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. We produce from properties we lease in Texas. We acquired our Texas property, which includes 130 wellbores (of which approximately 44 wells are capable of producing), in February 1997. Our plan has been to develop these properties by reworking many of the existing wells and drilling additional wells. However, the revenues we earned did not provide us with enough money to implement our development plans.

On March 31, 2006, Lothian loaned United Heritage $2,500,000 (the "Wardlaw Loan") pursuant to the terms of a promissory note and Secured Credit Agreement. We drew down the Wardlaw Loan as needed for development of the Wardlaw Field. As of March 31, 2007, we had drawn a total of $759,140. Due to Lothian's bankruptcy, limited funds are available to us.

On April 20, 2005, our wholly-owned subsidiary, Petroleum, 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. ("Dominion"). Petroleum 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. In 2006, Dominion drilled a well on the AMI, but has not notified us whether the well was successful. In June 2007 we notified Dominion that it had not performed in accordance with the terms of the assignment because it had not drilled a second well within 180 days from the completion of the first well. We have requested that Dominion reassign to us the land subject to the assignment, due to lack of production in paying quantities or Continuous Drilling Operations, as defined by the assignment. Dominion has not yet responded to our request.

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.

To date, other than the cash payment we received for the assignment, we have earned no revenues from it.

During the 2007 fiscal year, the sale price of oil produced by our properties in Texas increased by $1.53 a barrel, to $38.33 a barrel, from $36.80 a barrel during the 2006 fiscal year. Production costs during the 2007 fiscal year increased from $30.11 a barrel during the 2006 fiscal year to $144.79 a barrel for our Texas properties.

Prior to the Asset Sale, we realized proceeds from the sale of oil and gas derived from our properties in New Mexico. During the 2007 fiscal year, the sale price of oil produced by our properties in New Mexico increased by $0.01 a barrel, to $44.73 a barrel, from $44.72 a barrel during the 2006 fiscal year. Production costs during the 2007 fiscal year increased from $8.53 a barrel during the 2006 fiscal year to $42.96 a barrel for our New Mexico properties. During the 2007 fiscal year, the sales price of gas produced by our properties in New Mexico decreased by $0.33 per Mcf, from $3.34 per Mcf during the 2006 fiscal year to $3.01 per Mcf during the 2007 fiscal year. Due to the Asset Sale, we will not earn these revenues or accrue these expenses in the future.

While the Asset Sale will result in a significant decrease to our expenses, it will also result in a significant decrease to our revenues. Our Texas property does not produce significant quantities of oil therefore, if we do not receive operating capital from other sources, such as loans or proceeds from an offering of our securities, we may not be able to continue our operations. We do not have any commitments for financing. Due to the bankruptcy of Lothian, we do not know how much longer we can continue operating.

Except as otherwise discussed in this Annual 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 2008 fiscal year.

During the 2008 fiscal year, our plan is to continue redevelopment of our properties if we are successful in finding other funding sources or, alternatively, we will seek investors or buyers.

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 doubt about our ability to continue as a going concern. We sustained a net loss of $11,435,134 for the fiscal year ended March 31, 2007 and, as of the same period, we had a working capital deficit of $1,218,803. We must obtain financing in order to develop our properties and alleviate the 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. Reserve estimates have been updated at least annually and consider recent production levels and other technical information about each well. Because we had no proved reserves on March 31, 2007, we did not commission a reserve report. 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 the Company. The Company 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 Footnote 20 to the consolidated financial statements. 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 $15.3 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, impairment of unproved properties 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.

RESULTS OF OPERATIONS

The following selected financial data for the two years ended March 31, 2007 and March 31, 2006 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.

                                         Year Ended           Year Ended
                                       March 31, 2007       March 31, 2006

          Income Data :
          Revenues                    $      1,014,734     $        601,685
          Income Profit (Loss)        $    (11,435,134 )        (17,371,395 )
          Income Profit (Loss)
          Per Share                   $          (1.77 )   $          (2.98 )
          Weighted Average
          Number of Shares                   6,446,758            5,830,188


          Balance Sheet Data :
          Working Capital (deficit)   $     (1,218,803 )   $     (1,765,656 )
          Total Assets                $      9,983,559     $     15,461,605
          Current Liabilities         $      3,427,471     $      1,998,447
          Long-Term Debt              $      2,941,983     $      1,413,003
          Shareholders' Equity        $        803,977     $     11,783,643

Combined Results

Our 2007 fiscal year revenues were $1,014,734, an increase of $413,049 or approximately 69%, as compared to revenues of $601,685 for the 2006 fiscal year. The sales revenue increase for the 2007 fiscal year was due primarily to increased volume of oil sold.

Total operating expenses of $11,993,185 reflects a decrease of $13,864,818, or approximately 54%, for the 2007 fiscal year as compared to operating expenses of $25,858,003 for the 2006 fiscal year. The significant operating expenses reported for the 2006 fiscal year resulted from the inclusion of $23,199,110 in impairment of our oil and gas properties, which was not taken in 2007. The impairment was taken in conjunction with the re-evaluation of our reserves. General and administrative expenses decreased slightly by $22,464, or approximately 2%, from $1,339,920 in the 2006 fiscal year to $1,317,456 in the 2007 fiscal year. We also incurred a put option expense of $2,727,186 during the fiscal year ended March 31, 2007. We had no similar expense during the fiscal year ended March 31, 2006. Interest expense was $456,683 in the 2007 fiscal year, as compared to $221,445 in the 2006 fiscal year. The increase during the 2007 fiscal year was due primarily to the increase in the amount of money loaned to us by Lothian for development of our properties. 2007 fiscal year operating expenses include a $6,125,233 loss on the sale of oil and gas assets.

Our net loss for the 2007 fiscal year was $11,435,134, a decrease of $5,936,261 or approximately 34%, as compared to a net loss of $17,371,395 for the 2006 fiscal year. We reported a significant decrease in net loss because we had no impairment charge in the 2007 fiscal year, as compared to the impairment charge of $23,199,110 we included in the 2006 fiscal year.

Food Products Activity

Our subsidiary, National Heritage Sales Corporation, had $0 product sales during the 2007 fiscal year, as compared to sales for the 2006 fiscal year of $8,694. National is no longer selling meat and poultry products and has sold its assets. We do not intend to re-enter this market and we will no longer have results related to this activity to report.

Oil and Gas Activity

Oil and gas sales during the 2007 fiscal year were $1,014,734, an increase of $421,743 or approximately 71%, as compared to sales of $592,991 during the 2006 fiscal year. The volume of production sold during the 2007 fiscal year was greater than the volume of production sold during the 2006 fiscal year, however, significantly higher production costs offset the increased volumes and slightly higher product prices. The increased costs from the 2006 fiscal year were primarily the result of higher field labor, salt water disposal and high service company costs related to increased activity on the Texas and New Mexico properties. Production is expected to remain limited on our Texas property, the only property we currently own, due to a lack of operating and investment capital that, prior to its bankruptcy, had been provided to us by Lothian. Receivables due to the Asset Sale comprised 99% of our total receivable balance at March 31, 2007. Receivables from a single oil and gas customer comprised 55% of our trade receivable balance at March 31, 2006. 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. During the fiscal year ended March 31, 2007, we recorded oil and gas sales to only two customers. Buyers of crude oil are plentiful and can be easily replaced.

Production and operating expenses were $1,320,401 during the 2007 fiscal year as compared to $259,290 in production and operating expenses during the 2006 fiscal year, an increase of $1,061,111 or approximately 401%. This significant increase in production and operating expenses was the result of higher salt water disposal charges and charges for field labor. Depreciation and depletion expense for the 2007 fiscal year was $490,507 as compared to depreciation and depletion expense of $1,027,155 for the 2006 fiscal year, a decrease of $536,648 or approximately 52%. The decreased depreciation and depletion expense resulted primarily from the reduction of proved properties due to the impairment of assets in the 2006 fiscal year.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

Our sales 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 relied primarily on loans from Lothian to finance our operations. Lothian declared bankruptcy on June 13, 2007 and we do not believe that it is capable of providing additional funding to us. We currently have no other sources of capital. We are operating on a day-to-day basis and we will continue operating in this manner for as long as Lothian provides us with the funds to do so.

Our current assets increased by $1,975,877 or approximately 849%, from $232,791 at March 31, 2006 to $2,208,668 at March 31, 2007. The increase in our current assets was due primarily to cash and receivables related to the Asset Sale. Current liabilities increased from $1,998,447 at March 31, 2006, to $3,427,471 at March 31, 2007, an increase of $1,429,024 or approximately 72%. The increase in current liabilities was due to increased accounts payable and accrued interest on the related party notes payable. Working capital was a deficit of $1,218,803 at March 31, 2007 as compared to the March 31, 2006 deficit of $1,765,656, a decrease of $546,853 or approximately 31%. The decreased deficit was due primarily to the Asset Sale.

Due to the loss incurred on the sale of our New Mexico properties and the expense related to the put provision included in certain stock option agreements, equity capital decreased by $10,979,666, or approximately 93%, during the 2007 fiscal year. Shareholders' equity was $11,783,643 at March 31, 2006, as compared to $803,977 at March 31, 2007.

Total assets were $9,983,559 at March 31, 2007, a decrease of $5,478,046 as compared to $15,461,605 for the 2006 fiscal year. The decrease in total assets resulted primarily from the sale of our New Mexico property.

Cash Flow

Our operations used $575,885 of cash in the 2007 fiscal year as compared to $67,729 used in the 2006 fiscal year. The cash flow deficits are due to the operating losses incurred.

Cash of $642,211 was provided by investing activities during the 2007 fiscal year and cash of $1,908,815 was used in investing activities for the 2006 fiscal year. Net cash provided from investing activities for the 2007 fiscal year consisted of the proceeds from the sale of our New Mexico properties, which totaled $6,613,947. Cash of $5,971,736 was used for capital expenditures for our oil and gas properties and for the purchase of equipment. During the 2006 fiscal year, cash flows used in investing activities related primarily to capital expenditures for our oil and gas properties.

In the 2007 fiscal year, cash of $6,338,904 was provided by borrowings from Lothian. Payments totaling $4,809,924 were made to Lothian from the proceeds we received when we sold New Mexico's assets. During the 2006 fiscal year, cash in the amount of $5,249,753 from financing activities came from the exercise of warrants, the sale of our common stock to Lothian and loans from Lothian. Of this amount, $3,203,994 was used for the repayment of a loan from Almac Financial Corporation.

At March 31, 2007 we had cash of $1,671,672.

FACTORS AFFECTING OUR BUSINESS, OPERATING RESULTS AND FINANCIAL CONDITION

Risks Related to Our Business

Lothian filed a petition for protection under Chapter 11 of the U.S. Bankruptcy Code. It is not likely that Lothian will have the resources to continue funding our operations. We may be forced to discontinue our operations.

In October 2005 Lothian began to provide funding to us for our operations. On June 13, 2007 Lothian filed a petition for protection under Chapter 11 of the U.S. Bankruptcy Code. It is not likely that Lothian will be able to continue loaning money to us for our operations and we have no other sources of capital. If we cannot find other financing for our operations, we may be required to severely curtail or discontinue them.

Currently, Lothian does not have the financial capacity to develop our properties.

Lothian planned to develop our oil and gas properties, however, it does not currently have the funds to pay the costs associated with such development, including engineering studies, equipment purchases or leasing and personnel costs, all of which are significant. In order to undertake this development, it is likely that Lothian will need additional sources of capital. Lothian has recently filed for protection under Chapter 11 of the U.S. Bankruptcy Code. There is no guarantee that sources of capital will be available to Lothian on acceptable terms, or at all. If Lothian cannot develop our oil properties as it planned and we cannot find other sources of financing for our operations, we may be required to severely curtail or discontinue our operations.

We do not earn enough money to support our operations. We may be unable to continue our business.

We do not earn enough money from our oil and gas sales to pay for our operating expenses. Due to our substantial losses and our working capital deficit, we may be unable to continue as a going concern. We currently do not know how long we can continue our operations. If we do not obtain financing, we will be required to severely curtail, or to completely cease, our operations. We do not currently have any commitments for financing. We are operating on a day-to-day basis and we will continue operating in this manner for as long as Lothian provides us with the funds to do so.

Weaver and Tidwell, L.L.P., our independent auditor, has included in its report on our financial statements a paragraph stating that that we may be unable to continue as a going concern.

We have experienced net losses and negative cash flows from operations. We sustained a net loss of $11,435,134 and a working capital deficit of $1,218,803 for the fiscal year ended March 31, 2007. We have an accumulated deficit of $42,999,146. As discussed in Note 3 to the financial statements, we sold all of our proved reserves in 2007 and we currently do not have significant revenue producing assets. In addition, we have limited capital resources and Lothian, our majority shareholder who was financing our development, filed for bankruptcy subsequent to March 31, 2007. All of these factors raise substantial doubt about our ability to continue as a going concern. The financial statements included in this report do not include any adjustments that might result from the outcome of these uncertainties. As noted in an explanatory paragraph in the report of Weaver and Tidwell, L.L.P., our independent certified public accountants, on our consolidated financial statements for the year ended March 31, 2007, these conditions have raised substantial doubt about our ability to continue as a going concern.

We must estimate our proved oil and gas reserves and the estimated future net cash flows from the reserves. These estimates may prove to be inaccurate.

This Form 10-K/A contains estimates of our proved oil and gas reserves and the estimated future net cash flows from such reserves. These estimates are based upon various assumptions, including assumptions required by the Securities and Exchange Commission relating to oil and gas prices, drilling and operating expenses, capital expenditures, taxes and availability of funds. The process of estimating oil and natural gas reserves is complex. This process requires significant decisions and assumptions in the evaluation of available geological, geophysical, engineering and economic data for each reservoir and is therefore inherently imprecise. Additionally, our interpretations of the rules governing the estimation of proved reserves could differ from the interpretation of staff members of regulatory authorities resulting in estimates that could be challenged by these authorities.

Actual future production, oil and natural gas prices, revenues, taxes, development expenditures, operating expenses and quantities of recoverable oil and gas reserves will most likely vary from those estimated. Any significant variance could materially affect the estimated quantities and present value of reserves set forth in this Annual Report and the information incorporated by reference. Our properties may also be susceptible to hydrocarbon drainage from production by other operators on adjacent properties. In addition, we may adjust estimates of proved reserves to reflect production history, results of . . .