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 June 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
- - ------------------------------- ------------------------------------
(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 July 31, 1997, was 96,179,042 shares.
PAGE
Part I, Item 1. Financial Statements
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PAGE 3
UNITED HERITAGE CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
June 30, March 31,
1997 1997
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UNAUDITED
ASSETS
CURRENT ASSETS
Cash $ 56,195 $ 80,722
Accounts receivable-trade 113,940 134,940
Inventories 750 750
Other 45,819 51,999
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Total Current Assets 216,704 268,411
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PROPERTY AND EQUIPMENT, at cost 85,868 85,869
Less accumulated depreciation (53,865) (51,497)
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Net Property and Equipment 32,003 34,372
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NOTE RECEIVABLE 1,245,766 1,245,766
OIL AND GAS PROPERTIES 24,351,952 24,293,613
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$ 25,846,425 $25,842,162
============ ===========
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UNITED HERITAGE CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEET - CONTINUED
June 30, March 31,
1997 1997
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UNAUDITED
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses: $ 100,951 $ 119,403
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Total Current Liabilities 100,951 119,403
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SHAREHOLDERS' EQUITY
Common stock-$.001 par value;
100,000,000 shares authorized:
issued and outstanding
96,121,542 shares at June 30, 1997, 96,121
96,021,542 shares at March 31, 1997 96,021
Additional paid-in capital 32,500,751 32,425,853
Accumulated deficit (6,782,486) (6,714,807)
Deferred compensation (68,912) (84,308)
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Total Shareholders' Equity 25,745,474 25,722,759
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 25,846,425 $ 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
June 30, June 30,
1997 1996
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REVENUES
Processed beef products $ 644,144 $ 696,135
Interest and other income 758 4,506
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TOTAL REVENUES 644,902 700,641
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COSTS AND EXPENSES
Processed beef products 557,065 555,312
Selling 41,830 14,592
General and administrative 113,686 84,975
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TOTAL COSTS AND EXPENSES 712,581 654,879
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NET INCOME (LOSS) $ (67,679) $ 45,762
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NET INCOME (LOSS)
PER SHARE $ - $ -
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AVERAGE NUMBER OF COMMON SHARES 96,090,773 17,854,256
=========== ===========
See notes to consolidated condensed financial statements.
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UNITED HERITAGE CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED
June 30, June 30,
1997 1996
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OPERATING ACTIVITIES
Net income (loss) $ (67,679) $ 45,762
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation 2,368 3,806
Deferred compensation recognized
in current year 15,396 13,125
Changes in operating assets and liabilities:
(Increase) Decrease in accounts receivable 21,000 (3,402)
(Increase) Decrease in inventories - (14,802)
(Increase) Decrease in other current assets 6,180 5,139
Increase (Decrease) in accounts payable
and accrued expenses (18,452) 22,861
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NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES (41,187) 72,489
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INVESTING ACTIVITIES
Additions to property and equipment - (28,673)
Additions to oil and gas properties (58,338) (84,242)
Collections of notes receivable - 7,500
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NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES (58,338) (105,415)
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FINANCING ACTIVITIES
Proceeds from issuance of common stock 74,998 108,000
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NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES 74,998 108,000
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INCREASE (DECREASE) IN CASH (24,527) 75,074
Cash at beginning of period 80,722 437,656
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CASH AT END OF PERIOD $ 56,195 $ 512,730
========= =========
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
three-month period ended June 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:
June 30, March 31,
1997 1997
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Lite beef $750 $750
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NOTE 3 - NOTE RECEIVABLE
Included in notes receivable at June 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 plus subsequent 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.
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UNITED HERITAGE CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED) (CONTINUED)
NOTE 3 - NOTE RECEIVABLE (CONTINUED)
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 Heritage Corporation through common
stockholders. At June 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.
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 $52,500 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.
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UNITED HERITAGE CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED) (CONTINUED)
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 June
30, 1997 and June 30, 1996.
NOTE 6 - INCOME TAXES
As of March 31, 1997, the Company had net operating loss carry
overs 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 June 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 June 30, 1997 were incurred to evaluate the
project and are considered exploration costs.
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PAGE 10
Part I, Item 2. Management's Discussion and Analysis of Financial
Condition and Results ofOperations
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.
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 $644,144 for the
quarter ended June 30, 1997. The results for the quarter are
somewhat less than that reported in the prior year quarter of
$696,135. The decrease for the current quarter is due primarily to
a lower volume of sales. Gross profit from beef products was
$87,079 for the three-month period ended June 30, 1997, as compared
with $140,823 gross profit for the same period last year. The cost
of beef products as a percentage of sales was 86.5% for the three
months ended June 30, 1997, as compared to 79.8% for the three
months ended June 30, 1996. The increase in the cost of beef
product percentage is due primarily to an increase in packaging and
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.
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Material Changes in Results of Operations (continued)
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Selling expenses of $41,830 for the current quarter have
increased from that of the prior year period of $14,592. This
increase results mainly from an increase in advertising and outside
sales representative's costs. General and administrative costs have
increased during the quarter ended June 30, 1997, at $113,686, as
compared to $84,975 for the same period last year. This is a result
of increased legal and audit fees.
On a consolidated basis, the Company had a net loss for the
current three-month period of $67,679. The comparable quarter
result for the prior fiscal year was a net income of $45,762. The
primary reasons for the change from net income to a net loss is an
increase in costs and expenses.
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 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 June 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.
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Material Changes in Financial Position
- - --------------------------------------
The Company's equity capital has shown an increase of $22,715
since March 31, 1997, the previous fiscal year-end. This increase
is primarily the result of the issuance of common stock, which
generated $75,000, and the net loss for the three months ended June
30, 1997, of $67,679.
The working capital of the Company was $115,753 at June 30, 1997,
a decrease from the working capital of $149,008 reported at March
31, 1997. Current assets decreased $51,707 during the current
three-month period, and current liabilities decreased $18,452,
resulting in a decrease in the overall working capital position.
The total assets of the Company were $25,915,753 at June 30,
1997, which is $4,263 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 three months.
The Company's operating activities used $41,187 in cash flow for
the three months ended June 30, 1997, as compared to providing
$72,489 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 and an
increase in payables. Investing activities used $58,338 during the
three months ended June 30, 1997, due to additions to the oil and
gas properties. Investing activities used cash of $105,415 for the
three months ended June 30, 1996, due to additions to property and
equipment and additions to oil and gas properties. Financing
activities provided $74,998 cash during the current three 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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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
Form 8-K/A was filed April 28, 1997, for the Form 8-K
filed for the events of February 11, 1997. The item
reported in the 8-K/A was Item 7, disclosing financial
statements for the business acquired and proforma
financial information for the Company as of March 31,
1996.
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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 15
INDEX TO EXHIBITS
Exhibit Number Description
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27 Financial Data Schedule