Each one in plain English, with the numbers worked through for a shareholder.
25 Sept 2006material agreement▼ BadMajor
On September 21, 2006 the merger agreement with Lothian was amended: Lothian holders now get 0.80 company share per Lothian share instead of 0.60606, so more shares go to Lothian holders. The $3.00 warrants for other shareholders can now be called early if the stock closes above $4.50 for ten straight trading days, and the outside termination date moved from Sept 30, 2006 to April 30, 2007. The preferred stock was resized (Series A to 176,000, B-1 to 40,000, B-2 to 60,000 shares) with lower conversion prices ($1.25, $1.25, $1.5625). The press release attributes the change to new engineering and financial information and a revised fairness opinion.
On July 7, 2006 the Sterling Bank credit agreement was amended so the bank's commitment is the lesser of $20,000,000 and the borrowing base in effect (the base was $5,250,000 at signing). The higher interest rate (prime + 1.50%) now applies when the balance reaches that commitment instead of at $10,000,000. This tightens the terms of the June 16 facility.
On June 16, 2006 the company and its subsidiary UHC New Mexico signed, together with Lothian entities, a $20,000,000 credit line with Sterling Bank, secured by UHC New Mexico's oil and gas leases and by the company's pledge of its UHC New Mexico shares. The initial borrowing base is $5,250,000, the loan is due April 30, 2008, and $3,449,000 of principal plus a $500,000 letter of credit were already outstanding under a prior Lothian agreement. Lothian also agreed to rank its $4,000,000 loan to the company behind the bank. The company's assets now back debt that began as Lothian's line. A press release in the same filing says Lothian-funded work lifted Cato Unit output to about 170 barrels of oil equivalent per day from 40 wells, that Lothian committed over $1 million to a Wardlaw drilling pilot expected to start in August 2006, and that the annual report would be late (targeted for July 14, 2006).
The company extended the earlier restatement to also cover fiscal years ended March 31, 2000 and 2001, again because "proved" reserves were incorrectly stated; it expects those reserves to be reduced. It also filed for up to a 15-day delay of its annual report for the year ended March 31, 2006. This continues and widens the June 16 restatement.
On June 15, 2006 the board decided that the company's financial statements for the fiscal years ended March 31, 2002 through 2005 can no longer be relied on, because the reserves labelled "proved" were incorrectly stated. The company expects a significant portion of those reserves to be reclassified as "unproved" or "unevaluated"; the press release says the problem centres on the Cato Unit and Wardlaw Field, and the final changes have not yet been decided. This undercuts the reserves figures the company had been reporting (such as the 35.2 million barrels stated in Oct 2005) and comes while the Lothian merger is still pending.
23 May 2006security holder rights change▼ BadMajor
The company filed terms for new preferred stock (133,334 Series A, 30,303 Series B-1 and 45,455 Series B-2 shares) on May 17, 2006, to be issued to Lothian's preferred holders in the pending merger. The preferred pays 8% cumulative dividends and ranks ahead of common stock on dividends and liquidation, and converts to common at $1.65 (Series A, B-1) or about $2.06 (B-2). Series B-1 holders can elect one director. Because the preferred ranks ahead of common, common shareholders' claims are subordinate to it after the merger. No preferred stock has yet been issued by the company; this continues the Lothian merger.
The Boston Stock Exchange filed to delist the company's stock because it did not pay annual listing dues or list additional shares as required; the stock has not traded there since December 17, 2004. The company will not appeal, and says its stock stays on the Nasdaq Capital Market as UHCP, so there is little practical effect.
On April 11, 2006 the company and Lothian amended their February merger agreement so that every shareholder except Lothian will receive a five-year warrant to buy one share at $3.00 for each share held, on a record date still to be set. This adds a benefit for non-Lothian shareholders to the pending merger; the warrants only have value if the stock trades above $3.00.
On February 22, 2006 the company and Lothian Oil signed a merger agreement under which Lothian, which already owns 58.32% of the company's stock, will be merged into the company, which will be renamed Lothian Oil Inc. Lothian holders get 2 company shares (or matching preferred shares) for every 3.3 Lothian shares held. The filing says the required shareholder approvals have been obtained, dissenters' rights are not available, and the deal can be abandoned if not completed by September 30, 2006. Mize, Gilliam and the other five directors resigned on February 21, 2006 and were replaced by Lothian-linked appointees including Bruce Ransom, Thomas Kelly and Michael Raleigh; C. Scott Wilson is CEO and President and Kenneth Levy is CFO. The company's address is now Midland, Texas. This moves control from the Mize-era management to Lothian.
On October 7, 2005 the company agreed to sell Lothian Oil Inc. 3,280,000 new shares at $1.05 ($3,444,000 total) plus five-year warrants on 8,720,000 more shares at $1.05, $1.12 and $1.25, subject to shareholder approval. The cash is to repay the Almac Financial line of credit (owned by CEO Mize) with any remainder used for working capital. Separately, Mize and six other holders sold 8,000,000 shares to Lothian for $10,651,000 (Mize sold 5,080,590 and keeps 49,000 shares plus a 1,000,000-share option at $0.50). Lothian also is to enter a development and operating agreement on the Texas and New Mexico properties; the press release says Lothian becomes operator and has committed up to $6.5 million for development. Lothian paid for the purchased shares with a promissory note, and can require the sellers to take the shares back if shareholders reject the company's sale. The press release says Mize stays Chairman and CEO and Lothian may appoint four more directors.
Imperial Petroleum told the company on August 31, 2005 that the merger agreement signed October 14, 2004 was terminated, because the merger was not completed by the February 1, 2005 date. This resolves the long-pending Imperial merger; the filing says neither side owes any penalty, and the planned move of Jeffrey Wilson to CEO will not happen. The February 2005 operations management agreement (company subsidiaries as named operators of Imperial's wells) is not terminated by this filing; either side may end it since the merger missed May 1, 2005.
On August 30, 2005 Nasdaq said the company failed to regain the minimum bid price compliance, so its stock may be delisted from the SmallCap Market. The company has appealed and requested a hearing, which pauses any action, and says it could be quoted on the OTC Bulletin Board if needed. This continues the bid-price problem first flagged in September 2004.
Subsidiary UHC Petroleum assigned Dominion Oklahoma Texas Exploration & Production its rights below 2,000 feet on 7,840 of its 10,502 net acres in Edwards County, Texas, with a surrounding area of mutual interest of about 12,800 acres. In return it gets cash, an overriding royalty interest, a carried working interest in the first, second or third wells, and the right to join as a working interest partner. A Joint Operating Agreement is still being prepared, and the first well must start within two years.
The company did not regain the $1.00 minimum bid price by the February 28, 2005 deadline set in the September 2004 Nasdaq notice. Nasdaq gave it another 180 days, until August 29, 2005, because it meets the other SmallCap listing criteria.
The company settled its lawsuit with Southwest Securities Bank (formerly First Savings Bank) on February 22, 2005, paying $700,000 in full satisfaction of the $2,000,000 line of credit from April 2000. The company says this removed a $2,300,000 liability and added an estimated $1,600,000 in earnings (about $0.10 per share). Separately, Almac Financial Corporation, controlled by CEO Walter Mize, agreed to raise its loan to the company from $3,000,000 to $4,000,000 and extend the maturity.
28 Feb 2005asset acquisition disposition● NeutralMajor
The company's food subsidiary, Heritage Food Group, merged into BMW Holdings on January 27, 2005, after the 'Heritage Lifestyle' meat-business assets were moved into it. The company received a 7.5% stake in BMW (8,823,530 Class A shares) plus $75,000 in 12 monthly payments, and intends to distribute the BMW shares to its own shareholders. Management says the company is now involved strictly in oil and gas.
While the Imperial merger is still pending, the company's subsidiaries became the named operators of Imperial's Texas and New Mexico wells, with Imperial's Jeffrey Wilson managing daily operations. Either side can end this arrangement if the merger is not completed by May 1, 2005.
On October 14, 2004 the company signed a merger agreement to acquire Imperial Petroleum, Inc. Imperial holders get one company share for every three Imperial shares, and Imperial's CEO Jeffrey T. Wilson would become CEO. The deal still needs approval from both sets of shareholders, Imperial's lenders and an effective Form S-4. The earlier plan for Wilson to buy 13,188,834 company shares at $0.75 is off because he told the company he cannot proceed.
Nasdaq told the company (filing as United Heritage Corporation, the name used in its filings) that its stock closed below the $1.00 minimum bid price for 30 straight business days. It has until February 28, 2005 to regain compliance, with a possible extra 180 days, and management says it expects to comply.
