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, 2004
--------------------
( ) 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
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APEX RESOURCES GROUP, INC.
--------------------------
(Exact name of registrant as specified in charter)
UTAH 87-0403828
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
136 East South Temple, Suite 1600, Salt Lake City, Utah 84111
- ------------------------------------------------------- -----------
(Address of principal executive offices) (Zip Code)
(801) 363-2599
--------------
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 registrant's
classes of common equity, as of the latest practicable date.
Common stock, par value $.001; 69,192,854 shares outstanding as of
September 30, 2004.
INDEX
Page
Number
------
PART I.
ITEM 1. Financial Statements (unaudited)..................................3
Balance Sheets
September 30, 2004 and June 30, 2004............................4
Statements of Operations
Three months and nine months ended September 30, 2004
and 2003 and the period January 27, 1984 to
September 30, 2004..............................................5
Statement of Changes in Stockholders' Equity......................6
Period from January 27, 1984 to September 30, 2004
Statements of Cash Flows
Nine months ended September 30, 2004 and 2003
and the period January 27, 1984 to September 30, 2004..........8
Notes to Financial Statements....................................10
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..................15
ITEM 3. Controls and Procedures .........................................18
PART II
ITEM 2. Changes in Securities ...........................................19
ITEM 6. Exhibits and Reports on Form 8-K ................................20
Signatures.......................................................20
-2-
PART I - FINANCIAL INFORMATION
This filing contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. For this
purpose any statements contained herein that are not statements of historical
fact may be deemed to be forward-looking statements. Without limiting the
foregoing, words such as "may," "will," "expect," "believe," anticipate,"
"estimate" or "continue" or comparable terminology are intended to identify
forward-looking statements. These statements by their nature involve substantial
risks and uncertainty, and actual results may differ materially depending on a
variety of factors, many of which are not within the Company's control. These
factors include but are not limited to economic conditions generally and in the
industries in which the Company and its customers participate; competition
within the Company's industry, including competition from much larger
competitors; technological advances which could render the Company's products
less competitive or obsolete; failure by the Company to successfully develop new
products or to anticipate current or prospective customers' product needs; price
increase or supply limitations for components purchased by the Company for use
in its products; and delays, reductions, or cancellations of orders previously
placed with the Company.
ITEM 1. FINANCIAL STATEMENTS
The accompanying balance sheets of Apex Resources Group, Inc.,
(development stage company) at September 30, 2004 and June 30, 2004, the
statements of operations and cash flows for the three months ended September 30,
2004 and 2003 and the period January 27, 1984 (date of inception) to September
30, 2004 and the statement of stockholders' equity for the period from January
27, 1984 to September 30, 2004, 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, 2004, are not
necessarily indicative of the results that can be expected for the year ending
June 30, 2005.
-3-
APEX RESOURCES GROUP, INC.
(Development Stage Company)
BALANCE SHEETS - unaudited
September 30, 2004 and June 30, 2004
ASSETS
Sept 30, Jun 30,
2004 2004
---- ----
CURRENT ASSETS
Cash $ 39,937 $ 14,741
----------- -----------
Total Current Assets 39,937 14,741
----------- -----------
PROPERTY AND EQUIPMENT - net of accumulated
depreciation 191,538 197,538
----------- -----------
OTHER ASSETS
Accounts receivable - affiliates 148,932 148,932
Oil leases 67,913 67,913
Land 273,045 83,600
Deposit 4,000 --
Available-for-sale securities 2,428 2,628
----------- -----------
496,318 303,073
----------- -----------
$ 727,793 $ 515,352
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable - land $ 203,330 $ 71,183
Accounts payable 36,767 42,526
Accounts payable - related parties 82,689 84,000
----------- -----------
Total Current Liabilities 322,786 197,709
----------- -----------
LONG TERM DEBT - net of current - land 36,972 --
----------- -----------
STOCKHOLDERS' EQUITY
Common stock
400,000,000 shares authorized, at $.001
par value; 69,192,854 issued and outstanding 69,193 58,264
Capital in excess of par value 8,233,049 8,002,023
Less stock subcription receivable (25,000) --
Deficit accumulated during the
development stage (7,909,207) (7,742,644)
----------- -----------
Total Stockholders' Equity 368,035 317,643
----------- -----------
$ 727,793 $ 515,352
=========== ===========
The accompanying notes are an integral part of these financial statements.
-4-
APEX RESOURCES GROUP, INC.
(Development Stage Company)
STATEMENT OF OPERATIONS - unaudited
For the Three Months Ended September 30, 2004 and 2003 and the
Period January 27, 1984 (date of inception) to September 30, 2004
Sept 30, Sept 30, January 27, 1984
2004 2003 to Sept 30, 2004
---- ---- ----------------
REVENUES $ 9,947 $ 1,472 $ 360,644
----------- ----------- -----------
EXPENSES
Exploration, development, 170,510 64,212 9,493,220
and administrative - Note 10
Depreciation 6,000 7,000 101,386
----------- ----------- -----------
176,510 71,212 9,594,606
----------- ----------- -----------
NET LOSS - before other income (166,563) (69,740) (9,233,962)
GAIN (LOSS) ON SALE OF ASSETS -- -- 1,324,755
NET LOSS $ (166,563) $ (69,740) $(7,909,207)
=========== =========== ===========
LOSS PER COMMON SHARE
Basic $ -- $ --
----------- -----------
AVERAGE OUTSTANDING
SHARES
Basic (stated in 1000's) 59,980 13,927
----------- -----------
The accompanying notes are an integral part of these financial statements.
-5-
APEX RESOURCES GROUP, INC.
( Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Period January 27, 1984 (Date of Inception) to September 30, 2004
Common Stock Capital in
------------ 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)
----------- ----------- ----------- ------------
Balance June 30, 2003 $34,222,194 $ 34,222 $ 7,359,868 $(6,994,364)
The accompanying notes are an integral part of these financial statements.
-6-
APEX RESOURCES GROUP, INC.
( Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (Continued)
Period January 27, 1984 (Date of Inception) to September 30, 2003
Common Stock Capital in
------------ Excess of Accumulated
Shares Amount Par Value Deficit
------ ------ --------- -------
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 $.015 to $.04 - Jan & Feb 2004 2,501,820 2,502 49,657 --
Issuance of common stock for services
at $.05 - Mar 2004 367,655 368 18,014 --
Issuance of common stock for services
at $.001 - Apr 2004 500,000 500 -- --
Issuance of common stock for payment
of debt at $.03 - Jun 2004 2,376,234 2,377 68,910 --
Issuance of common stock for services
and expenses at $.03 - Nov & 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 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 --
Net loss form operations for the three
months ended September 30, 2004 -- -- -- (166,563)
----------- --------- ----------- ------------
Balance September 30, 2004 $69,192,854 $ 69,193 $ 8,233,049 $(7,909,207)
=========== ========= =========== ============
The accompanying notes are an integral part of these financial statements.
-7-
APEX RESOURCES GROUP, INC.
( Development Stage Company)
STATEMENT OF CASH FLOWS - unaudited
For the Three Months Ended September 30, 2004 and 2003 and the
Period January 27, 1984 (Date of Inception) to September 30, 2004
Sept 30, Sept 30, January 27, 1984
2004 2003 to Sept 30, 2004
----------- ----------- ----------------
CASH FLOWS FROM OPERATING
ACTIVITIES
Net loss $ (166,563) $ (69,740) $(7,909,207)
Adjustments to reconcile net loss
to net cash provided by operating
activities
Depreciation 6,000 7,000 101,386
Common capital stock issued
for services & expenses 115,854 -- 5,092,474
(Increase) decrease in accounts receivable -- (48,999) (148,932)
Increase (decrease) in liabilities 62,705 110,157 545,954
----------- ----------- -----------
Net Change in Cash from Operations 17,996 (1,582) (2,318,325)
----------- ----------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES
Deposit (4,000) -- (4,000)
Purchase of investments 200 -- (2,428)
Purchase of property & equipment (64,000) -- (458,524)
Purchase of oil & gas leases and mining claims -- -- (67,913)
----------- ----------- -----------
(67,800) -- (532,865)
----------- ----------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES
Net proceeds from issuance of capital stock 75,000 -- 2,891,127
----------- ----------- -----------
Net Change in cash 25,196 (1,582) 39,937
Cash at beginning of year 14,741 14,259 --
----------- ----------- -----------
Cash at end of year $ 39,937 $ 12,677 $ 39,937
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
-8-
APEX RESOURCES GROUP, INC.
(Development Stage Company)
STATEMENT OF CASH FLOWS (Continued)
For the Period January 27, 1984 (Date of Inception) to September 30, 2004
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 4,517,785 common shares for services and expenses
for the three months ended September 30, 2004 115,855
-------
-9-
APEX RESOURCES GROUP, INC.
( Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2004
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 (101,386)
---------
191,538
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, 2004
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 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.
-11-
APEX RESOURCES GROUP, INC.
(Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (Continued)
September 30, 2004
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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, 2004, the Company had a net operating loss available for carry
forward of $7,909,207. The tax benefit of approximately $237,300 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.
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.
-12-
APEX RESOURCES GROUP, INC.
(Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (Continued)
September 30, 2003
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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 pipeline is
built.
4. PURCHASE OF LAND
The Company is obligated under three installment sales contracts for the
purchase of land. One contract has a balance of $171,445, after the down
payment, on which $45,340 is due December 31, 2004 and the balance of $126,105
due over 25 years in monthly payments including 9% interest of $697, and two
contracts provide for 180 monthly payments of $776 starting in January and March
of 2004, including interest of 11%.
5. AVAILABLE-FOR-SALE SECURITIES
During 2001 the Company purchased 6,000,000 shares of Omega Ventures Group, Inc.
for $3,000. During the year ended June 30, 2004 745,635 shares were sold for
$21,184, and during August 2004 399,735 shares were sold for $8,761, leaving
4,854,630 shares. On the date of this report the shares have been trading, in a
small quantities, for $.03 per share.
Management intents to hold the securities for investment.
-13-
APEX RESOURCES GROUP, INC.
(Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (Continued)
September 30, 2003
6. PURCHASE OF OIL LEASES
During the quarter ended September 2004 the Company purchased a 1% interest, and
2.5 participation units in two oil leases by the payment of the initial drilling
costs. The payments for the drilling costs have been expensed.
7. ISSUANCE OF COMMON CAPITAL STOCK
During the year ended June 30, 2004 the Company issued 5,001,820 common shares
in a private placement sale for cash of $102,159.
During the year ended June 30, 2004 the Company issued 9,471,900 restricted
common shares for payment of debt of $284,156, 9,267,655 restricted common
shares for services at $.03 per share, and 300,000 restricted common shares for
Arizona land for $9,000, all to related parties.
During the quarter ended September 2004 the Company issued 4,517,785 restricted
common shares for services and expenses, 311,500 for payment of a debt,
1,100,000 for purchase of land, and 5,000,000 shares for cash and a note
receivable.
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.
8. 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.
The Company has made no interest, demand loans to affiliates of $148,932. 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.
9. 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.
-14-
APEX RESOURCES GROUP, INC.
(Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (Continued)
September 30, 2003
10. SCHEDULE OF EXPENSES
Following is a summary schedule of the expenses shown in the statement of
operations under exploration, development, and administrative.
Sept 30, Sept 30,
2004 2003
----- -----
Travel $ 3,467 $ 17,665
Office expenses 26,427 18,921
Professional 760 12,587
Consultants 77,147 13,881
Promotional 4,010 --
Rent 13,100 --
Exploration and development - oil and gas 38,100 --
Other 7,499 1,158
-------- --------
$170,510 $ 64,212
-------- --------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
For a complete understanding, this Management 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, 2004.
General
The Company is in the development stage and engaged in the acquisition
of 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, 2004, and the subsequent Quarterly Reports filed by the
Company on Form 10-QSB. Following is a brief description of relevant events that
occurred during the quarter ended September 30, 2004.
-15-
Oil and Gas Interests
- ---------------------
Plaquemines Parish, Louisiana
-----------------------------
During the quarter, Royal "T" Oil, the operator of well #1 of the
Bastian Bay State Lease 16152 at Plaquemines Parish, informed the Company that
the well has been shut-in to build pressure. It is anticipated that the well
will be reopened in early 2005. To date, this well has not been put into
production. The Company owns a 6.25% working interest in this well.
Manahuilla Creek Field , Texas
------------------------------
During the quarter, PB Energy Partners, the operator of the BB Gayle #1
gas well at Manahuilla Creek in Goliad, Texas, notified the Company that the
well had been drilled and perforated. The well did not prove to be of commercial
value. The Company owns a 1.875% of 75% participating working interest in this
gas well.
Henry Dome Prospect, Texas
--------------------------
During the quarter, the Company acquired 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 the re-entry and completion of the first
well prospect in McMullen County, Texas. The manager of this prospect is PB
Energy USA, Inc. The operator will be Dolphin Petroleum, LP of San Antonio
Texas. All operations will be conducted in accordance with the provisions of an
AAPL Form 610-1989 Model Form of Operating Agreement. The amount paid by the
Company is refundable, less reasonable costs, in the event the well, for any
reason is not spudded on or before December 31, 2004.
Northstar Wallis Prospect, Texas
--------------------------------
During the quarter, the Company purchased one unit (1%) of the
Northstar Wallis Well #1 Joint Venture in Victoria County, Texas for a cost of
$25,600 for drilling and testing and a completion cost of $6,000 after the well
has been logged and proven as a commercial well. The unit gives the Company a 1%
working interest in the Wallis Well #1. This well, which will be located in the
Wilcox trend, will be drilled to a depth of 10,000 feet. Northstar Energy, Inc.,
is the operator and Managing Venturer of the Joint Venture. Drilling of the well
will commence in late November 2004, and is expected to be completed during
December 2004.
Real Estate Interests
- ---------------------
Cowichan Lake, Victoria, B.C.
-----------------------------
During the quarter the Company acquired two undeveloped lots on Upper
Point Ideal Road in the Cowichan Lake District in Victoria B.C. The total
acreage of the two lots is approximately 1.86 acres. Following a down payment of
$16,000 the Company owes a balance of $171,445 to purchase these lots. The
Company is required to make a payment of $45,340 during December 2004, and will
pay off the balance of the purchase price by making monthly payments of $697 for
25 years. The rate of interest to be paid is 9% per annum. The Company acquired
these properties for investment purposes and has no present intent to develop or
improve these parcels.
-16-
mortgages. The Company paid a total down payment of $20,000 and will make total
monthly payments of $915.22 for 25 years. The Company acquired these properties
for investment purposes and has no present intent to develop or improve these
parcels.
The Company also owns approximately 4,854,630 or 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."
Liquidity and Capital Resources
During the three months ended September 30, 2004, the Company financed
its operations primarily through the issuance of Company securities. During the
quarter, the Company issued 10,929,285 shares of its common stock in
satisfaction of debts, expenses, services and for cash. The shares were
primarily valued at $0.2 per share, with total value for the shares received
equaling $214,586. On September 30, 2004, the Company had cash on hand of
$14,733. 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 oil and gas properties,
which will require all of its current working capital.
Results of Operations
Comparison of the quarter ended September 30, 2004 and 2003
The Company sustained a net loss of $166,563 in the quarter ended
September 20, 2004, compared to a loss of $69,740 for the quarter ended
September 30, 2003. This increase in loss was primarily the result of the
Company being much more active in its business operations in the three months
ended September 30, 2004, compared to the same period of 2003, as shown in the
following comparison of expenses:
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September 30, 2004 September 30, 2003
------------------ ------------------
Travel $ 3,467 $ 17,665
Office Expenses 26,427 18,921
Professional 760 12,587
Consultants 77,147 13,881
Promotional 4,010 --
Rent 13,100 --
Exploration and Development -
Oil and Gas 38,100 --
Other 7,499 1,158
-------- --------
$170,510 $ 64,212
-------- --------
The significant increases in exploration and development and consultant
fees are primarily the result of the Company undertaking more active oil and gas
exploration activities in the three months ended September 30, 2004 compared to
the same period 2003. The Company has no employees, rather management retains
consultants to provide the services the Company needs. We anticipate consultant
expenses to continue at about the same level in the upcoming quarter as the
Company continues active oil and gas exploration activities. Depending on the
results of exploration currently being conducted, exploration and development
expenses could also continue at about the same level during the upcoming
quarter.
Non operating revenue increased to $9,947 in the three months ended
September 30, 2004, compared to $1,472 in the three months ended September 30,
2003.
ITEM 3. CONTROLS AND PROCEDURES
(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 defined in Rule 13A-15(e)
under the Securities Exchange Act of 1934 ("Exchange Act") as of the end of the
period covered by this quarterly report (the "Evaluation Date"). Based on their
evaluation, the Company's Chief Executive Officer and Chief Financial Officer
have concluded that, as of the Evaluation Date, the Company's disclosure
controls and procedures are effective to ensure that information required to be
disclosed by the Company in its Exchange Act reports is recorded, processed,
summarized and reported within the applicable periods specified by the SEC's
rules and forms.
(b) Changes in Internal Controls and Procedures. During the period covered
by this quarterly report, there were no changes in the Company's internal
control over financial reporting (as defined in Rule 13a-15) or 15d-15 under the
Exchange Act) that has materially affected, or is reasonably likely to
materially affect, the Company's internal controls over financial reporting.
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PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
No instruments defining the rights of the holders of any class of
registered securities have been materially modified, limited or qualified during
the quarter ended September 30, 2004.
The following securities, which are not registered under the Securities
Act of 1933, were issued by the Company during the quarter ended September 30,
2004.
During the quarter ended September 30, 2004, the Company issued
5,311,500 shares of its common stock to non United States persons, including
311,500 shares to Company Secretary and Director, John Hickey and 1,000,000
shares to Company Director Robert Gill in satisfaction of debts owed by the
Company. All shares issued were valued at $.02 per share. These shares were
issued pursuant to Regulation S promulgated by the Securities and Exchange
Commission under the Securities Act of 1933. The Company did not offer the
securities to any person in the United States, any identifiable groups of U.S.
citizens abroad, or to any U.S. Person as that term is defined in Regulation S.
At the time the buy orders were originated, the Company reasonably believed the
Buyers were outside of the United States and were not U.S. Persons. The Company
reasonably believed that the transaction had not been pre-arranged with a buyer
in the United States. The Company has not nor will engage in any "Directed
Selling Efforts" and reasonably believes the Buyers have not nor will engage in
any "Directed Selling Efforts." The Company reasonably believed the Buyers
purchased the securities for their own accounts and for investment purposes and
not with the view towards distribution or for the account of a U.S. Person.
During the quarter ended September 30, 2004, the Company issued
2,150,000 shares of its common stock to non United States persons, including
700,000 shares to Company Secretary and Director, John Hickey for services
rendered to the Company. All shares issued were valued at $.03 per share. These
shares were issued pursuant to Regulation S promulgated by the Securities and
Exchange Commission under the Securities Act of 1933. The Company did not offer
the securities to any person in the United States, any identifiable groups of
U.S. citizens abroad, or to any U.S. Person as that term is defined in
Regulation S. At the time the buy orders were originated, the Company reasonably
believed the Buyers were outside of the United States and were not U.S. Persons.
The Company reasonably believed that the transaction had not been pre-arranged
with a buyer in the United States. The Company has not nor will engage in any
"Directed Selling Efforts" and reasonably believes the Buyers have not nor will
engage in any "Directed Selling Efforts." The Company reasonably believed the
Buyers purchased the securities for their own accounts and for investment
purposes and not with the view towards distribution or for the account of a U.S.
Person.
On September 2, 2004, the Company issued 1,717,785 restricted shares of
its common stock in satisfaction of a debt owed in the amount of $34,355. The
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shares were issued without registration under the Securities Act of 1933 in
reliance on an exemption from registration provided by Section 4(2) of the
Securities Act. No general solicitation was made in connection with the offer or
sale of these securities.
On September 24, 2004, the Company issued 650,000 restricted shares of
its common stock for services rendered to the Company. The services were valued
at $13,000. The shares were issued without registration under the Securities Act
of 1933 in reliance on an exemption from registration provided by Section 4(2)
of the Securities Act. No general solicitation was made in connection with the
offer or sale of these securities.
On September 29, 2004, the Company issued 100,000 restricted shares of
its common stock for services rendered to the Company. The services were valued
at $2,000. The shares were issued without registration under the Securities Act
of 1933 in reliance on an exemption from registration provided by Section 4(2)
of the Securities Act. No general solicitation was made in connection with the
offer or sale of these securities.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Reports on Form 8-K.
None.
(b) Exhibits.
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 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.
Date: November 19, 2004 By: /s/ John R. Rask
------------------------------------
John R. Rask, President and Director
Date: November 19, 2004 By: /s/ John M. Hickey
--------------------------------------
John M. Hickey, Secretary and Director
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