UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q


QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2004
Or
o    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934


Commission File Number: 001-31593


APOLLO GOLD CORPORATION
(Exact name of Registrant as Specified in Its Charter)

Yukon Territory, Canada
Not Applicable
(State or Other Jurisdiction of
(I.R.S. Employer
Incorporation or Organization)
Identification No.)


4601 DTC Blvd, Suite 750
Denver, Colorado 80237
(Address of Principal Executive Offices) (Zip Code)

Registrant’s telephone number, including area code (720) 886-9656

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days
 
Yes x No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12-b2 of the Exchange Act).
 
Yes o No x

At November 1, 2004, there were 79,632,189 common shares of Apollo Gold Corporation outstanding.


 
     



TABLE OF CONTENTS
 

   
Page
 
Part I - Financial Information
       
Item 1. Financial Statements
       
Consolidated Balance Sheet (Unaudited) -- As Of September 30, 2004
   
3
 
Consolidated Statement Of Operations and Deficit(Unaudited)
       
     For The Three and Nine Month Periods Ended September 30, 2004 and 2003
   
4
 
Consolidated Statement of Cash Flows (Unaudited)
       
     For The Three and Nine Months Ended September 30, 2004 and 2003
   
5
 
Notes To Financial Statements (Unaudited)
   
5
 
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
   
26
 
Item 3. Quantitative and Qualitative Disclosures about Market Risk
   
36
 
Item 4. Controls and Procedures
   
37
 
Part II - Other Information
   
39
 
Item 1. Legal Proceedings
   
39
 
Item 2. Changes in Securities and Use of Proceeds
   
39
 
Item 3. Defaults upon Senior Securities
   
39
 
Item 4. Submission of Matters to A Vote of Security Holders
   
39
 
Item 5. Other Information
   
39
 
Item 6. Exhibits
   
39
 
Signatures
   
40
 
Exhibits
   
41
 


STATEMENTS REGARDING FORWARD LOOKING INFORMATION
 
This report, including the Notes to Unaudited Consolidated Financial Statements, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act of 1934, as amended. Forward-looking statements include, without limitation, with respect to our financial condition, results of operations, production, costs, start-up of the Standard Mine, completing stripping at Montana Tunnels, feasibility studies at Black Fox, business prospects, plans, objectives, goals, strategies, future events, capital expenditure, and exploration and development efforts. Forward-looking statements can be identified by the use of forward-looking terminology, such as “may”, “will”, “should”, “expect”, “anticipate”, “estimate”, “continue”, “plans”, “intends”, or other similar terminology. These forward-looking statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is anticipated or forecasted in these forward-looking statements due to numerous factors, including, but not limited to, the outcome of assays and additional exploration sampling and drilling efforts, delay in permits or approvals, technical or permitting problems, unanticipated drilling problems or costs, variations in ore grade, the market price of gold and other minerals, unanticipated delays or costs for construction, or start-up at our mines, unanticipated reclamation liabilities, the availability and timing of external financing or acceptable terms and other factors disclosed under the heading “Risk Factors” in Apollo Gold’s 10-K for the year ended December 31, 2003 as well as our 10-Q filings for the periods ended March 31, 2004 and June 30, 2004 and elsewhere in Apollo Gold documents filed from time to time with the Toronto Stock Exchange, The American Stock Exchange, The United States Securities and Exchange Commission and other regulatory authorities. In addition, such statements could be affected by general industry and market conditions and growth rates, and general domestic and international economic conditions. We undertake no obligation to update forward-looking statements.
 

 
     

 

ACCOUNTING PRINCIPLES, REPORTING CURRENCY AND OTHER INFORMATION
 
Apollo Gold Corporation prepares its consolidated financial statements in accordance with accounting principles generally accepted in Canada (“Cdn GAAP”) and publishes its financial statements in United States dollars. This Quarterly Report on Form 10-Q should be read in conjunction with our consolidated financial statements and related notes for the fiscal year ended December 31, 2003 included in our Annual Report (the “Annual Report”) filed with the SEC. Certain reclassifications have been made to the prior period financial statements to conform with the current period presentation.
 
Unless stated otherwise, all dollar amounts are expressed in United States dollars.
 
References to “we”, “our”, “us”, the “Company” or “Apollo” mean Apollo Gold Corporation and its consolidated subsidiaries, or to any one or more of them, as the context requires.
 
NON-GAAP FINANCIAL INFORMATION
 
The cash operating, total cash and total production costs are non - GAAP financial measures and are used by management to assess performance of individual operations as well as a comparison to other gold producers.
 
The terms “cash operating cost” and “total cash cost” are used on a per ounce of gold basis. Cash operating cost per ounce is equivalent to direct operating costs expense for the period as found on the Consolidated Statements of Operations, less mining taxes and by-product credits payable for silver, lead, and zinc divided by the number of ounces of gold sold during the period. The term “total cash cost” per ounce is equivalent to mining operations expense for the period, less by-product credits payable, plus royalty expenses for silver, lead and zinc, divided by the number of ounces of gold sold during the period. The term “total production costs” is total cash costs plus depreciation and amortization.
 
This information differs from measures of performance determined in accordance with generally accepted accounting principles in Canada and the United States and should not be considered in isolation or a substitute for measures of performance prepared in accordance with GAAP. These measures are not necessarily indicative of operating profit or cash flow from operations as determined under GAAP and may not be comparable to similarly titled measures of other companies. See Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations for a reconciliation of these non-GAAP measures to our Statements of Operations.
 

  
     

 

ITEM 1: FINANCIAL STATEMENTS
 
These consolidated financial statements should be read in conjunction with the financial statements, accompanying notes and other relevant information included in the Company’s report on Form 10-K for the year ended December 31, 2003. 

Interim Consolidated Financial Statements of

APOLLO GOLD CORPORATION

September 30, 2004


 
     

 


APOLLO GOLD CORPORATION
   
Consolidated Balance Sheets
   
(In thousands of United States dollars)
   

 
September 30,
2004
 
December 31,
2003
 
ASSETS  
 (Unaudited)
(Audited)
 
           
CURRENT
         
     Cash and cash equivalents
 
$
1,414
 
$
25,851
 
     Short-term investments
   
-
   
5,855
 
     Accounts receivable
   
1,543
   
4,647
 
     Prepaids
   
510
   
552
 
     Broken ore on leach pad
   
12,403
   
9,594
 
     Inventories (Note 4)
   
3,297
   
2,839
 
     
19,167
   
49,338
 
BROKEN ORE ON LEACH PAD
   
2,363
   
1,827
 
PROPERTY, PLANT AND EQUIPMENT (Note 5)
   
52,659
   
38,519
 
DEFERRED STRIPPING COSTS
   
35,479
   
24,033
 
RESTRICTED CERTIFICATE OF DEPOSIT AND
             
     OTHER ASSETS
   
8,997
   
6,893
 
   
$
118,665
 
$
120,610
 
LIABILITIES
             
               
CURRENT
             
     Accounts payable
 
$
9,959
 
$
5,848
 
     Accrued liabilities
   
2,850
   
2,781
 
     Notes payable
   
2,992
   
4,117
 
     Property and mining taxes payable
   
1,081
   
1,080
 
     
16,882
   
13,826
 
NOTES PAYABLE AND LONG-TERM LIABILITY
   
1,525
   
3,275
 
ACCRUED SITE CLOSURE COSTS
   
22,947
   
21,619
 
     
41,354
   
38,720
 
               
CONTINUING OPERATIONS (Note 1)
             
COMMITMENTS AND CONTINGENCIES (Note 9)
             
               
SHAREHOLDERS' EQUITY
             
               
Share capital (Note 6)
   
134,958
   
120,624
 
Issuable common shares
   
231
   
231
 
Contributed surplus (Note 6)
   
8,147
   
7,172
 
Deficit
   
(66,025
)
 
(46,137
)
     
77,311
   
81,890
 
   
$
118,665
 
$
120,610
 

The accompanying notes are an integral part of these interim consolidated financial statements.

 
  

 
   

 

APOLLO GOLD CORPORATION
Consolidated Statements of Operations and Deficit
(In thousands of United States dollars, except per share amounts)
(Unaudited)


   
Three months ended
 
 Nine months ended
 
   
September 30,
 
 September 30,
 
   
2004
 
2003
 
 2004
 
 2003
 
REVENUE
                    
     Revenue from sale of minerals
 
$
12,720
 
$
20,098
 
$
45,904
 
$
46,025
 
OPERATING EXPENSES
                         
     Direct operating costs
   
14,489
   
16,293
   
47,887
   
36,965
 
     Depreciation and amortization
   
1,292
   
1,449
   
3,894
   
4,226
 
     General and administrative expenses
   
1,087
   
1,088
   
4,325
   
3,360
 
     Stock-based compensation
   
388
   
20
   
487
   
361
 
     Accretion expense
   
783
   
320
   
1,474
   
960
 
     Royalty expense
   
133
   
237
   
507
   
687
 
     Exploration and business development
   
515
   
52
   
774
   
2,052
 
     
18,687
   
19,459
   
59,348
   
48,611
 
OPERATING (LOSS) INCOME
   
(5,967
)
 
639
   
(13,444
)
 
(2,586
)
OTHER INCOME (EXPENSES)
                         
     Interest income
   
10
   
10
   
261
   
58
 
     Interest expense
   
(80
)
 
(127
)
 
(287
)
 
(444
)
     Foreign exchange (loss) gain and other
   
(79
)
 
(139
)
 
(567
)
 
516
 
NET (LOSS) INCOME FOR THE PERIOD
   
(6,116
)
 
383
   
(14,037
)
 
(2,456
)
DEFICIT, BEGINNING OF PERIOD
   
(59,909
)
 
(46,790
)
 
(46,137
)
 
(43,951
)
CUMULATIVE EFFECT OF CHANGE IN
                         
     ACCOUNTING POLICY (Note 3 (a))
   
-
   
-
   
(5,851
)
 
-
 
ADJUSTED OPENING BALANCE
   
(59,909
)
 
(46,790
)
 
(51,988
)
 
(43,951
)
DEFICIT, END OF PERIOD
 
$
(66,025
)
$
(46,407
)
$
(66,025
)
$
(46,407
)
NET (LOSS) INCOME PER SHARE,
                         
     BASIC AND DILUTED
 
$
(0.08
)
$
0.01
 
$
(0.18
)
$
(0.05
)
WEIGHTED AVERAGE NUMBER
                         
     OF SHARES OUTSTANDING
   
79,617,391
   
49,843,353
   
77,924,423
   
48,480,820
 

The accompanying notes are an integral part of these interim consolidated financial statements.


 
   4  

 

APOLLO GOLD CORPORATION
                    
Consolidated Statements of Cash Flows
                    
(In thousands of United States dollars)
                    
(Unaudited)
                    
           
   
Three months ended
 Nine months ended
September 30,
 September 30,
2004
2003
 2004
2003
 
OPERATING ACTIVITIES
                    
 Net (loss) income for the period
 
$
(6,116
)
$
383
 
$
(14,037
)
$
(2,456
)
     Items not affecting cash
                         
     Depreciation and amortization
   
1,292
   
1,449
   
3,894
   
4,226
 
     Stock-based compensation
   
388
   
20
   
487
   
361
 
     Accretion expense
   
783
   
320
   
1,474
   
960
 
     Other
   
(33
)
 
85
   
(146
)
 
(84
)
     Gain on sale of property, plant and equipment
   
-
   
(41
)
 
-
   
(41
)
     Net change in non-cash operating working
                         
     capital items
   
4,851
   
(630
)
 
3,524
   
(1,196
)
     
1,165
   
1,586
   
(4,804
)
 
1,770
 
INVESTING ACTIVITIES
                         
     Property, plant and equipment expenditures
   
(6,680
)
 
(4,288
)
 
(17,587
)
 
(6,733
)
     Proceeds from disposals of property, plant and equipment
   
-
   
172
   
-
   
172
 
     Deferred stripping costs
   
(4,097
)
 
(447
)
 
(11,446
)
 
(4,844
)
     Short-term investments
   
7,446
   
-
   
5,855
   
-
 
     Restricted Certificate of Deposit and other assets
   
(394
)
 
(214
)
 
(2,104
)
 
(1,097
)
     
(3,725
)
 
(4,777
)
 
(25,282
)
 
(12,502
)
FINANCING ACTIVITIES
                         
     Proceeds from exercise of warrants and options
   
71
   
35,129
   
8,931
   
37,912
 
     Acquisition and cancellation of shares
   
-
   
-
   
(48
)
 
-
 
     Payments of notes payable
   
(1,150
)
 
(936
)
 
(3,234
)
 
(2,762
)
     
(1,079
)
 
34,193
   
5,649
   
35,150
 
NET (DECREASE) INCREASE IN CASH
   
(3,639
)
 
31,002
   
(24,437
)
 
24,418
 
CASH AND CASH EQUIVALENTS,
                         
     BEGINNING OF PERIOD
   
5,053
   
1,842
   
25,851
   
8,426
 
CASH AND CASH EQUIVALENTS,
                         
     END OF PERIOD
 
$
1,414
 
$
32,844
 
$
1,414
 
$
32,844
 
SUPPLEMENTAL CASH FLOW INFORMATION:
                         
Interest paid
 
$
80
 
$
127
 
$
287
 
$
444
 
Income taxes paid
 
$
-
 
$
-
 
$
-
 
$
-
 

During the three and nine months ended September 30, 2004, property, plant and equipment of $19 was acquired under a capital lease obligation.

During the nine months ended September 30, 2004, the Company issued 48,978 shares to meet the earn-in requirements of the Huizopa Joint Venture Agreement. Share capital and property, plant and equipment both increased by $88 as a result of this transaction. Property, plant and equipment totaling $340 was acquired under a non-cash financing arrangement.

During the nine months ended September 30, 2003, the Company issued 61,500 shares to acquire certain parcels of land located in Nevada. Share capital and property, plant and equipment both increased by $134 as a result of this transaction. Property, plant and equipment totaling $1,587 was acquired under capital lease obligations.

The accompanying notes are an integral part of these interim consolidated financial statements.


 

 
   

 

APOLLO GOLD CORPORATION
Notes to the Consolidated Financial Statements
Nine month period ended September 30, 2004
(Stated in United States dollars; tabular amounts in thousands)
(Unaudited)


1.   CONTINUING OPERATIONS
These unaudited interim consolidated financial statements are prepared on the basis of a going concern which assumes that the Company will realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company’s ability to continue as a going concern is dependent on its ability to successfully operate the Montana Tunnels Mine and Florida Canyon Mine (including Standard mine). The Company will not have sufficient resources from existing operations to finance the development of the Black Fox project. Subsequent to September 30, 2004, the Company completed new financing totaling $7.5 million to sustain current operations and exploration activities. The Company is actively seeking financing to develop the Black Fox project, however, the availability, amount and timing of this financing is not certain at this time. The Company is actively seeking financing for the Black Fox project feasibility and exploration activities; however, the availability, amount and timing of this financing is not certain at this time.
 
2.   NATURE OF OPERATIONS
Apollo Gold Corporation (“Apollo” or the “Company”) is engaged in gold mining including extraction, processing and refining and the production of other by-product metals, as well as related activities including exploration and development. The Company currently owns and has rights to operate the Florida Canyon Mine, an open pit heap leach operation located in the State of Nevada; the Montana Tunnels Mine, an open pit mine and mill, producing gold doré and lead- gold and zinc-gold concentrates located in the State of Montana; and the Diamond Hill Mine, currently under care and maintenance, also located in the State of Montana.

Apollo has two development properties, Black Fox, which is located in the Province of Ontario near the Township of Mattheson, and Standard Mine, which is located near the Florida Canyon Mine. Apollo has four exploration properties located near the Florida Canyon Mine.

Apollo has entered into an agreement to earn up to a 71% interest in the Huizopa project located in the Sierra Madre gold belt in Mexico.

3.   ACCOUNTING POLICIES
  These consolidated interim financial statements have been prepared in accordance with Canadian generally accepted accounting principles. The accounting policies followed in preparing these financial statements are those used by the Company as set out in the audited financial statements for the year ended December 31, 2003, except as described in Notes 3 (a) and 3 (b). Certain information and note disclosure normally included in consolidated financial statements prepared in accordance with Canadian generally accepted accounting principles have been omitted. These interim financial statements should be read together with the Company’s audited financial statements for the year ended December 31, 2003.

 
   6  

 

APOLLO GOLD CORPORATION
Notes to the Consolidated Financial Statements
Nine month period ended September 30, 2004
(Stated in United States dollars; tabular amounts in thousands)
(Unaudited)

 

3.   ACCOUNTING POLICIES (Continued)
In the opinion of management, all adjustments considered necessary for fair presentation have been included in these financial statements. Interim results are not necessarily indicative of the results expected for the fiscal year.
Certain of the comparative figures have been reclassified to conform with the current period presentation.
(a)   Stock- based compensation
Effective January 1, 2004, the Company adopted the amended recommendations of the CICA Handbook Section 3870, Stock- based Compensation and Other Stock- based Payments. Under the amended standards of this Section, the fair value of all stock-based awards granted are estimated using the Black-Scholes model and are recorded in operations over their vesting periods. The compensation cost related to stock options granted to employees and directors after January 1, 2004 is recorded in the consolidated statement of operations.
Previously, the Company provided note disclosure of pro forma net loss as if the fair value based method had been used on stock options granted to employees and directors after January 1, 2002. The amended recommendations have been applied using the retroactive method without restatement and had the effect of increasing share capital, contributed surplus and opening deficit as follows:

     
Increase as at
 
     
January 1,
 
     
2004
 
 
Share capital
$
257
 
 
Contributed surplus
 
5,594
 
 
Deficit
 
(5,851
)
 
(b)   Hedging relationships
  Effective January 1, 2004, the Company adopted the CICA Accounting Guideline 13, Hedging Relationships (“AcG-13”). AcG-13 specifies the conditions under which hedge accounting is appropriate and includes requirements for the identification, documentation and designation of hedging relationships, sets standards for determining hedge effectiveness, and establishes criteria for the discontinuance of hedge accounting. The adoption of AcG-13 had no impact on the Company’s results of operations and financial position.


 
   7  

 

APOLLO GOLD CORPORATION
Notes to the Consolidated Financial Statements
Nine month period ended September 30, 2004
(Stated in United States dollars; tabular amounts in thousands)
(Unaudited)

 
4
.
INVENTORIES
                 
   
Inventories consist of:
                 
 
           
September 30,
   
December 31,
               
2004
   
2003
   
Concentrate inventory
       $
228
 
 $
98
   
Dore inventory
         
579
   
56
   
Materials and supplies
         
2,490
   
2,685
           
 
$ 
3,297
 
$
2,839
 
5
.
PROPERTY, PLANT AND EQUIPMENT
         
   
The components of property, plant and equipment are as follows:
         
 
        
 
 
 
        
September 30,
2004
 
December 31,
2003
 
        
Accumulated
Net Book
Net Book
  
Cost
Depreciation
Value
Value
 
 Mine assets  
 
                     
     Building, plant and equipment
       
$
16,884
     
$
5,302
 
$
11,582
 
$
10,643
 
     Mining properties and
                                   
         development costs
         
40,617
       
7,007
   
33,610
   
20,412
 
           
57,501
       
12,309
   
45,192
   
31,055
 
 Mineral rights
         
7,467
       
-
   
7,467
   
7,464
 
 Total property, plant and equipment
       
$
64,968
     
$
12,309
 
$
52,659
 
$
38,519
 

 
 
If the Black Fox project is developed and reaches commercial production, an additional $2.4 million (Cdn.$3 million) is due to the vendors to purchase the property free and clear of all encumbrances.
   
 
                 
 
 

 
   8  

 


APOLLO GOLD CORPORATION
Notes to the Consolidated Financial Statements
Nine month period ended September 30, 2004
(Stated in United States dollars; tabular amounts in thousands)
(Unaudited)


6.   SHARE CAPITAL
(a)   Authorized
Unlimited number of common shares with no par value.
(b)   Issued and outstanding

            
 Contributed
 
   
Shares
 
 Amount
 
 Surplus
 
Balance, December 31, 2003
               
     as previously reported
   
73,539,790
 
$
120,624
 
$
7,172
 
Cumulative effect of change in
                   
     accounting policy (Note 3 (a))
   
-
   
257
   
5,594
 
Adjusted balance, December 31, 2003
   
73,539,790
   
120,881
   
12,766
 
Warrants exercised
   
5,384,125
   
12,660
   
(4,075
)
Options exercised
   
399,054
   
966
   
(647
)
Options exercised by agents
   
15,723
   
35
   
(8
)
Shares reacquired and cancelled
   
(20,500
)
 
(48
)
 
-
 
Shares issued for 2003 share-based
                   
     compensation
   
265,000
   
376
   
(376
)
Shares issued for Huizopa interest
   
48,978
   
88
   
-
 
Stock-based compensation
   
-
   
-
   
487
 
Balance, September 30, 2004
   
79,632,170
 
$
134,958
 
$
8,147
 

(c)   Warrants
The following summarizes outstanding warrants as at September 30, 2004:

   
Number of
   
Exercise
 
Expiry
Warrants
 
Shares
   
Price
 
Date
653,277
 
653,277
 
$
1.67
 
September 26, 2005
63,969
 
63,969
   
1.67
 
October 26, 2005
3,000,000
 
3,000,000
   
2.10
 
December 23, 2006
3,717,246
 
3,717,246
         

 

 
   

 

APOLLO GOLD CORPORATION
Notes to the Consolidated Financial Statements
Nine month period ended September 30, 2004
(Stated in United States dollars; tabular amounts in thousands)
(Unaudited)

  
6.   SHARE CAPITAL (Continued)
(d)   Share purchase options
(i)   A summary of information concerning outstanding stock options at September 30, 2004 is as follows:

              
Performance-based
 
Fixed Stock Options
Stock Options
 
         
 Weighted
     
 Weighted
 
     
Number of
 
 Average
 
Number of
 
 Average
 
     
Common
 
 Exercise
 
Common
 
 Exercise
 
     
Shares
 
 Price
 
Shares
 
 Price
 
 
Balances, December 31, 2003
   
1,887,300
 
$
2.20
   
2,500,154
 
$
0.80
 
 
     Options granted
   
680,500
   
1.87
   
-
   
-
 
 
     Options exercised
   
-
   
-
   
(399,054
)
 
0.80
 
 
     Options cancelled
   
(214,500
)
 
2.16
   
(196,344
)
 
0.80
 
 
Balances, September 30, 2004
   
2,353,300
 
$
2.11
   
1,904,756
 
$
0.80
 

(ii)   The following table summarizes information concerning outstanding and exercisable fixed stock options at September 30, 2004:

Options Outstanding  
Options Exercisable
 
       
Weighted
     
 Weighted
 
       
Average
     
 Average
 
Number
 
Expiry
 
Exercise Price
 
Number
 
Exercise Price
 
Outstanding
 
Date
 
per Share
 
Exercisable
 
 per Share
 
1,531,000
   
February 18, 2013
     
$
2.24
   
765,500
       
$
2.24
 
2,600
   
March 28, 2013
       
2.34
   
1,300
         
2.34
 
70,000
   
May 21, 2013
       
2.27
   
35,000
         
2.27
 
110,000
   
August 22, 2013
       
2.12
   
55,000
         
2.12
 
100,000
   
November 13, 2013
       
1.67
   
-
         
-
 
367,000
   
March 10, 2014
       
2.05
   
-
         
-
 
129,900
   
May 19, 2014
       
1.44
   
-
         
-
 
42,800
   
August 10, 2014
       
0.95
   
-
         
-
 
2,353,300
           
$
2.11
   
856,800
       
$
2.23
 

(iii)   As at September 30, 2004, the 1,904,756 performance -based stock options were fully vested and have an expiry date of June 25, 2007.

 

 
   10  

 

APOLLO GOLD CORPORATION
Notes to the Consolidated Financial Statements
Nine month period ended September 30, 2004
(Stated in United States dollars; tabular amounts in thousands)
(Unaudited)


6.   SHARE CAPITAL (Continued)
(e)   Stock- based compensation
The fair value of each option granted is estimated at the time of grant using the Black- Scholes option pricing model with weighted average assumptions for grants as follows:

 
      Nine months ended September 30,   
      2004      2003   
    Risk free interest rate
   
3.1
%
 
3.5
%
    Dividend yield
   
0
%
 
0
%
    Volatility
   
56
%
 
52
%
    Expected life in years
   
5
   
5
 

As the Company has selected the retroactive without restatement method for reporting the change in accounting policy related to stock compensation expense (Note 3 (a)), the Company must disclose the
impact on net loss and net loss per share as if the fair value based method of accounting for stock-based compensation had been applied in 2003.

     
Three months
 
 Nine months
 
     
ended
 
 ended
 
     
September 30,
 
 September 30,
 
     
2003
 
 2003
 
 
Net income (loss)
          
 
     As reported
 
$
383
 
$
(2,456
)
 
     Pro forma stock option expense
   
(599
)
 
(2,368
)
     
$
(216
)
$
(4,824
)
 
Basic and diluted income (loss) per share
             
 
     As reported
 
$
0.01
 
$
(0.05
)
 
     Pro forma
 
$
(0.00
)
$
(0.10
)

  7. INCOME TAXES

      The Company did not record a recovery for income taxes for the period ended September 30, 2004 as the net loss carry forwards are fully offset by a valuation allowance.

 

 
   11  

 

APOLLO GOLD CORPORATION
Notes to the Consolidated Financial Statements
Nine month period ended September 30, 2004
(Stated in United States dollars; tabular amounts in thousands)
(Unaudited)


  8. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
    Gold hedges

The Company entered into hedging contracts with Standard Bank London Limited for gold in the aggregate amount of 100,000 ounces involving the use of combinations of put and call options. As of September 30, 2004 there are 28,000 ounces remaining on these contracts. The contracts give the holder the right to buy, and the Company the right to sell, stipulated amounts of gold at the upper and lower exercise prices, respectively. The contracts continue through April 25, 2005 with a put option strike price of $295 per ounce and a call option strike price of $345 per ounce. The Company has also completed certain spot deferred forward contracts for the delivery of gold. Gains or losses on these spot deferred forward contracts are recognized as an adjustment of revenue in the period when the originally designated production is sold. As at September 30, 2004, the fair value of the contracts is a loss of approximately $2.1 million (December 31, 2003 -$5.9 million).
     
The contracts mature as follows:
 
 
 
 
   
Ounces of
   
Gold
 
2004
12,000
 
2005
16,000
   
28,000

9.   COMMITMENTS AND CONTINGENCIES
(a)   Environmental
The Company’s mining and exploration activities are subject to various federal, provincial and state laws and regulations governing the protection of the environment.
These laws and regulations are continually changing and generally becoming more restrictive. The Company conducts its operations so as to protect public health and the environment and believes its operations are materially in compliance with all applicable laws and regulations. The Company has made, and expects to make in the future, expenditures to comply with such laws and regulations.
(b)   Litigation and claims
The Company is from time to time involved in various claims, legal proceedings and complaints arising in the ordinary course of business. The Company does not believe that adverse decisions in any pending or threatened proceedings related to any matter, or any amount which it may be required to pay by reason thereof, will have a material effect on the financial conditions or future results of operations of the Company.


 
   12  

 

APOLLO GOLD CORPORATION
Notes to the Consolidated Financial Statements
Nine month period ended September 30, 2004
(Stated in United States dollars; tabular amounts in thousands)
(Unaudited)


10.     SEGMENTED INFORMATION

Apollo operates the Montana Tunnels and Florida Canyon Mines in the United States and the Black Fox development project in Canada. As the products and services of the Company’s largest segments, Montana Tunnels and Florida Canyon, are essentially the same, the reportable segments have been determined at the level where decisions are made on the allocation of resources and capital and where performance is measured. The accounting policies for these segments are the same as those followed by the Company as a whole.

Amounts as at September 30, 2004 are as follows:
                 
   
Montana
Florida
Black
Corporate
Tunnels
Canyon
Fox
and Other
Total
 
Cash and cash equivalents
 
$
39
 
$
29
 
$
21
 
$
1,325
 
$
1,414
 
Broken ore on leach pad - current
   
-
   
12,403
   
-
   
-
   
12,403
 
Other non-cash current assets
   
2,926
   
2,077
   
179
   
168
   
5,350
 
     
2,965
   
14,509
   
200
   
1,493
   
19,167
 
Broken ore on leach pad - long-term
   
-
   
2,363
   
-
   
-
   
2,363
 
Property, plant and equipment
   
15,907
   
17,783
   
18,215
   
754
   
52,659
 
Deferred stripping costs
   
35,479
   
-
   
-
   
-
   
35,479
 
Restricted certificate of deposit
                               
     and other assets
   
3,405
   
5,028
   
511
   
53
   
8,997
 
Total assets
 
$
57,756
 
$
39,683
 
$
18,926
 
$
2,300
 
$
118,665
 
Current liabilities
 
$
7,393
 
$
7,158
 
$
1,366
 
$
965
 
$
16,882
 
Notes payable and long-term
                               
     liability
   
625
   
900
   
-
   
-
   
1,525
 
Accrued site closure costs
   
9,709
   
13,238
   
-
   
-
   
22,947
 
Total liabilities
 
$
17,727
 
$
21,296
 
$
1,366
 
$
965
 
$
41,354
 

 

 
   13  

 

APOLLO GOLD CORPORATION
Notes to the Consolidated Financial Statements
Nine month period ended September 30, 2004
(Stated in United States dollars; tabular amounts in thousands)
(Unaudited)



10
.
SEGMENTED INFORMATION (Continued)
                       
   
Amounts as at December 31, 2003 are as follows:
                       
     
Montana
   
Florida
   
Black
   
Corporate
     
     
Tunnels
   
Canyon
   
Fox
   
and Other
   
Total
   
Cash and cash equivalents
$
754
 
$
19
 
$
95
 
$
24,983
 
$
25,851
Short-term investments
-
 
-
 
-
 
5,855
 
5,855
Broken ore on leach pad - current
-
 
9,594
 
-
 
-
 
9,594
Other non-cash current assets
 
5,345
    
2,263
    
71
   
359
   
8,038
6,099
 
11,876
 
166
 
31,197
 
49,338
Broken ore on leach pad - long-term
-
 
1,827
 
-
 
-
 
1,827
Property, plant and equipment
15,559
 
13,529
 
8,914
 
517
 
38,519
Deferred stripping costs
24,033
 
-
 
-
 
-
 
24,033
Restricted certificate of deposit
       
and other assets
 
2,663
   
3,809
   
377
   
44
   
6,893
Total assets
$
48,354
 
$
31,041
 
$
9,457
 
$
31,758
 
$
120,610
Current liabilities
$
6,140
 
$
6,515
 
$
507
 
$
664
 
$
13,826
Notes payable and long-term
       
liability
980
 
2,295
 
-
 
-
 
3,275
Accrued site closure costs
 
9,148
    
12,471
    
-
     
-
    
21,619
Total liabilities
$
16,268
 
$
21,281
 
$
507
 
$
664
 
$
38,720
 

 

 
   14  

 

APOLLO GOLD CORPORATION
Notes to the Consolidated Financial Statements
Nine month period ended September 30, 2004
(Stated in United States dollars; tabular amounts in thousands)
(Unaudited)


10
.
SEGMENTED INFORMATION (Continued)
 
   
Amounts for the three and nine month periods ended September 30, 2004 and 2003, respectively,
 
   
are as follows:
 
 
       
 Three months ended September 30, 2004
   
Montana
 
 Florida
 
Black
 
Corporate
     
   
Tunnels
 
 Canyon
 
Fox
 
and Other
 
Total
 
 Revenue from sale of minerals
 
$
7,393
 
$
5,327
 
$
-
   
$
-
 
$
12,720
 
 Direct operating costs
   
8,530
   
5,959
   
-
     
-
   
14,489
 
 Depreciation and amortization
   
646
   
618
   
-
     
28
   
1,292
 
 General and administrative expenses
   
-
   
-
   
-
     
1,087
   
1,087
 
 Stock-based compensation
   
-
   
-
   
-
     
388
   
388
 
 Accretion expense
   
479
   
304
   
-
     
-
   
783
 
 Royalty expense
   
-
   
133
   
-
     
-
   
133
 
 Exploration and business development
   
-
   
-
   
-
     
515
   
515
 
     
9,655
   
7,014
   
-
     
2,018
   
18,687
 
 Operating loss
   
(2,262
)
 
(1,687
)
 
-
     
(2,018
)
 
(5,967
)
 Interest income
   
-
   
-
   
-
     
10
   
10
 
 Interest expense
   
(30
)
 
(50
)
 
-
     
-
   
(80
)
 Foreign exchange (loss) gain and other
   
(108
)
 
-
   
-
     
29
   
(79
)
 Net loss
 
$
(2,400
)
$
(1,737
)
$
-
   
$
(1,979
)
$
(6,116
)
 Investing activities
                                 
 Property, plant and equipment
                                 
 expenditures
 
$
1,069
 
$
2,628
 
$
3,002
   
$
-
 
$
6,699
 
 Deferred stripping expenditures
   
4,097
   
-
   
-
     
-
    4,097  
 
   

 Nine months ended September 30, 2004

  
   
Montana
 Florida
Black
Corporate
  
Tunnels
 Canyon
Fox
and Other
 Total
 Revenue from sale of minerals
 
$
25,542
 
$
20,362
 
$
-
   
$
-
 
$
45,904
 
 Direct operating costs
   
28,369
   
19,518
   
-
     
-
   
47,887
 
 Depreciation and amortization
   
1,823
   
1,987
   
-
     
84
   
3,894
 
 General and administrative expenses
   
-
   
-
   
-
     
4,325
   
4,325
 
 Stock-based compensation
   
-
   
-
   
-
     
487
   
487
 
 Accretion expense
   
560
   
914
   
-
     
-
   
1,474
 
 Royalty expense
   
-
   
507
   
-
     
-
   
507
 
 Exploration and business development
   
-
   
-
   
-
     
774
   
774
 
     
30,752
   
22,926
   
-
     
5,670
   
59,348
 
 Operating loss
   
(5,210
)
 
(2,564
)
 
-
     
(5,670
)
 
(13,444
)
 Interest income
   
-
   
-
   
-
     
261
   
261
 
 Interest expense
   
(113
)
 
(174
)
 
-
     
-
   
(287
)
 Foreign exchange loss and other
   
(108
)
 
-
   
-
     
(459
)
 
(567
)
 Net loss
 
$
(5,431
)
$
(2,738
)
$
-
   
$
(5,868
)
$
(14,037
)
 Investing activities
                                 
 Property, plant and equipment
                                 
 expenditures
 
$
2,171
 
$
6,241
 
$
9,301
   
$
321
 
$
18,034
 
 Deferred stripping expenditures
   
11,446
   
-
   
-
     
-
   
11,446
 


 
   15  

 


APOLLO GOLD CORPORATION
Notes to the Consolidated Financial Statements
Nine month period ended September 30, 2004
(Stated in United States dollars; tabular amounts in thousands)
(Unaudited)

10.    SEGMENTED INFORMATION(Continued)

 
        
  Three months ended September 30, 2003  
 
      
Montana
 Florida
Black
Corporate
  
  
Tunnels
 Canyon
Fox
and Other
 Total
 
 Revenue from sale of minerals
       
$
10,819
 
$
9,279
 
$
-
 
$
-
 
$
20,098
 
 Direct operating costs
         
8,906
   
7,387
   
-
   
-
   
16,293
 
 Depreciation and amortization
         
543
   
872
   
-
   
34
   
1,449
 
 General and administrative expenses
         
-
   
-
   
-
   
1,088
   
1,088
 
 Stock-based compensation
         
-
   
-
   
-
   
20
   
20
 
 Accretion expense
         
79
   
241
   
-
   
-
   
320
 
 Royalty expense
         
-
   
237
   
-
   
-
   
237
 
 Exploration and business development
         
-
   
-
   
-
   
52
   
52
 
           
9,528
   
8,737
   
-
   
1,194
   
19,459
 
 Operating income (loss)
         
1,291
   
542
   
-
   
(1,194
)
 
639
 
 Interest income
         
3
   
-
   
-
   
7
   
10
 
 Interest expense
         
(35
)
 
(81
)
 
-
   
(11
)
 
(127
)
 Foreign exchange gain (loss) and other
         
-
   
-
   
-
   
(139
)
 
(139
)
 Net income (loss)
       
$
1,259
 
$
461
 
$
-
 
$
(1,337
)
$
383
 
 Investing activities
                                     
Property, plant and equipment
                                     
 expenditures
       
$
2,051
 
$
254
 
$
1,511
 
$
472
 
$
4,288
 
Deferred stripping expenditures
         
447
   
-
   
-
   
-
   
447
 
 
                     
 
           

Nine months ended September 30, 2003  

 
         
Montana 
Florida
Black
Corporate
 
Tunnels 
Canyon
Fox
and Other
Total
 Revenue from sale of minerals
       
$
18,666
 
$
27,359
 
$
-
 
$
-
 
$
46,025
 
 Direct operating costs
         
16,071
   
20,894
   
-
   
-
   
36,965
 
 Depreciation and amortization
         
1,488
   
2,655
   
-
   
83
   
4,226
 
 General and administrative expenses
         
47
   
-
   
-
   
3,313
   
3,360
 
 Stock-based compensation
         
-
   
-
   
-
   
361
   
361
 
 Accretion expense
         
236
   
724
   
-
   
-
   
960
 
 Royalty expense
         
-
   
687
   
-
   
-
   
687
 
 Exploration and business development
         
-
   
-
   
1,638
   
414
   
2,052
 
           
17,842
   
24,960
   
1,638
   
4,171
   
48,611
 
 Operating income (loss)
         
824
   
2,399
   
(1,638
)
 
(4,171
)
 
(2,586
)
 Interest income
         
3
   
-
   
-
   
55
   
58
 
 Interest expense
         
(115
)
 
(265
)
 
-
   
(64
)
 
(444
)
 Foreign exchange gain (loss) and other
         
-
   
-
   
363
   
153
   
516
 
 Net income (loss)
       
$
712
 
$
2,134
 
$
(1,275
)
$
(4,027
)
$
(2,456
)
 Investing activities
                                     
 Property, plant and equipment
                                     
 expenditures
       
$
2,947
 
$
3,227
 
$
1,651
 
$
629
 
$
8,454
 
 Deferred stripping expenditures
         
4,844
   
-
   
-
   
-
   
4,844
 


 
 
   16  

 


APOLLO GOLD CORPORATION
Notes to the Consolidated Financial Statements
Nine month period ended September 30, 2004
(Stated in United States dollars; tabular amounts in thousands)
(Unaudited)


11.     DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
     ACCOUNTING PRINCIPLES (“GAAP”)

The Company prepares its consolidated financial statements in accordance with accounting principles generally accepted in Canada. The following adjustments and/or additional disclosures would be required in order to present the financial statements in accordance with U.S. GAAP and with practices prescribed by the United States Securities and Exchange Commission for the three and nine month periods ended September 30, 2004 and 2003.

Material variances between financial
statementitems under Canadian GAAP and the determined under U.S. GAAP are as follows:

Consolidated Balance Sheet
     
September 30, 2004
     

   
Property
Plant and,
Equipment
Deferred
Stripping
Costs
Accounts
Payable
 Other
Liabilities
Share
Capital
 Contributed
 Surplus
 Deficit
 
As at September 30, 2004
                                
     Canadian GAAP
 
$
52,659
 
$
35,479
 
$
9,959
 
$
-
 
$
134,958
 
$
8,147
 
$
(66,025
)
Convertible debenture (a)
   
-
   
-
   
-
   
-
   
-
   
20,675
   
(20,675
)
Gold hedge loss (c)
   
-
   
-
   
-
   
2,128
   
-
   
-
   
(2,128
)
Impairment of property, plant and
                                           
     equipment and capitalized
                                           
     deferred stripping costs and
                                           
     change in depreciation and
                                           
     amortization (d)
   
(5,062
)
 
(8,397
)
 
-
   
-
   
-
   
-
   
(13,459
)
Flow-through common
                                           
     shares (e)
   
-
   
-
   
-
   
-
   
(238
)
 
-
   
238
 
Black Fox development
                                           
 costs (f)
   
(12,706
)
 
-
   
-
   
-
   
-
   
-
   
(12,706
)
As at September 30, 2004
                                           
     U.S. GAAP
 
$
34,891
 
$
27,082
 
$
9,959
 
$
2,128
 
$
134,720
 
$
28,822
 
$
(114,755
)

 

 
  17   

 

APOLLO GOLD CORPORATION
Notes to the Consolidated Financial Statements
Nine month period ended September 30, 2004
(Stated in United States dollars; tabular amounts in thousands)
(Unaudited)


11
.
DIFFERENCES BETWEEN CANADIANANDUNITEDSTATESGENERALLY ACCEPTED ACCOUNTING PRINCIPLES (“GAAP”) (Continued) 
   
 
   
   
Consolidated Balance Sheet
   
   
December 31, 2003
   
   
 
   

     
 
Property
Plant and
Equipment
   
Deferred
Stripping
Costs
   
Accounts
Payable
   
Other
Liabilities
   
Share
Capital
   
Contributed
Surplus
   
Deficit
 
As at December 31, 2003,
                              
Canadian GAAP
 
$
38,519
 
$
24,033
 
$
5,848
 
$
-
 
$
120,624
 
$
7,172
 
$
(46,137
)
Convertible debenture (a)
   
-
   
-
   
-
   
-
   
-
   
20,675
   
(20,675
)
Stock-based
                                           
compensation (b)
   
-
   
-
   
-
   
-
   
-
   
4,343
   
(4,343
)
Gold hedge loss (c)
   
-
   
-
   
(551
)
 
5,911
   
-
   
-
   
(5,360
)

Impairment of property,
                                           
 plant and equipment,
                                           
     capitalized deferred
                                           
     stripping costs and
                                           
     change in depreciation
                                           
     and amortization (d)
   
(5,543
)
 
(8,740
)
 
-
   
-
   
-
   
-
   
(14,283
)
Flow-through common
                                           
     shares (e)
   
-
   
-
   
-
   
-
   
(238
)
 
-
   
238
 
Black Fox development
                                           
     costs (f)
   
(3,643
)
 
-
   
-
   
-
   
-
   
-
   
(3,643
)
As at December 31, 2003,
                                           
     U.S. GAAP
 
$
29,333
 
$
15,293
 
$
5,297
 
$
5,911
 
$
120,386
 
$
32,190
 
$
(94,203
)


 

 
   18  

 


APOLLO GOLD CORPORATION
Notes to the Consolidated Financial Statements
Nine month period ended September 30, 2004
(Stated in United States dollars; tabular amounts in thousands)
(Unaudited)


11.     DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY

    
ACCEPTED ACCOUNTING PRINCIPLES (“GAAP”) (Continued)

Under U.S. GAAP, the net loss and net loss per share would be adjusted as follows:

 
 
2004
 
 2003
 
Net (loss) income for the three month period ended
          
 September 30, based on Canadian GAAP
 
$
(6,116
)
$
383
 
Stock-based compensation (b)
   
-
   
(46
)
Gold hedge gain (loss) (c)
   
916
   
(2,833
)
Impairment of property, plant and equipment and
             
     change in depreciation (d)
   
184
   
-
 
Impairment of capitalized deferred stripping costs and
             
     change in amortization (d)
   
75
   
(829
)
Flow through shares premium paid in excess of market value
   
-
   
222
 
Black Fox development costs (f)
   
(2,813
)
 
(1,408
)
Net loss for the period based on U.S. GAAP
 
$
(7,754
)
$
(4,511
)
Other comprehensive gain (loss)
             
     Unrealized loss on cash flow hedges
 
$
(927
)
$
-
 
Comprehensive loss
 
$
(8,681
)
$
(4,511
)
Net loss per share - U.S. GAAP basic and diluted
 
$
(0.10
)
$
(0.09
)
 
             
     
2004
   
2003
 
Net loss for the nine month period ended September 30,
             
     based on Canadian GAAP
 
$
(14,037
)
$
(2,456
)
Cumulative effect of change in accounting policy (b)
   
(1,508
)
 
-
 
Stock-based compensation (b)
   
-
   
(814
)
Gold hedge gain (c)
   
3,166
   
(1,507
)
Impairment of property, plant and equipment and
             
     change in depreciation (d)
   
481
   
-
 
Impairment of capitalized deferred stripping costs and
             
     change in amortization (d)
   
343
   
(829
)
Flow through shares premium paid in excess of market value
   
-
   
222
 
Black Fox development costs (f)
   
(9,063
)
 
(1,408
)
Net loss for the period based on U.S. GAAP
 
$
(20,618
)
$
(6,792
)
Other comprehensive gain (loss)
             
     Unrealized gain on cash flow hedges
 
$
66
 
$
-
 
Comprehensive loss
 
$
(20,552
)
$
(6,792
)
Net loss per share - U.S. GAAP basic and diluted
 
$
(0.26
)
$
(0.14
)

 

 
  19   

 

APOLLO GOLD CORPORATION
Notes to the Consolidated Financial Statements
Nine month period ended September 30, 2004
(Stated in United States dollars; tabular amounts in thousands)
(Unaudited)


11.   DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (“GAAP”) (Continued)
(a)   Convertible debenture
Under Canadian GAAP, the convertible debenture was recorded as an equity instrument on issuance in March 2002. Under U.S. GAAP, on issuance, the convertible debenture would have been recorded as a liability and reclassified to equity only upon conversion.
Further, under U.S. GAAP, the beneficial conversion feature represented by the excess of the fair value of the shares and warrants issuable on conversion of the debenture, measured on the commitment date, over the amount of the proceeds to be allocated to the common shares and warrants upon conversion, would be allocated to contributed surplus.
This results in a discount on the debenture that is recognized as additional interest expense over the term of the debenture and any unamortized balance is expensed immediately upon conversion of the debenture. Accordingly, for U.S. GAAP purposes, the Company has recognized a beneficial conversion feature and debenture issuance costs of $20,675,000 for the year ended December 31, 2002. Canadian GAAP does not require the recognition of any beneficial conversion feature.
(b)   Stock- based compensation

Under Canadian GAAP, effective January 1, 2004, the Company adopted the amended recommendations of CICA Handbook Section 3870 (Note 2 (a)). Under U.S. GAAP, effective January 1, 2004, the Company adopted the modified prospective method of accounting for stock-based compensation recommended in SFAS 148, Accounting for Stock-Based Compensation - Transition and Disclosure (“SFAS 148”). Prior to January 1, 2004, the Company measured its employee stock-based awards using the intrinsic value method prescribed by APB No. 25, Accounting for Stock Issued to Employees. As required by SFAS 148, the Company must disclose the impact on net income and basic and diluted loss per share as if the fair value based method had been applied in the comparative period.

    

 
 2004
 2003
 
 
Net loss for the three month period ended
          
 
 September 30, as reported
 
$
(7,754
)
$
(4,511
)
 
Stock option expense as reported
   
388
   
46
 
 
Pro forma stock option expense
   
(388
)
 
(599
)
 
Net loss - pro forma
 
$
(7,754
)
$
(5,064
)
 
Net loss per share, basic - for the three month
             
 
 period ended September 30
 
$
(0.10
)
$
(0.09
)
 
Stock option expense as reported
   
0.00
   
0.00
 
 
Pro forma stock option expense
   
(0.00
)
 
(0.01
)
 
Net loss per share, basic - pro forma
 
$
(0.10
)
$
(0.10
)


 

 
  20   

 


APOLLO GOLD CORPORATION
Notes to the Consolidated Financial Statements
Nine month period ended September 30, 2004
(Stated in United States dollars; tabular amounts in thousands)
(Unaudited)


11.   DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (“GAAP”) (Continued)
(b) Stock- based compensation (continued)

     
2004
2003
 
 
Net loss for the nine month period ended
         
 
     September 30, as reported
 
$
(20,618
)
$
(6,792
)
 
Stock option expense as reported
   
487
   
814
 
 
Pro forma stock option expense
   
(487
)
 
(2,368
)
 
Net loss - pro forma
 
$
(20,618
)
$
(8,346
)
 
Net loss per share, basic - for the nine month
             
 
     period ended September 30
 
$
(0.26
)
$
(0.14
)
 
Stock option expense as reported
   
0.00
   
0.02
 
 
Pro forma stock option expense
   
(0.00
)
 
(0.05
)
&nbs