAS No. 123(R), fiscal year 2005 net earnings and net earnings per share would have differed from the amounts actually reported as shown in the following table.

	Nine months Ended			Three Months Ended
	December 31, 2005			December 31, 2005
Net loss, as reported (restated)	$	(16,523,942	)	$	(423,404	)
Add share-based employee compensation expense included
In reported net earnings, net of related tax expense		-0-			-0-
Deduct total stock-based employee compensation
Expense determined under fair value based method for
all awards, net of related tax expense		139,951			-0-
Net loss, pro forma	$	(16,240,489	)	$	(423,404	)
Net loss per share available to common stockholders:
As reported:
Basic	$	(3.07	)	$	(0.07	)
Pro forma:
Basic	$	(3.09	)	$	(0.07	)

UNITED HERITAGE CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 3 - CHANGE IN ACCOUNTING PRINCIPLE - continued

As a result of adopting SFAS No. 123(R) on April 1, 2006, the Company’s net loss for the three and nine month period ended December 31, 2006 were $65,127 and $341,601, respectively, higher than if the Company had continued to account for share-based compensation under APB No. 25. Also, basic loss per share for the three and nine month period ended December 31, 2006 were approximately $0.01 and $0.05, respectively, per share higher as a result of the adoption.

NOTE 4 - REVERSE STOCK SPLIT

On December 19, 2005, the Company’s shareholders approved a one-for-three reverse stock split. The reverse stock split was effective December 22, 2005. The Company retained the current par value of $0.001 per share for all common shares. All references in the financial statements and notes to the number of shares outstanding, per share amounts, and stock option and warrant data have been restated to reflect the reverse stock split for all periods presented.

NOTE 5 - INVENTORY

Inventory consists of oil in tanks of $62,921 and $48,626 at December 31, 2006 and March 31, 2006, respectively.

NOTE 6 - OIL AND GAS PROPERTIES

Capitalized costs related to oil and gas producing activities and related accumulated depletion, depreciation and amortization are as follows:

	December 31, 2006			March 31, 2006
Capitalized costs of oil and gas properties:
Proved	$	17,217,395		$	11,484,797
Unproved		5,781,645			5,781,645
		22,999,040			17,266,442
Less accumulated depletion, depreciation,
and amortization		(2,507,951	)		(2,048,818	)
	$	20,491,089		$	15,217,624

UNITED HERITAGE CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 6 - OIL AND GAS PROPERTIES-continued

Proved Reserves are as follows:

	Oil (Bbls)			Gas (Mcf)
March 31, 2006		559,742			2,602,071
Extensions, additions and discoveries		-0-			-0-
Less production for period (nine months)		(22,109	)		(80,188	)
December 31, 2006		537,633			2,521,883

During June 2005, the Company entered into an agreement with a subsidiary of Dominion Resources, Inc. (Dominion) whereby the Company assigned the rights below 2000 feet to Dominion on 7,840 acres from its 10,360 acre leasehold in Edwards County, Texas. The Company received, as consideration for the agreement, cash of $625,000, an overriding royalty interest, a carried working interest in the first, second or third wells, and the right to participate as a working interest partner on a “well by well” basis. This right to participate also included an “area of mutual interest” which included approximately 12,800 acres.

Under the full cost method of accounting for oil and gas properties, the proceeds of the sale reduced the Company’s investment in oil and gas properties and no gain or loss was recognized from the sale.

NOTE 7 - CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of trade receivables. Concentrations of credit risk with respect to trade receivables consist principally of oil and gas purchasers. Receivables from one oil and gas customer at December 31, 2006 comprised approximately 70%, of the trade receivable balance. No allowance for doubtful accounts has been provided because management has determined the recorded amounts were determined to be fully collectible.

NOTE 8 - NOTE PAYABLE TO RELATED PARTY

The Company had a $6,500,000 revolving line of credit secured by substantially all of the assets of the Company, bearing interest at 10%, due August 17, 2006 from Almac Financial Corporation, a corporation owned by Walter G. Mize, formerly the largest shareholder of the Company. During December 2005, with the proceeds of the sale of common stock, the Company paid Almac the principal balance plus all accrued interest, resulting in full payment of the line of credit.

UNITED HERITAGE CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 8 - NOTE PAYABLE TO RELATED PARTY - continued

The Company has a $4,000,000 loan agreement with Lothian Oil Inc., its majority shareholder (“Lothian”). The agreement, dated October 7, 2005, provides for draws as needed for the development of the Cato San Andres Unit in New Mexico. The note bears interest at 1% over the Citibank prime rate and is secured by a deed of trust and assignment of production, among other provisions. Loan advances are repayable monthly from 70% of the oil and gas proceeds produced by the Cato San Andres Unit. The note is due and payable on October 7, 2015 and is subordinated to the Sterling Bank agreement discussed below.

In November 2006, Lothian increased the note amount of the loan for the development of the Cato Unit from $4,000,000 to $8,000,000 and agreed to increase its capital spending commitment, pursuant to the Development and Exploration Agreement and Operating Agreement, to $7,500,000 from $6,500,000. In exchange, the Company granted Lothian an option, valid for 18 months from the date of issuance, to acquire a 70% interest in the UHC New Mexico and Texas properties for $2,500,000. Advances to the Company under this agreement were approximately $6,067,000 as of December 31, 2006. No payments have been made by the Company. Accrued interest of approximately $256,000 has been included in accrued expenses in the accompanying balance sheet at December 31, 2006.

The Company has an additional $2,500,000 loan agreement with Lothian Oil Inc., its majority shareholder. Advances to the Company under this agreement were approximately $735,000 as of December 31, 2006. The agreement, dated as of March 31, 2006, provides for draws as needed for the development of the Wardlaw Field in Texas. The note bears interest at 1% over the Citibank prime rate and is secured by a deed of trust and assignment of production, among other provisions. Loan advances are repayable monthly from 70% of the oil and gas proceeds produced by the Wardlaw Field. The note is due and payable on March 31, 2016. No payments have been made by the Company. Accrued interest of $40,000 has been included in accrued expenses in the accompanying balance sheet at December 31, 2006.

Reducing Revolving Line of Credit Agreement

The Company, as a co-borrower with its largest shareholder, Lothian Oil Inc., its subsidiary, UHC New Mexico Corporation, and two subsidiaries of Lothian Oil Inc. (collectively, the “Co-Borrowers”), entered into a reducing revolving line of credit agreement of up to $20 million (“Credit Agreement”) with Sterling Bank dated as of June 16, 2006 but effective as of March 31, 2006. The line is due and payable on April 30, 2008.

No outstanding loan amounts have been allocated to the Company under the Credit Agreement as of December 31, 2006. As a condition to entering into the Credit Agreement, Sterling Bank required Lothian Oil Inc. to subordinate its loan to the Company for the development of the Cato San Andres Unit to the loan from Sterling Bank. The Credit

UNITED HERITAGE CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 8 - NOTE PAYABLE TO RELATED PARTY - continued

Agreement is secured by oil and gas properties owned by the Co-Borrowers. The Credit Agreement contains various negative covenants relating to Lothian Oil Inc. which, at September 30, 2006, was in default of its current ratio and two reporting covenants.

On November 10, 2006 Sterling Bank provided a Waiver, Consent and Forbearance Agreement (the “Waiver Agreement”) to the Co-Borrowers. Pursuant to the Waiver Agreement, Sterling Bank waived the defaults and agreed to forbear from exercising its remedies under the Credit Agreement. Sterling Bank also agreed that Lothian Oil Inc. would have until December 31, 2006 to comply with the Credit Agreement.

Lothian was not in compliance with the terms of the Waiver Agreement on the date that it expired.

On January 12, 2007 the Co-Borrowers came to an agreement with Sterling Bank that was memorialized as the Second Amendment to the Amended and Restated Credit Agreement (the “Second Amendment”). The Second Amendment amended the Credit Agreement and, if entered into, was to be effective as of December 31, 2006.

The Co-Borrowers informed the Bank that they would sign the Second Amendment on the condition that it be placed in escrow until their respective boards of directors approved it. None of the boards of directors has approved the Second Amendment, but Sterling Bank has informed the Co-Borrowers that it believes that the Second Amendment is enforceable. The Co-Borrowers are working to resolve this matter with Sterling Bank.

On February 5, 2007 Lothian Oil Inc., Lothian Oil Texas II, Inc., UHC Petroleum Services Corporation and UHC Petroleum Corporation received a letter from Sterling Bank’s legal representative stating that the Co-Borrowers failed to make a payment of $1,500,000 due on January 31, 2007 pursuant to the Second Amendment and declaring the payment failure to be an “Event of Default” under the Credit Agreement. The letter stated that if the Co-Borrowers failed to make the payment immediately, Sterling Bank reserved the right to exercise its rights and all remedies available to it under the Credit Agreement, including accelerating all or a portion of the indebtedness due, foreclosing, liquidating or realizing upon all or any portion of the collateral securing the loan and initiating legal proceedings against the Co-Borrowers. If the indebtedness is accelerated, the Co-Borrowers would owe a total of approximately $4,600,000, which includes principal and interest, but does not include the amount of $500,000 due under the outstanding letter of credit, late fees, default interest and other fees and costs incurred by Sterling Bank that may be owed as a result of the default and that may be substantial. The letter also gave notice to the guarantors of the loan, which include Lothian Oil Texas II, Inc., UHC Petroleum Services Corporation and UHC Petroleum Corporation, of the Event of Default. The Co-Borrowers are currently working with Sterling Bank on the terms of a limited waiver and

UNITED HERITAGE CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 8 - NOTE PAYABLE TO RELATED PARTY - continued

forbearance agreement although no final agreement has yet been reached.

Other Advances

Included in the accompanying balance sheet are advances made to the Company from Lothian of $762,088 and $405,000 at December 31, 2006 and March 31, 2006, respectively. No interest has been accrued on these advances.

NOTE 9 - NET LOSS PER COMMON SHARE

Basic earnings (loss) per share of common stock is based on the weighted average number of shares outstanding during the periods ended December 31, 2006 and December 31, 2005. Diluted earnings per share have not been presented since the inclusion of potential common shares would be antidilutive.

NOTE 10 - INCOME TAXES

As of March 31, 2006, the Company had net operating loss carryovers of approximately $9,086,000 available to offset future income for income tax reporting purposes, which will ultimately expire in 2026, if not previously utilized.

NOTE 11 - ESTIMATES

The preparation of interim consolidated financial statements as of December 31, 2006 in conformity with accounting principles generally accepted in the United States of America require management to make estimates and assumptions that effect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

UNITED HERITAGE CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 12 - BUSINESS SEGMENTS

The Company was operated in two business segments, the sale of processed meat products and oil and gas producing activities. Factors used by management in determining reportable segments are by business area.

SEGMENT INFORMATION:

	THREE MONTHS ENDED DECEMBER 31,
	2006								2005
	Oil & Gas			Meat		Total			Oil & Gas			Meat		Total
Revenues from external customers	$			$	-	$	253,904		$	181,436		$	-	$	181,436
Segment profit (loss)		(482,010	)		-		(482,010	)		(386,707	)		-		(386,707	)

RECONCILIATIONS:
REVENUES
Total revenues for reportable segments						$	253,904							$	181,436
Other revenues							-								-
Total consolidated revenues						$	253,904							$	181,436
PROFIT OR LOSS
Total profit (loss) for reportable segments						$	(482,010	)						$	(386,707	)
Other profit or (loss)							(145,140	)							(36,697	)
Income (loss) before income taxes						$	(627,150	)						$	(423,404	)

	NINE MONTHS ENDED DECEMBER 31,
	2006								2005
	Oil & Gas			Meat		Total			Oil & Gas			Meat			Total
Revenues from external customers	$	909,995		$	- 1,8901111	$	909,995		$	484,267		$	8,694		$	492,961
Segment profit (loss)		(1,714,667	)		-		(1,714,667	)		(24,384,954	)		(7,302	)		(24,392,256	)

RECONCILIATIONS:
REVENUES
Total revenues for reportable segments						$	909,995								$	492,961
Other revenues							-									-
Total consolidated revenues						$	909,995								$	492,961
PROFIT OR LOSS
Total profit (loss) for reportable segments						$	(1,714,667	)							$	(24,392,256	)
Other profit or (loss)							(295,747	)								(181,611	)
Income (loss) before income taxes						$	(2,010,414	)							$	(24,573,867	)

UNITED HERITAGE CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 13 - STOCK OPTIONS

Directors of the Company adopted the 1995 Stock Option Plan effective September 11, 1995. This Plan set aside 66,667 shares of the authorized but unissued common stock of the Company for issuance under the Plan. Options may be granted to directors, officers, consultants, and/or employees of the Company and/or its subsidiaries.

Options granted under the Plan must be exercised within five years after the date of grant, but may be affected by the termination of employment. No options have been granted since 1998 and none are outstanding.

Directors of the Company adopted the 1998 Stock Option Plan effective July 1, 1998. This Plan and its subsequent amendment set aside 66,667 shares of the authorized but unissued common stock of the Company for issuance under the Plan. Options may be granted to directors, officers, consultants, and/or employees of the Company and/or its subsidiaries. Options granted under the Plan are exercisable over a period to be determined when granted, but may be affected by the termination of employment. As a result of a grant in January 2006 to the Company’s chief executive officer, discussed in more detail below, options to purchase 66,667 shares are outstanding under this plan.

There were no options granted during the nine months ended December 31, 2006.

The following table summarizes pertinent information with regard to the Plans for the nine months ended December 31, 2006:

	Options and Rights		Weighted Average Exercise Price
Outstanding at beginning of year, April 1, 2006		1,725,000	$	1.40
Granted		—		-
Exercised		—		-
Forfeited		—		-
Expired		—		-
Outstanding at December 31, 2006		1,725,000	$	1.40
Exercisable at December 31, 2006		1,378,333	$	1.47

UNITED HERITAGE CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 13 - STOCK OPTIONS-continued

The weighted average contractual life of options outstanding at December 31, 2006 was 3.8 years.

The following is a summary of the Company’s nonvested options for 2007:

Nonvested, at April 1, 2006			359,999
Granted			-
Vested			13,332
Forfeited			-
Nonvested, at December 31, 2006			346,667

As of December 31, 2006, there is approximately $424,000 of total unrecognized compensation cost related to non-vested share based compensation arrangements to be recognized over the vesting period. The weighted average grant date fair value of non-vested options outstanding at December 31, 2006 is $2.47, and of vested options outstanding at December 31, 2006 is $1.68. The weighted average grant date fair value of unvested options outstanding at April 1, 2006 was $2.44.

NOTE 14 - STOCK WARRANTS

The Company entered into a stock warrant agreement effective January 12, 2004. Pursuant to the agreement, the Company issued 500,000 warrants to purchase common stock in connection with a private placement. Warrants issued under the agreement must be exercised by March 15, 2007.

The Company entered into a stock warrant agreement effective April 2004 in connection with the issuance of convertible promissory notes. Pursuant to the agreement, the Company issued 1,766,667 warrants to purchase common stock. Warrants issued under the agreement must be exercised by March 15, 2007.

UNITED HERITAGE CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 14 - STOCK WARRANTS-continued

On December 19, 2005, the Company’s shareholders approved the issuance of warrants to purchase an additional 2,906,666 shares of Common Stock to Lothian Oil Inc. The warrants are exercisable upon issuance and have a term of five years and were issued as follows:

1)	Warrant for the purchase of 953,333 shares with an exercise price of $3.15 per share;

2)	Warrant for the purchase of 1,000,000 shares with an exercise price of $3.36 per share;

3)	Warrant for the purchase of 953,333 shares with an exercise price of $3.75 per share.

Half of the 1,766,667 warrants issued during fiscal year 2005 are exercisable at $2.25 and $3.00, respectively, and have a remaining contractual life of 2 years. The warrants issued in fiscal 2006 include those issued to Lothian Oil Inc. and 50,234 warrants issued for legal services exercisable at $1.50 per share to satisfy liabilities.

The following schedule summarizes pertinent information with regard to the stock warrants for the nine months ended December 31, 2006:

	Shares Outstanding		Weighted Average Exercise Price
Outstanding at beginning of year, April 1, 2006		5,085,334	$	3.08 0.88
Granted		-		-
Exercised		-		-
Forfeited		-		-
Expired		-		-
Outstanding at December 31, 2006		5,085,334	$	3.08
Exercisable		5,085,334	$	3.08 0.88

NOTE 15 - PREFERRED STOCK

The Company’s Articles of Incorporation authorize the issuance of 5,000,000 shares of preferred stock, $0.0001 par value per share and allow the Board of Directors, without shareholder approval and by resolution, to designate the preferences and rights of the preferred stock. On February 22, 2006, the Company’s Board of Directors unanimously adopted and approved a “Certificate of Designation, Preferences and Rights of Series A Preferred Stock of United Heritage Corporation” and a “Certificate of Designation, Preferences and Rights of Series B Preferred Stock of United Heritage Corporation”.

UNITED HERITAGE CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 15 - PREFERRED STOCK-continued

The Certificates of Designation created 133,334 shares of Series A Preferred Stock, 30,303 shares of Series B-1 Preferred Stock and 45,455 shares of Series B-2 Preferred Stock. The Certificates of Designation were filed with the Secretary of State of Utah on May 17, 2006.

NOTE 16 - UNREGISTERED SALE OF EQUITY SECURITIES TO LOTHIAN OIL INC.

On December 19, 2005, the Company’s shareholders approved the sale of 1,093,333 shares of the Company’s common stock, $0.001 par value, and warrants to purchase an additional 2,906,666 shares of common stock to Lothian Oil Inc. Proceeds from the sale of these securities were used to repay a line of credit made to the Company by Almac Financial Corporation, a corporation wholly-owned by Walter G. Mize, formerly the largest shareholder of the Company. Any funds remaining after payment of the line of credit were used by the Company for working capital purposes. None of these warrants were exercised as of December 31, 2006.

As part of the agreement, Lothian and the Company entered into a development and operating agreement relative to certain properties belonging to the Company’s wholly-owned subsidiaries, UHC Petroleum Corporation and UHC New Mexico Corporation.

In addition, Lothian purchased 2,666,667 restricted shares of the Company’s common stock from Walter G. Mize, Chairman of the Board of Directors and formerly the Company’s largest shareholder, President and Chief Executive Officer, and six other shareholders for an aggregate purchase price of $10,651,000 or $3.99 per share. Lothian paid the purchase price with a promissory note.

NOTE 17 - SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION

	NINE MONTHS ENDED December 31,
	2006		2005
Cash paid during the year for:
Interest	$	-	$	217,943
Taxes	$	-	$	-

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-QSB filed by United Heritage Corporation (referred to as “we”, “us” or “our”) contains forward-looking statements. These are statements regarding financial and operating performance and results and other statements that are not historical facts. The words “expect,” “project,” “estimate,” “believe,” “anticipate,” “intend,” “plan,” “forecast,” and similar expressions are intended to identify forward-looking statements. Certain important risks could cause results to differ materially from those anticipated by some of the forward-looking statements. Some, but not all, of these risks include, among other things:

·	we may be unable to find financing to continue our operations;

·	we may be unable to consummate the planned merger with Lothian Oil Inc., or to find another acceptable alternative which will allow us to develop or dispose of portions of our business;

·	costs or difficulties related to the integration of our business with that of Lothian Oil Inc. may be greater than expected and may result in the integration taking longer than anticipated;

·	we may be unable to realize, within the expected time frame, estimated operating results from our merger with Lothian Oil Inc.;

·	we may be unable to obtain the financing we need to implement our plan of bringing more oil and gas wells into production or to cover cash flow shortages;

·	there may be changes in regulatory requirements that adversely affect our business;

·	there may be adverse changes in the prices for oil and gas that adversely affect our business;

·	the recovery methods that we use in our oil and gas operations may not be successful;

·	our largest customers may not continue to do business with us; and

·	other uncertainties, all of which are difficult to predict and many of which are beyond our control.

We do not intend to update forward-looking statements. You should refer to and carefully review the information in future documents we file with the Securities and Exchange Commission.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

Management’s discussion and analysis of results of operations and financial condition is based upon our consolidated financial statements. These statements have been prepared in accordance with accounting principles generally accepted in the United States of America. These principles require management to make certain estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate these estimates based on historical experience and various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

OVERVIEW

We are an independent producer of natural gas and crude oil based in Midland, Texas. We produce from properties we lease in Texas and New Mexico. We acquired our Texas property, which includes 130 potentially productive wellbores (of which approximately 44 wells are capable of producing), in February 1997 and our New Mexico properties, which include 292 potentially productive wellbores, in June 1999. Our plan has been to develop these properties by reworking many of the existing wells and drilling additional wells. However, the revenues we earn do not provide us with enough money to implement our development plan.

On October 7, 2005, we and our subsidiaries, UHC Petroleum Corporation and UHC New Mexico Corporation, entered into a Development and Exploration Agreement with Lothian Oil Inc., our largest shareholder, (referred to in this discussion as “Lothian”) relating to certain properties and an assignment and assumption of interest relative to a portion of our working interest in those properties. In conjunction with this agreement, we signed an Operating Agreement naming Lothian as the operator of our properties in Edwards County, Texas and Chavez and Roosevelt Counties, New Mexico. Pursuant to the terms of a promissory note and Secured Credit Agreement, Lothian provided to us a line of credit in the amount of $4.0 million. We may draw down the credit line as needed for development of the Cato San Andres Unit. In November 2006, Lothian increased the note amount of the loan for the development of the Cato Unit from $4,000,000 to $8,000,000 and agreed to increase its capital spending commitment, pursuant to the Development and Exploration Agreement and Operating Agreement, to $7,500,000 from $6,500,000. In exchange, we granted Lothian an option, valid for 18 months from the date of issuance, to acquire a 70% interest in the UHC New Mexico and Texas properties for $2,500,000. Advances to us under this agreement were approximately $6,067,000 as of December 31, 2006. No payments have been made by us. Accrued interest of approximately $256,000 has been included in accrued expenses in the accompanying balance sheet at December 31, 2006.

On February 22, 2006, we entered into a Merger Agreement and Plan of Reorganization with Lothian. We believe, although we cannot guarantee, that the merger may be consummated during the 2007 fiscal year.

On March 31, 2006, Lothian loaned us an additional $2.5 million (the “Wardlaw Loan”) pursuant to the terms of a promissory note and Secured Credit Agreement. We may draw down the Wardlaw Loan as needed for development of the Wardlaw Field. As of December 31, 2006, we had drawn a total of $735,000.

On June 16, 2006, we and UHC New Mexico Corporation, along with Lothian and its subsidiaries, Lothian Oil (USA) Inc. and Lothian Oil Texas I Inc., entered into a series of agreements, including a promissory note and an Amended and Restated Credit Agreement, with Sterling Bank (referred to in this discussion as the “Bank”) relating to an amendment to a credit facility advanced by the Bank to Lothian effective March 31, 2006. The credit facility is a line of credit in the amount of $20,000,000 with availability established under an oil and gas borrowing base determined by the Bank in its sole discretion. On December 31, 2006, there was $4,750,000 of principal and $39,880 of accrued and unpaid interest, plus a Letter of Credit in the amount of $500,000, outstanding under the credit agreement between the Bank and Lothian. Proceeds of the credit facility may be used solely for capital expenditures in relation to the development of the properties used to secure the credit facility, payment of fees and expenses under the Amended and Restated Credit Agreement and/or for general corporate purposes. The Letters of Credit may be used solely for general corporate purposes, however, no Letter of Credit may be used in lieu or in support of stay or appeal bonds. The credit line is due and payable on April 30, 2008.

Lothian breached the Amended and Restated Credit Agreement by failing to meet the current ratio covenant as of September 30, 2006 and by failing to timely provide to the Bank its financial statements for the periods ended March 31, 2006 and June 30, 2006. As a result of the breach, the Bank was entitled to declare the reducing revolving line of credit all due and payable after providing notice to the borrowers. The Bank did not give the borrowers notice that it was exercising its rights under the Amended and Restated Credit Agreement. Instead, pursuant to a Waiver, Consent and Forbearance Agreement signed on November 10, 2006, the Bank waived the defaults with regard to Lothian’s failure to timely provide the financial statements and agreed to forbear from exercising its remedies under the Amended and Restated Credit Agreement with regard to the breach of the current ratio covenant. The Bank also agreed that Lothian would have until December 31, 2006 to provide its financial statements for the quarter ended September 30, 2006.

Lothian was not able to comply with the terms of the Bank’s waiver and forbearance agreement by December 31, 2006. On January 12, 2007 the borrowing parties came to an agreement with the Bank that was memorialized as the Second Amendment to Amended and Restated Credit Agreement (the “Second Amendment”). The Second Amendment amended the Amended and Restated Credit Agreement and, if entered into, was to be effective as of December 31, 2006. We and the other borrowing parties informed the Bank that we would sign the Second Amendment on the condition that it be placed in escrow until the boards of directors of the various borrowing parties approved it. The boards of directors have not approved the Second Amendment, but the Bank has informed us that it believes that the Second Amendment is enforceable. We and the remaining borrowing parties are working to resolve this matter with the Bank.

On February 5, 2007 Lothian, Lothian Oil Texas II, Inc., UHC Petroleum Services Corporation and UHC Petroleum Corporation received a letter from the Bank’s legal representative stating that the borrowing parties failed to make a payment of $1,500,000 due on January 31, 2007 pursuant to the Second Amendment and declaring the payment failure to be an “Event of Default” under the Amended and Restated Credit Agreement. The letter stated that if the borrowing parties failed to make the payment immediately, the Bank reserved the right to exercise its rights and all remedies available to it under the Amended and Restated Credit Agreement, including accelerating all or a portion of the indebtedness due, foreclosing, liquidating or realizing upon all or any portion of the collateral securing the loan and initiating legal proceedings against the borrowing parties. If the indebtedness is accelerated, then we and the remaining borrowing parties would owe a total of approximately $4,600,000, which includes principal and interest, but does not include the amount of $500,000 due under the outstanding letter of credit, late fees, default interest and other fees and costs incurred by the Bank that may be owed as a result of the default and that may be substantial. The letter also gave notice to the guarantors of the loan, which include Lothian Oil Texas II, Inc., UHC Petroleum Services Corporation and UHC Petroleum Corporation, of the Event of Default. We are currently working with the Bank on the terms of a limited waiver and forbearance agreement that would give us an extended period of time to comply with the terms of the Amended and Restated Credit Agreement, although no final agreement has yet been reached.

On April 20, 2005, our wholly-owned subsidiary, UHC Petroleum Corporation, assigned 7,840 specific net acres of its 10,360 acre oil and gas leasehold situated in the Val Verde Basin to Dominion Oklahoma Texas Exploration & Production, Inc., which is a petroleum exploration and production company owned by Dominion Resources, Inc. (referred to in this discussion as “Dominion”). UHC Petroleum Corporation and Dominion also agreed to an area of mutual interest (“AMI”) that surrounds the 7,840 specific net acres. This AMI encompasses approximately 12,800 acres. The assignment to Dominion is for development of wells in depths below 2000 feet. Petroleum reserved all right to develop wells above 2000 feet. The term of the assignment is two years, but will continue so long as oil, gas or associated hydrocarbons are produced in paying quantities. The assignment provides that the first well is to be commenced within two years from the date of the assignment, and that subsequent wells must be drilled every 180 days. Petroleum received as consideration for the assignment cash, an overriding royalty interest, a carried working interest in the first, second or third wells, and the right to participate as a working interest partner, on a “well by well” basis, in the development of the entire acreage. We chose to take our carried interest in the first well drilled. Dominion has drilled, completed and tested the first well and is studying the results. We have not received formal notification from Dominion concerning the results of the well or whether it will drill any additional wells.

On August 2, 2005 we elected to participate with Dominion in an additional 1,555 acre oil and gas lease acquisition. We paid $14,556 for our proportionate share of the cost of the lease.

In December 2005 we again elected to participate with Dominion in an additional 640 acre oil and gas lease acquisition in Edwards County, Texas. We paid $12,000 for our proportionate share of the cost.

On November 16, 2006, UHC New Mexico Corporation executed an Agreed Compliance Order (referred to in this discussion as the “Order”) with the State of New Mexico Oil Conservation Division (referred to in this discussion as the “OCD”). The Order was signed by the OCD on December 4, 2006 and received by us on December 11, 2006. The Order is effective as of September 1, 2006 and replaces in its entirety the order that was entered by the OCD on December 7, 2005. Pursuant to the Order, we have agreed that we will bring at least 220 wells into compliance with OCD Rule 201 by doing any one of the following:

·	restoring the wells to production or other OCD approved beneficial use;

·	plugging the wellbore; or

·	placing the well in approved temporary abandonment status.

The Order is scheduled to expire on March 15, 2007, unless extended in accordance with the terms described below.

We have agreed to bring at least 40 wells into compliance on or before March 15, 2007 and to file a written compliance report with the OCD’s attorney not later than March 25, 2007. Once the OCD verifies the accuracy of the report and we have paid any penalties that have accrued and become due under the terms of the Order (if any), then the OCD will extend the Order for a period of six months. So long as we continue to return wells to compliance at the rate of at least 36 wells during each six month extension period, the OCD will continue to issue amendments to the Order extending the term for additional six month periods. We are not certain that we will be able to comply with the Order.

If we fail to bring the required number of wells into compliance during any six month period, the Order will terminate unless the OCD issues a discretionary extension. In that event, we agree to pay a penalty of $1,000 times the number of wells we failed to bring into compliance under the schedule during the applicable six-month period. If we encounter unanticipated circumstances that prevent us from complying with the terms of the Order, we may file an administrative application with the OCD requesting a waiver or reduction of the penalty.

We must remediate the sites of the plugged wells and request inspection of them in compliance with OCD Rule 202. If we fail to comply with this requirement, we will be required to pay a penalty of $1,000 for each full month that a well remains out of compliance with the remediation requirements.

If we comply with the terms of the Order and any extension of it, the OCD will not seek penalties against us, other than those applicable to the terms of the Order, as it is extended.

During the 2006 fiscal year, the sales price of oil produced by our properties in Texas increased by $1.66 a barrel, to $36.80 a barrel, from $35.14 a barrel during the 2005 fiscal year while the sales price of oil produced by our properties in New Mexico increased by $7.03 a barrel, to $44.72 a barrel, from $37.69 a barrel during the 2005 fiscal year. Production costs during the 2006 fiscal year increased from $21.46 a barrel during the 2005 fiscal year to $30.11 a barrel for our Texas properties and from $7.89 a barrel during the 2005 fiscal year to $8.53 a barrel for our New Mexico properties.

During the 2006 fiscal year, the sales price of gas produced by our properties in New Mexico decreased by $0.48 per Mcf, from $3.82 per Mcf during the 2005 fiscal year to $3.34 per Mcf during the 2006 fiscal year.

Since we do not believe that our expenses will decrease significantly during the 2007 fiscal year, unless production and sales of oil and gas significantly increase, we may not attain profitability during the 2007 fiscal year.

Our largest shareholder, Lothian Oil Inc., has provided us with the funds to operate since November 2005. Lothian may no longer have the ability to fund our operations, and we do not have other sources of capital available, although we and Lothian are continuing to look for funding sources. However, we may be unable to continue our operations.

Except as otherwise discussed in this Quarterly Report, we know of no trends, events or uncertainties that have, or are reasonably likely to have, a material impact on our short-term or long-term liquidity or on our net sales or revenues from continuing operations. We do not currently have any commitments for capital expenditures for the 2007 fiscal year.

Due to the uncertainty of Lothian’s ability to continue to fund our operations, we will not move forward with our plan to continue redevelopment of our properties or to retain an engineering firm to develop a current waterflood study of the Cato San Andres Unit.

Restatement of Financial Information and Reserves

In June 2006 management determined, based on a report received from an independent petroleum engineer and management’s internal assessments, that a downward revision of our proved reserve estimates, from 36,492,693 Boe to 1,056,317 Boe, should have been reflected in the March 31, 2005 fiscal year and prior periods. The following table sets forth our estimated proved reserves, as reported and as restated, as of March 31, 2005 and March 31, 2004.

	March 31
	2005				2004
	As Reported		As Restated		As Reported		As Restated
Estimated Proved Reserves
Oil (Bbls)		35,225,600		567,189		27,592,015		575,783
Gas (Mcf)		7,602,559		2,934,765		1,507,510		3,097,811
Oil and Gas (Boe)		36,492,693		1,056,317		27,843,267		1,092,085

Estimated Proved Developed Reserves
Oil (Bbls)		5,629,000		567,189		6,702,230		575,783
Gas (Mcf)		2,538,000		2,934,765		1.507,510		3,097,811
Oil and Gas (Boe)		6,052,000		1,056,317		6,953,482		1,092,085

In view of the overstatement of proved reserves, management determined to restate our financial statements for the fiscal years ended March 31, 2000 through March 31, 2005 and the quarters ended June 30, 2005, September 30, 2005 and December 31, 2005. The revision to the reserve estimates and the recalculation of the ceiling limitations for the restated financial statements required us to record an impairment to our proved properties of approximately $948,898 in the fiscal year ended March 31, 2002. The cumulative impact of the restatement on our shareholders’ equity as of March 31, 2005 was a reduction of approximately $1,800,873, from $27,084,992 to $25,284,119.

The financial statements and related information contained in our Annual and Quarterly Reports on Forms 10-KSB and 10-QSB, respectively, for the periods prior to March 31, 2006 should no longer be relied upon. A summary of the effects of the restatement on reported amounts for the year ended March 31, 2005 and the quarters ended June 30, 2005, September 30, 2005 and December 31, 2005 are presented in Note 2 to our financial statements.

Going Concern Status

Our financial statements have been prepared on a going concern basis which contemplates the realization of assets and the liquidation of liabilities in the ordinary course of business. We have incurred substantial losses from operations and we have a working capital deficit which raises substantial doubt about our ability to continue as a going concern. We sustained a net loss of $2,010,414 for the nine month period ended December 31, 2006 and a net loss of $17,371,395 for the fiscal year ended March 31, 2006 and, as of the same periods, we had an accumulated deficit of $33,574,426 and $31,564,012, respectively. Even if the merger with Lothian is consummated, we are not certain that will be able to obtain the financing we need to develop our properties and alleviate doubt about our ability to continue as a going concern.

Critical Accounting Policies and Estimates

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. The reported financial results and disclosures were determined using the significant accounting policies, practices and estimates described below.

Oil and Gas Properties

Proved Reserves - Proved reserves are defined by the Securities and Exchange Commission as those volumes of crude oil, condensate, natural gas liquids and natural gas that geological and engineering data demonstrate with reasonable certainty are recoverable from known reservoirs under existing economic and operating conditions. Proved developed reserves are volumes expected to be recovered through existing wells with existing equipment and operating methods. Although our engineers are knowledgeable of and follow the guidelines for reserves established by the Securities and Exchange Commission, the estimation of reserves requires engineers to make a significant number of assumptions based on professional judgment. Reserves estimates are updated at least annually and consider recent production levels and other technical information about each well. Estimated reserves are often subject to future revision, which could be substantial, based on the availability of additional information including reservoir performance, new geological and geophysical data, additional drilling, technological advancements, price changes and other economic factors. Changes in oil and gas prices can lead to a decision to start-up or shut-in production, which can lead to revisions to reserve quantities. Reserve revisions in turn cause adjustments in the depletion rates utilized by us. We cannot predict what reserve revisions may be required in future periods.

Depletion rates are determined based on reserve quantity estimates and the capitalized costs of producing properties. As the estimated reserves are adjusted, the depletion expense for a property will change, assuming no change in production volumes or the costs capitalized. Estimated reserves are used as the basis for calculating the expected future cash flows from a property, which are used to determine whether that property may be impaired. Reserves are also used to estimate the supplemental disclosure of the standardized measure of discounted future net cash flows relating to oil and gas producing activities and reserve quantities disclosure in Note 21 to our consolidated financial statements for the fiscal year ended March 31, 2006. Changes in the estimated reserves are considered changes in estimates for accounting purposes and are reflected on a prospective basis.

We employ the full cost method of accounting for our oil and gas production assets, which are located in the southwestern United States. Under the full cost method, all costs associated with the acquisition, exploration and development of oil and gas properties are capitalized and accumulated in cost centers on a country-by-country basis. The sum of net capitalized costs and estimated future development and dismantlement costs for each cost center is depleted on the equivalent unit-of-production basis using proved oil and gas reserves as determined by independent petroleum engineers.

Net capitalized costs are limited to the lower of unamortized cost net of related deferred tax or the cost center ceiling. The cost center ceiling is defined as the sum of (i) estimated future net revenues, discounted at 10% per annum, from proved reserves, based on un-escalated year-end prices and costs; (ii) the cost of properties not being amortized; (iii) the lower of cost or market value of unproved properties included in the costs being amortized; less (iv) income tax effects related to differences between the book and tax basis of the oil and gas properties.

The ceiling test is affected by a decrease in net cash flow from reserves due to higher operating or finding costs or reduction in market prices for natural gas and crude oil. These changes can reduce the amount of economically producible reserves. If the cost center ceiling falls below the capitalized cost for the cost center, we would be required to report an impairment of the cost center’s oil and gas assets at the reporting date.

Impairment of Properties - We will continue to monitor our long-lived assets recorded in oil and gas properties in the consolidated balance sheet to ensure they are fairly presented. We must evaluate our properties for potential impairment when circumstances indicate that the carrying value of an asset could exceed its fair value. A significant amount of judgment is involved in performing these evaluations since the results are based on estimated future events. Such events include a projection of future oil and natural gas sales prices, an estimate of the ultimate amount of recoverable oil and gas reserves that will be produced from a field, the timing of future production, future production costs, and future inflation. The need to test a property for impairment can be based on several factors, including a significant reduction in sales prices for oil and/or gas, unfavorable adjustment to reserves, or other changes to contracts, environmental regulations or tax laws. All of these factors must be considered when testing a property's carrying value for impairment. We cannot predict whether impairment charges may be required in the future.

Revenue Recognition - Oil and gas production revenues are recognized at the point of sale. Production not sold at the end of the fiscal year is included as inventory.

Income Taxes - Included in our net deferred tax assets are approximately $3.1 million of future tax benefits from prior unused tax losses. Realization of these tax assets depends on sufficient future taxable income before the benefits expire. We are unsure if we will have sufficient future taxable income to utilize the loss carry-forward benefits before they expire. Therefore, we have provided an allowance for the full amount of the net deferred tax asset.

Accounting Estimates - Management uses estimates and assumptions in preparing financial statements in accordance with accounting principles generally accepted in the United States of America. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. In particular, there is significant judgment required to estimate oil and gas reserves and asset retirement obligations. Actual results could vary significantly from the results that are obtained by using management’s estimates.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements, special purpose entities or financing partnerships. On June 16, 2006 two of our subsidiaries, UHC Petroleum Corporation and UHC Services Corporation, guaranteed the $20,000,000 line of credit made by Sterling Bank to United Heritage, UHC New Mexico Corporation, Lothian and two of Lothian’s subsidiaries.

RESULTS OF OPERATIONS

The following selected financial data for the three and nine months ended December 31, 2006 as compared to December 31, 2005 is derived from our consolidated financial statements. The data is qualified in its entirety and should be read in conjunction with the consolidated financial statements and related notes contained elsewhere herein. We have presented the data from the three and nine months ended December 31, 2005 as reported and as restated.

	Three Months Ended			Three Months Ended			Three Months Ended
	December 31, 2006			December 31, 2005			December 31, 2005
				As Reported			As Restated
Income Data:
Revenues	$	253,904		$	181,436		$	181,436
Depreciation and depletion		156,621			21,269			234,881
Ceiling test impairment		-			-			-
Total operating costs and expenses		735,914			354,531			568,143
Loss from operations		(482,010	)		(173,095	)		(386,707	)
Income Tax		-			-			-
Net loss		(627,150	)		(209,792	)		(423,404	)
Basic and diluted loss
Per share	$	(0.10	)	$	(0.03	)	$	(0.07	)
Weighted Average
Number of Shares		6,446,850			6,375,454			6,375,454

	Nine months Ended			Nine months Ended			Nine months Ended
	December 31, 2006			December 31, 2005			December 31, 2005
				As Reported			As Restated
Income Data:
Revenues	$	909,995		$	492,961		$	492,961
Depreciation and depletion		503,293			47,190			688,321
Ceiling test impairment		-			-			23,199,110
Total operating costs and expenses		2,624,662			1,044,976			24,885,217
Loss from operations		(1,714,667	)		(552,015	)		(24,392,256	)
Income Tax		-			-			8,049,925
Net loss		(2,010,414	)		(733,626	)		(16,523,942	)
Basic and diluted loss
Per share	$	(0.32	)	$	(0.13	)	$	(2.94	)
Weighted Average
Number of Shares		6,446,850			5,628,099			5,628,099

Combined Results

Our revenues for the three months ended December 31, 2006 were $253,904, an increase of $72,468 or approximately 40%, as compared to revenues of $181,436 for the three months ended December 31, 2005. Revenues for the nine months ended December 31, 2006 were $909,995, an increase of $417,034 or approximately 85%, as compared to revenues of $492,961 for the nine months ended December 31, 2005. The increase in sales revenue for the three and nine months ended December 31, 2006 was due primarily to increased sales production volume and improved prices of oil sold.

Total operating costs and expenses of $735,914 reflect an increase of $167,771, or approximately 30%, for the three months ended December 31, 2006 as compared to operating expenses of $568,143 for the three months ended December 31, 2005. Total operating costs and expenses of $2,624,662 reflect a decrease of $22,260,555, or approximately 89%, for the nine months ended December 31, 2006 as compared to operating expenses of $24,885,217 for the nine months ended December 31, 2005. The significant decrease in operating expenses for the nine months ended December 31, 2006 resulted from an impairment of oil and gas properties of $23,199,110. Depreciation and depletion decreased by $78,260, or approximately 33% from $234,881 in the three months ended December 31, 2005 as compared to $156,621 for the three months ended December 31, 2006. Depreciation and depletion decreased by $185,028, or approximately 27% from $688,321 in the nine months ended December 31, 2005 as compared to $503,293 for the nine months ended December 31, 2006. General and administrative expenses decreased by $74,906, or approximately 30%, from $247,463 in the three months ended December 31, 2005 to $172,557 in the three months ended December 31, 2006. General and administrative expenses increased by $352,825, or approximately 48%, from $727,634 in the nine months ended December 31, 2005 to $1,080,449 in the nine months ended December 31, 2006 due primarily to stock compensation expense. Interest expense increased by $79,486 or approximately 121%, to $145,140 for the three months ended December 31, 2006 as compared to $65,654 for the three months ended December 31, 2005 primarily due to the increase in debt from related parties. Interest expense increased by $77,375 or approximately 35%, to $295,747 for the nine months ended December 31, 2006 as compared to $218,372 for the nine months ended December 31, 2005 due to increased debt from related parties, most of which was incurred during the second quarter of 2006.

Our net loss for the three months ended December 31, 2006 was $627,150, an increase of $203,746 or approximately 48%, as compared to a net loss of $423,404 for the three months ended December 31, 2005. Our net loss for the nine months ended December 31, 2006 was $2,010,414, a decrease of $14,513,528 or approximately 88%, as compared to a net loss of $16,523,942 for the nine months ended December 31, 2005. The decrease for the nine months ended December 31, 2006 as compared to the nine months ended December 31, 2005 was primarily due to an impairment of oil and gas properties of $23,199,110 that occurred in 2005 offset by the tax benefit of $8,049,925.

Food Products Segment

National Heritage Sales Corporation had minimal product sales of $8,694 during the nine months ended December 31, 2005, as compared to no sales for the nine months ended December 31, 2006. National is no longer selling meat and poultry products and has sold its assets related to this activity. We do not intend to re-enter this market.

Oil and Gas Segment

Oil and gas sales were $909,995 for the nine months ended December 31, 2006 as compared to $484,267 for the nine months ended December 31, 2005, an increase of $425,728 or approximately 141%. The volume of production sold during the nine months ended December 31, 2006 was higher than the volume of production sold during the nine months ended December 31, 2005 and market prices were improved, both of which resulted in increased revenues. The volume increase over the nine month period ended December 31, 2005 was primarily the result of our development and exploration and financing agreements with Lothian. Receivables from a single oil and gas customer comprised approximately 70% of our trade receivable balance at December 31, 2006 and 50% of our trade receivable balance at December 31, 2005. No allowance for doubtful accounts has been included in our financial statements since recorded amounts are determined to be fully collectible, based on management’s review of customer accounts, historical experience and other pertinent factors. If we were to lose this customer, we believe that it could be quickly replaced, since buyers of crude oil are plentiful.

Production and operating expenses were $1,040,920 during the nine months ended December 31, 2006 as compared to $254,156 in production and operating expenses during the nine months ended December 31, 2005, an increase of $786,764 or approximately 467%. Depreciation and depletion expense for the nine months ended December 31, 2006 was $503,293 as compared to depletion expense of $688,321 for the restatement period ended December 31, 2005, a decrease of $185,028 or 41%. Operating expenses increased during the three and nine months ended December 31, 2006 primarily due to the expense of hauling production water to an offsite salt water disposal well along with additional electricity costs attributable to the increased development activity in the Cato San Andres Unit. The increased depreciation and depletion expense in 2005 resulted primarily from the additional depletion recorded when we reclassified the cost of certain properties from unproved to proved based upon an engineering report from an independent consultant and our internal evaluations.

The oil and gas segment reported a loss of $1,714,667 for the nine months ended December 31, 2006 as compared to a restated loss of $24,384,954 for the nine months ended December 31, 2005. The loss resulted primarily from the impairment of our oil and gas properties and the significant increase in depreciation and depletion expense, both of which were caused by the reevaluation of our reserves and impairment of our unproved properties.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

Our revenues have not been adequate to support our operations and we do not expect that this will change in the near future. In the past, we have relied primarily on loans to finance our operations.

We, along with Lothian, have a $20,000,000 line of credit from Sterling Bank. So long as the line of credit is not in default, interest will accrue on the line of credit at the prime rate plus 0.75% at any time the loan balance is less than the commitment, as that term is defined in the Amended and Restated Credit Agreement, and at the prime rate plus 1.50% at any time the loan balance is equal to or greater than the commitment. The commitment is defined as the obligation of Sterling Bank, subject to applicable provisions of the Amended and Restated Credit Agreement, to make loans to or for the benefit of the borrowing parties (including United Heritage and New Mexico) and to issue Letters of Credit in an aggregate amount not to exceed the lesser of (i) $20,000,000 and (ii) the borrowing base then in effect. The line of credit is due and payable on April 30, 2008. On December 31, 2006, there was outstanding under the credit agreement between the Bank and Lothian $4,750,000 of principal and $39,880 of accrued and unpaid interest, plus a Letter of Credit in the amount of $500,000.00. Lothian pays interest on this loan on a monthly basis. Lothian breached the Amended and Restated Credit Agreement because it failed to meet the current ratio covenant at September 30, 2006 and failed to provide on a timely basis its financial statements for the periods ending March 31, 2006, June 30, 2006 and September 30, 2006. On November 10, 2006, the Bank agreed to waive the default relating to the failure to provide the financial statements and to forbear from exercising any remedies under the Amended and Restated Credit Agreement as to Lothian’s failure to meet the current ratio covenant so long as Lothian was able to comply with these covenants by December 31, 2006. Lothian was not able to comply with the terms of the Bank’s waiver and forbearance agreement by December 31, 2006. On January 12, 2007 the borrowing parties came to an agreement with the Bank that was memorialized as the Second Amendment to Amended and Restated Credit Agreement (the “Second Amendment”). The Second Amendment amended the Amended and Restated Credit Agreement and, if entered into, was to be effective as of December 31, 2006. We and the other borrowing parties informed the Bank that we would sign the Second Amendment on the condition that it be placed in escrow until the boards of directors of the various borrowing parties approved it. The boards of directors have not approved the Second Amendment, but the Bank has informed us that it believes that the Second Amendment is enforceable. We and the remaining borrowing parties are working to resolve this matter with the Bank.

We also have loans of $8,000,000 and $2,500,000 from Lothian. These loans bear interest at the prime rate announced by Citibank plus 1% per annum. These lines of credit will mature no later than October 7, 2015 and March 31, 2016, respectively. All of these loans are secured by substantially all of our assets and those of our subsidiaries. As of December 31, 2006 we had drawn $6,067,000 and $735,000, respectively, under our loan agreements with Lothian, which we used for development and production costs and expenses. We have made no payments toward our lines of credit with Lothian.

Lothian is not currently able to provide funds to us for our operations. We are currently seeking other sources of funds to operate but if we are unsuccessful in obtaining other funds, we may be required to cease our operations.

Our current assets increased by $119,509 or approximately 51%, from $232,791 at March 31, 2006 to $352,300 at December 31, 2006. The increase in our current assets was due primarily to an increase in trade accounts receivable and inventory. Current liabilities also increased, from $1,998,447 at March 31, 2006 to $3,767,216 at December 31, 2006, an increase of $1,768,769 or approximately 89%. The increase in current liabilities was due to an increase in payables related to oil and gas development. Working capital was a deficit of $1,765,656 at March 31, 2006 as compared to a working capital deficit of $3,414,916 at December 31, 2006, an increase of $1,649,260 or approximately 93%. The increased deficit was due primarily to the increase in payables.

Shareholders’ equity was $11,783,643 at March 31, 2006, as compared to $10,114,830 at December 31, 2006, a decrease of $1,668,813.

Total assets were $20,963,465 at December 31, 2006 as compared to $15,461,605 at March 31, 2006, an increase of $5,501,860. The increase in total assets resulted primarily from an increase of $5,732,183 in the carrying amount of our oil and gas properties. This change is due to the additional investments we have made in the properties during the current quarter.

Cash Flow

Our operations provided $578,762 of cash in the nine months ended December 31, 2006 as compared to $700,829 of cash used in the nine months ended December 31, 2005. Cash was provided primarily by an increase in accounts payable and accrued expenses in the amount of $3,728,069.

Total cash of $5,873,242 was used in investing activities during the nine months ended December 31, 2006 to redevelop New Mexico’s fields and purchase production equipment. In comparison, during the nine months ended December 31, 2005 we received $625,000 from Dominion in exchange for executing an assignment to Dominion for the development of wells, offset by $490,620 used to make additions to our oil and gas properties, providing $134,380 in cash from investing activities.

During the nine months ended December 31, 2006, we obtained loan proceeds from Lothian totaling $5,389,502. During the period ended December 31, 2005, cash flow from financing activities included $311,850 of funds raised from the issuance of common stock upon the exercise of warrants and $3,444,000 from the sale of restricted chares to Lothian offset by the payment of $3,203,994 toward a loan provided to us by Almac Financial Corporation.

At December 31, 2006 we had cash in the amount of $171,388 as compared to cash in the amount of $73,458 at December 31, 2005.

ITEM 3. CONTROLS AND PROCEDURES

An evaluation was performed under the supervision and with the participation of our management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the period covered by this report. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report. There have been no significant changes in our internal controls or in other factors that could significantly affect internal controls subsequent to the period covered by this report.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None

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.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

3.1		Articles of Incorporation, as amended (1)
3.2		Bylaws (1)
4.1		Certificate of Designation, Preferences and Rights of Series A Preferred Stock of United Heritage Corporation (2)
4.2		Certificate of Designation, Preferences and Rights of Series B Preferred Stock of United Heritage Corporation (2)
10.1		Waiver, Consent and Forbearance Agreement dated November 10, 2006 between Sterling Bank on the one hand and Lothian Oil Inc., United Heritage Corporation, UHC New Mexico Corporation, Lothian Oil (USA) Inc. and Lothian Oil Texas I, Inc. (3)
99.1		Compliance Order with the State of New Mexico Oil Conservation Division (4)
31.1		Certification Pursuant to Rule 13a-14(a) and 15d-14(a) (4)*
31.2		Certification Pursuant to Rule 13a-14(a) and 15d-14(a) (4)*
32		Certification Pursuant to Section 1350 of Title 18 of the United States Code*

(1) Incorporated by reference from Form S-18 File No. 2-73370, filed with the Securities and Exchange Commission on July 24, 1981.

(2) Incorporated by reference from the Current Report on Form 8-K filed with the Securities and Exchange Commission on May 23, 2006.

(3) Incorporated by reference from the Current Report on Form 8-K filed with the Securities and Exchange Commission on November 15, 2006.

(4) Incorporated by reference from the Current Report on Form 8-K filed with the Securities and Exchange Commission on December 19, 2006.

*Filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	UNITED HERITAGE CORPORATION

Date: February 20, 2007	By:	/s/ C. Scott Wilson
		C. Scott Wilson, President and Chief Executive Officer


Date: February 20, 2007	By:	/s/ Kenneth Levy
		Kenneth Levy, Chief Financial Officer and Secretary

Glen Rose Petroleum (GLRP) 10QSB2007 Q3 Quarterly report (small business)