UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-KSB (x) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscal year ended June 30, 2004 -------------------------------------------- ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from to ------------------ ------------------ Commission File number 0-11695 ------------------------------------------ APEX RESOURCES GROUP INC, ------------------------------------------------------- (Exact name of registrant as specified in charter) Utah 87-0403828 -------------------------------------------- ------------------------------- State or other jurisdiction of incorporation (I.R.S. Employer I.D. No.) or organization 610-800 West Pender Street, Vancouver, Canada V6C 256 ------------------------------------------------- -------------------- (Address of principal executive offices) (Zip Code) Issuer's telephone number, including area code (604) 669-2723 ------------------------- Securities registered pursuant to section 12 (b) of the Act: Title of each class Name of each exchange on which registered None None -------------------- ------------------ Securities registered pursuant to section 12 (g ) of the Act: Common --------------- (Title of Class) Check whether the Issuer (1 ) filed all reports required to be filed by section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. (1) Yes [x] No [ ] (2) Yes [x] No [ ] Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [ ] State issuer's revenues for its most recent fiscal year: $ 26,664 ---------------- The aggregate market value of the issuer's voting stock held as of October 14, 2004, by non-affiliates of the issuer based on the closing daily price as quoted on the OTCBB was $3,199,110. As of June 30, 2003, the registrant had 58,263,569 shares of common stock issued and outstanding. Transitional Small Business Disclosure Format. Yes [ ] No [X] Documents incorporated by reference: Current Report on Form 8-K, filed on February 10, 2004, as amended. TABLE OF CONTENTS PART I Page ------ ---- ITEM 1. DESCRIPTION OF BUSINESS........................................... 3 ITEM 2. DESCRIPTION OF PROPERTIES......................................... 7 ITEM 3. LEGAL PROCEEDINGS................................................. 8 ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS................. 8 PART II ------- ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS........................................................... 9 ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.........................................................10 ITEM 7. FINANCIAL STATEMENTS..............................................13 ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE...............................27 ITEM 8A. CONTROLS AND PROCEDURES...........................................27 PART III -------- ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16 (a) OF THE EXCHANGE ACT...............................................................27 ITEM 10. EXECUTIVE COMPENSATION............................................29 ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT....................................................30 ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS....................31 ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K..................................31 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES............................32 -2- -------------------------------------------------------------------------------- PART I -------------------------------------------------------------------------------- FORWARD -------------------------------------------------------------------------------- This Form 10-KSB contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For this purpose any statements contained in this Form 10-KSB that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, words such as "may," "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; failure by the Company to successfully anticipate changes in the markets in which it competes and price and supply increases or decreases. -------------------------------------------------------------------------------- ITEM 1. DESCRIPTION OF BUSINESS -------------------------------------------------------------------------------- History and Organization Apex Resources Group Inc. (the "Registrant" or "Company") is a development stage company. It was incorporated under the laws of the State of Utah on January 27, 1984. The Company was initially organized primarily to hold overriding royalties of both producing and non- producing oil and gas properties. However, the Company's articles of incorporation authorize it to engage in all aspects of the oil and gas business and for any other lawful purpose. In 1989, the Company transferred its assets in exchange for cancellation of the Company's debt and ceased operations until 1995. Since 1995, the Company has been primarily engaged in the business of acquiring interests in oil and gas properties. Oil and Gas Properties Beaufort Sea ------------ The Company holds a 3.475% working interest in the Beaufort Sea well Esso Pex Home, et. al. Itiyok I-27, consisting of 640 acres, located at Latitude 70-00', Longitude 134-00', Sections -3- 7, 8, 17, 18, 27, 28 and 37. License No. 55, dated April 22, 1987. During 1982 and 1983 a consortium of companies participated in drilling, casing and testing the area to a depth of 12,980 feet. The other partners in the project are controlled by Exxon Oil Corporation, Anderson Oil and Gulf Canada Resources. It was recently announced that a consortium of oil and gas companies have filed an application to build a natural gas pipeline that could be used to transport gas from the Beaufort Sea region. This area will not be developed until a pipeline is built. Bastian Bay Field, Plaquamines Parish, Louisiana ------------------------------------------------ The Company holds a 6.5% working interest in the Bastian Bay Field Lease #16152 in Plaquamines Parish Louisiana. Although drilling and some work have been done on this well, the well operator has encountered various problems at this site. To date, this well has not been put into production. It is anticipated that additional work, including workover of the well, will begin during November 2004. Once workover is completed, the well will be tested to determine its production capacity. Manahuilla Creek Field, Texas ----------------------------- The Company owns a 1.875% of 75% participating working interest in this gas well. Drilling of the well was completed on May 20, 2004. Unfortunately, the initial zone tested was unproductive. The Company has learned that the operator intends to refracture the well at a higher zone, where it is believed there is an opportunity for gas. A refracture of the well could be completed before the end of the year. Selection of Target Areas for Acquisition The Company will continue to explore and investigate the acquisition of interests in other oil and gas properties. In most cases, the Company has and will continue to seek to acquire only partial interests in properties thereby diversifying its risk. This will also allow the Company to acquire interests in more properties than it otherwise could if it were to acquire complete interests in properties. Rather than employ the significant staff that would be required to operate the wells the Company may acquire, it will continue to seek out and locate qualified local operators, whom it will contract to manage the daily operations of the particular properties. This aids the Company in keeping its overhead to a minimum. The Company will seek to purchase interests for cash or in exchange for shares of its common stock, where allowed by law. The purchases made with cash will be made with cash on hand, internally generated capital, financed through conventional loans made by oil and gas lenders or through funds made available through equity financing. The Company may consider -4- issuing common stock to project owners in situations where the project has significant upside potential due to proven reserves that are behind pipe or that are undeveloped and for which traditional financing cannot be obtained. Market for Oil Production The market for oil and gas production is regulated by federal, state and foreign governments. The overall market is mature and with the exception of gas, all producers in a producing region will receive the same price. The major oil companies will purchase all crude oil offered for sale at posted field prices. There are price adjustments for deviations from the quality standards established by the purchaser. Oil sales are normally contracted with a "gatherer" which is a third-party who contracts to pickup the oil at the well site. In some instances there may be deductions for transportation from the wellhead to the sales point. The majority of crude oil purchasers do not at this time charge transportation fees, unless the well is outside their service area. The oil gatherer will usually handle disbursements of sales revenue to both the owners of the well (a "working interest owner") as well as payments to persons entitled to royalties as a result of such sales ("royalty owners"). The Company typically will be a working interest owner in the projects that it undertakes or in which it invests. By being a working interest owner, the Company is responsible for the payment of its proportionate share of the operating expenses of the well. Royalty owners receive a percentage of gross oil production for the particular lease and are not obligated in any manner whatsoever to pay for the cost of operating the lease. Therefore, the Company, in most instances, will be paying the expenses for the oil and gas revenues paid to the royalty owners. Market for Gas Production In contrast to sales of oil, the gas purchaser will pay the well operator 100% of the sales proceeds monthly for the previous month's sales. The operator is responsible for all checks and distributions to the working interest and royalty owners. There is no standard price for gas. Prices will fluctuate with the seasons and the general market conditions. It is the Company's intention to utilize this market whenever possible in order to maximize revenues. The Company does not anticipate any significant change in the manner its gas production would be purchased, however, no assurance can be given that such changes will not occur in the future. Competition The oil and gas industry is highly competitive. Competition for prospects and producing properties is intense. As the Company pursues new opportunities in oil and gas exploration, it will be competing with a number of other potential purchasers of prospects and producing properties, most of which will have greater financial resources than the Company. The bidding for prospects has become particularly intense with different bidders evaluating potential acquisitions with different product pricing parameters and other criteria that result in widely divergent bid prices. The presence in the market of bidders willing to pay prices higher than are -5- supported by the Company's evaluation criteria could further limit the ability of the Company to acquire prospects and low or uncertain prices for properties can cause potential sellers to withhold or withdraw properties from the market. In this environment, there can be no assurance that there will be a sufficient number of suitable prospects available for acquisition by the Company or that the Company will be able to obtain financing for or participants to join in the development of prospects. The Company's competitors and potential competitors include major oil companies and independent producers of varying sizes. Most of the Company's competitors have greater financial, personnel and other resources than the Company and therefore have greater leverage to use in acquiring prospects, hiring personnel and marketing oil and gas. A high degree of competition in these areas is expected to continue indefinitely. Governmental Regulation The production and sale of oil and gas is subject to regulation by state, federal, local authorities, and foreign governments. In most areas there are statutory provisions regulating the production of oil and natural gas under which administrative agencies may set allowable rates of production and promulgate rules in connection with the operation and production of such wells, ascertain and determine the reasonable market demand of oil and gas, and adjust allowable rates with respect thereto. The sale of liquid hydrocarbons was subject to federal regulation under the Energy Policy and Conservation Act of 1975 that amended various acts, including the Emergency Petroleum Allocation Act of 1973. These regulations and controls included mandatory restrictions upon the prices at which most domestic crude oil and various petroleum products could be sold. All price controls and restrictions on the sale of crude oil at the wellhead have been withdrawn. It is possible, however, that such controls may be reimposed in the future but when, if ever, such reimposition might occur and the effect thereof on the Company cannot be predicted. Approvals to conduct oil and gas exploration and production operations are required from various governmental agencies. There is no assurance when and if such approvals will be granted. Environmental Laws The Company intends to conduct its operations in compliance with all applicable environmental laws. The cost of such compliance has been and will be factored into the estimated costs of drilling and production. The effects of applicable environmental laws are to add to the cost of operations and to add to the time it takes to bring a project to fruition. Employees The Company currently has 3 full-time employees and its officers and directors. -6- -------------------------------------------------------------------------------- ITEM 2. DESCRIPTION OF PROPERTIES -------------------------------------------------------------------------------- Oil and Gas Properties See "ITEM 1. Description of Business". Rental Properties Abbecombec Ocean Village Resort ------------------------------- The Company owns two vacation homes in the Abbecombec Ocean Village Resort located on the shore of Clam Bay, which is 40 miles east of Halifax, Nova Scotia. The Company currently rents the dwellings on a month-to-month basis for $500 per month. During the year, the occupancy rate for these vacation homes has been 100%. The income generated by these properties is subject to a number of factors, including the time of year, occupancy rates among similar properties in the area and economic conditions in general. These properties are not subject to any mortgage or other obligation. At this time the Company has no plans for renovate or otherwise improve the properties. The Company believes these properties are adequately insured. Woodland Valley Ranch, Arizona ------------------------------ The Company owns 37 acres of undeveloped land in Woodland Valley Ranch, located in Apache County in northern Arizona. These parcels are located about 12 miles northeast of St. Johns, Arizona. The Woodland Valley Ranch is comprised of over 32,000 acres of virgin wilderness with elevations ranging from 5,900 feet to 6,800 feet above sea level. The Woodland Valley Ranch borders over 30,000 acres of Arizona State Trust lands. The Company is required to make monthly payments of $255 through December 2019. As of the date of this annual report, the current principal balance is approximately $46,008. The Company is working with the contract holder to resolve the default. The Company acquired these parcels for investment purposes and has no present intent to develop or improve this property. As undeveloped land, the Company does not believe there is a need to insure the property at this time. Elk Valley Ranch, Arizona ------------------------- The Company owns 2 undeveloped lots, totaling 73 acres of real property, in Elk Valley Ranch. Elk Valley Ranch is near the Woodland Valley Ranch and is about 15 miles east of St. Johns, Arizona. The Company purchased the lots for $98,715, including a down payment of $5,020 and monthly payments of $521 for 180 months. As of the date of this annual report, the current principal balance is approximately $93,695. The Company is working with the contract -7- holder to resolve the default. The Company acquired these properties for investment purposes and has no present intent to develop or improve these parcels. As undeveloped parcels, the Company does not believe there is a need to insure the properties at this time. 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." Executive Offices The Company currently leases 1,500 square feet of executive office space located at 610- 800 West Pender Street, Vancouver, Canada, V6C 2V6. The offices are rented on a month-to- month basis for approximately $2,050 per month. The Company believes this space will be sufficient for its needs for the foreseeable future. The Company rents the office furnishings for its Canadian office from Michael C. Gill Enterprises Ltd., for $6,500 per month. The Company also leases 1,500 square feet of administrative office space located at 136 East South Temple, Suite 1600, Salt Lake City, Utah 84111 for approximately $3,800 per month. The Company has subleased most of this space to a third party for approximately $3,800 per month. -------------------------------------------------------------------------------- ITEM 3. LEGAL PROCEEDINGS -------------------------------------------------------------------------------- No legal proceedings are threatened or pending against the Company or any of its officers or directors. Further, none of the Company's officers or directors or affiliates of the Company are parties against the Company or have any material interests in actions that are adverse to the Company's interests. -------------------------------------------------------------------------------- ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS -------------------------------------------------------------------------------- No matters were submitted to a vote of the Company's shareholders during the fiscal year ended June 30, 2004. -8- -------------------------------------------------------------------------------- ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS -------------------------------------------------------------------------------- The Company's common stock is listed on the NASD OTC Bulletin Board under the symbol "APXR." As of June 30, 2004, the Company had 882 shareholders holding 58,263,569 common shares. The published closing bid and ask quotations for the previous two fiscal years are included in the chart below. These quotations represent prices between dealers and do not include retail markup, markdown or commissions. In addition, these quotations do not represent actual transactions. BID PRICES ASK PRICES HIGH LOW HIGH LOW 2003-2004 --------- July thru Sep. 2003 .05 .02 .08 .04 Oct. thru Dec. 2003 .065 .03 .073 .035 Jan. thru Mar. 2004 .09 .031 .10 .04 Apr. thru June 2004 .087 .05 .095 .063 2003-2002 --------- July thru Sep. 2002 .018 .009 .02 .011 Oct. thru Dec. 2002 .017 .0085 .02 .01 Jan. thru Mar. 2003 .01 .002 .011 .003 Apr. 1 thru Apr. 2, 2003 .005 .0035 .007 .007 Apr. 3 thru Jun. 2003 .09 .02 .15 .06 (After a 1 for 20 reverse split) The foregoing figures were furnished to the Company by Pink Sheets, L.L.C., 304 Hudson Street, 2nd Floor, New York, New York 10013. Dividends Since its inception, the Company has not paid any dividends on its common stock, and the Company does not anticipate that it will pay dividends in the foreseeable future. Securities for Issuance Under Equity Compensation Plans The Company currently has no equity compensation plans. -9- Recent Sales of Unregistered Securities During the quarter ended June 30, 2004, the following equity securities, which were not registered under the Securities Act of 1933, were issued. On April 8, 2004, the Company issued 500,000 restricted common shares to a consultant for providing public relations services to the Company. The shares were were valued at $.01 per share. 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, and from similar applicable state securities laws, rules and regulations exempting the offer and sale of these securities by available state exemptions. On June 2, 2004, the Company issued 5,600,000 restricted common shares to five parties, including 1,400,000 common shares to John Hickey, the Company Secretary and a director, for services rendered to the Company. The shares were valued at $.03 per share. The shares were issued without registration under the Securities Act of 1933 in reliance on an exemption from registration provided by Regulation S promulgated by the Securities and Exchange Commission. In June 2004, the Company issued 2,376,234 restricted common shares to two parties, including 602,556 common shares to John Hickey in satisfaction of debt. The shares were valued at $.03 per share. The shares were issued without registration under the Securities Act of 1933 in reliance on exemptions from registration provided by Regulation S promulgated by the Securities and Exchange Commission and Section 4(2) of the Securities Act. -------------------------------------------------------------------------------- ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS -------------------------------------------------------------------------------- The following discussion is intended to assist you in understanding our results of operations and our present financial condition. Our Financial Statements and the accompanying notes included elsewhere in this Form 10-KSB contain additional information that should be referred to when reviewing this material. Statements in this discussion may be forward-looking. These forward-looking statements involve risks and uncertainties, including those discussed below, which could cause actual results to differ from those expressed. Please read Forward-Looking Information on page 3. General The Company is a development stage company engaged in the exploration of gas and oil. The Company has been engaged in the gas and oil business since 1995. We did not produce any natural gas or oil prior to August 2001. -10- Liquidity and Capital Resources During the fiscal year ended June 30, 2004, the Company funded its operations primarily primarily from the sale of Company securities. During the year, the Company sold 5,001,820 shares of its common stock for $102,159. As of June 30, 2004, the Company had cash on hand of $ 14,741. 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. As pointed out in the Report of our independent registered public accounting firm, 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 include the Company's obligation in connection with its working interests in the Bastian Bay Field and the Manahuilla Creek Field. Results of Operations Comparison of the year ended June 30, 2004 and the year ended June 30, 2003 The Company generated a net loss of $748,280 in the year ended June 30, 2004, compared to a loss of $652,701 in the year ended June 30, 2003. The $95,597 increase in net loss is the result of increases in exploration, development and administrative expenses. These expenses include: June June 2004 2003 ---- ---- Travel $ 37,345 $194,450 Office expenses 104,139 67,354 Telephone 17,930 32,497 Professional 33,431 57,155 Consultants 328,936 156,034 Promotional 10,801 15,139 Rent 28,529 27,172 -11- Exploration and development 177,180 57,183 - oil and gas Other 12,594 26,543 Decreases in travel, telephone, professional, promotional and other expenses were more than offset by increases in office expenses, consultants and exploration and development expenses. Despite the Company's efforts to control expenses as evidenced by the aforementioned decreased expenses, the overall increase in net loss is primarily attributable to the increased oil and gas exploration activities in Texas and Louisiana by the Company in 2004 as compared to 2003. The Company has not generated operating income in either of the past two years. It did, however, receive $26,664 in non operating revenue for the twelve months ended June 30, 2004, compared to $8,292 in the same period for 2003. Comparison of the year ended June 30, 2003 and the year ended June 30, 2002 The Company generated a loss of $652,701 in the year ended June 30, 2003, compared to a loss of $1,216,953 for the year ended June 30, 2002. The $564,252 decrease in the loss is the result of a decrease in expenses. The Company has not generated an operating income for the past two years, however, it received $8,292 in non operating revenue for the twelve months ended June 30, 2003 compared to $40,556 in the same period for 2002. During the year ended June 30, 2003, the Company incurred $633,527 in exploration, development and promotion, which included $194,450 in travel expenses, and consulting fees of $153,394, related to the Company's projects in Texas, and Louisiana;. During the same period ended June 30, 2002, the Company spent $1,191,385. The $557,858 decrease was due primarily to a decrease in the exploration and related costs as result of a decrease in the Company's activity in its investment's in its mineral claims. Rental and related office expenses decreased from $301,972 in 2002 to $127,023 in 2003 caused by the decreased activity outlined above. Off-Balance Sheet Financing Arrangements As of March 31, 2004, we had no off-balance sheet financing arrangements. Critical Accounting Policies The Company has identified policies below as critical to its business operations and the understanding of its financial statements. The impact of these policies and associated risks are discussed throughout Management's Discussion and Analysis and Plan of Operations where such policies affect its reported and expected financial results. A complete discussion of the -12- Company's accounting policies in included in Note A of the Notes to Consolidated Financial Statements. Capitalization of Oil Leases Costs The Company uses the successful efforts cost method for recording its oil lease interests. This provides for capitalizing the purchase price of the project and the additional costs directly related to proving the properties and amortizing these amounts over the life of the reserve when operations begin or a shorter period if the property is shown to have an impairment in value or expensing the remaining balance if it is proven to be of no value. Expenditures for oil well equipment are capitalized and depreciated over their useful lives. Environmental Requirements At the report date environmental requirements related to the mineral claim interests held by the Company are unknown and therefore an estimate of any future cost cannot be made. Foreign Currency Translation Part of the transactions of the Company were completed in Canadian dollars and have been translated to US dollars as incurred, at the exchange rate in effect at the time, and therefore, no gain or loss from the translations is recognized. U.S. dollars are considered to be the functional currency of the Company. Development Stage and Going Concern The Company is a development stage company and have not yet generated revenue. The Company has accumulated losses totaling $7,742,644 and has incurred debt in the development of its operations. To generate positive cash flow, the Company will require substantial additional funding. Funding which may not be available to the Company on acceptable terms, or at all. Moreover, to obtain additional funding the Company may have to issue significant additional common shares, which could result in dilution to current shareholders. Recent Accounting Pronouncements The Company does not expect that the adoption of other recent accounting pronouncements will have a material impact on its financial statements. -------------------------------------------------------------------------------- ITEM 7. FINANCIAL STATEMENTS -------------------------------------------------------------------------------- -13- MADSEN & ASSOCIATES, CPA's Inc. 684 East Vine St, Suite 3 ------------------------------- Murray, Utah 84107 Certified Public Accountants and Business Consultants Telephone 801 268-2632 Fax 801-262-3978 Board of Directors Apex Resources Group, Inc. Vancouver, Canada REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We have audited the accompanying balance sheet of Apex Resources Group, Inc. (development stage company) at June 30, 2004, and the related statements of operations, stockholders' equity, and cash flows for the years ended June 30, 2004 and 2003, and the period January 27, 1984 (date of inception) to June 30, 2004. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall balance sheet presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Apex Resources Group, Inc. at June 30, 2004, and the results of operations, and cash flows for the years ended June 30, 2004 and 2003, and the period January 27, 1984 to June 30, 2004, in conformity with accounting principles generally accepted in the United States of America. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company will need additional working capital to service its debt and for any planned activity, which raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are described in the notes to the financial statements. These financial statements do not include any adjustments that might result from the outcome of this uncertainty. Salt Lake City, Utah October 14, 2004 s/Madsen & Associates, CPA's Inc. -14- APEX RESOURCES GROUP, INC. ( Development Stage Company) BALANCE SHEET June 30, 2004 -------------------------------------------------------------------------------- ASSETS CURRENT ASSETS Cash $ 14,741 ----------- Total Current Assets 14,741 ----------- PROPERTY AND EQUIPMENT - net of accumulated depreciation 197,538 ----------- OTHER ASSETS Accounts receivable - affiliates 148,932 Oil leases 67,913 Land - Arizona 83,600 Available-for-sale securities 2,628 ----------- 303,073 ----------- $ 515,352 =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Notes payable - land $ 71,183 Accounts payable 42,526 Accounts payable - related parties 84,000 ----------- Total Current Liabilities 197,709 ----------- STOCKHOLDERS' EQUITY Common stock 400,000,000 shares authorized, at $.001 par value; 58,263,569 issued and outstanding 58,264 Capital in excess of par value 8,002,023 Deficit accumulated during the development stage (7,742,644) ----------- Total Stockholders' Equity 317,643 ----------- $ 515,352 =========== The accompanying notes are an integral part of these financial statements. -15- APEX RESOURCES GROUP, INC. ( Development Stage Company) STATEMENT OF OPERATIONS For the Years Ended June 30, 2004 and 2003 and the Period January 27, 1984 (date of inception) to June 30, 2004 -------------------------------------------------------------------------------- June June January 27, 1984 2004 2003 to June 30, 2004 ----------- ----------- ---------------- REVENUES Other non operating income $ 26,664 $ 8,292 $ 350,697 ----------- ----------- ----------- EXPENSES Exploration, development, 750,885 633,527 9,293,994 and administrative - Note 9 Depreciation 24,059 27,466 124,102 ----------- ----------- ----------- 774,944 660,993 9,418,096 ----------- ----------- ----------- NET LOSS - before other income (748,280) (652,701) (9,067,399) NET GAIN ON SALE OF ASSETS -- -- 1,324,755 NET LOSS $ (748,280) $ (652,701) $(7,742,644) =========== =========== =========== LOSS PER COMMON SHARE Basic and diluted $ (.02) $ (.05) ----------- ----------- AVERAGE OUTSTANDING SHARES Basic (stated in 1000's) 42,947 13,927 ----------- ----------- The accompanying notes are an integral part of these financial statements. -16-
APEX RESOURCES GROUP, INC. ( Development Stage Company) STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY Period January 27, 1984 (Date of Inception) to June 30, 2004 --------------------------------------------------------------------------------------------------- Common Stock Capital in ------------ Excess of Accumulated Shares Amount Par Value Deficit ------ ------ --------- --------------- Balance January 27, 1984 -- $ -- $ -- $ -- 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. -17-
APEX RESOURCES GROUP, INC. ( Development Stage Company) STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (Continued) Period January 27, 1984 (Date of Inception) to June 30, 2004 -------------------------------------------------------------------------------------------------- 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) 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 - March 2004 367,655 368 18,014 -- Issuance of common stock for services at $.001 - April 2004 500,000 500 -- -- Issuance of common stock for payment of debt at $.03 - June 2004 2,376,234 2,377 68,910 -- Issuance of common stock for services and expenses at $.03 - Nov 2003 & Jun 2004 8,400,000 8,400 243,600 -- Net loss from operations for the year ended June 30, 2004 -- -- -- (748,280) ---------- ---------- ---------- ---------- Balance June 30, 2004 58,263,569 $ 58,264 $8,002,023 $(7,742,644) ========== ========== ========== ========== The accompanying notes are an integral part of these financial statements. -18-
APEX RESOURCES GROUP, INC. ( Development Stage Company) STATEMENT OF CASH FLOWS For the Years Ended June 30, 2004 and 2003 and the Period January 27, 1984 (Date of Inception) to June 30, 2004 ------------------------------------------------------------------------------------------------- June June January 27, 1984 2004 2003 to June 30, 2004 ----------- ----------- ---------------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (748,280) $ (652,701) $(7,742,644) Adjustments to reconcile net loss to net cash provided by operating activities Loss on mineral properties 131,657 2,640 134,297 Depreciation 24,059 27,466 124,102 Common capital stock issued for services & expenses 270,882 115,380 4,976,619 Gain on sale of assets -- -- (1,354,755) (Increase) decrease in accounts receivable (56,370) 295,115 (148,932) (Increase) decrease in deposits 38,664 -- Increase (decrease) in liabilities 279,792 (79,953) 429,330 ----------- ----------- ----------- Net Cash Used By Operations (98,260) (253,389) (3,581,983) ----------- ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of investments -- -- (9,645) Purchase of property & equipment (74,600) -- (396,240) Purchase of oil & gas leases and mining claims -- -- (523,019) Net proceeds from sale of assets -- -- 1,638,159 ----------- ----------- ----------- (74,600) -- 709,255 ----------- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Notes payable - land 71,183 -- 71,183 Net proceeds from issuance of capital stock 102,159 15,650 2,816,286 ----------- ----------- ----------- 173,342 15,650 2,887,469 ----------- ----------- ----------- Net increase (decrease) in cash 482 (237,739) 14,741 Cash at beginning of year 14,259 251,998 -- ----------- ----------- ----------- Cash at end of year $ 14,741 $ 14,259 $ 14,741 =========== =========== =========== The accompanying notes are an integral part of these financial statements. -19-
APEX RESOURCES GROUP, INC. ( Development Stage Company) STATEMENT OF CASH FLOWS (Continued) For the Period January 27, 1984 (Date of Inception) to June 30, 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 9,267,655 common shares for services and expenses - for the year ended June 30, 2004 270,882 ---------- The accompanying notes are an integral part of these financial statements. -20- APEX RESOURCES GROUP, INC. ( Development Stage Company) NOTES TO FINANCIAL STATEMENTS June 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. 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 (95,386) --------- 197,538 ------- 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. -21- APEX RESOURCES GROUP, INC. ( Development Stage Company) NOTES TO FINANCIAL STATEMENTS (Continued) June 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 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. -22- APEX RESOURCES GROUP, INC. ( Development Stage Company) NOTES TO FINANCIAL STATEMENTS (Continued) June 30, 2004 -------------------------------------------------------------------------------- 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 due their short term maturities. Income Taxes ------------ The Company utilizes the liability method of accounting for income taxes. Under the liability method deferred tax assets and liabilities are determined based on the differences between financial reporting and the tax bases of the assets and liabilities and are measured using the enacted tax rates and laws that will be in effect, when the differences are expected to reverse. An allowance against deferred tax assets is recorded, when it is more likely than not, that such tax benefits will not be realized. At June 30, 2004, the Company had a net operating loss available for carry forward of $7,744,912. The tax benefit of approximately $2,323,500 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 2024. Revenue Recognition ------------------- Revenue is recognized on the sale and transfer of properties or services and the receipts of other sources income. Advertising and Market Development ---------------------------------- The Company expenses advertising and market development costs as incurred. Concentration of Credit Risk ---------------------------- Financial instruments that potentially subject the Company to significant concentration of credit risk consists primarily of account receivables. Accounts receivable are unsecured, however, management considers them to be currently collectable. -23- APEX RESOURCES GROUP, INC. ( Development Stage Company) NOTES TO FINANCIAL STATEMENTS (Continued) June 30, 2004 -------------------------------------------------------------------------------- 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. 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. 4. PURCHASE OF LAND The Company is obligated under two installment sales contracts for the purchase of land. The contracts provide for 180 monthly payments of $776 starting in January and March of 2004, including interest of 11%. On the date of this report the contracts were in default. -24- APEX RESOURCES GROUP, INC. ( Development Stage Company) NOTES TO FINANCIAL STATEMENTS (Continued) June 30, 2004 -------------------------------------------------------------------------------- 5. AVAILABLE-FOR-SALE SECURITIES During 2001 the Company purchased 6,000,000 shares of Omega Ventures Group, Inc. for $3,000. Durng the year ended June 30, 2004 745,635 shares were sold for $21,184, leaving 5,254,365 shares. On the date of this report the shares have been trading, in a small quanties, for $.03 per share. Management intents to hold the securities for investment. 6. 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. 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 and a consultant have acquired 21% of the outstanding common stock of the Company and have received the restricted common capital stock issued to them as outlined in note 4. On June 30, 2004 officers-directors had accrued consultant fees and expenses due them of $84,000. 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. -25- APEX RESOURCES GROUP, INC. ( Development Stage Company) NOTES TO FINANCIAL STATEMENTS (Continued) June 30, 2004 -------------------------------------------------------------------------------- 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 from related parties, and equity funding, which will enable the Company to operate for the coming year. 9. SCHEDULE OF EXPENSES Following is a summary schedule of the expenses shown in the statement of operations under exploration, development, and administrative. June June 2004 2003 ----- ----- Travel $ 37,345 $ 194,450 Office expenses 104,139 67,354 Telephone 17,930 32,497 Professional 33,431 57,155 Consultants 328,936 156,034 Promotional 10,801 15,139 Rent 28,529 27,172 Exploration and development - oil and gas 177,180 57,183 Other 12,594 26,543 -------- -------- $ 750,885 $ 633,527 ------- ------- -26- -------------------------------------------------------------------------------- ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE -------------------------------------------------------------------------------- On February 5, 2004, the Company dismissed Sellers & Andersen, from it position as its independent accountants and engaged Madsen & Associates, CPAs, Inc., as the Company's registered independent public accounting firm. This change in accountants was reported in a Current Report on Form 8-K filed on February 10, 2004, as amended, and that Current Report is incorporated herein in its entirety by this reference. -------------------------------------------------------------------------------- ITEM 8A. CONTROLS AND PROCEDURES -------------------------------------------------------------------------------- (a) Evaluation of Disclosure Controls and Procedures. Our Chief Executive Officers and Chief Financial Officer have conducted an evaluation of our disclosure controls and procedures as of the end of the period covered by this report (the "Evaluation Date"). Based on their evaluation, our Chief Executive Officers and Chief Financial Officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed in reports that we file or submit 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 our 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. -------------------------------------------------------------------------------- ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT -------------------------------------------------------------------------------- The following table sets forth as of October 14, 2004, includes the name, age, and position of each executive officer and director and the term of office of each director of the Company. Name Age Position Director and/or Officer Since ---- --- -------- ----------------------------- John R. Rask 54 President March 2003 Director August 1996 -27- John M. Hickey 62 Secretary March 2003 Director October 1996 Robert Gill 25 Director March 2003 -------------------------------------------------------------------------------- Each director of the Company serves for a term of one year or until his successor is elected at the Company's annual shareholders' meeting and is qualified, subject to removal by the Company's shareholders. Each officer serves, at the pleasure of the board of directors, for a term of one year and until his successor is elected at the annual meeting of the board of directors and is qualified. Set forth below is certain biographical information regarding each of the Company's executive officers and directors. John R. Rask. Since the early 1980's Mr. Rask has been owner and operator of Ray's Income Tax Service, a company which specialized in bookkeeping and the preparation of income tax returns. Mr. Rask is the President and a director of the Company. Mr. Rask is also an officer and director of Omega Ventures Group, Inc.. John M. Hickey. From 1995 to present Mr. Hickey has worked for the Company. Mr. Hickey began with Apex Resources as the General Manager and is currently the Secretary and a Director of Apex Resources. Mr. Hickey is also President and a director of Omega Ventures Group, Inc. Robert Gill. Mr. Gill earned a Bachelors of Science degree from Simon Fraser University located in British Columbia majoring in Computing Science and minoring in business in June of 2003. Since 1996 Mr. Gill has owned and operated a web development and technical support company and has worked as a software engineer for several companies. Mr. Gill is also an officer and director of Omega Ventures Group, Inc. Compliance with Section 16(a) of the Exchange Act Directors and executive officers are required to comply with Section 16(a) of the Securities Exchange Act of 1934, which requires generally that such persons file reports regarding ownership of and transactions in securities of the Company on Forms 3, 4, and 5. Form 3 is an initial statement of ownership of securities. Form 4 is to report changes in beneficial ownership. Form 5 is an annual statement of changes in beneficial ownership. Based solely on a review of Forms 3 and 4 and amendments thereto furnished to the Company during its most recent fiscal year, and Forms 5 and amendments thereto furnished to the Company with respect to the most recent fiscal year, it appears all Forms 3, 4 and 5 were not timely filed. -28- -------------------------------------------------------------------------------- ITEM 10. EXECUTIVE COMPENSATION -------------------------------------------------------------------------------- The following table sets forth certain summary information concerning the compensation paid or accrued over each of the Registrant's last three completed fiscal years to the Company's, or its principal subsidiaries, chief executive officers during such period (as determined at June 30, 2004 the end of the Registrant's last completed fiscal year).
Summary Compensation Table Long Term Compensation ---------------------- Annual Compensation Awards Payouts Name and Principal ------------------- ------ ------- ------------------ Position Restricted -------- Other Annual Stock Options/ LTIP All Other Year Salary Bonus Compensation Awards$ SARs Payout Compensation ---- ------ ----- ------------ ------- ---- ------ ------------ John R. Rask 2004 -0- -0- -0- -0- -0- -0- -0- President/Director 2003 -0- -0- -0- -0- -0- -0- -0- 2002 -0- -0- -0- -0- -0- -0- -0- John M. Hickey 2004 -0- -0- 60,000* -0- -0- -0- -0- Secretary/Director 2003 -0- -0- 60,000* -0- -0- -0- -0- 2002 -0- -0- 48,000* -0- -0- -0- -0-
-------------------------------------------------------------------------------- * Mr. Hickey provides services as secretary to the Company through Manhattan Communications, Inc. Mr. Hickey is the controlling shareholder of Manhattan Communications. In each of the years 2002, 2003 and 2004, the Company has issued restricted common shares to Manhattan Communications in lieu of cash payment for Mr. Hickey's services. The number of shares issued to Manhattan Communications is based on the prevailing market price at the time the shares are issued. Employment Contracts and Termination of Employment and Change in Control Arrangement In the past three years no executive officer has received any amounts in connection with an executive officer's resignation, retirement, or other termination. No executive officer received any amounts in the last three years in connection with a change in control of the Company of a change in the executive officer's responsibilities after a change in control. There are no compensatory plans or arrangements, including payments to be received from the Company, with respect to any person named in Cash Compensation set out above which would in any way result in payments to any such person because of his resignation, retirement, or other termination of such person's employment with the Company or its subsidiaries, or any change in control of the Company, or a change in the person's responsibilities following a change in control of the Company. -29- -------------------------------------------------------------------------------- ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT -------------------------------------------------------------------------------- The following table sets forth as of June 30, 2004, the name and number of shares of the Company's common stock, par value $0.001 per share, held of record or beneficially by each person who held of record, or was known by the Company to own beneficially, more than 5% of the 58,263,569 issued and outstanding shares of the Company's Common Stock, and the name and share holdings of each director and of all officers and directors as a group. Title of Amount and Nature of Percentage -------- -------------------- ---------- Class Name of Beneficial Owner Beneficial Ownership of Class ----- ------------------------ -------------------- -------- Common Robert Card1 5,500,000 9.4% 475 Howe Street, Suite 1102 Vancouver, B.C. V6C 2B3 Common Robert Gill 2,367,655 4.1% 1075 Groveland Road West Vancouver, B.C. V7S 1Z3 Common John M. Hickey2 6,451,500 11.1% 1601-1415 West Georgia Street Vancouver, B.C. V6G 3C8 Common Eric Smith 3,000,000 5.1% Network Capital Group, Inc. P.O. Box 61 Front Street Churchill Building Grand Turk, Turks & Caicos Islands Common John R. Rask 907,825 3.0% 1909 Monroe Ave. Butte, Montana 59701 --------------------- 1 Mr. Card may be deemed to be the beneficial owner of 3,000,000 common shares held of record by Republic Securities, Ltd. and 2,500,000 shares held of record by Siam Oceanic Fund, Inc. 2 In addition to the 5,011,500 shares Mr. Hickey holds in his own name, he may also be deemed to be the beneficial owner of 1,440,000 common shares held of record by Manhattan Communications, Inc. -30- -------------------------------------------------------------------------------- Common All Officers and Directors as a Group: (3 persons) 9,727,016 16.7% -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS -------------------------------------------------------------------------------- The Company contracts with Manhattan Communications, Inc., to retain the services of John M. Hickey to serve as Secretary of the Company. Mr. Hickey owns the controlling interest in Manhattan Communications, and therefore may be deemed to be the beneficial owner of the shares held by Manhattan Communications. The Company paid Manhattan Communications approximately $60,000 this year for Mr. Hickey's services and reimbursed Manhattan Communications for all expenses incurred on the Company's behalf. During the year Mr. Hickey made loans to the Company. In June 2004, the Company issued 602,556 restricted common shares to Mr. Hickey in satisfaction of approximately $18,100 worth of debt owed to Mr. Hickey. During the year the Company made no interest, demand loans to affiliates, including Omega Ventures Group, Inc., of $56,370. Omega Ventures Group, Inc., is related through common management. The total outstanding balance of demand loans made by the Company totaled $148,932 at June 30, 2004. As of the date of this annual report, the Company has not demanded repayment of these loans. On June 30, 2004, officers and directors of the Company had accrued consulting fees and expenses totaling $84,000. -------------------------------------------------------------------------------- ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K -------------------------------------------------------------------------------- (a) Reports on Form 8-K. No reports on Form 8-K were filed during the quarter ended June 30, 2004. (b) Exhibits. -31- 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 -------------------------------------------------------------------------------- ITEM 14. CONTROLS AND PROCEDURES -------------------------------------------------------------------------------- Madsen & Associates, CPA's Inc., served as our independent registered public accounting firm for the year ended June 30, 2004, and is expected to serve in that capacity for the current year. Principal accounting fees for professional services rendered for us by Madsen & Associates for the year ended June 30, 2004, are summarized as follows: 2004 2003 ---- ---- Audit $ 14,675 $ 11,950 Audit related - - Tax 450 400 All other - - --------- ------ ------ Total $ 15,125 $ 12,350 =========================================================== Audit Fees. Audit fees were for professional services rendered in connection with the Company's annual financial statement audits and quarterly reviews of financial statements for filing with the Securities and Exchange Commission. Board of Directors Pre-Approval Policies and Procedures. At its regularly scheduled and special meetings, the Board of Directors, in lieu of an established audit committee, considers and pre- approves any audit and non-audit services to be performed by the Company's independent accountants. The Board of Directors has the authority to grant pre-approvals of non-audit services. -------------------------------------------------------------------------------- SIGNATURES -------------------------------------------------------------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by following persons on behalf of the Registrant and in the capacities and on the dates indicated: APEX RESOURCES GROUP, INC. Date: October 15, 2004 By: /s/ John R. Rask ------------------------------------ John R. Rask, President and Director Date: October 15, 2004 By: /s/ John M. Hickey -------------------------------------- John M. Hickey, Secretary and Director -32-