UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
(x) | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended: March 31, 2007
( ) | 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.
(Exact name of registrant as specified in charter)
UTAH | 87-0403828 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| |
299 S. Main Street, Suite 1300, Salt Lake City, Utah | 84111 |
(Address of principal executive offices) | (Zip Code) |
(801) 534-4450
Registrant’s telephone number, including area code
Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
As of May 10, 2007, the Company had 120,681,870 shares of its $.001 par value, common stock outstanding.
Transitional Small Business Disclosure Format:
INDEX
| | Page |
| | Number |
PART I. | |
| | |
ITEM 1. | Financial Statements (unaudited) | 3 |
| | |
| Balance Sheet As of March 31, 2007 and June 30, 2006 | 4 |
| | |
| Statements of Operations Three Months and Nine Months Ended March 31, 2007 and 2006 and the Period from Inception (January 27, 1984) to March 31, 2007 | 5 |
| | |
| Statement of Cash Flows Nine Months Ended March 31, 2007 and 2006 and the Period from Inception (January 27, 1984) to March 31, 2007 | 6 |
| | |
| Notes to Financial Statements | 7 |
| | |
ITEM 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 12 |
| | |
ITEM 3. | Controls and Procedures | 17 |
| | |
PART II | |
| | |
ITEM 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 17 |
| | |
ITEM 5. | Other Information | 18 |
| | |
ITEM 6. | Exhibits | 18 |
| | |
Signatures | 19 |
PART I - FINANCIAL INFORMATION
This filing contains certain forward-looking statements. For this purpose any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, words such as “may,” “will,” “expect,” “believe,” anticipate,” “estimate” or “continue” or comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainty, and actual results may differ materially depending on a variety of factors, many of which are not within the Company’s control. These factors include but are not limited to economic conditions generally and in the industries in which the Company participate; competition within the Company’s industry, including competition from much larger competitors; and changes in laws and regulation that effect the Company.
ITEM 1. | FINANCIAL STATEMENTS |
The accompanying balance sheet of Apex Resources Group, Inc., (development stage company) at March 31, 2007, the statements of operations for the three and nine months ended March 31, 2007 and 2006 and the period from inception (January 27, 1984) to March 31, 2007 and statements of cash flows for the nine months ended March 31, 2007 and 2006 and the period from inception (January 27, 1984) to March 31, 2007, have been prepared by the Company’s management in conformity with accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature.
Operating results for the quarter ended March 31, 2007, are not necessarily indicative of the results that can be expected for the year ending June 30, 2007.
APEX RESOURCES GROUP, INC.
(DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
| | March 31, 2007 | | June 30, 2006 | |
CURRENT ASSETS | | | | | |
Cash | | | 9,770 | | | 6,775 | |
Total Current Assets | | | 9,770 | | | 6,775 | |
| | | | | | | |
PROPERTY AND EQUIPMENT - net of accumulated depreciation | | | 103,183 | | | 167,005 | |
| | | | | | | |
OTHER ASSETS | | | | | | | |
Accounts receivable - affiliates | | | 49,879 | | | 70,210 | |
Oil leases | | | 67,913 | | | 67,913 | |
Available for sale securities | | | 2,428 | | | 2,428 | |
Land | | | 34,352 | | | 92,679 | |
Land - Canada | | | - | | | | |
| | | 154,572 | | | 233,230 | |
| | | | | | | |
Total Assets | | | 267,525 | | | 407,010 | |
| | | | | | | |
LIABILITIES AND STOCKHOLDERS' DEFICIT | | | | | | | |
| | | | | | | |
CURRENT LIABILITIES | | | | | | | |
Accounts payable | | | 168,850 | | | 74,718 | |
Note Payable - Land | | | - | | | - | |
Accounts payable - related parties | | | 67,056 | | | 807,686 | |
Total Current Liabilities | | | 235,906 | | | 882,404 | |
| | | | | | | |
STOCKHOLDERS' EQUITY | | | | | | | |
Common stock | | | | | | | |
400,000,000 shares authorized, at $.001 par value; 120,681,870 issued and outstanding | | | 120,682 | | | 92,625 | |
Capital in excess of par value | | | 9,505,281 | | | 10,983,235 | |
Less stock subscriptions receivable | | | (274,209 | ) | | (2,427,000 | ) |
Deficit accumulated during the development stage | | | (9,320,135 | ) | | (9,124,254 | ) |
Total Stockholders' Equity | | | 31,619 | | | (475,394 | ) |
| | | | | | | |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | | | 267,525 | | | 407,010 | |
APEX RESOURCES GROUP, INC.
(DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
| | 3 months ended March 31, | | 9 months ended March 31 | | Jan. 27, 1984 (date of inception of development stage) to March 31, | |
| | 2007 | | 2006 | | 2007 | | 2006 | | 2007 | |
| | | | | | | | | | | |
REVENUES | | | | | | | | | | | |
Other non-operating income | | $ | 318 | | $ | 1,299 | | $ | 968 | | $ | 5,083 | | $ | 369,111 | |
| | | | | | | | | | | | | | | | |
EXPENSES | | | | | | | | | | | | | | | | |
Exploration, development and administrative - Note 6 | | | 124,511 | | | 42,877 | | | 318,657 | | | 238,686 | | | 10,982,907 | |
Depreciation | | | 6,000 | | | 6,000 | | | 16,656 | | | 18,000 | | | 188,758 | |
| | | | | | | | | | | | | | | | |
Total operating expenses | | | 130,511 | | | 48,877 | | | 335,313 | | | 256,686 | | | 11,171,665 | |
| | | | | | | | | | | | | | | | |
NET (LOSS) - before other income (expense) | | | (130,193 | ) | | (47,578 | ) | | (334,345 | ) | | (251,603 | ) | | (10,802,554 | ) |
| | | | | | | | | | | | | | | | |
Gain on sale of assets | | | - | | | - | | | 141,636 | | | 39,249 | | | 1,511,945 | |
Loss on land foreclosure | | | | | | | | | | | | | | | (1,744 | ) |
Interest expense | | | (1,840 | ) | | (2,000 | ) | | (3,172 | ) | | (22,525 | ) | | (27,782 | ) |
| | | | | | | | | | | | | | | | |
NET (LOSS) | | | (132,033 | ) | | (49,578 | ) | | (195,881 | ) | | (234,879 | ) | | (9,320,135 | ) |
| | | | | | | | | | | | | | | | |
Basic net (loss) per common share | | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | | | |
| | | | | | | | | | | | | | | | |
Weighted average shares outstanding | | | 114,015,203 | | | 92,625,000 | | | 107,901,198 | | | 92,625,000 | | | | |
APEX RESOURCES GROUP, INC.
(DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
| | 9 months ended March 31, | | Jan. 27, 1984 (date of inception of development stage) to March 31, | |
| | 2007 | | 2006 | | 2007 | |
| | | | | | | |
| | | | | | | |
Cash flows from operating activities: | | | | | | | |
Net (loss) | | $ | (195,881 | ) | $ | (234,879 | ) | $ | (9,320,135 | ) |
Adjustments to reconcile net loss to cash used in operating activities: | | | | | | | | | | |
Depreciation | | | 16,656 | | | 18,000 | | | 188,758 | |
Gain on sale of assets | | | (141,636 | ) | | (39,249 | ) | | (1,511,945 | ) |
Common stock issued for services | | | - | | | - | | | 5,322,092 | |
Changes in operating assets and liabilities: | | | | | | | | | | |
(Increase) decrease in accounts receivable | | | 20,331 | | | (357 | ) | | (49,879 | ) |
Increase (decrease) in liabilities | | | 56,394 | | | 223,092 | | | 938,798 | |
Net cash used in operating activities | | $ | (244,136 | ) | $ | (33,393 | ) | | (4,432,311 | ) |
| | | | | | | | | | |
Cash flows from investing activities: | | | | | | | | | | |
Purchase of investments | | $ | - | | $ | - | | | (2,428 | ) |
Proceeds from sale of assets | | | 247,131 | | | 36,415 | | | 2,039,521 | |
Purchase of oil & gas leases and mining claims | | | - | | | - | | | (67,913 | ) |
Purchase of property and equipment | | | - | | | - | | | (616,225 | ) |
Net cash provided by investing activities | | | 247,131 | | | 36,415 | | | 1,352,955 | |
| | | | | | | | | | |
Cash flows from financing activities: | | | | | | | | | | |
Payment of notes payable | | | - | | | (137,917 | ) | | | |
Proceeds from notes payable | | | - | | | 277,916 | | | | |
Net proceeds from issuance of common stock | | | - | | | - | | | 2,949,127 | |
Net cash provided by financing activities | | | 3,089,126 | | | | | | | |
| | | | | | | | | | |
Net increase (decrease) in cash and cash equivalents | | | 2,995 | | | 3,022 | | | 9,770 | |
Cash and cash equivalents, beginning of period | | | 6,775 | | | 18,507 | | | - | |
| | | | | | | | | | |
Cash and cash equivalents, end of period | | $ | 9,770 | | $ | 21,529 | | $ | 9,770 | |
| | | | | | | | | | |
| | | | | | | | | | |
Supplemental disclosure of cash flow information: | | | | | | | | | | |
Interest paid | | $ | - | | $ | - | | $ | - | |
Income taxes paid | | $ | - | | $ | - | | $ | - | |
| | | | | | | | | | |
Non-cash financing activities: | | | | | | | | | | |
Common stock issued for debt | | $ | 600,103 | | $ | - | | $ | 600,103 | |
Common stock subscriptions canceled | | $ | (2,450,000 | ) | $ | - | | $ | (2,450,000 | ) |
Common stock issued - stock subscription | | $ | 400,000 | | | | | $ | 400,000 | |
APEX RESOURCES GROUP, INC.
(Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 2007
1. ORGANIZATION AND BASIS OF PRESENTATION
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.
The interim financial statements of Apex Resources Group, Inc. for the three and nine months ended March 31, 2007 are unaudited. The financial statements are prepared in accordance with the requirements for unaudited interim periods, and consequently do not include all disclosures required to be in conformity with accounting principles generally accepted in the United States of America.
In the opinion of management, the accompanying financial statements contain all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation of the Company’s financial position as of March 31, 2007 and the results of operations and cash flows for the three and nine months ended March 31, 2007.
The results of operations for the three and nine months ended March 31, 2007 are not necessarily indicative of the results for a full year period.
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.
APEX RESOURCES GROUP, INC.
(Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (Continued)
March 31, 2007
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Property and Equipment
The Company’s property and equipment consists of the following:
Office equipment | | | 145,880 | |
Residential rentals | | | 117,345 | |
Less accumulated depreciation | | | (160,042 | ) |
| | | 103,183 | |
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.
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.
APEX RESOURCES GROUP, INC.
(Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (Continued)
March 31, 2007
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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 March 31, 2007, the Company had an approximate net operating loss available for carry forward of $9,320,000. The tax benefit of approximately $2,800,000 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 2026.
Revenue Recognition
Revenue is recognized on the sale and transfer of properties or services and the receipt other sources of income.
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.
APEX RESOURCES GROUP, INC.
(Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (Continued)
March 31, 2007
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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.
APEX RESOURCES GROUP, INC.
(Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (Continued)
March 31, 2007
4. STOCKHOLDERS’ EQUITY
In November 2006, the Company canceled stock subscription agreements for which 18,000,000 shares of common stock had been issued, as related amounts were deemed to be uncollectible. The related shares of common stock were also canceled. Then, in November 2006, the Company issued another 18,000,000 shares of common stock under new stock subscription agreements, at a value of $180,000 (6,000,000 of these shares were to related parties as disclosed in Footnote 4). On March 31, 2007, the Company also issued stock subscription agreements for the purchase of 10,000,000 “units” through a private placement offering. Each unit consists of one share of common stock and one warrant. Each unit was sold at a price of $0.022 per unit. Each warrant entitles the holder to purchase one additional share of stock at an exercise price of $0.03 per share with the warrants expiring one year from the date of issuance. At March 31, 2007, the Company had recorded $274,209 in stock subscriptions receivable.
5. 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.
6. SCHEDULE OF EXPENSES
Following is a summary schedule of the expenses, for the nine months ended March 31, shown in the statement of operations under exploration, development, and administrative.
| | March 31, | |
| | 2007 | | 2006 | |
| | | | | |
Travel | | $ | 40,478 | | $ | 27,754 | |
Advertising | | | 28,260 | | | - | |
Office expenses | | | 67,260 | | | 25,404 | |
Professional | | | 35,384 | | | 22,047 | |
Consultants | | | 116,974 | | | 72,862 | |
Rent | | | 25,405 | | | 44,179 | |
Exploration and development oil & gas | | | 4,896 | | | 1,030 | |
Other | | | - | | | 45,410 | |
| | | | | | | |
| | $ | 318,657 | | $ | 238,686 | |
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION |
For a complete understanding, this Management’s Discussion and Analysis should be read in conjunction with Part I- Item 1, Financial Statements to this Form 10-QSB and the Annual Report of the Company on Form 10-KSB for the year ended June 30, 2006.
General
The Company is in the development stage and engaged in the acquisition of small interests in gas and oil properties and the acquisition of interests in real estate. The Company has not been engaged in the production of any gas and oil. For a detailed description of the oil and gas and real estate holding of the Company, please see the Annual Report of the Company filed on Form 10-KSB for the year ended June 30, 2006. Following is a brief description of relevant events that occurred during the quarter ended March 31, 2007.
Business of the Company
Oil and Gas Interests
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 main partner in the project is Imperial Oil Resources. A consortium of oil and gas companies has filed an application to build a natural gas pipeline that could be used to transport gas from the Beaufort Sea region. No current plans have been formulated to perform further work in the immediate Beaufort Sea area. It is anticipated this area will not be developed until a pipeline is built.
Bastian Bay Field, Plaquamines Parish, Louisiana
Last year, Imperial Petroleum Inc., the operator of Bastian Bay Field Lease #16152 in Plaquamines Parish Louisiana made a cash call to all participants in the well. The participants in the well were given the choice to pay the cash call or continue on a non-consent basis under which the non paying participants relinquishing half of their working interest. The Company determined that it was not in its best interest to meet the cash call. Therefore, the Company’s interest in this well decreased from 6.25% to 3.125%. As of this time Imperial has put work on the well on hold and the Company does not know when they expect to begin work again.
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 450,000 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. As part of the additional testing, to try and increase the flow rate of gas, the operator is planning on installing an electric generator. Installation of the electric generator occurred during the quarter. We expect the well will be opened in the next few months.
Real Estate Interests
Abbecombec Ocean Village Resort
The Company is currently trying to sell this property, and had discontinued renting the vacation home until such time as it is sold. This property is not subject to any mortgage or other obligation and the Company believes the property is adequately insured. At this time the Company has no plans to renovate or otherwise improve the property.
The Company also owns approximately 11,146,679 or 10.1% 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.”
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 three months ended March 31, 2007, the Company financed part of its operations through cash on hand, as cash on hand at the end of the decreased to $9,770 from $56,648 at the beginning of the quarter. The Company also borrowed funds from a related party to help fund operations during the quarter. During the quarter accounts payable increased from $89,622 to $168,850.
The Company has plans to further develop its oil and gas properties, which will require substantial additional working capital that the Company does not currently have. Moreover, the Company does not anticipate significant revenue from its operating activities in the upcoming quarter.
Results of Operations
Comparison of the three months ended March 31, 2007 and 2006
The Company sustained a net loss of $132,033 during the three months ended March 31, 2007 compared to a loss of $49,578 for the three months ended March 31, 2006 as the Company engaged in more active operations during the first quarter 2007 than in the first quarter 2006. The Company incurred the following expenses:
| | Three months ended | |
| | March 31, | |
| | 2007 | | 2006 | |
| | | | | |
Travel | | $ | 23,259 | | $ | 7,740 | |
Advertising | | | 14,834 | | | - | |
Office expenses | | | 31,248 | | | 7,380 | |
Professional | | | 8,163 | | | 3,518 | |
Consultants | | | 37,762 | | | 403 | |
Rent | | | 4,349 | | | 6,628 | |
Exploration and development oil & gas | | | 4,896 | | | 1,030 | |
Other | | | - | | | 16,178 | |
| | | | | | | |
| | $ | 124,511 | | $ | 42,877 | |
Travel expenses increased $15,519 or 201% to during the three months ended March 31, 2007 compared to March 31, 2006. This increase in travel expenses was primarily the result of increased travel by management to meet with the Company’s legal and accounting professionals in connection with the preparation of SEC filings. The Company expects travel expenses in future quarters to be more or less consistent with expenses realized during the three months ended March 31, 2007.
During the three months ended March 31, 2007 we incurred $14,834 in advertising expense, compared to $0 during the three months ended March 31, 2006. Advertising expense was largely related to the cost of issuing press releases and other information regarding the Company. The Company anticipates advertising expense will continue to remain at about the same level as experienced during the third quarter throughout the remainder of the fiscal year.
Office expenses increased $24,048 or 326% to $31,248 during the three months ended March 31, 2007 compared to the same period 2006. This increase was attributable to the costs of office relocation and the closing of the Company’s offices in Canada. We do not expect office expenses to continue to rise in upcoming quarters.
Professional fees increased $4,645 or 132% during the three months ended March 31, 2007. The increase is primarily the result of professional fees incurred by the Company seeking the assistance of its accounting and legal firms firm in reviewing and assisting in the preparation of the Company’s financial statements and reports to the SEC. The Company expects professional expenses will continue at rates consistent with or higher than those experienced during the quarter as a result of increasing legal and accounting costs associated with being a public company.
During the three months ended March 31, 2007 consultants’ fees increased to 37,762 from $403 during the three months ended March 31, 2006 as the Company retained the services of an additional consultant. The Company has no employees, rather management retains consultants to provide the services the Company needs. The Company expects consultants’ fees to continue to be higher throughout the remainder of the current fiscal year.
Rent expenses decreased $2,279 or 34% during the three months ended March 31, 2007 compared to 2006 as a result of the termination of the lease for our Vancouver office. We anticipate rents will remain consistent with those experienced during the three month ended March 31, 2007 in upcoming quarters.
Exploration and development expenses increased to $4,896 during the third fiscal quarter 2007 compared to $1,030 during the third fiscal quarter 2006. This increase is the result of works completed at the Henry Dome prospect. The Company does not expect to incur additional exploration and development costs during the balance of the current fiscal year.
Other expenses decreased to $0 for the three months ended March 31, 2007 compared to $16,613 for the three months ended March 31, 2006. We expect that other expenses will remain at consistent level in upcoming fiscal quarters.
The Company generated no operating income during the three months ended March 31, 2007 or 2006. Non-operating income during the three months ended March 31, 2007, was $318 compared to $1,299 during the three months ended March 31, 2006.
Comparison of the nine months ended March 31, 2007 and 2006
The Company sustained a net loss of $195,881 during the nine months ended March 31, 2007 compared to a loss of $234,879 for the nine months ended March 31, 2007. This decrease in loss was primarily the result of the Company realizing $141,636 on the sale of assets during fiscal 2007, compared to a gain on the sale of assets of only $39,249 during fiscal 2006. Otherwise, the Company incurred greater costs in fiscal 2007 than in fiscal 2006. The Company incurred the following expenses:
| | Nine months ended, | |
| | March 31, | |
| | 2007 | | 2006 | |
| | | | | |
Travel | | $ | 40,478 | | $ | 27,754 | |
Advertising | | | 28,260 | | | - | |
Office expenses | | | 67,260 | | | 25,404 | |
Professional | | | 35,384 | | | 22,047 | |
Consultants | | | 116,974 | | | 72,862 | |
Rent | | | 25,405 | | | 44,179 | |
Exploration and development oil & gas | | | 4,896 | | | 1,030 | |
Other | | | - | | | 45,410 | |
| | | | | | | |
| | $ | 318,657 | | $ | 238,686 | |
Travel expenses increased $12,724 or 46% during the nine months ended March 31, 2007 compared to March 31, 2007. This increase in travel expenses was primarily the result of increased travel by management to meet with the Company’s legal and accounting professionals in connection with the preparation of SEC filings and travel by the board of directors to investigate potential investment opportunities. We expect travel expenses will continue to be higher throughout the balance of the current fiscal year.
During the nine months ended March 31, 2007 we incurred $28,260 in advertising expense, compared to $0 during the three months ended March 31, 2006. Advertising expense was largely related to the cost of issuing press releases and other information regarding the Company. The Company anticipates advertising expense will continue to remain at about the same level as experienced during the third quarter throughout the remainder of the fiscal year.
Office expenses increased $41,856 or 165% during the nine months ended March 31, 2007 compared to the same period 2006. This increase is primarily the result of transferring the Company’s executive offices from Vancouver, British Columbia to Salt Lake City, Utah, while continuing to maintain the Vancouver, British Columbia office. And the costs associated with closing the Vancouver office in February 2007. With the closing of the Vancouver office we expect office expenses may be lower in upcoming fiscal quarters.
Professional fees increased $13,337 or 60% during the nine months ended March 31, 2007. The increase is primarily the result of increasing legal and accounting costs incurred by the Company in connection with compliance with its SEC reporting obligations. The Company expects professional expenses to continue at rates consistent with or even higher than those experienced during fiscal 2007.
Consultants’ fees increased $44,112 or 61% during the nine months ended March 31, 2007 compared to nine month period ended March 31, 2006. The Company has no employees, rather management retains consultants to provide the services the Company needs. This increase in consulting fees is the result of the Company relying upon the services of additional consultants during the current fiscal year. The Company expects consultants’ fees to remain constant throughout the balance of the current fiscal year.
Rent expenses decreased $18,774 or 42% during the nine months ended March 31, 2007 compared to 2006. As discussed above, during the current fiscal year the Company completed its lease in Vancouver, Canada and closed its Canadian office. The Company also relocated its offices in Salt Lake City to a smaller office which resulted in lower rents.
Exploration and development expenses increased to $4,896 during the nine months ended March 31, 2007 compared to $1,030 during the nine months ended March 31, 2006. This increase was the result of work completed at the Henry Dome prospect. We do not expect to incur additional exploration and development expenses during the current fiscal year.
Other expenses decreased to $0 for the nine months ended March 31, 2007 compared to $45,410 for the nine months ended March 31, 2006. We expect that other expenses will remain at consistent level in upcoming fiscal quarters.
The Company generated no operating income during the nine months ended March 31, 2007 and 2006. Non-operating income during the nine months ended March 31, 2007, was $968 compared to $5,083 during the nine months ended March 31, 2006.
ITEM 3. | CONTROLS AND PROCEDURES |
Evaluation of Disclosure Controls and Procedures
Our principal executive officer 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. Based on this evaluation, our Certifying Officers have concluded that our disclosure controls and procedures are effective as of March 31, 2007.
Changes in Internal Control over Financial Reporting
There were no changes in our internal controls over financial reporting during the quarter ended March 31, 2007 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
Subsequent to the quarter end, on May 5, 2007, the Company closed a private placement of units to four non-U.S. investors. Each unit consisted of one share of restricted Company common stock and one warrant to purchase an additional share of restricted common stock at an exercise price of $0.03 per share. The warrants are immediately exercisable and expire two years from the date they were issued. The unit price was $.022 per unit. The Company sold a total of 10,000,000 units.
Total proceeds from the private placement was $220,000. From the total proceeds, the Company will pay finders’ fees of up to 10% of the total amount raised. The finders’ fees will not be paid either directly or indirectly to any officer, director or greater than 10% shareholder of the Company.
All offers and sales were made to non-U.S. persons in offshore transactions. No directed selling efforts were made in the United State by the issuer, placement agent or any person acting on their behalf. The shares sold are subject to the offering restrictions set forth in Rule 903(b)(3), including a one-year distribution compliance period.
On March 20, 2007, the board of directors appointed Sameer Chinoy to serve as a director of the corporation. Mr. Chinoy is 29 years of age. Mr. Chinoy is currently employed by Naekheel, a development company in Dubai, UAE, where he works in sales and marketing. During the past five years he has also been employed by Faronics Corporation, a Vancouver-based developer of utilities for multi-user computing environments. Mr. Chinoy also worked in sales and marketing at Faronics Corporation. Mr. Chinoy is not a director of any other SEC reporting issuer. Mr. Chinoy is not related to any Company officer or director.
Exhibits. The following exhibits are included as part of this report:
| 31.1 | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| 31.2 | Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| 32.1 | Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| 32.2 | Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized
| APEX RESOURCES GROUP, INC. |
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Date: May 12, 2007 | By: | /s/ John R. Rask |
| | John R. Rask, President and Director |
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Date: May 12, 2007 | By: | /s/ John M. Hickey |
| | John M. Hickey, Secretary and Director |