FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 For the
three month period ended: September 30, 2000
Or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 0-27791
APOLO GOLD, INC.
-------------------
(Exact name of registrant as specified in its charter)
NEVADA applied for
--------- -------------
(State of incorporation) (IRS Employer ID No.)
1458 - 409 Granville Street
Vancouver, BC V6C 1T2
------------------------------
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code: (604) 687-4150
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 No X
As of November 13, 2000, the Registrant had 17,904,580 Shares of Common Stock
outstanding.
Transitional Small Business Disclosure Format (check one); Yes No X
<PAGE>
Part I Financial Information
APOLO GOLD, INC.
(A Development Stage Company)
September 30, 2000
TABLE OF CONTENTS
ACCOUNTANT'S REVIEW REPORT 1
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets 2
Consolidated Statements of Operations 3
Consolidated Statement of Stockholders' Equity 4
Consolidated Statements of Cash Flows 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6
<PAGE>
Williams & Webster, P.C.
Certified Public Accountants & Business Consultants
Bank of America Financial Center
601 W. Riverside, Suite 1940
Spokane, WA 99201-0611
509-838-5111 Fax: 509-838-5114 Email: [email protected]
Board of Directors
Apolo Gold, Inc.
Vancouver, B.C.
CANADA
Independent Accountant's Review Report
We have reviewed the accompanying consolidated balance sheet of Apolo Gold, Inc.
as of September 30, 2000 and the related consolidated statements of operations,
stockholders' equity and cash flows for the three months ended September 30,
2000. These financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit in accordance with
generally accepted auditing standards, the objective of which is the expression
of an opinion regarding the financial statements taken as a whole. Accordingly,
we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles.
The financial statements for the year ended June 30, 2000 were audited by us and
we expressed an unqualified opinion on them in our report dated August 4, 2000,
but we have not performed any auditing procedures since that date.
As discussed in Note 2, the Company has been in the development stage since its
inception on March 18, 1997. Realization of a major portion of the assets is
dependent upon the Company's ability to meet its future financing requirements,
and the success of future operations. These factors raise substantial doubt
about the Company's ability to continue as a going concern. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/ Williams & Webster, P.S.
----------------------------
Williams & Webster, P.S.
Certified Public Accountants
Spokane, WA
November 10, 2000
<PAGE>
APOLO GOLD, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, June 30,
2000 2000
(Unaudited)
------------- -------------
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash $ 8,468 $ 6,485
Accounts receivable - 4,880
Inventory 47,904 -
Deposit - -
------------- -------------
------------- -------------
Total Current Assets 56,372 11,365
------------- -------------
PROPERTY AND EQUIPMENT
Equipment 359,010 350,658
Less accumulated depreciation (79,371) (61,694)
------------- -------------
------------- -------------
Total Property and Equipment 279,639 288,964
------------- -------------
MINERAL PROPERTY 2,996,189 2,999,500
------------- -------------
TOTAL ASSETS $ 3,332,200 $ 3,299,829
============= =============
LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 35,935 $ 57,454
Loans payable 5,000 5,000
Accrued interest 193,979 193,979
Shareholder advances 322,848 154,659
Mineral property contract payable 60,000 60,000
------------- -------------
------------- -------------
Total Current Liabilities 617,762 471,092
------------- -------------
LONG-TERM LIABILITIES
Mineral property contract payable, net of current portion 2,830,000 2,845,000
------------- -------------
TOTAL LIABILITIES 3,447,762 3,316,092
------------- -------------
COMMITMENTS AND CONTINGENCIES - -
------------- -------------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, 200,000,000 shares authorized, $0.001
par value; 17,573,580 shares issued and outstanding 17,573 17,573
Additional paid-in-capital 1,160,023 1,160,023
Stock subscriptions receivable - -
Accumulated deficit (1,293,158) (1,193,859)
------------- -------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (115,562) (16,263)
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 3,332,200 $ 3,299,829
============= =============
</TABLE>
See accompanying notes and accountant's review report.
-2-
<PAGE>
APOLO GOLD, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
September 30, 2000 September 30, 1999
(Unaudited) (Unaudited)
---------------- ----------------
<S> <C> <C>
REVENUES $ - -
Direct costs - -
Indirect costs - -
---------------- ----------------
---------------- ----------------
TOTAL COST OF REVENUES - -
---------------- ----------------
GROSS PROFIT (LOSS) - -
---------------- ----------------
EXPENSES
Mineral property exploration expense - 27,682
Consulting and professional fees 8,862 24,612
General and administrative expenses 90,437 10,113
---------------- ----------------
TOTAL EXPENSES 99,299 62,407
---------------- ----------------
LOSS FROM OPERATIONS (99,299) (62,407)
OTHER EXPENSES
Interest Expense - -
---------------- ----------------
LOSS BEFORE INCOME TAXES (99,299) (62,407)
INCOME TAXES - -
---------------- ----------------
NET LOSS $ (99,299) $ (62,407)
================ ================
NET LOSS PER COMMON SHARE,
BASIC AND DILUTED $ (0.006) $ (0.004)
================ ================
WEIGHTED AVERAGE NUMBER OF
COMMON STOCK SHARES OUTSTANDING,
BASIC AND DILUTED 17,573,580 16,542,250
================ ================
</TABLE>
See accompanying notes and accountant's review report.
-3-
<PAGE>
<TABLE>
<CAPTION>
Common Stock Additional Stock Total
Number Paid-In Subscriptions Accumulated Stockholders'
of Shares Amount Capital Receivable Deficit Equity
----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1999 12,942,250 $ 12,942 $ 796,489 $ (250,000) $ (740,081) $ (180,650)
Issuance of shares at $0.01
for cash 3,520,000 3,520 31,680 - - 35,200
Issuance of shares at $0.35
for equipment 120,252 120 42,068 - - 42,188
Issuance of shares at $0.35
for cash 499,363 499 174,178 - - 174,677
Issuance of shares an average of $0.24 per share
for services and debt 491,715 492 115,608 - - 116,100
Payment of stock subscriptions receivable - - - 250,000 - 250,000
Net loss for the year ended June 30, 2000 - - - - (453,778) (453,778)
---------- ------- ---------- -------- ----------- ---------
Balance, June 30, 2000 17,573,580 17,573 1,160,023 - (1,193,859) (16,263)
Net loss for the three months ended
September 30, 2000 (unaudited) - - - - (99,299) (99,299)
---------- ---------- ----------- ---------- -------------- -------------
17,573,580 $ 17,573 $ 1,160,023 $ - $ (1,293,158) $ (115,562)
========== ========== =========== ========== ============== =============
</TABLE>
See accompanying notes and accountant's review report.
-4-
<PAGE>
<TABLE>
<CAPTION>
Three Months Three Months
Ending Ending
September 30, 2000 September 30, 1999
(Unaudited) (Unaudited)
--------------------- -----------------------
Cash flows from operating activities:
<S> <C> <C>
Net loss $ (99,299) $ (62,407)
Adjustments to reconcile net loss
to net cash used by operating activities:
Depreciation 17,677 -
Depletion 3,311 -
Decrease (increase) in:
Accounts receivable 4,880 -
Inventory (47,904) -
Accounts payable (21,519) -
--------------------- ---------------------
Net cash (used) by operating activities (142,854) (62,407)
--------------------- ---------------------
Cash flows from investing activities:
Purchase of mineral property (15,000) -
Purchase of equipment (8,352) (85,747)
--------------------- ---------------------
--------------------- ---------------------
Net cash (used) by investing activities (23,352) (85,747)
--------------------- ---------------------
Cash flows from financing activities:
Net proceeds from shareholder loans 168,189 -
Proceeds from collection of subscriptions receivable - 250,000
Proceeds from sale of common stock - 36,000
--------------------- ---------------------
--------------------- ---------------------
Net cash provided by financing activities 168,189 286,000
--------------------- ---------------------
--------------------- ---------------------
Increase (Decrease) in cash 1,983 137,846
Cash, beginning of year 6,485 155,937
--------------------- ---------------------
Cash, end of peroid $ 8,468 $ 293,783
===================== =====================
Supplemental disclosures:
Interest paid $ - $ -
===================== =====================
===================== =====================
Income taxes paid $ - $ -
===================== =====================
</TABLE>
See accompanying notes and accountant's review report.
-5-
<PAGE>
APOLO GOLD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2000
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Apolo Gold, Inc. (the Company) was incorporated in March of 1997 under the laws
of the State of Nevada primarily for the purpose of acquiring and developing
mineral properties. The Company conducts operations primarily from its offices
in Vancouver, British Columbia, Canada. The Company has formed a subsidiary
corporation in Venezuela. Although this entity has had no financial
transactions, the Company used this subsidiary to acquire a Venezuelan mining
property.
In November 1997, the Company incorporated Apologold C.A. (a Venezuelan
company). The Company owns 99 shares of the 100 shares issued by Apologold C.A.
The remaining share is owned by a citizen of Venezuela.
Apologold C.A. began production in the State of Bolivar, Venezuela in November
1999 using an open pit mining process. Prior to this the Company was development
stage.
The Company's year-end is June 30.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Apolo Gold, Inc. is presented
to assist in understanding the Company's financial statements. The financial
statements and notes are representations of the Company's management, which is
responsible for their integrity and objectivity. These accounting policies
conform to generally accepted accounting principles and have been consistently
applied in the preparation of the financial statements.
Accounting Method
-----------------
The Company's financial statements are prepared using the accrual method of
accounting.
Basic and Diluted Loss Per Share
--------------------------------
Loss per share was computed by dividing the net loss by the weighted average
number of shares outstanding during the period. The weighted average number of
shares was calculated by taking the number of shares outstanding and weighting
them by the amount of time that they were outstanding. Basic and diluted loss
per share was the same, as there were no common stock equivalents outstanding.
Estimates
---------
The preparation of financial statements in conformity with generally accepted
accounting principles requires 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 financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
-6-
<PAGE>
APOLO GOLD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2000
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Development Stage in Prior Years
--------------------------------
The Company was formed in March 1997, and was in the development stage through
June 30, 1999. The year 2000 is the first year during which it is considered an
operating company.
Mineral Exploration and Development Costs
-----------------------------------------
All exploration expenditures are expensed as incurred. Significant property
acquisition payments for active exploration properties are capitalized. If no
minable ore body is discovered, previously capitalized costs are expensed in the
period the property is abandoned. Expenditures to develop new mines, to define
further mineralization in existing ore bodies, and to expand the capacity of
operating mines, are capitalized and amortized on a units of production basis
over proven and probable reserves.
Should a property be abandoned, its capitalized costs are charged to operations.
The Company charges to operations the allocable portion of capitalized costs
attributable to properties sold. Capitalized costs are allocated to properties
sold based on the proportion of claims sold to the claims remaining within the
project area.
Cash and Cash Equivalents
-------------------------
For purposes of the statement of cash flows, the Company considers all
short-term debt securities purchased with a maturity of three months or less to
be cash equivalents.
The Venezuelan government does not require foreign entities to maintain cash
reserves in Venezuela.
Foreign Currency Translation
----------------------------
Assets and liabilities of the Company's foreign operations are translated into
U.S. dollars at the period-end exchange rates, and revenue and expenses are
translated at the average exchange rates during the period. Exchange differences
arising on translation are disclosed as a separate component of shareholders'
equity. Realized gains and losses from foreign currency transactions are
reflected in the results of operations.
Impaired Asset Policy
---------------------
The Company reviews its long-lived assets quarterly to determine if any events
or changes in circumstances have transpired which indicate that the carrying
value of its assets may not be recoverable. At June 30, 2000, the Company has
written off amounts expended for its Panama operations (Notes 3 and 8). At
September 30, 2000 the Company has determined that there was no further
impairment of long-lived assets.
Provision for Taxes
-------------------
At September 30, 2000, the Company has a net operating loss of approximately
$1,200,000, which may be offset against future taxable income through 2019. No
provisions for taxes or tax benefit from net operating loss carryforwards has
been reported in the financial statements as it is currently unknown if the
carryforwards will expire unused.
-7-
<PAGE>
APOLO GOLD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2000
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Derivative Instruments
----------------------
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This standard establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in the
balance sheet and measures those instruments at fair value. At September 30,
2000, the Company has not engaged in any transactions that would be considered
derivative instruments or hedging activities.
Reclamation Costs
-----------------
Management believes reclamation costs at its mining site in State of Bolvar,
Venezuela will be minimal. The reclamation process is expected to be completed
by the Apologold C.A. work crew. Venezuela requires that a bond be posted prior
to depletion of the mineral reserves. The Company estimates the bond to
approximate $12,000 per year and therefore will begin to accrue that amount for
reclamation costs after one year of full production. At September 30, 2000, this
bond has not been posted.
Compensated Absences
--------------------
Employees of the Company are entitled to paid vacation, paid sick days and
personal days off depending on job classification, length of service, and other
factors. The Company's policy is to recognize the cost of compensated absences
when actually paid to employees. If the amount were estimatible, it would not be
currently recognized as the amount would be deemed immaterial.
Fair Value of Financial Instruments
-----------------------------------
The carrying amounts for cash, marketable securities, accounts receivable,
accounts payable, notes payable and accrued liabilities approximate their fair
value.
Concentration of Risk
---------------------
The Company maintains its cash accounts in primarily one commercial bank in
Vancouver, British Columbia, Canada. The Company's cash account, which is not
insured, is a business checking account maintained in United States dollars.
Revenue Recognition
-------------------
Sales are recorded when minerals are delivered to the purchaser.
Interim Financial Statements
----------------------------
The interim financial statements for the period ended September 30, 2000,
included herein have not been audited, at the request of the Company. They do
reflect all adjustments, which are, in the opinion of management, necessary to
present fairly the results of operations for the period. All such adjustments
are normal recurring adjustments. The results of operations for the period
presented is not necessarily indicative of the results to be expected for the
full fiscal year.
-8-
<PAGE>
APOLO GOLD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2000
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Inventory
---------
Inventory consists of raw ore and is stated at the cost of extraction.
Reclassifications
-----------------
Certain amounts from prior periods have been reclassified to conform with the
current period presentation. This reclassification has resulted in no changes to
the Company's accumulated deficit or net losses presented.
NOTE 3 - MINERAL PROPERTIES
Venezuela
---------
In May 1999, the Company entered into an agreement through its subsidiary,
Aplogold C.A., to acquire a mine in Venezuela. (See Note 8). Under the terms of
the agreement, the Company acquired control over all rights for the exploitation
of diamonds and gold in a mining concession called Codsa 13, which is located in
the jurisdiction of Gran Sabana Autonomous Municipality, State of Bolivar,
Venezuela.
The mining property is being depleted using the units of production method base
upon proven and probable reserves. The depletion expense for the three months
ended September 30, 2000 is $3,311.
Panama
------
In October 1997, the Company entered into an agreement to purchase a 99%
interest in Golden Cycle of Panama, Inc. (a Panamanian company). Under terms of
the agreement, the Company assumes all profits and expenses for operating Golden
Cycle's mine located at the Conception River Basin, Calovebora Township,
District of Santa Fe, Province of Veraguas, Republic of Panama. Although
expenditures have been made on the property and core samples have been
promising, operations have been abandoned due to nondelivery of the shares of
Golden's stock. The Company is attempting to restore the agreement to its
original terms (Note 8) and all amounts expended for the venture have been
charged to operations as incurred.
Foreign Operations
------------------
The accompanying balance sheet includes $3,416,914 relating to the Company's
assets in Venezuela. Although this country is considered economically stable, it
is always possible that unanticipated events in foreign countries could disrupt
the Company's operations.
Segment Information
-------------------
The Company adopted SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information," in the year ended June 30, 2000. SFAS No. 131
supersedes SFAS No. 14, "Financial Reporting for Segments of a Business
Enterprise," replacing the "industry segment" approach with the "management"
approach. The management approach designates the internal organization that is
used by management for making operating decisions and assessing
-9-
<PAGE>
APOLO GOLD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2000
NOTE 3 - MINERAL PROPERTIES (continued)
performance as the source of the Company's reportable segments. SFAS No. 131
also requires disclosures about products and services, geographic areas and
major customers. The adoption of SFAS No. 131 did not affect the Company's
results of operations or financial position, but did affect the disclosure of
segment information as illustrated in Note 10.
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Major additions and improvements
are capitalized. Minor replacements, maintenance and repairs that do not
increase the useful lives of the assets are expensed as incurred. Depreciation
of property and equipment is being calculated using the straight-line method
over the expected useful lives of the assets. Depreciation expense for the three
months ended September 30, 2000 was $17,677.
NOTE 5 - MINERAL PROPERTY CONTRACT PAYABLE
The contracted purchase price for the Company's Venezuelan mine was $3,500,000,
which consisted of a cash deposit paid of $100,000 and a non-interest bearing
loan in the amount of $3,400,000. The loan, collateralized by the mine, was
recorded at its present value to reflect an effective interest rate of 5.92%.
The loan calls for initial minimum payments of $5,000 per month commencing in
June 2000. The loan matures in 2002. See Note 8.
NOTE 6 - COMMON STOCK
During 1998, services were performed by directors in payment of stock
subscriptions receivable. These services were valued at $54,000. The Company
also issued 1,000,000 shares of common stock for stock subscriptions receivable,
valued at $0.25 per share, which is the fair market value of the shares on the
date of issuance. This amount was fully paid in September 1999.
During 1999, the Company issued 100,000 shares of common stock in exchange for
services. The shares were valued at $0.01 per share, which is the fair market
value of the shares on the date of issuance.
As part of a purchase agreement, the Company issued 50,000 shares of common
stock to Mohammed Youssef Merhi, and 3,500,000 shares of common stock as a
finder's fee to AML Diamond and Gold Exp., Inc. The stock was issued at $0.01
per share.
The Company issued 120,252 shares of common stock for mining equipment valued at
$42,188 and 492,000 shares of common stock for $100,000 in debt and $16,100 in
services. A total of 469,078 shares of common stock was issued for an average
cash price of $0.24 per share.
-10-
<PAGE>
APOLO GOLD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2000
NOTE 6 - COMMON STOCK (continued)
On July 20, 2000, the Company's board of directors approved the Apolo Gold, Inc.
2000 stock option plan. Under this plan, 5,000,000 shares of common stock have
been set aside to be issued to officers, directors and key employees. The
exercise price of the options will be determined at the date of grant.
NOTE 7 - RELATED PARTIES
As of September 30, 2000 and 1999, the Company has received $322,848 and
$154,659 respectively, in cash advances from shareholders. These advances are
noninterest-bearing, uncollateralized and are expected to be repaid in the year
ended June 30, 2001. Subsequent to September 30, 2000, $14,740 was repaid with
the issuance of stock.
The Company leases office facilities in Vancouver, British Columbia. The lease
is classified as a month-to-month tenancy and provides for monthly payments of
$2,228. During the three months ended September 30, 2000, lease payments totaled
$6,684.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
Apologold C.A. (a Venezuelan Company)
-------------------------------------
In May 1999, the Company through Apologold C.A. entered into an agreement to
acquire a mine in Venezuela. The terms of the acquisition are as follows.
1. Contract purchase price of $3,500,000. The Company paid a deposit of
$100,000 to obtain the property and obligated itself to pay $3,400,000 of
non-interest bearing debt. (See Note 5.)
2. As part of the transaction, the Company issued 50,000 shares of its stock
to the seller for $0.01 per share.
3. The seller retains a 10% royalty payment from production as payment for
rent and operational and technical assistance and receives a 10% royalty
payment from production to be applied against the purchase price. The
minimum monthly payments are $5,000 for rent and operational and technical
assistance and $5,000 toward the purchase price. This is in effect until
the purchase price is paid in full.
4. The seller retains a net production royalty of 2.5% after ownership
transfers. (Note 5.)
Equipment Purchase Contract
---------------------------
During the year ended June 30, 2000, the Company entered into an agreement to
purchase equipment located in Venezuela for $100,000 cash plus 50,000 shares of
its common stock valued at $0.01 per share. The terms of payment in regards to
the $100,000 are as follows:
-11-
<PAGE>
APOLO GOLD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2000
NOTE 8 - COMMITMENTS AND CONTINGENCIES - (continued)
Payments of $25,000 were due in November and December 1999 and in March and June
2000. During the year ended June 30, 2000, $57,500 was paid in cash and stock.
At September 30, 2000, $42,500 is in arrears and is expected to be paid in the
last quarter of 2000.
Golden Cycle of Panama, Inc. (a Panamanian Company)
---------------------------------------------------
In October 1997, the Company entered into an agreement to purchase a 99%
interest in Golden Cycle of Panama, Inc. (a Panamanian Company). The agreement
called for a 6% royalty from gold production or minimum payments of $15,000
until May 1998, at which time the minimum payment increased to $20,000 until a
total of $5,000,000 had been paid. In addition, the Company was to make a
payment of approximately $97,000 for payment of Golden's outstanding debts. The
Company made payments as agreed, however, the shares of common stock of Golden
were never delivered. Further development of the mineral properties has been
suspended pending restoration of this agreement to its original standing.
Management does not expect to receive Golden's stock and has charged $629,117 to
operations as incurred for the year ended June 30, 1999. (See Note 3).
Compliance with Environmental Regulations
-----------------------------------------
The Company's mining activities are subject to laws and regulations controlling
not only the exploration and mining of mineral properties, but also the effect
of such activities on the environment. Compliance with such laws and regulations
may necessitate additional capital outlays, affect the economics of a project,
and cause changes or delays in the Company's activities.
NOTE 9 - REPORTING SEGMENTS
As described in Note 2, the Company adopted SFAS No. 131 for 2000. The Company's
operations are classified into two principal reporting segments that provide
different products or services. Separate management of each section is required
because each business unit is subject to different marketing, production, and
technology strategies.
-12-
<PAGE>
APOLO GOLD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2000
NOTE 10 - REPORTING SEGMENTS (continued)
The table below presents information about the Company's reportable segments:
<TABLE>
<CAPTION>
For the Three Months Ending September 30, 2000
----------------------------------------------------------------------------------
ApoloGold, Inc. Apologold C.A Eliminations Consolidated
<S> <C> <C> <C> <C>
External revenue $ - $ - $ - $ -
Intersegment revenue - - - -
Total net revenue $ - $ - $ - $ -
Operating income (loss) $ (1,049) $ (98,250) $ - $ (99,299)
(Options) Corporate expenses ============ ============== ============ ===============
Income (loss) before income taxes $ (99,299)
===============
Depreciation and depletion $ 1,049 $ 19,939 $ - $ 20,988
=========== ============== ============ ==============
Interest expense $ - $ - $ - $ -
=========== ============== ============ ==============
Identifiable assets $ - $ 3,332,200 $ - $ 3,332,200
=========== ============== ============ ==============
General corporate assets $ -
Total assets $ 3,322,200
==============
</TABLE>
Apolo Gold, Inc., the first reportable segment, is a holding for Apologold C.A.,
the operating company. The second reportable segment derives its revenues from
the sale of minerals mined in Venezuela.
The accounting policies for the two reportable segments are the same as those
described in the summary of significant accounting policies. The Company
allocates resources to and evaluates performance of its operating segments based
on operating income.
NOTE 11 - GOING CONCERN
As shown in the financial statements, the Company incurred a net loss of $99,299
for the three months ended September 30, 2000 and has an accumulated deficit of
$1,293,158 since inception.
The Company is actively seeking additional capital and management believes that
properties can ultimately be developed to enable the Company to continue its
operations. However, there are inherent uncertainties in mining operations and
management cannot provide assurances that it will be successful in its
endeavors.
These factors indicate that the Company may be unable to continue in existence.
The financial statements do not include any adjustments related to the
recoverability and classification of recorded assets, or the amounts and
classification of liabilities that might be necessary in the event the Company
cannot continue existence. Management plans to attract additional investment
capital and believes that significant and imminent private placements as well as
income from operations will generate sufficient cash for the Company to operate
for the next few years.
-13-
<PAGE>
NOTE 12 - SUBSEQUENT EVENTS
The Company is continuing efforts to restore a purchase agreement for a 99%
interest in Golden Cycle of Panama, Inc. to its original standing. Management
does not expect to receive Golden's common stock as originally agreed. (See Note
3)
-14-
<PAGE>
ITEM 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
--------
Apolo Gold, Inc. ("Company") was incorporated in March 1997 under the laws of
the State of Nevada for the purpose of financing and operating a gold and
diamond mining concession in Southeastern Venezuela, acquired by the Company's
subsidiary Compania Minera Apologold, C.A. a corporation incorporated under the
laws of Venezuela.
Compania Minera Apologold, C.A. entered into an agreement on May 18, 1999 with
Empresa Proyectos Goldma, C.A. to acquire the alluvial diamond and gold mining
concession called Codsa 13, that is located in Gran Sabana Autonomous
Municipality State of Bolivar, Venezuela for a total consideration of
$3,500,000(2,086,000 Bolivars).
Payments of $140,000 have been made to Sept 30, 2000 on this debt. Since June
2000, the Company has made minimum monthly payments of $10,000 as they prepare
for full production. Once production is underway, payments will be 20% of gross
production or $10,000, whichever is greater. 50% of the payment is to be
credited as payment on the purchase price and the remaining 50% is to be applied
as a rental payment on mining equipment and technical assistance.
Full production commenced in the latter part of October with volumes sufficient
to meet the terms of the agreement with Empresa Proyectos Goldma, C.A.
All payments to the Seller can be made in US dollars, gold and diamonds as
priced in Venezuela and shares in the Company, or any combination thereof, as
agreed by the Seller.
In addition to the foregoing, a further royalty payment of 2.5% of the annual
net profits of the concession is to be paid to the Seller. The royalty is
payable as long as there is production on the property.
A royalty of 4% of production is also payable to the government of Venezuela
Results of Operations
---------------------
The Company commenced production in late September and accordingly, has not
recorded any revenue for the period. At Sept 30, 2000, the Company had deemed
inventory on hand of precious metals of $47,904, being the direct cost of
product produced. This product has yet to be processed and its final value is as
yet undetermined.
Production has increased steadily in October and the Company expects to be fully
operational on a two-shift basis by the end of November 2000.
Expenses to date in the quarter amounted to $48,523 net, after allowance for the
inventory generated.
The Company continues to carefully control its expenses as it moves to full
production. During the period ending September 30, 2000, some directors and some
shareholders advanced approximately $150,000 in loans to the Company. The
Company has sufficient funds on hand to conduct its operations and will continue
to raise required funds through loans and sale of common stock.
<PAGE>
The Company has no employees in its parent company other than officers and uses
consultants where necessary. In the subsidiary company in Venezuela, the Company
employees 10-12 people depending on requirements. This will increase as the
second shift is introduced in late November 2000.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
The Company has 17,573,580 shares outstanding at September 30, 2000 and to date
have raised $1,177,597 by sale of common stock with the proceeds being applied
to the development of its property in Venezuela.
During the quarter, the Company continued to finance its development by way of
loans from some directors and other shareholders of the Company. To date there
are no specific terms of repayment for these loans.
The Company has sufficient cash to finance its operations at this stage of the
site development. It continues to have no liabilities to third parties other
than its directors and officers. The Company will raise additional funds as
required either by way of loans or sale of common stock.
Inflation has not been a factor during the quarter ending September 30, 2000. As
capital expenditures are essentially complete, there does not appear to be any
inflationary pressures on the operation.
<PAGE>
Part II - Other Information
Item 1 - Legal Proceedings: There are no proceedings to report.
Item 2. - Changes in Securities: None
Item 3. - Default Upon Senior Securities: There are no defaults to report.
Item 4. - Submission of Matters to a Vote of Security Holders: None.
Item 5. - Other Information: None
Item 6. - Exhibits and Reports on Form 8-K: none
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
APOLO GOLD, INC.
Dated: November 14, 2000
/S/ROBERT DINNING
-----------------
Robert Dinning, Chief Financial Officer
<PAGE>
