UNITED STATES SECURITIES AND EXCHANGE Commission
Washington, D. C. 20549
FORM 10-KSB
(x) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF TEE SECURITIES EXC
ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended June 30, 1998
---------------------
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from _______________ to _______________
Commission File number 0-11695
--------------------------
AMBRA RESOURCES GROUP, INC.
---------------------------
(Exact name of registrant as specified in charter)
Utah 87-0403828
- -------------------------------------------- --------------------------
State or other jurisdiction of incorporation (I.R.S. Employer I.D. No.)
or organization
610 - 800 West Pender Street, Vancouver, Canada V6C 2V6
- ----------------------------------------------- --------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code 1-604-669-2723
--------------
Securities registered pursuant to section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
- ---------------------- -----------------------------------------
Securities registered pursuant to section 12(g) of the Act
None
- ----------------------------
(Title of Class)
Check whether the Issuer (I ) filed all reports required to be filed by section
13 or 15 (d) of the Exchange Act during the past 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
(1) Yes [ ] No [X] (2) Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year: $ 4,607
--------
State the aggregate market value of the voting stock held by non affiliates of
the registrant The aggregate market value shall be computed by reference to the
price at which the stock was sold, or the average bid and asked prices of such
stock, as of a specified date within the post 60 days
<PAGE>
Currently, management is not able to determine the time or resources that will
be necessary to complete the participation in or acquisition of any future
business prospect.
ACQUISITION OF PROPERTY - LAND - NOVIA SCOTIA, CANADA
On December 8, 1994, the Registrant entered into an option purchase agreement by
the issuance of 50,000 shares of it's common stock (non refundable), to purchase
property containing 1000 acres of improved and unimproved land, lots, two homes,
and a recreation building located at Clam Bay, Halifax County, Providence of
Nova Scotia, Canada at a purchase price of $2,300,000. In late 1995 the option
expired due to non-performance by the Registrant, however, prior to the
expiration the Registrant purchased two of the lots, and their improvements.
ACQUISITION OF PROPERTY - MINING CLAIMS - PROVINCE OF BRITISH COLUMBIA, CANADA
On June 20, 1994, the Registrant purchased three mineral claims, from a related
party, by the issuance of 200,000 common shares of its stock and are identified
as Marathon, Marathon I and Marathon 2, containing a total of 32 units, with an
expiration date of February 24, 2006, which 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.
The terms of the purchase provides for payments as follows:
<TABLE>
<CAPTION>
Dates Due Amounts (canadian) Shares of Company
- ---------- ------------------ -----------------
<S> <C> <C>
6-20-94 - 200,000
11-7-96 5,000 100,000
6-30-97 10,000 100,000
12-31-97 10,000 100,000
6-30-98 10,000 100,000
12-31-98 15,000 100,000
------------------ -----------------
50,000 700,000
------------------ -----------------
</TABLE>
The required stock issues have been made however $17,50OCn is past due on June
30, 1998. These amounts ARE BEING CAPITALIZED until the claims are proven or
shown to be of no value
The Company has entered into a contract with Globe Drilling LTD to do
exploratory drilling. The terms of the agreement provides for drilling, at
locations specified by the Company, to a minimum of 1000 feet The Company has
staked an additional 20 claim units known as the Krystle Ann 1, 2, and 3 claims.
If the Company fails to make timely payments and cannot renegotiate the contract
its investment in the property will be lost.
ACQUISITION OF PROPERTY - 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, 27,18, 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.
<PAGE>
At June 30, 1998, the aggregate market value of the voting stock held by non
affiliates is undeterminable and is considered to be 0. During the past five
years there has been no trading on an exchange however there has been
over-counter-trading in small quantities and therefore the Registrant has
arbitrarily valued these shares with no value.
(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Not applicable
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
As of June 30, 1998, the registrant had 32,216,756 shares of common stock issued
and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and the part
of the Form 10- KSB (e.g., part 1, part 11, etc.) into which the document is
incorporated: (1) Any annual report to security holders-, (2) any proxy or other
information statement; and (3) Any prospectus filed pursuant to rule 424 (b) or
(c) under the Securities Act of 1933: NONE
2
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PART I Page
- -------- ----
<S> <C> <C>
ITEM 1. DESCRIPTION OF BUSINESS 4
ITEM 2. DESCRIPTION OF PROPERTIES 4
ITEM 3. LEGAL PROCEEDINGS 4
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS 4
PART II
- --------
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 5
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 5
ITEM 7. FINANCIAL STATEMENTS 8
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING 8
AND FINANCIAL DISCLOSURE
PART III
- --------
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16 (a) OF THE EXCHANGE ACT 9
ITEM 10 EXECUTIVE COMPENSATION 11
ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 12
ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 12
ITEM 13 EXHIBITS AND REPORTS ON FORM 8-K 13
</TABLE>
3
<PAGE>
================================================================================
ITEM 1. DESCRIPTION OF BUSINESS
================================================================================
HISTORY AND ORGANIZATION
Ambra Resources Group, Inc. (the "Registrant" or "Company") was incorporated
under the laws of the State of Utah on January 27, 1984. The Registrant was
initially organized primarily to hold overriding royalties of both producing and
non-producing oil and gas properties. However, the Company's articles of
incorporation authorize it to engage in all aspects of the oil and gas business
and for any other lawful purpose.
In connection with its corporate purpose, the Registrant was formed as a
wholly-owned subsidiary of Ambra Oil and Gas Company ("Ambra Oil") for the
specific purpose of holding the overriding royalty interests which were
previously owned by Ambra Oil.
In 1989, the Company transferred its remaining assets in exchange for
cancellation of the Company's debt and ceased operations. The Registrant intends
to take advantage of any reasonable business proposal presented which management
believes will provide the Company and its stockholders with a viable business
opportunity. The board of directors will make the final approval in determining
whether to complete any acquisition, and unless required by applicable law, the
articles of incorporation or bylaws or by contract, stockholders' approval will
not be sought. See "ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION" for recent acquisitions.
================================================================================
ITEM 2. DESCRIPTION OF PROPERTIES
================================================================================
The Company's administrative offices are located at 610-800 West Pender Street,
Vancouver, Canada, V6C 2V6. The offices are rented from Metric Resource Group,
Inc ( a related party). See Item 6 for a description of properties being
acquired for further development and or sale.
================================================================================
ITEM 3. LEGAL PROCEEDINGS
================================================================================
NONE
================================================================================
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
================================================================================
No matters were submitted to a vote of shareholders of the Company during the
fourth quarter of fiscal year ended June 30, 1998.
<PAGE>
================================================================================
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
================================================================================
During the past five years through June 30, 1998 there has been no established
trading market for the shares of the Registrant's common stock over an exchange
however the stock has been trading over-the-counter in small quantities. The
trading amounts for a share of stock for the last two years are listed below by
quarter:
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ---------
Low High Low High Low High
---- ---- ---- ---- --- ----
<S> <C> <C> <C> <C> <C> <C>
First .04 07 .03 07
Second .05 18 .03 .05
Third .10 21 .10 16
Fourth .07 16 .03 06
</TABLE>
The above market quotes were provided by Union Securities and Georgia Pacific
Securities. There have been no interdealer sales. During the last fiscal year
the Registrant has sold 1,22 1,000 restricted common shares of its capital stock
at $. 10 per share under the Regulation S exemption. Since its inception, the
Company has not paid any dividends on its common stock, and the Company does not
anticipate that it will pay dividends in the foreseeable future. At June 30,
1998 the Company had approximately 818 shareholders.
================================================================================
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
================================================================================
OVERVIEW
Ambra Resources Group, Inc. (the "Registrant" or "Company") was incorporated
under the laws of the State of Utah on January 27, 1984. The registrant was
initially organized primarily to hold overriding royalties of both producing and
non-producing oil and gas properties. However, the Company's articles of
incorporation authorize it to engage in all aspects of the oil and gas business
and for any other lawful purpose.
In connection with its corporate purpose, the Registrant was formed as a
wholly-owned subsidiary of Ambra Oil and Gas Company ("Ambra Oil") for the
specific purpose of holding the overriding royalty interests which were
previously owned by Ambra Oil.
In 1989, the Company transferred its remaining assets in exchange for
cancellation of the Company's debt and ceased operations. The Registrant intends
to take advantage of any reasonable business proposal presented which management
believes will provide the Company and its stockholders with a viable business
opportunity. The board of directors will make the final approval in determining
whether to complete any acquisition, and unless required by applicable law, the
articles of incorporation or bylaws or by contract, stockholders' approval will
not be sought.
The investigation of specific business opportunities and the negotiation,
drafting, and execution of relevant agreements, disclosure documents, and other
instruments will require substantial management time and attention and will
require the Company to incur substantial costs for payment of accountants,
attorneys, and others. If a decision is made not to participate in or complete
the acquisition of a specific business opportunity, the costs incurred in a
related investigation will not be recoverable. Further, even if an agreement is
reached for the participation in a specific business opportunity by way of
investment or otherwise, the failure to consummate the particular transaction
may result in the loss to the Company of all related costs incurred. In the past
the board of directors has approved a resolution authorizing the Registrant to
issue shares of its common stock as consideration for monies advanced or
services rendered on behalf of the Company.
-5-
<PAGE>
The terms of the purchase provides for a payment of S 15,000 and the issuance of
1,05 0,000 shares of the Company , which has been completed, and an option to
purchase an additional 750,000 shares of the Company any time within two years
at $.20 per share.
ACQUISITION OF PROPERTY - OIL Leases - ALKALI CREEK PROSPECT, PETROLEUM COUNTY,
MONTANA
On May 27, 1997 the Company purchased a 50% working interest in the Alkali Creek
Prospect area, Petroleum County Montana, from Starrock Resources Ltd. ,
consisting 4,987 unproven acres. The terms of the leases begin to expire in 1999
through 2004 and provide for royalties of 12.5% to 25% of production.
The Company has agreed to provide $83,5 10 for it's one half of the amount
projected to explore the area, of which, $14,208 has been paid. During July 1998
the Company paid $50,000 for drilling scheduled for September 1998.
The Company paid $10,225 and 600,000 shares of its common capital stock for the
interest.
If the Company fails to make timely payments and cannot renegotiate the contract
its investment in the property will be lost.
Acquisition of Property - Boonesville - Wise County, Texas
On July 11, 1997 the Company purchased a 10% working interest and a 8% net
revenue interest in an oil lease known as Boonesvile 41 Wise County, Texas for
$2,700. The Company has agreed pay to the operator the Company's share of the
initial test well costs and on June 30, 1998 owes a balance of $49,292.
ACQUISITION OF PROPERTY - CESSFORD - ALBERTA, CANADA
On July 17, 1997 the Company purchased a 20% interest in an oil lease in the
Cessford Area, Alberta, Canada by payment of $ 36,627 and 1,230,000 shares of
the Company. The Company has participated in the initial test well costs. On
June 3, 1998 the parties mutually agreed to reduced the 20% interest to 5%
resulting in a credit of $33,598, to the Company, to be used in the future
drilling programs.
LOSS OF PROPERTY
On July 7, 1993, the board of directors of the Registrant entered into an
agreement with Dix Corporation, a Utah corporation, a nonaffiliated entity, to
exchange 200,000 shares of the Company's common stock, for real property located
in Fentress and Overton Counties, all in the State of Tennessee (the
"Property"). The conveyance of the Property was made by Warranty deed, dated
July 9, 1993. The Property is more specifically described in an Exhibit attached
to an 8-K filed and dated July 7, 1993. The Property conveyed was part of a
larger purchase of 12,100 acres by the Dix Corporation through the issuance of a
convertible corporate debentures and the assumption of a lien due the U.S. Army
Corp. of Engineers. The face value of the debenture was S 1,000,000 and the lien
assumed amounted to $ 1, 100,000. The lien is non-callable and carries no
interest, but final title insurance can be only obtained after payment of the
portion of the lien that applies to the 2, 100 acres amounting to $19,792.
Since that time it has been determined that there was a defect in the title to
the property and therefore the stock was canceled by notification to the
transfer agent and the recipients of the stock. However, the stock has not been
returned to the Company. The officers of the Company, with council believe that
the recipients still holding the stock have no legal claim on the Company nor is
the Company liable under the lien. The issuance of the stock has been recorded
on the books of the Company and is shown as outstanding at June 30, 1998.
LIQUIDITY AND CAPITAL RESOURCES
-7-
<PAGE>
As of June 30, 1999, the Registrant had agreed to make payments on various
projects which exceeds its current working capital, and without receiving
additional working capital, it will not be able to pay its liabilities.
RESULTS OF OPERATIONS
Since the Company ceased operations in 1989, its only activity, to date has
involved the investigation and purchase of potential business opportunities.
================================================================================
ITEM 7. FINANCIAL STATEMENTS
================================================================================
The financial statements of the Company are included immediately following the
signature page to this form 10-KSB.
================================================================================
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
================================================================================
The Company has had no disagreements with its certified public accountants with
respect to accounting practices or procedures of financial disclosure.
================================================================================
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
================================================================================
The following table as of June 30, 1998, includes the name, age, and position of
each executive officer and director and the term of office of each director of
the Company.
<TABLE>
<CAPTION>
Name Age Position Director and/or Officer Since
- ---------------- -------- ---------------------- -----------------------------
<S> <C> <C> <C>
John M. Hickey 56 President and Director October 1996
John R. Rask 46 Secretary and Director August 1996
Charles Yourshaw Director August 1996
Dr. Kelly Bowman Director August 1996
</TABLE>
Each director of the Company serves for a term of one year and until his
successor is elected at the Company's annual shareholders' meeting and is
qualified, subject to removal by the Company's shareholders. Each officer
serves, at the pleasure of the board of directors, for a term of one year and
until his successor is elected at the annual meeting o~ the board of directors
and is qualified.
Included below is certain biographical information regarding each of the
Company's executive officers and directors.
John M. Hickey Mr. Hickey has had 25 years experience in marketing and
advertising with national public companies and resides in
Vancouver, British Columbia, Canada. He offers
-8-
<PAGE>
expertise in his negotiations skills and business
knowledge, as well as strong leadership.
John R. Rask Mr. Rask has had 20 years experience in the income tax
service field and resides in Butte, Montana
Charles Yourshaw Mr. Yourshaw has been a professional engineer for 25 years
and owns his own engineering business with experience
in real estate. He resides in Pottsvelle, Pa
Dr. Kelly Bowman Dr. Bowman is as experienced investor with a good knowledge
of public companies.
Except as indicated below, to the knowledge of management, during the past five
years, no present or former director, executive officer or person nominated to
become a director or an executive officer of the Company:
(1) filed a petition under the federal bankruptcy laws or any state insolvency
law, nor had a receiver, fiscal agent or similar officer appointed by a court
for the business or property of such person, or any partnership in which he was
a general partner at or within two years before the time of such filing;
(2) was convicted in a criminal proceeding or named subject of a pending
criminal proceeding (excluding traffic violations and other minor offenses);
(3) was the subject of any order, judgment or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction, permanently or
temporarily enjoining him from or otherwise limiting, the following activities:
(i) acting as a futures commission merchant, introducing broker, commodity
trading advisor, commodity pool operator, floor broker, leverage transaction
merchant, associated person of any of the foregoing, or as an investment
advisor, underwriter, broker or dealer in securities, or as an affiliate person,
director or employee of any investment company, or engaging in or continuing any
conduct or practice in connection with such activity;
(ii) engaging in any type of business practice; or
(iii) engaging in any activity in connection with the purchase or sale of
any security or commodity or in connection with any violation of federal or
state securities laws or federal commodities laws;
(4) was the subject of any order, judgment, or decree, not subsequently
reversed, suspended, or vacated, of any federal or state authority barring,
suspending or otherwise limiting for more than 60 days the right of such person
to engage in any activity described above under this Item, or to be associated
with persons engaged in any such activity;
(5) was found by a court of competent jurisdiction in a civil action or by the
Securities and Exchange Commission to have violated any federal or state
securities law, and the judgment in such civil action or finding by the
Securities and Exchange Commission has not been subsequently reversed,
suspended, or vacated.
-9-
<PAGE>
(6) was found by a court of competent jurisdiction in a civil action or by the
Commodity Futures Trading Commission to have violated any federal commodities
law, and the judgement in such civil action or finding by the Commodity Futures
Trading Commission has not been subsequently reversed, suspended or vacated.
Compliance with Section 16(a) of the Exchange Act
Since the Company ceased operations in 1989, the Company knows of no person, who
at any time during the subsequent fiscal years, was a director, officer,
beneficial owner of more than ten percent of any class of equity securities of
the registrant registered pursuant to Section 12 ("Reporting Person"), that
failed to file on a timely basis any reports required to be furnished pursuant
to Section 16 (a). Based upon a review of Forms 3 and 4 furnished to the
registrant under Rule 16a-3(d) during its most recent fiscal year, other than
disclosed below, the registrant knows of no Reporting Person that failed to file
the required reports during the most recent fiscal year or prior years.
The following table as of June 30, 1998, includes the name and position of each
Reporting Person that failed to file on a timely basis any reports required
pursuant to Section 16(a) during the most recent fiscal year or prior years.
<TABLE>
<CAPTION>
Name Position Report to be Filed
<S> <C> <C>
John M. Hickey President and Director Form 3
John R. Rask Secretary and Director Form 3
Charles Yourshaw Director Form 3
Dr. Kelly Bowman Director Form 3
</TABLE>
================================================================================
ITEM 10. EXECUTIVE COMPENSATION
================================================================================
CASH COMPENSATION
There was no cash compensation paid to any director or executive officer of the
Company during the fiscal years ended June 30, 1998, 1997, and 1996.
BONUSES AND DEFERRED COMPENSATION
None.
COMPENSATION PURSUANT TO PLANS
None.
PENSION TABLE
None.
OTHER COMPENSATION
-10-
<PAGE>
In May 1985, the board of director's authorized the issuance of common stock to
officers, directors, and affiliates of the Company for services rendered and
expenses paid by such individuals.
Pursuant to a resolution of the board of director's dated November 2, 1995, the
board authorized the issuance of 1, 173,908 shares of common stock to Gary
Worley (former officer and director) and/or his assigns as full consideration
for services, and the use of an office, furniture, and other expenses.
Subsequent to the issuance of the stock and because of a dispute over the
transaction Mr. Worley has agreed to return the stock. The Company will continue
to show the stock as outstanding until it is returned for cancellation.
Pursuant to resolutions of the board of director's for the period from November
1996 through June 1998 the board authorized the issuance of 9,382,190 shares of
common stock to related parties for services, use of office equiment, and other
expenses.
(See "ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.")
COMPENSATION OF DIRECTORS
None.
TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENT
There are no compensatory plans or arrangements, including payments to be
received from the Company, with respect to any person named in Cash Compensation
set out above which would in any way result in payments to any such person
because of his resignation, retirement, or other termination of such person's
employment with the Company or its subsidiaries, or any change in control of the
Company, or a change in the person's responsibilities following a changing in
control of the Company.
================================================================================
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
================================================================================
The following table as of June 30, 1998, includes the name and address and the
number of shares of the Company's Common Stock, par value $0.001 per share, held
of record or beneficially by each person who held of record, or was known by the
Company to own beneficially, more than 5% of the 32,216,756 issued and
outstanding shares of the Company's Common Stock, and the name and share
holdings of each director and of all officers and directors as a group.
<TABLE>
<CAPTION>
Nature of Number of
Name of Person or Group Ownership (1) Shares Owned Percent
- --------------------------- ------------- ------------ -------
<S> <C> <C> <C>
Officers and Directors and
Principal Shareholders:
John M. Hickey Direct - -
John R. Rask Direct - -
Charles Yourshaw Direct - -
Dr. Kelly Bowman Direct - -
<PAGE>
All Officers and Directors
as a Group (4 persons) Direct 2,601,200 8
</TABLE>
All shares owned directly arc owned beneficially and of record, and such
shareholder has sole voting, investment, and dispositive power, unless otherwise
noted.
(2) The registrant has granted the above officers and directors, as a group,
options to purchase 2,5 00,000 shares of the Company at $. 10 per share. The
option will expire January 1, 2000.
================================================================================
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
================================================================================
TRANSACTIONS WITH MANAGEMENT AND OTHERS
Except as indicated below, and for the periods indicated, there were no material
transactions, or series of similar transactions, since the beginning of the
Company's last fiscal year, or any currently proposed transactions, or series of
similar transactions, to which the Company was or is to be party, in which the
amount involved exceeds $60,000, and in which any director or executive officer,
or any security holder who is known by the Company to own of record or
beneficially more than 5% of any class of the Company's common stock, or any
member of the immediate family of any of the foregoing persons, has an interest.
CERTAIN BUSINESS RELATIONSHIPS
The transactions described below were not the result of arm's length
negotiations, but in the opinion of management, the terms of such transactions
were fair to the Company and no less favorable than could have been obtained
from unrelated parties.
At a special meeting of the board of directors held on May 15, 1985, the board
approved a resolution authorizing the Company to issued shares of common stock
of the Company as consideration to officers, directors, and affiliates to
services rendered and reimbursement of expenses incurred on behalf of the
Company due to the Company's reduced operational status and lack- of funds to
cover such expenses.
See item 10 for issuance of common capital stock for services, use of office,
and expenses to related parties in accordance with the above approved
resolution.
Indebtedness of Management
There were no material transactions, or series of similar transactions, since
the beginning of the Company's last fiscal year, or any currently proposed
transactions, or series of similar transactions, to which the Company was or is
to be a party, in which the amount involved exceeds $60,000 and in which any
director or executive officer, or any security holder who is known to the
Company to own of record or beneficially more than 5% of any class of the
Company's common stock, or any member of the immediate family of any of the
foregoing persons, has an interest.
TRANSACTIONS WITH PROMOTERS
-12-
<PAGE>
The Company was organized more than five years ago therefore transactions
between the Company and its promoters or founders are not deemed to be material.
================================================================================
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
================================================================================
(a) (1) Financial Statements. The following financial statements are included in
this report:
<TABLE>
<CAPTION>
Title of Document Page
- ---------------------------------------------------------------------------------- ----
<S> <C>
Report of Andersen, Andersen & Strong, Certified Public Accountants 15
Balance Sheet as of June 30, 1998 16
Statements of Operations for years ended June 30, 1998 and 1997 and from inception 17
Statements of Stockholders' Equity for the years ended June 30, 1998 and 1997
and from inception 18
Statements of Cash Flows for the years ended June 30, 1998 and 1997
and from inception 24
Notes to Financial Statements 26
</TABLE>
(a)(2) Financial Statement Schedules. The following financial statement
schedules are included as part of this report:
None.
(a)(3) Exhibits. None
None.
SIGNATURES
-13-
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this report has been signed below by following persons on behalf of the
Registrant and in the capabilities and on the dates indicated:
AMBRA RESOURCES GROUP, INC
Date: August 31, 1998 By: /s/ John M. Hickley
-------------------------------------------
John M. Hickley, President and Director
Date: August 31, 1998 By: /s/ John R. Rask
--------------------------------------------
John R. Rask, Secretary and Director
-14-
<PAGE>
ANDERSEN ANDERSEN & STRONG, L.C.
Certified Public Accountants and Business Consultants
Member SEC Practice Section of the A ICPA
941 East 3300 South, Suite 202
Salt Lake City, Utah 84106
Telephone 801-486-0096
Fax 801-486-0098
E-mail KAndcrscn @msn.com
Board of Directors
Ambra Resources Group, Inc.
Vancouver, B.C. Canada
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have audited the accompanying balance sheet of Ambra Resources Group, Inc. (a
development stage company), at June 30, 1998 and the statements of operations,
changes in stockholders' equity, and cash flows for the years ended June 30,
1998 and 1997 and the period January 27, 1984 (date of inception) to June 30,
1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion the financial statements referred to above present fairly, in all
material respects, the financial position of Ambra Resources Group, Inc. as of
June 30, 1998, and the results of operations and cash flows for the years ended
June 30, 1998, and 1997 and the period January 27, 1984 (date of inception) to
June 30, 1998, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note I to the
financial statements, the Company has been in the development stage since its
inception and has suffered recurring losses from operations, which raises
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are described in Note 7. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
August 18, 1998
Salt Lake City, Utah
/s/ Andersen Andersen & Strong, L.C.
-----------------------------------------
Andersen Andersen & Strong, L.C.
A member of ACF International affiliated offices worldwide
-15-
<PAGE>
<TABLE>
<CAPTION>
AMBRA RESOURCES GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCESHEET
JUNE 30,1998
ASSETS
CURRENT ASSETS
<S> <C>
Cash $ 60,034
------------
Total Current Assets 60,034
------------
PROPERTY AND EQUIPMENT - net of accumulated
depreciation - (Note 2) 104,712
------------
OTHER ASSETS
Residential lots - Phoenix Arizona 75,000
Mining claims - (Note 3) 56,917
Oil leases - (Note 4) 270,465
Account receivable - related party 20,071
------------
Total Other Assets 422,453
------------
CURRENT LIABILITIES
Accounts payable - related parties $ 43,100
Accounts payable - other 101,454
------------
Total Current Liabilities 144,554
------------
STOCKHOLDERS'EQUITY
LIABILITIES AND STOCKHOLDERSEQUITY
Common stock
50,000,000 shares authorized, at $.001 par value:
32,216,756 issued and outstanding - (Note 5) 32,217
Capital in excess of par value 2,090,806
Deficit accumulated during the development stage (1,680,378)
------------
Total Stockholders' Equity 442,645
------------
$ 587,199
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
-16-
<PAGE>
<TABLE>
<CAPTION>
AMBRA RESOURCES GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30,1998 AND 1997 AND THE
PERIOD FROM JANUARY 27, 1984 (DATE OF INCEPTION) TO JUNE 30, 1998
January 27,1984
June June (Date of Inception)
1998 1997 to June 30,1998
----------------- ------------ --------------------
<S> <C> <C> <C>
REVENUES $ 4,607 $ 3,939 $ 231,393
----------------- ------------ --------------------
EXPENSES
Operations 650,729 503,099 1,893,093
Interest - 13,500 13,500
Depreciation 2,600 2,578 5,178
653,329 519,177 1,911,771
----------------- ------------ --------------------
NET LOSS
LOSS PER COMMON SHARE
Basic $ (.02) $ (.02)
Diluted $ (.02) $ (.02)
AVERAGE OUTSTANDING SHARES
Basic 32,216,756 22,008,566
Diluted 35,766,756 25,258,566
</TABLE>
The accompanying notes are an integral part of these financial statements.
-17-
<PAGE>
<TABLE>
<CAPTION>
AMBRA RESOURCES GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS'EQUITY
PERIOD FROM JANUARY 27, 1984 (DATE OF INCEPTION) TO JUNE 30, 1998
Capital in
Common Stock Excess of Accumulated
----------------
Shares Amount Par Value Deficit
------- ------- ---------- ---------
<S> <C> <C> <C> <C>
BALANCE JANUARY 27,1984
(Date of Inception) - $ - $ - $ -
Issuance of common stock for
oil and gas leases 122,086 122 19,438 -
Net income from operations
for the period ended
June 30, 1984 - - - 3,048
BALANCE JUNE 30,1984 122,086 122 19,438 3,048
Net loss from operations
for the year ended
June 30, 1985 - - - (44,556)
------- ------- ---------- ---------
BALANCE JUNE 30,1985 122,086 122 19,438 (41,508)
Issuance of common stock
for cash 501 1 38 -
Net income from operations
for the year ended
June 30, 1986 - - - 18,018
------- ------- ---------- ---------
BALANCE JUNE 30,1986 122,587 123 19,476 (23,490)
Issuance of common stock
for cash 7,774 7 19,298 -
Net loss from operations
for the year ended
June 30, 1987 - - - (9,248)
------- ------- ---------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
-18-
<PAGE>
<TABLE>
<CAPTION>
AMBRA RESOURCES GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS'EQUITY (CONTINUED)
PERIOD FROM JANUARY 27, 1984 (DATE OF INCEPTION) TO JUNE 30, 1998
Capital in
Common Stock Excess of Accumulated
-----------------
Shares Amount Par Value Deficit
--------- ------ ---------- --------
<S> <C> <C> <C> <C>
BALANCE JUNE 30,1987 130,361 130 38,774 (32,738)
Issuance of common stock
for cash 6,000 6 - -
Net income from operations
for the year ended
June 30, 1988 - - - 15,828
--------- ------ ---------- --------
BALANCE JUNE 30,1988 136,361 136 38,774 (16,910)
Net loss from operations
for the year ended
June 30, 1989 - - - (22,000)
BALANCE JUNE 30,1989 136,361 136 38,774 (38,910)
BALANCE JUNE 30,1992 136,361 136 38,774 (38,910)
Capital contribution - expenses - - 752 -
Issuance of common stock
for services - related party 900,000 900 8,100 -
Net loss from operations
for the year ended
June 30, 1993 - - - (9,752)
--------- ------ ---------- --------
BALANCE JUNE 30,1993 1,036,361 1,036 47,626 (48,662)
Issuance of common stock
for land 200,000 200 (200) -
</TABLE>
The accompanying notes are an integral part of these financial statements.
-19-
<PAGE>
<TABLE>
<CAPTION>
AMBRA RESOURCES GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS'EQUITY (CONTINUED)
PERIOD FROM JANUARY 27, 1984 (DATE OF INCEPTION) TO JUNE 30, 1998
Capital in
Common Stock Excess of Accumulated
-------------------
Shares Amount Par Value Deficit
--------- -------- --------- ---------
<S> <C> <C> <C> <C>
Issuance of common stock
for services - related party 300,000 300 2,700 -
Issuance of common stock
for mining claims - related party 50,000 50 450 -
Issuance of common stock
for stock dividends 16 - - -
Issuance of common stock
for cash 22,500 23 44,977 -
Net loss from operations
for the year ended
June 30, 1994 - (82,277)
--------- --------
BALANCE JUNE 30,1994 1,608,877 1,609 95,553 (130,939)
Issuance of common stock
for option on property 50,000 50 450
Issuance of common. stock
for mining claims - related party 150,000 150 1,350
Issuance of common stock
for expenses 22,000 22 198
Issuance of common stock for cash 255,000 255 179,745
Net loss from operations
for the year ended June 30, 1995 - - - (115.762)
--------- -------- --------- ---------
BALANCE JUNE 30,1995 2,085,877 2,086 277,296 (246,701)
</TABLE>
The accompanying notes are an integral part of these financial statements.
-20-
<PAGE>
<TABLE>
<CAPTION>
AMBRA RESOURCES GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS'EQUITY (CONTINUED)
PERIOD FROM JANUARY 27,1984 (DATE of INCEPTION) TO JUNE 30,1998
Capital in
Common Stock Excess of Accumulated
----------------
Shares Amount Par Value Deficit
--------- ------ ---------- ---------
<S> <C> <C> <C> <C>
Issuance of common stock for
expenses - September 22, 1995 -
related party 137,979 138 68,850 -
Issuance of common stock for
cash - November 2, 1995 10,000 10 4,990 -
Issuance of common stock for
equipment and expenses -
November 2, 1995 - (Note 8) 1,173,897 1,174 (1,174) -
Issuance of common stock for
cash - December 15, 1995 10,000 10 4,990 -
Issuance of common stock for
cash - February 20, 1996 40,000 40 19,960 -
Issuance of common stock for
expenses - April 30, 1996 20,000 20 3,980 -
Issuance of common stock for
cash and expenses - May 8, 1996 153,000 153 30,447 -
Issuance of common stock for
expenses - May 20, 1996 62,500 62 12,438 -
Issuance of common stock for
cash - May 20, 1996 25,000 25 12,475 -
Issuance of common stock for
oil leases - June 18, 1996 -
related party 200,000 200 1,800 -
Issuance of common stock for
expenses - June 18, 1996 -
related party 300,000 300 59,700 -
Net loss from operations for
the year ended June 30, 1996 - - - (269,717)
--------- ------ ---------- ---------
Balance June 30,1996 4,218,253 4,218 495,752 (516,418)
</TABLE>
The accompanying notes are an integral part of these financial statements.
-21-
<PAGE>
<TABLE>
<CAPTION>
AMBRA RESOURCES GROUP, INC.
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS'EQUITY (Continued)
Period from January 27, 1984 (DATE OF INCEPTION) TO JUNE 30, 1998
Capital in
Common Stock Excess of Accumulated
-----------------
Shares Amount Par Value Deficit
--------- ------ ---------- -------
<S> <C> <C> <C> <C>
Issuance of additional shares resulting
from reverse stock split - October 1996 4,540,007 4,540 (4,540) -
Issuance of common stock for accts pay and,
commissions at $.05 - Sept & Oct 1996 1,028,600 1,029 48,730 -
Issuance of common stock for mining
claims at $.05 - Nov 1996 100,000 100 4,900 -
Issuance of common stock for services and
expenses at $.05- related parties - Nov 1996 2,425,200 2,425 123,065 -
Issuance of common stock for services -
at $.05 - Jan 1997 425,000 425 20,825 -
Issuance of common stock for services and
expenses at $.05 - related parties - Apr 1997 1,774,506 1,775 86,952 -
Issuance of common stock for oil leases
at $.05 - May 1997 600,000 600 29,400 -
Issuance of common stock for services and
expenses at $.05 - related parties - May 1997 2,550,000 2,550 124,950 -
Issuance of common stock for cash at $. 10 -
May & June 1997- private placement 1,359,000 1,359 134,541 -
Issuance of common stock for oil leases
at S.05 - June 1997 1,240,000 1,240 60,760 -
Issuance of common stock for cash at $. 10 -
June 1997 - private placement 1,008,000 1,008 99,800 -
Issuance of common stock for services
at $.05 - June 1997 640,000 640 30,860 -
</TABLE>
The accompanying notes are an integral part of these financial statements.
-22-
<PAGE>
<TABLE>
<CAPTION>
AMBRA RESOURCES GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS'EQUITY (CONTINUED)
PERIOD FROM JANUARY 27, 1984 (DATE OF INCEPTION) TO JUNE 30, 1998
Capital in
Common Stock Excess of Accumulated
-----------------
Shares Amount Par Value Deficit
---------- ------ ---------- -----------
<S> <C> <C> <C> <C>
Issuance of common stock for mining
claims at $.05 - June 1997 100,000 100 4,900 -
Net loss from operations for the
year ended June 31, 1997 - - - (515,238)
---------- -----------
Balance June 30, 1997 22,008,566 22,009 1,260,895 (1,031,656)
Issuance of common stock for oil
leases at $. 10 - July 1997 930,000 930 92,070 -
Issuance of common stock for payment
of debt at $. 10 - July 1997 - related party 1,134,480 1,134 112,314 -
Issuance of common stock for two
residential lots at $. 10 - Sept 1997 700,000 700 69,300 -
Issuance of common stock and payment
of stock issuance expense - Sept 1997 250,000 250 (9,250) -
Issuance of common stock for cash at $. 10 - 1,221,000 1,221 120,879 -
July and Sept 1997 - private placement
Issuance of common stock for services and
payment of debt at $. 10 - related parties 1,199,710 1,200 118,771 -
Dec 1997
Issuance of common stock for costs
of stock issuance - Dec 1997 250,000 250 (250) -
Issuance of common stock for installment
payment on mining claims at S. 10 - 100,000 100 9,900 -
Dec 1997
</TABLE>
The accompanying notes are an integral part of these financial statements.
-23-
<PAGE>
<TABLE>
<CAPTION>
AMBRA RESOURCES GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS'EQUITY (CONTINUED)
PERIOD FROM JANUARY 27, 1984 (DATE OF INCEPTION) TO JUNE 30, 1998
Capital in
Common Stock Excess of Accumulated
-----------------
Shares Amount Par Value Deficit
---------- ------- ---------- ------------
<S> <C> <C> <C> <C>
Issuance of common stock for expenses at $.10 549,000 549 54,351 -
related parties - Dec 1997
Issuance of common stock for expenses 2,274,000 2,274 111,426 -
at $.05 - related parties - May 1998
Issuance of common stock for expenses
at $.06 - related parties - June 1998 1,500,000 1,500 140,500 -
Issuance of common stock for expenses
at $. 10 - June 1998 100,000 100 9,900 -
Net loss from operations for the year
ended June 30, 1998 - - - (648,722)
---------- ------- ---------- ------------
BALANCE JUNE 30,1998 32,216,756 $32,217 $2,090,806 $(1,680,378)
---------- ------- ---------- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
-24-
<PAGE>
<TABLE>
<CAPTION>
AMBRA RESOURCES GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30,1998 AND 1997 AND THE
PERIOD JANUARY 27, 1984 (DATE OF INCEPTION) TO JUNE 30, 1998
January 27,1984
June June (Date of Inception)
1998 1997 to June 30,1998
----------------- ---------- --------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net loss $ (648,722) $(515,238) $ (1,680,378)
Adjustments to reconcile net loss
to net cash provided by operating
activities:
Depletion, depreciation
and amortization 2,600 2,578 29,439
Common capital stock issued
for services & expenses 492,773 449,735 1,243,571
Loss of oil leases 11,000 - 11,000
(Increase) decrease in accounts receivable (20,071) 2,526 (20,071)
(Increase) decrease in security deposits 3,299 (3,299) -
Increase (decrease) in liabilities 19,763 (11,205) 19,763
----------------- ---------- --------------------
Net Cash Used By Operations (139,358) (74,903) (396,676)
----------------- ---------- --------------------
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of property & equipment (5,000) (2,013) (114,390)
Purchase of oil & gas leases and
mining claims (40,993) (36,636) (97,948)
----------------- ---------- --------------------
CASH FLOWS FROM FINANCING
ACTIVITIES
Net proceeds from sale of capital stock 122,100 236,700 669,048
----------------- ---------- --------------------
Net increase (decrease) in cash (63,251) 123,148 60,034
Cash at beginning of year 123,285 137 -
----------------- ---------- --------------------
Cash at end of year $ 60,034 $ 123,285 $ 60,034
----------------- ---------- --------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
-25-
<PAGE>
<TABLE>
<CAPTION>
AMBRA RESOURCES GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE PERIOD January 27,1984 (DATE OF INCEPTION) TO JUNE 30,1997
SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
<S> <C>
Issuance of 122,086 shares in exchange for royalty
interests in oil and gas leases - 1984 $ 19,560
--------
Issuance of 900,000 shares for services - 1993 9,000
--------
Issuance of 200,000 shares for land - 1993 - (Note 1) -
--------
Issuance of 50,000 shares for mining claims - 1994 500
--------
Issuance of 300,000 shares for services - 1994 3,000
--------
Issuance of 50,000 shares for option on property - 1994 500
--------
Issuance of 150,000 shares for mining claims - 1995 1,500
--------
Issuance of 22,000 shares for expenses - 1995 220
--------
Issuance of 137,979 shares for expenses - 1995 68,988
--------
Issuance of 1, 173,897 shares for equipment and expenses - 1995 - Note I -
--------
Issuance of 20,000 shares for expenses - 1996 4,000
--------
Issuance of 118,115 shares for expenses - 1996 23,623
--------
Issuance of 62,500 shares for expenses - 1996 12,500
--------
Issuance of 200,000 shares for oil leases - 1996 2,000
--------
Issuance of 300,000 shares for expenses - 1996 60,000
--------
Issuance of 1,028,600 shares for accounts payable and commissions - 1996 49,759
--------
Issuance of 100,000 shares for mining claims - 1996 5,000
--------
Issuance of 2,425,200 shares for services and expenses - 1996 125,490
--------
Issuance of 425,000 shares for services -1997 21,250
--------
Issuance of 1,774,506 shares for services and expenses - 1997 88,727
--------
Issuance of 600,000 shares for oil leases - 1997 30,000
--------
Issuance of 2,550,000 shares for services and expenses - 1997 127,500
--------
Issuance of 1,240,000 shares for oil leases - 1997 62,000
--------
Issuance of 640,000 shares for services - 1997 31,500
--------
Issuance of 100,000 shares for mining claims - 1997 5,000
--------
Issuance of 930,000 shares for oil leases - 1997 93,000
--------
Issuance of 1, 134,480 shares for payment of debt - 1997 113,448
--------
Issuance of 700,000 shares for two residential lots - 1997 70,000
--------
Issuance of 1, 199,7 10 shares for services and payment of debt - 1997 119,971
--------
Issuance of 100,000 shares for installment payment on mining claims - 1997 10,000
--------
Issuance of 549,000 shares for expenses - 1998 54,900
--------
Issuance of 2,274,000 shares for expenses - 1998 113,700
--------
Issuance of 1,500,000 shares for expenses - 1998 142,000
--------
Issuance of 100,000 shares for installment payment on mining claims - 1998 10,000
--------
</TABLE>
The accompanying notes are an integral part of these financial statements.
-26-
<PAGE>
AMBRA RESOURCES GROUP, INC.
(A 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. 00
1.
On October 14, 1996 the Company completed a reverse stock split of ten shares of
outstanding shares for one share in connection with a name change to "Ambra
Resources Group, Inc." from "Ambra Royalty, Inc." This report has been prepared
showing after stock split shares with a par value of $0.001 from inception.
The company has been in the development stage since inception and has been
primarily engaged in the business of the acquisition and the development mining
and oil properties.
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 consists of the following:
<TABLE>
<CAPTION>
<S> <C>
Office equipment 2,013
Residential rentals 107,877
Less accumulated depreciation (5,178)
--------
104,712
</TABLE>
Office equipment is depreciated on the straight line method over 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 shares actually outstanding after the stock splits, using the treasury
stock method in accordance with FASB No 128.
-27-
<PAGE>
AMBRA RESOURCES GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Amortization of Capitalized Mining and Oil Leases
- -------------------------------------------------------
The Company uses the successful efforts cost method for recording its mining and
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 mineral deposit when operations
begin or expensing the remaining balance if proven of no value.
Income Taxes
- -------------
At June 30, 1998, the Company had a net operating loss carry forward of
$1,650,642. The tax benefit from the loss carry forward has been fully offset by
a valuation reserve because the use of the future tax benefit is doubtful. 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 2000
through 2018.
Foreign Currency Translation
- ------------------------------
The transactions of the Company completed in Canadian dollars have been
translated to US dollars. Assets and liabilities are translated at the year end
exchange rates and the income and expenses at the average rates of exchange
prevailing during the years reported on. Any gain or loss resulting from the
translation is reported in the statement of operations.
Financial Instruments
- ----------------------
The carrying amounts of financial instruments, including cash, investments in
mining claims and oil leases, and accounts payable, are considered by management
to be their estimated fair values. These values are not necessarily indicative
of the amounts that the Company could realize in a current market exchange.
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.
3. MINING CLAIMS
On June 20, 1994 the Company purchased three unproven mineral claims, from a
related party, by the issuance of 200,000 Common shares of its stock, and are
identified as Marathon, Marathon I and Marathon 2, containing a total of 32
units, with expiration dates during 2006, which 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.
-28-
<PAGE>
AMBRA RESOURCES GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. MINING CLAIMS -continued
The terms of the purchase provides for payments as follows:
<TABLE>
<CAPTION>
Dates Due Amounts (canadian) Shares of Comp
- ---------- ------------------ --------------
<S> <C> <C>
6-20-94 - 200,000
11-7-96 5,000 100,000
6-30-97 10,000 100,000
12-31-97 10,000 100,000
6-30-98 10,000 100,000
12-31-98 15,000 100,000
------------------ --------------
50,000 700,000
------------------ --------------
</TABLE>
The required stock issues have been made however $17,50OCn is past due on June
30, 1998. These amounts are being capitalized until the claims are proven or
shown to be of no value.
The Company has entered into a contract with Globe Drilling LTD to do
exploratory drilling. The terms of the agreement provides for drilling, at
locations specified by the Company, to a minimum of 1000 feet The Company has
staked an additional 20 claim units known as the krystle Ann 1, 2, and 3 claims.
If the Company fails to make timely payments and cannot renegociate the contract
its investment in the property will be lost.
4. OIL LEASES
<TABLE>
<CAPTION>
BEAUFORT SEA PROJECT
- -----------------------------------------------------------------------------------------------------
COST
-------
<S> <C>
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.
The terms of the purchase provides for a payment of $15,000 and the issuance of 1,050,000 shares
of the Company, which has been completed, and an option to purchase an additional 750,000
shares of the Company, by the seller, any time within two years at $.20 per share. $67,913
</TABLE>
-29-
<PAGE>
AMBRA RESOURCES GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
<S> <C>
4. OIL LEASES - CONTINUED
ALKALI CREEK PROSPECT, PETROLEUM COUNTY, MONTANA
- ------------------------------------------------
COST
--------
On May 27, 1997 the Company purchased a 50% working interest in the Alkali Creek Prospect
area, Petroleum County Montana, from Starrock Resources Ltd. , consisting 4,987 unproven acres.
The terms of the leases begin to expire in 1999 through 2004 and provide for royalties of 12.5%
to 25% of production.
The Company has agreed to provide $83,5 10 for it's one half of the amount projected to
explore the area, of which, $14,208 has been paid. During July 1998 the Company paid $50,000
for drilling scheduled to be done in September 1998.
If the Company fails to make timely payments and cannot renegociate the contract its
investment in the property will be lost.
The Company paid $10,225 and 600,000 shares of its common capital stock for the interest. $ 40,225
BOONESVILLE - VASE COUNTY, TEXAS
- --------------------------------
On July 11, 1997 the Company purchased a 10% working interest and a 8% net revenue interest in an oil lease
known as Boonesvile #I Wise County, Texas for $2,700. The Company has agreed to pay the Company's
share of the initial test well costs and on June 30, 1998 owes a balance of $49,292
$ 2,700
CESSFORD - ALBERTA, CANADA
- --------------------------
On July 17, 1997 the Company purchased a 20% interest in an oil lease in the Cessford Area, Alberta, Canada by
payment of $36,627 and 1,230,000 shares of the Company. The Company has participated in the initial test well
costs. On June 3, 1998 the parties mutually agreed to reduced the 20% interest to 5% resulting in a
credit of $33,598, to the Company, to be used in the future drilling programs . $159,627
--------
270,465
========
</TABLE>
5. STOCK OPTIONS
The Company has granted a 2,500,000 share stock option to officers of the
Company at $. 10 per share which will expire January 1, 2000. Other stock
options includes 750,000 shares at $.20 per share which expires on June 9, 1999,
as shown in note 4, and 300,000 shares at $.06 which expires December 5, 1997.
6. RELATED PARTY TRANSACTIONS
See statement of changes in stock regarding shares issued to officers for
services and mining claims.
See note 5 regarding stock options granted to officers.
-30-
<PAGE>
AMBRA RESOURCES GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. GOING CONCERN
The Company intends to continue to acquire other interests in various business
opportunities which, in the opinion of management, will provide a profit to the
Company.
Continuation of the Company as a going concern is dependent upon obtaining the
additional working capital necessary to fund the projects management has
undertaken and they have developed a strategy, which they believes will
accomplish this through additional equity funding.
Management recognizes that, if they are unable to raise additional capital, they
cannot conduct operations in the future and they will lose the properties
outlined in notes 3,and 4.
8. CONTINUING AND CONTINGENT LIABILITIES
On July 9, 1993 the Company issued 200,000 shares of it's common stock in
exchange for 2, 100 acres of undeveloped land located in Fentress and Overton
Counties, Tennessee. This parcel was part of a larger purchase of 12, 100 acres
by
The predecessor by the issuance of a convertible corporate debenture and the
assumption of a lien due the U.S. Army Corp. of Engineers. Since that time it
has been determined that there was a defect in the title to the property and
therefore the stock was canceled by notification to the transfer agent and the
recipients of the stock, however, the stock has not been returned to the
Company. Management, with council, believe that the recipients still holding the
stock have no legal claim on the Company nor is the Company liable under the
lien. The issuance of the stock has been recorded on the books of the Company
and is shown as outstanding at the report date.
On November 2, 1995 the Company issued 1, 173,897 shares of its common stock to
a previous related party in exchange for the use of office equipment and other
expenses. The parties receiving the stock have agreed to return the stock of the
Company for cancellation, which resulted from a dispute over the transaction.
The stock has not been returned to the Company by the report date and is shown
as outstanding with no value.
See notes 3 and 4 for amounts due in the future for oil and mining claims.
9. SUBSEQUENT EVENTS
See note 4 regarding payment of $50,000 for drilling scheduled to be done in
September 1998.
-31-
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