10-Q 1 ambra10q_dec2002.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q (x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 2002 ------------------------------ ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to -------------- ---------- Commission File number O-11695 ---------- AMBRA RESOURCES GROUP, INC. -------------------------------------------------------------------- (Exact name of registrant as specified in charter) UTAH 87-0403828 -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 610-800 West Pender Street, Vancouver., Canada, V6C 2V6 ----------------------------------------------- -------------------- (Address of principal executive offices) (Zip Code) 1- 604- 669-2723 ------------------------------------------------------------------------ Registrant's telephone number, including area code (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), Yes [x ] No [ ] and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ] APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the last practicable date. Class Outstanding as of December 31, 2002 --------------------- ------------------------------------ Common Stock, $0.001 160,238,322 -1- INDEX Page Number PART I. ITEM 1. Financial Statements (unaudited)................................3 Balance Sheets..................................................4 December 31, 2002 and June 30, 2002 Statements of Operations Three and six months ended December 31, 2002 and 2001 .......5 and the period January 27, 1984 to December 31, 2002 Statements of Cash Flows Six months ended December 31, 2002 and 2001.................6 and the period January 27, 1984 to December 31, 2002 Notes to Financial Statements...................................7 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ...............11 PART II. Other Information..............................................12 Signatures.....................................................13 -2- PART I - FINANCIAL INFORMATION -------------------------------------------------------------------------------- This filing contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For this purpose any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, words such as "may," "will," "expect," "believe," anticipate," "estimate" or "continue" or comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainty, and actual results may differ materially depending on a variety of factors, many of which are not within the Company's control. These factors include but are not limited to economic conditions generally and in the industries in which the Company and its customers participate; competition within the Company's industry, including competition from much larger competitors; technological advances which could render the Company's products less competitive or obsolete; failure by the Company to successfully develop new products or to anticipate current or prospective customers' product needs; price increase or supply limitations for components purchased by the Company for use in its products; and delays, reductions, or cancellations of orders previously placed with the Company. ITEM 1. FINANCIAL STATEMENTS -------------------------------------------------------------------------------- The accompanying balance sheets of Ambra Resources Group, Inc. ( development stage company) at December 31, 2002 and June 30, 2002, and the statements of operations and cash flows for the three and six months ended December 31, 2002 and 2001 and the period January 27, 1984 (date of inception) to December 31, 2002, have been prepared by the Company's management in conformity with accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. Operating results for the quarter ended December 31, 2002, are not necessarily indicative of the results that can be expected for the year ending June 30, 2003. -3-

AMBRA RESOURCES GROUP, INC. ( Development Stage Company) NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- 1. ORGANIZATION The Company was incorporated under the laws of the State of Utah on January 27, 1984 with authorized capital stock of 50,000,000 shares at a par value of $0.001 and on May 17, 1999 the authorized was increased to 100,000,000 shares and on March 3, 2000 the authorized was increased to 400,000,000 shares with the same par value. The company has been in the development stage since inception and has been engaged in the business of the acquisition of mining and oil property interests and other business activities. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Accounting Methods ------------------ The Company recognizes income and expenses based on the accrual method of accounting. Dividend Policy --------------- The Company has not yet adopted any policy regarding payment of dividends. Cash and Cash Equivalents ------------------------- The Company considers all highly liquid instruments purchased with a maturity, at the time of purchase, of less than three months, to be cash equivalents. Property and Equipment ---------------------- The Company's property and equipment at December 31, 2002 consists of the following: Office equipment 157,128 Residential rentals 164,512 Less accumulated depreciation (91,577) --------- 233,063 Office equipment is depreciated on the straight line method over five and seven years and the residential rentals are depreciated on the straight line method over forty years. Earnings Per Share ------------------ Earnings (loss) per share amounts are computed based on the weighted average number of outstanding shares. -7- AMBRA RESOURCES GROUP, INC. ( Development Stage Company) NOTES TO FINANCIAL STATEMENTS (Continued) -------------------------------------------------------------------------------- 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Capitalization of Mining Claim Costs ------------------------------------- Costs of acquisition, exploration, carrying, and retaining unproven properties are expensed as incurred. Costs incurred in proving and developing a property ready for production are capitalized and amortized over the life of the mineral deposit or over a shorter period if the property is shown to have an impairment in value. Expenditures for mine equipment are capitalized and depreciated over their useful lives. Capitalization of Oil Leases Costs ------------------------------------- The Company uses the successful efforts cost method for recording its oil lease interests, which provides for capitalizing the purchase price of the project and the additional costs directly related to proving the properties and amortizing these amounts over the life of the reserve when operations begin or a shorter period if the property is shown to have an impairment in value or expensing the remaining balance if proven of no value. Expenditures for oil well equipment are capitalized and depreciated over their useful lives. Environmental Requirements -------------------------- At the report date environmental requirements related to the mineral claims acquired are unknown and therefore an estimate of any future cost cannot be made. Income Taxes ------------ At December 31, 2002, the Company had a net operating loss carry forward of $6,705,305. The tax benefit of approximately $2,011,592 from the loss carry forward has been fully offset by a valuation reserve because the use of the future tax benefit is doubtful because the Company is unable to establish a predictable projection of operating profits for future years. The net operating loss carryovers will expire beginning in the years 2001 through 2023. Foreign Currency Translation ---------------------------- Part of the transactions of the Company were completed in Canadian dollars and have been translated to US dollars as incurred, at the exchange rate in effect at the time, and therefore, no gain or loss from the translations is recognized. US dollars are considered to be the functional currency. Financial Instruments --------------------- The carrying amounts of financial instruments, including cash, accounts receivable, investments in oil and gas interests, and accounts payable, are considered by management to be their estimated fair values. -8- AMBRA RESOURCES GROUP, INC. ( Development Stage Company) NOTES TO FINANCIAL STATEMENTS (Continued) -------------------------------------------------------------------------------- 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Estimates and Assumptions ------------------------- Management uses estimates and assumptions in preparing financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of the assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could vary from the estimates that were assumed in preparing these financial statements. Concentration of Credit Risk ---------------------------- Financial instruments that potentially subject the Company to significant concentration of credit risk consists primarily of cash and account receivables. Cash balances are maintained in accounts that are not federally insured for amounts over $100,000 but are other wise in financial institutions of high credit quality. Accounts receivable are unsecured however management considers them to be currently collectable. Other Recent Accounting Pronouncements -------------------------------------- The Company does not expect that the adoption of other recent accounting pronouncements to have any material impact on its financial statements. 4. OIL LEASES - BEAUFORT SEA PROJECT On June 9, 1997 the Company purchased a 3.745% working interest in the Beaufort Sea well Esso Pex Home et al Itiyok I-27 consisting of 640 acres and is located at Latitude 70-00', Longitude 134-00', Sections 7, 8, 17, 18, 27, 28, and 37, License No. 55, dated April 22, 1987. During 1982 and 1983 a consortium of companies participated in the drilling, casing, and testing the area to a depth of 12,980 feet. A review of the well data and geological prognosis indicates that the area would contain proven recoverable gas reserves of 108 Bscf and proven recoverable oil reserves of 8,976 MSTB. The other partners in the project are controlled by Exxon Oil Corporation, however there is no immediate plans to develop the area. 5. JOINT VENTURE INTEREST During July 2001 the Company purchased a one half participation interest in a joint venture covering the "Hughes Prospect Lease Bank Agreement" for $175,290 which consists of 4,219 acres of oil and gas leases located in Robertson County, Texas in which the joint venture participants are marketing the leases. The Company has received $50,278 as its share of the on-going sale of the leases, however, a gain or loss cannot be determined until all of the leases are sold. -9- AMBRA RESOURCES GROUP, INC. ( Development Stage Company) NOTES TO FINANCIAL STATEMENTS (Continued) -------------------------------------------------------------------------------- 6. MINING CLAIMS On June 20, 1994 the Company purchased six unproven mineral claims, from a related party, and are identified as Marathon, Marathon 1 and Marathon 2, Krystal Ann 1, Krystal Ann 2 and Krystal Ann 3. The Marathon claims contain 32 units and expire in February 2006 and the Krystal claims contain 28 units and expire in May 2006. The Claims are located near Cowichan Lake in the Province of British Columbia, Canada. The claims are located within the Sicker Volcanic Belt on Vancouver Island in an active gold mining area and are current though 2005. The claims have not been proven to have a commercially minable ore reserve and therefore all costs for acquisition and retaining the properties have been expensed. 7. SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES Officers-directors and their controlled entities have acquired .038% of the common shares of the Company and on December 31, 2002 have made demand, no interest loans to the Company of $68,900. An officer-director receives compensation for services of $8,000 per month and $9,000 per month is paid to a manager. (an officer in an affiliate) The Company has made no interest, demand loans at December 31, 2002 to affiliates of $99,099. The affiliations resulted by common officers between the company and its affiliates. 8. CONTINUING LIABILITIES The Company is obligated under a three year lease for office space, starting in March 2001 through February 2004 at $2,555Cn per month. -10- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION -------------------------------------------------------------------------------- General The Company is in the development stage and engaged in the acquisition of interests in gas and oil properties in Texas, and Louisiana, and other business interests, however the Company has not been engaged in the production of any gas and oil. Liquidity and Capital Resources During the quarter ended December 31, 2002, the Company funded its operations primarily with cash on hand from funds raised during 2000 and 2001 in Regulation S offerings and the sale of mineral properties. On December 31, 2002 the Company had cash on hand of $ 146,797. The Company has a limited operating history and can only estimate the future needs for capital based on the current status of the Company's operations, its current plans and current economic condition. The Company expects that its existing cash reserves, cash flows from operations and financing, will be sufficient to cover the Company's cash requirements for the next twelve months. The Company has plans to further develop its properties which will require most of its current working capital. The Company's material commitments for capital expenditures are limited to the Company's obligation under the Operating Agreement with Kebo Oil and Gas, Inc., to pay one percent of the costs associated with the ten well drilling program. Results of Operations Comparison of the quarter ended December 31, 2002 and the quarter ended December 31, 2001 The Company sustained a net operating loss of $173,507 in the quarter ended December 31, 2002, compared to a loss of $237,977 for the quarter ended December 31, 2001. There was a $64,470 decrease in the loss which was largely effected by a decrease in expenses for consultants, and exploration with increases in office expenses and professional fees. -11- A comparison of the principal operating expenses for each quarter follows: December 31, 2002 December 31, 2001 ----------------- ----------------- Exploration $ 17,363 $ 41,051 Office supplies and expenses 63,487 36,700 Consultants 2,375 107,856 Travel and entertainment 58,775 60,138 Professional 33,765 PART II - OTHER INFORMATION -------------------------------------------------------------------------------- ITEM 1. LEGAL PROCEEDINGS -------------------------------------------------------------------------------- None. -------------------------------------------------------------------------------- ITEM 2. CHANGES IN SECURITIES -------------------------------------------------------------------------------- None -------------------------------------------------------------------------------- ITEM 3. DEFAULTS UPON SENIOR SECURITIES -------------------------------------------------------------------------------- None. -------------------------------------------------------------------------------- ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS -------------------------------------------------------------------------------- None -------------------------------------------------------------------------------- ITEM 5. OTHER INFORMATION -------------------------------------------------------------------------------- None. -------------------------------------------------------------------------------- ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K -------------------------------------------------------------------------------- None. -12- 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 AMBRA RESOURCES GROUP, INC. (Registrant) Dated: February 7, 2003 By /s/ John M. Hickey -------------------------------- John M. Hickey, President -13- CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 1 John M. Hickey, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Ambra Resources Group, Inc: 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report: 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared. b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; -14- 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directions (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6) the registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: February 7, 2003 By: /s/ John M. Hickey --------------------------------------- John M. Hickey, Chief Executive Officer Date: February 7, 2003 By: /s/ John R. Rask --------------------------------------- John R. Rask, Chief Financial Officer -15-

AMBRA RESOURCES GROUP INC 10-Q