APC Group, Inc - FORM 10-K/A - February 2, 2010

Attached files

file	filename
EX-32 - CERTIFICATION - APC Group, Inc	ex-32.htm
EX-31 - CERTIFICATION - APC Group, Inc	ex-31.htm
EX-10 - FILING REQUIREMENTS - APC Group, Inc	ex-10.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K/A

(Mark One)

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended November 30, 2008

¨	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________to ____________

Commission File Number 000-52789

APC GROUP, INC.

(Name of small business issuer in its charter)

Nevada	20-1069585
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

3526 Industrial Ave., Fairbanks, AK	99701
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code:

(907) 457-2501

Securities registered under Section 12(b) of the Exchange Act:

Title of Each Class	Name of Each Exchange On Which Registered
N/A	N/A

Securities registered under Section 12(g) of the Act:

Title of Class	Name of Each Exchange On Which Registered
Common Stock, $.001 par value per share	N/A

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 the Securities Act.

Yes ¨ No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act

Yes ¨ No x

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) and (2) has been subject to such filing requirements for the last 90 days.

Yes x No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this

chapter) is not contained herein, and will not e contained, to the best of registrant’s knowledge, in definitive proxy

or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form

10-K ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated, a non-accelerated filer, or

a smaller reporting company. See Definition of “large accelerated filer,” “accelerated filer” and “smaller reporting

company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨		Accelerated filer	¨
Non-accelerated filer	¨		Smaller reporting company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No x

The aggregate market value of Common Stock held by non-affiliates of the Registrant on February 4, 2009 was

$3,946,832 based on a $.20 closing price for the Common Stock on February 4, 2009. For purposes of this computation,

all executive officers and directors have been deemed to be affiliates. Such determination should not be deemed to be

an admission that such executive officers and directors are, in fact, affiliates of the Registrant.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock as of the latest practicable

date. 32,956,365 common shares as of February 4, 2009.

DOCUMENTS INCORPORATED BY REFERENCE

None.

Form 10-KSB

For the Fiscal Year Ended November 30, 2008

TABLE OF CONTENTS

		Page
PART I
Item 1.	Description of Business.	1
Item 2.	Description of Property.	5
Item 3.	Legal Proceedings.	5
Item 4.	Submission of Matters to a Vote of Security Holders.	5

PART II
Item 5.	Market for Common Equity and Related Stockholder Matters.	6
Item 6.	Management’s Discussion and Analysis.	6
Item 7.	Financial Statements.	16
Item 8.	Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.	26
Item 8A(T).	Controls and Procedures.	26
Item 8B.	Other Information.	27

PART III
Item 9.	Directors, Executive Officers, Promoters, Control Persons and Corporate Governance; Compliance With Section 16(a) of the Exchange Act.	28
Item 10.	Executive Compensation.	29
Item 11.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.	31
Item 12.	Certain Relationships and Related Transactions, and Director Independence.	32
Item 13.	Exhibits.	33
Item 14.	Principal Accountant Fees and Services.	33

Form 10-KSB

For the Fiscal Year Ended November 30, 2008

PART I

Item 1.

Description of Business.

Organization

APC Group, Inc. was originally formed in April 1, 2003 as Alaskan Products Company Partnership, a general partnership in Alaska. Initially, there were two general partners.

On October 20, 2003, the State of Alaska approved our Certificate of Conversion allowing us to convert us to an Alaska limited liability company, under the name Alaskan Products Company, LLC.

On April 28, 2004 we became APC Group, Inc., a Nevada corporation, through the adoption of a Plan of Conversion and the filing of Articles of Incorporation with Nevada.

Alaskan Products Company LLC, one of our predecessor entities, entered a contract to purchase all of the assets of Reel-Thing Innovations Inc., a product development company, on July 10, 2003. Under the terms of the contract, as amended, the assets include the patents, molds, blueprints, design drawings, websites, instructional manuals, promotional materials and trade names for MedReel and Reel-Thing, in exchange for installment payments totaling $508,000. In the event that any of the installment payments is past due, Reel-Thing has the right to assess interest on the past due amounts at a rate of 1.5% per month. In the event that any of the installment payments is ninety (90) days past due, the assets revert back to Reel-Thing unless they provide their written consent waiving their right to the reversion. As of November 30, 2007, we had paid $75,000 to Reel-Thing for the assets, missed eight (8) installment payments totaling $213,000 and accrued $46,928 in late payment interest on the past due amounts.

On February 21, 2008, Reel-Thing and we amended the contract to revise the repayment schedule so we are no longer past due on our installment payments. In addition, Reel-Thing provided a waiver of their right to reversion of the assets during the period we were past due. Under the amendment, Reel-Thing converted $291,811, which consisted of $238,000 of past due installment payments on the purchase price and $53,811 of accrued late payment interest, into 1,209,524 restricted shares of our common stock. Reel-Thing also agreed to modify the payment schedule for $195,000 of the purchase price which remained unpaid. We paid $5,000 of the purchase price to Reel-Thing in finalizing the amendment, and we are scheduled to pay twenty-four (24) installment payments of $7,916 on the first business day of each month beginning on August 1, 2008. As of November 30, 2008, we were ninety (90) or more days past due. See the heading below, entitled “Risk Factors, Risks Relating to Our Business and Industry.” We plan to enter into negotiations with Reel-Thing either to further extend the repayment schedule so we are no longer past due on our installment payments and obtain a waiver or further convert the debt to equity. We are currently using the assets in our business and we have not received any communication from Reel-Thing expressing their intent to seize those assets, but there can be no assurance.

Our Business and Products

We market numerous watertight retractable 110v power cord products for use in different industries. We also manufacture proprietary Arctic Leash extension cords in various lengths and gages.

Arctic Leash™ (“Arctic Leash”): Vehicle mount retractable polar extension cord reel for motor vehicles.

Boom Leash™: Retractable polar cord reel for use with “Boom” trucks and high reach equipment.

Wall Leash™: Outdoor, wall or pole mountable retractable polar cord reel for homes, business, and general use in all climates for homes, business, and industry.

MedReel® (“MedReel”): Retractable green dot cord reel for operating rooms, crash carts, IV poles, computer carts, and hospital beds in health care facilities.

Arctic Leash Extension Cords: Proprietary extension cords in all lengths and gauges.

Marine Leash™: Retractable watertight cord reels for boats, yachts, sailboats, and ships.

The 18 Ft. Arctic Leash

The Arctic Leash is designed for motorists that commonly use extension cords, and it allows them to easily implement and store the cord for future and continuous use. Many motorists in arctic environments carry an extension cord around to plug-in their vehicle, as it is common practice in Alaska, Canada, and other cold climates in keeping vehicle engines heated that most of the world is unaware exists. The uniqueness of this product as well the concept of plugging your car into an electrical outlet caught the eye of a major cable TV network channel and appeared in a program about sub-arctic technology. Typically, motorists coil an extension cord around their side-view mirror. The Arctic Leash installs an extension cord inside a vehicle’s wheel well or behind the bumper, and it retracts into its confined case when not in use to remain out of view and secure when driving. When extended, the cord locks in place and with a slight tug it retracts into its watertight case when not in use. Although this is not a seasonal product, it has limited geographical appeal, primarily in colder climates. Dealerships install these units on selected models year round as part of their package, similar to fog lights.

Current wholesale prices are $84.84 with discounts based upon sales volumes. Current suggested retail price is $119.00 for all models

The 20/30 ft. Boom Leash

The Boom Leash is designed for boom truck manufactures where the Occupational Safety and health Administration, or OSHA, requires a cut off switch. This unit is non-ratcheting and is used as a closure only to signal the operator that the boom is over loaded. These units are original equipment manufacturer, or OEM, devices and can be engineered in different lengths and gauges. We believe that prior to the Boom Leash, there were no extension cord reels with a watertight case that could be used in the warmest and coldest climates.

Current OEM prices are $84.84 based upon sales volumes.

The 30 Ft. Wall Leash

The Wall Leash is designed to provide outside/inside retractable power in a watertight case for all climates, environments and applications. The wall leash differs from the Arctic Leash in the sense that it brings power to a device and equipment such as power tools, electric gardening equipment, or as a convenience on decks and patios, were the Arctic Leash is intended to plug into a power source. This removes the need to locate, carry, and connect traditional extension cords when needed power is required outside the house, business, or industry. The wall leash comes with mounting brackets to attach to most any surface, location, or device.

Current wholesale prices are $84.84 with discounts based upon sales volumes. Current suggested retail price is $119.00 for all models.

Arctic Leash Brand Extension Cords

We manufacture and distribute all weather extension cords in various length and gauges that are of the highest quality. Arctic Leash brand extension cords are all weather indoor/outdoor extension cords for use in all climates. Arctic Leash extension cords have lighted plugs on both ends, additional stress relief on plugs, solid stainless steel prongs and are warranted for life.

The MedReel

The MedReel is a retractable extension cord reel developed for use in health care facilities. The National Electric Code published by the National Fire Protection Association specifies that receptacles that are used in hospitals and may be wired to an emergency power supply be designated with a distinguishing feature which is commonly met by marking the receptacles with a distinctive green dot. Hospital grade receptacles are made to the highest and most rigid mechanical and electrical standards. MedReel is designed to provide green dot retractable power for various applications in the medical industry.

The MedReel has a wide range of uses and applications for a medical setting. It can be mounted on electric beds, operating theatre beds, portable testing equipment, dialysis machines, and other electrical medical equipment. It can also be ceiling mounted in operating theatres and critical care areas. The extension cord retracts and stores in a waterproof durable case when it is not in use.

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MedReel’s market consists of hospitals and healthcare facilities, and is intended for applications that are mainly employed indoors. The sales potential of the MedReel are expected to be consistent throughout all periods of the year, and the success of the MedReel product will depend on our ability to market and produce it.

The MedReel is available in four models, made to meet a variety of applications used by health care facilities. Based on the selected models, MedReel products are priced from $199.00 to $269.00. Individual brackets, sold separately, are priced ranging from $39.00 to $99.00.

We believe that the patented, retractable extension cords, in all their forms and applications, may become a product line that can be marketed and sold anywhere in the world, regardless of temperature, climate, or equipment type.

Our Market

We operate in the wire and cable manufacturing market. The wire and cable market is fragmented and characterized by a large number of public companies and privately owned companies throughout the U.S. The industry has been undergoing consolidation, and over the past few years some large market participants have been willing to divest businesses that are underperforming or not perceived as good growth opportunities. This current market environment has caused a ripple effect in the market, disrupting many customer relationships, which we believe will benefit us as a direct provider of high quality, low cost products.

Copper comprises one of the major cost components for cable and wire products. Cable and wire manufacturers are typically able to pass through the changes in the cost of copper to the customer. However, there can be timing delays for pricing implementations of varying lengths depending on the type of product, competitive conditions, particular customer arrangements and inventory management.

Marketing and Distribution

We sell our products through direct marketing to independent store owners (or retailers), independent chain retailers (or franchisees), hospitals, electrical contractors, corporate chain stores and corporate end users. We provide product samples, price sheets, brochures, pictures, DVD’s and other materials to attract potential customers and introduce new applications for use of our products. Our niche in the extension cord market can be defined as eliminating corporate chain store purchasers and selling directly to the independent store owner at a substantial discount. Many automotive chain stores own a small portion of there stores and franchise the name to independent store owners. These independent store owners are our principal customers, and we are not dependent on any one or more customers.

Corporate chain stores have multi-tiered distribution systems in place with generally one large distribution center that purchases product from the corporation and resells at a mark up to a smaller localized distribution center that resells at a mark up to even smaller distribution centers or in some cases the independent store owner. In many cases, these independent store owners are not bound to buy products only from the corporation or distribution centers, but are able to buy directly from the manufacturer. Knowing this, we market directly to the independent store owner, removing the corporate and distribution center mark ups and providing the independent store owner better pricing and other benefits such as higher quality products, free shipping, and lifetime warranties. With this in mind, we also leverage other products outside of our current product lines to these independent store owners. We believe that by selling directly to independent store owners we are able to provide better pricing which reduces our reliance on key customer accounts.

We plan to engage up to fifty (50) independent sales representatives in fiscal 2009 to sell our products. The independent representatives will use our web-based data program which has 3,500 potential customers to market our products. They will also use our existing data base to generate sales, but more importantly, they will also be inputting additional potential customers into our data base to create a value all of its own. We plan to use the program to manage our inventory levels by controlling what products are available in what industries for sale by the independent representatives and to monitor their performance.

We distribute our products directly to independent store owners in most cases. We also use a fulfillment house in Toronto, Canada. We have a few distributors who market our products; however, this accounts for less the 5% of our total sales.

Competition

We face intense competition from other manufacturers of extension cords and cord reels.

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We compete on the following basis:

Brand Recognition. We market watertight retractable extension cord reels under several brands and trademarks, including Arctic Leash, Boom Leash™, Wall Leash™, Marine Leash™ and MedReel. We believe that the Arctic Leash is the only retractable extension cord that can be mounted on a vehicle. Although this product has one of our lowest gross margins, its uniqueness allows us to attract customers and introduce them to our line of Arctic Leash branded, all weather, indoor/outdoor extension cords which have a much higher gross margin.

Low Cost. As discussed above under the heading “Marketing and Distribution”, we market our products primarily to independent store owners. By doing so, we remove corporate and distribution center mark ups that are typical in our industry.

High Quality. Our products meet or exceed the requirements of well recognized industry standard-setting authorities in the U.S. and Canada such as Underwriters Laboratories and the Canadian Standards Association.

We believe that we compete favorably on the factors described above. However, our industry is becoming increasingly competitive. Larger, more established companies than us may be able to compete more efficiently or effectively.

We face pricing pressure from various manufacturers and distributors that sell lower quality extension cords. The average end consumer generally is not aware of the differences in quality among the various brands of extension cords in the market. They are heavily persuaded by price. We handle this pressure by marketing high quality extension cords directly to independent store owners who typically are aware of differences in quality. By removing the corporate and distribution center mark ups, we are able to offer high quality extension cords at a low cost to combat pricing pressure.

Intellectual Property and Other Proprietary Rights

We rely on a combination of patent, trademark, copyright and trade secret laws in the U.S. and other jurisdictions as well as confidentiality procedures and contractual provisions to protect our intellectual property and other proprietary rights.

We rely on three (3) U.S patents which expire in 2012, 2015 and 2016 and a Canadian patent which expires in 2016 for the primary design of the Arctic Leash and the MedReel. The patents were granted for the concept of a water resistant retractable cord reel case that can be sealed by means of a fitted rubber sleeve on the cord. The tension of the retraction mechanism holds the specially designed sleeve firmly within the mouth of the case, creating a water tight seal for the case. The case is also designed with an integral inner water tight compartment for the mounting of a circuit breaker. The entire unit is designed to be rugged and capable of exterior mounting on a building or in the wheel well or engine compartment of an automobile, yet still protect all of the internal mechanisms and wiring from water, dampness and exposure to the elements.

MedReel is a registered trademark in the U.S. Our trademarks which are not federally registered include: Arctic Leash™, Boom Leash™, Wall Leash™ and Marine Leash™.

Contract Manufacturing

We outsource the manufacture of our extension cords to a contract manufacturer in the U.S. and one in China. We rely on a single Ohio-based manufacturer for both the MedReel and Arctic Leash cord reels. The manufacturer also warehouses our products and ships them to our customers. We have relied on a China-based manufacturer since 2004, for our other extension cord products. We plan to continue using the Ohio-based manufacturer for our patented watertight retractable, extension cord reels that could be jeopardized if they were manufactured offshore. We plan to continue using the Chinese-based manufacturer for our other extension cord products.

We do not have written contracts with either of our manufacturers; however, we have developed a course of dealing with them.

We negotiate pricing for each purchase order of our patented watertight retractable, extension cord reels based on the current cost of copper. We periodically schedule shipping of these products to us in Fairbanks, Alaska and pay 100% of the purchase order upon receipt of these products, except that we pay 100% of the purchase order of the MedReel and the manufacturer ships the MedReel directly to our customers. The risk of loss of these products passes to us in Ohio when the goods are shipped.

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We also negotiate pricing for each purchase order of our other products based on the current cost of copper. We provide a 30% deposit on the goods, which are delivered to Seattle, Washington where they are held in U.S. customs while our customs broker prepares documentation for them to clear customs. We pay the balance of the purchase order when the goods clear customs. The risk of loss of the goods passes to us when the goods arrive in Seattle. The manufacturer authorizes release of the goods to our shipping company which transports the goods to Anchorage, Alaska and then to us in Fairbanks.

We chose contract manufacturing because we have limited human and capital resources to manufacture our products ourselves. We believe that contract manufacturing provides us with the flexibility to better control the costs, inventory levels and quality of our products given our resources. We plan to continue using contract manufacturers for the foreseeable future.

Employees

We have two full-time employees. We believe that we have a good relationship with all of our employees.

We plan to engage up to fifty (50) independent sales representatives in fiscal 2009 to grow our business. We plan for them to sell our products directly to customers on a local level.

Regulation

Our electrical products are subject to product safety standards in the U.S. and Canada. To sell our products in these jurisdictions, we are required to have a government recognized, private-sector, third-party organization provide independent evaluations, product safety testing and certifications of our products. We have chosen Intertek, which issues the Electrical Testing Labs certification (or “ETL Listed Mark”) that is recognized and accepted in both jurisdictions, to perform these functions for the MedReel and Arctic Leash cord reels which are manufactured in the U.S. Our Chinese manufacturer delivers products to us with an Underwriters Laboratories (or UL) certification for both jurisdictions.

Intertek evaluates, tests and certifies our products under standards developed by Underwriters Laboratories in the United States and the Canadian Standards Association in Canada. Intertek performs quarterly audits of our MedReel and Arctic Leash cord reels. During fiscal 2008, we incurred $423 for Intertek’s services.

Item 2.

Description of Property.

Our corporate headquarters are located at 3526 Industrial Avenue, Fairbanks, Alaska 99701 and consist of approximately 2,100 square feet of office space and 1,500 square feet of warehouse space. We rent the premises for $1,450 per month under a month-to-month operating lease that is cancelable with thirty (30) days written notice.

Item 3.

Legal Proceedings.

In April 2006, Adrian Marangoni, a former executive officer, filed a lawsuit against us in the District Court for the State of Alaska, Fourth Judicial District at Fairbanks seeking the payment of $21,407, which he claims he loaned to us, along with post judgment interest, costs and attorney’s fees. On June 11, 2007, we made an Offer of Judgment to Mr. Marangoni in the amount of $21,407 which was accepted. Mr. Marangoni has yet to file a form of final judgment computing interest, costs and attorney’s fees. As of August 31 2008, we had accrued $30,267 consisting of the judgment amount, interest from April 1, 2006 to August 31, 2008 at the rate of 9.25% per annum, attorney fees at 18% of the judgment amount and filing fees. On August 7, 2008, the Superior Court for the State of Alaska Fourth Judicial District at Fairbanks issued an order of dismissal in the case.

From time to time, we may be a party to, and our properties may be the subject of, routine legal proceedings or threats of legal proceedings which we do not believe are material.

Item 4.

Submission of Matters to a Vote of Security Holders.

There were no matters submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report.

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PART II

Item 5.

Market for Common Equity and Related Stockholder Matters.

Market Information

On August 7, 2008 our common stock was cleared for quotation on the OTCBB under the symbol “APCU”. The following table sets forth for the indicated periods the high and low bid prices for our common stock on the OTCBB. The quotations reflect inter-dealer prices, without retail mark-up, markdown or commission, and may not necessarily represent actual transactions.

Fiscal 2008 Quarters Ended:	High		Low

November 30, 2008	$	0.15	$	0.15
August 30, 2008	$	0.50	$	0.50
May 31, 2008	$	-	$	-
February 29, 2008	$	-	$	-

Holders of Record

As of February 4, 2009, we had one hundred twelve (112) holders of record of our common stock.

Dividend Policy

We have never declared or paid dividends on our common stock. We do not anticipate paying dividends on our common stock in the near future. We intend to reinvest in our business operations any funds that could be used to pay dividends. Our common stock is junior in priority to our preferred stock with respect to dividends.

Item 6.

Management’s Discussion and Analysis.

The following discussion may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which can be identified by the use of forward-looking terminology such as, “may,” “believe,” “expect,” “intend,” “anticipate”, “estimate,” or “continue” or the negative thereof or other variations thereon or comparable terminology. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to have been correct. Our operations involve a number of risks and uncertainties, including those described under the heading “Risk Factors”, below, and other documents filed with the Securities and Exchange Commission (the “SEC”). Therefore, these types of statements may prove to be incorrect.

Overview

We market a number of patented watertight retractable power cord products for use in different industries. We also market our proprietary Arctic Leash brand polar extension cords.

Arctic Leash: Vehicle mount retractable polar extension cord reel for motor vehicles.

Boom Leash: Retractable polar cord reel for use with “Boom” trucks.

Wall Leash: Outdoor wall or pole mountable retractable polar cord reel for homes, business, and general use in all climates for homes, business, and industry.

MedReel: Retractable green dot cord reel for operating rooms, crash carts, IV poles, computer carts, and hospital beds in health care facilities.

Arctic Leash Extension Cords: Proprietary polar cords in all lengths and gauges.

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Results of Operations

Fiscal Year Ended November 30, 2008 Compared to Fiscal Year Ended November 30, 2007

Revenues increased $6,582, or 3%, to $198,345 for the fiscal year ended November 30, 2008, compared to revenues of $191,763 for the fiscal year ended November 30, 2007. During fiscal 2007 and the first three quarters of fiscal 2008, our sole executive officer was diverted from generating sales to managing the going public process. On August 7, 2008, our common stock was cleared for quotation on the OTCBB, which allowed our sole executive officer to focus more time generating sales. We generated 54% of our revenues during the fourth quarter of fiscal 2008. The increase in revenues is directly attributable to the increased focus of our sole executive officer on generating sales during the fourth quarter of fiscal 2008. We plan to engage up to fifty (50) independent sales representatives in fiscal 2009 to generate sales.

Cost of revenues increased $12,807, or 16%, to $90,507 for the fiscal year ended November 30, 2008, compared to cost of revenues of $77,700 for the fiscal year ended November 30, 2007. The increase in cost of revenues was primarily due to the increase in sales.

Gross profit decreased $6,225, or 5%, to $107,838 for the fiscal year ended November 30, 2008, compared to gross profit of $114,063 for the fiscal year ended November 30, 2007. The decrease in gross profit was due to the increase in cost of revenues which exceeded the increase in revenues.

Our gross margin was 54% for the fiscal year ended November 30, 2008, as compared to 59% for the fiscal year ended November 30, 2007. The gross margin on the Arctic Leash watertight retractable extension cord reel is approximately 30% while the gross margin on some of our Arctic Leash brand, all weather, indoor/outdoor extension cords is as high as 200%. Although the Arctic Leash has one of our lowest gross margins, its uniqueness allows us to attract customers and introduce them to our line of higher margin Arctic Leash branded extension cords. Sometimes we price the Arctic Leash at cost to build relationships so that we can introduce our other products. Our overall gross margin for any period is directly affected by the mix of products that we sell during the period. We generated revenue of $50,245, or 25% of sales, and $42,933, or 22% of sales, from the sale of Arctic Leash watertight retractable extension cord reels for the fiscal years ended November 30, 2008 and 2007, respectively, as compared to revenue of $148,100, or 75% of sales, and $148,830, or 78% of sales, from the sale of Arctic Leash brand, all weather, indoor/outdoor extension cords and the MedReel for those same periods. The decrease in gross margin was due to the decrease in sales of higher margin Arctic Leash brand, all weather, indoor/outdoor extension cords and the MedReel relative to sales of Arctic Leash watertight retractable extension cord reels.

Selling, general and administrative expenses was $3,931,144 for the fiscal year ended November 30, 2008, compared to selling, general and administrative expenses of $892,638 for the fiscal year ended November 30, 2007. The increase in selling, general and administrative expenses was primarily due to an increase in common stock issued to our sole executive officer and current and former directors as a bonus for taking the Company public and professional service providers. The bonus of common stock issued to Kenneth F. Forster, our only executive officer, and the members of our board of directors was valued at $2,800,000 and $87,500, respectively. The significant components of selling, general and administrative expenses for the fiscal year ended November 30, 2008 and 2007, the percentage change over the prior fiscal year and the expense level as a percentage of revenues are set forth in the table below:

	Fiscal 2007			Fiscal 2008

Compensation	$	508,537		$	2,996,310
Percentage change over prior fiscal year		196	%		489	%
As a percentage of revenues		265	%		1,511	%
Professional fees	$	255,092		$	822,017
Percentage change over prior fiscal year		(42	)%		222	%
As a percentage of revenues		133	%		414	%
Other expenses	$	129,009		$	112,817
Percentage change prior fiscal year		10	%		(13	)%
As a percentage of revenues		67	%		57	%

During fiscal 2008, compensation included $2,835,000 due to 8,000,000 shares of our common stock valued at $0.35 per share that we issued to Kenneth S. Forster, our only executive officer, and $35,000 due to 100,000 shares valued at $0.35 per share that we issued to Matthew Meyer, our sole director. Forster and Meyer received the shares as a bonus for taking the Company public. During fiscal 2008, professional fees included $375,000 due to 750,000 shares of common stock valued at $0.50 per share that we issued to a consultant to provide us with regulatory compliance services for twelve (12) months, $210,000 due to 600,000 shares of common stock valued at $0.35 per share that we issued to a consultant to provide us with print advertising and $131,250 due to an aggregate of 375,000 shares valued at $0.35 per share that we issued to consultants for accounting and administrative services. Our common stock was cleared for quotation on the OTCBB on August 7, 2008; however, the current market for our common stock is illiquid and extremely volatile. Prior to August 7, 2008, there was no market for our common stock, and we valued the shares based upon the last third-party sale of our common stock at that time. Our expense level was disproportionate to our revenues because we have been

required to issue large amounts of stock due to the risk associated with their being either no market for our common stock or an illiquid, volatile market. We have a limited amount of cash and will likely be required to issue additional shares for services in the future. We expect a disproportionate expense level to persist until we can increase our revenue of which there can be no assurance. In addition, we believe that if there was a liquid, nonvolatile market for our common stock, people providing services to us would consider it less risky and be willing to accept fewer shares at the market price which would decrease our expenses.

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Depreciation expenses was $11,634 for the fiscal year ended November 30, 2008, compared to depreciation expense of $11,626 for the fiscal year ended November 30, 2007.

Net operating loss was $3,834,940 for the fiscal year ended November 30, 2008, compared to net operating loss of $790,201 for the fiscal year ended November 30, 2007. The increase in operating loss was directly attributable to the increase in selling, general and administrative expenses.

We had loan costs of $36,250 for the fiscal year ended November 30, 2008 due to shares of common stock that we issued to an existing shareholder who assigned his personal $100,000 certificate of deposit as collateral for a $100,000 line of credit that we secured.

Interest expense decreased $26,282, or 38%, to $42,979 for the fiscal year ended November 30, 2008, compared to interest expense of $69,261 for the fiscal year ended November 30, 2007. The decrease in interest expense was due to a decrease in past due payments to Reel-Thing Innovations, Inc. (“Reel-Thing”). In February 2008, Reel-Thing converted $291,811, which consisted of $238,000 of past due installment payments on the purchase price and $53,811 of accrued late payment interest, into 1,209,524 restricted shares of our common stock, discussed below.

We had net loss of $3,885,414 (or basic and diluted net loss per share of $0.15) for the fiscal year ended November 30, 2008, compared to net loss of $899,462 (or basic and diluted net loss per share of $0.04) for the fiscal year ended November 30, 2007. The increase in net loss was primarily attributable to the decrease in gross profit and the increase in net operating loss.

Liquidity and Capital Resources

Total current assets were $131,340 as of November 30, 2008, consisting of cash and cash equivalents of $26,781, net accounts receivable of $30,984, inventory of $68,035 and prepaid expenses of $5,540.

Total current liabilities were $558,346 as of November 30, 2008, consisting of note payable to related party of $173,072, trade accounts payable of $143,675, current maturities of long-term debt of $121,987, line of credit of $99,875 and accrued expenses of $14,737.

As of November 30, 2008, we had a working capital deficit of $427,006. The ratio of current assets to current liabilities was 24% as of November 30, 2008. We plan to resolve our working capital deficit by converting our debt into equity and expending our operations. For example, in February 2008, Reel-Thing agreed to convert approximately $291,811 into 1,209,524 restricted shares of our common stock. As a result, our current maturities of long-term debt significantly decreased which decreased our working capital deficit. As of November 30, 2008, we had creditors that we plan to offer conversion on aggregate debt of $243,550 consisting of trade accounts payable of $143,675 and a line of credit of $99,875. Some of the creditors are also current shareholders, persons who have previously provided services to us for shares of our common stock or persons who have previously converted amounts owed to them, so we believe that they may accept our offer, but there can be no assurance.

We believe that if we can generate revenue of $500,000, then we would have positive cash flow from operations. We plan to increase our revenue by engaging up to fifty (50) independent sales representatives to generate sales. The sales representatives will receive commissions based on their sales volume and mix of products sold, which would give us flexibility because of the large variance in the gross margin on the Arctic Leash, which is 30%, compared to some of our Arctic Leash private label extension cords, which is as high as 200%. We believe that we can attract sales representatives without a significant amount of additional capital.

During the fiscal year ended November 30, 2008, we had a net increase in cash and cash equivalents of $22,985 consisting of net cash provided by financing activities of $180,524 which was offset by net cash used in operating activities of $157,399 and net cash used in investing activities of $140.

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Net cash used in operating activities was $157,399 during the fiscal year ended November 30, 2008, consisting of net loss of $3,885,414, adjustments for gain on settlement of lawsuit of $30,267 and bad debt recovery of $7,117 and a decrease in accounts payable related parties of $1,674 which were offset by adjustments for stock issued for services of $3,603,750, stock issued for loan costs of $36,250, depreciation expense of $11,634, accretion of discount on notes payable of $17,599, decreases in accounts receivable of $1,616, inventory of $19,830 and prepaid expenses of $7,568 and increases in trade accounts payable of $57,457 and accrued liabilities of $11,369.

Net cash used in investing activities was $140 during the fiscal year ended November 30, 2008 from the purchase of property and equipment. We did not have cash flows from investing activities during the fiscal year ended November 30, 2007.

Net cash provided by financing activities was $180,524 for the fiscal year ended November 30, 2008, consisting of proceeds from the issuance of debt of $165,619 and proceeds from sale of common stock of $20,750 which were offset by payments made on debt of $3,198, related party debt of $2,547 and revolving line of credit of $100.

On November 30, 2006, we obtained a $100,000 line of credit from Denali State Bank which originally matured on November 30, 2007, but was extended to November 30, 2008. The original annual interest rate was 6.25% with accrued interest paid monthly beginning December 30, 2006. The interest rate was reduced to 5.95% with the extension. A certificate of deposit in the amount of $100,000 was assigned by one of our shareholders as collateral for which we issued 200,000 shares of common stock valued at $30,000 as loan costs. Our board of directors authorized the issuance of an additional 125,000 shares to the shareholder for use of the certificate of deposit as collateral for the extension. On November 28, 2008, we issued 75,000 shares of common stock to the shareholder valued at $11,250 as loan costs in exchange for assigning the certificate of deposit to the bank. On November 30, 2008, the $100,000 line of credit between us and the bank became due. On December 31, 2008, the bank cashed in the $100,000 certificate of deposit that was put up as collateral by the shareholder to repay the line of credit. We issued the shareholder a promissory note for $100,000 with interest at 5% per annum and monthly payments of $1,000 beginning March 1, 2009 and ending January 18, 2020.

At November 30, 2008, we had current maturities of long-term debt of $126,987, most of which was owed to Reel-Thing. On February 21, 2008, Reel-Thing and we amended our contract to purchase all of the assets of Reel-Thing to revise the repayment schedule. Under the amendment, Reel-Thing converted $291,811, which consisted of $238,000 of past due installment payments on the purchase price and $53,811 of accrued late payment interest, into 1,209,524 restricted shares of our common stock. Reel-Thing also agreed to modify the payment schedule for $195,000 of the purchase price which remained unpaid. We paid $5,000 of the purchase price to Reel-Thing to finalize the amendment and we were scheduled to pay twenty-four (24) installment payments of $7,917 on the first business day of each month which began on August 1, 2008. As of November 30, 2008, we were ninety (90) or more days past due. Under our agreement, the assets revert back to Reel-Thing in the event that any of the installment payments is ninety (90) days past due. See the heading below, entitled “Risk Factors, Risks Relating to Our Business and Industry.” We plan to enter into negotiations with Reel-Thing either to further extend the repayment schedule so we are no longer past due on our installment payments and obtain a written waiver or further convert the debt to equity. We are currently using the assets in our business and we have not received any communication from Reel-Thing expressing their intent to seize those assets, but there can be no assurance.

Historically, we have issued a significant amount of shares as compensation to executive officers, employees and professional services providers for services rendered or to be rendered to us. We currently have a limited amount of cash and cash equivalents, and may be required to issue additional shares of common stock as compensation in the future. Our common stock was cleared for quotation on the OTCBB on August 7, 2008; however, the current market for our common stock is illiquid and extremely volatile. Prior to August 7, 2008, there was no market for our common stock, and we valued the shares based upon the last third-party sale of our common stock at that time. We believe that if there was a liquid, nonvolatile market for our common stock, people providing services to our company would consider it less risky and be willing to accept fewer shares at the market price which would decrease our expenses.

We need to raise $1,500,000 of additional financing in order to meet our cash requirements for the next twelve (12) months and to fully implement our business plan during the next twelve months. The table below depicts how we plan to utilize the additional financing in the event that 25%, 50%, 75% and 100% of the funds are raised; however, the amounts actually expended for any purposes may vary significantly and will depend on a number of factors, including the amount of our future revenues and the other factors. Accordingly, we will retain broad discretion in the allocation of any additional financing.

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Purpose

Sales Force	$	141,000	$	300,000	$	300,000	$	300,000
Inventory		141,000		300,000		300,000		300,000
Advertising and Marketing		93,000		150,000		200,000		200,000
Technology and Software		-		-		75,000		75,000
Engineering and Testing		-		-		50,000		50,000
Misc. Other Purposes		-		-		200,000		575,000
Net Proceeds (1)	$	375,000	$	750,000	$	1,125,000	$	1,500,000

The funds would be used to increase manufacturing of our products, expand our research and development efforts, and attract a larger talented sales force. We intend to raise the financing from the sale of common stock in one or more private placements or public offerings and/or from bank financing. We do not have any firm commitments or identified sources of additional capital from third parties or from our officers, directors or shareholders. There can be no assurance that additional capital will be available to us, or that, if available, it will be on terms satisfactory to us. Any additional financing may involve dilution to our shareholders. If we are unable to raise additional financing on terms satisfactory to us, or at all, we would not be able to fully implement our business plan which would have a materially adverse effect our business and financial position and could cause us to delay, curtail, scale back or forgo some or all of our operations or we could cease to exist.

Contractual Obligations

We lease approximately 3,600 square feet of office and warehouse space for $1,450 per month under a month-to-month operating lease in Fairbanks, Alaska for our corporate headquarters. The lease is cancelable with thirty (30) days written notice.

Off-Balance Sheet Arrangements

We do not have any off balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations is based upon our financial statements, which have been prepared in accordance with accounting principals generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of any contingent assets and liabilities. We base our estimates on various assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. On an on-going basis, we evaluate our estimates. Actual results may differ from these estimates if our assumptions do not materialize or conditions affecting those assumptions change.

We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our financial statements:

Revenue Recognition

We derive revenues primarily from selling power cord products. We recognize revenue when persuasive evidence of an agreement exists, the sale is complete, the price is fixed or determinable, and collectibility is reasonable assured. This typically occurs when the order is shipped. Provisions for discounts, estimated returns and allowances, and other adjustments are provided for in the same period the related revenues are recorded.

Customers have the right to inspection and acceptance for generally up to thirty days after taking delivery. We also offer lifetime warranties on power cord products to limited customers with proof of purchases and accrue for estimated future warranty costs in the period in which the revenue is recognized. Since inception, we have experienced insignificant product returns and exchanges.

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Allowance for Doubtful Accounts

Bad debt expense is recognized based on management’s estimate of likely losses per year, past experience and an estimate of current year uncollectible amounts.

Stock-Based Compensation

Effective January 1, 2006, we began recording compensation expense associated with stock options and other forms of equity compensation in accordance with Statement of Financial Accounting Standards No. 123R, Share-Based Payment, as interpreted by SEC Staff Accounting Bulletin No. 107. Prior to January 1, 2006, we accounted for stock options according to the provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations, and therefore no related compensation expense was recorded for awards granted with no intrinsic value. We adopted the modified prospective transition method provided for under SFAS No. 123R, and, consequently, have not retroactively adjusted results from prior periods. During the years ended November 30, 2008 and 2007, no options were granted by us to our employees.

Going Concern Considerations

In its report dated March 2, 2009, our principal independent auditors expressed an opinion that there is substantial doubt about our ability to continue as a going concern because we suffered recurring losses of $3,885,414 and $889,462 in fiscal 2008 and 2007, respectively, and we had an accumulated deficit of $7,174,713 and a working capital deficit of $427,006 at November 30, 2008. We will try to raise additional capital from the sale of common stock in one or more private placements or public offerings and/or from bank financing. The accompanying financial statements have been prepared assuming that we will continue as a going concern. The financial statements do not include any adjustments that might result in the event that we cannot continue as a going concern. Our continuation as a going concern is dependent upon future events, including the acquisition of additional financing to fully implement our business plan. If we are unable to continue as a going concern, you will lose your entire investment

Risk Factors

Risks Related to Our Business and Industry

We need to raise a significant amount of additional capital to meet our current and future business requirements and such capital raising may be costly or difficult to obtain and could dilute current stockholders’ ownership interests.

We need to raise $1,500,000 of additional financing in order to meet our cash requirements for the next twelve (12) months and to fully implement our business plan during the next twelve months. The funds would be used to increase manufacturing of our products, expand our research and development efforts, and attract a larger talented sales force. We intend to raise the financing from the sale of common stock in one or more private placements or public offerings and/or from bank financing. We do not have any firm commitments or identified sources of additional capital from third parties or from our officers, directors or shareholders. Although our officers and directors or their affiliates have facilitated capital for us, or provide us with capital, in the past, they are not legally bound to do so. There can be no assurance that additional capital will be available to us, or that, if available, it will be on terms satisfactory to us. Any additional financing may involve dilution to our shareholders. If we are unable to raise additional financing on terms satisfactory to us, or at all, we would not be able to fully implement our business plan which would have a materially adverse effect our business and financial position and could cause us to delay, curtail, scale back or forgo some or all of our operations or we could cease to exist.

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We may become past due on our payments to Reel-Thing Innovations, Inc. and risk reversion of our right to the patents, molds, blueprints, design drawings, websites, instructional manuals, promotional materials and trade names for our products which would have a material adverse effect on our business and results of operations or could cause us to delay, curtail or cease operations.

As of November 30, 2008, we were more than ninety (90) days past due on our installment payments to Reel-Thing Innovations Inc. in the amount of $32,838 including accrued late payment interest of $1,171. We did not have enough cash to make the scheduled installment payments and fund our operations. Under the terms of our contract with Reel-Thing, the patents, molds, blueprints, design drawings, websites, instructional manuals, promotional materials and trade names for our products revert back to Reel-Thing in the event that we are ninety (90) days past due unless they provide their written consent waiving their right to the reversion. We plan to enter into negotiations with Reel-Thing either to extend the repayment schedule so we are no longer past due on our installment payments and obtain a written waiver or further convert the debt to equity. We are currently using the assets in our business and we have not received any communication from Reel-Thing expressing their intent to seize those assets, but there can be no assurance. If Reel-Thing and we do not resolve this matter and we continue to be past due or we become past due under a revised schedule, we risk reversion of our right to use the patents, molds, blueprints, design drawings, websites, instructional manuals, promotional materials and trade names which would have a material adverse effect on our business and results of operations or could cause us to delay, curtail or cease operations.

We have a history of operating and net losses which we anticipate will continue.

We have a history of losses from operations. We anticipate that for the foreseeable future, we will continue to experience losses from operations. We had a net loss of $3,885,414 during fiscal 2008 and a net loss of $889,462 during fiscal 2007. We anticipate that our net loss will increase for fiscal 2009.

Disruptions in the supply of copper and other raw materials used in our products could cause us to be unable to meet customer demand, which could result in the loss of customers and net sales.

Copper is the primary raw material that we use to manufacture our products. Other significant raw materials that we use are plastics, such as polyethylene. There are a limited number of domestic and foreign suppliers of copper and these other raw materials. If we are unable to maintain good relations with our manufactures or if there are any business interruptions at our suppliers, we may not have access to a sufficient supply of raw materials. If we lose one or both of our manufactures and are unable to locate alternative manufactures, we may not be able to meet customer demand, which could result in the loss of customers and net sales.

Fluctuations in the price of copper and other raw materials, as well as fuel and energy, and increases in freight costs could increase our cost of goods sold and results of operations.

The prices of copper and our other significant raw materials, as well as fuel and energy costs, are subject to considerable volatility. This volatility has affected our profitability and we expect that it will continue to do so in the future. For example, from 2004 to 2006, the average selling price of copper cathode on the COMEX increased from $1.29 per pound in 2004 to $3.10 per pound in 2006, an increase of 140.3%. As a result, volatility in these prices, particularly copper prices, can result in significant fluctuations in our cost of goods sold. If the cost of raw materials increases and we are unable to increase the prices of our products, or offset those cost increases with cost savings in other parts of our business, our results of operations would be reduced. We do not engage in activities to hedge the price of our raw materials. As a result, increases in the price of copper and other raw materials may affect our results of operations if we cannot effectively pass these price increases on to our customers.

The markets for our products are highly competitive, and our inability to compete with other manufacturers in the extension cord and cable reel industry could harm our net sales and profitability.

The markets for extension cord and cable reel products are highly competitive. We compete with much larger competitors in each of our business lines. Many of our products are made to industry specifications and may be considered similar to our competitors' products. Accordingly, we are subject to competition in many of our markets primarily on the basis of price. We must also be competitive in terms of quality, availability, payment terms and customer service. Many of our competitors have greater resources, financial and otherwise, than we do and may be better positioned to invest in manufacturing and supply chain efficiencies and product development. We may not be able to compete successfully with our existing competitors or with new competitors.

We are dependent upon a number of key customers. If they were to cease purchasing our products, our net sales and operating results would likely decline.

We are dependent upon a number of key customers, although none of our customers accounted for more than 10% of our revenues for the year ended November 30, 2008. Our customers can cease buying our products at any time and can also sell products that compete with our products. The loss of one or more key customers, or a significant decrease in the volume of products they purchase from us, could result in a drop in our net sales and a decline in our operating results. In addition, a disruption or a downturn in the business of one or more key customers could reduce our sales and could reduce our liquidity if we were unable to collect amounts they owe us.

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We face pricing pressure in each of our markets, and our inability to continue to achieve operating efficiency and productivity improvements in response to pricing pressure may result in lower margins.

We face pricing pressure in each of our markets as a result of significant competition, and price levels for many of our products (after excluding price adjustments related to the increased cost of copper) have declined over the past few years. We expect pricing pressure to continue for the foreseeable future. A component of our business strategy is to continue to achieve operating efficiencies and productivity improvements with a focus on lowering purchasing, manufacturing and distribution costs. We may not be successful in lowering our costs. In the event we are unable to lower these costs in response to pricing pressure, we may experience lower margins and decreases in operating results.

Our independent auditors have expressed substantial doubt about our ability to continue as a going concern.

In its report dated March 2, 2009, our independent auditors, Malone & Bailey, PC, expressed an opinion that there is substantial doubt about our ability to continue as a going concern because we have suffered recurring losses from operations and we have an accumulated deficit and a working capital deficit. We expect to continue to incur losses for the foreseeable future. The accompanying financial statements have been prepared assuming that we will continue as a going concern. The financial statements do not include any adjustments relating to the recoverability of recorded assets, or the amounts and classification of liabilities that might be necessary in the event we cannot continue in existence. Our continuation as a going concern is dependent upon future events, including the acquisition of additional capital to fully implement our business plan. There can be no assurance these future events will occur or that we will continue as a going concern even if they do occur. If we are unable to continue as a going concern, you will lose your entire investment.

If we were to lose the services of Kenneth S. Forster, we may not be able to execute our business strategy.

Kenneth S. Forster, our only executive officer, serves as our President, CEO, Secretary and Treasurer. Our future success depends in large part upon Mr. Forster’s continued service. Mr. Forster is an at-will employee, and we do not maintain a key-person life insurance policy covering Mr. Forster. The loss of Mr. Forster could seriously harm our business.

If we lose the services of our independent order taking and fulfillment companies, our revenues could be reduced.

We depend on the subcontract services of an independent order taking and fulfillment company to sell our products and provide order fulfillment to our customers. Although we believe that we could replace the independent order taking and fulfillment company if our agreement were cancelled, we would face business disruption and possibly increased costs. The loss of our independent order taking and fulfillment company would have a material adverse effect on our business and results of operations.

We may be subject to product liability claims that could be costly and time consuming or harm our reputation and reduce the demand for our products which would have a material adverse effect on our business, financial condition and results of operations.

Although we have had no prior experience with product liability claims, our business exposes us to this risk and other adverse effects of product failures. For example, the MedReel is used in health care facilities for a wide range of applications such as operating theatre beds, dialysis machines, and other electrical medical equipment. If a MedReel extension cord failed to perform, the resultant injury could be serious or even fatal and subject us to product liability claims. A product liability claim can cause us to incur significant legal defense costs and adverse publicity regardless of the claim’s merit or eventual outcome. If we were required to pay damages, such payments could significantly harm our financial condition. A product liability claim also could harm our reputation and lead to a decline in the demand for our products. We do not carry general or other liability insurance to protect us against product liability claims. If we become subject to a product liability claim, it could have a material adverse effect of our business, financial condition and results of operation.

If we fail to protect our intellectual property rights, our competitors may take advantage of our ideas to compete more effectively with us.

Our proprietary rights are one of the keys to our performance and ability to remain competitive. We rely on a combination of patent, trademark, copyright and trade secret laws in the U.S. and other jurisdictions as well as confidentiality agreements and procedures, non-compete agreements and other contractual provisions to protect our intellectual property, other proprietary rights and our brand. Our intellectual property rights may be challenged, invalidated or circumvented by third parties. We may not be able to prevent the unauthorized disclosure or use of our technical knowledge or other trade secrets by employees. Furthermore, the laws of foreign countries may not protect our intellectual property rights to the same extent as the laws of the U.S. Litigation may be necessary to enforce our intellectual property rights which could result in substantial costs to us and substantial diversion of management attention. If we do not adequately protect our intellectual property, our competitors could use it to enhance their products. Our inability to adequately protect our intellectual property rights could adversely affect our business and financial condition, and the value of our brand name and other intangible assets.

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Risk Related To Ownership of Our Common Stock

There is currently no market for our common stock, and we expect that any market that does develop will be illiquid and extremely volatile.

Our common stock was cleared for quotation on the OTCBB on August 7, 2008; however, the current market for our common stock is illiquid and extremely volatile. Prior to August 7, 2008, there was no market for our common stock. As of February 4, 2009, we had one hundred twelve (112) shareholders of record, and we had been subject to the reporting requirements of the Exchange Act for at least ninety (90) days. There were 16,514,020 shares of our common stock that had been held by non-affiliates for a minimum of one year which could be freely resold under Rule 144, and 2,186,667 shares of our common stock that had been held by such persons for a minimum of six months which could be resold under Rule 144 subject to public information requirements for reporting issuers. There were 5,122,202 shares of our common stock that had been held by affiliates for a minimum of six months which could be resold under Rule 144 subject to the volume limitations, manner of sale provisions, public information requirements for reporting issuers and notice requirements. There were 1,133,475 shares of our common stock that had been held by non-affiliates for less than six months and could not be resold under Rule 144.

The market for our common stock is illiquid and subject to wide fluctuations in response to several factors, including, but not limited to:

limited numbers of buyers and sellers in the market;

actual or anticipated variations in our results of operations;

our ability or inability to generate new revenues;

increased competition; and

conditions and trends in the extension cord industry.

Furthermore, our stock price may be impacted by factors that are unrelated or disproportionate to our operating performance which include stock market fluctuations, general economic, political and overall global market conditions, such as recessions, interest rates or international currency fluctuations. Any and all of these factors, while unrelated directly to us, may adversely affect the market price and liquidity of our common stock.

We have authorized preferred stock which can be designated by our board of directors without shareholder approval and have established Series A preferred stock, which gives the holders majority voting power over our company.

We have authorized 5,000,000 shares of preferred stock. The shares of preferred stock may be issued from time to time in one or more series, each of which shall have distinctive designation or title as shall be determined by or board of directors prior to the issuance of any shares thereof. The preferred stock shall have such voting powers, full or limited, or no voting powers, and such preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof as adopted by our board of directors. Because our board of directors is able to designate the powers and preferences of the preferred stock without the vote of the holders of our common stock, the holders of our common stock will have no control over what designations and preferences our preferred stock will have. As a result of this, our board of directors could designate one or more series of preferred stock with superior rights to the rights of the holders of our common stock.

We have issued 66,000 of our outstanding Series A preferred stock to Kenneth S. Forster who thereby controls our company, and his interest may be different than, or adverse to the interests of our other stockholders.

Our board of directors designated 100,000 shares of Series A preferred stock with super-voting rights and issued 66,000 shares of Series A preferred stock to Kenneth S. Forster, our only executive officer. Mr. Forster, voting separately as a class, has the right to vote on all shareholder matters (including the election of directors) equal to fifty-one percent (51%) of the total vote regardless of the number of common shares that may be issued in the future. For example, if there are 21,511,222 shares of our common stock issued and outstanding at the time of a shareholder vote, Mr. Forster, voting separately as a class, would have the right to vote an aggregate of 22,389,231 shares, out of a total number of 43,900,453 shares voting. If the issued and outstanding shares of our common stock increased to 25,000,000, Mr. Forster, voting separately as a class, would have the right to vote an aggregate of 26,020,408 shares, out of a total number of 51,020,408 shares voting. Accordingly, Mr. Forster will exercise control over our company on matters submitted to the stockholders for approval, including the election of directors, mergers, consolidations, the sale of all or substantially all of our assets, and also the power to prevent or cause a change in control. Mr. Forster’s interest may differ from the interests of our other stockholders and thus result in corporate decisions that are adverse to our other stockholders.

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The Series A preferred stock may only be issued to our President and Treasurer, which could be a person or persons other than Mr. Forster. Their relative ownership interests shall be determined by our board of directors in its sole discretion. The Series A preferred stock may not be transferred, sold, assigned or hypothecated or transferred by will or by the laws of descent and distribution or for the benefit of any person. In the event of death or disability or the holder’s termination of service to us or removal from office without cause, such holder’s shares of Series A preferred stock shall revert back to us at $0.50 per share, shall be retired and restored to the status of authorized and unissued shares, and our board of directors, in its sole discretion, may reissue the authorized and unissued shares as Series A preferred stock to such holder’s successor in office. The holders of Series A preferred stock are not entitled to receive any dividends paid on our common stock, have no preemptive or other subscription rights, and there are no liquidation preferences, conversion rights or redemption or sinking fund provisions with respect to the shares of our Series A preferred stock.

We do not expect to pay dividends for the foreseeable future.

We have not declared or paid, and do not anticipate declaring or paying in the foreseeable future, any cash dividends on our common stock. Our ability to pay dividends is dependent upon, among other things, our future earnings, operating and financial condition, our capital requirements, general business conditions and other pertinent factors, and is subject to the discretion of our board of directors. Accordingly, there is no assurance that any dividends will ever be paid on our common stock.

Investors may face significant restrictions on the resale of our common stock due to federal regulations of penny stock.

Our common stock is subject to the requirements of Rule 15(g)9, promulgated under the Securities Exchange Act as long as the price of our common stock is below $5.00 per share. Under such rule, broker-dealers who recommend low-priced securities to persons other than established customers and accredited investors must satisfy special sales practice requirements, including a requirement that they make an individualized written suitability determination for the purchaser and receive the purchaser's consent prior to the transaction. The Securities Enforcement Remedies and Penny Stock Reform Act of 1990, also requires additional disclosure in connection with any trades involving a stock defined as a penny stock. Generally, the SEC defines a penny stock as any equity security not traded on an exchange or quoted on NASDAQ that has a market price of less than $4.00 per share. The required penny stock disclosures include the delivery, prior to any transaction, of a disclosure schedule explaining the penny stock market and the risks associated with it. Such requirements could severely limit the market liquidity of the securities and the ability of purchasers to sell their securities in the secondary market. In addition, various state securities laws impose restrictions on transferring penny stocks.

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Item 7.

Financial Statements.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

APC Group, Inc.

Fairbanks, Alaska.

We have audited the accompanying balance sheet of APC Group, Inc. as of November 30, 2008 and 2007 and the related statements of operations, changes in shareholders’ deficit and cash flows for the two years then ended. These financial statements are the responsibility of APC Group’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. APC Group is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of APC Group’s internal control over financial reporting. Accordingly, we express no such opinion. 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 financial statement presentation. We believe that our audits provide 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 APC Group as of November 30, 2008 and 2007 and the results of its operations and cash flows for the two years then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that APC Group will continue as a going concern. As discussed in Note 2 to the financial statements, APC Group suffered recurring losses from operations and has an accumulated deficit, which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Malone & Bailey, P.C.

www.malone-bailey.com

Houston, Texas

March 2, 2009

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APC GROUP, INC.

BALANCE SHEETS

	November 30,			November 30,
	2008			2007
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	26,781		$	3,796
Accounts receivable, net of allowance for bad debt of $12,042 and $19,159, respectively		30,984			25,483
Inventory		68,035			87,865
Prepaid expenses		5,540			13,108
Total current assets		131,340			130,252

Property and equipment, net of accumulated depreciation of $41,919 and $30,285, respectively		39,459			50,953

TOTAL ASSETS	$	170,799		$	181,205

LIABILITIES AND SHAREHOLDERS’ DEFICIT
CURRENT LIABILITIES
Accounts payable-trade	$	143,675		$	86,218
Accounts payable-related party		-			31,941
Accrued expenses		14,737			57,179
Note payable-related party		173,072			10,000
Line of credit		99,875			99,975
Current maturities of long-term debt		126,987			301,423
Total current liabilities		558,346			586,736

Long-term debt, net of current maturities		81,471			133,490
TOTAL LIABILITIES		639,817			720,226

SHAREHOLDERS’ DEFICIT
Preferred stock, $0.001 par value; 5,000,000 shares authorized; 66,000 shares issued and outstanding		66			66
Common stock, $0.001 par value; 50,000,000 shares authorized; 32,956,364 and 21,511,222 shares issued and outstanding, respectively		32,957			21,511
Additional paid-in-capital		6,672,672			2,728,701
Accumulated deficit		(7,174,713	)		(3,289,299	)
Total shareholders’ deficit		(469,018	)		(539,021	)

TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT	$	170,799		$	181,205

See accompanying summary of accounting policies and notes to financial statements.

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APC GROUP, INC.

STATEMENTS OF OPERATIONS

	Years Ended
	November 30,
	2008			2007

REVENUES	$	198,345		$	191,763
COST OF REVENUES		90,507			77,700
Gross profit		107,838			114,063

OPERATING EXPENSES
Selling, general and administrative expenses		3,931,144			892,638
Depreciation expense		11,634			11,626

Net operating loss		(3,834,940	)		(790,201	)

OTHER INCOME (EXPENSES)
Loan costs		(36,250	)		(30,000	)
Other income		28,755			-
Interest expense		(42,979	)		(69,261	)

Net loss	$	(3,885,414	)	$	(889,462	)

Basic and diluted net loss per share	$	(0.15	)	$	(0.04	)
Weighted average shares outstanding		25,693,254			20,198,912

See accompanying summary of accounting policies and notes to financial statements.

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APC GROUP, INC.

STATEMENT OF CHANGES IN SHAREHOLDERS’ DEFICIT

Years Ended November 30, 2008 and 2007

	Preferred Shares		Common Shares		Preferred Stock		Common Stock		Additional Paid in Capital		Accumulated Deficit			Total

Balances, November 30, 2006		66,000		17,537,000	$	66	$	17,537	$	1,975,932	$	(2,399,837	)	$	(406,302	)

Stock issued for:
Cash		-		1,075,000		-		1,075		213,925		-			215,000
Services		-		2,699,222		-		2,699		509,044		-			511,743
Loan costs		-		200,000		-		200		29,800		-			30,000

Net loss		-		-		-		-		-		(889,462	)		(889,462	)

Balances, November 30, 2007		66,000		21,511,222		66		21,511		2,728,701		(3,289,299	)		(539,021	)

Stock issued for:
Cash		-		60,618		-		61		20,689		-			20,750
Services		-		9,975,000		-		9,975		3,593,775		-			3,603,750
Debt conversion		-		1,209,524		-		1,210		290,601		-			291,811
Loan costs		-		200,000		-		200		36,050		-			36,250

Additional debt discount from
modification of debt		-		-		-		-		2,856		-			2,856

Net loss		-		-		-		-		-		(3,885,414	)		(3,885,414	)

Balances, November 30, 2008		66,000		32,956,364	$	66	$	32,957	$	6,672,672	$	(7,174,713	)	$	(469,018	)

See accompanying summary of accounting policies and notes to financial statements.

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APC GROUP, INC.

STATEMENTS OF CASH FLOWS

	Years Ended
	November 30,
	2008			2007
Cash flows from operating activities:
Net loss	$	(3,885,414	)	$	(889,462	)
Adjustments to reconcile net loss to net
cash used in operating activities:
Stock issued for services		3,603,750			511,743
Stock issued for loan costs		36,250			30,000
Depreciation expense		11,634			11,626
Accretion of discount on notes payable		17,599			28,250
Gain on settlement of lawsuit		(30,267	)		-
Bad debt recovery		(7,117	)		(3,390	)
Changes in assets and liabilities
Accounts receivable		1,616			25,459
Inventory		19,830			(34,535	)
Prepaid expenses		7,568			(11,032	)
Accounts payable-trade		57,457			7,616
Accounts payable-related parties		(1,674	)		14,558
Accrued liabilities		11,369			18,024
Net cash used in operating activities		(157,399	)		(291,143	)

Cash flows from investing activities:
Purchase of property and equipment		(140	)		-
Net cash used in investing activities		(140	)		-

Cash flows from financing activities:
Proceeds from sale of common stock		20,750			215,000
Net borrowings under revolving line of credit		(100	)		99,975
Proceeds from issuance of related party debt		165,619			10,000
Payments made on related party debt		(2,547	)		-
Payments made on debt		(3,198	)		(43,673	)
Net cash provided by financing activities		180,524			281,302

Net increase (decrease) in cash and cash equivalents		22,985			(9,841	)
Cash and cash equivalents, at beginning of period		3,796			13,637
Cash and cash equivalents, at end of period	$	26,781		$	3,796

Supplemental cash flows information:
Cash paid for interest	$	42,979		$	22,220
Cash paid for income taxes					-

Noncash financing activities:
Stock issued for debt	$	291,811		$	-
Additional debt discount for modification of debt		2,856			-

See accompanying summary of accounting policies and notes to financial statements.

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APC GROUP, INC.

NOTES TO FINANCIAL STATEMENTS

1.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and nature of business

APC Group, Inc. was originally formed in April 1, 2003, as a general partnership under the laws in State of Alaska. On October 20, 2003, Alaskan Products Company Partnership was converted to a Limited Liability Company. On April 28, 2004, APC, LLC was converted into a corporation in the State of Nevada and changed its name to APC Group, Inc. APC Group's products include a broad range of polar and non-polar standard extension cords, retractable extension cords for consumer, industry, construction, medical facilities, and marine use. APC markets and distributes products through a variety of channels, including direct response, domestic and international distributors, online automotive web sites, and mass retail department stores and chains through out the United States and Canada.

Use of Estimates in Financial Statement Preparation

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Revenue Recognition

APC Group recognizes revenue when persuasive evidence of an agreement exists, services have been rendered, the sales price is fixed or determinable, and collectibility is reasonable assured. This typically occurs when the product is shipped.

Cash and Cash Equivalents

APC Group considers all highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents.

Inventory

Inventory consists of finished goods stated at the lower of average cost or market. Retractable extension cords produced using an APC Group mold are assembled with various parts to produce finished goods.

Allowance for Doubtful Accounts

Bad debt expense is recognized based on management’s estimate of likely losses per year, past experience and an estimate of current year uncollectible amounts. Allowance for doubtful accounts was $12,042 as of November 30, 2008.

Property and Equipment

Property and equipment are recorded at cost. The cost and related accumulated depreciation of assets sold, retired or otherwise disposed of are removed from the respective accounts, and any resulting gains or losses are included in the Statements of Operations. Maintenance and repairs are expensed as incurred. Replacements and betterments are capitalized. Depreciation is computed for financial reporting purposes using the straight-line method over the estimated useful lives of the related assets as follows:

Molds	15 years
Furniture and Fixtures	7 years
Computers and Equipment	5 years
Vehicles	5 years

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Depreciation expense related to property and equipment was approximately $11,634 and $11,626 for the years ended November 30, 2008 and 2007, respectively.

Impairment of Long-Lived Assets

APC Group reviews the carrying value of its long-lived assets annually or whenever events or changes in circumstances indicate that the historical cost-carrying value of an asset may no longer be appropriate. APC Group assesses recoverability of the carrying value of the asset by estimating the future net cash flows expected to result from the asset, including eventual disposition. If the future net cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset’s carrying value and fair value.

Fair Value of Financial Instruments

APC Group believes that the carrying value of its current assets and current liabilities approximate the fair value of such items due to their short-term nature.

Income Taxes

Prior to incorporating as APC Group, the company operated as a partnership named Alaskan Products Company, LLC. No provision for income taxes was required because the partners reported their proportional shares of partnership taxable income or loss on their respective income tax returns.

Income tax expense is now based on reported earnings before income taxes. Deferred income taxes reflect the impact of temporary differences between assets and liabilities recognized for financial reporting purposes and such amounts recognized for tax purposes, and are measured by applying enacted tax rates in effect in years in which the differences are expected to reverse.

Stock-Based Compensation

Effective January 1, 2006, APC Group began recording compensation expense associated with stock options and other forms of equity compensation in accordance with Statement of Financial Accounting Standards No. 123R, Share-Based Payment, as interpreted by SEC Staff Accounting Bulletin No. 107. Prior to January 1, 2006, APC Group accounted for stock options according to the provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations, and therefore no related compensation expense was recorded for awards granted with no intrinsic value. APC Group adopted the modified prospective transition method provided for under SFAS No. 123R, and, consequently, has not retroactively adjusted results from prior periods. During the years ended November 30, 2008 and 2007, no options were granted by APC Group to its employees.

Basic and Diluted Net Loss per Share

Basic and diluted net loss per share calculations are presented in accordance with Financial Accounting Standards Statement 128, and are calculated on the basis of the weighted average number of common shares outstanding during the year. They include the dilutive effect of common stock equivalents in years with net income. Basic and diluted loss per share are the same due to the absence of common stock equivalents.

Debt Modifications

We evaluate the application of EITF 96-19, "Debtor's Accounting for a Modification or Exchange of Debt Instruments" for debt instruments that are modified to determine if the modification constitutes a debt modification rather than a debt extinguishment.

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Recently Issued Accounting Pronouncements

APC Group does not expect the adoption of any recently issued accounting pronouncements to have a significant impact on its financial position, results of operations or cash flows.

2.	GOING CONCERN

APC Group suffered losses in 2008 and 2007, has an accumulated deficit and a working capital deficit at November 30, 2008. These conditions raise substantial doubt as to APC Group’s ability to continue as a going concern. Management is trying to raise additional capital through sales of common stock. The financial statements do not include any adjustments that might be necessary if APC Group is unable to continue as a going concern.

3.	LONG-TERM DEBT

On February 21, 2008, APC Group and Reel Thing Innovations, Inc. amended their May 5, 2005 agreement to convert the past due amount consisting of $238,000 principal and $53,811 accrued late payment interest for 1,209,524 shares of APC’s common stock. The remaining balance of $195,000 was modified such that $5,000 is due on the effective date of the amended agreement and twenty-four (24) installment payments of $7,916 beginning on August 1, 2008 and ending on August 1, 2010. A 10% interest rate was used to discount the loan for the non-interest bearing obligation. As of November 30, 2008, APC was more than 90 days past due on this obligation. Under the terms of APC’s contract with Reel-Thing, the patents, molds, blueprints, design drawings, websites, instructional manuals, promotional materials and trade names for APC’s products revert back to Reel-Thing in the event that APC is ninety (90) days past due unless they provide their written consent waiving their right to the reversion and as of the date of this filing a waiver had not been obtained from Reel Thing and Reel Thing has not exercised their right.

APC Group has two equipment loans, bearing interest at 22% that require monthly payments through March 2009. APC Group has a vehicle loan, bearing interest at 6% that requires monthly payments through January 2012.

Balances of long-term debt obligations as of November 30, 2008 and 2007 and scheduled maturities of that debt are set out below.

	Maturity		2008			2007
Note payable to Reel-Thing Innovations	August 2010		$	195,000		$	433,000
Loan discount		n/a		(11,460	)		(26,203	)
Equipment loans	March 2009			433			1,831
Vehicle loan	January 2012			24,485			26,285
				208,458			434,913
Current maturities of long-term debt				(81,471	)		(133,490	)
Long-term debt			$	126,987		$	301,423

4.	NOTE PAYABLE - RELATED PARTY

On October 02, 2007, APC Group borrowed $10,000 from Richard Bienvenue a shareholder of APC Group. The unsecured loan bears interest at 7% per annum and is due on October 02, 2008. On October 02, 2008, the loan was modified whereby the interest rate was changed to 8% per annum with no fixed terms of repayment and thus the loan is deemed payable on demand. The loan is convertible, at the holder’s option, into common stock at a rate of $0.20.

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Between December 1, 2007 and November 30, 2008, APC Group borrowed a net aggregate of $163,072 from two shareholders of APC Group. The loans are unsecured and accrue interest at 8% per annum. The loans have no fixed terms of repayment and are deemed payable on demand. $50,000 of these loans is convertible into common stock at a rate of $0.50 and $105,119 of these loans is convertible into common stock at a rate of $0.20.

APC Group evaluated the convertible portion of the above debt under FAS 133 and EITF 00-19 for consideration of classification as a liability and derivative and determined both were not applicable. APC Group then evaluated the convertible portion under EITF’s 98-5 and 00-27 for consideration of beneficial conversion feature and determined none existed.

5.	LINE OF CREDIT

On November 30, 2006, a business loan was signed between APC Group and Denali State Bank establishing a $100,000 line of credit with a maturity date of November 30, 2007, at an annual interest rate of 6.25% with accrued interest paid monthly beginning December 30, 2006. A certificate of deposit in the amount of $100,000 was assigned by an APC Group shareholder as collateral for which APC Group issued 200,000 shares of common stock valued and expensed at $30,000 as loan costs.

On November 30, 2007, the $100,000 line of credit between APC Group and Denali State Bank was renewed with a new maturity date of November 30, 2008, at an annual interest rate of 5.95% with accrued interest paid monthly beginning December 30, 2007. A certificate of deposit in the amount of $100,000 was assigned by Ludwig Bergh, an APC Group shareholder, as collateral. On December 1, 2007, APC Group issued 125,000 shares of common stock to Ludwig Bergh, valued at $25,000 as loan costs.

On November 28, 2008, APC Group issued 75,000 shares of common stock to Ludwig Bergh, valued at $11,250 as loan costs, in exchange for assigning his certificate of deposit in the amount of $100,000 as collateral for the line of credit between APC Group and Denali State Bank.

On November 30, 2008, the $100,000 line of credit between APC Group and Denali State Bank became due. On December 31, 2008, the bank cashed in the $100,000 certificate of deposit that was put up as collateral by Ludwig Berg, a shareholder of APC Group, to repay the line of credit. APC group issued the shareholder a promissory note for $100,000 with interest at 5% per annum and monthly payments of $1,000 beginning March 1, 2009 and ending January 18, 2020.

6.	MAJOR CUSTOMERS

During the year ended November 30, 2008, no one customer accounted for more than 10% of APC Group’s revenue. During the year ended November 30, 2007, 14% of APC Group’s revenue was from one customer.

7.	INCOME TAX

APC Group uses the liability method, where deferred tax assets and liabilities are determined based on the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities for financial and income tax reporting purposes. During fiscal 2008 and 2007, APC Group incurred net losses and, therefore, has no tax liability. The net deferred tax asset generated by the loss carry-forward has been fully reserved. The cumulative net operating loss carry-forward is approximately $2,400,000 at November 30, 2008, and will expire in the years 2027 through 2028.

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At November 30, 2008 and 2007, deferred tax assets consisted of the following:

	2008			2007
Deferred tax assets
Net operating losses	$	827,000		$	766,312
Less: valuation allowance		(827,000	)		(766,312	)
Net deferred tax asset	$	-		$	-

8.	COMMON STOCK

Between December 1, 2006 and November 30, 2007, APC Group issued 1,075,000 common shares for $215,000 in cash, issued 2,699,222 shares, valued at $511,743 for services and issued 200,000 common shares, valued and expensed at $30,000 as loan costs.

Between December 1, 2007 and November 30, 2008, APC Group issued 60,618 common shares for $20,750 in cash, issued 8,000,000 common shares, valued at $2,800,000 to Ken Foster, President, as a bonus for services rendered, issued 1,975,000 common shares, valued at $803,750 to various parties for services rendered, issued 1,209,524 common shares, valued at $291,811 for the conversion of debt and accrued interest and issued 200,000 common shares, valued and expensed at $36,250 as loan costs.

9.	COMMITMENTS AND CONTINGENCIES

APC Group leases office and warehouse space in Fairbanks, Alaska under a month to month operating lease. The lease is cancelable with thirty days written notice. Rent expense was $19,980 and $17,150 for the years ended November 30, 2008, and 2007, respectively.

On June 11, 2007, APC Group made an Offer of Judgment to a former employee in the amount of $21,407 which was accepted. As of November 30, 2007, APC Group has accrued $28,755 consisting of $21,407 judgment amount, interest of $3,345 from April 1, 2006 to November 30, 2007 at the rate of 9.25% per annum, attorney fees of $3,853 at 18% of the judgment amount and filing fees of $150.

On August 7, 2008, the Superior Court for the State of Alaska Fourth Judicial District of Fairbanks issued order of dismissal in the case of a former employee verse APC Group. A gain on the settlement of the lawsuit of $30,267 was recorded during the year ended November 30, 2008.

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Item 8.

Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.

None.

Item 8A(T).

Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of our “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report (the “Evaluation Date”), has concluded that as of the Evaluation Date, our disclosure controls and procedures were not effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act (i) is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure, and (ii) is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms because of the identification of a material weaknesses in our internal control over financial reporting which are identified below, which we view as an integral part of our disclosure controls and procedures..

Management’s Report on Internal Control Over Financial Reporting.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes, in accordance with generally accepted accounting principles. Because of inherent limitations, a system of internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to change in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management conducted an evaluation of the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework. Based on its evaluation, our management concluded that internal control over financial reporting was not effective as of November 30, 2008 because management identified material weaknesses. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. In assessing the effectiveness of our internal control over financial reporting, management identified the following three material weaknesses in internal control over financial reporting as of November 30, 2008:

Deficiencies in Our Control Environment. Our control environment did not sufficiently promote effective internal control over financial reporting throughout the organization. This material weakness exists because of the aggregate effect of multiple deficiencies in internal control which affect our control environment, including: a) the lack of an effective risk assessment process for the identification of fraud risks; b) the lack of an internal audit function or other effective mechanism for ongoing monitoring of the effectiveness of internal controls; c) deficiencies in our accounting system and controls; and d) insufficient documentation and communication of our accounting policies and procedures.

Deficiencies in the staffing of our financial accounting department. The number of qualified accounting personnel with experience in public company SEC reporting and GAAP is limited. This weakness does not enable us to maintain adequate controls over our financial accounting and reporting processes regarding the accounting for non-routine and non-systematic transactions. There is a risk that a material misstatement

of the financial statements could be caused, or at least not be detected

in a timely manner, by this shortage of qualified resources.

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Deficiencies in Segregation of Duties. Our CEO and CFO are the same person, and therefore cannot provide an independent review and quality assurance function within the accounting and financial reporting group. The limited number of qualified accounting personnel discussed above results in an inability to have independent review and approval of financial accounting entries. Furthermore, management and financial accounting personnel have wide-spread access to create and post entries in our financial accounting system. There is a risk that a material misstatement of the financial statements could be caused, or at least not be detected in a timely manner, due to insufficient segregation of duties. The Company is currently expanding its internal control procedures. However, because of an independence review of the financial statements by our financial consultant, review and approval by the Company's management and independent auditor verification of the Company's financial data, the Company believes that the financial condition of the Company is accurate as reported.

The reason the Company stated that there were material weaknesses in internal over financial reporting is because the Company's CEO and CFO are the same person. However, the Company has always employed an independent financial consultant to review the Company's books and aid the Company in compiling and preparing financial statements for the Company's management review and approval prior to delivering same to our independent auditor before reporting to the SEC. The Company has now retained a financial advisor to aid the Company in expanded internal financial control procedures and to aid the Company in interviewing candidates for the Company's Chief Financial Officer.

The Company is also in the process of filling vacancies on the board of directors with independent directors for the establishment of independent financial control committees (audit and compensation). The Company expects to have in place these prior to filing of the November 30, 2009 SEC Form 10KSB with audited financial statements.

This annual report does not include an attestation report of our independent registered public accounting firm due to a transition period established by rules of the SEC for newly public companies.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 8B.

Other Information.

Item 3.02 Unregistered Sales of Equity Securities.

On November 1, 2008, we sold 18,889 shares of common stock for $3,400 (or $0.18 per share) to an individual. We claim an exemption from registration afforded by Section 4(2) of the Securities Act since the foregoing issuance did not involve a public offering, the recipient took the securities for investment and not resale and we took appropriate measures to restrict transfer.

Item 8.01 Other Events.

As of November 30, 2008, we were more than ninety (90) days past due on our installment payments to Reel-Thing Innovations Inc. in the amount of $32,838 including accrued late payment interest of $1,171. Under the terms of our contract with Reel-Thing, the patents, molds, blueprints, design drawings, websites, instructional manuals, promotional materials and trade names for our products revert back to Reel-Thing in the event that we are ninety (90) days past due unless they provide their written consent waiving their right to the reversion. We plan to enter into negotiations with Reel-Thing either to extend the repayment schedule so we are no longer past due on our installment payments and obtain a written waiver or convert the debt to equity. We are currently using the assets in our business and we have not received any communication from Reel-Thing expressing their intent to seize those assets, but there can be no assurance.

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PART III

Item 9.

Directors, Executive Officers, Promoters, Control Persons and Corporate Governance; Compliance With Section 16(a) of the Exchange Act.

Executive Officers and Directors

Our executive officers and directors, and their ages and positions are as follows:

Name	Age	Position

Kenneth S. Forster	47	President, CEO, Secretary and Treasurer
Matthew Meyer	47	Director

Kenneth S. Forster has served as our President and CEO since April 2003 and also as our Secretary and Treasurer since October 2006. Mr. Forster was not employed during March 2003. From June 2001 to February 2003, Mr. Forster was the Weatherman and Marketing Representative for CBS and Fox Television affiliates in Fairbanks, Alaska. From May 2000 to May 2001, he served as a Radio Talk Show Host for Clear Channel Communications of Fairbanks, Alaska, which produces radio programs. From April 1996 to May 2000, Mr. Forster was the Vice President of Marketing and Sales for Coconut Telegraph Company, which sold, serviced and maintained telecommunication equipment in Santa Barbara, California and the surrounding areas. From July 1994 to April 1996, Mr. Forster worked as President of Island Communications of Oregon, providing telecommunication contractors to the federal government, maintaining national forest communication equipment in southern Oregon and many local businesses, and for ten years prior to that, Mr. Forster was President of Business Telephone Services, which sold, serviced, engineered, manufactured and maintained telecommunication equipment throughout Southern California.

Matthew Meyer has served as a member of our board of directors since June 2006 and as Chairman since May 2007. From September 2004 to present, Mr. Meyer has been employed as an Educational Advisor at Devry University. From February 2002 to September 2004, Mr. Meyer was employed as an Admissions Advisor at Charter College in Anchorage, Alaska. From January 2002 to February 2002, Mr. Meyer served as District Manager for the Anchorage Daily News. From July 1979 to January 2002, Mr. Meyer served in the United States Air Force and retired as Master Sergeant, E-7. Mr. Meyer received a Bachelors degree in Business from Wayland Baptist University and Associate degrees in both Financial Management and Personnel Management from the Community College of the Air Force. Mr. Meyer is a licensed real estate salesperson in the State of Alaska.

There are no family relationships among our directors, executive officers or persons nominated to become directors or executive officers. There are no arrangements or understandings between Mr. Forster, as the controlling shareholder, and the members of our board of directors regarding board compensation or board voting positions.

We are not aware of the occurrence during the last five years of any events that are material to an evaluation of the ability or integrity of any of our directors or executive officers such as the following:

Any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;

Any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);

Being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting the involvement of such person in any type of business, securities or banking activities; and

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Being found by a court of competent jurisdiction (in a civil action), the United States Securities Commission (the “SEC” or the “Commission”) or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.

Committees of the Board of Directors

We do not have a standing audit, nominating, or compensation committee, or any other committees of our board of directors performing similar functions. We do not have an audit committee financial expert. We do not anticipate implementing any of these committees or seek an individual to serve as an audit committee financial expert until we are required to do so under federal or state corporate or securities laws or the rules of any stock exchange or inter-dealer quotation system on which our securities may be listed or cleared for quotation.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our directors, officers and holders of more than 10% of our common stock to file with the SEC reports regarding their ownership and changes in ownership of our equity securities. Such persons are required by SEC regulation to furnish us with copies of all Section 16(a) forms that they file.

To our knowledge, based solely on a review of the copies of such reports furnished to us and on representations that no other reports were required, no person required to file such a report failed to file during the fiscal year covered by this report.

Code of Ethics

Our board of directors adopted a code of ethics meeting the requirements of Section 406 of the Sarbanes-Oxley Act of 2002. We will provide to any person without charge, upon request, a copy of our code of ethics. Persons wishing to make such a request should contact Secretary, APC Group, Inc., 3526 Industrial Avenue, Fairbanks, Alaska 99701.

Item 10.

Executive Compensation.

The table below sets forth, for our last two completed fiscal years, the compensation earned by our President and CEO, who is our only “Named Executive Officer” as he is currently our only executive officer and no person who served as an executive officer during our last completed fiscal year received $100,000 or more of compensation during such year.

SUMMARY COMPENSATION TABLE (1)

Name and Principal Position	Year	Salary ($)		Stock Awards ($) (2)			All Other Compensation ($)			Total ($)

Kenneth S. Forster	2008	$	54,000	$	2,800,000	(3)	$	10,454	(4)	$	2,864,454
President, CEO, Secretary and Treasurer	2007	$	46,500	$	387,440	(5)	$	13,916	(4)	$	447,856

(1)	Does not include perquisites and other personal benefits or property unless the aggregate amount of such compensation is $10,000 or more.

(2)

Stock awards granted prior to August 7, 2008 (the date that our stock became publicly traded) were valued based on the price per share of the last sale of our common stock to a third party as of the grant date. Thereafter, stock awards are valued at the closing price of our common stock on the OTCBB on the grant date. See “Notes to Consolidated Financial Statements, Note 1 – Summary of Accounting Policies” included in “Item 7. Financial Statements,” above.

(3)	Consists of 8,000,000 shares issued on August 9, 2008 for taking the Company public.

(4)	Represents commissions paid in advance for future estimated sales. In the event that actual sales are less or more than estimated sales, the compensation is decreased or increased, respectively.

(5)	Consists of 1,937,202 shares issued on May 3, 2007 for services as our sole executive officer.

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For fiscal 2008, we and Kenneth S. Forster had orally agreed to compensation of $54,000 per year, and commissions at a rate of 10% on new accounts and 5% on reorders that result from Mr. Forster’s sales efforts. In addition, Mr. Forster has received bonuses in the form of stock awards at the sole discretion of our board of directors. We plan to enter into a formal employment agreement with Mr. Forster in the near term to provide for base salary and stock bonuses for fiscal 2009.

The table below sets forth, for our last completed fiscal year, compensation earned by our directors during the periods presented.

Compensation of Directors

DIRECTOR COMPENSATION (1)
Name	Year	Stock Awards ($) (2)			Total ($)

Matthew Meyer	2008	$	35,000	(3)	$	35,000
Former Directors	2008	$	52,500	(4)	$	52,500

(1)	Does not include perquisites and other personal benefits or property unless the aggregate amount of such compensation is $10,000 or more.

(2)

Stock awards granted prior to August 7, 2008 (the date that our stock became publicly traded), were valued based on the price per share of the last sale of our common stock to a third party as of the grant date. Thereafter, stock awards are valued at the closing price of our common stock on the OTCBB on the grant date. See “Notes to Consolidated Financial Statements, Note 1 – Summary of Accounting Policies” included in “Item 7. Financial Statements,” above.

(3)	Consists of 100,000 shares issued on August 9, 2008 as a one-time bonus for taking the Company public.

(4)	Consists of an aggregate of 150,000 issued on August 7, 2008 to Richard L. Bienvenue, Robert C. Tsigonis and A. Roy Wilbur as a one-time bonus for taking the Company public.

Annual Fee – We do not have in effect a policy regarding an annual fee or other compensation for serving on our board of directors.

Equity Incentives – Our directors will be eligible to participate in any equity incentive plan which we may adopt in the future.

Other Benefits – We reimburse our directors for their reasonable expenses incurred in attending meetings of our board of directors. Our bylaws, subject to the provisions of Nevada Law, contain provisions which allow us to indemnify our directors and director nominees against liabilities and other expenses incurred as the result of defending or administering any pending or anticipated legal issue in connection with their service to us if it is determined that that person acted in good faith and in a manner which he reasonably believed was in our best interest.

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Item 11.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The following table sets forth information regarding beneficial ownership of our common stock as of February 4, 2009 by (i) each person known by us to be the beneficial owner of more than 5% of our common stock; (ii) each of our directors, nominees and named executive officers; and (iii) all directors and executive officers as a group:

	Common Stock Beneficially Owned (without taking into account Series A Preferred Stock (1))						Common Stock and Series A Preferred Stock Beneficially Owned (1)
Name and address (2)	Number			Percent			Number			Percent

Kenneth S. Forster		12,837,202			38.9	%		47,138,724	(5)		70.0	%

A. Roy Wilbur and Brenda Wilbur		2,750,000			8.3	%		2,750,000			4.0	%

Public Company Management Corporation (3)		1,875,000			5.6	%		1,875,000			2.7	%

Matthew Meyer (4)		385,000			1.1	%		385,000			*

Executive Officers and Directors As a Group (2 people)		13,222,202	(4)		40.1	%		47,523,724	(4)(5)		70.6	%

* Less than 1%.

(1)

The number of shares of common stock owned are those "beneficially owned" as determined under the rules of the SEC, including any shares of common stock as to which a person has sole or shared voting or investment power and any shares of common stock which the person has the right to acquire within 60 days through the exercise of any option, warrant or right. Shares of common stock subject to securities exercisable or convertible into shares of common stock that are currently exercisable or convertible, or exercisable or convertible within 60 days, are deemed to be outstanding for computing the percentage of ownership of such person holding such securities, but are not deemed outstanding for computing the percentage ownership of any other person. As of February 4, 2009, 2008, there were 32,956,364 shares of common stock outstanding. We have authorized 100,000 shares of Series A preferred stock with super voting rights of which 66,000 shares are outstanding and held by Ken Forster, our only executive officer, as of February 4, 2009. Mr. Foster, solely voting his Series A preferred stock separately as a class, has the right to vote on all shareholder matters (including a vote for the election of directors) equal to fifty-one percent (51%) (or 34,301,522 shares of common stock) of a total vote of 67,257,886 shares of common stock, based on 32,956,364 shares of common stock outstanding as of February 4, 2009, and thereby controls APC.

(2)	The address is 3526 Industrial Avenue, Fairbanks, Alaska 99701.

(3)

Includes 500,000 shares owned by GoPublicToday.com and 1,375,000 shares owned by Public Company Management Corporation Services, Inc. GoPublicToday.com and Public Company Management Corporation Services are subsidiaries of Public Company Management Corporation, a reporting company of which Stephen Brock is the President and majority shareholder.

(4)	Includes 10,000 shares owned by Mr. Meyer’s spouse.

(5)	Includes voting power over 34,301,522 shares of common stock pursuant to the super voting right of the Series A preferred stock.

Series A Preferred Stock

We have designated 100,000 shares of Series A preferred stock with super-voting rights. The purpose of the Series A preferred stock is to vest voting control of all shareholder matters (including a vote for the election of directors) with the holders of the Series A preferred stock to prevent a takeover. Our board of directors believed that it was in our best interest to vest such voting control with the person or persons operating our company. The Series A preferred stock may only be issued to the person or persons serving as our President and Treasurer. Their relative ownership interests shall be determined by our board of directors in its sole discretion. We issued 66,000 shares of Series A preferred stock to Kenneth S. Forster, who serves as our only executive officer, in consideration for his services as an executive officer valued at $16,500 and included in his compensation in 2006. We may issue 34,000 shares of

Series A preferred stock if someone takes over as Treasurer. If Mr. Forster were to leave office, his shares of Series A preferred stock would revert back to us at $0.50 per share, be retired and restored to the status of authorized and unissued shares, and our board of directors, in its sole discretion, would have authority to issue the authorized and unissued shares as Series A preferred stock to any person serving as our President or Treasurer or both. No changes in Series A voting and ownership provisions are contemplated in connection with our efforts to become a fully reporting publicly traded company.

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The holders of the Series A preferred stock voting separately as a class, have the right to vote on all shareholder matters (including the election of directors) equal to fifty-one percent (51%) of the total vote regardless of the number of common shares that may be issued in the future. For example, if there are 21,511,222 shares of our common stock issued and outstanding at the time of a shareholder vote, the holders of Series A preferred stock, voting separately as a class, will have the right to vote an aggregate of 22,389,231 shares, out of a total number of 43,900,453 shares voting. If the issued and outstanding shares of our common stock increased to 25,000,000, Mr. Forster, voting separately as a class, would have the right to vote an aggregate of 26,020,408 shares, out of a total number of 51,020,408 shares voting. There are no arrangements or understandings between Mr. Forster, as the controlling shareholder, and the members of our board of directors regarding board compensation or board voting positions. The holders of Series A preferred stock are not entitled to receive any dividends paid on our common stock, have no preemptive or other subscription rights, and there are no liquidation preferences, conversion rights or redemption or sinking fund provisions with respect to the shares of our Series A preferred stock. The Series A preferred stock may not be transferred, sold, assigned or hypothecated or transferred by will or by the laws of descent and distribution or for the benefit of any person. In the event of death or disability or the holder’s termination of service to us or removal from office without cause, such holder’s shares of Series A preferred stock shall revert back to us at $0.50 per share, shall be retired and restored to the status of authorized and unissued shares, and our board of directors, in its sole discretion, may reissue the authorized and unissued shares as Series A preferred stock to such holder’s successor in office.

Item 12.

Certain Relationships and Related Transactions, and Director Independence.

Since the Beginning of Our Last Fiscal Year

During fiscal 2008, we borrowed $155,119 from Richard L. Bienvenue, a former director, and renewed a promissory note issued to him for $10,000 which had become due in October 2008. The amounts are unsecured, accrue interest at a rate of 8% per annum, have no fixed terms of repayment, are deemed payable upon demand and $50,000 and $115,119 of the amounts are convertible into our common stock at a rate of $0.50 and $0.20, respectively, per share. The dollar value of the amount involved in the transaction (including the dollar value of the amount of Mr. Bienvenue’s accrued interest) is $173,055.

During fiscal 2008, we borrowed $10,500 from Matthew Meyer who serves as our sole director. We issued a twelve-month note for this principal amount to Mr. Meyer which bears interest at a rate of 8% per annum. The note is unsecured. There are no fixed terms of repayment on the note and it is deemed payable upon demand. The dollar value of the amount involved in the transaction (including the dollar value of the amount of Mr. Meyer’s accrued interest) is $11,049.

We believe that our related party transactions have been entered into upon terms no less favorable to us than those that could be obtained from unaffiliated third parties. Our reasonable belief of fair value is based upon proximate similar transactions with third parties or attempts to obtain the services from third parties, if such transaction would be available from third parties. All ongoing and future transactions with such persons, including any loans from or compensation to such persons, will be approved by a majority of disinterested members of our board of directors.

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Item 13.

Exhibits.

Exhibit No.		Description of Exhibit

2.1 (1)		Plan of Conversion, dated April 28, 2005
3.1 (1)		Articles of Incorporation
3.2 (1)		Bylaws
3.3 (1)		Certificate of Amendment to Articles of Incorporation
4.1 (1)		Certificate of Designation of Series A Preferred Stock
10.1*		Annual Filing Requirements Agreement with PCMS, dated August 14, 2008
14(2)		Code of Ethics
31*		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32*		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

* Filed herein.

(1)	Filed as Exhibits 2.1, 3.1, 3.2, 3.3, 4.1, 10.1 and 10.2, respectively to the to the registrant’s Form 10-SB filed with the SEC on August 30, 2007, and incorporated herein by reference.

(2)	Filed as Exhibit 14 to the to the registrant’s Form 10-KSB filed with the SEC on May 16, 2008, and incorporated herein by reference.

Item 14.

Principal Accountant Fees and Services.

The following table sets forth the aggregate fees incurred by us for the audit and other services provided by Malone & Bailey, PC during the fiscal years ended November 30, 2007 and 2008:

	2007		2008

Audit Fees	$	40,000	$	40,000
Audit-Related Fees	$	-	$	-
Tax Fees	$	-	$	-
All Other Fees	$	-	$	-

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	APC GROUP, INC.

Date: March 2, 2009	By:	/s/ Kenneth S. Forster
	Name: Kenneth S. Forster
	Title: President and Chief Executive Officer

In accordance with the requirements of the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date

/s/ Kenneth S. Forster	President, Chief Executive Officer and Treasurer	March 2, 2009
Kenneth S. Forster	(Principal Executive Officer,
	(Principal Financial Officer and
	Principal Accounting Officer)

/s/ Matthew Meyer	Sole Director	March 2, 2009
Matthew Meyer

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APC Group, Inc - FORM 10-K/A - February 2, 2010

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