UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003
COMMISSION FILE NUMBER: 001-31593
APOLLO GOLD CORPORATION
(Exact name of registrant as specified in its charter)
-----------------
YUKON TERRITORY NOT APPLICABLE
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4601 DTC Boulevard, Suite 750
Denver, Colorado 80237-2571
(Address of Principal Executive Offices Including Zip Code)
(720) 886-9656
(Registrant's telephone number,
including area code)
-----------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, no par value
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [_]
Indicate by a check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [_]
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).
Yes [_] No [X]
As of March 15, 2004, the approximate aggregate market value of voting stock
held by non-affiliates of the registrant was $147,811,000 (based upon the
closing price for shares of the registrant's common stock as reported by the
American Stock Exchange on that date). Shares of common stock held by each
officer, director, and holder of 5% or more of the outstanding common stock have
been excluded in that such persons may be deemed to be affiliates. This
determination of affiliate status is not necessarily a conclusive determination
for other purposes.
As of March 15, 2004, the registrant had 75,031,198 shares of common stock, no
par value per share, outstanding.
Apollo Gold Corporation (the "Registrant") is amending Item 8 of its Annual
Report on Form 10-K for the year ended December 31, 2003 to include the
signature of its independent auditors to the Independent Auditors Report. The
signature was included in the Independent Auditors Report provided to the
Registrant, but was inadvertently omitted from the Registrant's previous filing
of the Form 10-K as originally filed on EDGAR. Item 8 is included in its
entirety, but no other changes have been made to Item 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Apollo Gold Corporation
Independent Auditors Reports F-2
Consolidated Balance Sheets at December 31, 2003 and December 31, 2002 F-3
Consolidated Statements of Operations and Deficit for the years ended
December 31, 2003, 2002 and 2001 F-4
Consolidated Statements of Cash Flows for the years ended
December 31, 2003, 2002 and 2001 F-5
Notes to the Consolidated Financial Statement F-6
INDEPENDENT AUDITORS' REPORT
To the Shareholders of Apollo Gold Corporation
We have audited the consolidated balance sheets of Apollo Gold Corporation as at
December 31, 2003 and 2002 and the consolidated statements of operations and
deficit and cash flows for each of the years in the three-year period ended
December 31, 2003. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in connection with Canadian generally accepted auditing
standards and auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. As audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the 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, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at December 31, 2003
and 2002 and the results of its operations and cash flows for each of the years
in the three-year period ended December 31, 2003 in accordance with Canadian
generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Chartered Accountants
Vancouver, British Columbia
March 5, 2004
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F-2
APOLLO GOLD CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF UNITED STATES DOLLARS)
================================================================
December 31,
--------------------
2003 2002
--------- ---------
ASSETS
CURRENT
Cash and cash equivalents $ 25,851 $ 8,426
Short-term investments 5,855 -
Accounts receivable 4,647 3,228
Prepaids 552 532
Broken ore on leach pad 9,594 9,098
Inventories (Note 4) 2,839 2,926
----------------------------------------------------------------
49,338 24,210
BROKEN ORE ON LEACH PAD - LONG-TERM 1,827 1,605
PROPERTY, PLANT AND EQUIPMENT (Note 5) 38,519 30,375
DEFERRED STRIPPING COSTS 24,033 16,998
RESTRICTED CERTIFICATE OF DEPOSIT (Note 6) 6,893 5,302
----------------------------------------------------------------
$120,610 $ 78,490
================================================================
LIABILITIES
CURRENT
Accounts payable $ 5,848 $ 4,935
Accrued liabilities 2,781 1,961
Notes payable (Note 7) 4,117 3,114
Property and mining taxes payable 1,080 911
----------------------------------------------------------------
13,826 10,921
NOTES PAYABLE (Note 7) 3,275 5,247
ACCRUED SITE CLOSURE COSTS (Note 9) 21,619 20,508
----------------------------------------------------------------
38,720 36,676
----------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (Note 13)
SHAREHOLDERS' EQUITY
Share capital (Note 10) 120,624 72,206
Issuable common shares (Note 10) 231 231
Special warrants (Note 10) - 6,305
Contributed surplus (Note 10) 7,172 7,023
Deficit (46,137) (43,951)
----------------------------------------------------------------
81,890 41,814
----------------------------------------------------------------
$120,610 $ 78,490
================================================================
APPROVED ON BEHALF OF THE BOARD
----------------------------------
G.W. Thompson, Director
----------------------------------
Robert Watts, Director
The accompanying notes are an integral part of these consolidated financial
statements.
================================================================================
F-3
APOLLO GOLD CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
(IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT FOR SHARE AMOUNTS)
===============================================================================
Year ended December 31,
-------------------------------------
2003 2002 2001
------------ ------------ ---------
REVENUE
Revenue from sale of minerals $ 66,841 $ 20,410 $ -
-------------------------------------------------------------------------------
OPERATING EXPENSES
Direct operating costs 55,684 15,726 -
Depreciation and amortization 4,997 3,488 -
General and administrative expenses 4,651 2,286 439
Share-based compensation 376 615 -
Accretion expense 1,280 771 -
Royalty expenses 898 508 -
Exploration and business development 2,117 451 94
-------------------------------------------------------------------------------
70,003 23,845 533
-------------------------------------------------------------------------------
OPERATING LOSS (3,162) (3,435) (533)
OTHER INCOME (EXPENSES)
Gain on sale of marketable securities - - 73
Interest income 213 76 6
Interest expense (544) (991) -
Foreign exchange gain and other 1,307 1,299 -
-------------------------------------------------------------------------------
NET LOSS FOR THE YEAR (2,186) (3,051) (454)
DEFICIT, BEGINNING OF YEAR (43,951) (40,900) (40,446)
-------------------------------------------------------------------------------
DEFICIT, END OF YEAR $ (46,137) $ (43,951) $(40,900)
===============================================================================
NET LOSS PER SHARE, BASIC
AND DILUTED $ (0.04) $ (0.16) $ (0.54)
===============================================================================
WEIGHTED-AVERAGE NUMBER OF
SHARES OUTSTANDING 54,536,679 19,297,668 834,124
===============================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
================================================================================
F-4
APOLLO GOLD CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF UNITED STATES DOLLARS)
================================================================================================
Year ended December 31,
----------------------------
2003 2002 2001
--------- --------- ------
OPERATING ACTIVITIES
Net loss for the year $ (2,186) $ (3,051) $(454)
Items not affecting cash:
Depreciation and amortization 4,997 3,488 -
Amortization of deferred stripping 1,699 - -
Share-based compensation 376 615 -
Accretion expense 1,280 771 -
Gain on sale of property, plant and equipment (339) - -
Gain on sale of marketable securities - - (73)
Other (56) - -
Net change in non-cash operating working capital items (Note 15) (168) (1,206) (33)
------------------------------------------------------------------------------------------------
5,603 617 (560)
------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Property, plant and equipment expenditures (11,507) (2,932) -
Deferred stripping costs (8,734) (12,129) -
Short-term investments (5,855) - -
Acquisition of Nevoro (Note 3 (a)) - (11,061) -
Black Fox acquisition (Note 3 (b)) - (2,028) -
Proceeds from disposal of property, plant and equipment 339 - -
Restricted Certificate of Deposit (1,591) (1,569) -
Proceeds on repayment of promissory note - - 245
Proceeds on sale of marketable securities - - 192
------------------------------------------------------------------------------------------------
(27,348) (29,719) 437
------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds on issuance of shares 37,702 - -
Proceeds from exercise of warrants and options 3,937 - -
Proceeds from notes payable 1,259 1,790 -
Payments of notes payable (3,728) (2,602) -
Issuance of special warrants - 14,611 -
Issuance of flow-through common shares - 2,875 -
Proceeds on issuance of convertible debentures, net - 20,772 -
------------------------------------------------------------------------------------------------
39,170 37,446 -
------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH 17,425 8,344 (123)
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 8,426 82 205
------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS,
END OF YEAR $ 25,851 $ 8,426 $ 82
================================================================================================
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ 544 $ 991 $ -
================================================================================================
Income taxes paid $ - $ - $ -
================================================================================================
During the year ended December 31, 2003, the Company issued 61,500 shares to
acquire certain parcels of land located in Nevada. Share capital and property,
plant and equipment both increased by $134 as a result of this transaction.
During the years ended December 31, 2003, 2002 and 2001, property, plant and
equipment totaling $1,500, $1,550 and $Nil, respectively, was acquired under
capital lease obligations.
The accompanying notes are an integral part of these consolidated financial
statements.
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F-5
APOLLO GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2003, 2002 AND 2001
(IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT PER SHARE AMOUNTS)
================================================================================
1. NATURE OF OPERATIONS
On June 25, 2002, pursuant to a statutory Plan of Arrangement, Apollo Gold
Corporation ("Apollo" or the "Company") acquired the business of Nevoro
Gold Corporation ("Nevoro"). This acquisition has been accounted for using
the purchase method of accounting.
Apollo, through its acquisition of Nevoro, is engaged in gold mining
including extraction, processing and refining and the production of other
by-product metals, as well as related activities including exploration and
development. The Company currently owns and has rights to operate the
following facilities: the Florida Canyon Mine through Florida Canyon
Mining, Inc. ("FCMI") located in the State of Nevada, Montana Tunnels Mine
through Montana Tunnels Mining, Inc. ("MTMI") located in the State of
Montana and Diamond Hill Mine also located in the State of Montana.
The Florida Canyon Mine is an open pit, heap leach operation located near
Winnemucca, Nevada, producing gold and silver. The Florida Canyon Mine is
currently operating at its designed capacity (approximately 110,000 gold
ounces per year). The Montana Tunnels Mine is an open pit mine and mill,
located near Helena, Montana, producing ore and lead-gold and zinc-gold
concentrates. The Montana Tunnels Mine recommenced commercial production in
April 2003. Diamond Hill Mine, also located near Helena, Montana, is
currently under care and maintenance.
Apollo has one development property and four exploration properties,
Standard Mine, Pirate Gold, Nugget Field, Willow Creek, and Buffalo Canyon
each located near the Florida Canyon Mine.
Apollo also purchased the Black Fox Project (former Glimmer Mine) which is
located in the Province of Ontario near the Township of Mattheson in
September of 2002. The Project is now considered a development property.
Prior to the acquisition of Nevoro, the Company had interests in
exploration projects in Indonesia and the Philippines. In December 2001,
the Company executed an agreement with Hinoba Holdings Limited ("HL")
whereby HL was granted an option to acquire all of the rights to the
Company's Philippines project. HL defaulted on this agreement and the
Company has discontinued pursuing its interest in the Philippines and
Indonesia projects and is no longer financing the subsidiaries that own the
underlying title to the properties. During 2003, the Company sold its
interest in the Philippines and Indonesia projects for $166.
================================================================================
F-6
2. SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements of Apollo are prepared by management
in accordance with Canadian generally accepted accounting principles
("Canadian GAAP") and except as described in Note 18, conform in all
material respects with accounting principles generally accepted in the
United States ("U.S. GAAP") . The principal accounting policies followed by
the Company, which have been consistently applied, are summarized as
follows:
(a) Principles of consolidation
The consolidated financial statements include the accounts of Apollo
and its wholly-owned subsidiaries. All intercompany transactions and
balances have been eliminated upon consolidation.
(b) Use of estimates
The preparation of financial statements in conformity with Canadian
GAAP requires the Company's management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
consolidated financial statements. Significant estimates used herein
include those relating to gold and other metal prices, recoverable
proven and probable reserves, available resources, available operating
capital and required reclamation costs. These estimates each affect
management's evaluation of asset impairment and the recorded balances
of broken ore on leach pad, property, plant and equipment, deferred
stripping costs, reclamation, site closure and remediation
obligations, and the future tax asset valuation allowance. It is
reasonably possible that actual results could differ in the near term
from those and other estimates used in preparing these financial
statements and such differences could be material.
(c) Foreign currency translation
With the acquisition of Nevoro, virtually all of the Company's assets
and liabilities, and revenues and expenses, are denominated in United
States (U.S.) dollars. Accordingly, effective June 25, 2002, the
Company changed its measurement currency to U.S. dollars from Canadian
dollars.
Effective December 31, 2003, the Company changed its reporting
currency from Canadian dollars to U.S. dollars, the measurement
currency. The change in reporting currency was made in order to report
the Company's financial position and results of operations in the
currency of measurement following the Company's listing on the AMEX
Exchange in the United States. Historical results have been restated
to the measurement currency. Previously, for purposes of financial
reporting, the Company's financial statements were converted from U.S.
dollars, the measurement currency, to the Canadian dollar, the
reporting currency, using the current rate method.
================================================================================
F-7
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(c) Foreign currency translation (continued)
Prior to June 25, 2002, foreign currency denominated monetary assets
and liabilities had been translated into Canadian dollars at the rate
of exchange prevailing at the balance sheet date with any
corresponding gains or losses being recognized in the statement of
loss. Foreign currency revenues and expenses had been translated at
the rates prevailing on the transaction date.
(d) Cash and cash equivalents
Cash and cash equivalents are comprised of cash, term deposits and
treasury bills. The original maturity dates of term deposits and
treasury bills is not in excess of 90 days.
(e) Short-term investments
Short-term investments are comprised of term deposits with maturity
dates of greater than 90 days and less than one year from date of
acquisition.
(f) Broken ore on leach pads
Broken ore on leach pad comprises gold in process in heap leach pads
and in stockpiles that are valued at the lower of average production
cost and net realizable value. Based on current production estimates,
the gold contained within the heap leach pad is recoverable over a
period in excess of twelve months. The cost of gold in process and
final products is comprised of costs of mining the ore and hauling it
to the mill, costs of processing the ore and an attributable amount of
mining and production overheads relating to deferred mineral property
and development costs. Units of gold on the leach pad are based on the
amount of ore introduced into production, expected recovery and assay
results.
Direct production costs associated with ore on the heap leach pads are
deferred and amortized as the contained gold is recovered. Based upon
actual metal recoveries, the Company periodically evaluates and
refines estimates used in determining the amortization and carrying
value of deferred mining costs associated with ore under leach.
(g) Inventories
Metals inventories are stated at the lower of cost and net realizable
value determined by using the first-in, first-out method. Materials
and supplies at the mine sites are valued at the lower of direct cost
of acquisition and replacement cost.
================================================================================
F-8
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(h) Property, plant and equipment
Mine development costs are capitalized after proven and probable
reserves have been identified. Amortization is calculated using the
units-of-production method over the expected life of the operation
based on the estimated recoverable gold equivalent ounces or value of
metals over proven and probable reserves and a portion of resources
expected to be converted to reserves based on past results.
Buildings and equipment are recorded at acquisition cost and amortized
over the remaining reserves of the mine site on a units-of-production
basis. Equipment that is mobile is amortized on a straight-line basis
over the estimated useful life of the equipment of five to ten years.
Costs relating to repair and maintenance costs are expensed as
incurred.
Financing and acquisition costs including interest and fees are
capitalized on the basis of expenditures incurred for the acquisition
of assets and mineralized properties and related development
activities. Capitalization ceases when the asset or property is
substantially complete and ready to produce at commercial rates.
(i) Mineral rights
Mineral rights include the cost of obtaining patented United States of
America mining claims and the cost of acquisition of properties.
Significant payments related to the acquisition of land and mineral
rights are capitalized. If a mineable ore body is discovered, such
costs are amortized when production begins using the
units-of-production method based on proven and probable reserves. If
no mineable ore body is discovered or such rights are otherwise
determined to have no value, such costs are expensed in the period in
which it is determined the property has no future economic value.
================================================================================
F-9
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(j) Deferred stripping costs
Mining costs associated with open-pit deposits that have diverse ore
grades and waste-to-ore ton ratios are deferred and amortized over the
mine life. These mining costs arise from the removal of waste rock
commonly referred to as "deferred stripping costs". Amortization of
amounts deferred is based on a ratio, calculated as estimated total
waste mining costs divided by the current proven and probable reserves
and mineral resources expected to be converted into mineral reserves.
This ratio is used to calculate the current period production cost
charged against earnings by multiplying the ratio times the reserves
mined during the period. Amortization of deferred stripping costs is
included within direct operating costs in our statement of operations.
This accounting method results in the smoothing of these costs over
the life of the mine, rather than expensing them as incurred. The full
amount of deferred stripping costs may not be expensed until the end
of the life of the mine. Some mining companies expense these costs as
incurred, which may result in the reporting of greater volatility in
period to period results of operations. Deferred stripping costs are
included with related mining property, plant and equipment for
impairment testing purposes.
(k) Exploration expenditures
Exploration expenditures are expensed as incurred during the reporting
period.
(l) Property evaluations
The Company evaluates the carrying amounts of its mining properties
and related buildings, plant and equipment when events or changes in
circumstances indicate that the carrying amount may not be
recoverable. If the Company has reason to believe that an impairment
may exist, estimated future undiscounted cash flows are prepared using
estimated recoverable ounces of gold (considering current proven and
probable reserves and mineral resources expected to be converted into
mineral reserves) and corresponding by-product credits along with
estimated future metals prices and estimated operating and capital
costs. The inclusion of mineral resources is based on various
circumstances, including but not limited to the existence and nature
of known mineralization, location of the property, results of recent
drilling and analysis to demonstrate the ore is commercially
recoverable. The future cash flows cover the known ore reserve at the
time. If the future undiscounted cash flows are less than the carrying
value of the assets, the assets will be written down to fair value and
the write-off charged to earnings in the current period.
================================================================================
F-10
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(m) Reclamation and closure costs
The Company, as part of the purchase accounting for the acquisition of
Nevoro, has recorded the present value of estimated future asset
retirement obligation and reclamation with a corresponding increase to
the carrying amount of the related asset. The carrying value will be
amortized over the life of the related assets on a unit-of-production
basis and the related liabilities are accreted to the original present
value estimate.
The present value of the reclamation liabilities may be subject to
change based on management's current estimates, changes in remediation
technology or changes to the applicable laws and regulations by
regulatory authorities, which affects the ultimate cost of remediation
and reclamation.
(n) Revenue recognition
Revenue from the sale of gold and by-products is recognized when the
following conditions are met: persuasive evidence of an arrangement
exists; delivery has occurred in accordance with the terms of the
arrangement; the price is fixed or determinable and collectability is
reasonably assured. Revenue for gold bullion is recognized at the time
of delivery and transfer of title to counter-parties. Revenue for lead
and zinc concentrates is determined by contract as legal title to the
concentrate transfers and includes provisional pricing arrangements
accounted for as an embedded derivative instrument under SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" as
amended.
(o) Commodity contracts
The Company enters into hedging contracts for gold involving the use
of combinations of put and call options. These options have common
notional amounts and maturity dates and are designated in combination
as hedges of future gold sales on the basis that they generate
offsetting cash flows. No premium has been received with respect to
these options.
Providing that the criteria for an effective hedge are met, gains and
losses on the contracts are deferred and recognized in revenue at the
time of the sale of the designated future gold production.
================================================================================
F-11
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(p) Stock incentive plans
The Company does not record stock options issued to employees as
compensation expense and discloses pro forma information on the fair
value of stock compensation issued during the period in the notes to
the financial statements. This method is acceptable under existing
CICA guidelines for stock based compensation and other stock based
payments for the year ended December 31, 2003.
Handbook Section 3870, however, does require additional disclosures
for options granted to employees, including disclosure of pro forma
earnings and pro forma earnings per share as if the fair value based
accounting method had been used to account for employee stock options
(see Note 10 (g)).
Beginning in the first quarter of 2004, the Company will expense stock
options in the financial statements as a component of compensation
expense in accordance with new recommendations of the CICA with
respect to stock based compensation which will come into effect for
the Company on January 1, 2004. Under this new standard, direct awards
of stock granted to employees are recorded at fair value on the date
of grant and the associated expense is amortized over the vesting
period.
(q) Income taxes
The Company accounts for income taxes whereby future income tax assets
and liabilities are computed based on differences between the carrying
amount of assets and liabilities on the balance sheet and their
corresponding tax values using the enacted income tax rates at each
balance sheet date. Future income tax assets also result from unused
loss carryforwards and other deductions. The valuation of future
income tax assets is reviewed annually and adjusted, if necessary, by
use of a valuation allowance to reflect the estimated realizable
amount. Although the Company has tax loss carryforwards (see Note 11),
there is uncertainty as to utilization prior to their expiry.
Accordingly, the future income tax asset amounts have been fully
offset by an uncertainty provision.
(r) Loss per share
The basic loss per share is computed by dividing the net loss by the
weighted average number of common shares outstanding during the year.
The fully diluted loss per share reflects the potential dilution of
common share equivalents, such as outstanding stock options and share
purchase warrants, in the weighted average number of common shares
outstanding during the year, if dilutive. For this purpose, the
"treasury stock method" is used for the assumed proceeds upon the
exercise of stock options and warrants that are used to purchase
common shares at the average market price during the year.
================================================================================
F-12
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(s) Comparative figures
Certain of the prior year's figures have been reclassified to conform
to the current year's presentation.
3. ACQUISITION
(a) Plan of arrangement
The Company acquired Nevoro as of June 25 2002. In order to finance
the acquisition and continuing operations of Nevoro, the Company
completed a private placement financing of $20,772, net of issue
expenses. The private placement was in the form of non-interest
bearing convertible secured debentures. The debentures were converted
into common shares and warrants of the Company upon completion of the
Plan of Arrangement as described in Note 10.
================================================================================
F-13
3. ACQUISITION (CONTINUED)
(a) Plan of arrangement (continued)
A summary of the allocation of the purchase price to the Nevoro assets
acquired, less liabilities assumed, at fair value on June 25, 2002 is
as follows:
ASSETS, at fair value
Accounts receivable $ 1,512
Prepaid expenses 155
Broken ore on leach pad 10,587
Inventories 2,667
--------------------------------------------
14,921
--------------------------------------------
Broken on leach pad - long-term 1,868
Property, plant and equipment 29,272
Restricted certificate of deposit 3,733
--------------------------------------------
34,873
--------------------------------------------
49,794
--------------------------------------------
LIABILITIES, at fair value
Accounts payable and accruals 7,329
Notes payable 1,767
Property and mining taxes payable 975
--------------------------------------------
10,071
--------------------------------------------
Notes payable 5,437
Accrued site closure costs 20,876
--------------------------------------------
26,313
--------------------------------------------
36,384
--------------------------------------------
NET ASSETS OF NEVORO ACQUIRED $13,410
============================================
CONSIDERATION
Cash $11,061
Shares 2,349
--------------------------------------------
TOTAL CONSIDERATION PAID $13,410
============================================
================================================================================
F-14
3. ACQUISITION (CONTINUED)
(a) Plan of arrangement (continued)
Apollo issued 1,970,000 shares (Note 10) valued at $2,349 to the
former shareholders of Nevoro as part consideration for the
acquisition of all of the outstanding shares of Nevoro. The value of
the shares issued was determined based on the average market price of
common shares over the two-day period before and after the terms of
the acquisition were agreed to and announced, less imputed share
issuance costs of $126.
In addition, certain key employees, officers and directors are
eligible to receive up to an aggregate of 2,780,412 options of the
Company. Each option will be exercisable for a period of five years
from the effective date and entitle the holder to acquire one share at
an exercise price of $0.80 per share. In fiscal 2002, following the
completion of the Plan of Arrangement, one-half of the options vested
based upon satisfying the established performance criteria. The
balance of the options vest based upon satisfying the established
fiscal 2003 performance criteria. These new unvested options were not
included as part of the purchase consideration but have been accounted
for in accordance with the Company's accounting policy for employee
stock options as outlined in Note 2.
The statement of earnings of Apollo for the year ended December 31,
2002 includes the earnings of Nevoro for the period from June 25,
2002.
(b) Purchase of Black Fox property
In September of 2002, Apollo completed a transaction ("Glimmer
Transaction") to purchase the Glimmer property near the city of
Timmins in the Province of Ontario. The Glimmer Transaction included
purchase price consideration of $2,028 cash and 2,080,000 Apollo
shares valued at $2,949. The total cost of the property is included in
property, plant and equipment. If the old Glimmer mine is developed
and reaches commercial production, an additional $2,322 (Cdn.$3,000)
is due to the vendors to purchase the property free and clear of all
encumbrances. The additional consideration will be recorded when it is
more likely than not that it will be payable.
Subsequent to the acquisition, management commenced a new exploration
project on adjacent targets under the name "Black Fox". In the third
quarter of 2003, following the delineation of proven and probable
reserves, Black Fox was reclassified as an advanced development
project whereby costs associated with the project will be capitalized
until commercial production is reached.
================================================================================
F-15
4. INVENTORIES
Inventories consists of:
2003 2002
------ ------
Concentrate inventory $ 98 $ -
Dore inventory 56 -
Materials and supplies 2,685 2,926
--------------------------------------
$2,839 $2,926
======================================
5. PROPERTY, PLANT AND EQUIPMENT
The components of property, plant and equipment at December 31 are as
follows:
2003 2002
------------------------------- --------
Accumulated Net Book Net Book
Cost Depreciation Value Value
------- ------------- ------- --------
Mine assets
Building, plant and equipment $13,712 $ 3,069 $10,643 $ 7,293
Mining properties and
development costs 25,740 5,328 20,412 15,963
--------------------------------------------------------------------------
39,452 8,397 31,055 23,256
Mineral rights 7,464 - 7,464 7,119
--------------------------------------------------------------------------
Total property, plant and
equipment $46,916 $ 8,397 $38,519 $30,375
==========================================================================
Included in building, plant and equipment are assets held under capital
leases which had cost of $3,190 and $792, and accumulated depreciation of
$1,592 and $133, respectively, as at December 31, 2003 and 2002.
================================================================================
F-16
6. RESTRICTED CERTIFICATE OF DEPOSIT
The restricted certificate of deposit represents cash that has been placed
in trust as security to the State of Montana and the State of Nevada
relating to the Company's site closure obligations (see Note 9).
The Company has entered into an agreement with CNA, an insurer, to complete
the bonding requirements at MTMI. CNA committed to an approximate $15,000
15-year term bonding facility which is not cancelable, unless MTMI fails to
meet its requirements under the arrangement. The agreement obligates MTMI
to make payments of approximately $75 monthly until the balance in the
trust account is equal to the penal sum of the CNA bond. At December 31,
2003, the restricted certificate of deposit for bonding requirements at
MTMI is $2,663 (2002 - $1,557).
At the Florida Canyon Mine the restricted certificate of deposit for
bonding requirements at December 31, 2003 is $3,700 (2002 - $3,538). This
covers areas excluded from the coverage of the SAFECO bond (Note 9). The
Company also has other amounts on deposit with respect to its other
projects.
7. NOTES PAYABLE
The notes payable are secured by a fixed charge on certain machinery and
equipment and bear interest at various rates between 3.615% and 7.5%, and
are repayable as follows:
2004 $ 4,117
2005 2,650
2006 625
-------------------------------------
Total notes payable 7,392
Less current portion (4,117)
-------------------------------------
Total long-term obligations $ 3,275
=====================================
8. EMPLOYEE BENEFIT PLAN
The Company maintains a defined contribution 401(K) plan for all US
employees. Employees have the right to invest up to 25% of their respective
earnings up to the statutory limits. The Company will match 100% of the
first 6% invested. The vesting schedule is two years. All US employees are
eligible to participate on the first of the month after their date of hire.
The amounts charged to earnings for the Company's defined contribution plan
totaled $590, $522 and $Nil for the years ended December 31, 2003, 2002 and
2001, respectively.
The Company maintains medical and life insurance benefits only for all
active employees.
================================================================================
F-17
9. ACCRUED SITE CLOSURE COSTS
All of the Company's operations are subject to reclamation and closure
requirements. Although the ultimate amount of site restoration costs is
uncertain, on a regular basis, the Company monitors these costs and
together with third party engineers prepares internal estimates to evaluate
their bonding requirements. The estimates prepared by management are then
reconciled with the requirements of the State and Federal officials.
At December 31, 2003, the accrued site closure liability amounted to
$21,619 (2002 - $20,508). This liability is based on the most recently
prepared third party engineer reports, together with management's estimate
of the Company's severance obligation upon closure of the related facility.
The liability is covered by a combination of both surety bonds as well as a
restricted certificate of deposit which in aggregate are valued at
approximately $38,729.
In view of the uncertainties concerning future removal and site restoration
costs, as well as the applicable laws and legislations, the ultimate costs
to the Company could differ materially from the amounts estimated by
management. Future changes, if any, due to their nature and
unpredictability, could have a material impact and would be reflected
prospectively, as a change in accounting estimate.
One of the Company's sureties, SAFECO Insurance Company of America
("SAFECO"), has sent notice to the regulatory authorities to cancel one of
the bonds currently valued at $16,936. Through litigation, the surety
instrument is still in place under full force and effect. This legal
decision was challenged by SAFECO and during 2003 the original judgment was
affirmed by the Court of Appeals. SAFECO did not take any further appeal
within the time permitted for appeals and the favorable judgment has become
final.
The following table summarizes the effect to the Company's accrued site
closure costs:
Balance, December 31, 2001 $ -
Additions during the year upon acquisition of Nevoro (Note 3) 20,876
Accretion 771
Expenditures (1,139)
-----------------------------------------------------------------------
Balance, December 31, 2002 20,508
Accretion 1,280
Expenditures (169)
-----------------------------------------------------------------------
Balance, December 31, 2003 $21,619
=======================================================================
The Company has estimated that the total obligations associated with the
retirement of the Florida Canyon and Montana Tunnels mines at December 31,
2003 is $32,140. The $21,619 fair value of these obligations is determined
using a 7.5% credit adjusted risk-free discount rate and expected payment
of obligations over fifteen years.
================================================================================
F-18
10. SHARE CAPITAL
(a) Authorized
Unlimited number of common shares with no par value
(b) Issued and outstanding
Contributed Special
Shares Amount Surplus Warrants
----------- -------- ------------ ----------
Balance, December 31, 2000 and 2001 834,124 $ 41,186 $ 177 $ -
Conversion of debentures (Note 10 (d)(i)) 28,750,000 16,623 4,149 -
Issuance of shares on Nevoro
acquisition (Note 3 (a)) 1,970,000 2,349 - -
Black Fox purchase (Note 3 (b)) 2,080,000 2,949 - -
Conversion of special warrants
private placement issued
September 13, 2002 (Note 10 (d)(ii)) 4,963,000 6,224 - -
Flow-through common shares
(Note 10 (d)(iii)) 1,593,750 2,875 - -
Share compensation - - 615 -
Special warrants private placement
issued December 23, 2002
(Note 10 (d)(iv)) - - 2,082 6,305
------------------------------------------------------------------------------------------
Balance, December 31, 2002 40,190,874 72,206 7,023 6,305
Shares issued for cash (Note 10 (c)) 24,432,300 37,314 388 -
Conversion of special warrants 6,000,000 6,305 - (6,305)
Warrants exercised 2,381,500 3,810 - -
Options exercised 158,616 127 - -
Nevoro acquisition, senior executive
share compensation - - 376 -
Shares issued to supplier 50,000 113 - -
Shares issued for land 61,500 134 - -
Fiscal 2002 stock-based compensation
issued in 2003 265,000 615 (615) -
------------------------------------------------------------------------------------------
Balance, December 31, 2003 73,539,790 $120,624 $ 7,172 $ -
==========================================================================================
================================================================================
F-19
10. SHARE CAPITAL (CONTINUED)
(c) Shares issued in 2003
On September 26, 2003, the Company issued 22,300,000 shares for
proceeds of $37,169, net of agent's commissions of $2,230, expenses of
$679 and fair value of agent's options of $353.
On October 27, 2003, the agents exercised their over-allotment option
and the Company issued a further 2,132,300 shares for proceeds of
$3,662, net of expenses of $220 and fair value of agent's options of
$35. The Company granted the agents 732,969 agent's options with an
exercise price of $1.67 (Cdn.$2.25) per option in connection with this
issuance. These agent's options expire in two years and vest
immediately. Using the fair value based method for stock-based
compensation, share issuance costs of approximately $388 were
recognized. This amount was determined using an option pricing model
assuming no dividends were paid, a volatility of the Company's share
price of 53%, an expected life of the options of two years, and annual
risk-free rate of 3.50%.
(d) Shares issued in 2002
(i) In 2002, the Company completed a private placement financing of
$20,772, net of issue costs in the form of non-interest bearing
convertible secured debentures, in order to finance the
acquisition of Nevoro. Upon completion of the Plan of
Arrangement, the debentures were converted into 28,750,000 common
shares and 7,187,500 warrants of the Company. In addition, the
underwriters were granted 718,750 warrants as additional
compensation in connection with the issuance of the convertible
debentures. Each warrant entitles the holder to acquire one share
at a price of $1.60 per share until March 21, 2004. An amount of
$4,149 was allocated to both sets of warrants and was presented
as contributed surplus.
(ii) On September 13, 2002 the Company issued 4,963,000 special
warrants convertible to common shares to raise an additional
$6,889, net of share issue expenses of $665. The warrants were
subsequently converted into common shares.
(iii) On November 21, 2002, under a private placement financing, the
Company issued 1,500,000 flow-through common shares as defined in
subsection 66(15) of the Income Tax Act (Canada). The aggregate
proceeds amounted to $2,875. The Company issued 93,750 additional
common shares from treasury, with an assigned value of $165, as
consideration to the underwriter in connection with this
transaction.
================================================================================
F-20
10. SHARE CAPITAL (CONTINUED)
(d) Shares issued in 2002 (continued)
(iv) On December 23, 2002, the Company issued 6,000,000 stock-warrant
units under a private placement financing. Each unit consisted of
one common share, and one-half of one common share purchase
warrant. Each full common share purchase warrant entitled the
holder to acquire from the Company, for a period of four years,
at a price of $2.10 (Cdn.$3.25) per warrant, one additional
common share. Each unit was issued at a price of $1.55
(Cdn.$2.40) for aggregate net proceeds of $9,343, net of issuance
expenses of $955. Of the original proceeds, $2,082 was allocated
to the related warrants and was presented as contributed surplus.
During fiscal 2003 6,000,000 units were converted into common
shares.
(e) Warrants
The following summarizes outstanding warrants as at December 31, 2003:
Number of Exercise Expiry
Warrants Shares Price Date
--------- ----------- ----------------- -----------------
5,524,750 5,524,750 $ 1.60 March 21, 2004
3,000,000 3,000,000 2.10 (Cdn.$3.25) December 23, 2006
------------------------------------------------------------
8,524,750 8,524,750
============================================================
================================================================================
F-21
10. SHARE CAPITAL (CONTINUED)
(f) Options
A summary of information concerning outstanding stock options at
December 31, 2003 is as follows:
Performance-based
Fixed Stock Options Stock Options
--------------------- ---------------------
Weighted Weighted
Number of Average Number of Average
Common Exercise Common Exercise
Shares Price Shares Price
---------- --------- ---------- ---------
Balances, December 31, 2000
and 2001 68,855 $ 44.14 - $ -
Options granted - - 2,780,412 0.80
Options cancelled (68,855) 44.14 - -
-------------------------------------------------------------------------
Balances, December 31, 2002 - - 2,780,412 0.80
Options granted 2,039,100 2.20 - -
Options exercised - - (158,616) 0.80
Options cancelled (151,800) 2.24 (121,642) 0.80
-------------------------------------------------------------------------
Balances, December 31, 2003 1,887,300 $ 2.20 2,500,154 $ 0.80
=========================================================================
================================================================================
F-22
10. SHARE CAPITAL (CONTINUED)
(f) Options (continued)
(i) Fixed stock option plan
The Company has a stock option plan that provides for the
granting of options to directors, officers, employees and service
providers of the Company.
The following table summarizes information concerning outstanding
and exercisable fixed stock options at December 31, 2003:
Options Outstanding Options Exercisable
---------------------------------------------- ------------------------
Weighted Weighted
Average Average
Exercise Exercise
Number Expiry Price Number Price
Outstanding Date per Share Exercisable per Share
----------- --------------------- ---------- ------------ ----------
1,563,200 February 18, 2013 $ 2.24 - $ -
4,100 March 28, 2013 2.34 - -
70,000 May 21, 2013 2.27 - -
150,000 August 22, 2013 2.12 - -
100,000 November 13, 2013 1.67 - -
------------------------------------------------------------------------
1,887,300 $ 2.20 - $ -
========================================================================
(ii) Performance-based stock option plan
As part of the Nevoro acquisition, 2,780,412 performance-based
options with an expiry date of June 25, 2007 were granted to
certain directors, officers and employees, and are subject to a
reduction if certain performance criteria are not met.
Furthermore, certain senior executives are entitled to receive
530,000 performance-based common shares subject to a reduction if
certain performance criteria are not met.
================================================================================
F-23
10. SHARE CAPITAL (CONTINUED)
(f) Options (continued)
(ii) Performance-based stock option plan (continued)
In fiscal 2002, one-half of the performance-based options and
common shares vested based upon the established performance
criteria. The balance of the options vest based upon the
established fiscal 2003 performance criteria. Furthermore, one
half of the related performance-based common shares were approved
for issuance in 2003 based upon the fiscal 2002 performance and
the balance of the shares vest based upon the established fiscal
2003 performance criteria. An expense of $376 has been recorded
in the statement of operations relating to the fair value expense
of the performance-based common shares vesting in fiscal 2003 and
credited to contributed surplus.
(g) Stock-based compensation
The following pro forma financial information presents the net loss
for the year and the basic and diluted loss per common share had the
Company adopted the fair value method of accounting for stock options
as set out in CICA Handbook Section 3870, Stock-Based Compensation and
Other Stock-Based Payments:
2003 2002
-------- --------
Net loss
As reported $(2,186) $(3,051)
Compensatory fair value of options (3,871) (1,980)
--------------------------------------------------------
Pro forma $(6,057) $(5,031)
========================================================
Basic and diluted loss per share
As reported $ (0.04) $ (0.16)
Pro forma (0.11) (0.26)
========================================================
================================================================================
F-24
10. SHARE CAPITAL (CONTINUED)
(g) Stock-based compensation (continued)
Using the fair value based method for stock-based compensation,
additional costs of approximately $3,876 and $1,980 would have been
recorded for the years ended December 31, 2003 and 2002, respectively.
These amounts were determined at the date of grant using a
Black-Scholes option pricing model with the following weighted average
assumptions:
2003 2002
------ ------
Risk free interest rate 3.534% 3.550%
Dividend yield 0% 0%
Volatility 75% 92%
Expected life in years 5.0 2.0
The weighted average grant-date fair value of stock options granted
during 2003 was $1.40.
(h) Issuable common shares
The Company is committed under a previous agreement to issue such
number of fully paid common shares as shall have a market value of
$231. To date, none of these shares have been issued.
================================================================================
F-25
11. INCOME TAXES
The Company did not record a provision or benefit for income taxes for the
periods ended December 31, 2003, 2002 and 2001, due to the availability of
net operating loss carryforwards and the uncertainty of their future
realization.
The provision for income taxes reported differs from the amounts computed
by applying the cumulative Canadian federal and provincial income tax rates
to the loss before tax provision due to the following:
2003 2002 2001
------- -------- -------
Statutory tax rate 37.62% 39.62% 44.67%
-------------------------------------------------------------------
Recovery of income taxes computed
at standard rates $ 822 $ 1,209 $ 203
Lower foreign tax rates (10) (34) -
Tax losses not recognized in the period
that the benefit arose (812) (1,175) (203)
-------------------------------------------------------------------
$ - $ - $ -
===================================================================
The tax effects of temporary differences that would give rise to
significant portions of the future tax assets and future tax liabilities at
December 31, were as follows:
2003 2002
--------- ---------
Future income taxes
Net operating losses carried forward $ 35,217 $ 32,455
Foreign exploration and development expenses 1,784 1,370
--------------------------------------------------------------------
37,001 33,825
Less: Valuation allowance (37,001) (33,825)
--------------------------------------------------------------------
Net future income tax asset $ - $ -
====================================================================
Utilization of the net operating losses carried forward and the foreign
exploration and development expenses are subject to limitations.
At December 31, 2003, the Company has the following unused tax losses
available for tax purposes:
Country Amount Expiry
------------- ------- ---------
Canada $15,718 2004-2010
United States 84,232 2011-2023
================================================================================
F-26
12. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
(a) Market risk
Due to the nature of the precious metals market, the Company is not
dependent on a significant customer to provide a market for its
refined gold and silver. However, if the Company had to change the
smelters to which zinc, lead, and pyrite concentrates are shipped, the
additional transportation costs could be considerable. Although it is
possible that the Company could be directly affected by weaknesses in
the metals processing business, the Company periodically monitors the
financial condition of its customers.
Accounts receivable at December 31, 2003 are due from two customers.
(b) The estimated fair value of the Company's financial instruments was as
follows:
December 31,
-------------------------------------
2003 2002
------------------ -----------------
Carrying Fair Carrying Fair
Amount Value Amount Value
--------- ------- --------- ------
Cash and cash equivalents $ 25,851 $25,851 $ 8,426 $8,426
Short-term investments 5,855 5,855 - -
Accounts receivable 4,647 4,647 3,228 3,228
Accounts payable 5,848 5,848 4,935 4,935
Accrued liabilities 2,781 2,781 1,961 1,961
Notes payable
Current 4,117 4,117 3,114 3,114
Non-current 3,275 3,275 5,247 5,247
The fair value of notes payable was determined using the discounted
cash flows at prevailing market rates. The fair value of the Company's
other financial instruments was estimated to approximate their
carrying value due primarily to the immediate or short-term maturity
of these financial instruments.
================================================================================
F-27
12. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)
(c) Gold hedges
The Company has entered into hedging contracts, with Standard Bank
London Limited, for gold in the aggregate amount of 100,000 ounces
involving the use of combinations of put and call options. As of
December 31, 2003 there are 64,000 ounces remaining on these
contracts. The contracts give the holder the right to buy, and the
Company the right to sell, stipulated amounts of gold at the upper and
lower exercise prices, respectively. The contracts continue through
April 25, 2005 with a put option strike price of two hundred and
ninety-five dollars per ounce and a call option strike price of three
hundred and forty-five dollars per ounce. The Company has also entered
into certain spot deferred forward contracts for the delivery of
15,862 ounces of gold. Gains or losses on these spot deferred forward
contracts are recognized as an adjustment of revenue in the period
when the originally designated production is sold. As at December 31,
2003, the fair value of the contracts is a loss of $5,911 (December
31, 2002 - $2,265).
The contracts mature as follows:
Ounces of
Gold
---------
2004 63,862
2005 16,000
-----------------
79,862
=================
13. COMMITMENTS AND CONTINGENCIES
(a) Royalties
The Company's properties are subject to royalty obligations based on
minerals produced from the properties. The current reserves at the
FCMI are subject to a 2.5% net smelter return royalty. The MTMI
reserves are not subject to a royalty obligation. Royalty obligations
for other properties arise upon mine production.
(b) Environmental
The Company's mining and exploration activities are subject to various
federal, provincial and state laws and regulations governing the
protection of the environment. These laws and regulations are
continually changing and generally becoming more restrictive. The
Company conducts its operations so as to protect public health and the
environment and believes its operations are materially in compliance
with all applicable laws and regulations. The Company has made, and
expects to make in the future, expenditures to comply with such laws
and regulations.
================================================================================
F-28
13. COMMITMENTS AND CONTINGENCIES (CONTINUED)
(c) Litigation and claims
The Company is from time to time involved in various claims, legal
proceedings and complaints arising in the ordinary course of business.
The Company does not believe that adverse decisions in any pending or
threatened proceedings related to any matter, or any amount which it
may be required to pay by reason thereof, will have a material effect
on the financial conditions or future results of operations of the
Company.
(d) Bank indebtedness
During the year ended December 31, 2003 the Company entered into a
$5,000 Revolving Loan, Guaranty and Security Agreement with Standard
Bank London Limited ("Standard Bank"). The Company must satisfy
certain requirements in order for Standard Bank to advance the maximum
amount of the loan. Until the commitment under the line of credit
expires or has been terminated, the Company must meet certain
covenants. As of December 31, 2003, the Company has no amount
outstanding under the revolving loan and is in compliance with the
covenants.
14. LEASE COMMITMENTS
Minimum lease payments under capital and non-cancelable operating leases
and the present value of net minimum payments at December 31, 2003 were as
follows:
Capital Operating
Leases Leases
-------- ----------
2004 $ 1,234 $ 160
2005 435 86
2006 254 77
2007 - 75
2008 - 25
-------------------------------------------------------------------------
Total 1,923 $ 423
==========
Less imputed interest 52
--------
Total present value of minimum capitalized payments 1,871
Less current portion of capital lease obligations 1,202
-------------------------------------------------------------
Long-term capital lease obligations $ 669
=============================================================
Rent expense under non-cancelable operating leases was $87, $17 and $Nil
for 2003, 2002 and 2001, respectively. The current portion of the capital
lease obligations is included in current portion of notes payable and the
long-term portion is included in long-term portion of notes payable in the
consolidated balance sheets.
================================================================================
F-29
15. NET CHANGE IN NON-CASH OPERATING WORKING CAPITAL ITEMS
2003 2002 2001
-------- -------- ------
(Increase) decrease in:
Accounts receivable $(1,419) $(1,716) $ -
Prepaids (20) (346) 12
Broken ore on leach pad (718) 1,752 -
Inventories 87 (259) -
Increase (decrease) in:
Accounts payable 913 (668) (45)
Accrued liabilities 820 95 -
Property and mining taxes payable 169 (64) -
---------------------------------------------------------------
$ (168) $(1,206) $ (33)
===============================================================
16. RELATED PARTY TRANSACTIONS
The Company had the following related party transactions during each of the
years in the three-year period ended December 31, 2003:
2003 2002 2001
----- ----- -----
Legal fees paid to two law firms, a partner
of each firm is a director of the Company $ 795 $ 153 $ -
Legal fees paid to law firm, a partner of which
is related to an officer of the Company 463 77 -
Consulting services paid to a relative of an
officer and director of the Company 64 63 -
These transactions are in the normal course of business and are measured at
the exchange amount which is the consideration established and agreed to by
the related parties.
17. SEGMENTED INFORMATION
Apollo operates the Montana Tunnels and Florida Canyon Mines in the United
States and the Black Fox development project in Canada. As the products and
services of the Company's largest segments, Montana Tunnels and Florida
Canyon, are essentially the same, the reportable segments have been
determined at the level where decisions are made on the allocation of
resources and capital and where performance is measured. The accounting
policies for these segments are the same as those followed by the Company
as a whole.
================================================================================
F-30
17. SEGMENTED INFORMATION (CONTINUED)
Amounts as at December 31, 2003 are as follows:
Montana Florida Black Corporate
Tunnels Canyon Fox and Other Total
-------- -------- ------ ---------- --------
Cash and cash equivalents $ 754 $ 19 $ 95 $ 24,983 $ 25,851
Short-term investments - - - 5,855 5,855
Broken ore on leach pad - current - 9,594 - - 9,594
Other non-cash current assets 5,345 2,263 71 359 8,038
-------------------------------------------------------------------------------------
6,099 11,876 166 31,197 49,338
Broken ore on leach pad - long-term - 1,827 - - 1,827
Property, plant and equipment 15,559 13,529 8,914 517 38,519
Deferred stripping costs 24,033 - - - 24,033
Restricted certificate of deposit 2,663 3,809 377 44 6,893
-------------------------------------------------------------------------------------
Total assets $ 48,354 $ 31,041 $9,457 $ 31,758 $120,610
=====================================================================================
Current liabilities $ 6,140 $ 6,515 $ 507 $ 664 $ 13,826
Notes payable 980 2,295 - - 3,275
Accrued site closure costs 9,148 12,471 - - 21,619
-------------------------------------------------------------------------------------
Total liabilities $ 16,268 $ 21,281 $ 507 $ 664 $ 38,720
=====================================================================================
Amounts as at December 31, 2002 are as follows:
Montana Florida Black Corporate
Tunnels Canyon Fox and Other Total
-------- -------- ------ ---------- -------
Cash and cash equivalents $ 89 $ 20 $2,814 $ 5,503 $ 8,426
Broken ore on leach pad - current - 8,990 - - 8,990
Other non-cash current assets 3,678 2,725 15 268 6,686
------------------------------------------------------------------------------------
3,767 11,735 2,829 5,771 24,102
Broken ore on leach pad - long-term - 1,713 - - 1,713
Property, plant and equipment 12,627 12,771 4,977 - 30,375
Deferred stripping costs 16,998 - - - 16,998
Restricted certificate of deposit 1,557 3,538 100 107 5,302
------------------------------------------------------------------------------------
Total assets $ 34,949 $ 29,757 $7,906 $ 5,878 $78,490
====================================================================================
Current liabilities $ 4,847 $ 4,357 $ - $ 1,717 $10,921
Notes payable 1,040 4,207 - - 5,247
Accrued site closure costs 8,679 11,829 - - 20,508
------------------------------------------------------------------------------------
Total liabilities $ 14,566 $ 20,393 $ - $ 1,717 $36,676
====================================================================================
================================================================================
F-31
17. SEGMENTED INFORMATION (CONTINUED)
Amounts for the years ended December 31, 2003, 2002 and 2001 are as
follows:
YEAR ENDED DECEMBER 31, 2003
-----------------------------------------------------
Montana Florida Black Corporate
Tunnels Canyon Fox and Other Total
--------- --------- -------- ----------- --------
Revenue from sale of minerals $ 30,858 $ 35,983 $ - $ - $66,841
-----------------------------------------------------------------------------------------
Direct operating costs 27,149 28,535 - - 55,684
Depreciation and amortization 1,251 3,731 - 15 4,997
General and administrative - - - 4,651 4,651
Share-based compensation - - - 376 376
Accrued site closure costs
- accretion expense 500 780 - - 1,280
Royalties - 898 - - 898
Exploration and development - - 1,553 564 2,117
-----------------------------------------------------------------------------------------
28,900 33,944 1,553 5,606 70,003
-----------------------------------------------------------------------------------------
Operating income (loss) 1,958 2,039 (1,553) (5,606) (3,162)
Interest income - - - 213 213
Interest expense (152) (339) - (53) (544)
Foreign exchange gain (loss)
and other - - (271) 1,578 1,307
-----------------------------------------------------------------------------------------
Net (loss) income $ 1,806 $ 1,700 $(1,824) $ (3,868) $(2,186)
=========================================================================================
Investing activities
Property, plant and equipment
expenditures $ 4,184 $ 4,489 $ 3,937 $ 531 $13,141
Deferred stripping expenditures 8,734 - - - 8,734
================================================================================
F-32
17. SEGMENTED INFORMATION (CONTINUED)
Year ended December 31, 2002
----------------------------------------------------
Montana Florida Black Corporate
Tunnels Canyon Fox and Other Total
--------- --------- ------- ----------- --------
Revenue from sale of minerals $ - $ 20,410 $ - $ - $20,410
----------------------------------------------------------------------------------------
Direct operating costs - 15,696 - 30 15,726
Depreciation and amortization - 3,488 - - 3,488
General and administrative - - - 2,286 2,286
Share-based compensation - - - 615 615
Accrued site closure costs
- accretion expense 300 471 - - 771
Royalties - 508 - - 508
Exploration and development 114 - - 337 451
----------------------------------------------------------------------------------------
414 20,163 - 3,268 23,845
----------------------------------------------------------------------------------------
Operating income (loss) (414) 247 - (3,268) (3,435)
Interest income 29 - - 47 76
Interest expense (260) (463) - (268) (991)
Foreign exchange gain (loss)
and other 236 621 (99) 541 1,299
----------------------------------------------------------------------------------------
Net (loss) income $ (409) $ 405 $ (99) $ (2,948) $(3,051)
========================================================================================
Investing activities
Property, plant and equipment
expenditures $ 1,967 $ 2,515 $4,977 $ - $ 9,459
Deferred stripping expenditures 12,129 - - - 12,129
For the year ended December 31, 2001, all activity was in the Corporate and
Other segment.
================================================================================
F-33
18. DIFFERENCES BETWEEN CANADIAN AND U.S. GAAP
The Company prepares its consolidated financial statements in accordance
with Canadian GAAP. The following adjustments and/or additional disclosures
would be required in order to present the financial statements in
accordance with U.S. GAAP and with practices prescribed by the United
States Securities and Exchange Commission for the years ended December 31,
2003, 2002 and 2001.
Material variances between financial statement items under Canadian GAAP
and the amounts determined under U.S. GAAP are as follows:
CONSOLIDATED BALANCE SHEETS AS AT DECEMBER 31, 2003 AND 2002
Property, Deferred
Plant and Stripping Accounts Other Share Contributed
Equipment Costs Payable Liabilities Capital Surplus Deficit
----------- ----------- ---------- ------------ --------- ------------ ---------
As at December 31, 2003,
Canadian GAAP $ 38,519 $ 24,033 $ 5,848 $ - $120,624 $ 7,172 $(46,137)
Convertible debenture (b) - - - - - 20,675 (20,675)
Share-based
compensation (c) - - - - - 4,343 (4,343)
Gold hedge loss (d) - - (551) 5,911 - - (5,360)
Impairment of property,
plant and equipment,
capitalized deferred
stripping costs and
change in depreciation
and amortization (e) (5,543) (8,740) - - - - (14,283)
Flow-through common
shares (f) - - - - (238) - 238
Black Fox development
costs (g) (3,643) - - - - - (3,643)
-----------------------------------------------------------------------------------------------------------------
As at December 31, 2003,
U.S. GAAP $ 29,333 $ 15,293 $ 5,297 $ 5,911 $120,386 $ 32,190 $(94,203)
=================================================================================================================
================================================================================
F-34
18. DIFFERENCES BETWEEN CANADIAN AND U.S. GAAP (CONTINUED)
Property, Deferred
Restricted Plant and Stripping Other Share Contributed
Cash Cash Equipment Costs Liabilities Capital Surplus Deficit
------------ ---------- ----------- -------- ------------ ------------- -------- ---------
As at December 31, 2002,
Canadian GAAP $ 8,426 $ - $ 30,375 $16,998 $ - $ 72,206 $ 7,023 $(43,951)
Convertible debenture (b) - - - - - - 20,675 (20,675)
Share-based compensation (c) - - - - - - 2,604 (2,604)
Gold hedge loss (d) - - - - 2,265 - - (2,265)
Impairment of property,
plant and equipment,
capitalized deferred
stripping costs and change
in depreciation and
amortization (e) - - (5,456) (8,828) - - - (14,284)
Flow-through common
shares (f) (2,845) 2,845 - - 238 (238) - -
--------------------------------------------------------------------------------------------------------------------------------
As at December 31, 2002,
U.S. GAAP $ 5,581 $ 2,845 $ 24,919 $ 8,170 $ 2,503 $ 71,968 $ 30,302 $(83,779)
================================================================================================================================
Under U.S. GAAP, the net loss and net loss per share would be adjusted as
follows:
2003 2002 2001
--------- --------- -------
Net loss for the year ended December 31,
based on Canadian GAAP $ (2,186) $ (3,051) $ (454)
Marketable securities (a) - - (54)
Convertible debenture (b) - (20,675) -
Share-based compensation (c) (1,739) (2,604) -
Gold hedge loss (d) (3,095) (2,265) -
Impairment of property, plant and equipment and
change in depreciation (e) (87) (5,456) -
Impairment of capitalized deferred stripping costs
and change in amortization (e) 88 (8,828) -
Flow-through shares premium paid in excess
of market value (f) 238 - -
Black Fox development costs (g) (3,643) - -
----------------------------------------------------------------------------------
Net loss for the year based on U.S. GAAP $(10,424) $(42,879) $ (508)
==================================================================================
Comprehensive loss $(10,424) $(42,879) $ (508)
==================================================================================
Net loss per share - U.S. GAAP - basic and diluted $ (0.19) $ (2.22) $(0.61)
==================================================================================
================================================================================
F-35
18. DIFFERENCES BETWEEN CANADIAN AND U.S. GAAP (CONTINUED)
(a) Marketable securities
In accordance with Canadian GAAP, the Company's marketable securities
are carried at the lower of cost and quoted market values. Under U.S.
GAAP, these investments would be considered as trading securities and
marked to market, with unrealized gains and losses included in the
Consolidated Statement of Operations. The related securities were sold
in fiscal 2001.
(b) Convertible debenture
Under Canadian GAAP, the convertible debenture was recorded as an
equity instrument on issuance in March 2002. Under U.S. GAAP, on
issuance, the convertible debenture would have been recorded as a
liability and reclassified to equity only upon conversion. Further,
under U.S. GAAP, the beneficial conversion feature represented by the
excess of the fair value of the shares and warrants issuable on
conversion of the debenture, measured on the commitment date, over the
amount of the proceeds to be allocated to the common shares and
warrants upon conversion, would be allocated to contributed surplus.
This results in a discount on the debenture that is recognized as
additional interest expense over the term of the debenture and any
unamortized balance is expensed immediately upon conversion of the
debenture. Accordingly, for U.S. GAAP purposes, the Company has
recognized a beneficial conversion feature and debenture issuance
costs of $20,675 in the year ended December 31, 2002. Canadian GAAP
does not require the recognition of any beneficial conversion feature.
(c) Share-based compensation
In accordance with Canadian GAAP, the Company has not recorded any
expense with respect to stock options granted to employees. Under U.S.
GAAP, the Company has elected to continue to measure its employee
stock-based awards using the intrinsic value method prescribed by
Accounting Principles Board Opinion No. 25 "Accounting for Stock
Issued to Employees" ("APB No. 25").
Beginning in the first quarter of 2004, the Company will expense stock
options in the financial statements as a component of compensation
expense in accordance with SFAS 148 "Accounting for Stock-Based
Compensation - Transition and Disclosure." This method of accounting
will be similar to the method under Canadian GAAP as disclosed in Note
2 (p) and, as such, no difference will arise.
In fiscal 2003, an expense of $1,739 has been recorded under APB No.
25 with respect to the intrinsic value of stock options granted in the
year and in fiscal 2002, an expense of $2,604 has been recorded under
APB No. 25. In addition, under APB No. 25, the performance shares
granted during 2002 are accounted for as variable awards until the
performance targets are met.
================================================================================
F-36
18. DIFFERENCES BETWEEN CANADIAN AND U.S. GAAP (CONTINUED)
(d) Gold hedge loss
Under Canadian GAAP, gains or losses on spot deferred forward
contracts are recognized as an adjustment of revenue in the period
when the originally designated production is sold. Under U.S. GAAP,
SFAS 133 requires that for hedge accounting to be achieved, a company
must provide detailed documentation and must specifically designate
the effectiveness of a hedge. Furthermore, U.S. GAAP also requires
fair value accounting to be used for all types of derivatives. As the
Company has chosen not to meet these requirements for U.S. GAAP
purposes, a charge of $2,265 has been recorded in the fourth quarter
of fiscal 2002 to reflect the fair value loss on the contracts
outstanding at December 31, 2002, and an additional loss of $3,095 has
been recorded in the year ended December 31, 2003 to reflect the fair
value loss on the contracts between December 31, 2002 and 2003. The
gold hedge loss on outstanding hedge contracts amounted to $5,911 and
$2,265 at December 31, 2003 and 2002, respectively.
(e) Impairment of property, plant and equipment and capitalized deferred
stripping costs
Under Canadian GAAP, write-downs for impairment of property, plant and
equipment and capitalized deferred stripping costs are determined
using current proven and probable reserves and mineral resources
expected to be converted into mineral reserves. Under U.S. GAAP,
write-downs are determined using current proven and probable reserves.
In addition, under U.S. GAAP, future cash flows from impaired
properties are discounted. Accordingly, for U.S. GAAP purposes, a
reduction in property, plant and equipment and capitalized deferred
stripping costs of $14,284 has been recorded as an impairment. This
write-down has resulted in an adjustment of depreciation and
amortization expense for U.S. GAAP purposes, upon recommencement of
commercial production at the Montana Tunnels Mine in April 2003, of
$14,283 at December 31, 2003.
(f) Flow-through common shares
Under Canadian income tax legislation, a company is permitted to issue
shares whereby the company agrees to incur qualifying expenditures and
renounce the related income tax deductions to the investors. The
Company has accounted for the issue of flow-through shares using the
deferral method in accordance with Canadian GAAP. At the time of
issue, the funds received are recorded as share capital. For U.S.
GAAP, the premium paid in excess of the market value of $238 is
credited to other liabilities and included in income as the qualifying
expenditures are made.
================================================================================
F-37
18. DIFFERENCES BETWEEN CANADIAN AND U.S. GAAP (CONTINUED)
(f) Flow-through common shares (continued)
Also, notwithstanding whether there is a specific requirement to
segregate the funds, the flow-through funds which are unexpended at
the consolidated balance sheet dates are considered to be restricted
and are not considered to be cash or cash equivalents under U.S. GAAP.
As at December 31, 2003, unexpended flow-through funds were $Nil
(December 31, 2002 - $2,845).
(g) Black Fox Project
Under Canadian GAAP, mining development costs at the Black Fox Project
have been capitalized. Under U.S. GAAP, these expenditures are
expensed as incurred. Accordingly, for U.S. GAAP purposes, a reduction
in property, plant and equipment of $3,643 has been recorded as at
December 31, 2003.
(h) Statement of Cash Flows
Under Canadian GAAP, expenditures incurred for deferred stripping
costs are included in cash flows from investing activities in the
consolidated statement of cash flows. Under U.S. GAAP, these
expenditures are included in cash flows from operating activities.
Accordingly, under U.S. GAAP, the consolidated statement of cash flows
for the year ended December 31, 2003 and 2002 would reflect a
reduction in cash utilized in investing activities of $8,734 and
$12,129, respectively, and a corresponding increase in cash utilized
in operating activities.
(i) Comprehensive income
Statement of Financial Accounting Standards ("SFAS") No. 130,
"Reporting Comprehensive Income" ("SFAS 130") establishes standards
for the reporting and display of comprehensive income and its
components in a full set of general purpose financial statements. SFAS
130 requires that all items that are required to be recognized under
accounting standards as components of comprehensive income be reported
in a financial statement. For the Company, the only component of
comprehensive loss is the net loss for the period.
================================================================================
F-38
18. DIFFERENCES BETWEEN CANADIAN AND U.S. GAAP (CONTINUED)
(j) Supplemental information for U.S. GAAP purposes on stock-based
compensation
Pro forma information regarding net loss and net loss per share is
required by SFAS No. 123 "Accounting for Stock-Based Compensation" and
has been determined as if the Company had accounted for its employees
stock options under the fair value method. The fair value for these
options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted average assumptions:
2003 2002 2001
------ ------ -----
Risk free interest rate 3.534% 3.550% 0%
Dividend yield 0% 0% 0%
Volatility 75% 92% 0%
Expected life in years 5.0 2.0 -
The weighted average fair value per share of options granted during
2003, 2002 and 2001 was $1.40, $1.58 and $Nil, respectively, and the
expense is amortized over the vesting period.
The following table presents the net loss and net loss per share,
under U.S. GAAP, as if the Company had recorded compensation expense
under SFAS No. 123 with the estimated fair value of the options being
amortized to expense over the options' vesting period.
2003 2002 2001
--------- --------- -------
Net loss for the year based on U.S. GAAP $(10,424) $(42,879) $ (508)
Stock option expense as reported 2,115 3,219 -
Pro forma stock option expense (4,247) (2,595) (1)
-----------------------------------------------------------------------
Net loss - pro forma $(12,556) $(42,255) $ (509)
=======================================================================
Net loss per share, basic and diluted -
based on U.S. GAAP $ (0.19) $ (2.22) $(0.61)
Stock option expense as reported 0.04 0.17 -
Pro forma stock option expense (0.08) (0.14) -
-----------------------------------------------------------------------
Net loss per share, basic and
and diluted - pro forma $ (0.23) $ (2.19) $(0.61)
=======================================================================
================================================================================
F-39
18. DIFFERENCES BETWEEN CANADIAN AND U.S. GAAP (CONTINUED)
(k) Recently issued accounting pronouncements
In November 2002, the Financial Accounting Standards Board ("FASB")
issued FASB Interpretation No. 45 ("FIN 45"), "Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others". FIN 45 requires that upon
issuance of a guarantee, a guarantor must recognize a liability for
the fair value of an obligation assumed under a guarantee. FIN 45 also
requires additional disclosures by a guarantor in its interim and
annual financial statements about the obligations associated with
guarantees issued. The disclosure requirements of FIN 45 were
effective for financial statements for period ending after December
15, 2002. The Company adopted the disclosure requirements of FIN 45 in
fiscal 2002. The initial recognition and measurement provisions of FIN
45 are effective for any guarantees that are issued or modified after
December 31, 2002. The Company adopted the recognition and measurement
requirements of FIN 45 in fiscal 2003, which had no material impact on
its results of operations, financial position or liquidity.
In January 2003, the FASB issued Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities", an Interpretation of
ARB No. 51. FIN 46 requires certain variable interest entities to be
consolidated by the primary beneficiary of the entity if the equity
investors in the entity do not have the characteristics of a
controlling financial interest or do not have sufficient equity at
risk for the entity to finance its activities without additional
subordinated financial support from other parties. FIN 46 is effective
for all new variable interest entities created or acquired after
January 31, 2003. For variable interest entities created or acquired
prior to February 1, 2003, the provisions of FIN 46 must be applied
for the first interim or annual period beginning after December 15,
2003 however, earlier adoption is permitted. The Company adopted FIN
46 on July 1, 2003. Adoption of this standard did not have a material
effect on the Company's results of operations, financial position or
disclosures.
In April 2003, SFAS No. 149, "Amendment of Statement 133 on Derivative
Instruments and Hedging Activities," was issued. In general, this
statement amends and clarifies accounting for derivative instruments,
including certain derivative instruments embedded in other contracts,
and for hedging activities under SFAS No. 133. The Company adopted
SFAS No. 149 on July 1, 2003. Adoption of this standard did not have a
material impact on the Company's financial position or disclosures.
In May 2003, SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity", was
issued. In general this statement requires that those instruments be
classified as liabilities rather than equity on the balance sheet. The
Company adopted this standard on July 1, 2003. Adoption of this
standard did not have a material impact on the Company's financial
position or disclosures.
================================================================================
F-40
18. DIFFERENCES BETWEEN CANADIAN AND U.S. GAAP (CONTINUED)
(k) Recently issued accounting pronouncements (continued)
CICA Handbook Sections 3063 - "Impairment of Long Lived Assets" and
3475 - "Disposal of Long Lived Assets and Discontinued Operations"
were amended to harmonize with SFAS 144. The standards will require an
impairment loss to be recognized when the carrying amount of an asset
held for use exceeds the sum of the undiscounted cash flows. The
impairment loss would be measured as the amount by which the carrying
amount exceeds the fair value of the asset. An asset held for sale is
to be measured at the lower of carrying cost or fair value less cost
to sell. In addition, this guidance broadens the concept of a
discontinued operation and eliminates the ability to accrue operating
losses expected between the measurement date and the disposal date.
Section 3063 is effective for fiscal years beginning on or after April
1, 2003 and Section 3475 applies to disposal activities initiated by
an enterprise's commitment to a plan on or after May 1, 2003. The
Company will adopt this new standard in its 2004 financial statements.
CICA Handbook Section 3475 - "Disposal of Long Lived Assets and
Discontinued Operations" establishes standards for the recognition,
measurement, presentation and disclosure of the disposal of long lived
assets. It also establishes standards for the presentation and
disclosure of discontinued operations, whether or not they include
long-lived assets. The new recommendations apply to disposal
activities initiated by an enterprise's commitment to a plan on or
after May 1, 2003. As at December 31, 2003, the Company does not have
any long lived assets subject to disposal in accordance with these new
standards.
The CICA issued Accounting Guideline 13, AcG-13, "Hedging
Relationships", which requires that in order to apply hedge
accounting, all hedging relationships must be identified, designated,
documented and effective. Where hedging relationships cannot meet
these requirements, hedge accounting must be discontinued. AcG-13 is
applicable for fiscal years beginning on or after July 1, 2003. The
provisions of this recently issued accounting pronouncement are
currently being assessed by management.
The CICA issued Accounting Guideline 14, AcG-14, "Disclosures of
Guarantees" which elaborates on the disclosures to be made by a
guarantor about its obligations under certain guarantees issued. The
Company adopted the provisions of this guideline in fiscal 2003, which
had no material impact on its results of operations, financial
position or liquidity.
The CICA issued Accounting Guideline 15, "Consolidation of Variable
Interest Entities", which addresses when a company should include in
its financial statements the assets, liabilities and activities of
another entity. Management does not expect the adoption of the new
guideline to have a material impact on its financial statements.
================================================================================
F-41
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
The following exhibits are being filed or furnished with this Report:
Exhibit
Number Description of Exhibit
-------- ------------------------------------------------------------------
31.1 Certification of Chief Executive Officer Pursuant to Rules
13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934,
as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
31.2 Certification of Chief Financial Officer Pursuant to Rules
13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934,
as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
32.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
APOLLO GOLD CORPORATION
/s/ R. DAVID RUSSELL
---------------------------------
R. David Russell, President and
Chief Executive Officer
July 25, 2004
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, 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/ R. DAVID RUSSELL President and July 25, 2004
----------------------- Chief Executive Officer and
R. David Russell a Director
/s/ G.W. THOMPSON Chairman of the Board of July 25, 2004
----------------------- Directors and a Director
G.W. Thompson
/s/ R. LLEE CHAPMAN Vice President, Chief July 25, 2004
----------------------- Financial Officer, Treasurer
R. Llee Chapman & Controller
/s/ MICHAEL HOBART Assistant Secretary and July 25, 2004
----------------------- a Director
Michael Hobart
/s/ CHARLES E. STOTT Director July 25, 2004
-----------------------
Charles E. Stott
/s/ ROBERT A. WATTS Director July 25, 2004
-----------------------
Robert A. Watts
Director July __, 2004
-----------------------
W.S. Vaughan
Director July __, 2004
-----------------------
Gerald J. Schissler