ALASKA APOLLO RESOURCES INC, DEF 14A, 1997-05-23

ALASKA APOLLO RESOURCES INC
DEF 14A, 1997-05-23
CRUDE PETROLEUM & NATURAL GAS

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SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>

ALASKA APOLLO RESOURCES, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)

Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies: .......

(2) Aggregate number of securities to which transaction applies: ..........

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............

(4) Proposed maximum aggregate value of transaction: ......................

(5) Total fee paid: .......................................................

[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid: ...............................................

(2) Form, Schedule or Registration Statement No.: .........................

(3) Filing Party: .........................................................

(4) Date Filed: ...........................................................

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<PAGE> 2

ALASKA APOLLO RESOURCES INC.
131 PROSPEROUS PLACE, SUITE 17-A
LEXINGTON, KENTUCKY 40509-1844

------------------------

PROXY STATEMENT AND INFORMATION CIRCULAR
AS AT MAY 21, 1997
<PAGE> 3

ALASKA APOLLO RESOURCES INC.
131 PROSPEROUS PLACE, SUITE 17-A
LEXINGTON, KENTUCKY 40509-1844

May 21, 1997

To Our Shareholders:

You are cordially invited to attend the 1997 Annual General Meeting of the
Shareholders of Alaska Apollo Resources Inc. to be held at 625 Howe Street,
Suite 700, Vancouver, British Columbia, Canada, on June 25, 1997 at 10:00 a.m.,
Vancouver, British Columbia time.

At the meeting, we will report on the progress of the Company, comment on
matters of interest and respond to your questions. A copy of the Company's 1996
Annual Report to Shareholders has been furnished to shareholders.

Whether or not you plan to attend the meeting, we ask that you indicate the
manner in which you wish your shares to be voted and sign and return your proxy
as promptly as possible in the enclosed envelope so that your vote may be
recorded. You may vote your shares in person if you attend the meeting, even if
you send in your proxy.

We appreciate your continued interest in Alaska Apollo Resources Inc.

Very truly yours,

/s/ WILLIAM S. DAUGHERTY
--------------------------------------
William S. Daugherty
Chairman of the Board and President
<PAGE> 4

ALASKA APOLLO RESOURCES INC.
131 PROSPEROUS PLACE, SUITE 17-A
LEXINGTON, KENTUCKY 40509-1844

------------------------

NOTICE OF ANNUAL GENERAL MEETING OF THE SHAREHOLDERS
TO BE HELD ON JUNE 25, 1997

To the shareholders of Alaska Apollo Resources Inc.:

Notice is hereby given that the 1997 Annual General Meeting of the
Shareholders (the "Meeting") of Alaska Apollo Resources Inc. (the "Company")
will be held at 625 Howe Street, Suite 700, Vancouver, British Columbia, Canada,
on June 25, 1997 at 10:00 a.m., Vancouver, British Columbia time, for the
following purposes:

1. To fix the number of directors of the Board of Directors at three
members.

2. The election of three directors as members of the Board of
Directors.

3. To consider and vote upon the Company's 1997 Stock Option Plan.

4. For the ratification of the Company's independent public
accountants.

5. To receive the report of the Board of Directors.

6. To receive the audited financial statements of the Company for the
year ending December 31, 1996, together with the auditor's report thereon.

7. Such other business as may properly come before the Meeting or any
adjournment or postponement thereof.

Only shareholders of record at the close of business on May 16, 1997 are
entitled to notice of and to vote at the Meeting and any adjournment or
postponement thereof. A list of such shareholders will be available for
inspection for at least 10 days prior to the Meeting during normal business
hours at the offices of the Company.

Shareholders are cordially invited to attend the Meeting in person. Those
who do not plan to attend and who wish their shares voted are requested to sign,
date, and mail promptly the enclosed proxy, for which a return envelope is
provided.

By Order of the Board of Directors.

/s/ WILLIAM S. DAUGHERTY
--------------------------------------
William S. Daugherty
Chairman of the Board and President

Lexington, Kentucky
May 21, 1997
<PAGE> 5

PROXY STATEMENT AND INFORMATION CIRCULAR

This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Alaska Apollo Resources Inc., a British
Columbia corporation (the "Company"), to be voted at the 1997 Annual General
Meeting of Shareholders (the "Meeting") to be held at 625 Howe Street, Suite
700, Vancouver, British Columbia, Canada, on June 25, 1997 at 10:00 a.m.,
Vancouver, British Columbia time, and at any and all adjournments thereof. The
information contained in this Proxy Statement is given as of May 21, 1997,
unless otherwise stated herein.

The 1996 Annual Report to Shareholders, including financial statements for
the year ended December 31, 1996, is enclosed with this Proxy Statement.
Solicitation of proxies by mail is expected to commence on April 17, 1997, and
the cost thereof will be borne by the Company. Advance notice of the Meeting was
published in the Vancouver Province in Vancouver, British Columbia on April 17,
1997. In addition to such solicitation by mail, certain of the directors,
officers and regular employees of the Company may, without extra compensation,
solicit proxies by telephone, telegraph and personal interview. Arrangements
will be made with brokerage houses, custodians, nominees and other fiduciaries
to send proxy materials to their principles, and they will be reimbursed by the
Company for postage and clerical expenses. Unless otherwise specified herein,
all references to dollars shall mean United States dollars.

SHARES REPRESENTED BY PROPERLY EXECUTED PROXIES WILL BE VOTED AS SPECIFIED.
IF NO SPECIFICATIONS HAVE BEEN GIVEN IN A PROXY, THE SHARES REPRESENTED THEREBY
WILL BE VOTED FOR THE FIXING OF THE NUMBER OF DIRECTORS FOR THE ENSUING YEAR AT
THREE (ITEM 1), FOR THE ELECTION OF THE NOMINEES LISTED HEREIN AS DIRECTORS
(ITEM 2), FOR THE APPROVAL OF THE ALASKA APOLLO RESOURCES INC. 1997 STOCK OPTION
PLAN (ITEM 3), FOR THE RATIFICATION OF KRAFT, ROTHMAN, BERGER, GRILL, SCHWARTZ &
COHEN AS INDEPENDENT PUBLIC ACCOUNTANTS FOR 1997 (ITEM 4), and, in the
discretion of the persons named in the proxy, on any other business that may
properly come before the Meeting. A form of proxy will not be valid unless it is
completed and delivered to Pacific Corporate Trust Company, 625 Howe Street,
Suite 830, Vancouver, British Columbia V6C 3B8, Canada, not less than 48 hours
(excluding Saturdays and holidays) before the Meeting at which the person named
therein purports to vote in respect thereof.

THIS SOLICITATION OF PROXIES IS BEING MADE ON BEHALF OF THE MANAGEMENT OF
THE COMPANY. THE INDIVIDUALS NAMED IN THE ACCOMPANYING FORM OF PROXY ARE THE
PRESIDENT AND A DIRECTOR OF THE COMPANY. A SHAREHOLDER WISHING TO APPOINT SOME
OTHER PERSON (WHO NEEDS NOT BE A SHAREHOLDER OF THE COMPANY) TO REPRESENT HIM AT
THE MEETING HAS THE RIGHT TO DO SO, EITHER BY INSERTING SUCH PERSON'S NAME IN
THE BLANK SPACE PROVIDED IN THE FORM OF PROXY OR BY COMPLETING ANOTHER FORM OF
PROXY.

Proxies may be revoked at any time before the commencement of the Meeting
by delivering to the Chairman of the Meeting a written revocation or a duly
executed proxy bearing a later date. The principal executive office and mailing
address of the Company is 131 Prosperous Place, Suite 17-A, Lexington, Kentucky
40509-1844. For a period of at least 10 days prior to the Meeting, a complete
list of shareholders entitled to vote at the Meeting will be available for
inspection by shareholders of record during ordinary business hours for proper
purposes at the Company's principal executive office.

VOTING SECURITIES

Shareholders of record at the close of business on May 16, 1997 (the
"Record Date"), are entitled to notice of and to vote at the Meeting and at any
adjournment thereof. On the Record Date, the authorized capital stock of the
Company consisted of 20,000,000 shares of common stock, without par value per
share (the "Common Stock"), each of which shares is entitled to one vote, of
which there were 9,035,287 shares issued and outstanding, fully paid and
non-assessable. The quorum for the transaction of business at the Meeting
consists of two persons present and being, or representing by proxy,
shareholders holding not less than one-tenth of the outstanding shares of the
Common Stock. If there are not sufficient shares represented in person or by
proxy at the Meeting to constitute a quorum, the Meeting may be postponed or
adjourned in order to permit further solicitations of proxies by the Company.
Proxies given pursuant to this solicitation and not revoked will be voted at any
postponement or adjournment of the Meeting in the manner set forth above.

1
<PAGE> 6

Under the Company Act of British Columbia, the three nominees receiving the
greatest number of votes cast by the holdings of the Common Stock will be
elected as directors (Item 2). There will be no cumulative voting in the
election of directors. A simple majority of the votes cast at the Meeting is
required to approve the fixing of the number of directors for the ensuring year
at three (Item 1), for the approval of the Alaska Apollo Resources Inc. 1997
Stock Option Plan (Item 3), and for the ratification of Kraft, Rothman, Berger,
Grill, Schwartz & Cohen as independent public accountants for 1997 (Item 4).

Under British Columbia law, abstentions are treated as present and entitled
to vote and thus will be counted in determining whether a quorum is present and
will have the effect of a vote against a matter, except the election of
directors as to which they will have no effect. A broker non-vote (i.e., shares
held by brokers or nominees as to which instructions have not been received from
the beneficial owners or persons entitled to vote and the broker or nominee does
not have discretionary power to vote on a particular matter) is counted for
purposes of determining the existence of a quorum and will have no effect on the
outcome of the vote on any of the proposals.

DETERMINATION OF THE NUMBER OF DIRECTORS

Management proposes to fix the number of directors of the Company at three
for the ensuing year.

VOTE REQUIRED

The affirmative vote of a majority of the total number of shares of the
Common Stock present in person or represented by proxy at the Meeting is
required to fix the number of directors of the Company at three for the ensuing
year.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FIXING OF THE NUMBER OF
DIRECTORS FOR THE ENSUING YEAR AT THREE.

ELECTION OF DIRECTORS

The size of the Board of Directors is currently determined at three. It is
intended that the number of directors will be three for the ensuing year.

TERM OF OFFICE

The term of office of each of the current directors expires at the Meeting.
The persons named below will be nominated for election at the Meeting as
management's nominees. Each director elected will hold office until the next
annual general meeting of the shareholders of the Company or until his successor
is elected or appointed, unless his office is earlier vacated in accordance with
the Articles of the Company or the provisions of the Company Act of British
Columbia.

NOMINEES

The following sets forth certain information with respect to the business
experience of each nominee during the past five years and certain other
directorships held by each nominee.

William S. Daugherty, age 42, has been a director since September 1993. Mr.
Daugherty has served as President and Chief Operating Officer of the Company
since September 1993 when he acquired 1,250,000 shares of the Common Stock in
exchange for all of his common stock in Daugherty Petroleum, Inc., a Kentucky
corporation and the Company's wholly-owned subsidiary ("Daugherty Petroleum,
Inc."). Mr. Daugherty has served as President of Daugherty Petroleum, Inc. since
1984. In 1995, Mr. Daugherty was elected as Chairman of the Board of the
Company.

James K. Klyman-Mowczan, age 42, has been a director since May 1992. For
the past five years Mr. Klyman-Mowczan has been a computer software designer and
programmer specializing in applied information technology.

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<PAGE> 7

Charles L. Cotterell, age 72, has been a director since June 1994. Mr.
Cotterell has been involved in the resources industry and has participated in
the natural gas and oil industries in Western Canada and the United States,
particularly in Kentucky. He is a Vice President of Konal Engineering Co., Ltd.,
is a past director of Mariner Mines, Ltd., Nordustrial, Ltd., Goliath Boat Co.,
and Dominion Power Press Equipment Co., Ltd., and the past President of Smith
Press Automation Co., Ltd.

BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD

During fiscal 1996, the Board of Directors held one meeting. The Board of
Directors has established an Audit Committee and Nominating Committee to oversee
specific matters affecting the Company.

COMMITTEES

The Company does not have an Executive Committee. The Company is required
to have an Audit Committee of which the current members are William S.
Daugherty, James K. Klyman-Mowczan and Charles L. Cotterell. The Audit Committee
held one meeting during fiscal 1996. The Audit Committee meets with the
Company's independent accountants to review the Company's accounting policies,
internal controls and other accounting and auditing matters; makes
recommendations to the Board as to the engagement of independent accountants;
and reviews the letter of engagement and statement of fees relating to the scope
of the annual audit and special audit work which may be recommended or required
by the independent accountants.

The Nominating Committee, currently composed of William S. Daugherty and
Charles L. Cotterell, held one meeting during fiscal 1996. The functions
performed by the Nominating Committee include selecting candidates to fill
vacancies on the Board of Directors, reviewing the structure and composition of
the Board, and considering qualifications requisite for continuing Board
service. The Nominating Committee will consider candidates recommended by a
shareholder of the Company. Any such recommendation for the 1998 Annual General
Meeting of Shareholders should be provided to the Corporate Secretary of the
Company by February 25, 1998.

During the fiscal year ended December 31, 1996, each director attended all
meetings of the Company's Board of Directors and respective Committee on which
he served.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Company does not have a Compensation Committee or other Board committee
performing an equivalent function. In establishing compensation levels, the
Board of Directors has endeavored to ensure the compensation programs for the
Company's executive officers were effective in attracting and retaining key
executives responsible for the success of the Company and were administered in
an appropriate fashion in the long-term best interests of the Company and its
shareholders. In that regard, the Board of Directors sought to align total
compensation for the Company's executive officers with the performance of the
Company and the individual performance of each executive officer in assisting
the Company in accomplishing its goals.

All actions of the Board with respect to Mr. Daugherty's compensation are
taken without his involvement. Mr. Daugherty and Charles L. Cotterell, one of
the directors of the Company, participated in deliberations concerning other
officer and key employee base compensation, while bonuses and incentive stock
options are authorized by the action of the entire Board of Directors.

Base Salary

The Board's policy with respect to 1996 base salaries for executive
officers was generally to keep them at appropriate levels in light of what was
customary in the industry. Mr. Daugherty's base compensation has remained
unchanged since September 1993.

3
<PAGE> 8

Stock Options

The Board of Directors believes that to achieve the Company's long-term
growth objectives and to align management and its shareholders' interests, it is
in the best interest of the Company from time to time to grant stock options to
key members of its management and staff. Consequently, on March 7, 1997, the
Board of Directors adopted, subject to the approval of the shareholders of the
Company, a Stock Option Plan under Section 422 of the Internal Revenue Code of
1986, as amended. The Stock Option Plan is administered by a Committee appointed
by the Board of Directors, the members of which are to be "Non-Employee
Directors" as defined in Rule 16b-3 of the Securities Exchange Act of 1934. The
initial members of the Committee are James K. Klyman-Mowczan and Charles L.
Cottrell. The Stock Option Plan provides that 3,000,000 shares of the Common
Stock are to be the subject of stock options, 2,000,000 of which are reserved
for Mr. Daugherty, and the remaining 1,000,000 reserved for other employees of
the Company as may be determined by the Committee.

LEGAL PROCEEDINGS

From time to time, the Company is involved in litigation relating to claims
arising out of its operations in the normal course of its business. The Company
maintains insurance coverage against potential claims in an amount which it
believes to be adequate. The Company believes that it is not presently a party
to any litigation the outcome of which would have a material adverse effect on
its results of operations or financial condition.

EXECUTIVE OFFICERS

The names, ages and current offices of the executive officers of the
Company serving as of the date of this Proxy Statement are set forth below. Also
indicated is the date when each such person commenced serving as an executive
officer of the Company.

<TABLE>
<CAPTION>
NAME AND AGE OFFICE DATE BECAME EXECUTIVE OFFICER
- -------------------------------- ------------------------------------- -----------------------------
<S> <C> <C>
William S. Daugherty (42) Chairman of the Board and President September 1993
D. Michael Wallen (42) Vice President and Assistant March 1997
Secretary
</TABLE>

A description of the business experience during the past several years of
Mr. Wallen is set forth below. Information with respect to Mr. Daugherty is
provided elsewhere. See "Nominees."

D. Michael Wallen joined Daugherty Petroleum, Inc. in March 1995 as Vice
President of Engineering. Mr. Wallen received a Bachelor of Science in Physics
in 1975 from Morehead State University. From 1975 to 1982, Mr. Wallen worked for
Kentucky West Virginia Gas Company, a subsidiary of Equitable Resources, as a
well drilling and completion specialist. From 1982 to 1984, Mr. Wallen worked as
a production engineer for Sabine Corporation. From 1984 to 1986, he worked as a
production engineer for Scott Talbott, Jr., an independent operator in Kentucky.
From 1986 to 1988, he was Eastern Kentucky Production Superintendent for
Southeastern Gas Company. In December 1988, Mr. Wallen was appointed by the then
Governor of Kentucky, Wallace Wilkinson, as Director of the Kentucky Division of
Oil and Gas. Mr. Wallen also currently serves as the Kentucky Governor's
official representative to the Interstate Oil and Gas Compact Commission.

Effective December 6, 1996, Timothy F. Guthrie resigned as Chief Financial
Officer and Secretary of the Company in order to pursue other business
interests.

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EXECUTIVE COMPENSATION

The following table sets forth information regarding annual and long-term
compensation with respect to the fiscal years ended December 31, 1996, 1995 and
1994 for services in all capacities rendered to the Company by William S.
Daugherty, the Chief Executive Officer of the Company. There was no other person
serving as an executive officer of the Company at December 31, 1996, whose total
annual salary and bonus exceeded $100,000.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------- ----------------------
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS #
- ------------------------------------------ ----- --------- -------- ----------------------
<S> <C> <C> <C> <C>
William S. Daugherty, 1996 86,538 0 200,000
Chairman and President 1995 100,000 19,000(1) 400,000
1994 100,000 0 200,000
</TABLE>

- ---------------

(1) The bonus was in the form of 50,000 shares of the Common Stock valued at
$0.38 per share. The shares represent bonuses approved by the Board of
Directors in February and December 1995 for the years 1994 and 1995. The
shares were issued July 18, 1996.

While the officers of the Company receive benefits in the form of certain
perquisites, none of the individuals identified in the foregoing table has
received perquisites which exceed in value the lesser of $50,000 or 10 percent
of such officer's salary and bonus.

OPTION GRANTS IN 1996

The following table provides details regarding the stock options indicated
in the Summary Compensation Table as having been granted to the named executive
officers in 1996. In addition, in accordance with the rules of the Securities
and Exchange Commission (the "Commission"), there are shown hypothetical gains
or "option spreads" that could be realized for the respective options, based on
arbitrarily assumed rates of annual compound stock price appreciation of five
percent and 10 percent from the date the options were granted over the full
five-year term of the options. No gain to the optionees is possible without an
increase in the stock price which will benefit all shareholders proportionately.

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------- POTENTIAL REALIZABLE VALUE AT
NUMBER OF PERCENT OF ASSUMED
SHARES TOTAL EXERCISE ANNUAL RATES OF STOCK PRICE
UNDERLYING OPTIONS OR BASE APPRECIATION FOR OPTION TERMS(1)
OPTIONS GRANTED TO PRICE ----------------------------------
GRANTED EMPLOYEES ($ PER EXPIRATION 5% 10%
NAME (#) IN 1996 SHARE) DATE ($) ($)
- ---------------------------- ---------- ---------- -------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
W.S. Daugherty(2) 200,000 47.06% $ 1.00 6-28-2004 0 0
</TABLE>

- ---------------

(1) These amounts represent certain assumed rates of appreciation only. Actual
gains, if any, on stock option exercises or stock holdings are dependent on
the future performance of the shares of the Common Stock and overall stock
market conditions. There can be no assurance that the amounts reflected in
this table will be achieved.

(2) On June 28, 1996, the Board of Directors of the Company authorized the
granting of incentive stock options covering 200,000 shares of the Common
Stock for Mr. Daugherty vesting and exercisable in 50,000 share increments
on June 28, 1996, 1997, 1998, and 1999. All options authorized in favor of
Mr. Daugherty in 1996 are exercisable at $1.00 per share, expire five years
from the date of vesting and are contingent upon Mr. Daugherty's employment
at the time of vesting. As of March 31, 1997, these options have not been
issued; however, the Company is obligated to issue them to Mr. Daugherty.

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<PAGE> 10

The following table shows the number of shares of the Common Stock
underlying all exercisable and non-exercisable stock options held by the named
executive officers as of December 31, 1996.

AGGREGATED FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL YEAR-END(#) OPTIONS AT FISCAL YEAR-END($)
----------------------------- ---------------------------------
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
------------------------- ----------------------------- ---------------------------------
<S> <C> <C>
William S. Daugherty 400,000/400,000 -0-
</TABLE>

- ---------------

(1) The market price for the shares of the Common Stock at December 31, 1996 was
below the option price for each share of the Common Stock.

Mr. Daugherty received options to purchase 200,000 shares of the Common
Stock in 1994 exercisable at $1.90 per share in increments of 50,000 shares each
on December 10, 1994, 1995, 1996, and 1997. These options expire December 10,
1998. In February 1995, the Board of Directors of the Company authorized the
granting of incentive stock options covering 200,000 shares of Common Stock for
Mr. Daugherty vesting and exercisable in 50,000 share increments on February 27,
1995, 1996, 1997 and 1998. Additionally, on December 27, 1995, the Board of
Directors of the Company authorized granting of incentive stock options covering
200,000 shares of the Common Stock for Mr. Daugherty vesting and exercisable in
50,000 share increments on December 27, 1995, 1996, 1997 and 1998. All options
authorized in favor of Mr. Daugherty in 1995 are exercisable at $1.00 per share,
expire five years from the date of vesting and are contingent upon Mr.
Daugherty's employment at the time of vesting. As detailed above, on June 28,
1996, the Board of Directors authorized the granting of incentive stock options
to Mr. Daugherty covering 200,000 shares of the Common Stock. On March 7, 1997,
pursuant to an Incentive Stock Option Agreement between the Company and Mr.
Daugherty, the Administrative Committee of the Alaska Apollo Resources Inc. 1997
Stock Option Plan granted Mr. Daugherty options to purchase 2,000,000 shares of
the Common Stock exercisable at $0.309375 per share. Options for 355,555 shares
vested on March 7, 1997, with 355,555 shares vesting on January 1, 1998, 1999,
2000, and 2001, and the remaining 222,225 shares vesting on January 1, 2002.
These options are contingent upon Mr. Daugherty's employment with the Company on
the vesting dates. They expire on March 7, 2002.

COMPENSATION OF DIRECTORS

The Company does not compensate any of its directors for their services to
the Company as directors. However, the Company does reimburse its directors for
expenses incurred in attending board meetings. Further, the Company has granted
options to acquire shares of the Common Stock to the following current directors
of the Company, other than Mr. Daugherty.

AGGREGATED FISCAL YEAR-END OPTION VALUES

- ---------------

(1) The market price for the shares of the Common Stock at December 31, 1996 was
below the option price for each share of the Common Stock.

In 1993, Mr. Klyman-Mowczan was granted options to purchase 10,000 shares
of the Common Stock exercisable at $1.90 per share and expiring December 10,
1998. On June 15, 1994, the Board of Directors approved the reduction of the
exercise price of these options to $1.00. On June 15, 1994, Mr. Cotterell was
granted an option to purchase 10,000 shares of the Common Stock in 1994
exercisable at $1.00 per share expiring December 10, 1998. On February 27, 1995,
the Board of Directors approved the grant of options to

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<PAGE> 11

Messrs. Klyman-Mowczan and Cotterell to purchase 10,000 shares of the Common
Stock each exercisable at $1.00 per share and expiring February 27, 2000. On
June 28, 1996, the Board of Directors approved the grant of options to Messrs.
Klyman-Mowczan and Cotterell to purchase 10,000 shares of the Common Stock each
exercisable at $1.00 per share and expiring June 28, 2001.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's directors and executive officers and persons who own more
than 10 percent of a registered class of the Company's equity securities, to
file with the Commission and the Nasdaq Stock Market initial reports of
ownership and reports of changes in ownership of the Common Stock and other
equity securities of the Company. Directors, officers and greater than 10
percent shareholders are required by the Commission's regulations to furnish the
Company with copies of all Section 16(a) forms they file.

William S. Daugherty and James K. Klyman-Mowczan failed to file a Form 4 on
a timely basis after the receipt of options granted by the Company in January
1994. Additionally, Messrs. Daugherty and Klyman-Mowczan each failed to file on
a timely basis a Form 5 for fiscal 1996.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

INDEBTEDNESS OF DIRECTORS, OFFICERS AND EMPLOYEES

As of March 31, 1997, the aggregate indebtedness to the Company and to any
other person which is the subject of a guarantee, support agreement, letter of
credit or other similar arrangement or understanding provided by the Company of
all present and former directors, officers and employees of the Company was
$39,161.27.

<TABLE>
<CAPTION>
LARGEST AMOUNT
NAME AND INVOLVEMENT OF OUTSTANDING DURING AMOUNT OUTSTANDING
PRINCIPAL POSITION ISSUER OR SUBSIDIARY LAST COMPLETED FISCAL YEAR AS OF MARCH 31, 1997
- -------------------------------------- -------------------- -------------------------- --------------------
<S> <C> <C> <C>
William S. Daugherty (1).............. Lender $51,710.22 $14,791.90
President and Chief
Operating Officer
Timothy F. Guthrie(2)(3).............. Lender $34,738.22 $24,369.37
Former Secretary and Chief
Financial Officer
</TABLE>

- ---------------

(1) Part of the indebtedness of Mr. Daugherty to the Company is evidenced by a
promissory note dated September 23, 1993 in the principal amount of
$50,000. The debt was incurred to assist Mr. Daugherty in the payment of
his legal expenses resulting from the acquisition by the Company of
Daugherty Petroleum, Inc. By the terms of the note, the unpaid principal
bears interest at the rate of six percent per annum and is repayable in
monthly installments of not less than $1,000 per month. Repayment commenced
in November 1993. As of December 31, 1996, the unpaid principal balance due
on the note was $17,791.90. Any unpaid balance is payable in full on
December 31, 1997. The note is unsecured. As of March 31, 1997, the unpaid
principal balance of the note was $14,791.90. As of December 31, 1996, and
March 31, 1997, Renfro Valley Broadcasting, Inc., a company wholly-owned by
Mr. Daugherty was indebted to Daugherty Petroleum, Inc. in the amount of
$17,556.

(2) During 1996, the Company advanced CFO Services, Inc., a company owned by
Mr. Guthrie, $11,405.22, which amount, as of March 31, 1997, remains due
and payable.

(3) As of December 31, 1996, Mr. Guthrie was indebted to the Company in the
amount of $12,964.15. Said indebtedness represents the remaining balance on
a promissory note payable to the order of the Company dated December 21,
1994, and due May 10, 1998. Said note bears interest at the rate of 10
percent per annum. Payments are to be made from 100 percent of the proceeds
of the sale of natural gas from two wells the Company drilled prior to
December 31, 1994, for a joint venture in which

7
<PAGE> 12

Mr. Guthrie was a participant. The note is secured by a pledge of a nine
percent working interest in the two well joint venture program.

LEASE OBLIGATION OF THE COMPANY

The Company is the tenant in a building owned by a partnership in which
William S. Daugherty, a director and the Chief Executive Officer of the Company
and Timothy F. Guthrie, a former officer of the Company, each owns a 50 percent
interest. The rent is $2,600 per month, and the lease expires in July 1997. The
Company has not made any decision as to whether or not it intends to seek
renewal of the lease.

CFO SERVICES, INC.

Since 1990, Timothy F. Guthrie, the former Chief Financial Officer and
Secretary of the Company, has served as director, Secretary and President of CFO
Services, Inc. ("CFO"), a consulting firm that provides temporary and interim
Chief Financial Officer and Controller services to companies and due diligence
and investment monitoring services for various investor groups. CFO was retained
by the Company to provide various accounting and financial management services.
As CFO's representative, Mr. Guthrie performed the agreed upon duties. CFO also
performed similar services for other companies. Mr. Guthrie became Secretary and
Chief Financial Officer of the Company in 1995. The agreement between the
Company and CFO was on a month to month basis and provided for the Company to
pay a minimum of $5,967 for services rendered by CFO. The Company also
reimbursed CFO for all out of pocket expenses it incurred rendering services to
the Company. On December 6, 1996, Mr. Guthrie resigned as Chief Financial
Officer and Secretary and the agreement with CFO was terminated as of that date.
During 1996, CFO invoiced the Company and its subsidiaries the sum of
$52,720.93. As of December 31, 1996, and March 31, 1997, the Company and its
subsidiaries were indebted to CFO in the amount of $24,586.42 and $9,586.42
respectively. During 1996, CFO was paid a total of $67,009.00. The payment was
in the form of 134,018 shares of the Common Stock at the price of $0.50 per
share, of which $42,007.42 was for services rendered and invoiced during 1995.
As of December 31, 1996, CFO and Mr. Guthrie held 199,223 and 65,881 shares,
respectively, of the Common Stock.

GUTHRIE YORK & COMPANY, INC.

On February 1, 1995, the Company entered into an agreement with Guthrie
York & Company, Inc. ("GYC"), whereby GYC provided marketing, public relations
and investor relations services to the Company. Timothy F. Guthrie, the former
Secretary and Chief Financial Officer of the Company, is a principal in GYC. As
of December 31, 1996, GYC held 5,000 shares of the Common Stock.

INDEBTEDNESS OF THE COMPANY TO A SHAREHOLDER

The Company was indebted to Alaska Investments Limited in the amount of
$75,000 for expenditures made on behalf of the Company for public relations
services. Alaska Investments Limited assigned the obligation to Jayhead
Investments Limited on January 6, 1997. The obligation was fully paid by the
Company in consideration for the issuance to Jayhead Investments Limited of
immediately exercisable warrants to purchase 500,000 shares of the Common Stock,
such warrants having an exercise price of $0.125 per share, pursuant to a
Warrant Agreement dated March 7, 1997 between the Company and Jayhead
Investments Limited. Alaska Investments Limited is the beneficial owner of 11.25
percent of the Common Stock of the Company, and Jayhead Investments Limited is
the beneficial owner of 5.26 percent of the Common Stock of the Company.

Niagara Oil, Inc., a subsidiary of Daugherty Petroleum, Inc., is indebted
to Jayhead Investments Limited, an affiliate of Alaska Investments Limited. The
remaining balance of the indebtedness is $64,779.00 and bears interest at a rate
of 10 percent beginning April 1, 1995. Payment terms are based on quarterly
payments of interest only with the total principal and interest, if any, due in
full June 1, 1997. This

8
<PAGE> 13

indebtedness is secured by the assets of Niagara Oil, Inc., as well as the
corporate guarantee of Daugherty Petroleum, Inc.

FINANCING COMMITMENTS.

On January 6, 1997, Trio Growth Trust agreed to act as the underwriter in a
private placement of up to $1,000,000 for the Company's wholly-owned subsidiary,
Red River Hardwoods, Inc. In consideration for such underwriting, the Company
agreed to issue to Trio Growth Trust immediately exercisable warrants for the
purchase of 1,500,000 shares of the Common Stock, such warrants having an
exercise price of $0.125 per share pursuant to a Warrant Agreement dated March
7, 1997 between the Company and Trio Growth Trust. As a result of the
underwriting agreement, Trio Growth Trust acquired a beneficial ownership of
14.28 percent of the Common Stock of the Company. In addition to the
underwriting commitment of Trio Growth Trust, Exergon Capital S.A. agreed to
participate in the underwriting of Red River Hardwoods, Inc., and in
consideration thereof received immediately exercisable warrants for the purchase
of 500,000 shares of the Common Stock, such warrants having an exercise price of
$0.125 per share, pursuant to a Warrant Agreement dated March 7, 1997 between
the Company and Exergon Capital S.A. As a result of said Warrant Agreement,
Exergon Capital S.A. is the beneficial owner of 10.52 percent of the Common
Stock of the Company.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table indicates the number of shares of the Common Stock
owned beneficially as of April 30, 1997 by (i) each person known to the Company
to beneficially own more than five percent of the outstanding shares of the
Common Stock, (ii) each director, (iii) the officers of the Company, and (iv)
all directors and executive officers as a group. Except to the extent indicated
in the footnotes to the following table, each of the persons or entities listed
therein has sole voting and sole investment power with respect to the shares of
the Common Stock which are deemed beneficially owned by such person or entity.

<TABLE>
<CAPTION>
SHARES OWNED PERCENT
TITLE OF CLASS BENEFICIAL OWNER BENEFICIALLY OF CLASS
- ------------------------- ------------------------------------------ ------------ --------
<S> <C> <C> <C>
Common Stock............. William S. Daugherty 2,174,555(1) 21.79
131 Prosporous Place, Suite 17-A
Lexington, Kentucky 40509

Trio Growth Trust 1,500,000(2) 14.28
18 York Valley Crescent
Willowdale, Ontario M2P 1A7

GraceChurch Securities Ltd. 1,003,000 11.10
21 Abbotsbury House, Abbotsbury Road
London W14 8EN, England

Alaska Investments Limited 1,013,334 11.25
Ospery House, 5 Old Street
St. Helier, Jersey, Channel Islands,
U.K.

Exergon Capital S.A. 1,000,000(3) 10.52
Dufourstrasse 101
Zurich 8008, Switzerland

Jayhead Investments Limited 500,000(4) 5.26
18 York Valley Crescent
Willowdale, Ontario M2P 1A7

Charles L. Cotterell 74,200(5) *

James K. Klyman-Mowczan 30,000(6) *

Directors and executive officers as a
group
(4 persons) 2,508,255(7) 24.74
</TABLE>

- ---------------

* Represents ownership of less than one percent.

9
<PAGE> 14

(1) Includes warrants to purchase 119,000 shares of the Common Stock and options
to acquire 805,555 shares of the Common Stock which are currently
exercisable, and options to acquire 50,000 shares of the Common Stock which
will become exercisable on June 28, 1997.

(2) Consists of warrants to purchase 1,500,000 shares of the Common Stock which
are currently exercisable.

(3) Includes warrants to purchase 500,000 shares of the Common Stock which are
currently exercisable.

(4) Consists of warrants to purchase 500,000 shares of the Common Stock which
are currently exercisable.

(5) Includes options to purchase 30,000 shares of the Common Stock which are
currently exercisable.

(6) Consists of options to purchase 30,000 shares of the Common Stock which are
currently exercisable.

(7) Includes options to purchase 840,555 shares of the Common Stock which are
currently exercisable, options to purchase 75,000 shares of the Common Stock
which are exercisable within 60 days, and warrants to purchase 119,000
shares of the Common Stock which are currently exercisable.

SHAREHOLDER RETURN PERFORMANCE GRAPHS

The following graph compares the total shareholder returns of the Company
since December 31, 1992, to two indices: The Nasdaq Stock Market Total Return
Index (the "Nasdaq Index") prepared for Nasdaq by the Center of Research in
Security Prices, and a peer group (the "Peer Group") of publicly traded
companies with substantial similarities to the Company. The Peer Group consists
of three companies traded on The Nasdaq SmallCap Market and one company traded
on the American Stock Exchange. The Peer Group is composed of Parallel Petroleum
Co., XCL Ltd., Texoil, Inc., and Credo Petroleum Corporation which are oil and
gas exploration companies with operations and other similarities to the
Company's major business operation. While the total return for the Company, the
Peer Group, and the Nasdaq Index assumes the reinvestment of dividends, none of
the Peer Group companies or the Company have ever declared dividends on their
Common Stock. The Nasdaq Index comprises all domestic and foreign common shares
traded on The Nasdaq National Market and The Nasdaq SmallCap Market for all
Standard Industrial Classification codes. The following graph is presented
pursuant to the Commission's rules.

COMPARISON OF TOTAL RETURN SINCE DECEMBER 31, 1992(1)

<TABLE>
<CAPTION>
MEASUREMENT PERIOD PEER GROUP ALASKA APOLLO
(FISCAL YEAR COVERED) AVERAGE THE NASDAQ INDEX RESOURCES INC.
<S> <C> <C> <C>
12-31-92 100 100 100
12-31-93 150.45 115.74 122.72
12-31-94 167.89 112.26 63.63
12-31-95 116.29 157.66 34.09
12-31-96 177.53 193.05 9.09
</TABLE>

10
<PAGE> 15

- ---------------

(1) This graph assumes that the value of the investment in the Common Stock of
the Company, the Peer Group, and the Nasdaq Index was $100 on December 31,
1992, and that all dividends were reinvested. One member of the Peer Group,
Texoil, Inc., did not trade publicly until 1994, and therefore, is not
included in the Peer Group averages until December 31, 1994. It should be
noted that the Peer Group was changed for the analysis for the year end
December 31, 1996, due to the fact that one member of the previous Peer
Group, Haldor Petroleum Co., is no longer publicly traded and a second
member of the previous Peer Group, Amerae Energy Corp. was determined by the
Company to no longer be an appropriate selection due to significant advances
in it market capitalization, revenue and other factors.

The following chart shows the value of a $100 investment in the Common
Stock of the Company, the Peer Group, and the Nasdaq Index as of the relevant
dates, assuming an initial investment of $100 in each on December 31, 1992.
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
12-31-92 12-31-93 12-31-94 12-31-95 12-31-96
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Peer Group Average 100 150.45 167.89 116.29 177.53
- -------------------------------------------------------------------------------------------------
The Nasdaq Index 100 115.74 112.26 157.66 193.05
- -------------------------------------------------------------------------------------------------
Alaska Apollo Resources Inc. 100 122.72 63.63 34.09 9.09
- -------------------------------------------------------------------------------------------------
</TABLE>

The foregoing graph and chart are not incorporated in any prior or future
filings of the Company under the Securities Act of 1933 or the Exchange Act.
Unless the Company specifically incorporates the graph and chart by reference,
the graph and chart shall not otherwise be deemed filed under such Acts.

APPROVAL OF THE ALASKA APOLLO RESOURCES INC. 1997 STOCK OPTION PLAN

The Board of Directors has adopted, subject to the approval of the
shareholders of the Company, the Alaska Apollo Resources Inc. 1997 Stock Option
Plan (the "Stock Option Plan"), a copy of which is attached hereto as Appendix
A. The following description of the Stock Option Plan is qualified by reference
to the full text of the Stock Option Plan.

The purpose of the Stock Option Plan is to retain key executives and other
selected employees, reward them for making major contributions to the success of
the Company and provide them with a proprietary interest in the growth and
performance of the Company.

The total number of shares of the Common Stock that may be issued pursuant
to the Stock Option Plan will not exceed 3,000,000 shares, of which 2,000,000
are reserved for William S. Daugherty, the Chairman of the Board and President
of the Company, and 1,000,000 shares for other employees of the Company. The
number of shares of the Common Stock that may be awarded pursuant to the Stock
Option Plan is subject to adjustment upon the occurrence of certain events. At
the close of the market on May 15, 1997, the market price of the Common Stock as
reported on The Nasdaq SmallCap Market was $0.469 bid and $0.531 asked.

The Stock Option Plan shall be administered by a Committee which may be
appointed by the Board of Directors from time to time (collectively referred to
as the "Administrator"). The Administrator shall, from time to time, at its
discretion and without approval of the shareholders, designate those employees
of the Company or any subsidiary to whom incentive stock options shall be
granted pursuant to the Stock Option Plan. The Administrator may grant
additional incentive stock options under this Plan to some or all participants
then holding options or may grant options solely or partially to new
participants. In designating participants, the Administrator shall also
determine the number of shares to be optioned to each such participant. The
Administrator may from time to time designate individuals as being ineligible to
participate in this Plan. Since the Company's securities are registered pursuant
to Section 12 of the Exchange Act, then, to the extent necessary for compliance
with Rule 16b-3, or any successor provision, each of the members of the
Committee shall be a "Non-Employee Director" as defined in said rule.

11
<PAGE> 16

To the extent required to qualify any option under the Stock Option Plan as
an incentive stock option under Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), or any successor provision, the option price per
share shall not be less than 100 percent of the fair market value of the Common
Stock per share on the date the Administrator grants the option; provided,
however, that if a person to whom an option is granted pursuant to the Stock
Option Plan (the "Optionee") owns stock possessing more than 10 percent of the
total combined voting power of all classes of stock of the Company, the option
price per share of an incentive stock option granted to such Optionee shall not
be less than 110 percent of the fair market value of the Common Stock per share
on the date of the grant or the option. The Administrator shall have full
authority and discretion in establishing the option price and shall be fully
protected in so doing. The exercise price of any stock option may, at the
discretion of the Administrator, be paid in cash or by surrendering shares of
the Common Stock, valued at fair market value on the date of exercise, or any
combination thereof. Vesting conditions for a stock option will be specified by
the Administrator and set forth in the applicable option agreement. Vesting
conditions may include, without limitation, provision for acceleration in the
case of change of control of the Company.

Adoption of the Stock Option Plan shall be and is expressly subject to the
condition of approval by the shareholders of the Company within 12 months before
or after the adoption of the Stock Option Plan by the Board of Directors. Any
incentive stock options granted after adoption of the Stock Option Plan by the
Board of Directors shall be treated as nonqualified stock options if shareholder
approval is not obtained within such 12-month period.

Incentive stock options may be granted pursuant to the Stock Option plan
from time to time during a period of 10 years from the effective date of the
Stock Option Plan. Any incentive stock option granted during such ten-year
period shall remain in full force and effect until the expiration of the option
as specified in the written stock option agreement and shall remain subject to
the terms and conditions of the Stock Option Plan.

The term during which any incentive stock option granted under the Stock
Option Plan may be exercised shall be established in each case by the
Administrator. To the extent required to qualify the option as an incentive
stock option under Code Section 422, or any successor provision, in no event
shall any incentive stock option be exercisable during a term of more than 10
years after the date on which it is granted; provided, however, that if an
Optionee owns stock possessing more than 10 percent of the total combined voting
power of all classes of stock of the Company, the incentive stock option granted
to such Optionee shall be exercisable during a term of not more than five years
after the date on which it is granted.

To the extent that the aggregate fair market value of Common Stock for
which an incentive stock option becomes exercisable by the Optionee for the
first time in any calendar year exceeds $100,000, the portion of such incentive
stock option which exceeds such $100,000 limitation shall be treated as a
Non-Statutory Stock Option and not an incentive stock option under Code Section
422.

The Optionee shall have the registration rights set forth in Exhibit A to
the Stock Option Plan.

The holder of a nonqualified stock option will recognize no taxable income
as a result of the grant of the stock option. Upon the exercise of the stock
option, however, the holder of a nonqualfied stock option will recognize taxable
ordinary income in an amount equal to the difference between the fair market
value of the shares on the date of exercise and the exercise or purchase price
(or, in the case of relinquishment, in an amount equal to the sum of the cash
received and the fair market value of the shares or award received determined on
the date of exercise) and, correspondingly, the Company will be entitled to an
income tax deduction for such amount.

Upon the exercise of an incentive stock option, the stock option holder
generally will not recognize taxable income by reason of the exercise, and the
Company normally will not be entitled to any income tax deduction. If the
Optionee disposes of the shares acquired upon the exercise of an incentive stock
option after satisfaction of certain minimum holding periods, any gain realized
will be capital gain. Gain attributable to post-exercise appreciation of stock
acquired upon the exercise of a nonqualified or incentive stock option will be
capital gain if the Optionee has held the shares as a capital asset for more
than one year. If an Optionee disposes of the shares acquired upon the exercise
of an incentive stock option within the minimum holding

12
<PAGE> 17

periods, the Optionee would recognize ordinary income, and the Company would be
entitled to a commensurate income tax deduction (except with respect to
post-exercise appreciation).

The allocation of awards under the Stock Option Plan is not currently
determinable as such allocation is dependent upon future decisions to be made by
the Administrator in its sole discretion, subject to the applicable provisions
of the Stock Option Plan.

VOTE REQUIRED

The affirmative vote of a majority of the total number of shares of the
Common Stock present in person or represented by proxy at the Meeting is
required to approve the Stock Option Plan. For the purpose of such
determination, abstentions will have the same effect as votes cast against the
approval of the Stock Option Plan, and broker non-votes will have no effect on
the outcome of the vote.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE STOCK OPTION
PLAN.

RATIFICATION OF THE APPOINTMENT OF INDEPENDENT ACCOUNTANTS

Subject to shareholder ratification, the Board of Directors has appointed
Kraft, Rothman, Berger, Grill, Schwartz & Cohen to serve as the Company's
independent public accountants for the fiscal year ending December 31, 1997 at
the remuneration to be fixed by the Board of Directors. Kraft, Rothman, Berger,
Grill, Schwartz & Cohen has served as the Company's independent public
accountants since 1992. Representatives of Kraft, Rothman, Berger, Grill,
Schwartz & Cohen are not expected to be present at the Meeting.

VOTE REQUIRED

The affirmative vote of a majority of the total number of shares of the
Common Stock present in person or represented by proxy at the Meeting is
required to approve the ratification of Kraft, Rothman, Berger, Grill, Schwartz
& Cohen as the Company's independent public accountants.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE SELECTION
OF KRAFT, ROTHMAN, BERGER, GRILL, SCHWARTZ & COHEN AS THE COMPANY'S INDEPENDENT
PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1997 AT THE
REMUNERATION TO BE FIXED BY THE BOARD OF DIRECTORS.

OTHER MATTERS

The Board of Directors knows of no other matter to be presented at the 1997
Meeting. If any additional matter should be presented properly, it is intended
that the enclosed proxy will be voted in accordance with the discretion of the
persons named in the proxy.

AVAILABILITY OF INFORMATION

An Annual Report to Shareholders, including financial statements for the
year ended December 31, 1996, is enclosed herewith. The financial statements
were audited by Kraft, Rothman, Berger, Grill, Schwartz & Cohen, auditors of the
Company. No disagreement over accounting practices of the Company exists.

A copy of the exhibits to the Annual Report submitted to the Commission is
available to each shareholder of record, at the cost of duplication, upon
receipt of a written request addressed to the Company at 131 Prosperous Place,
Suite 17-A, Lexington, Kentucky 40509-1844. The Company will also make these
materials available at the same cost to "beneficial owners" of such securities
upon receipt of a similar written request, containing a representation that, as
of May 16, 1997, such person was a beneficial owner of shares of the Common
Stock of the Company.

All information contained in this Proxy Statement relating to the
occupations and security holdings of directors and officers of the Company is
based upon information received by the Company from such directors and officers.

13
<PAGE> 18

SHAREHOLDER PROPOSALS FOR 1998 ANNUAL GENERAL MEETING OF SHAREHOLDERS

Proposals of shareholders intended to be presented at the 1998 Annual
General Meeting of Shareholders must be received by the Company by February 25,
1998 to be considered for inclusion in the proxy statement and form of proxy
relating to the 1998 meeting.

By Order of the Board of Directors,

/s/ WILLIAM S. DAUGHERTY

--------------------------------------
William S. Daugherty
Chairman of the Board and President

14
<PAGE> 19

APPENDIX A

ALASKA APOLLO RESOURCES INC.

1997 STOCK OPTION PLAN

1. DEFINITIONS. As used herein, the following terms shall have the meanings
indicated below:

(a) "Committee" shall mean a Committee of two or more directors who
shall be appointed by and serve at the pleasure of the Board of Directors.
If the Company's securities are registered pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), then, to
the extent necessary for compliance with Rule 16b-3, or any successor
provision, each of the members of the Committee shall be a "Non-Employee
Director." For purposes of this Paragraph 1(a), "Non-Employee Director"
shall have the same meaning as set forth in Rule 16b-3, or any successor
provision, as then in effect, of the General Rules and Regulations under
the Exchange Act.

(b) The "Code" is the Internal Revenue Code of 1986, as amended from
time to time.

(d) "Fair Market Value" as of any day shall mean (i) if such stock is
reported by the Nasdaq National Market or Nasdaq SmallCap Market or is
listed upon an established stock exchange or exchanges, the reported
closing price of such stock by the Nasdaq National Market or Nasdaq
SmallCap Market or on such stock exchange or exchanges on such date or, if
no sale of such stock shall have occurred on such date, on the next
preceding day on which there was a sale of stock; (ii) if such stock is not
so reported by the Nasdaq National Market or Nasdaq SmallCap Market or
listed upon an established stock exchange, the average of the closing "bid"
and "asked" prices quoted by the National Quotation Bureau, Inc. (or any
comparable reporting service) on such date or, if there are no quoted "bid"
and "asked" prices on such date, on the next preceding date for which there
are such quotes; or (iii) if such stock is not publicly traded as of such
date, the per share value as determined by the Board of Directors, or the
Committee, in its sole discretion by applying principles of valuation with
respect to the Company's Common Stock in accordance with Code Section 422.

(e) "Non-Employee Director" shall mean members of the Board of
Directors who at the relevant time are "outside directors" within the
meaning of Code Section 162(m).

(f) "Option Stock" shall mean Common Stock of the Company (subject to
adjustments as described in Paragraph 12) reserved for options pursuant to
this Plan.

(g) The "Optionee" means an employee of the Company or any Subsidiary
to whom an incentive stock option has been granted pursuant to Paragraph 9.

(h) The "Plan" means the Alaska Apollo Resources Inc. 1997 Stock
Option Plan, as amended hereafter from time to time, including the form of
Option Agreements as they may be modified by the Board of Directors from
time to time.

(i) "Related Corporation" means a Parent Corporation or a Subsidiary
Corporation each as defined in Code Section 424.

2. PURPOSE. The purpose of this Plan is to promote the success of the
Company and its subsidiaries by facilitating the retention of competent
personnel and by furnishing incentives to officers, directors, employees,
consultants, and advisors upon whose efforts the success of the Company and its
subsidiaries will depend to a large degree.

It is the intention of the Company to carry out this Plan through the
granting of stock options which will qualify as "incentive stock options" under
the provisions of Code Section 422 or any successor provision, pursuant to
Paragraph 9 of this Plan. Adoption of this Plans shall be and is expressly
subject to the condition of approval by the shareholders of the Company within
12 months before or after the adoption of this Plan by

A-1
<PAGE> 20

the Board of Directors. Any incentive stock options granted after adoption of
this Plan by the Board of Directors shall be treated as nonqualified stock
options if shareholder approval is not obtain within such 12-month period.

3. EFFECTIVE DATE OF PLAN. This Plan shall have be effective as of the date
of adoption by the Board of Directors, subject to approval by the shareholders
of the Company as required in Paragraph 2 hereof.

4. ADMINISTRATION. This Plan shall be administered by a Committee which may
be appointed by the Board of Directors from time to time (collectively referred
to as the "Administrator"). The Administrator shall have all of the powers
vested in it under the provisions of this Plan, including but not limited to
exclusive authority (where applicable and within the limitations described in
this Plan) to determine, in its sole discretion, whether an incentive stock
option shall be granted, the individuals to whom, and the time or times at
which, options shall be granted, the number of shares subject to each option and
the option price and terms and conditions of each option. The Administrator
shall have full power and authority to administer and interpret this Plan, to
make and amend rules, regulations and guidelines for administering this Plan, to
prescribe the form and conditions of the respective stock option agreements
(which may vary from Optionee to Optionee) evidencing each option and to make
all other determinations necessary or advisable for the administration of this
Plan. The Administrator's interpretation of this Plan, and all actions taken,
and determinations made by the Administrator pursuant to the power vested in it
hereunder, shall be conclusive and binding on all parties concerned.

No member of the Committee shall be liable for any action taken or
determination made in good faith in connection with the administration of this
Plan. Upon the appointment of a Committee by the Board of Directors as provided
hereunder, any action of the Committee with respect to the administration of
this Plan shall be taken pursuant to a majority vote of the Committee members or
pursuant to the written resolution of all Committee members.

5. PARTICIPANTS. The Administrator shall, from time to time, at its
discretion and without approval of the shareholders, designate those employees
of the Company or any subsidiary to whom incentive stock options shall be
granted pursuant to Paragraph 9 of this Plan. The Administrator may grant
additional incentive stock options under this Plan to some or all participants
then holding options or may grant options solely or partially to new
participants. In designating participants, the Administrator shall also
determine the number of shares to be optioned to each such participant. The
Administrator may from time to time designate individuals as being ineligible to
participate in this Plan.

6. STOCK. The Stock to be optioned under this Plan shall consist of
authorized but unissued shares of Option Stock. Three million Shares of Option
Stock shall be reserved and available for options under this Plan; provided,
however, that the total number of shares of Option Stock reserved for options
under this Plan shall be subject to adjustment as provided in Paragraph 11 of
this Plan. In the event that any outstanding option under this Plan for any
reason expires or is terminated prior to the exercise thereof, the shares of
Option Stock allocable to the unexercised portion of such option shall continue
to be reserved for options under this Plan and may be optioned hereunder.

7. DURATION OF PLAN. Incentive stock options may be granted pursuant to
this Plan from time to time during a period of 10 years from the effective date
as defined in Paragraph 3. Any incentive stock option granted during such
ten-year period shall remain in full force and effect until the expiration of
the option as specified in the written stock option agreement and shall remain
subject to the terms and conditions of this Plan.

8. PAYMENT. Optionees may pay for shares upon exercise of options granted
pursuant to this Plan with cash, personal check, certified check, Common Stock
of the company valued at such Stock's then Fair Market Value, or such other form
of payment as may be authorized by the Administrator. The Administrator may, in
its sole discretion, limit the forms of payment available to the Optionee and
may exercise such discretion any time prior to the termination of the option
granted to the Optionee or upon any exercise of the option by the Optionee.

A-2
<PAGE> 21

With respect to payment in the form of Common Stock of the Company, the
Administrator may require advance approval or adopt such rules as it deems
necessary to assure compliance with Rule 16b-3, or any successor provision, as
then in effect, of the General Rules and Regulations under the Exchange Act, if
applicable.

9. TERMS AND CONDITIONS OF INCENTIVE STOCK OPTIONS. Each incentive stock
option granted pursuant to this Paragraph 9 shall be evidenced by a written
stock option agreement (the "Option Agreement"). The Option Agreement shall be
in such form as may be approved from time to time by the Administrator and may
vary from Optionee to Optionee; provided, however, that each Optionee and each
Option Agreement shall comply with and be subject to the following terms and
conditions.

(a) Number of Shares and Option Price. The Option Agreement shall
state the total number of shares covered by the incentive stock option. To
the extent required to quality the Option as an incentive stock option
under Code Section 422, or any successor provision, the option price per
share shall not be less than 100 percent of the Fair Market Value of the
Common Stock per share on the date the Administrator grants the option;
provided, however, that if an Optionee owns stock possessing more than 10
percent of the total combined voting power of all classes of stock of the
Company or of its Parent or any Subsidiary, the option price per share of
an incentive stock option granted to such Optionee shall not be less than
110 percent of the Fair Market Value of the Common Stock per share on the
date of the grant of the option. The Administrator shall have full
authority and discretion in establishing the option price and shall be
fully protected in so doing.

(b) Term and Exercisability of Incentive Stock Option. The term during
which any incentive stock option granted under this Plan may be exercised
shall be established in each case by the Administrator. To the extent
required to qualify the Option as an incentive stock option under Code
Section 422, or any successor provision, in no event shall any incentive
stock option be exercisable during a term of more than 10 years after the
date on which it is granted; provided, however, that if an Optionee owns
stock possessing more than 10 percent of the total combined voting power of
all classes of stock of the Company or of its parent or any Subsidiary, the
incentive stock option granted to such Optionee shall be exercisable during
a term of not more than five years after the date on which it is granted.

The Option Agreement shall state when the incentive stock option
becomes exercisable and shall also state the maximum term during which the
option may be exercised. In the event an incentive stock option is
exercisable immediately, the manner of exercise of the option in the event
it is not exercised in full immediately shall be specified in the Option
Agreement. The Administrator may accelerate the exercisability of any
incentive stock option granted hereunder which is not immediately
exercisable as of the date of grant.

(c) Maximum Size of Incentive Stock Option As Such. To the extent that
the aggregate Fair Market Value of Common Stock for which an Incentive
Stock Option becomes exercisable by the Optionee for the first time in any
calendar year exceeds $100,000, the portion of such incentive stock option
which exceeds such $100,000 limitation shall be treated as a Non-Statutory
Stock Option and not an incentive stock option under Code Section 422. For
purposes of this Paragraph 9, all incentive stock options granted to an
Optionee by the Company, as well as any options that may have been granted
to the Optionee under any other stock incentive plans of the Company or any
Related Corporation which are intended to comply with the provisions Code
Section 422 shall be considered in the order in which they were granted,
and the Fair Market Value as of the time they were granted.

(d) Other Provisions. The Option Agreement authorized under this
Paragraph 9 shall contain such other provisions as the Administrator shall
deem advisable. Any such Option Agreement shall contain such limitations
and restrictions upon the exercise of the option as shall be necessary to
ensure that such option will be considered as an "Incentive stock option"
as defined in Code Section 422 or to conform to any change therein.

10. TRANSFER OF OPTION. No incentive stock option shall be transferable, in
whole or in part, by the Optionee other than by will or by the laws of descent
and distribution and, during the Optionee's lifetime, the

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<PAGE> 22

option may be exercised only by the Optionee. If the Optionee shall attempt any
transfer of any incentive stock option granted under this Plan during the
Optionee's lifetime, such transfer shall be void and the incentive stock option,
to the extent not fully exercised, shall terminate.

11. ANTI-DILUTION ADJUSTMENTS. A pro rata adjustment for an increase or
decrease in the number of shares of Common Stock of the Company subject to this
Plan or that may be awarded to any individual in any year shall be made to give
effect to any consolidation of shares, the equivalent value in stock of cash
dividends, stock dividends, stock splits, stock combinations, recapitalization
and other similar changes in the capital structure of the Company. Pro rata
adjustments shall be made in the number, kind and price of shares of Common
Stock of the Company covered by any outstanding Option hereunder to give effect
to any consolidation of shares, stock dividends, stock splits, stock
combinations, recapitalization and similar changes in the capital structure of
the Company, or a merger or dissolution or reorganization of the Company, after
the date the Option is granted so that the Optionee is treated in a manner
equivalent to that of holders of the underlying Common Stock.

12. CHANGE IN CORPORATE CONTROL. Upon a change in Corporate Control, each
outstanding Incentive Stock Option shall immediately become fully exercisable,
and a registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the shares covered by all outstanding
Incentive Stock Options, whether to be issued by the Company or by any successor
corporation, shall be effective at all times during which the Incentive Stock
Options may be exercised and, to facilitate resale of the shares, during the
twelves months after the last exercise of the Options.

"Change in Corporate Control" means (a) the time of approval of the Company
of (i) any consolidation or merger of the Company in which the Company is not
the continuing or surviving corporation or pursuant to which shares of Common
Stock would be converted into cash, securities or other property, other than a
merger in which the holders of Common Stock immediately prior to the merger will
have the same proportionate ownership of Common Stock of the surviving
corporation immediately after the merger, (ii) any sale, lease, exchange or
other transfer (in one transaction or a series of related transactions) of all
or substantially all of the assets of the Company, or (iii) adoption of any plan
or proposal for the liquidation or dissolution of the Company; or (b) the date
on which any "person" (as defined in Section 13(d) of the Exchange Act), other
than the Company or a subsidiary or employee benefit plan or trust maintained by
the Company or any of its subsidiaries, shall become (together with its
"affiliates" and "associates," as defined in Rule 12b-2 under the Exchange Act)
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of more than 25 percent of the Common Stock outstanding
at the time, without the prior approval of the Board of Directors of the
Company.

The Administrator may restrict the rights of or the applicability of this
Paragraph 12 to the extent necessary to comply with Section 16(b) of the
Exchange Act, the Code or any other applicable law or regulation. The grant of
an option pursuant to this Plan shall not limit in any way the right or power of
the Company to make adjustments, reclassification, reorganizations or changes of
its capital or business structure or to merge, exchange or consolidate or to
dissolve, liquidate, sell or transfer all or any part of its business or assets.

13. SECURITIES LAW COMPLIANCE. No shares of Common Stock shall be issued
pursuant to this Plan unless and until there has been compliance, in the opinion
of Company's counsel, with all applicable legal requirements, including without
limitation, those relating to securities laws and stock exchange listing
requirements. As a condition to the issuance of Option Stock to Optionee, the
Administrator may require Optionee to (a) represent that the shares of Option
Stock are being acquired for investment and not resale and to make such other
representations as the Administrator shall deem necessary or appropriate to
qualify the issuance of the shares as exempt from the Securities Act of 1933 and
any other applicable securities laws, and (b) represent that Optionee shall not
dispose of the shares of Option Stock in violation of the securities Act or any
other applicable securities laws.

In the event of a transaction (as defined in Paragraph 12 of this Plan)
which is treated as a "pooling of interests" under generally accepted accounting
principles, Optionee will comply with Rule 145 of the Securities Act and any
other restrictions imposed under other applicable legal or accounting principles
if

A-4
<PAGE> 23

Optionee is an "affiliate" (as defined in such applicable legal and accounting
principles) at the time of the transaction, and the Optionee will execute any
documents necessary to ensure compliance with such rules.

The Company reserves the right to place a legend on any stock certificate
issued upon exercise of an option granted pursuant to this Plan to assure
compliance with this Paragraph 13.

14. RIGHTS AS A SHAREHOLDER. An Optionee (or the Optionee's successor or
successors) shall have no rights as a shareholder with respect to any shares
covered by an option until the date of the issuance of a stock certificate
evidencing such shares. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property), distributions or
other rights for which the record date is prior to the date such stock
certificate is actually issued (except as otherwise provided in Paragraph 12 of
this Plan).

15. AMENDMENT OF THIS PLAN. The Board of Directors may from time to time,
insofar as permitted by law, suspend or discontinue this Plan or revise or amend
it in any respect; provided, however, that no such revision or amendment, except
as is authorized in paragraph 12, shall impair the terms and conditions of any
option which is outstanding on the date of such revision or amendment to the
material detriment of the Optionee without the consent of the Optionee.
Notwithstanding the foregoing, no such revision or amendment shall (a)
materially increase the number of shares subject to this Plan except as provided
in Paragraph 12 hereof, (b) change the designation of the class of employees
eligible to receive options, (c) decrease the price at which options may be
granted, or (d) materially increase the benefits accruing to Optionees under
this Plan without the approval of the shareholders of the Company if such
approval is required for compliance with the requirements of any applicable law
or regulation. Furthermore, this Plan may not, without the approval of the
shareholders, be amended in any manner that will cause Incentive Stock Options
to fail to meet the requirements of Code Section 422.

16. NO OBLIGATION TO EXERCISE OPTION. The granting of an option shall
impose no obligation upon the Optionee to exercise such option. Further, the
granting of an option hereunder shall not impose upon the Company or any
Subsidiary any obligation to retain the Optionee in its employ for any period.

17. REGISTRATION RIGHTS. The Optionee shall have the registration rights
set forth in Exhibit A.

A-5
<PAGE> 24

EXHIBIT A TO THE
ALASKA APOLLO RESOURCES INC.
1997 STOCK OPTION PLAN

REGISTRATION RIGHTS

DEMAND REGISTRATION RIGHTS

(a) At any time, commencing one (1) year after the effective date of the
Plan, the Optionee or any other holders of options (collectively, "Option
Holders") granted under the Plan shall have the right, on one occasion, by
written notice to the Company, to have the Company prepare and file with the
Securities and Exchange Commission (the "Commission"), a registration statement
on Form S-8 or similar form, including a reoffer prospectus which is prepared in
accordance with the requirements of Part I of the Form S-8, and such other
documents, as may be necessary in the opinion of both counsel for the Company
and counsel for the Option Holders, in order to comply with the provisions of
the Securities Act of 1933 (the "Act"), so as to permit a public offering and
sale of all of the options and securities underlying such options issued or to
be issued under the Plan by the holders thereof, subject to whatever
restrictions on the exercise of the options or the sale of the options as are
set forth in the Plan. The demand registration rights granted hereby shall
expire after all of the options and/or securities underlying the options have
been sold or have expired, but in no event later than ten (10) years after the
effective date of the Plan.

COVENANTS OF THE COMPANY WITH RESPECT TO REGISTRATION

(b) In connection with any registration under paragraph (a) above, the
Company covenants and agrees as follows:

(1) The Company shall use its best efforts to file a registration
statement within sixty (60) days of receipt of any demand therefor, or in
the event the Company does not qualify for the use of Form S-8 or similar
form, as soon as practicable after the Company becomes qualified to use
such form, and to have any registration statement declared effective at the
earliest possible time and, to the extent applicable, shall furnish each
Option Holder desiring to sell securities registered thereby such number of
prospectuses as shall reasonably be requested.

(2) The Company shall pay all costs, fees and expenses in connection
with the registration statement filed pursuant to paragraph (a) above.

(3) The Company will take all necessary action which may be required
in qualifying or registering the securities included in the registration
statement for offer and sale under the securities or blue sky laws of such
states as reasonably are requested by the Option Holder(s), provided that
the Company shall not be obligated to execute or file any general consent
to service of process or to qualify as a foreign corporation to do business
under the laws of any such jurisdiction.

(4) Nothing contained in this Agreement shall be construed as
requiring the Option Holder(s) to exercise their options prior to the
initial filing of any registration statement or the effectiveness thereof,
other than as may be required by the terms of the Plan.

(5) The Company shall not permit the inclusion of any securities other
than the options and the securities underlying the options to be included
in any registration statement filed pursuant to paragraph (a) hereof.

A-6
<PAGE> 25

ALASKA APOLLO RESOURCES INC.
131 PROSPEROUS PLACE, SUITE 17-A
LEXINGTON, KENTUCKY 40509-1844

PROXY

THIS PROXY IS SOLICITED BY THE MANAGEMENT OF ALASKA APOLLO RESOURCES INC.
(THE "COMPANY") FOR THE ANNUAL GENERAL MEETING OF ITS SHAREHOLDERS (THE
"MEETING") TO BE HELD ON JUNE 25, 1997.

The undersigned hereby appoints William S. Daugherty, the Chairman of the
Board and President of the Company, or failing him, James K. Klyman-Mowczan, a
director of the Company, or instead of either of the foregoing, (insert name)
_________________________ , as nominee of the undersigned, with full power of
substitution, to attend and vote on behalf of the undersigned at the Meeting to
be held at 625 Howe Street, Suite 700, Vancouver, British Columbia, Canada, on
June 25, 1997 at 10:00 a.m., Vancouver, British Columbia time, and at any
adjournments thereof, and directs the nominee to vote or abstain from voting the
shares of the undersigned in the manner indicated below:

1. Fixing the Number of Directors.

Vote FOR [ ] AGAINST [ ] the resolution fixing the size of the Board of
Directors at three.

2. Election of Directors.

The nominees proposed by management are:

William S. Daugherty
James K. Klyman-Mowczan
Charles E. Cotterell

Vote FOR [ ] the election of all nominees listed above (EXCEPT THOSE WHOSE
NAMES THE UNDERSIGNED HAS DELETED).

WITHHOLD [ ] vote.

3. Approval of the Company's 1997 Stock Option Plan.

Vote FOR [ ] AGAINST [ ] the resolution approving the Company's 1997 Stock
Option Plan.

4. Auditors.

Vote FOR [ ] WITHHOLD [ ] vote on the resolution to appoint Kraft, Rothman,
Berger, Grill, Schwartz & Cohen, Chartered Accountants, as auditors of the
Company at the remuneration to be fixed by the Board of Directors.

5. Upon any other matter that properly comes before the Meeting.

RETURN THIS PROXY IMMEDIATELY.

(to be completed on reverse side)
<PAGE> 26

THE UNDERSIGNED HEREBY REVOKES ANY PRIOR PROXY OR PROXIES.

Dated ____________________________ , 1997.

- --------------------------------------------------------------------------------
Signature of Shareholder

- --------------------------------------------------------------------------------
Printed Name of Shareholder

A PROXY WILL NOT BE VALID UNLESS THE FORM OF PROXY IS DATED, DULY EXECUTED AND
DELIVERED TO THE OFFICE OF PACIFIC CORPORATE TRUST COMPANY, 625 HOWE STREET,
SUITE 830, VANCOUVER, BRITISH COLUMBIA V6C 3B8, NOT LESS THAN 48 HOURS
(EXCLUDING SATURDAYS AND HOLIDAYS) BEFORE THE MEETING AT WHICH THE PERSON NAMED
THEREIN PURPORTS TO VOTE IN RESPECT THEREOF.

Joint owners should each sign the proxy and where the proxy is signed by a
corporation either its common seal must be affixed to the proxy or it should be
signed by the corporation under the hand of an officer or attorney duly
authorized in writing, which authorization must accompany the proxy.

THE SHARES REPRESENTED BY THE PROXY WILL BE VOTED OR WITHHELD FROM VOTING IN
ACCORDANCE WITH THE INSTRUCTIONS OF THE SHAREHOLDER ON ANY BALLOT AND WHERE A
CHOICE WITH RESPECT TO ANY MATTER TO BE ACTED UPON IS SPECIFIED, THE SHARES WILL
BE VOTED ON ANY BALLOT IN ACCORDANCE WITH SUCH SPECIFICATION.

(PLEASE ADVISE THE COMPANY OF ANY CHANGE OF ADDRESS)