10K-SB..:
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1933
For the fiscal year ended June 30, 2005
[ ] 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 0-11695
APEX RESOURCES GROUP, INC.
(Name of Small Business Issuer in its charter)
UTAH 87-0403828
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
610-800 West Pender Street, Vancouver, Canada V6C 2V6
(Address of principal executive Offices) (Zip Code)
Issuer's telephone number: (604) 669-2723
Securities registered pursuant to section 12(b) of the Exchange Act: None
Securities registered pursuant to section 12(g) of the Exchange Act: None
Check whether the Issuer (1) 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 report(s), and (2) has been subject to such filing requirements for the past 90 days. (1) Yes [ ] No [X]
Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is contained in this form, and no disclosure will be contained, to the best of 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. [ ]
The issuer’s revenue for its most recent fiscal year was: $12,247.
The aggregate market value of the issuer’s voting stock held as of , by non-affiliates of the issuer, based on the price at which the shares were sold, was approximately: $6,363,786.
As of October 17, 2005, the issuer had 92,625,212 shares of its $0.001 par value common stock outstanding.
Transitional Small Business Disclosure Format. Yes [ ] No [X]
Documents incorporated by reference: None
TABLE OF CONTENTS
PART I
ITEM 1. DESCRIPTION OF BUSINESS 3
ITEM 2. DESCRIPTION OF PROPERTY 7
ITEM 3. LEGAL PROCEEDINGS 9
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS 9
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS 9
ITEM 6. MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OR
PLAN OF OPERATIONS 11
ITEM 7. FINANCIAL STATEMENTS 15
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE 15
ITEM 8A. CONTROLS AND PROCEDURES 15
ITEM 8B. OTHER INFORMATION 16
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT 16
ITEM 10. EXECUTIVE COMPENSATION 18
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT 19
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 20
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K 20
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES 21
SIGNATURES 21
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PART I
FORWARD
This Form 10-KSB contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For this purpose any statements contained in this Form 10-KSB that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, words such as “may,”“hope,”“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. DESCRIPTION OF BUSINESS
History and Organization
Apex Resources Group Inc. (the "Registrant" or "Company") is a development stage company. It was incorporated under the laws of the State of Utah on January 27, 1984. The Company 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 1989, the Company transferred its assets in exchange for cancellation of the Company's debt and ceased operations until 1995. Since 1995, the Company has been primarily engaged in the business of acquiring interests in oil and gas properties.
Our executive offices are located at Suite 610 - 800 West Pender Street, Vancouver, British Columbia, Canada V6C 2V6. Our telephone number is (604) 669-2723. Our website is located at www.apexresourcesgroup.com .
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Oil and Gas Properties
Beaufort Sea
The Company holds a 3.745% working interest in the Beaufort Sea well Esso Pex Home, et. al. Itiyok I-27, consisting of 640 acres, 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 drilling, casing and testing the area to a depth of 12,980 feet.
The other partners in the project are coordinated by Imperial Oil Resources. It was recently announced that a consortium of oil and gas companies have filed an application to build a natural gas pipeline that could be used to transport gas from the Beaufort Sea region. This area will not be developed until a pipeline is built.
Bastian Bay Field, Plaquamines Parish, Louisiana
The Company owns a 6.25% working interest in the Bastian Bay Field Lease #16152 in Plaquamines Parish Louisiana. Until recently, Royal “T” Oil was the operator of this well. It turned over its interest in the well to Imperial Petroleum, Inc. Prior to Hurricane Katrina, Imperial had decided to work over the well at an estimated cost of $906,800. It was the Company’s understanding that Imperial intended to make a cash call to all participants. The participants in the well would be given the choice to pay the cash call or continue on a non-consent basis under which the non paying participants relinquish half of their working interest after Imperial has recouped its expenditures. The Company had determined to continue on a non-consent basis and not meet the cash call. If the Company fails to meet the cash call, its net revenue interest will be reduced from 6.25% to 3.125%. The Company has not yet learned how Imperial intends to proceed in the aftermath of Hurricane Katrina.
Henry Dome Prospect, Texas
The Company owns 2.5 participation units in the Henry Dome Prospect in McMullen County, Texas, for $12,500. These units give the Company a 1.875% working interest in JB Henry Dome #1 well. Initial flow testing of the well demonstrated flow of 1.2 to 1.4 million cubic feet of gas per day. Following initial testing, acid washing of the well was performed to attempt to increase flow rates. Additional testing is ongoing as the operator has encountered many problems with this well. The estimated life expectancy of this well is at least six years.
Selection of Target Areas for Acquisition
The Company will continue to explore and investigate the acquisition of interests in other oil and gas properties. In most cases, the Company has and will continue to seek to acquire only partial interests in properties thereby diversifying its risk. This will also allow the Company to acquire interests in more properties than it otherwise could if it were to acquire complete interests in properties.
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Rather than employ the significant staff that would be required to operate the wells the Company may acquire, it will continue to seek out and locate qualified local operators, whom it will contract to manage the daily operations of the particular properties. This aids the Company in keeping its overhead to a minimum.
The Company will seek to purchase interests for cash or in exchange for shares of its common stock, where allowed by law. The purchases made with cash will be made with cash on hand, internally generated capital, financed through conventional loans made by oil and gas lenders or through funds made available through equity financing. The Company may consider issuing common stock to project owners in situations where the project has significant upside potential due to proven reserves that are behind pipe or that are undeveloped and for which traditional financing cannot be obtained.
Market for Oil Production
The market for oil and gas production is regulated by federal, state and foreign governments. The overall market is mature and with the exception of gas, all producers in a producing region will receive the same price. The major oil companies will purchase all crude oil offered for sale at posted field prices. There are price adjustments for deviations from the quality standards established by the purchaser. Oil sales are normally contracted with a "gatherer" which is a third-party who contracts to pickup the oil at the well site. In some instances there may be deductions for transportation from the wellhead to the sales point. The majority of crude oil purchasers do not at this time charge transportation fees, unless the well is outside their service area. The oil gatherer will usually handle disbursements of sales revenue to both the owners of the well (a "working interest owner" ) as well as payments to persons entitled to royalties as a result of such sales ( "royalty owners" ). The Company typically will be a working interest owner in the projects that it undertakes or in which it invests. By being a working interest owner, the Company is responsible for the payment of its proportionate share of the operating expenses of the well. Royalty owners receive a percentage of gross oil production for the particular lease and are not obligated in any manner whatsoever to pay for the cost of operating the lease. Therefore, the Company, in most instances, will be paying the expenses for the oil and gas revenues paid to the royalty owners.
Market for Gas Production
In contrast to sales of oil, the gas purchaser will pay the well operator 100% of the sales proceeds monthly for the previous month's sales. The operator is responsible for all checks and distributions to the working interest and royalty owners. There is no standard price for gas. Prices will fluctuate with the seasons and the general market conditions. It is the Company's intention to utilize this market whenever possible in order to maximize revenues. The Company does not anticipate any significant change in the manner its gas production would be purchased, however, no assurance can be given that such changes will not occur in the future.
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Competition
The oil and gas industry is highly competitive. Competition for prospects and producing properties is intense. As the Company pursues new opportunities in oil and gas exploration, it will be competing with a number of other potential purchasers of prospects and producing properties, most of which will have greater financial resources than the Company. The bidding for prospects has become particularly intense with different bidders evaluating potential acquisitions with different product pricing parameters and other criteria that result in widely divergent bid prices. The presence in the market of bidders willing to pay prices higher than are supported by the Company's evaluation criteria could further limit the ability of the Company to acquire prospects and low or uncertain prices for properties can cause potential sellers to withhold or withdraw properties from the market. In this environment, there can be no assurance that there will be a sufficient number of suitable prospects available for acquisition by the Company or that the Company will be able to obtain financing for or participants to join in the development of prospects.
The Company's competitors and potential competitors include major oil companies and independent producers of varying sizes. Most of the Company's competitors have greater financial, personnel and other resources than the Company and therefore have greater leverage to use in acquiring prospects, hiring personnel and marketing oil and gas. A high degree of competition in these areas is expected to continue indefinitely.
Governmental Regulation
The production and sale of oil and gas is subject to regulation by state, federal, local authorities, and foreign governments. In most areas there are statutory provisions regulating the production of oil and natural gas under which administrative agencies may set allowable rates of production and promulgate rules in connection with the operation and production of such wells, ascertain and determine the reasonable market demand of oil and gas, and adjust allowable rates with respect thereto.
The sale of liquid hydrocarbons was subject to federal regulation under the Energy Policy and Conservation Act of 1975 that amended various acts, including the Emergency Petroleum Allocation Act of 1973. These regulations and controls included mandatory restrictions upon the prices at which most domestic crude oil and various petroleum products could be sold. All price controls and restrictions on the sale of crude oil at the wellhead have been withdrawn. It is possible, however, that such controls may be reimposed in the future but when, if ever, such reimposition might occur and the effect thereof on the Company cannot be predicted.
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Approvals to conduct oil and gas exploration and production operations are required from various governmental agencies. There is no assurance when and if such approvals will be granted.
Environmental Laws
The Company intends to conduct its operations in compliance with all applicable environmental laws. The cost of such compliance has been and will be factored into the estimated costs of drilling and production. The effects of applicable environmental laws are to add to the cost of operations and to add to the time it takes to bring a project to fruition.
Employees
The Company currently has no full-time employees. The officers provide services to the Company on an as needed basis. The Company contracts out with consultants to provide all other necessary services.
ITEM 2. DESCRIPTION OF PROPERTY
Oil and Gas Properties
See “ITEM 1. Description of Business”.
Rental Properties
Abbecombec Ocean Village Resort
The Company owns two vacation homes in the Abbecombec Ocean Village Resort located on the shore of Clam Bay, which is 40 miles east of Halifax, Nova Scotia. The Company currently rents the dwellings on a month-to-month basis for $500 per month. During the year, the occupancy rate for these vacation homes has been 100%. The income generated by these properties is subject to a number of factors, including the time of year, occupancy rates among similar properties in the area and economic conditions in general. These properties are not subject to any mortgage or other obligation. At this time the Company has no plans for renovate or otherwise improve the properties. The Company believes these properties are adequately insured.
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Woodland Valley Ranch, Arizona
The Company owns 37 acres of undeveloped land in Woodland Valley Ranch, located in Apache County in northern Arizona. These parcels are located about 12 miles northeast of St. Johns, Arizona. The Woodland Valley Ranch is comprised of over 32,000 acres of virgin wilderness with elevations ranging from 5,900 feet to 6,800 feet above sea level. The Woodland Valley Ranch borders over 30,000 acres of Arizona State Trust lands. The Company is required to make monthly payments of $255 through December 2019. As of the date of this annual report, the current principal balance is approximately $46,008. The Company is eight months in arrears on its monthly payments on this property, with back payments totaling $2,040. The Company is working with the contract holder to resolve the default. The Company acquired these parcels for investment purposes and has no present intent to develop or improve this property. As undeveloped land, the Company does not believe there is a need to insure the property at this time.
Elk Valley Ranch, Arizona
The Company owns 2 undeveloped lots, totaling 73 acres of real property, in Elk Valley Ranch. Elk Valley Ranch is near the Woodland Valley Ranch and is about 15 miles east of St. Johns, Arizona. The Company purchased the lots for $98,715, including a down payment of $5,020 and monthly payments of $521 for 180 months. As of the date of this annual report, the current principal balance is approximately $93,695. The Company is eight months in arrears on its monthly payments on this property, with back payments totaling $4,168. The Company is working with the contract holder to resolve the default. The Company acquired these properties for investment purposes and has no present intent to develop or improve these parcels. As undeveloped parcels, the Company does not believe there is a need to insure the properties at this time.
Cowichan Lake, Victoria, B.C.
In January 2005, the Company paid approximately $39,000 toward the purchase price for Lot 4 on Upper Point Ideal Road in the Cowichan Lake District in Victoria B.C. In March 2005, the Company paid approximately $42,000 toward the purchase price of Lot 2. Part of the payment covered various fees and taxes, the remainder was applied to reduce the balance of the purchase price. In September 2005, the Company sold Lot 4 for $177,426. The Company used the proceeds from the sale of that property to retire the $87,500 mortgage on Lot 4 and the $78,000 mortgage om Lot 2. The Company is currently attempting to sell Lot 2. The Company acquired these properties for investment purposes and has no present intent to develop or improve these parcels.
The Company also owns approximately 5,254,365 or 5.7% of the outstanding common shares of Omega Ventures Group, Inc., a corporation whose common stock is traded on the Over-the-Counter Bulletin Board, stock symbol “OMGV.”
Executive Offices
The Company currently leases 1,500 square feet of executive office space located at 610-800 West Pender Street, Vancouver, Canada, V6C 2V6. The offices are rented on a month-to-month basis for approximately $2,532 per month. The Company believes this space will be sufficient for its needs for the foreseeable future.
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The Company rents the office furnishings for its Canadian office from Nevada Holdings, for $6,500 per month.
The Company also leases 1,500 square feet of administrative office space located at 136 East South Temple, Suite 1600, Salt Lake City, Utah 84111 for approximately $3,892 per month.
ITEM 3. LEGAL PROCEEDINGS
Subsequent to the fiscal year end, in October 2005, WTRG Corp., filed a Notice of Claim was filed in the Provincial Court of British Columbia in Vancouver, Canada against the Company and John Hickey. The Notice of claim seeks damages in the amount of $18,290 for breach of contract for services rendered to the Company. Prior to filing a response to the Notice of Claim, the Company settled this dispute with WTRG.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of our shareholders during the fiscal year ended June 30, 2005.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is listed on the NASD OTC Bulletin Board under the symbol “APXR." As of October 17, 2005, the Company had 902 shareholders holding 92,625,212 common shares.
The published closing bid and ask quotations for the previous two fiscal years are included in the chart below. These quotations represent prices between dealers and do not include retail markup, markdown or commissions. In addition, these quotations do not represent actual transactions.
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BID PRICES ASK PRICES
HIGH LOW HIGH LOW
2005-2004
Apr. thru June 2005 .20 .08 .205 .082
Jan. thru Mar. 2005 .281 .17 .29 .183
Oct. thru Dec. 2004 .275 .055 .30 .062
July thru Sep. 2004 .13 .05 .14 .055
2004-2003
Apr. thru June 2004 .087 .05 .095 .063
Jan. thru Mar. 2004 .09 .031 .10 .04
Oct. thru Dec. 2003 .065 .03 .073 .035
July thru Sep. 2003 .05 .02 .08 .04
The foregoing figures were furnished to the Company by Pink Sheets, L.L.C., 304 Hudson Street, 2 nd Floor, New York, New York 10013.
Dividends
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.
Securities for Issuance Under Equity Compensation Plans
The Company currently has no equity compensation plans.
Recent Sales of Unregistered Securities
During the quarter ended June 30, 2005, the following equity securities, which were not registered under the Securities Act of 1933, were issued.
On May 11, 2005, the Company issued 840,000 restricted common shares to four parties, including 210,000 common shares to John Hickey, the Company Secretary and a director, for services rendered to the Company. The shares were valued at $.10 per share. The shares were issued without registration under the Securities Act of 1933 in reliance on an exemption from registration provided by Regulation S promulgated by the Securities and Exchange Commission.
On June 10, 2005, the Company issued 100,000 restricted common shares to WTRG Corp, for investor relations services rendered to the Company. The shares were valued at $.10 per share. The shares were issued without registration under the Securities Act of 1933 in reliance on an exemption from registration provided by Regulation S promulgated by the Securities and Exchange Commission.
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ITEM 6. MANAGEMENTS’ DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The following discussion is intended to assist you in understanding our results of operations and our present financial condition. Our Financial Statements and the accompanying notes included elsewhere in this Form 10-KSB contain additional information that should be referred to when reviewing this material.
Statements in this discussion may be forward-looking. These forward-looking statements involve risks and uncertainties, including those discussed below, which could cause actual results to differ from those expressed. Please read Forward-Looking Information on page 3.
General
The Company is a development stage company engaged in the exploration of gas and oil. The Company has been engaged in the gas and oil business since 1995.
Liquidity and Capital Resources
The Company currently does not have sufficient cash reserves or cash flow from operations to meet its cash requirements. This raises substantial doubt about the Company’s ability to continue as a going concern. During the year ended June 30, 2005, the Company financed its operations primarily through the issuance of Company securities and loans from related parties. During the quarter ended December 31, 2004, the Company received subscriptions to purchase 18,000,000 shares of its common stock in private placement transactions for cash totaling $2,450,000. As of June 30, 2005, the Company has received $23,000. The Company’s balance sheet reflects the remaining balance as stock subscriptions receivable. During the quarter ended December 31, 2004, the Company caused its transfer agent to issue the 18,000,000 shares. These shares, however, are being held in escrow and will only be delivered out as funds are received by the Company. During the year ended June 30, 2005, the Company issued a total of 9,850,143 common shares in satisfaction of expenses and for services rendered in the total amount of $401,974. The Company issued an aggregate of 5,311,300 shares in satisfaction of debt obligations in the amount of $106,230. The Company also issued 100,000 shares for $10,000 cash.
On June 30, 2005, the Company had cash on hand of $18,507, as cash flows from operating and financing activities only partially offset cash flows used in investing activities.
The Company has plans to further develop its oil and gas properties, which will require substantial additional working capital which the Company does not currently have. Moreover, the Company does not anticipate significant revenue from its operating activities in the upcoming quarter.
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Results of Operations
Comparison of the year ended June 30, 2005 and the year ended June 30, 2004
The Company sustained a net loss of $738,495 in the year ended June 30, 2005 compared to a loss of $748,280 for the year ended June 30, 2004. The following shows a more detailed comparison of the Company’s expenses during the past two years:
June 30, 2005 June 30, 2004
Travel $ 55,075 $ 37,345
Office Expenses 93,066 104,139
Telephone 29,465 17,930
Professional 36,163 33,431
Consultants 320,054 328,936
Promotional 18,678 10,801
Rent 72,421 28,529
Exploration and Development - Oil and Gas 69,003 177,180
Other 37,706 12,594
Total $ 731,631 $ 750,885
Travel expenses increased $17,730 or 47% to $55,075 during the year ended June 30, 2005 compared to June 30, 2004. This increase is primarily the result of increased travel in connection with increasing operating activities during the year ended June 30, 2005 compared to the same period of 2004. The Company expects travel expenses to remain at or near the levels incurred in fiscal 2005 in the upcoming fiscal year.
Office expenses decreased $11,073 or 11% to $93,066 during the year ended June 30, 2005 compared to the same period 2004. This decrease is the result of decreased activity in the Company’s Salt Lake City office. Office expenses in the upcoming fiscal year should remain fairly consistent with those experienced during fiscal 2005.
Telephone expenses increased 64% from $17,930 to $29,465 during the year ended June 30, 2005 compared to the year ended June 30, 2004. As a result of the investor relations program implemented by the Company during the year, the Company incurred significantly greater telephone expenses. The Company anticipates telephone expenses to remain at or near fiscal 2005 levels during the upcoming year.
Professional expenses also increased from $33,341 to $36,163, an 8% increase during the year ended June 30, 2005 compared to the year ended June 30, 2004. as accounting and legal expenses continue to increase as a result of more stringent compliance obligations imposed by the Sarbanes-Oxley Act of 2002. The Company expects professional fees to continue to increase in upcoming fiscal quarters.
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Consultants’ fees decreased from $328,936 during the year ended June 30, 2004, to $320,054 during the year ended June 30, 2005. The Company has no employees, rather management retains consultants to provide the services the Company needs. The Company expects consultants’ fees to remain fairly consistent with the expenses incurred during fiscal 2005 during the upcoming fiscal year.
Promotional expenses increased $7,877, or 73% to $18,678 during the year ended June 30, 2005 compared to the year ended June 30, 2004. This increase in promotional expenses is largely the result of the Company’s efforts to keep its shareholders and the market better informed as to the Company’s activities through a coordinated media campaign. The Company expects promotional expenses to continue to increase in upcoming quarters due to the Company’s ongoing investor relations campaign.
Rent expenses increased from $28,529 for the year ended June 30, 2004, to $72,421 for the year ended June 30, 2005. We expect rent expenses to continue at rates similar to those incurred in 2005. We do not anticipate such significant increases in the upcoming year.
During the year ended June 30, 2005, the Company incurred $69,003 in exploration and development expenses, compared to $177,180 during the year ended June 30, 2004. The Company believes this decrease is simply a result of timing issues and anticipates exploration and development expenses in the future will return to the higher levels experienced during the year ended June 30, 2004.
Other expenses nearly tripled from $12,594 during the 2004 fiscal year to $37,706 during the 2005 fiscal year. This increase is primarily due to the increased operating activities of the Company during the 2005 year compared to the 2004 year. While the Company does not anticipate other expenses to continue to increase at such rates in the upcoming year, it does expect other expenses to continue at levels consistent with the year ended June 30, 2005.
Non operating revenue from interest and rents decreased from $26,664 during fiscal 2004 to $12,247 during fiscal 2005. This decrease is due to rents not being received due to remolding at the Company’s Nova Scotia property.
Summary of Material Contractual Commitments
The following table lists our significant commitments as of December 31, 2005.
Payments Due by Fiscal Year
Contractual Commitments Total 2006 2007 2008 2009 Thereafter
Woodland Valley Ranch $ 122,856 $ 9,450 $ 9,450 $ 9,450 $ 9,450 $ 85,054
Elk Valley Ranch 97,193 6,480 6,480 6,480 6,480 71,275
Office Leases 138,935 78,171 30,382 30,382 - -
Total $ 358,984 $ 94,101 46,312 46,312 15,930 156,329
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Off-Balance Sheet Financing Arrangements
As of June 30, 2005, we had no off-balance sheet financing arrangements.
Critical Accounting Policies
The Company has identified policies below as critical to its business operations and the understanding of its financial statements. The impact of these policies and associated risks are discussed throughout Management’s Discussion and Analysis and Plan of Operations where such policies affect its reported and expected financial results. A complete discussion of the Company’s accounting policies in included in Note A of the Notes to Consolidated Financial Statements.
Capitalization of Oil Leases Costs
The Company uses the successful efforts cost method for recording its oil lease interests. This 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 it is proven to be 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 claim interests held by the Company are unknown and therefore an estimate of any future cost cannot be made.
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. U.S. dollars are considered to be the functional currency of the Company.
Development Stage and Going Concern
The Company is a development stage company and have not yet generated revenue. The Company has accumulated losses totaling $7,742,644 and has incurred debt in the development of its operations. To generate positive cash flow, the Company will require substantial additional funding. Funding which may not be available to the Company on acceptable terms, or at all. Moreover, to obtain additional funding the Company may have to issue significant additional common shares, which could result in dilution to current shareholders.
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Recent Accounting Pronouncements
The Company has considered recent accounting pronouncements and does not expect that such pronouncements will have a material impact on its financial statements.
ITEM 7. FINANCIAL STATEMENTS
See Financial Statement listed in the accompanying index to the Financial Statements on Page F-1 herein.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
On February 5, 2004, the Company dismissed Sellers & Andersen, from it position as its independent accountants and engaged Madsen & Associates, CPAs, Inc., as the Company’s registered independent public accounting firm.
This change in accountants was reported in a Current Report on Form 8-K filed on February 10, 2004, as amended, and that Current Report is incorporated herein in its entirety by this reference.
ITEM 8A. CONTROLS AND PROCEDURES
Our principal executive officers and our principal financial officer (the "Certifying Officers" ) are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e). Such officers have concluded (based upon their evaluations of these controls and procedures as of the end of the period covered by this report) that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in this report is accumulated and communicated to management, including the Certifying Officers as appropriate, to allow timely decisions regarding required disclosure.
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The Certifying Officers have also indicated that there were no significant changes in our internal controls over financial reporting or other factors that could significantly affect such controls subsequent to the date of their evaluation, and there were no significant deficiencies and material weaknesses.
Our management, including the Certifying Officers, does not expect that our disclosure controls or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. In addition, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the control. The design of any systems of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of these inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.
ITEM 8B. OTHER INFORMATION
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLAINCE WTH SECTION 16(a) OF THE EXCHANGE ACT
The following table sets forth our directors, executive officers, promoters and control persons, their ages, and all offices and positions held. Directors are elected for a period of one year and thereafter serve until their successor is duly elected by the stockholders. Officers and other employees serve at the will of the Board of Directors.
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Name Age Positions Held Director Since
John R. Rask 55 President March 2003
Director August 1996
John M. Hickey 63 Secretary March 2003
Director October 1996
Robert Gill 26 Director March 2003
Each director of the Company serves for a term of one year or 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 of the board of directors and is qualified.
Set forth below is certain biographical information regarding each of the Company's executive officers and directors.
John R. Rask . Since the early 1980's Mr. Rask has been owner and operator of Ray’s Income Tax Service, a company which specialized in bookkeeping and the preparation of income tax returns. Mr. Rask is the President and a director of the Company. Mr. Rask is also an officer and director of Omega Ventures Group, Inc..
John M. Hickey . From 1995 to present Mr. Hickey has worked for the Company. Mr. Hickey began with Apex Resources as the General Manager and is currently the Secretary and a Director of Apex Resources. Mr. Hickey is also President and a director of Omega Ventures Group, Inc.
Robert Gill . Mr. Gill earned a Bachelors of Science degree from Simon Fraser University located in British Columbia majoring in Computing Science and minoring in business in June of 2003. Since 1996 Mr. Gill has owned and operated a web development and technical support company and has worked as a software engineer for several companies. Mr. Gill is also an officer and director of Omega Ventures Group, Inc.
The Company intends to, but has not yet adopted a code of ethics for its principal executive, financial and accounting officers or controller or for person performing similar functions.
Compliance with Section 16(a) of the Exchange Act
Directors and executive officers are required to comply with Section 16(a) of the Securities Exchange Act of 1934, which requires generally that such persons file reports regarding ownership of and transactions in securities of the Company on Forms 3, 4, and 5. Form 3 is an initial statement of ownership of securities. Form 4 is to report changes in beneficial ownership. Form 5 is an annual statement of changes in beneficial ownership.
17
Based solely on a review of Forms 3 and 4 and amendments thereto furnished to the Company during its most recent fiscal year, and Forms 5 and amendments thereto furnished to the Company with respect to the most recent fiscal year, to the Company’s knowledge, it appears that John Hickey failed to file Form 4s reporting seven transactions during the year.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth certain summary information concerning the compensation paid or accrued to its executive officers and directors during the past three fiscal years.
Summary Compensation Table
Annual Compensation Long Term Compensation
Awards Payouts
Name & Principal Other Annual Restricted Stock Options LTIP Payout All Other
Position Year Salary Bonus Compensation Awards /SARs # ($) Compensation
John R. Rask 2005 $ -0- $ -0- $ -0- $ -0- -- $ -0- $ -0-
President, Director 2004 -0- -0- -0- -0- -- -0- -0-
2003 -0- -0- -0- -0- -- -0- -0-
John M. Hickey 2005 60,000 -0- -0- -0- -- -0- -0-
Secretary, Director 2004 60,000 -0- -0- -0- -- -0- -0-
2003 60,000 -0- -0- -0- -- -0- -0-
Employment Agreements with Executive Officers
We have no formal employment agreements with any of our executive officers.
Compensation of Directors
We have no arrangements pursuant to which your directors are compensated for any services provided as a director, or for committee participation or special assignments.
Termination of Employment and Change of Control Arrangement
There are no compensatory plans or arrangements, including payments to be received from us, with respect to any person named in cash compensation set forth above that 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, or a change in the person's responsibilities following a changing in control of the Company.
18
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The term "beneficial owner" refers to both the power of investment (the right to buy and sell) and rights of ownership (the right to receive distributions from the company and proceeds from sales of the shares). Inasmuch as these rights or shares may be held by more than one person, each person who has a beneficial ownership interest in shares is deemed the beneficial owners of the same shares because there is shared power of investment or shared rights of ownership.
The following table sets forth as of October 17, 2005, the name and 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 92,625,212 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.
Title of Class Name of Beneficial Owner Amount and Nature of Beneficial Ownership Percentage of Class
Common Robert Gill 2,367,655 2.6%
1075 Groveland Road
West Vancouver, B.C. V7S 1Z3
Common John M. Hickey 1 5,795,480 6.2%
1601-1415 West Georgia Street
Vancouver, B.C. V6G 3C8
Common John R. Rask 907,825 0.9%
1909 Monroe Ave.
Butte, Montana 59701
Common All Officers and Directors as a Group: 9,070,960 9.7%
(3 persons)
1 In addition to the 4,355,480 shares Mr. Hickey holds in his own name, he may also be deemed to be the beneficial owner of 1,440,000 common shares held of record by Manhattan Communications, Inc.
19
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the year the Company made no interest, demand loans to Omega Ventures Group, Inc., of $148,004. Omega Ventures Group, Inc., is related through common management. The total outstanding balance of demand loans made by the Company totaled $156,072 at June 30, 2005. As of the date of this annual report, the Company has not demanded repayment of these loans.
During the year, the Company issued 1,855,480 restricted common shares to John Hickey, for services and reimbursement of Company expenses paid by John Hickey on behalf of the Company. The shares were valued at the current market price at the time the shares were issued.
In December 2004, the Company issued John Hickey a bonus of 700,000 restricted common shares bonus in recognition of the contributions he has made to the Company over the past ten years.
On June 30, 2005, the Company had accrued accounts payable to related parties, including officers and directors in the amount of $147,074.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Reports on Form 8-K.
None.
(b) Exhibits. The following exhibits are included as part of this report:
Exhibit 21.1 List of Subsidiaries
Exhibit 31.1 Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 31.2 Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 32.1 Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 32.2 Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
20
ITEM 14. PRINCIPAL ACOUNTANT FEES AND SERVICES
Madsen & Associates, CPA’s Inc., served as our independent registered public accounting firm for the years ended June 30, 2005 and 2004, and is expected to serve in that capacity for the current year. Principal accounting fees for professional services rendered for us by Madsen & Associates for the years ended June 30, 2005 and 2004, are summarized as follows:
2005 2004
Audit $ 15,250 $ 14,675
Audit related - -
Tax $ 300 $ 450
All other - -
Total $ 15,550 $ 15,125
Audit Fees . Audit fees were for professional services rendered in connection with the Company’s annual financial statement audits and quarterly reviews of financial statements for filing with the Securities and Exchange Commission.
Board of Directors Pre-Approval Policies and Procedures . At its regularly scheduled and special meetings, the Board of Directors, in lieu of an established audit committee, considers and pre-approves any audit and non-audit services to be performed by the Company’s independent accountants. The Board of Directors has the authority to grant pre-approvals of non-audit services.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused this report to be signed on its behalf of the undersigned, thereunto duly authorized.
APEX RESOURCES GROUP, INC.
Date: November 4, 2005 By: /s/ John R. Rask
John R. Rask, President and Director Officer
Date: November 4, 2005 By: /s/ John Hickey
John Hickey, Secretary and Director Officer
Date: November 4, 2005 By: /s/ Robert Gill
Robert Gill, Director Officer
21
APEX RESOURCES GROUP, INC.
(A Development Stage Entity)
FINANCIAL STATEMENTS
For the year ended June 30, 2005
TABLE OF CONTENTS
Page
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2005
Balance Sheets F-2
Statement of Operations F-3
Statement of Stockholders’ Equity F-4
Statement of Cash Flows F-6
Notes to Financial Statements F-8
F-1
Board of Directors
Apex Resources Group, Inc.
Vancouver, B.C., Canada
Report of Independent Registered Public Accounting Firm
We have audited the accompanying balance sheet of Apex Resources Group, Inc.( a Development Stage Company) as of June 30, 2005 and the related statements of operations, changes in stockholders’ equity and cash flows for the years ended June 30, 2005 and 2004 and for the period January 27, 1984 (date of inception) to June 30, 2005. 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 audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance 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, significant estimates made by management and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, these financial statements referred to above present fairly, in all material aspects, the financial position of Apex Resources Group, Inc. as of June 30, 2005 and the results of its operations and cash flows for the years ended June 30, 2005 and 2004 and for the period January 27, 1984 (date of inception) to June 30, 2005 in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The Company will need additional working capital for its planned activity, which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are described in the notes to the financial statements. These financial statements do not include any adjustment that might result from the outcome of this uncertainty.
Madsen & Associates CPA’s, Inc.
October 15, 2005
Salt Lake City, Utah
F-2
APEX RESOURCES GROUP, INC.
(Development Stage Company)
BALANCE SHEETS
June 30, 2005
ASSETS
CURRENT ASSETS
Cash $ 18,507
Total Current Assets $ 18,507
PROPERTY AND EQUIPMENT - net of accumulated depreciation 191,005
OTHER ASSETS
Accounts receivable - affiliates 156,072
Oil leases 67,913
Land 83,600
Available-for-sale securities 2,428
Land - Canada 222,234
$ 532,247
$ 741,759
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable - land $ 214,118
Accounts payable 36,766
Accounts payable - related parties 323,604
Total Current Liabilities 574,488
STOCKHOLDERS' EQUITY
Common stock
400,000,000 shares authorized, at $.001 par value;
92,625,212 issued and outstanding 92,625
Capital in excess of par value 10,983,235
Less stock subscriptions receivable (2,427,000 )
Deficit accumulated during the development stage (8,481,589 )
Total Stockholders' Equity 167,271
$ 741,759
The accompanying notes are an integral part of these financial statements.
F-3
APEX RESOURCES GROUP, INC.
(Development Stage Company)
STATEMENT OF OPERATIONS -
For the Years Ended June 30, 2005 and 2004 and the
Period January 27, 1984 (date of inception) to June 30, 2005
June June Jan 27, 1984 to
2005 2004 June 30, 2005
REVENUES
Other non operating income $ 12,247 $ 26,664 $ 362,944
EXPENSES
Exploration, development and administrative - Note 9 731,631 750,885 10,025,625
Depreciation 24,000 24,059 148,102
755,753 774,944 10,173,849
NET LOSS - before other Income (743,506 ) (748,280 ) (9,810,905 )
Gain on sale of assets 4,561 - 1,329,316
NET LOSS $ (738,945 ) $ (748,280 ) $ (8,481,589 )
LOSS PER COMMON SHARE
Basic and diluted $ (0.01 ) $ (0.02 )
AVERAGE OUTSTANDING SHARES - (stated in 1,000's)
Basic 68,186 42,947
The accompanying notes are an integral part of these financial statements.
F-4
APEX RESOURCES GROUP, INC.
(Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Period January 27, 1984 (Date of Inception) to June 30, 2005
Capital in
Common Stock Excess of Accumulated
Shares Amount Par Value Deficit
Balance January 27, 1984 (Date of Inception) - $ - $ - $ -
Issuance of common stock from inception to June 30, 1998 1,610,838 1,611 2,120,660
Net losses from operations for the six years ended June 30, 1989 - - - (38,910 )
Capital contribution - expenses - - 752 -
Net losses from operations for the six years ended June 30, 1998 - - - (1,641,468 )
Issuance of common stock for the year ended June 30, 1999 1,943,798 1,944 1,344,079 -
Net loss from operations for the year ended June 30, 1999 - - - (1,607,517 )
Issuance of common stock for the year ended June 30, 2000 3,318,058 3,318 2,948,196 -
Net loss from operations for the year ended June 30, 2000 - - - (1,029,239 )
Issuance of common stock for the year ended June 30, 2001 1,034,500 1,034 778,467 -
Net loss from operations for the year ended June 30, 2001 - - - (807,576 )
Issuance of common stock for services & expenses - August 31, 2001 105,000 105 62,894 -
Net loss from operations for the year ended June 30, 2002 - - - (1,216,953 )
Issuance of common stock for services at $.001 - April 14, 2003 6,380,000 6,380 - -
Issuance of common stock for cash at $.001 - April & June 2003 15,650,000 15,650 - -
Issuance of common stock for services at $.01 - June 3, 2003 2,500,000 2,500 22,500 -
Issuance of common stock for services at $.05 - June 30, 2003 1,680,000 1,680 82,320 -
Net loss from operations for the year ended June 30, 2003 - - - (652,701 )
Issuance of common stock for purchase of land at $.03 - Nov 17, 2003 300,000 300 8,700 -
Issuance of common stock for payment of debt at $.03 - Nov 25, 2003 7,095,666 7,095 205,774 -
Issuance of common stock for cash at $.02 - Nov 6, 2003 2,500,000 2,500 47,500 -
Issuance of common stock for cash at $.15 to $.04 - Jan & Feb 2004 2,501,820 2,502 49,657 -
Issuance of common stock for cash at $.05 - March 2004 367,665 368 18,014 -
Issuance of common stock for services at $.001 - April 2004 500,000 500 - -
Issuance of common stock for payment of debt at $.03 - June 2004 2,376,234 2,377 68,910 -
Issuance of common stock for services and expenses $ .03 - Nov 2003 & Jun 2004 8,400,000 8,400 243,600
Net loss from operations for the year ended June 30, 2004 - - - (748,280 )
Balance June 30, 2004 - audited 58,263,569 58,264 8,002,023 (7,742,644 )
Issuance of common stock for expenses at $.02 - Sept 2, 2004 1,717,785 1,718 30,137 -
Issuance of common stock for payment of debt at $.02 - Sept 2, 2004 311,500 311 7,789 -
Issuance of common stock for expenses and services at $.02 - Sept 24, 2004 2,800,000 2,800 81,200 -
Issuance of common stock for cash and note receivable at $.02 - Sept 27, 2004 5,000,000 5,000 95,000 -
Issuance of common stock for land at $.016 to .02 - Sept 29, 2004 1,100,000 1,100 16,900 -
Issuance of common stock for stock subscriptions receivable at $.05 to $.20 November & December 2004 18,000,000 18,000 2,432,000 -
Issuance of common stock for expenses at $.05 - December 21, 2004 4,392,358 4,392 215,226 -
Issuance of common stock for cash at $.10 - December 2, 2004 100,000 100 9,900 -
Issuance of common stock for payment of debt at $.10 - May 11, 2005 840,000 840 83,160 -
Issuance of common stock for expenses at $.10 - June 15, 2005 100,000 100 9,900 -
Net loss from operations for the year ended June 30, 2005 - - - $ (738,945 )
Balance June 30, 2005 - 92,625,212 $ 92,625 $ 10,983,235 $ ( 8,481,589 )
The accompanying notes are an integral part of these financial statements.
F-5
APEX RESOURCES GROUP, INC.
(Development Stage Company)
STATEMENT OF CASH FLOWS -
For the Years Ended June 30, 2005 and 2004 and the
Period January 27, 1984 (Date of Inception) to June 30, 2005
June June, January 27, 1984
2005 2004 to June 2005
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (738,945 ) $ (748,280 ) $ (8,481,589 )
Adjustments to reconcile net loss to net cash provided by operating activities
Loss of mineral properties - 131,657 -
Depreciation 24,000 24,059 124,386
Common capital stock issued for services & expenses 345,473 270,882 5,322,093
Gain on sale of assets - - -
(Increase) decrease in accounts receivable (7,140 ) (56,370 ) (156,072 )
Increase (decrease) in liabilities 468,879 279,792 947,128
Net Cash used by Operations 92,267 ( 98,260 ) (2,244,054 )
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investments - 200 - (2,428 )
Purchase of property & equipment (221,701 ) (74,600 ) (616,225 )
Purchase of oil & gas leases and mining claims - - (67,913 )
Net proceeds from sale of assets - - -
(221,501 ) (74,600 ) (6856,566 )
CASH FLOWS FROM FINANCING ACTIVITIES
Notes payable - land - 71,183 -
Net proceeds from issuance of capital stock -133,000 102,159 2,949,127
133,000 173,342 2,949,127
Net increase (decrease) in cash 3,766 482 18,507
Cash at beginning of year 14,741 14,259 -
Cash at end of year $ 18,507 $ 14,741 $ 18,507
The accompanying notes are an integral part of these financial statements.
F-6
APEX RESOURCES GROUP, INC.
(Development Stage Company)
STATEMENT OF CASH FLOWS (Continued)
For the Period January 27, 1984 (Date of Inception) to June 30, 2005
SCHEDULE OF NONCASH OPERATING, INVESTING, AND FINANCING ACTIVITIES
Issuance of 1,154,073 common shares for assets, services and expenses -
from inception to June 30, 1998 $ 1,500,765
Issuance of 1,549,875 common shares for assets, services and expenses -
for the year ended June 30, 1999 1,157,000
Issuance of 1,242,781 common shares for assets, services and expenses -
for the year ended June 30, 2000 1,240,093
Issuance of 784,500 common shares for services and expenses -
for the year ended June 30, 2001 629,500
Issuance of 105,000 common shares for services and expenses -
for the year ended June 30, 2002 62,999
Issuance of 10,560,000 common shares for services and expenses -
for the year ended June 30, 2003 115,380
Issuance of 9,267,655 common shares for services and expenses -
for the year ended June 30, 2004 270,882
Issuance of 9,010,143 common shares for assets, services and expenses
for the year ended June 30, 2005 345,473
The accompanying notes are an integral part of these financial statements.
F-7
APEX RESOURCES GROUP, INC.
(Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
June 30, 2005
1. ORGANIZATION
The Company was incorporated in the State of Utah on January 27, 1984 with authorized capital stock of 50,000,000 shares at a par value of $0.001. 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. On March 26, 2003 the name of the Company was changed from “Ambra Resources Group, Inc. to “Apex Resources Group, Inc.”
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 consists of the following:
Office equipment 145,880
Residential rentals 164,511
Less accumulated depreciation (119,386 )
191,005
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.
Basic and Diluted Net Income (Loss) Per Share
Basic net income (loss) per share amounts are computed based on the weighted average number of shares actually outstanding. Diluted net income (loss) per share amounts are computed using the weighted average number of common shares and common equivalent shares outstanding as if shares had been issued on the exercise of any common share rights unless the exercise becomes antidilutive and then only the basic per share amounts are shown in the report.
F-8
APEX RESOURCES GROUP, INC.
(Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (Continued)
June 30, 2005
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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 it is proven to be 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 claim interests acquired are unknown and therefore an estimate of any future cost cannot be made.
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 are considered by management to be their estimated fair values due their short term maturities.
Income Taxes
The Company utilizes the liability method of accounting for income taxes. Under the liability method deferred tax assets and liabilities are determined based on the differences between financial reporting and the tax bases of the assets and liabilities and are measured using the enacted tax rates and laws that will be in effect, when the differences are expected to reverse. An allowance against deferred tax assets is recorded, when it is more likely than not, that such tax benefits will not be realized.
At June 30, 2005, the Company had a net operating loss available for carry forward of $8,470,402 . The tax benefit of approximately $2,541,121 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 2005 through 2025.
Revenue Recognition
Revenue is recognized on the sale and transfer of properties or services and the receipt other sources of income.
F-9
APEX RESOURCES GROUP, INC.
(Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (Continued)
June 30, 2005
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Advertising and Market Development
The company expenses advertising and market development costs as incurred.
Estimates and Assumptions
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 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.
3. OIL LEASES - BEAUFORT SEA PROJECT
On June 9, 1997 the Company purchased a 3.745% working interest, for $67,913, 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 lease is shown at cost, which is considered by management to be its estimated fair value.
The other partners in the project are controlled by Exxon Oil Corporation, however there is no
immediate plans to develop the area until a gas pipe line becomes available.
F-10
APEX RESOURCES GROUP, INC.
(Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (Continued)
June 30, 2005
4. PURCHASE OF LAND
The Company is obligated under installment sales contracts for the purchase of land. The contracts have balances of $214,118 at June 30, 2005, including accrued interest, on which $126,105 was due December 31, 2004 (unpaid) and the balance of $88,013 due over 25 years in monthly payments, including interest of 11%. The payments due are in arrears.
5. ISSUANCE OF COMMON CAPITAL STOCK
During the year ended June 30, 2005 the Company issued 5,000,000 restricted common shares for cash and note receivable for $100,000. Also, during the year ended June 30, 2005, the Company issued 9,010,143 restricted common shares for services for $345,473, 1,151,500 restricted common shares for payment of debt for $92,100, 1,100,000 restricted common shares for land of $18,000, 18,000,000 restricted common shares for subscriptions receivable for $2,450,000 and 100,000 common shares for cash in the amount of $10,000..
6. SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES
Officers-directors and their controlled entities and a consultant have acquired 21% of the outstanding common stock of the Company and have received the restricted common capital stock issued to them as outlined in note 5.
On June 30, 2005 the Company owed certain shareholders, directors and officers the sum of $323,604.
The Company has made no interest, demand loans to affiliates of $156,072. The affiliations resulted through common officers between the company and its affiliates, and the Company owns 13% of the outstanding stock of one of the affiliates.
7. GOING CONCERN
The company will need additional working capital for its future planned activity and to service its debt, which raises substantial doubt about its ability to continue as a going concern. Continuation of the Company as a going concern is dependent upon obtaining sufficient working capital to be successful in that effort. The management of the Company has developed a strategy, which it believes will accomplish this objective, through additional short term loans, and equity funding, which will enable the Company to operate for the coming year.
F-11
APEX RESOURCES GROUP, INC.
( Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (Continued)
June 30, 2005
8. SCHEDULE OF EXPENSES
Following is a summary schedule of the expenses shown in the statement of operations under exploration, development, and administrative.
June, 2005 June, 2004
Travel $ 55,075 $ 37,345
Office expenses 93,066 104,139
Telephone 29,465 17,930
Professional 36,163 33,431
Consultants 320,054 328,936
Promotional 18,678 10,801
Rent 72,421 28,529
Exploration and development - oil and gas 69,003 77,180
Other 37,706 12,594
$ 731,631 $ 750,885
F-12
EXHIBIT 21.1
LIST OF SUBSIDIARIES OF
APEX RESOURCES GROUP, INC.
The Company has no subsidiaries.
EXHIBIT 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, John Rask, certify that:
(1) I have reviewed this Annual Report on Form 10-KSB of Apex Resources Group, Inc. (the “Company”);
(2) Based on my knowledge, this Annual 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 Annual Report;
(3) Based on my knowledge, the financial statements, and other financial information included in this Annual Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this Annual Report;
(4) The Company’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:
(a) Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision to ensure that material information relating to the Company, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this Annual Report based on such evaluation; and
(d) Disclosed in this Annual Report any change in the Company’s internal controls over financial reporting that occurred during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal controls over financial reporting; and
(5) The Company’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons fulfilling the equivalent function):
(a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls over financial reporting.
Date: November 4, 2005 /s/ John Rask
John Rask, Principal Executive Officer
EXHIBIT 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, John Hickey, certify that:
(1) I have reviewed this Annual Report on Form 10-KSB of Apex Resources Group, Inc. (the “Company”);
(2) Based on my knowledge, this Annual 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 Annual Report;
(3) Based on my knowledge, the financial statements, and other financial information included in this Annual Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this Annual Report;
(4) The Company’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:
(a) Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision to ensure that material information relating to the Company, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this Annual Report based on such evaluation; and
(d) Disclosed in this Annual Report any change in the Company’s internal controls over financial reporting that occurred during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal controls over financial reporting; and
(5) The Company’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons fulfilling the equivalent function):
(a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls over financial reporting.
Date: November 4, 2005 /s/ John Hickey
John Hickey, Principal Financial Officer
EXHIBIT 32.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT BY
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Apex Resources Group, Inc. on Form 10-KSB for the year ended June 30, 2005, as filed with the Securities and Exchange Commission on the date hereof (the "Report" ), the undersigned, John Rask, Principal Executive Officer of Apex Resources Group, Inc., certifies, pursuant to 18 U.S.C. §1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13 (a) or 15 (d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
Date: November 4, 2005 /s/ John Rask
John Rask, Principal Executive Officer
EXHIBIT 32.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT BY
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Apex Resources Group, Inc., on Form 10-KSB for the period ending June 30, 2005 as filed with the Securities and Exchange Commission on the date hereof (the "Report" ), the undersigned, John Hickey, Principal Financial Officer of Apex Resources Group, Inc., certifies, pursuant to 18 U.S.C. §1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13 (a) or 15 (d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
Date: November 4, 2005 /s/ John Hickey
John Hickey, Principal Financial Officer
End of Filing
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