10QSB 1 apex10qsbdec2003.txt 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 December 31, 2003 ---------------------------- ( ) 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. formerly Ambra 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 registrants classes of common equity, as of the latest practicable date. Common stock, par value $.001; 46,917,860 shares outstanding as of December 31, 2003. INDEX Page Number PART I. ITEM 1. Financial Statements (unaudited)..................................3 Balance Sheet December 31, 2003 and June 30, 2003.............................4 Statements of Operations Three months ended December 31, 2003 and 2002 and the period January 27, 1984 to December 31, 2003...........5 Statements of Cash Flows Three months ended December 31, 2003 and 2002 and the period January 27, 1984 to December 31, 2003 .........6 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 ..........................................17 PART II ITEM 6. Exhibits and Reports on Form 8-K .................................18 Signatures........................................................19 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 sheet of Apex Resources Group, Inc., (development stage company) at December 31, 2003 and June 30, 2003, and the statements of operations and cash flows for the three months ended December 31, 2003 and 2002 and the period January 27, 1984 (date of inception) to December 31, 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 December 31, 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 SHEETS December 31, 2003 and June 30, 2003 --------------------------------------------------------------------------------------- ASSETS Dec 31, 2003 Jun 30, 2003 CURRENT ASSETS Cash $ 18,102 $ 14,259 ----------- ----------- Total Current Assets 18,102 14,259 ----------- ----------- PROPERTY AND EQUIPMENT - net of accumulated depreciation 240,997 221,597 ----------- ----------- OTHER ASSETS Accounts receivable - affiliates 142,561 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 ----------- ----------- 342,491 292,492 ----------- ----------- $ 601,590 $ 528,348 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Note payable - current portion 3,067 -- Accounts payable $ 29,787 $ 26,059 Accounts payable - related parties 18,464 102,563 ----------- ----------- Total Current Liabilities 51,318 128,622 ----------- ----------- NOTE PAYABLE - net of current portion 18,893 -- ----------- ----------- STOCKHOLDERS' EQUITY Common stock 400,000,000 shares authorized, at $.001 par value; 46,917,860 issued and outstanding on Dec 31, 2003 46,918 34,222 Capital in excess of par value 7,703,042 7,359,868 Deficit accumulated during the development stage (7,218,581) (6,994,364) ----------- ----------- Total Stockholders' Equity 531,379 399,726 ----------- ----------- $ 601,590 $ 528,348 =========== =========== The accompanying notes are an integral part of these financial statements. 4
APEX RESOURCES GROUP, INC. (Development Stage Company) STATEMENTS OF OPERATIONS Forthe Three and Six Months Ended December 31, 2003 and 2002 and the Period January 27, 1984 (date of inception) to December 31, 2003 Three Months Six Months Dec Dec Dec Dec Jan 27, 1984 to 2003 2002 2003 2002 Dec 31, 2003 ----------- ----------- ----------- ----------- ----------- REVENUES Rents and interest $ 1,317 $ 4,553 $ 2,789 $ 8,813 $ 326,822 ----------- ----------- ----------- ----------- ----------- EXPENSES Exploration, development and promotion 148,794 168,560 213,006 353,455 8,786,115 Depreciation 7,000 9,500 14,000 19,000 114,043 ----------- ----------- ----------- ----------- ----------- 155,794 178,060 227,006 372,455 8,900,158 ----------- ----------- ----------- ----------- ----------- NET LOSS - before other income (154,477) (173,507) (224,217) (363,642) (8,573,336) Gain on sale of assets -- -- -- -- 1,354,755 ----------- ----------- ----------- ----------- ----------- NET LOSS $ (154,477) $ (173,507) $ (224,217) $ (363,642) $(7,218,581) =========== =========== =========== =========== =========== LOSS PER COMMON SHARE Basic $ -- $ (.01) $ (.01) $ (.01) ----------- ----------- ----------- ----------- AVERAGE OUTSTANDING SHARES - (stated in 1,000's) Basic 42,685 34,222 36,338 34,222 ----------- ----------- ----------- ----------- 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 December 31, 2003 ------------------------------------------------------------------------------------------------------------------------------ Capital in Common Stock Excess of Accumulated Shares Amount Par Value Deficit Balance January 27, 1984 (Date of Inception) - $ - $ - $ - Issuance of common stock from inception to June 30, 1998 1,610,838 1,611 2,120,660 Net income from operations for the period ended June 30, 1984 - - - 3,048 Net loss from operations for the year ended June 30, 1985 - - - (44,556) Net income from operations for the year ended June 30, 1986 - - - 18,018 Net loss from operations for the year ended June 30, 1987 - - - (9,248) Net income from operations for the year ended June 30, 1988 - - - 15,828 Net loss from operations for the year ended June 30, 1989 - - - (22,000) Capital contribution - expenses - - 752 - Net loss from operations for the year ended June 30, 1993 - - - (9,752) Net loss from operations for the year ended June 30, 1994 - - - (82,277) Net loss from operations for the year ended June 30, 1995 - - - (115,762) Net loss from operations for the year ended June 30, 1996 - - - (269,717) Net loss from operations for the year ended June 31, 1997 - - - (515,238) Net loss from operations for the year ended June 30, 1998 - - - (648,722) 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) Balance June 30, 2000 6,872,694 6,873 6,413,687 (4,317,134) 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 December 31, 2003 ------------------------------------------------------------------------------------------------------------------------------ Capital in Common Stock Excess of Accumulated Shares Amount Par Value Deficit 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) 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 7,096 205,774 - Issuance of common stock for services and expenses at $.03 - Nov 25, 2003 2,800,000 2,800 81,200 - Issuance of common stock for cash at $.02 - Dec 10, 2003 2,500,000 2,500 47,500 - Net loss from operations for the six months ended December 31, 2003 - - - (224,217) Balance December 31, 2003 46,917,860 $ 46,918 $ 7,703,042 $ ( 7,218,581) ========== ====== ========= ========== The accompanying notes are an integral part of these financial statements. 7 APEX RESOURCES GROUP, INC. ( Development Stage Company) STATEMENTS OF CASH FLOWS For the Six Months Ended December 31, 2003 and 2002 and the Period January 27, 1984 (Date of Inception) to December 31, 2003 ----------------------------------------------------------------------------------------------------- January 27, 1984 Dec Dec (Date of Inception) 2003 2002 to Dec 31, 2003 ----------- ----------- -------------- CASH FLOWS FROM OPERATING ACTIVITIES Net profit (loss) $ (224,217) $ (363,642) $ (7,218,581) Adjustments to reconcile net loss to net cash provided by operating activities Valuation of investments -- -- 2,640 Depreciation 14,000 19,000 114,043 Common capital stock issued for services & expenses 84,000 -- 4,789,737 Gain from sale of assets -- -- (1,354,755) (Increase) decrease in accounts receivable (49,999) 205,312 (142,561) (Increase) decrease in advance deposits -- 38,664 -- Increase (decrease) in liabilities 132,499 (14,535) 282,037 ----------- ----------- -------------- Net Cash Used By Operations (43,717) (115,201) (3,527,440) ----------- ----------- -------------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of other assets -- -- (9,645) Purchase of property & equipment (24,400) -- (346,040) Purchase of oil & gas leases -- -- (523,019) Net sales of assets -- -- 1,638,159 ----------- ----------- -------------- (24,400) -- 759,455 ----------- ----------- -------------- CASH FLOWS FROM FINANCING ACTIVITIES Increase in note payable 21,960 -- 21,960 Net proceeds from sale of capital stock 50,000 10,000 2,764,127 ----------- ----------- -------------- Net increase (decrease) in cash 3,843 (105,201) 18,102 Cash at beginning of year 14,259 251,998 -- ----------- ----------- -------------- Cash at end of year $ 18,102 $ 146,797 $ 18,102 =========== =========== ============== 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 December 31, 2003 ------------------------------------------------------------------------------------ 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 300,000 for purchase of land November 17, 2003 9,000 --------- Issuance of 7,095,666 for payment of debt November 25, 2003 212,870 --------- Issuance of 2,800,000 for services and expenses November 25, 2003 84,000 --------- 9
APEX RESOURCES GROUP, INC. ( Development Stage Company) NOTES TO FINANCIAL STATEMENTS December 31, 2003 -------------------------------------------------------------------------------- 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: Land 33,400 Office equipment 128,413 Residential rentals 164,511 Less accumulated depreciation (85,327) --------- 240,997 ========= 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) December 31, 2003 -------------------------------------------------------------------------------- 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) December 31, 2003 -------------------------------------------------------------------------------- 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Financial Instruments --------------------- The carrying amounts of financial instruments, including cash, accounts receivable due from affiliates, 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 $7,218,581. The tax benefit of approximately $2,165,000 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) December 31, 2003 -------------------------------------------------------------------------------- 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 other wise in financial institutions of high credit quality. Accounts receivable are unsecured however management considers them to be currently collectable. Other Recent Accounting Pronouncements -------------------------------------- The Company does not expect that the adoption of other recent accounting pronouncements to have any material impact on its financial statements. 3. OIL LEASES - BEAUFORT SEA PROJECT On June 9, 1997 the Company purchased a 3.745% working interest, for $67,913, in the Beaufort Sea well Esso Pex Home et al Itiyok I-27 consisting of 640 acres and is located at Latitude 70-00', Longitude 134-00', Sections 7, 8, 17, 18, 27, 28, and 37, License No. 55, dated April 22, 1987. During 1982 and 1983 a consortium of companies participated in the drilling, casing, and testing the area to a depth of 12,980 feet. A review of the well data and geological prognosis indicates that the area would contain proven recoverable gas reserves of 108 Bscf and proven recoverable oil reserves of 8,976 MSTB. The lease is shown at cost, which is considered by management, to be its estimated fair value. The other partners in the project are controlled by Exxon Oil Corporation, however, there are no plans to develop the area until a pipeline is built to transport the gas. 13 APEX RESOURCES GROUP, INC. ( Development Stage Company) NOTES TO FINANCIAL STATEMENTS (Continued) December 31, 2003 -------------------------------------------------------------------------------- 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, and 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 quarter ended December 31, 2003 the Company issued 10,195,666 restricted common shares of its capital stock for services, expenses, and the purchase of land, and 2,500,000 restricted common shares for cash, as outlined in the statement of changes in stockholders' equity. 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-directors and their controlled entities have acquired 36% of the outstanding common stock of the Company and have made demand, no interest loans to the Company of $18,464. The Company has made no interest, demand loans to affiliates of $142,561. The affiliations resulted through common officers between the Company and its affiliates, and the Company owns 15% of the outstanding stock of one of the affiliates. 14 APEX RESOURCES GROUP, INC. ( Development Stage Company) NOTES TO FINANCIAL STATEMENTS (Continued) December 31, 2003 -------------------------------------------------------------------------------- 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. -------------------------------------------------------------------------------- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION -------------------------------------------------------------------------------- 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, the Company has not been engaged in the production of any gas and oil. Near the end of the quarter, the Company learned that well #1 of the Bastian Bay State Lease 16152 at Plaquemines Parish, Louisiana was expected to begin production during the upcoming quarter. Apex has a 6.25% working interest in this well and hopes that production will lead to a steady income stream for the Company in the upcoming quarters. On September 30, 2003, the Company also entered into a Participation Agreement with PB Energy USA, Inc., acquiring 1.875% participating working interest in an oil and gas prospect on certain prospect lands located in Goliad County, Texas, for $7,500. At this time it is anticipated that drilling on this prospect will commence in March 2004. During the quarter ended December 31, 2003, the Company purchased approximately 37 acres of real property at the Woodland Valley Ranch. The Woodland Valley Ranch is located approximately 15 miles northeast of St. Johns, Arizona. The purchase price of the property was $24,400. The Company financed the purchase of the property. The Company also owns approximately 5,600,000 or 14.5% 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." 15 Liquidity and Capital Resources During the quarter ended December 31, 2003, the Company funded its operations primarily from the sale of Company securities. During the quarter, the Company reduced its accounts payable to related parties by issuing 7,095,666 shares of its common stock in satisfaction of debts owing of approximately $212,870. On December 31, 2003, the Company had cash on hand of $18,102. 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. Results of Operations Comparison of the quarter ended December 31, 2003 and the quarter ended December 31, 2002 The Company sustained a net operating loss of $154,477 in the quarter ended December 31, 2003, compared to a loss of $173,507 for the quarter ended December 31, 2002. This decrease in the loss was largely the result of decreases in expenses as shown in the following comparison of expenses: December 31, 2003 December 31, 2002 Exploration, development $148,794 $168,560 and promotion Depreciation 7,000 9,500 The decrease in operating expenses in the quarter ended December 31, 2003, compared to the same period of 2002 was primarily the result of decreased exploration, development and promotional activity by the Company in the quarter ended December 31, 2003, because of a lack of funds to pursue these activities. Revenue from rents and interest decreased from $4,553 in the three months ended December 31, 2002 to $1,317 in the three months ended December 31, 2003. 16 Comparison of the six months ended December 31, 2003 and six months ended December 31, 2002. The Company sustained a net operating loss of $224,217 for the six months ended December 31, 2003, compared to a loss of $363,642 for six months ended December 31, 2002. This decrease in the loss was largely the result of decreases in expenses as shown in the following comparison of expenses: December 31, 2003 December 31, 2002 Exploration, development $213,006 $353,455 and promotion Depreciation 14,000 19,000 The decrease in operating expenses during the six months ended December 31, 2003, compared to the same period of 2002 was primarily the result of decreased exploration, development and promotional activity by the Company in the six months ended December 31, 2003, due to a lack of funds to pursue these activities. Revenue from rents and interest decreased from $8,813 in the six months ended December 31, 2002 to $2,789 in the six months ended December 31, 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 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. 17 -------------------------------------------------------------------------------- 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, 2003. On November 17, 2003, the Company issued 300,000 restricted common shares to purchase certain real property in the State of Arizona. The shares were valued at $.03 per share. The shares were issued without registration under the Securities Act of 1933 in reliance upon an exemption from registration provided by Section 4(2) of the Securities Act. On November 25, 2003, the Company issued 7,095,666 restricted common shares to Manhattan Communications and Computer Wizards Consulting, affiliates of the Company through common officers and/or directors, in satisfaction of debt owed in the amount of approximately $212,870. The shares were issued without registration under the Securities Act of 1933 in reliance upon an exemption from registration provided by Section 4(2) of the Securities Act. Also on November 25, 2003, the Company issued 2,800,000 restricted common shares to four individuals, including Mr. John Hickey, the Company's Secretary and a Director, for services rendered to the Company and expenses incurred on the Company's behalf. These shares 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. On December 10, 2003, the Company issued 2,500,000 restricted common shares to three individuals for $50,000. The shares were issued without registration under the Securities Act of 1933 in reliance upon an exemption from registration provided by Section 4(2) of the Securities Act. -------------------------------------------------------------------------------- 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 31.2 Certification of Principal Financial Officer 32.1 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 18 -------------------------------------------------------------------------------- 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: February 16, 2004 By:/s/ John R. Rask --------------------------------- John R. Rask, President Date: February 16, 2004 By:/s/ John M. Hickey --------------------------------- John M. Hickey, Secretary 19