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 September 30, 2003
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( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File number 0-11695
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APEX RESOURCES GROUP, INC.
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formerly Ambra Resources Group, Inc.
(Exact name of registrant as specified in charter)
UTAH 87-0403828
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
136 East South Temple, Suite 1600, Salt Lake City, Utah 84111
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(Address of principal executive offices) (Zip Code)
(801) 363-2599
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Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), Yes [x ] No [ ] and (2) has been
subject to such filing requirements for the past 90 days. Yes [x] No [ ]
State the number of shares outstanding of each of the registrants
classes of common equity, as of the latest practicable date.
Common stock, par value $.001; 34,222,194 shares outstanding as of
November 2, 2003.
1
INDEX
Page
Number
PART I.
ITEM 1. Financial Statements (unaudited).................................3
Balance Sheets
September 30, 2003 and June 30, 2003...........................4
Statements of Operations
Three months ended September 30, 2003 and 2002...............5
and the period January 27, 1984 to September 30, 2003
Statements of Cash Flows
Three months ended September 30, 2003 and 2002...............6
and the period January 27, 1984 to September 30, 2003
Notes to Financial Statements....................................8
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.................15
ITEM 3. Controls and Procedures ........................................15
PART II
ITEM 6. Exhibits and Reports on Form 8-K ...............................16
Signatures......................................................17
2
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PART I - FINANCIAL INFORMATION
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This filing contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. For this
purpose any statements contained herein that are not statements of historical
fact may be deemed to be forward-looking statements. Without limiting the
foregoing, words such as "may," "will," "expect," "believe," anticipate,"
"estimate" or "continue" or comparable terminology are intended to identify
forward-looking statements. These statements by their nature involve substantial
risks and uncertainty, and actual results may differ materially depending on a
variety of factors, many of which are not within the Company's control. These
factors include but are not limited to economic conditions generally and in the
industries in which the Company and its customers participate; competition
within the Company's industry, including competition from much larger
competitors; technological advances which could render the Company's products
less competitive or obsolete; failure by the Company to successfully develop new
products or to anticipate current or prospective customers' product needs; price
increase or supply limitations for components purchased by the Company for use
in its products; and delays, reductions, or cancellations of orders previously
placed with the Company.
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ITEM 1. FINANCIAL STATEMENTS
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The accompanying balance sheets of Apex Resources Group, Inc., (
development stage company) at September 30, 2003 and June 30, 2003, and the
statements of operations and cash flows for the three months ended September 30,
2003 and 2002 and the period January 27, 1984 (date of inception) to September
30, 2003, 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 September 30, 2003, are not
necessarily indicative of the results that can be expected for the year ending
June 30, 2004.
3
APEX RESOURCES GROUP, INC.
( Development Stage Company)
BALANCE SHEET
September 30, 2003 and June 30, 2003
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ASSETS
Sept 30, 2003 Jun 30, 2003
CURRENT ASSETS
Cash $ 12,677 $ 14,259
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Total Current Assets 12,677 14,259
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PROPERTY AND EQUIPMENT - net of accumulated
depreciation 214,597 221,597
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OTHER ASSETS
Accounts receivable - affiliates 144,061 92,562
Oil leases - note 3 67,913 67,913
Joint venture interest - note 4 125,012 125,012
Other investments 7,005 7,005
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343,991 292,492
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$ 571,265 $ 528,348
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 28,408 $ 26,059
Accounts payable - related parties 212,871 102,563
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Total Current Liabilities 241,279 128,622
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STOCKHOLDERS' EQUITY
Common stock
400,000,000 shares authorized, at $.001 par value;
34,222,194 issued and outstanding 34,222 34,222
Capital in excess of par value 7,359,868 7,359,868
Deficit accumulated during the development stage (7,064,104) (6,994,364)
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Total Stockholders' Equity 329,986 399,726
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$ 571,265 $ 528,348
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The accompanying notes are an integral part of these financial statements.
4
APEX RESOURCES GROUP, INC.
( Development Stage Company)
STATEMENTS OF OPERATIONS
For the Three Months Ended September 30, 2003 and 2002 and the
Period January 27, 1984 (date of inception) to September 30, 2003
January 27, 1984
Sept 30, Sept 30, (Date of Inception)
2003 2002 to Sept 30, 2003
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REVENUES
Rents and interest $ 1,472 $ 4,260 $ 325,505
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EXPENSES
Exploration, development, 64,212 184,895 8,637,321
and promotion
Depreciation 7,000 9,500 107,043
71,212 194,395 8,744,364
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NET LOSS - before other income (69,740) (190,135) (8,418,859)
GAIN FROM SALE OF ASSETS -- -- 1,354,755
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NET PROFIT (LOSS) $ (69,740) $ (190,135) $ (7,064,104)
=========== =========== ===============
LOSS PER COMMON SHARE
Basic and diluted $ -- $ --
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AVERAGE OUTSTANDING
SHARES
Basic (stated in 1,000's) 34,222 34,222
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5
The accompanying notes are an integral part of these financial statements.
AMBRA RESOURCES GROUP, INC.
( Development Stage Company)
STATEMENTS OF CASH FLOWS
For the Three Months Ended September 30, 2003 and 2002 and the
Period January 27, 1984 (Date of Inception) to September 30, 2003
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January 27, 1984
Sept Sept (Date of Inception)
2003 2002 to Sept 30, 2003
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CASH FLOWS FROM OPERATING
ACTIVITIES
Net profit (loss) $ (69,740) $ (190,135) $(7,064,104)
Adjustments to reconcile net loss
to net cash provided by operating
activities
Valuation of investments -- -- 2,640
Depreciation 7,000 9,500 107,043
Common capital stock issued
for services & expenses -- -- 4,705,737
Gain from sale of assets -- -- (1,354,755)
(Increase) decrease in accounts receivable (48,999) 40,084 (141,561)
(Increase) decrease in advance deposits -- 21,664 --
Increase (decrease) in liabilities 110,157 (11,909) 259,695
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Net Cash Used By Operations (1,582) (130,796) (3,485,305)
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CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of other assets -- -- (9,645)
Purchase of property & equipment -- -- (321,640)
Purchase of oil & gas leases -- -- (523,019)
Net sales of assets -- -- 1,638,159
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-- -- 783,855
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CASH FLOWS FROM FINANCING
ACTIVITIES
Stock subscriptions received -- 10,000 --
Net proceeds from sale of capital stock -- -- 2,714,127
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Net increase (decrease) in cash (1,582) (120,796) 12,677
Cash at beginning of period 14,259 251,998 --
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Cash at end of period $ 12,677 $ 131,202 $ 12,677
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7
The accompanying notes are an integral part of these financial statements.
APEX RESOURCES GROUP, INC.
( Development Stage Company)
STATEMENT OF CASH FLOWS
(Continued) For the Period January 27, 1984
(Date of Inception) to September 30, 2003
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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
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Issuance of 1,242,781 common shares for assets, services and expenses -
for the year ended June 30, 2000 1,240,093
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Issuance of 784,500 common shares for services and expenses -
for the year ended June 30, 2001 629,500
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Issuance of 105,000 common shares for services and expenses -
for the year ended June 30, 2002 62,999
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Issuance of 10,560,000 common shares for services and expenses -
for the year ended June 30, 2003 115,380
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9
APEX RESOURCES GROUP, INC.
( Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2003
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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. The Company has not engaged in any mineral claims
explorations.
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 128,413
Residential rentals 164,511
Less accumulated depreciation (78,327)
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214,597
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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.
10
APEX RESOURCES GROUP, INC.
( Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (Continued)
September 30, 2003
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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 Mining Claim Costs
Costs of acquisition, exploration, carrying, and retaining unproven properties
are expensed as incurred. Costs incurred in proving and developing a property
ready for production are capitalized and amortized over the life of the mineral
deposit or over a shorter period if the property is shown to have an impairment
in value. Expenditures for mine equipment are capitalized and depreciated over
their useful lives.
Capitalization of Oil Leases Costs
The Company uses the successful efforts cost method for recording its oil lease
interests, which provides for capitalizing the purchase price of the project and
the additional costs directly related to proving the properties and amortizing
these amounts over the life of the reserve when operations begin or a shorter
period if the property is shown to have an impairment in value or expensing the
remaining balance if 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.
11
APEX RESOURCES GROUP, INC.
( Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (Continued)
September 30, 2003
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Financial Instruments
The carrying amounts of financial instruments, including cash, accounts
receivable due from affiliates, investments in oil and gas interests, and
accounts payable, are considered by management to be their estimated fair
values.
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 September 30, 2003, the Company had a net operating loss available for carry
forward of $7,066,604. The tax benefit of approximately $2,120,000 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 2004
through 2023.
Revenue Recognition
Revenue is recognized on the sale and transfer of properties or services and the
receipt other sources of income.
Statement of Cash Flows
For the purposes of the statement of cash flows, the Company considers all
highly liquid investments with a maturity of three months or less to be cash
equivalents.
Advertising and Market Development
The Company expenses advertising and market development costs as incurred.
12
APEX RESOURCES GROUP, INC.
( Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (Continued)
September 30, 2003
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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 otherwise 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 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 are no immediate plans to develop the area.
13
APEX RESOURCES GROUP, INC.
( Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (Continued)
September 30, 2003
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4. JOINT VENTURE INTEREST
During July 2001 the Company purchased a one half participation interest in a
joint venture covering the "Hughes Prospect Lease Bank Agreement" for $175,290
which consists of 4,219 acres of oil and gas leases located in Robertson County,
Texas in which the joint venture participants are marketing the leases. The
Company has received $50,278 as its share of the on-going sale of the leases,
which has been recorded as a reduction of the cost of the joint venture. A gain
or loss cannot be determined until the balance of the leases have been sold.
5. MINING CLAIMS
On June 20, 1994 the Company purchased six unproven mineral claims, from a
related party, which are identified as Marathon, Marathon 1 and Marathon 2,
Krystal Ann 1, Krystal Ann 2 and Krystal Ann 3. The Marathon claims contain 32
units and expire in February 2006 and the Krystal claims contain 28 units and
expire in May 2006. The Claims are located near Cowichan Lake in the Province of
British Columbia, Canada. The claims are located within the Sicker Volcanic Belt
on Vancouver Island in an active gold mining area and are current though 2005.
The claims have not been proven to have a commercially minable ore reserve and
therefore all costs for acquisition and retaining the properties have been
expensed.
6. ISSUANCE OF COMMON CAPITAL STOCK
During the year ended June 30, 2003 the Company issued 10,560,000 restricted
common shares of its capital stock for services, and expenses, with a value of
between $.001 to $.05 per share, and 15,650,000 restricted common shares for
cash at $.001 per shares. On March 26, 2003 the Company completed a reverse
stock split of one share for 20 shares of outstanding stock.
This report has been prepared showing post split shares from inception.
7. SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES
Officers and directors and their controlled entities and a consultant have
acquired 14% of the outstanding common stock of the Company and have made
demand, no interest loans to the Company of $212,871. The Company has made no
interest, demand loans to affiliates of $141,561. The affiliations resulted
through common officers between the company and its affiliates, and the Company
owns 16% of the outstanding stock of one of the affiliates.
14
APEX RESOURCES GROUP, INC.
( Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (Continued)
September 30, 2003
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8. 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.
9. CONTINUING LIABILITIES
The Company is obligated under a three year lease for office space, starting in
March 2001 through February 2004 at $2,545Cn per month.
15
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
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General
The Company is in the development stage and engaged in the acquisition
of interests in gas and oil properties in Texas, and Louisiana, and other
business interests, however the Company has not been engaged in the production
of any gas and oil.
Liquidity and Capital Resources
During the quarter ended September 30, 2003, the Company funded its
operations primarily with cash on hand and funds raised during 2000 and 2001 in
Regulation S offerings and from funds loaned to the Company by an officer and
director. On September 30, 2003, the Company had cash on hand of $12,677. The
Company will need additional working capital for its future planned activities
and to service its debt. 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.
Continuation of the Company as a going concern is dependent upon obtaining
sufficient working capital to be successful in that effort. Management of the
Company has developed a strategy, that it believes will accomplish this
objective, through additional short term loans, and equity funding, which may
enable the Company to operate for the coming year. The Company, however, has no
firm commitments from any party to provide it additional funding. Without some
source of additional funds, it is unlikely the Company will have sufficient
funds to continue operations for the next twelve months. There is no guarantee
the Company will be successful in implementing its strategy to obtain sufficient
working capital to continue operations for the next twelve months.
The Company has plans to further develop its properties which will
require all of its current working capital.
The Company's material commitments for capital expenditures are limited
to the Company's obligation under the Operating Agreement with Kebo Oil and Gas,
Inc., to pay one percent of the costs associated with the ten well drilling
program.
Results of Operations
Comparison of the quarter ended September 30, 2003 and the quarter ended
September 30, 2002
The Company sustained a net operating loss of $69,740 in the quarter
ended September 30, 2003, compared to a loss of $190,135 for the quarter ended
September 30, 2002. There was a $120,395 decrease in the loss which was largely
effected by a decrease in expenses for all categories as shown in the following
comparison of expenses:
September 30, 2003 September 30, 2002
Exploration $ - $ 9,740
Office supplies and expenses 18,921 31,333
Consultants 13,881 62,344
Travel and entertainment 17,665 55,139
Professional 12,587 23,599
The decrease in operating expenses in the first quarter of 2003 compared to the
first quarter of 2002 is primarily the result of decreased exploration,
development and business activity by the Company in the quarter ended September
30, 2003 because of a lack of funds to pursue these activities.
16
Revenue from rents and interest decreased from $4,260 in the three
months ended September 30, 2002 to $1,472 in the three months ended September
30, 2003.
During the quarter ended September 30, 2003, the Company realized a net
loss of $69,740 compared to a net loss of 190,135 for the quarter ended
September 30, 2002. Again, this reduction in net loss is primarily attributable
to the decreased business activity of the Company during the most recent fiscal
quarter.
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ITEM 3. CONTROLS AND PROCEDURES
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(a) Evaluation of Disclosure Controls and Procedures. The Company's
Chief Executive Officer and Chief Financial Officer have conducted an evaluation
of the Company's disclosure controls and procedures as of a date (the
"Evaluation Date") within 90 days before the filing of this quarterly report.
Based on their evaluation, the Company's Chief Executive Officer and Chief
Financial Officer have concluded that the Company's disclosure controls and
procedures are effective to ensure that information required to be disclosed by
the Company in reports that it files or submits under the Securities Exchange
Act of 1934 is recorded, processed, summarized and reported within the time
periods specified in the applicable Securities and Exchange Commission rules and
forms.
(b) Changes in Internal Controls and Procedures. Subsequent to the
Evaluation Date, there were no significant changes in the Company's internal
controls or in other factors that could significantly affect these controls, nor
were any corrective actions required with regard to significant deficiencies and
material weaknesses.
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PART II - OTHER INFORMATION
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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(a) Reports on Form 8-K.
None.
(b) Exhibits.
31.1 Certification of Principal Executive Officer
31.2 Certification of Principal Financial Officer
32.1 Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
17
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SIGNATURES
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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.
Date: November 7, 2003 By: /s/
----------------------------------------
John R. Rask, President and Director
Date: November 7, 2003 By: /s/
----------------------------------------
John M. Hickey, Secretary and Director
18