Oil Dependency’s Ultimate Downside

Tiny exploration company United Heritage may have to cease operations after a bankruptcy filing by big shareholder Lothian Oil.
Stephen TaubJune 20, 2007

United Heritage Corp., a small energy-exploration company private closely tied to private Lothian Oil Inc., raised questions about the ability of United Heritage to continue operating in the wake of Lothian’s Chapter 11 bankruptcy filing.

United Heritage, which has a $5 million market capitalization, and lost more than $17 million on just $602,000 in revenues in its March 31, 2006, fiscal year, said in a press release that it “does not know what effect this action will have on its ability to continue its operations.” But it United stressed that Lothian has provided funds for United’s operations.

United added in a press release that it received a letter from Nasdaq warning that it is out of compliance with the exchange’s listing requirement because for a period of 30 consecutive business days the bid price of its common stock closed below the minimum $1 per share requirement. United has until December 12 to regain compliance, the Nasdaq letter said, after which the Nasdaq staff will determine whether the capital market initial listing criteria is met.

United will receive an additional 180-day compliance period if it meets the criteria, and it will be delisted if it does not.

Lothian is United’s largest shareholder, and in October 2005 purchased 3.28 million shares from United for more than $3.4 million. The companies said at the time that the money would be used to pay the majority of United’s debt. Under the deal, United also issued to Lothian warrants to purchase 8.72 million shares of stock.

In a separate agreement then, Lothian immediately became an operator of United’s oil and gas properties in Texas and New Mexico. Lothian said it had committed up to $6.5 million for the development of these properties.

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