UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
DC 20549





FORM
10-KSB





(Mark
One)





x
            ANNUAL
      REPORT UNDER 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)





Issuer’s
telephone number (907)
457-2501





Securities
registered under Section 12(b) of the Exchange Act: None





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





Common Stock, $.001 par
value per share


(Title of
class)





Check
whether the issuer is not required to file reports pursuant to Section 13 or
15(d) of the Exchange Act.  ̈





Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.  Yes xNo  ̈





Check if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of the registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. 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
issuer’s revenue for the most recent fiscal year ended November 30, 2008 was
$198,345.





The
aggregate market value of the voting and non-voting common equity held by
non-affiliates was $3,946,832 as of February 4, 2009, based upon the per share
closing sale price of $0.20 on such date.





As of
February 4, 2009, there were outstanding 32,956,364 shares of the registrant’s
common stock, $.001 par value per share.





Transitional
Small Business Disclosure Format:  Yes  ̈No x





Form
10-KSB


For
the Fiscal Year Ended November 30, 2008





TABLE
OF CONTENTS








PagePART
      IItem 1.
                                                                                                  Description of Business.
                                                                                                  1Item 2.
                                                                                                  Description of Property.
                                                                                                  5Item 3.
                                                                                                  Legal Proceedings.
                                                                                                  5Item 4.
                                                                                                  Submission of Matters to a Vote of Security
      Holders.
                                                                                                  5PART IIItem 5.
                                                                                                  Market for Common Equity and Related Stockholder
      Matters.
                                                                                                  6Item 6.
                                                                                                  Management’s Discussion and
      Analysis.
                                                                                                  6Item 7.
                                                                                                  Financial Statements.
                                                                                                  16Item 8.
                                                                                                  Changes In and Disagreements With Accountants on
      Accounting and Financial Disclosure.
                                                                                                  26Item 8A(T).
                                                                                                  Controls and Procedures.
                                                                                                  26Item 8B.
                                                                                                  Other Information.
                                                                                                  27PART IIIItem 9.
                                                                                                  Directors, Executive Officers, Promoters, Control
      Persons and Corporate Governance; Compliance With Section 16(a) of the
      Exchange Act.
                                                                                                  28Item 10.
                                                                                                  Executive Compensation.
                                                                                                  29Item 11.
                                                                                                  Security Ownership of Certain Beneficial Owners
      and Management and Related Stockholder Matters.
                                                                                                  31Item 12.
                                                                                                  Certain Relationships and Related Transactions,
      and Director Independence.
                                                                                                  32Item 13.
                                                                                                  Exhibits.
                                                                                                  33Item 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
numerouswatertight
retractable 110v power cord products for use in different industries. We also
manufacture proprietary Arctic Leash extension cords in various lengths and
gages.





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


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


·
            Wall
      LeashTM:  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 LeashTM:
      Retractable watertight cord reels for boats, yachts, sailboats, and
      ships.


-1-


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.


-2-


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.


-3-


We
compete on the following basis:





·
            Brand
      Recognition.  We market watertight retractable extension
      cord reels under several brands and trademarks, including Arctic Leash,
      Boom LeashTM, Wall LeashTM, Marine LeashTM 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 LeashTM, Boom LeashTM, Wall LeashTM and Marine
LeashTM.





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.


-4-


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.


-5-


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
                    
                    
                    LowNovember
      30, 2008
                    
                    $
                    0.15
                    
                    
                    $
                    0.15August
      30, 2008
                    
                    $
                    0.50
                    
                    
                    $
                    0.50May
      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.


-6-


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 2008Compensation
                  
                  $
                  508,537
                  
                  
                  $
                  2,996,310Percentage change over prior
      fiscal year
                  
                  
                  196
                  %
                  
                  
                  489
                  %As a percentage of
      revenues
                  
                  
                  265
                  %
                  
                  
                  1,511
                  %Professional
      fees
                  
                  $
                  255,092
                  
                  
                  $
                  822,017Percentage change over prior
      fiscal year
                  
                  
                  (42
                  )%
                  
                  
                  222
                  %As a percentage of
      revenues
                  
                  
                  133
                  %
                  
                  
                  414
                  %Other
      expenses
                  
                  $
                  129,009
                  
                  
                  $
                  112,817Percentage 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.


-7-


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.


-8-


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.


-9-





PurposeSales
      Force
                    
                    $
                    141,000
                    
                    
                    $
                    300,000
                    
                    
                    $
                    300,000
                    
                    
                    $
                    300,000Inventory
                    
                    
                    141,000
                    
                    
                    
                    300,000
                    
                    
                    
                    300,000
                    
                    
                    
                    300,000Advertising
      and Marketing
                    
                    
                    93,000
                    
                    
                    
                    150,000
                    
                    
                    
                    200,000
                    
                    
                    
                    200,000Technology
      and Software
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    75,000
                    
                    
                    
                    75,000Engineering
      and Testing
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    50,000
                    
                    
                    
                    50,000Misc.
      Other Purposes
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    200,000
                    
                    
                    
                    575,000Net
      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.


-10-


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.


-11-


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.


-12-


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.


-13-





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.


-14-




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.


-15-


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


-16-





APC
GROUP, INC.


BALANCE
SHEETS





November 30,
                  
                  
                  November 30,2008
                  
                  
                  2007ASSETSCURRENT
      ASSETSCash
      and cash equivalents
                  
                  $
                  26,781
                  
                  
                  $
                  3,796Accounts
      receivable, net of allowance for bad debt of $12,042 and $19,159,
      respectively
                  
                  
                  30,984
                  
                  
                  
                  25,483Inventory
                  
                  
                  68,035
                  
                  
                  
                  87,865Prepaid
      expenses
                  
                  
                  5,540
                  
                  
                  
                  13,108Total
      current assets
                  
                  
                  131,340
                  
                  
                  
                  130,252Property
      and equipment, net of accumulated depreciation of $41,919 and $30,285,
      respectively
                  
                  
                  39,459
                  
                  
                  
                  50,953TOTAL
      ASSETS
                  
                  $
                  170,799
                  
                  
                  $
                  181,205LIABILITIES
      AND SHAREHOLDERS’ DEFICITCURRENT
      LIABILITIESAccounts
      payable-trade
                  
                  $
                  143,675
                  
                  
                  $
                  86,218Accounts
      payable-related party
                  
                  
                  -
                  
                  
                  
                  31,941Accrued
      expenses
                  
                  
                  14,737
                  
                  
                  
                  57,179Note
      payable-related party
                  
                  
                  173,072
                  
                  
                  
                  10,000Line
      of credit
                  
                  
                  99,875
                  
                  
                  
                  99,975Current
      maturities of long-term debt
                  
                  
                  126,987
                  
                  
                  
                  301,423Total
      current liabilities
                  
                  
                  558,346
                  
                  
                  
                  586,736Long-term
      debt, net of current maturities
                  
                  
                  81,471
                  
                  
                  
                  133,490TOTAL
      LIABILITIES
                  
                  
                  639,817
                  
                  
                  
                  720,226SHAREHOLDERS’
      DEFICITPreferred
      stock, $0.001 par value; 5,000,000 shares authorized; 66,000 shares issued
      and outstanding
                  
                  
                  66
                  
                  
                  
                  66Common
      stock, $0.001 par value; 50,000,000 shares authorized; 32,956,364 and
      21,511,222 shares issued and outstanding, respectively
                  
                  
                  32,957
                  
                  
                  
                  21,511Additional
      paid-in-capital
                  
                  
                  6,672,672
                  
                  
                  
                  2,728,701Accumulated
      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.


-17-





APC
GROUP, INC.


STATEMENTS
OF OPERATIONS





Years
      EndedNovember
      30,2008
                  
                  
                  2007REVENUES
                  
                  $
                  198,345
                  
                  
                  $
                  191,763COST
      OF REVENUES
                  
                  
                  90,507
                  
                  
                  
                  77,700Gross
      profit
                  
                  
                  107,838
                  
                  
                  
                  114,063OPERATING
      EXPENSESSelling,
      general and administrative expenses
                  
                  
                  3,931,144
                  
                  
                  
                  892,638Depreciation
      expense
                  
                  
                  11,634
                  
                  
                  
                  11,626Net
      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.


-18-





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
                      
                      
                      TotalBalances,
      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
                      
                      
                      
                      -
                      
                      
                      
                      215,000Services
                      
                      
                      -
                      
                      
                      
                      2,699,222
                      
                      
                      
                      -
                      
                      
                      
                      2,699
                      
                      
                      
                      509,044
                      
                      
                      
                      -
                      
                      
                      
                      511,743Loan
      costs
                      
                      
                      -
                      
                      
                      
                      200,000
                      
                      
                      
                      -
                      
                      
                      
                      200
                      
                      
                      
                      29,800
                      
                      
                      
                      -
                      
                      
                      
                      30,000Net
      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
                      
                      
                      
                      -
                      
                      
                      
                      20,750Services
                      
                      
                      -
                      
                      
                      
                      9,975,000
                      
                      
                      
                      -
                      
                      
                      
                      9,975
                      
                      
                      
                      3,593,775
                      
                      
                      
                      -
                      
                      
                      
                      3,603,750Debt
      conversion
                      
                      
                      -
                      
                      
                      
                      1,209,524
                      
                      
                      
                      -
                      
                      
                      
                      1,210
                      
                      
                      
                      290,601
                      
                      
                      
                      -
                      
                      
                      
                      291,811Loan
      costs
                      
                      
                      -
                      
                      
                      
                      200,000
                      
                      
                      
                      -
                      
                      
                      
                      200
                      
                      
                      
                      36,050
                      
                      
                      
                      -
                      
                      
                      
                      36,250Additional
      debt discount frommodification
      of debt
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      2,856
                      
                      
                      
                      -
                      
                      
                      
                      2,856Net
      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.


-19-





APC
GROUP, INC.


STATEMENTS
OF CASH FLOWS





Years
      EndedNovember
      30,2008
                  
                  
                  2007Cash
      flows from operating activities:Net
      loss
                  
                  $
                  (3,885,414
                  )
                  
                  $
                  (889,462
                  )Adjustments
      to reconcile net loss to netcash
      used in operating activities:Stock
      issued for services
                  
                  
                  3,603,750
                  
                  
                  
                  511,743Stock
      issued for loan costs
                  
                  
                  36,250
                  
                  
                  
                  30,000Depreciation
      expense
                  
                  
                  11,634
                  
                  
                  
                  11,626Accretion
      of discount on notes payable
                  
                  
                  17,599
                  
                  
                  
                  28,250Gain
      on settlement of lawsuit
                  
                  
                  (30,267
                  )
                  
                  
                  -Bad
      debt recovery
                  
                  
                  (7,117
                  )
                  
                  
                  (3,390
                  )Changes
      in assets and liabilitiesAccounts
      receivable
                  
                  
                  1,616
                  
                  
                  
                  25,459Inventory
                  
                  
                  19,830
                  
                  
                  
                  (34,535
                  )Prepaid
      expenses
                  
                  
                  7,568
                  
                  
                  
                  (11,032
                  )Accounts
      payable-trade
                  
                  
                  57,457
                  
                  
                  
                  7,616Accounts
      payable-related parties
                  
                  
                  (1,674
                  )
                  
                  
                  14,558Accrued
      liabilities
                  
                  
                  11,369
                  
                  
                  
                  18,024Net
      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
                  
                  
                  
                  215,000Net
      borrowings under revolving line of credit
                  
                  
                  (100
                  )
                  
                  
                  99,975Proceeds
      from issuance of related party debt
                  
                  
                  165,619
                  
                  
                  
                  10,000Payments
      made on related party debt
                  
                  
                  (2,547
                  )
                  
                  
                  -Payments
      made on debt
                  
                  
                  (3,198
                  )
                  
                  
                  (43,673
                  )Net
      cash provided by financing activities
                  
                  
                  180,524
                  
                  
                  
                  281,302Net
      increase (decrease) in cash and cash equivalents
                  
                  
                  22,985
                  
                  
                  
                  (9,841
                  )Cash
      and cash equivalents, at beginning of period
                  
                  
                  3,796
                  
                  
                  
                  13,637Cash
      and cash equivalents, at end of period
                  
                  $
                  26,781
                  
                  
                  $
                  3,796Supplemental
      cash flows information:Cash
      paid for interest
                  
                  $
                  42,979
                  
                  
                  $
                  22,220Cash
      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.


-20-


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
      yearsFurniture
      and Fixtures
                7
      yearsComputers
      and Equipment
                5
      yearsVehicles
                5
      years




-21-





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.




-22-




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
                  
                  
                  2007Note
      payable to Reel-Thing Innovations
                  
                  August
      2010
                  
                  
                  $
                  195,000
                  
                  
                  $
                  433,000Loan
      discount
                  
                  
                  n/a
                  
                  
                  
                  (11,460
                  )
                  
                  
                  (26,203
                  )Equipment
      loans
                  
                  March
      2009
                  
                  
                  
                  433
                  
                  
                  
                  1,831Vehicle
      loan
                  
                  January
      2012
                  
                  
                  
                  24,485
                  
                  
                  
                  26,285208,458
                  
                  
                  
                  434,913Current
      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.


-23-





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.


-24-





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





2008
                  
                  
                  2007Deferred
      tax assetsNet
      operating losses
                  
                  $
                  827,000
                  
                  
                  $
                  766,312Less:
      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.


-25-


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 there are material weaknesses in our internal control over financial
reporting. 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:





1.
            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.





2.
            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.


-26-




3.
            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.





This
annual report does not include a report of management's assessment regarding
internal control over financial reporting or 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.


-27-


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
                        
                        PositionKenneth
      S. Forster
                        
                        47
                        
                        President,
      CEO, Secretary and TreasurerMatthew
      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


-28-





·
            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)
                                        
                                        $
                                        2,864,454President,
      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.


-29-





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)
                        
                        $
                        35,000Former
      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.


-30-





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
                    
                    
                    PercentKenneth
      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 ManagementCorporation
      (3)
                    
                    
                    1,875,000
                    
                    
                    
                    5.6
                    %
                    
                    
                    1,875,000
                    
                    
                    
                    2.7
                    %Matthew
      Meyer (4)
                    
                    
                    385,000
                    
                    
                    
                    1.1
                    %
                    
                    
                    385,000
                    
                    
                    
                    *Executive
      Officers and DirectorsAs
      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.


-31-


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 Meyerwho 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.


-32-





Item
13.  Exhibits.





Exhibit
      No.
              
              Description
      of Exhibit2.1(1)
              
              Plan
      of Conversion, dated April 28, 20053.1(1)
              
              Articles
      of Incorporation3.2(1)
              
              Bylaws3.3(1)
              
              Certificate
      of Amendment to Articles of Incorporation4.1(1)
              
              Certificate
      of Designation of Series A Preferred Stock10.1*
              
              Annual
      Filing Requirements Agreement with PCMS, dated August 14,
    200814(2)
              
              Code
      of Ethics31*
              
              Certification
      pursuant to Section 302 of the Sarbanes-Oxley Act of
  200232*
              
              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
                    
                    
                    2008Audit
      Fees
                    
                    $
                    40,000
                    
                    
                    $
                    40,000Audit-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. ForsterName:
      Kenneth S. ForsterTitle:
      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, 2009Kenneth S. Forster
                          
                          (Principal Executive Officer,(Principal Financial Officer andPrincipal Accounting Officer)/s/Matthew
      Meyer
                          
                          Sole
      Director
                          
                          March
      2, 2009Matthew
      Meyer


-33-