SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q/A
Mark One
[X] Quarterly report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 for the quarterly
period ended September 30, 1997; or
[ ] 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
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(Exact name of registrant as specified in charter)
Utah 87-0372864
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2 North Caddo Street, Cleburne, Texas 76031
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(Address of principal executive offices)
(817) 641-3681
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(Registrant's telephone number, including area code)
No Change
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(Former name, former address and former fiscal year if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
YES [X] NO [ ]
The number of shares of common stock, $0.001 par value,
outstanding at November 7, 1997, was 96,199,042 shares.
PAGE
Part I, Item 1. Financial Statements
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PAGE 3
UNITED HERITAGE CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
September 30, March 31,
1997 1997
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UNAUDITED
ASSETS
CURRENT ASSETS
Cash $ 6,661 $ 80,722
Accounts receivable-trade 117,686 134,940
Inventories 45,354 750
Other 44,755 51,999
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Total Current Assets 214,456 268,411
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PROPERTY AND EQUIPMENT, at cost 87,196 85,869
Less accumulated depreciation (56,260) (51,497)
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Net Property and Equipment 30,936 34,372
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NOTE RECEIVABLE 1,245,766 1,245,766
OIL AND GAS PROPERTIES 24,424,479 24,293,613
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$ 25,915,637 $ 25,842,162
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UNITED HERITAGE CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEET - CONTINUED
September 30, March 31,
1997 1997
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UNAUDITED
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued
expenses: $ 166,501 $ 119,403
Note payable - Affiliate 4,000
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Total Current Liabilities 170,501 119,403
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SHAREHOLDERS' EQUITY
Common stock-$.001 par value;
100,000,000 shares authorized:
issued and outstanding
96,179,042 shares at September 30, 1997, 96,179
96,021,542 shares at March 31, 1997 96,021
Additional paid-in capital 32,520,693 32,425,853
Accumulated deficit (6,818,220) (6,714,807)
Deferred compensation (53,516) (84,308)
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Total Shareholders' Equity 25,745,136 25,722,759
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $25,915,637 $25,842,162
============= ===========
See notes to consolidated condensed financial statements.
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UNITED HERITAGE CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
September 30, September 30,
1997 1996 1997 1996
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REVENUES
Processed beef products $ 689,181 $ 720,326 $ 1,333,325 $ 1,416,461
Interest and other income 40 4,156 798 8,662
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TOTAL REVENUES 689,221 724,482 1,334,123 1,425,123
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COSTS AND EXPENSES
Processed beef products 576,353 592,795 1,133,417 1,148,107
Selling 24,583 14,446 66,414 29,037
General and administrative 124,019 115,192 237,705 200,168
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TOTAL COSTS AND EXPENSES 724,955 722,433 1,437,536 1,377,312
---------- ---------- ----------- ------------
NET INCOME (LOSS) $ (35,734) $ 2,049 $ (103,413) $ 47,811
========== ========== =========== ============
TOTAL NET INCOME (LOSS)
PER SHARE $ (0.00) $ 0.00 $ (0.00) $ 0.00
========== ========== =========== ============
AVERAGE NUMBER
OF COMMON SHARES 96,179,042 18,256,542 95,614,608 18,054,137
========== ========== =========== ============
See notes to consolidated condensed financial statements.
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UNITED HERITAGE CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED
September 30,
1997 1996
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OPERATING ACTIVITIES
Net income (loss) $(103,413) $ 47,811
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation 4,763 7,413
Deferred compensation recognized in current year 30,792 26,250
Changes in operating assets and liabilities:
(Increase) Decrease in accounts receivable 17,254 (55,970)
(Increase) Decrease in inventories (44,604) 24,562
(Increase) Decrease in other current assets 7,244 (22,113)
Increase (Decrease) in accounts payable
and accrued expenses 47,098 5,501
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NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (40,866) 33,454
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INVESTING ACTIVITIES
Additions to property and equipment (1,327) (34,673)
Additions to oil and gas properties (130,866) (252,086)
Collections of notes receivable 7,500
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NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES (132,193) (279,259)
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FINANCING ACTIVITIES
Proceeds from issuance of common stock 94,998 108,000
Principal payments on borrowings (37,000)
Proceeds from loans 41,000
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NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 98,998 108,000
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INCREASE (DECREASE) IN CASH (74,061) (137,805)
Cash at beginning of period 80,722 437,656
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CASH AT END OF PERIOD $ 6,661 $299,851
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See notes to consolidated condensed financial statements.
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UNITED HERITAGE CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have
been prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete
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 six-month
period ended September 30, 1997 are not necessarily indicative of the
results that may be expected for the year ended March 31, 1998. For
further information, refer to the consolidated financial statements
and footnotes thereto included in the Company's annual report on Form
10-K for the year ended March 31, 1997.
NOTE 2 - INVENTORIES
Inventory consists of the following:
SEPTEMBER 30, MARCH 31,
1997 1997
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Lite beef $ 45,354 $ 750
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NOTE 3 - NOTE RECEIVABLE
Included in notes receivable at September 30, 1997, is the note
receivable from Madison Radio Group, Inc. recorded at $1,245,766.
The Madison note for $2,500,000 is recorded net of the initial
deferred gain and interest payments totaling $1,254,234.
On November 1, 1994, the Company sold its broadcasting assets to
Madison Radio Group, Inc., a wholly-owned subsidiary of Madison Group
Associates, Inc., for $2,500,000. The broadcasting assets included
AM/FM radio stations in Canyon and Amarillo, Texas. The
consideration of $2,500,000 is in the form of a three-year note
bearing interest at 7%, and pursuant to a modification of the note on
August 31, 1995, is payable in monthly payments of $5,000 for the
first nine months beginning December 1, 1994, through August 1, 1995,
when such payments increased to $6,500 per month for three months
beginning September 1, 1995 through November 1, 1995.
Then payments increased to $7,500 per month for three months
beginning December 1, 1995 through February 1, 1996, when such
payments increased to $5,000 principal per month plus interest
accrued thereon until November 1, 1997, when the remaining principal
balance will be due. Madison failed to make the March 1, 1996
payment, and thus is in default. Presently, the Company has filed
suit to collect this note.
The $2,500,000 note is secured by a First Purchase Money Security
Interest Lien on all real and personal property transferred pursuant
to this transaction, one million (1,000,000) shares of the common
stock of Madison Group Associates, Inc., and by all the outstanding
stock of Madison Radio Group, Inc., the wholly-owned subsidiary. The
stock of Madison radio Group, Inc. was foreclosed on in November 1996
and subsequently sold to Heritage Communications Corporation, a
company related to United
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UNITED HERITAGE CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED) (CONTINUED)
NOTE 3 - NOTE RECEIVABLE (CONTINUED)
Heritage Corporation through common stockholders. At September 30,
1997, Madison Radio Group, Inc. is wholly owned by Heritage
Communications Corporation. In addition, Madison Group Associates,
Inc., has pledged a promissory note executed on September 20, 1992,
in the original amount of $1,000,000 payable to Canaveral
International Corp. (now known as Madison Group Associates, Inc.) by
First Capital Trust, Sam Podany and Ted Yashcheshen. In addition,
Madison Group Associates, Inc. has filed for bankruptcy. The Company
has had the collateral securing the note receivable appraised and has
determined that the value of the collateral exceeds the Company's
carrying amount of the note receivable.
The potential gain of $1,254,234 has been deferred due to the lack
of a significant initial investment by the buyer. This accounting
treatment will continue until the buyer's cumulative payments are
sufficient to qualify the transaction for gain recognition under
generally accepted accounting principles.
NOTE 4 - TRANSACTIONS WITH RELATED PARTIES
On February 22, 1996, the Company granted stock options for
120,000 shares to Lavaca Mortgage Investors, Inc., a corporation
owned by Mr. Mize's brother. Options were exercised on the grant
date at $0.25 per share when the market value was $0.69 per share.
Deferred consulting costs of $52,000 were recorded as a reduction
of shareholder's equity and were expensed in 1997 as the services
were rendered.
On June 28, 1996, Mr. Mize exercised stock options and bought
400,000 shares of the Company's common stock for $100,000.
On February 11, 1997, the Company acquired 100% of Apex Petroleum,
L.L.C. The Company issued 77,500,000 shares of common stock to the
members of Apex. Mr. Mize, President and Chairman of the Board of
the Company, has a controlling interest in Apex.
On August 5, 1997, the Company obtained a $300,000 unsecured
revolving line of credit from ALMAC Financial Corporation, a company
owned by Walter G. Mize. At September 30, 1997, the Company owed
$4,000 on the line of credit which bears interest at 8 1/2 % and
matures August 5, 1998.
NOTE 5 - INCOME (LOSS) PER COMMON SHARE
Income (loss) per share of common stock is based on the weighted
average number of shares outstanding during the periods ended
September 30, 1997 and September 30, 1996.
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UNITED HERITAGE CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED) (CONTINUED)
NOTE 6 - INCOME TAXES
As of March 31, 1997, the Company had net operating loss
carryovers of approximately $4,550,000 available to offset future
income for income tax reporting purposes which will ultimately expire
in 2012 if not previously utilized.
NOTE 7 - DEFERRED COMPENSATION
During the year ended March 31, 1997, the Company issued various
stock options and warrants. Deferred compensation costs (resulting
from the options and warrants), are recorded as a reduction of
shareholder's equity and are being amortized over their expected lives.
NOTE 8 - OIL AND GAS PROPERTIES
In September 1995, the Company entered into an agreement to
acquire 100% of Apex Petroleum, L.L.C., (Apex) owner of certain
unproved oil and gas leases located in Edwards County, Texas. The
agreement was contingent on the Company having certain testing and
development performed and a valuation being obtained which was
acceptable to the Company. Apex is related to the Company through
members who are also shareholders of the Company including Mr. Mize,
who has a controlling interest in Apex. Pursuant to the agreement,
the Company has incurred exploration costs necessary to obtain an
evaluation of reserves. Costs incurred have been capitalized as oil
and gas properties.
A favorable valuation report was received and the transaction was
closed on February 11, 1997. The Company issued 77,500,000 shares of
common stock to the members of Apex, pursuant to the agreement and
subsequent revision.
As of September 30, 1997, a determination cannot be made about the
extent of proved reserves for this project and no oil or gas has been
produced. Consequently, no amortization has been computed on the
exploration costs. The Company will begin to amortize these costs
when testing of the project is complete and production commences,
which is currently estimated to be later in 1997. All costs
capitalized as of September 30, 1997 were incurred to evaluate the
project and are considered exploration costs.
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UNITED HERITAGE CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED) (CONTINUED)
Note 9 - CONTINGENCIES
The Company has formed a wholly-owned subsidiary, Sovereign
Communications Corporation ("Sovereign"). If and when the Company
forecloses its lien position pertaining to the radio stations in
Canyon and Amarillo, Texas ("KZRK AM/FM"), Sovereign will hold these
properties. Sovereign has entered into a Letter of Intent with
Cumulus Broadcasting, Inc. ("Cumulus"), which states that if and when
Sovereign acquires the properties pertaining to KZRK AM/FM, a portion
of same will be sold to Cumulus for $1,000,000 cash with Sovereign
and/or the Company retaining certain real and personal properties for
future sale. The consummation of this transaction may result in a
minimal loss to the Company.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
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Part I, Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
General
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On February 11, 1997 the Company acquired all of the membership
interests of Apex Petroleum, L.L.C. ("Apex"), a Texas limited
liability company, in consideration of 77,500,000 shares of the
Company's $0.001 par value common stock ("Common Stock") issued to
the members of Apex. On February 27, 1997, Apex was merged with and
into UHC Petroleum Corporation, a newly formed Texas corporation,
which is a wholly-owned subsidiary of the Company. The transaction
was based on an independent valuation of Apex by Surtek, Inc.
("Surtek"), a petroleum engineering company, which performed certain
tests on the primary assets of Apex, leases of an oil field in South
Texas consisting of approximately 10,502 acres, to determine the
value of the Apex assets. Based on the Surtek report, the Company_s
board of directors unanimously accepted the valuation and elected to
close the transaction to purchase the Apex interests.
After completion of a successful test, the Company acquired a
Klaeger Oil Retrieval System ("KORS") unit. Utilizing the technology
of the KORS unit, the Company has announced that it has 24 wells
capable of production.
The Company has formed a wholly-owned subsidiary, Sovereign
Communications Corporation ("Sovereign"). If and when the Company
forecloses its lien position pertaining to radio stations in Canyon
and Amarillo, Texas ("KZRK AM/FM"), Sovereign will hold these
properties. Sovereign has entered into a Letter of Intent with
Cumulus Broadcasting, Inc. ("Cumulus"), which states that if and when
Sovereign acquires the properties pertaining to KZRK AM/FM, a portion
of same will be sold to Cumulus for $1,000,000 cash with Sovereign
and/or the Company retaining certain real and personal properties for
future sale. The consummation of this transaction may result in a
minimal loss to the Company.
The Company continues to purvey Heritage Lifestyle Lite Beef, the
lower-fat beef product marketed by the Company to a New Mexico
supermarket chain and 41 stores of a major West Coast supermarket
chain.
Material Changes in Results of Operations
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Revenues for the Company's beef products were $689,181 and
$1,333,325 for the quarter and six-month period ended September 30,
1997, respectively. The results for the quarter and six-month period
are somewhat less than that reported in the prior year quarter and
six-month period of $720,326 and $1,416,461, respectively. Gross
profit from beef products was $199,908 for the six-month period ended
September 30, 1997, as compared with $268,354 gross profit for the
same period last year. The cost of beef products as a percentage of
sales was 85.0% for the six months ended September 30, 1997, as
compared to 81.1% for the six months ended September 30, 1996. The
increase in the cost of beef product percentage is due
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Material Changes in Results of Operations (continued)
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primarily to an increase in transportation costs for the current
period as compared with the previous year's period.
The Company is selling Heritage Lifestyle Lite Beef (R) in 41
selected stores out of the 250-store southern division of a major
West Coast supermarket chain. The southern and northern divisions of
this chain together contain 425 stores. The Company also continues
to sell its lower-fat beef product to the Jewel-Osco supermarket
chain in New Mexico. While these prospects have the potential for
significantly increasing the Company's beef sales, there can be no
guarantee that such will be the case.
Interest and other income for the current quarter is below the
level of the prior year period. This results from having less cash
available to invest in interest-bearing accounts.
Selling expenses of $24,583 for the current quarter have increased
from that of the prior year period of $14,446. This increase results
mainly from an increase in outside sales representative's costs.
Selling expenses of $66,414 for the current six-month period have
increased from that of the prior year period of $29,037. This
increase results mainly from an increase in advertising and outside
sales representatives costs. General and administrative costs have
increased to $124,019 and $237,705 for the quarter and six-month
period ended September 30, 1997, as compared to $115,192 and
$200,168 for the same periods last year. This is a result of
increased travel, audit fees, and compensation resulting from stock
options.
On a consolidated basis, the Company had a net loss for the
current six-month period of $103,413. The comparable period result
for the prior fiscal year was a net income of $47,811. The primary
reasons for the change from net income to a net loss are a slight
decrease in sales and a slight increase in cost of sales, as
previously discussed.
On November 1, 1994, the Company sold its broadcasting business to
Madison Radio Group, Inc., a wholly-owned subsidiary of Madison Group
Associates, Inc., for $2,500,000. The broadcasting business included
AM/FM radio stations in Canyon and Amarillo, Texas. The
consideration of $2,500,000 is in the form of a three-year note
bearing interest at 7%, and pursuant to a modification of the note on
August 31, 1995, is payable in monthly payments of $5,000 for the
first nine months beginning December 1, 1994, through August 1, 1995,
when such payments increased to $6,500 per month for three months
beginning September 1, 1995, through November 1, 1995. Then payments
increased to $7,500 per month for three months beginning December 1,
1995, through February 1, 1996, when such payments decreased to
$5,000 principal per month plus interest accrued thereon until
November 1, 1997, when the remaining principal balance will be due.
Madison failed to make the March 1, 1996 payment, and thus is in
default. Presently, the Company has filed suit to collect this note.
The $2,500,000 note is secured by a First Purchase Money Security
Interest Lien on all real and personal property transferred pursuant
to this transaction, one million (1,000,000) shares of the common
stock of Madison Group Associates, Inc., as well as all outstanding
stock of Madison Radio Group, Inc., the wholly-owned subsidiary. The
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PAGE 13
Material Changes in Results of Operations (continued)
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stock of Madison Radio Group, Inc. was foreclosed on in November
1996 and subsequently sold to Heritage Communications Corporation, a
company related to United Heritage Corporation through common
stockholders. As of September 30, 1997, Madison Radio Group, Inc. is
wholly owned by Heritage Communications Corporation. In addition,
Madison Group Associates, Inc., has pledged a promissory note
executed on September 20, 1992, in the original amount of $1,000,000
payable to Canaveral International Corp. (now known as Madison Group
Associates, Inc.) by First Capital Trust, Sam Podany and Ted
Yashcheshen. Madison Group Associates, Inc. has filed for
bankruptcy. The Company has had the collateral securing the note
receivable appraised and has determined that the value of the
collateral exceeds the Company's carrying amount of the note
receivable.
The potential gain of $1,254,234 has been deferred due to the lack
of a significant initial investment by the buyer . This accounting
treatment will continue until the buyer's cumulative payments are
sufficient to qualify the transaction for gain recognition under
generally accepted accounting principles. During the year ended
March 31, 1997, the Company received $16,000 of interest payments,
which have been added to and included in the deferred gain.
Material Changes in Financial Position
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The Company's equity capital has shown an increase of $22,377
since March 31, 1997, the previous fiscal year-end. This increase is
primarily the result of the issuance of common stock, which generated
$95,000, the net loss for the six months ended September 30, 1997, of
$103,413, and the recognition of deferred compensation of $30,790.
The working capital of the Company was $43,955 at September 30,
1997, a decrease from the working capital of $149,008 reported at
March 31, 1997. Current assets decreased $53,955 during the current
six-month period, and current liabilities increased $51,098,
resulting in a decrease in the overall working capital position.
The total assets of the Company were $25,915,637 at September 30,
1997, which is $73,475 greater than total assets at the previous year
end. This increase in total assets is primarily due to an increase
in oil and gas properties for this six months.
The Company's operating activities used $40,866 in cash flow for
the six months ended September 30, 1997, as compared to providing
$33,454 in cash during the prior year period. The cash used in the
current period was primarily due to the net loss. The cash provided
in the prior year period was primarily from net income. Investing
activities used $132,193 during the six months ended September 30,
1997, due to additions to the oil and gas properties. Investing
activities used cash of $279,259 for the six months ended September
30, 1996, due to additions to property and equipment and additions to
oil and gas properties. Financing activities provided $98,998 cash
during the current six months from the issuance of common stock.
Financing activities from the prior year period provided $108,000
from the issuance of common stock.
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PAGE 14
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
27 Financial Data Schedule *
* Filed herewith.
(b) Reports on Form 8-K
None
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PAGE 15
UNITED HERITAGE CORPORATION
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
/s/ Walter G Mize
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Date: May 28, 1998 Walter G. Mize, President
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PAGE 16
INDEX TO EXHIBITS
Exhibit Number Description
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27 Financial Data Schedule