**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-Q**





R  **QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE**


**SECURITIES
      EXCHANGE ACT OF 1934**





For
      the
      quarterly period ended March 31, 2006





OR





£  **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
              Incorporation
                or Organization)
            (I.R.S.
                Employer Identification No.)





**5655
      South Yosemite St., Suite 200**


**Greenwood
      Village, Colorado 80111-3220**


(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 R No £





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check
      one).





Large
                Accelerated Filer£
            Accelerated
                Filer£
            Non-Accelerated
                FilerR





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).


Yes £ No R





At
      May 5,
      2006, there were 121,396,859 common shares of Apollo Gold Corporation
      outstanding.










**TABLE
      OF CONTENTS**


*Page*PART
                  IFINANCIAL
                  INFORMATION
              
              4ITEM
                  1.
              
              FINANCIAL
                  STATEMENTS (Unaudited)
              
              4Consolidated
                  Balance Sheets - As of March 31, 2006 and as of December 31,
                  2005
              
              5Consolidated
                  Statements of Operations for the Three Months Ended March 31, 2006
                  and
                  2005
              
              6Consolidated
                  Statements of Shareholders' Equity for the Year ended December
                  31, 2005
                  and the Three Months Ended March 31, 2006
              
              7Consolidated
                  Statements of Cash Flows for the Three Months Ended March 31, 2006
                  and
                  2005
              
              8Notes
                  to the Consolidated Financial Statements
              
              9ITEM
                  2.
              
              MANAGEMENT'S
                  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                  OPERATIONS
              
              20ITEM
                  3.
              
              QUANTITATIVE
                  AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
              
              25ITEM
                  4.
              
              CONTROLS
                  AND PROCEDURES
              
              25PART
                  IIOTHER
                  INFORMATION
              
              26ITEM
                  1.
              
              LEGAL
                  PROCEEDINGS
              
              26ITEM
                  1A.
              
              RISK
                  FACTORS
              
              26ITEM
                  2.
              
              UNREGISTERED
                  SALES OF EQUITY IN SECURITIES AND USE OF PROCEEDS
              
              27ITEM
                  3.
              
              DEFAULTS
                  UPON SENIOR SECURITIES
              
              27ITEM
                  4.
              
              SUBMISSION
                  OF MATTERS TO A VOTE OF SECURITY HOLDERS
              
              27ITEM
                  5.
              
              OTHER
                  INFORMATION
              
              27ITEM
                  6.
              
              EXHIBITS
              
              27INDEXTO
                  EXHIBITS
              
              28Certification
                  of CEO Pursuant to Section 302
              
              Exhibit
                  31.1Certification
                  of CFO Pursuant to Section 302
              
              Exhibit
                  31.2Certification
                  of CEO and CFO Pursuant to Section 906
              
              Exhibit
                  32.1





**STATEMENTS
      REGARDING FORWARD LOOKING INFORMATION**




This
      Quarterly Report on Form 10-Q contains forward looking statements as defined
      in
      the *Private
      Securities Litigation Reform Act of 1995* with
      respect to our financial condition, results of operations, 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 words such as “may,” “should,” “expects,” “plans,”
“anticipates,” “believes,” “estimates,” “predicts,” “intends,” “continue,” or
      the negative of such terms, or other comparable terminology. These statements
      include comments regarding:




·
            the
                Company’s future focus on Black
                Fox;




·
            the
                establishment and estimates of mineral reserves and
                resources;




2




·
            production
                and production costs;




·
            cash
                operating costs;




·
            total
                cash costs;




·
            grade;




·
            publication
                of reserves and an NI 43-101 report and any results
                therefrom;




·
            feasibility
                studies;




·
            remediation
                efforts;




·
            expenditures;




·
            exploration;




·
            permits;




·
            expansion
                plans;




·
            plans
                for Black Fox and Huizopa;




·
            closure
                costs;




·
            cash
                flows;




·
            future
                financing;




·
            liquidity;




·
            sale
                of Montana Tunnels;




·
            estimates
                of environmental liabilities;




·
            our
                ability to fund our estimate expenditure and capital
                requirements;




·
            factors
                impacting our results of
                operations;




·
            application
                of Sarbanes-Oxley 404 reporting requirements and our ability to meet
                those
                reporting requirements; and




·
            the
                impact of adoption of new accounting
                standards.




These
      forward looking statements are subject to numerous risks, uncertainties and
      assumptions, including our ability to locate a purchaser of the Montana Tunnels
      mine and negotiate acceptable terms; unexpected
      changes in business and economic conditions; metallurgy, processing,
      access, availability of materials, equipment, supplies and water; determination
      of reserves; changes in project parameters; costs and timing of development
      of
      new reserves; results of current and future exploration activities; results
      of
      pending and future feasibility studies; political or economic instability,
      either globally or in the countries in which we operate; local and community
      impacts and issues; timing of receipt of government approvals; accidents and
      labor disputes; environmental costs and risks; competitive factors, including
      competition for property acquisitions; availability of external financing at
      reasonable rates or at all; and the factors discussed in our Annual Report
      on
      Form 10-K for the year ended December 31, 2005 under the heading “Risk Factors.” We
      disclaim any obligation to update forward looking statements, whether as a
      result of new information, future events or otherwise.




3




**ACCOUNTING
      PRINCIPLES, REPORTING CURRENCY AND OTHER INFORMATION**




Apollo
      Gold Corporation prepares its consolidated financial statements in accordance
      with accounting principles generally accepted in Canada 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 included in this quarterly report, as well as our annual
      financial statements for the fiscal year ended December 31, 2005 included
      in our Annual Report on Form 10-K. Certain classifications 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**




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. We have included cash operating
      costs information to provide investors with information about the cost structure
      of our mining operations.




The
      term
“cash operating costs” is used on a per ounce of gold basis. Cash operating
      costs per ounce is equivalent to direct operating cost as found on the
      Consolidated Statements of Operations, less production royalty expenses and
      mining taxes but includes by-product credits for payable silver, lead and
      zinc.




The
      term
“total cash costs” is equivalent to cash operating costs plus production
      royalties and mining taxes.




The
      term
“total production costs” is equivalent to total cash costs plus non-cash costs
      including depreciation and amortization.




This
      information differs from measures of performance determined in accordance with
      generally accepted accounting principles (GAAP) 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.




**PART
      I** **FINANCIAL
      INFORMATION**




**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 Annual Report on Form 10-K for the year ended December 31,
      2005 filed with the Securities and Exchange Commission on March 31,
      2006.




4




**APOLLO
      GOLD CORPORATION**


**CONSOLIDATED
      BALANCE SHEETS**


(In
      thousands of U.S. dollars)


(Unaudited)





**March
                31,**
              **2006**
            
            **December
                31,**
              **2005****ASSETS**CURRENTCash
                and cash equivalents
            
            $
            5,949
            
            $
            119Accounts
                receivable
            
            
            125
            
            
            152Prepaids
            
            
            146
            
            
            376Current
                assets of discontinued operations (Note 4)
            
            
            3,032
            
            
            4,226Total
                current assets
            
            
            9,252
            
            
            4,873Property,
                plant and equipment
            
            
            29,447
            
            
            26,128Restricted
                certificates of deposit
            
            
            578
            
            
            11,578Deferred
                financing costs
            
            
            504
            
            
            584Non-current
                assets of discontinued operations (Note 4)
            
            
            19,483
            
            
            19,382TOTAL
                ASSETS
            
            $
            59,264
            
            $
            62,545**LIABILITIES**CURRENTAccounts
                payable
            
            $
            1,723
            
            $
            2,553Accrued
                severance and other liabilities
            
            
            319
            
            
            2,116Notes
                payable
            
            
            67
            
            
            298Current
                liabilities of discontinued operations (Note 4)
            
            
            3,685
            
            
            5,444Total
                current liabilities
            
            
            5,794
            
            
            10,411Accrued
                severance
            
            
            370
            
            
            383Notes
                payable
            
            
            70
            
            
            75Convertible
                debenture
            
            
            6,847
            
            
            6,601Non-current
                liabilities of discontinued operations (Note 4)
            
            
            12,871
            
            
            12,634TOTAL
                LIABILITIES
            
            
            25,952
            
            
            30,104Continuing
                operations (Note 1)**SHAREHOLDERS’
                EQUITY**Share
                capital (Note 5)
            
            
            152,738
            
            
            148,295Issuable
                common shares
            
            
            231
            
            
            231Equity
                component of convertible debentures
            
            
            1,809
            
            
            1,809Note
                warrants
            
            
            1,086
            
            
            781Contributed
                surplus
            
            
            10,669
            
            
            10,561Deficit
            
            
            (133,221
            )
            
            (129,236
            )TOTAL
                SHAREHOLDERS’ EQUITY
            
            
            33,312
            
            
            32,441TOTAL
                LIABILITIES AND SHAREHOLDERS’ EQUITY
            
            $
            59,264
            
            $
            62,545




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




5




**APOLLO
      GOLD CORPORATION**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


(In
      thousands of U.S. dollars, except share and per share amounts)


(Unaudited)





**Three
                months ended**
              **March
                31,****2006**
            
            **2005****(Restated
                -**
              **Note
                3(b))**Operating
                expensesDepreciation
                and amortization
            
            $
            31
            
            $
            32General
                and administrative expenses
            
            
            1,193
            
            
            1,650Stock-based
                compensation
            
            
            108
            
            
            202Exploration
                and business development
            
            
            351
            
            
            2401,683
            
            
            2,124Operating
                loss
            
            
            (1,683
            )
            
            (2,124
            )Other
                income (expenses)Interest
                income
            
            
            15
            
            
            87Interest
                expense
            
            
            (512
            )
            
            (685
            )Foreign
                exchange loss and other
            
            
            (7
            )
            
            (26
            )Loss
                from continuing operations for the period
            
            
            (2,187
            )
            
            (2,748
            )Loss
                from discontinued operations for the period (Note 4)
            
            
            (1,798
            )
            
            (1,500
            )Net
                loss for the period
            
            $
            (3,985
            )
            $
            (4,248
            )Basic
                and diluted net loss per share from:Continuing
                operations
            
            $
            (0.02
            )
            $
            (0.03
            )Discontinued
                operations
            
            
            (0.01
            )
            
            (0.01
            )$
            (0.03
            )
            $
            (0.04
            )Basic
                and diluted weighted-average number of shares outstanding
            
            
            116,555,263
            
            
            94,857,192





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




6




**APOLLO
      GOLD CORPORATION**


**CONSOLIDATED
      STATEMENTS OF SHAREHOLDERS’ EQUITY**


(In
      thousands of U.S. dollars)


(Unaudited)




**Share
                Capital****Number**
              **of
                Shares**
            
            **Amount**
            
            **Issuable**
              **Common**
              **Shares**
            
            **Equity
                Component of Convertible Debentures**
            
            **Note
                Warrants**
            
            **Contributed**
              **Surplus**
            
            **Deficit**
            
            **Total**Balance,
                December 31, 2004
            
            
            90,973,120
            
            
            141,795
            
            
            231
            
            
            1,815
            
            
            781
            
            
            9,627
            
            
            (107,028
            )
            
            47,221Units
                issued for cash
            
            
            4,199,998
            
            
            2,587
            
            
            -
            
            
            -
            
            
            -
            
            
            194
            
            
            -
            
            
            2,781Shares
                issued for increase in Huizopa interest
            
            
            1,000,000
            
            
            410
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            410Shares
                issued for cash
            
            
            10,000,000
            
            
            3,183
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            3,183Conversion
                of convertibledebentures
            
            
            33,333
            
            
            23
            
            
            -
            
            
            (6
            )
            
            -
            
            
            -
            
            
            -
            
            
            17Engagement
                fee shares and warrants
            
            
            350,000
            
            
            100
            
            
            -
            
            
            -
            
            
            -
            
            
            143
            
            
            -
            
            
            243Completion
                fee shares
            
            
            900,000
            
            
            197
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            197Stock-based
                compensation
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            597
            
            
            -
            
            
            597Net
                loss
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (22,208
            )
            
            (22,208
            )Balance,
                December 31, 2005
            
            
            107,456,451
            
            
            148,295
            
            
            231
            
            
            1,809
            
            
            781
            
            
            10,561
            
            
            (129,236
            )
            
            32,441Units
                issued for cash
            
            
            11,650,000
            
            
            3,488
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            3,488Shares
                issued for 2005 stock-based compensation
            
            
            2,290,408
            
            
            955
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            955Reduction
                of exercise price of Note Warrants (Note 5(b))
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            305
            
            
            -
            
            
            -
            
            
            305Stock-based
                compensation
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            108
            
            
            -
            
            
            108Net
                loss
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (3,985
            )
            
            (3,985
            )Balance,
                March 31, 2006
            
            
            121,396,859
            
            $
            152,738
            
            $
            231
            
            $
            1,809
            
            $
            1,086
            
            $
            10,669
            
            $
            (133,221
            )
            $
            33,312





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




7




**APOLLO
      GOLD CORPORATION**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


(In
      thousands of U.S. dollars)


(Unaudited)


**Three
                months ended**
              **March
                31,****2006**
            
            **2005****(Restated
                -Note 3(b))**Operating
                activitiesLoss
                from continuing operations for the period
            
            $
            (2,187
            )
            $
            (2,748
            )Items
                not affecting cash:Depreciation
                and amortization
            
            
            31
            
            
            32Amortization
                of deferred financing costs
            
            
            80
            
            
            80Reduction
                in exercise price of Note Warrants (Note 5(b))
            
            
            305
            
            
            -Stock-based
                compensation
            
            
            108
            
            
            202Accretion
                expense - convertible debenture, net of interest paid
            
            
            245
            
            
            420Other
            
            
            7
            
            
            28Net
                change in non-cash operating working capital items
            
            
            (1,428
            )
            
            718Discontinued
                operations
            
            
            (1,660
            )
            
            (2,177
            )Net
                cash used in operating activities
            
            
            (4,499
            )
            
            (3,445
            )Investing
                activitiesProperty,
                plant and equipment expenditures
            
            
            (3,445
            )
            
            (2,010
            )Proceeds
                from disposal of property, plant and equipment
            
            
            90
            
            
            -Restricted
                certificate of deposit and other assets
            
            
            11,000
            
            
            (105
            )Discontinued
                operations
            
            
            (448
            )
            
            (1,237
            )Net
                cash provided by (used in) investing activities
            
            
            7,197
            
            
            (3,352
            )Financing
                activitiesProceeds
                on issuance of shares
            
            
            3,488
            
            
            2,761Payments
                of notes payable
            
            
            (236
            )
            
            -Discontinued
                operations
            
            
            (120
            )
            
            (691
            )Net
                cash provided by financing activities
            
            
            3,132
            
            
            2,070Net
                increase (decrease) in cash
            
            
            5,830
            
            
            (4,727
            )Cash
                and cash equivalents, beginning of period
            
            
            119
            
            
            7,146Cash
                and cash equivalents, end of period
            
            $
            5,949
            
            $
            2,419SUPPLEMENTAL
                CASH FLOW INFORMATIONInterest
                paid
            
            $
            275
            
            $
            322Income
                taxes paid
            
            $
            -
            
            $
            -




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




8


**APOLLO
        GOLD CORPORATION**
 **Notes
        to the Consolidated Financial Statements**
 **Three
        month period ended March 31, 2006**
 (Stated
        in U.S. dollars; tabular amounts in thousands)
 (Unaudited)




**1.** **CONTINUING
      OPERATIONS**




These
      consolidated financial statements are prepared on the basis of a going concern
      which assumes that Apollo Gold Corporation (“Apollo” or the “Company”) will
      realize its assets and discharge its liabilities in the normal course of
      business for the foreseeable future. To date the Company has funded its
      operations through issuance of debt and equity securities, the sale of the
      Nevada assets plus the sale of other surplus assets. The Company’s ability to
      continue as a going concern is dependent on its ability to generate cash flow
      from the sale of Montana Tunnels Mining, Inc. (“MTMI”) (Note 4) and/or continue
      to issue debt and equity securities.




The
      Company estimates that with its current period end cash balance of $5.9 million,
      it will not have sufficient funds to finance the current work programs at the
      Black Fox development project (the “Black Fox Project”) and the Huizopa
      exploration project (the “Huizopa Project”), as well as corporate overhead.
      Therefore, the Company is exploring financing opportunities to further develop
      and construct the Black Fox Project and continue its exploration program at
      the
      Huizopa Project. In addition, Apollo may raise funds from the sale of debt
      or
      equity securities which may include Canadian flow-through financing to further
      fund a portion of its Canadian exploration activities. The availability, amount,
      terms and timing of this financing are not certain at this time.




If
      the
      Company is unable to sell MTMI and/or secure additional financing and therefore
      be unable to continue as a going concern, then material adjustments would be
      required to the carrying value of assets and liabilities and balance sheet
      classifications used.




**2.** **NATURE
      OF OPERATIONS**




Apollo
      is
      engaged in the acquisition, exploration and development of mineral deposits
      principally in Canada and Mexico. The Company has a development property, the
      Black Fox Project, which is located near the Township of Matheson in the
      Province of Ontario, Canada. Apollo also owns Mexican subsidiaries which own
      or
      have the right to acquire concessions at the Huizopa Project, located in the
      Sierra Madre gold belt in Chihuahua, Mexico.




The
      Company’s assets of discontinued operations (Note 4) at March 31, 2006 consist
      of MTMI, which owns the Montana Tunnels and Diamond Hill mines. The Montana
      Tunnels mine is an open pit mine and mill, that produced gold doré and lead-gold
      and
      zinc-gold concentrates, located in the State of Montana. Mining in the open
      pit
      was suspended in October 2005 due to pit wall instability. Since the open pit
      mine operations were suspended and until May 12, 2006, the mill had been
      producing lead-gold and zinc-gold concentrates from low grade ore stockpiles.
      All operations ceased on May 12, 2006 and the Montana Tunnels mine was placed
      under care and maintenance. The Diamond Hill mine, also located in the State
      of
      Montana, is currently under care and maintenance.




**3.** **SIGNIFICANT
      ACCOUNTING POLICIES**




***a)*** These
      unaudited consolidated interim financial statements have been prepared in
      accordance with Canadian generally accepted accounting principles (“Canadian
      GAAP”) and except as described in Note 8, conform in all material respects with
      accounting principles generally accepted in the United States (“U.S. GAAP”). 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, 2005. Certain information and note disclosures normally
      included in consolidated financial statements prepared in
      accordance with Canadian GAAP have been omitted. These interim financial
      statements should be read together with the Company’s audited financial
      statements for the year ended December 31, 2005.




9


**APOLLO
        GOLD CORPORATION**
 **Notes
        to the Consolidated Financial Statements**
 **Three
        month period ended March 31, 2006**
 (Stated
        in U.S. dollars; tabular amounts in thousands)
 (Unaudited)


**3.** **SIGNIFICANT
        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 to the current
      period presentation. In particular, the assets and liabilities of MTMI as at
      December 31, 2005 and the results of operations of MTMI and the Nevada
      properties (the “Nevada Assets”) and their cash flows for the three months ended
      March 31, 2005 (Note 4) have been reclassified as discontinued
      operations.




***b)*** On
      March
      30, 2005, the Financial Accounting Standards Board (“FASB”) ratified the
      consensus of the Emerging Issues Task Force (“EITF”) Issue 04-6 that stripping
      costs incurred during the production phase of a mine are variable production
      costs that should be included in the costs of the inventory produced during
      the
      period that the stripping costs are incurred.




In
      the
      first quarter of 2005 and prior periods, Apollo deferred or accrued stripping
      costs incurred during production, as appropriate, and charged these costs to
      operations on the basis of the estimated average stripping ratio for Montana
      Tunnels. Commencing in the second quarter of 2005, Apollo changed its accounting
      policy under Canadian GAAP and U.S. GAAP with respect to stripping costs to
      be
      consistent with the consensus reached by the EITF, on the basis that the
      consensus results in a more reliable, relevant and consistent application of
      GAAP. This change has been applied retrospectively by restating prior periods.
      The effect of this change was to increase the deficit at January 1, 2005 by
      $36,851,000. The net loss for the three months ended March 31, 2005 increased
      by
      $515,000 ($0.01 per share) as a result of this change.




**4.** **DISCONTINUED
      OPERATIONS**




In
      March
      2006, the Company adopted a plan to dispose of MTMI, which includes the Montana
      Tunnels and Diamond Hill mines. The Montana Tunnels mine is an open pit mine
      and
      mill that produced gold doré and lead-gold and zinc-gold concentrates, located
      in the State of Montana. The Montana Tunnels mine was placed under care and
      maintenance on May 12, 2006. The Diamond Hill mine, also located in the State
      of
      Montana, is currently under care and maintenance.




In
      November 2005, the Company sold the Nevada Assets to Jipangu, Inc (“Jipangu”)
      for $14.0 million in cash. The Nevada Assets include the Florida Canyon Mine,
      an
      open pit heap leach operation located in the State of Nevada; the Standard
      Mine,
      an open pit heap leach operation situated 8 kilometers south of the Florida
      Canyon Mine; and four exploration properties located near the Florida Canyon
      Mine.




The
      following tables present summarized financial information related to
      discontinued operations:




10





**APOLLO
        GOLD CORPORATION**
 **Notes
        to the Consolidated Financial Statements**
 **Three
        month period ended March 31, 2006**
 (Stated
        in U.S. dollars; tabular amounts in thousands)
 (Unaudited)




**4.** **DISCONTINUED
        OPERATIONS (continued)**




**March
                31, 2006**
            
            **December
                31, 2005**ASSETSCash
                and cash equivalents
            
            $
            6
            
            $
            8Other
                non-cash current assets
            
            
            3,026
            
            
            4,218Current
                assets of discontinued operations
            
            
            3,032
            
            
            4,226Property,
                plant and equipment
            
            
            13,571
            
            
            13,917Restricted
                certificate of deposit
            
            
            5,912
            
            
            5,465Non-current
                assets of discontinued operations
            
            
            19,483
            
            
            19,382Total
                assets of discontinued operations
            
            
            22,515
            
            
            23,608LIABILITIESCurrent
                liabilities of discontinued operations
            
            
            3,685
            
            
            5,444Non-current
                liabilities of discontinued operations (accrued site closure costs)
            
            
            12,871
            
            
            12,634Total
                liabilities of discontinued operations
            
            
            16,556
            
            
            18,078Net
                assets of discontinued operations
            
            $
            5,959
            
            $
            5,530







**Three
                months ended March 31,****2006**
            
            **2005**(Restated**-**
              Note
                3(b))Revenue
                from sale of minerals
            
            $
            6,138
            
            $
            15,694Direct
                operating costs
            
            
            7,159
            
            
            17,323Depreciation
                and amortization
            
            
            333
            
            
            1,202Accretion
                expense
            
            
            237
            
            
            414Royalty
                expenses
            
            
            -
            
            
            887,729
            
            
            19,027Operating
                loss
            
            
            (1,591
            )
            
            (3,333
            )Interest
                income
            
            
            51
            
            
            17Interest
                expense
            
            
            (8
            )
            
            (56
            )Gain
                on sale of property, plant and equipment
            
            
            -
            
            
            1,834Realized
                and unrealized gain on commodity contracts
            
            
            -
            
            
            38Loss
                on disposal of discontinued operations
            
            
            (250
            )
            
            -Loss
                from discontinued operations for the period
            
            $
            (1,798
            )
            $
            (1,500
            )





Results
      of discontinued operations for the three months ended March 31, 2006 includes
      the operations of Montana Tunnels and a $250,000 additional loss on disposal
      of
      the Nevada Assets for costs related to an obligation to Jipangu to repair the
      Standard Mine leach pad. Results of discontinued operations for the three months
      ended March 31, 2005 includes operations of both the Montana Tunnels mine and
      the Florida Canyon mine.





**5.** **SHARE
      CAPITAL**




***(a)*** Shares
      issued in 2006




*(i)*  On
      January 26, 2006, the Company completed a private placement of 11,650,000 units
      with Jipangu at Cdn$0.35 per unit for proceeds of $3.5 million. Each unit
      consists of one common share of
      the
      Company and 0.17167 of a warrant for a total of 2,000,000 warrants, with each
      whole warrant exercisable for two years at Cdn$0.39 for one common share of
      the
      Company.




11




**APOLLO
          GOLD CORPORATION**
 **Notes
          to the Consolidated Financial Statements**
 **Three
          month period ended March 31, 2006**
 (Stated
          in U.S. dollars; tabular amounts in thousands)
 (Unaudited)




**5.** **SHARE
      CAPITAL (continued)**




*(ii)*  On
      February 27, 2006, the Company issued 2,290,398 common shares of the Company
      at
      Cdn$0.48 per share to officers of the Company, as approved by the Company’s
      Board of Directors in December 2005. In connection with this, the Company
      announced on January 23, 2006 that the number of executive officers would be
      reduced from seven to three, effective February 18, 2006 and the Company entered
      into severance agreements with the four departing officers pursuant to which
      an
      aggregate of 1,187,175 common shares were issued to the officers as part of
      their severance. Also on January 23, 2006, the Company entered into amended
      employment agreements with the three remaining executive officers pursuant
      to
      which the officers agreed to reduce their base salaries by an aggregate of
      $170,000 per annum in exchange for an aggregate of 1,103,223 common
      shares.




***(b)*** Warrants




The
      following summarizes outstanding warrants as at March 31, 2006:




**Date
                Issued**
            
            **Number
                of Warrants**
            
            **Number
                of Shares**
            
            **Exercise
                Price**
            
            **Expiry
                Date**Exercisable
                in US$October
                19, 2004
            
            
            1,000,000
            
            
            1,000,000
            
            
            $
                0.80
            
            
            October
                19, 2006November
                4, 2004
            
            
            1,400,133
            
            
            1,400,133
            
            
            0.80
            
            
            November
                4, 2006December
                31, 2004
            
            
            6,224,999
            
            
            6,224,999
            
            
            1.00
            
            
            December
                31, 2006November
                4, 2004
            
            
            5,013,600
            
            
            5,013,600
            
            
            0.40
            
            
            November
                4, 2007November
                4, 2004
            
            
            240,000
            
            
            240,000
            
            
            0.80
            
            
            November
                4, 2007November
                4, 2004
            
            
            1,396,000
            
            
            1,396,000
            
            
            0.80
            
            
            November
                4, 2007January
                7, 2005
            
            
            3,149,998
            
            
            3,149,998
            
            
            1.00
            
            
            January
                7, 200718,424,730
            
            
            18,424,730Exercisable
                in Cdn$December
                23, 2002
            
            
            3,000,000
            
            
            3,000,000
            
            
            Cdn$
                3.25
            
            
            December
                23, 2006June
                30, 2005
            
            
            1,250,000
            
            
            1,250,000
            
            
            Cdn$
                0.40
            
            
            June
                30, 2007January
                26, 2006
            
            
            2,000,000
            
            
            2,000,000
            
            
            Cdn$
                0.39
            
            
            January
                26, 20086,250,000
            
            
            6,250,00024,674,730
            
            
            24,674,730





In
      addition, 1,250,000 broker compensation warrants were issued and were
      immediately exercisable on January 7, 2005. Each broker compensation
      warrant is exercisable at $0.75 into one equity unit comprised of one common
      share of the Company and 0.75 of a share purchase warrant, with each whole
      share
      purchase warrant exercisable into one common share of the Company at $1.00
      per
      common share. The broker compensation warrants expire on January 7, 2007.
      The share purchase warrants are exercisable for two years from the date of
      issue.





On
      January 6, 2006, the Company agreed to reduce the exercise price on 5,013,600
      warrants issued as attachments to the convertible debentures (“Debentures”) in
      November 2004 from $0.80 to $0.40 per common share. The reduction in exercise
      price was in consideration for pledging the Company’s Black Fox property to The
      Canada Trust Company (the “Secured Party”) as substitute collateral for the
      Debentures, which were previously secured by an $11.0 million restricted cash
      deposit. The Secured Party is trustee for the holders of the Debentures. The
      reduction in the exercise price was effective
      January 16, 2006, and applies to all warrants attached to the Debentures except
      for the 240,000 warrants held by the Company’s insiders, which remain
      exercisable at $0.80 per common share. The Company recorded an additional cost
      of $305,000 as a result of this reduction of the exercise
      price.




12




**APOLLO
          GOLD CORPORATION**
 **Notes
          to the Consolidated Financial Statements**
 **Three
          month period ended March 31, 2006**
 (Stated
          in U.S. dollars; tabular amounts in thousands)
 (Unaudited)




**5.** **SHARE
      CAPITAL (continued)**




***(c)*** Options




A
      summary
      of information concerning outstanding stock options at March 31, 2006 is as
      follows:




**Fixed
                Stock Options**
            
            **Performance-based**
              **Stock
                Options****Number
                of**
              **Common**
              **Shares**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price**
            
            **Number
                of**
              **Common**
              **Shares**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price**Balances,
                December 31, 2005
            
            
            3,874,100
            
            $
            1.15
            
            
            1,794,582
            
            $
            0.80Options
                granted
            
            
            125,000
            
            
            0.65
            
            
            -
            
            
            -Options
                cancelled
            
            
            (83,450
            )
            
            1.14
            
            
            (30,933
            )
            
            0.80Balances,
                March 31, 2006
            
            
            3,915,650
            
            $
            1.13
            
            
            1,763,649
            
            $
            0.80





*(i)*  Fixed
      stock option plan




The
      Company has a stock option plan that provides for the granting of options to
      directors, officers, employees and service providers of the
      Company.




The
      following table summarizes information concerning outstanding and exercisable
      fixed stock options at March 31, 2006:




**Options
                Outstanding**
            
            **Options
                Exercisable****Number**
              **Outstanding**
            
            **Expiry
                Date**
            
            **Weighted
                Average**
              **Exercise**
              **Price
                per Share**
            
            **Number**
              **Exercisable**
            
            **Weighted
                Average**
              **Exercise**
              **Price
                per Share**936,400
            
            
            February
                18, 2013
            
            $
            2.24
            
            
            936,400
            
            $
            2.242,000
            
            
            March
                28, 2013
            
            
            2.34
            
            
            2,000
            
            
            2.34100,000
            
            
            November
                13, 2013
            
            
            1.67
            
            
            100,000
            
            
            1.67265,200
            
            
            March
                10, 2014
            
            
            2.05
            
            
            265,200
            
            
            2.05125,000
            
            
            May
                19, 2014
            
            
            1.44
            
            
            62,500
            
            
            1.4423,600
            
            
            August
                10, 2014
            
            
            0.95
            
            
            11,800
            
            
            0.951,838,450
            
            
            March
                10, 2015
            
            
            0.65
            
            
            1,169,225
            
            
            0.65100,000
            
            
            April
                6, 2015
            
            
            0.39
            
            
            -
            
            
            -100,000
            
            
            August
                4, 2015
            
            
            0.27
            
            
            -
            
            
            -300,000
            
            
            December
                12, 2015
            
            
            0.20
            
            
            -
            
            
            -125,000
            
            
            March
                28, 2016
            
            
            0.65
            
            
            -
            
            
            -3,915,650
            
            
            
            
            $
            1.13
            
            
            2,547,125
            
            $
            1.44





*(ii)*  Performance-based
      stock option plan




As
      of
      March 31, 2006 the 1,763,649 performance-based stock options exercisable at
      $0.80 were fully vested and have an expiry date of June 25, 2007.




13




**APOLLO
          GOLD CORPORATION**
 **Notes
          to the Consolidated Financial Statements**
 **Three
          month period ended March 31, 2006**
 (Stated
          in U.S. dollars; tabular amounts in thousands)
 (Unaudited)




**5.** **SHARE
      CAPITAL (continued)**





***(d)*** 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:





**Three
                months ended March 31,****2006**
            
            **2005**Risk
                free interest rate
            
            
            4.1
            %
            
            3.6
            %Dividend
                yield
            
            
            0
            %
            
            0
            %Volatility
            
            
            91
            %
            
            73
            %Expected
                life in years
            
            
            5
            
            
            5





**6.** **INCOME
      TAXES**




The
      Company did not record a recovery for income taxes for the period ended March
      31, 2006 as the net loss carry forwards are fully offset by a valuation
      allowance.





**7.** **SEGMENTED
      INFORMATION**




Apollo
      operates the Black Fox Project in Canada, a development project. 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. Montana
      Tunnels and the Nev ada
      Assets have been reported as discontinued operations (Note 4). The accounting
      policies for these segments are the same as those followed by the Company as
      a
      whole.




Amounts
      as at March 31, 2006 are as follows:




**Black**
              **Fox**
            
            **Corporate**
              **and
                Other**
            
            **Total**Cash
                and cash equivalents
            
            $
            48
            
            $
            5,901
            
            $
            5,949Other
                non-cash current assets
            
            
            94
            
            
            177
            
            
            271142
            
            
            6,078
            
            
            6,220Property,
                plant and equipment
            
            
            28,239
            
            
            1,208
            
            
            29,447Restricted
                certificates of deposit
            
            
            578
            
            
            -
            
            
            578Deferred
                financing costs
            
            
            -
            
            
            504
            
            
            504Total
                assets
            
            $
            28,959
            
            $
            7,790
            
            $
            36,749Current
                liabilities
            
            $
            191
            
            $
            1,918
            
            $
            2,109Accrued
                severance
            
            
            -
            
            
            370
            
            
            370Notes
                payable and convertible debenture
            
            
            65
            
            
            6,852
            
            
            6,917Total
                liabilities
            
            $
            256
            
            $
            9,140
            
            $
            9,396





14




**APOLLO
          GOLD CORPORATION**
 **Notes
          to the Consolidated Financial Statements**
 **Three
          month period ended March 31, 2006**
 (Stated
          in U.S. dollars; tabular amounts in thousands)
 (Unaudited)




**7.** **SEGMENTED
      INFORMATION (continued)**




Amounts
      as at December 31, 2005 are as follows:




**Black**
              **Fox**
            
            **Corporate**
              **and
                Other**
            
            **Total**Cash
                and cash equivalents
            
            $
            15
            
            $
            104
            
            $
            119Other
                non-cash current assets
            
            
            100
            
            
            428
            
            
            528115
            
            
            532
            
            
            647Property,
                plant and equipment
            
            
            24,794
            
            
            1,334
            
            
            26,128Restricted
                certificates of deposit
            
            
            581
            
            
            10,997
            
            
            11,578Deferred
                financing costs
            
            
            -
            
            
            584
            
            
            584Total
                assets
            
            $
            25,490
            
            $
            13,447
            
            $
            38,937Current
                liabilities
            
            $
            221
            
            $
            4,746
            
            $
            4,967Accrued
                severance
            
            
            -
            
            
            383
            
            
            383Notes
                payable and convertible debenture
            
            
            66
            
            
            6,610
            
            
            6,676Total
                liabilities
            
            $
            287
            
            $
            11,739
            
            $
            12,026





Amounts
      for the three month periods ended March 31, 2006 and 2005 are as
      follows:




**Three
                months ended March 31, 2006****Black**
              **Fox**
            
            **Corporate**
              **and
                Other**
            
            **Total**Revenue
                from sale of minerals
            
            $
            -
            
            $
            -
            
            $
            -Depreciation
                and amortization
            
            
            -
            
            
            31
            
            
            31General
                and administrative expenses
            
            
            -
            
            
            1,193
            
            
            1,193Stock-based
                compensation
            
            
            -
            
            
            108
            
            
            108Exploration
                and business development
            
            
            -
            
            
            351
            
            
            351-
            
            
            1,683
            
            
            1,683Operating
                loss
            
            
            -
            
            
            (1,683
            )
            
            (1,683
            )Interest
                income
            
            
            -
            
            
            15
            
            
            15Interest
                expense
            
            
            -
            
            
            (512
            )
            
            (512
            )Foreign
                exchange loss and other
            
            
            -
            
            
            (7
            )
            
            (7
            )Loss
                from continuing operations
            
            $
            -
            
            $
            (2,187
            )
            $
            (2,187
            )Investing
                activities
              Property,
                plant and equipment expenditures
            
            $
            3,445
            
            $
            -
            
            $
            3,445




15




**APOLLO
          GOLD CORPORATION**
 **Notes
          to the Consolidated Financial Statements**
 **Three
          month period ended March 31, 2006**
 (Stated
          in U.S. dollars; tabular amounts in thousands)
 (Unaudited)


**7.** **SEGMENTED
      INFORMATION (continued)**




**Three
                months ended March 31, 2005**(Restated**-**Note
                3(b))**Black**
              **Fox**
            
            **Corporate**
              **and
                Other**
            
            **Total**Revenue
                from sale of minerals
            
            $
            -
            
            $
            -
            
            $
            -Depreciation
                and amortization
            
            
            -
            
            
            32
            
            
            32General
                and administrative expenses
            
            
            -
            
            
            1,650
            
            
            1,650Stock-based
                compensation
            
            
            -
            
            
            202
            
            
            202Exploration
                and business development
            
            
            -
            
            
            240
            
            
            240-
            
            
            2,124
            
            
            2,124Operating
                loss
            
            
            -
            
            
            (2,124
            )
            
            (2,124
            )Interest
                income
            
            
            -
            
            
            87
            
            
            87Interest
                expense
            
            
            -
            
            
            (685
            )
            
            (685
            )Foreign
                exchange loss and other
            
            
            -
            
            
            (26
            )
            
            (26
            )Loss
                from continuing operations
            
            $
            -
            
            $
            (2,748
            )
            $
            (2,748
            )Investing
                activities
              Property,
                plant and equipment expenditures
            
            $
            1,970
            
            $
            40
            
            $
            2,010





**8.** **DIFFERENCES
      BETWEEN CANADIAN AND U.S. GAAP**




The
      Company prepares its consolidated financial statements in accordance with
      Canadian GAAP. The following adjustments and/or additional disclosures would
      be
      required in order to present the financial statements in accordance with U.S.
      GAAP and with practices prescribed by the U.S. Securities and Exchange
      Commission for the three month periods ended March 31, 2006 and
      2005.




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




16




**APOLLO
        GOLD CORPORATION**
 **Notes
        to the Consolidated Financial Statements**
 **Three
        month period ended March 31, 2006**
 (Stated
        in U.S. dollars; tabular amounts in thousands)
 (Unaudited)




**8.** **DIFFERENCES
      BETWEEN CANADIAN AND U.S. GAAP (continued)**





**Consolidated
      Balance Sheet**


**March
      31, 2006**


**Property**
              **Plant**
              **and**
              **Equipment**
            
            **Deferred**
              **Financing
                Costs**
            
            **Non-Current
                Assets of Discontinued Operations**
            
            **Convertible**
              **Debenture**
            
            **Share**
              **Capital**
            
            **Equity**
              **Component
                of**
              **Convertible**
              **Debentures**
            
            **Contributed**
              **Surplus**
            
            **Deficit**As
                at March 31, 2006, Canadian GAAP
            
            $
            29,447
            
            $
            504
            
            $
            19,483
            
            $
            6,847
            
            $
            152,738
            
            $
            1,809
            
            $
            10,669
            
            $
            (133,221
            )Black
                Fox Project development costs(a)
            
            
            (22,626
            )
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (22,626
            )Impairment
                of property, plant and equipment, and change in depreciation and
                amortization(c)(i)
            
            
            -
            
            
            -
            
            
            (4,190
            )
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (4,190
            )Convertible
                debenture((b)(i))
            
            
            -
            
            
            196
            
            
            -
            
            
            1,340
            
            
            (1
            )
            
            (1,809
            )
            
            123
            
            
            543Convertible
                debenture((b)(ii))
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            20,675
            
            
            (20,675
            )Flow-through
                common shares
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (238
            )
            
            -
            
            
            -
            
            
            238As
                at March 31, 2006, U.S. GAAP
            
            $
            6,821
            
            $
            700
            
            $
            15,293
            
            $
            8,187
            
            $
            152,499
            
            $
            -
            
            $
            31,467
            
            $
            (179,931
            )





**Consolidated
      Balance Sheet**


**December
      31, 2005**


**Property**
              **Plant**
              **and**
              **Equipment**
            
            **Deferred**
              **Financing
                Costs**
            
            **Non-Current
                Assets of Discontinued Operations**
            
            **Convertible**
              **Debenture**
            
            **Share**
              **Capital**
            
            **Equity**
              **Component
                of**
              **Convertible**
              **Debentures**
            
            **Contributed**
              **Surplus**
            
            **Deficit**As
                at December 31, 2005, Canadian GAAP
            
            $
            26,128
            
            $
            584
            
            $
            19,382
            
            $
            6,601
            
            $
            148,295
            
            $
            1,809
            
            $
            10,561
            
            $
            (129,236
            )Black
                Fox Project development costs(a)
            
            
            (19,181
            )
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (19,181
            )Impairment
                of property, plant and equipment, and change in depreciation and
                amortization(c)(i)
            
            
            -
            
            
            -
            
            
            (4,260
            )
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (4,260
            )Convertible
                debenture((b)(i))
            
            
            -
            
            
            227
            
            
            -
            
            
            1,512
            
            
            (1
            )
            
            (1,809
            )
            
            123
            
            
            401Convertible
                debenture((b)(ii))
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            20,675
            
            
            (20,675
            )Flow-through
                common shares
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (238
            )
            
            -
            
            
            -
            
            
            238As
                at December 31, 2005, U.S. GAAP
            
            $
            6,947
            
            $
            811
            
            $
            15,122
            
            $
            8,113
            
            $
            148,056
            
            $
            -
            
            $
            31,359
            
            $
            (172,713
            )




17




**APOLLO
          GOLD CORPORATION**
 **Notes
          to the Consolidated Financial Statements**
 **Three
          month period ended March 31, 2006**
 (Stated
          in U.S. dollars; tabular amounts in thousands)
 (Unaudited)


**8.** **DIFFERENCES
      BETWEEN CANADIAN AND U.S. GAAP (continued)**





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




**Three
                months ended**
              **March
                31,****2006**
            
            **2005**(Restated**-**
              Note
                3(b))Loss
                from continuing operations for the period ended March 31,based
                on Canadian GAAP
            
            $
            (2,187
            )
            $
            (2,748
            )Black
                Fox Project development costs (a)
            
            
            (3,445
            )
            
            (1,970
            )Convertible
                debenture ((b)(i))
            
            
            142
            
            
            311Loss
                from continuing operations for the period based on U.S.
                GAAP
            
            
            (5,490
            )
            
            (4,407
            )Loss
                from discontinued operations for the period based on Canadian
                GAAP
            
            
            (1,798
            )
            
            (1,500
            )Change
                in depreciation of property, plant and equipment ((c)(i))
            
            
            70
            
            
            162Commodity
                contracts gain ((c)(ii))
            
            
            -
            
            
            1,005Standard
                Mine development costs
            
            
            -
            
            
            (314
            )Loss
                from discontinued operations for the period based on U.S.
                GAAP
            
            
            (1,728
            )
            
            (647
            )Net
                loss for the period based on U.S. GAAP
            
            $
            (7,218
            )
            $
            (5,054
            )Comprehensive
                loss
            
            $
            (7,218
            )
            $
            (5,054
            )Basic
                and diluted loss per share in accordance with U.S. GAAP:Continuing
                operations
            
            $
            (0.05
            )
            $
            (0.04
            )Discontinued
                operations
            
            
            (0.01
            )
            
            (0.01
            )Net
                loss per share - U.S. GAAP basic and diluted
            
            $
            (0.06
            )
            $
            (0.05
            )





***(a)*** Black
      Fox
      Project




Under
      Canadian GAAP, mining development costs at the Black Fox Project have been
      capitalized. Under U.S. GAAP, these expenditures are expensed as incurred.
      Accordingly, for U.S. GAAP purposes, a reduction in property, plant and
      equipment of $22.6 million has been recorded as at March 31, 2006.




***(b)*** Convertible
      debenture




*(i)*  Under
      Canadian GAAP, the convertible debentures were recorded as a compound financial
      instrument including detachable note warrants. On issuance in November 2004,
      under U.S. GAAP, the detachable note warrant is similarly treated as an equity
      instrument with the remainder of the convertible debentures treated as a
      liability. Further, under U.S. GAAP, the beneficial conversion feature
      determined using the effective conversion price based on the proceeds allocated
      to the convertible debenture in accordance with EITF 00-27, “Application of
      Issue No. 98-5 to Certain Convertible Instruments”, is allocated to contributed
      surplus. This discount on the debenture is recognized as additional interest
      expense immediately as the debt is convertible at the date of issuance. Canadian
      GAAP does not require the recognition of any beneficial conversion
      feature.




*(ii)*  Under
      Canadian GAAP, the convertible debentures were 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 was allocated to contributed surplus and the Company recognized
      debenture issuance costs of $20.7 million. Canadian GAAP does not require the
      recognition of any beneficial conversion feature.




18




**APOLLO
        GOLD CORPORATION**
 **Notes
        to the Consolidated Financial Statements**
 **Three
        month period ended March 31, 2006**
 (Stated
        in U.S. dollars; tabular amounts in thousands)
 (Unaudited)




**8.** **DIFFERENCES
      BETWEEN CANADIAN AND U.S. GAAP (continued)**




***(c)*** Discontinued
      operations




*(i)*  Under
      Canadian GAAP, write-downs for impairment of property, plant and equipment
      are
      determined using current proven and probable reserves and mineral resources
      expected to be converted into mineral reserves. In 2002, under U.S. GAAP,
      write-downs were determined using current proven and probable reserves.
      Accordingly, for U.S. GAAP purposes, an impairment of property, plant and
      equipment and an adjustment to the related depreciation has been
      recorded.




*(ii)*  Prior
      to
      January 1, 2004, under U.S. GAAP, unrealized gains and losses on the put and
      call option contracts were recorded in the statement of operations. As of
      January 1, 2004, the Company adopted the provisions of CICA Accounting Guideline
      13, *Hedging
      Relationships* and
      unrealized gains and losses on these contracts are now recorded in the statement
      of operations under Canadian GAAP.




***(d)*** Comprehensive
      income




SFAS
      No.
      130, “Reporting Comprehensive Income” (“SFAS 130”) establishes standards for the
      reporting and display of comprehensive income and its components in a full
      set
      of general purpose financial statements. SFAS 130 requires that all items that
      are required to be recognized under accounting standards as components of
      comprehensive income be reported in a financial statement. For the Company,
      the
      only component of comprehensive loss is the net loss for the
      period.




***(e)*** Statement
      of cash flows




Under
      Canadian GAAP, mining development costs at the Black Fox Project are included
      in
      cash flows from investing activities in the consolidated statements of cash
      flows.  Under U.S. GAAP, these expenditures are included in cash flows from
      operating activities.  Accordingly, under U.S. GAAP, the consolidated
      statements of cash flows for the three months ended March 31, 2006 and 2005
      would reflect an increase in cash provided by investing activities of $3.4
      million and $2.0 million, respectively, and a corresponding decrease in cash
      used in operating activities.




***(f)*** Share-Based
      Payment




As
      of
      January 1, 2006 the Company adopted the provisions of SFAS No. 123(R),
“Share-Based Payment”. The adoption of this standard did not impact the
      Company’s financial position or results of operations.




**9.** **SUBSEQUENT
      EVENTS**




On
      May
      12, 2006, the Montana Tunnels mine was placed under care and
      maintenance.




19


**ITEM
      2.** **MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS**




**All
      Dollar amounts are expressed in United States Dollars**




The
      following discussion and analysis should be read in conjunction with the
      accompanying consolidated financial statements and related notes. The financial
      statements have been prepared in accordance with generally accepted accounting
      principles in Canada (Canadian GAAP). For a reconciliation to GAAP in the United
      States (U.S. GAAP), see Note 8 to the attached consolidated financial
      statements.




In
      this
      Form 10-Q, the terms “cash operating cost”, “total cash cost” and “total
      production cost” are non-GAAP financial measures and are used on a per ounce of
      gold sold basis. Cash operating costs per ounce is equivalent to direct
      operating cost as found on the Consolidated Statements of Operations, less
      production royalty expenses and mining taxes but includes by-product credits
      for
      payable silver, lead, and zinc production. Total cash costs is equivalent to
      cash operating costs plus production royalties and mining taxes. The term “total
      production costs” is equivalent to total cash costs plus non-cash costs
      including depreciation and amortization.




The
      Montana Tunnels results of operations have been restated for all periods
      presented March 31, 2005 and earlier to reflect a change in accounting policy
      with respect to stripping costs.




Additionally,
      certain of the comparative figures have been reclassified to conform with the
      current period presentation. In particular, the results of operations of the
      Montana Tunnels Mine, the Florida Canyon Mine and the Standard Mine for the
      three months ended March 31, 2005 have been classified as discontinued
      operations.




**BACKGROUND
      AND RECENT DEVELOPMENTS**




We
      are
      principally engaged in the exploration, development and mining of gold. We
      own a
      development property, the Black Fox project, which is located near the township
      of Matheson in the Province of Ontario, Canada. Additionally, we own Mexican
      subsidiaries which own or have the right to acquire concessions of the Huizopa
      exploration property located in the Sierra Madre gold belt in Chihuahua, Mexico.
      We also own the Montana Tunnels mine, an open pit mine and mill located near
      Helena, Montana, which produced gold doré and lead-gold and zinc-gold
      concentrates until it was placed under care and maintenance on May 12, 2006.
      We
      also own the Diamond Hill mine, currently under care and maintenance, also
      located in the state of Montana. In March 2006, the Company adopted a plan
      to
      dispose of Montana Tunnels Mining, Inc., which owns both the Montana Tunnels
      and
      Diamond Hill mines.




**Recent
      Events**




Upon
      closing of the sale of our Nevada assets to Jipangu Inc. (“Jipangu”) on November
      18, 2005, $11.0 million of the $14.0 million purchase price was deposited as
      substitute collateral for the Apollo12% Series 2004-B secured convertible
      debentures (“Debentures”), which were previously secured by the Nevada assets.
      In January 2006, after meeting certain conditions, Apollo replaced the $11.0
      million cash collateral with its Black Fox property as security for the
      Debentures, which resulted in $8.4 million additional funds being available
      to
      the Company after paying $2.6 million (Cdn$3.0 million) to release an existing
      lien over the Black Fox property. In connection with the substitution of
      collateral for the Debentures the Company reduced the exercise price on
      5,013,600 of the note warrants attached to the Debentures from $0.80 to $0.40
      per common share. The Company recorded an additional cost of $0.3 million as
      a
      result of this reduction of the exercise price.




20




On
      January 26, 2006, we completed a $3.5 million private placement to Jipangu
      of
      11,650,000 equity units priced at Cdn$0.35 per unit with each unit consisting
      of
      one of our common shares and 0.17167 of a warrant, with each whole warrant
      exercisable for two years at Cdn$0.39 for one of our common shares.




At
      the
      Montana Tunnels mine the open pit mining activity was suspended on
      October 21, 2005, for safety reasons due to increased wall activity on the
      eastern side of the open pit. Following the suspension of mining, the mill
      continued to process ore from stockpiled material and produce gold doré and
      lead-gold and zinc-gold concentrates. On January 31, 2006, we gave a Workers
      Adjustment and Retraining Notification (“WARN”) Act Notice to all hourly and
      salaried Montana Tunnels, Inc. employees. The WARN Act requires companies to
      give employees 60 days’ notice prior to a plant shutdown or mass layoff. This
      WARN Act Notice was extended through May 14, 2006. On May 12, 2006, all
      operations ceased and the property was placed under care and maintenance. In
      March 2006, we adopted a plan to dispose of the Montana Tunnels
      mine.




At
      Huizopa we entered into an agreement with the Ejido Huizopa (the “Ejido”)
      pursuant to which the Company has a right to use Ejido land covering the 12,800
      hectares of the Company’s mining concessions in Huizopa for all activities
      necessary for the exploration, development, and production of potential ore
      deposits in our Huizopa project area. The Company may, in the future, apply
      for
      a change of use of land without any additional obligations to the Ejido. In
      addition, the Company may traverse through adjoining and nearby Ejido land
      outside the boundaries of the Huizopa mining concessions for the purpose of
      constructing, operating, and maintaining improvements or facilities necessary
      for the Huizopa project.




On
      January 23, 2006, we announced that we would reduce the number of executive
      officers from seven to three, effective February 18, 2006. Apollo entered into
      severance agreements with the four departing officers, pursuant to which the
      departing officers received termination packages consisting of a combination
      of
      cash and Company common stock and as a result, an aggregate of 1,187,175 common
      shares were issued at Cdn$0.48 per share to the officers as part of their
      severance.




Also
      on
      January 23, 2006, the Company entered into amended employment agreements with
      the three remaining executive officers pursuant to which the officers agreed
      to
      reduce their base salaries by an aggregate of $170,000 per annum in exchange
      for
      an aggregate of 1,103,223 common shares at Cdn$0.48 per share.





At
      Black
      Fox work has continued throughout the first quarter on updating the ore reserves
      and we now expect to publish these reserves by the end of June 2006. The new
      mineral resources will take into account the 526 core holes (128,600 meters)
      of
      additional drilling completed by us since the last Canadian National Instrument
      43-101 (“NI 43-101”) was published in March 2004.




**MATERIAL
      CHANGES IN RESULTS OF OPERATIONS**




***Three
      Months Ended March 31, 2006 Compared to the Three Months Ended March 31,
      2005***




**Operating
      Expenses.**




*Depreciation
      and Amortization.*  Depreciation
      and amortization expenses were $31,000 and $32,000 for the three months ended
      March 31, 2006 and 2005, respectively.




*General
      and Administrative Expenses.* General
      and administrative expenses were $1.2 million and $1.7 million for the three
      months ended March 31, 2006 and 2005, respectively. This decrease is due to
      a
      decrease in personnel costs and a decrease in audit and accounting expenses.
      Included in general and administrative expenses for the three months ended
      March
      31, 2006 is a $0.3 million financing charge related to the reduction of exercise
      price of the note warrants attached to the Debentures in consideration for
      the
      Debenture holders accepting the Black Fox property as substitute collateral
      to
      $11.0 million cash.




21




*Stock-Based
      Compensation.* In
      January 2004, the Company adopted the fair value method of accounting for stock
      options as set out in CICA Handbook section 3870, Stock-Based Compensation
      and
      Other Stock-Based Payments. Stock-based compensation was $108,000 and $202,000
      for the three months ended March 31, 2006 and 2005, respectively. This decrease
      is due to a decrease in the number of stock options awarded to
      employees.




*Exploration
      and Business Development Expense.* Expenses
      for exploration and development, consisting of drilling and related expenses
      at
      our exploration properties, totaled approximately $351,000 and $240,000 for
      the
      three months ended March 31, 2006 and 2005, respectively. This increase is
      due
      to increased activity at our Huizopa exploration project.




*Total
      Operating Expenses* .
      As a
      result of these expense components, our total operating expenses decreased
      21%
      to $1.7 million for the three months ended March 31, 2006, from $2.1 million
      for
      the three months ended March 31, 2005.




**Other
      Income (Expenses).**




*Interest
      Income and Interest Expense.* We
      realized interest income of $15,000 during the three months ended March 31,
      2006
      and interest expense of $512,000 in the same period compared to $87,000 in
      interest income and $685,000 in interest expense during the three months ended
      March 31, 2005. The decrease in interest expense is due to a decrease in the
      accretion on the Debentures issued in the fourth quarter of 2004.




*Loss
      from Continuing Operations.* As
      a
      result of the foregoing, the Company incurred a loss from continuing operations
      of $2.2 million, or $0.02 per share, for the three months ended March 31, 2006,
      as compared to a loss of $2.7 million, or $0.03 per share, for the three months
      ended March 31, 2005.




*Loss
      from Discontinued Operations.* In
      March
      2006, the Company adopted a plan to dispose of the Montana Tunnels mine. For
      the
      three months ended March 31, 2006, loss from discontinued operations was $1.8
      million, or $0.01 per share, compared to a loss of $1.5 million, or $0.01 per
      share, for the three months ended March 31, 2005.




**Net
      Loss.**




For
      the
      three months ended March 31, 2006, we incurred a net loss of $4.0 million,
      or
      $0.03 per share, as compared to a net loss of $4.2 million, or $0.04 per share,
      for the three months ended March 31, 2005.




**Discontinued
      Operations.**




In
      November 2005, the Company sold the Florida Canyon and Standard mines. In March
      2006, the Company adopted a plan to dispose of the Montana Tunnels mine.
      Therefore, for the three months ended March 31, 2006, discontinued operations
      include the operations of the Montana Tunnels mine and a $250,000 additional
      loss on disposal of the Nevada assets for costs related to an obligation to
      Jipangu to repair the Standard Mine leach pad. For the three months ended March
      31, 2005, discontinued operations include the operations of the Montana Tunnels
      mine and the Florida Canyon mine.




*Montana
      Tunnels.* Revenues
      at Montana Tunnels were $6.1 million for the three months ended March 31, 2006
      compared to $12.3 million for the three months ended March 31, 2005.
      Operating costs were $7.7 million and $14.3 million for the three months ended
      March 31, 2006 and 2005, respectively. The decreases in revenue and operating
      costs are the result of closing the open pit mine in October 2005 and processing
      low grade ore stockpiles.




22




*Florida
      Canyon.* The
      Florida Canyon mine was sold on November 18, 2005 and therefore had no activity
      in the three month period ended March 31, 2006. Revenues at Florida Canyon
      for
      the three months ended March 31, 2005 were $3.2 million. Operating costs were
      $4.7 million for the three months ended March 31, 2005.







*Standard
      Mine.* The
      Standard Mine was sold on November 18, 2005 and therefore had no activity in
      the
      three month period ended March 31, 2006. The mine was not in production for
      the
      three months ended March 31, 2005 and capital expenditure was $1.0 million.
      The
      mine entered commercial production on June 1, 2005.




*Gain
      on sale of property, plant and equipment* .
      Gain on
      sales of property, plant and equipment of discontinued operation for the three
      months ended March 31, 2006 was nil, as compared to a gain of $1.8 million
      for
      the three months ended March 31, 2005.




**MATERIAL
      CHANGES IN LIQUIDITY**




To
      date,
      we have funded our operations primarily through issuances of debt and equity
      securities, the sale of the Nevada Assets and sale of surplus assets. At March
      31, 2006, we had cash of $5.9 million, compared to cash of $0.1 million at
      December 31, 2005. The increase in cash since December 31, 2005 is primarily
      the
      result of investing cash inflows of $7.2 million and financing cash inflows
      of
      $3.1 million, offset by operating cash outflows of $4.5 million.




During
      the three months ended March 31, 2006, investing activities totaled $7.2
      million. The $11.0 million held as cash collateral security for the Debentures
      that was in restricted cash at December 31, 2005, was released during the
      quarter. Capital expenditures for the further development of the Black Fox
      project were $3.4 million, which included the payment of $2.6 million to the
      former lien holders of Black Fox. Investing activities of discontinued
      operations were $0.4 million for the funding of the Montana Tunnels reclamation
      liability.




During
      the three months ended March 31, 2006, financing activities provided $3.1
      million in cash, which included $3.5 million from the completion of a private
      placement with Jipangu for 11,650,000 equity units at $0.30 (Cdn$0.35) per
      share. Each unit consists of one common share of the Company and 0.17167 of
      a
      warrant for a total of 2,000,000 warrants, with each whole warrant exercisable
      for two years at Cdn$0.39 for one common share of the Company. Payments of
      notes
      payable accounted for a cash outflow of $0.4 million during the
      quarter.




Our
      current funds are not sufficient to fund the balance of our projected 2006
      expenditures of $2.5 million at Black Fox and $2.0 million for exploration
      at
      Huizopa, as well as keeping the Montana Tunnels mine on care and maintenance.
      In
      March 2006, the Company adopted a plan to sell Montana Tunnels Mining, Inc.,
      which owns the Montana Tunnels and Diamond Hill mines, the proceeds from which,
      together with our cash on hand, we believe would provide us with sufficient
      liquidity to complete all planned activities for 2006. If we do not sell Montana
      Tunnels Mining, Inc., we expect to seek alternative financing solutions, which
      may include entering into a joint venture with respect to the mine, selling
      debt
      or equity securities, or selling the Montana Tunnels assets. Sales of debt
      or
      equity securities may include Canadian flow-through financing to further fund
      a
      portion of our Black Fox exploration activities.




Our
      ability to raise capital is highly dependent upon the commercial viability
      of
      our projects and the associated prices of precious metals. Because of the
      significant impact that changes in the prices of gold and silver have on our
      financial condition, declines in these metals prices may negatively impact
      short-term liquidity and our ability to raise additional funding for long-term
      projects. In the event that cash balances decline to a level that cannot support
      our operations, our management will defer certain planned capital expenditures
      and exploration activities as needed to conserve cash for operations. There
      can
      be no assurance that we will be successful in generating adequate funding for
      planned capital expenditures, environmental remediation and reclamation
      expenditures and for exploration expenditures.




23




**DIFFERENCES
      BETWEEN CANADIAN AND U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
      (GAAP)**




The
      Company reports under Canadian GAAP and reconciles to U.S. GAAP. The application
      of U.S. GAAP has a significant effect on the net loss and net loss per share.
      For a detailed explanation see Note 8 of our interim financial statements.




**CRITICAL
      ACCOUNTING ESTIMATES AND POLICIES**




The
      preparation of financial statements in conformity with generally accepted
      accounting principals requires management to make a variety of estimates and
      assumptions that affect the reported amounts of assets and liabilities and
      disclosure of contingent assets and liabilities as of the date of the financial
      statements as well as the reported amounts of revenues and expenses during
      the
      reporting periods covered by the financial statements.




On
      March
      30, 2005, the Financial Accounting Standards Board (“FASB”) ratified the
      consensus of the EITF Issue 04-6 that stripping costs incurred during the
      production phase of a mine are variable production costs that should be included
      in the costs of the inventory produced during the period that the stripping
      costs are incurred.




In
      the
      first quarter of 2005 and prior periods, Apollo deferred or accrued stripping
      costs incurred during production, as appropriate, and charged these costs to
      operations on the basis of the estimated average stripping ratio for Montana
      Tunnels. Commencing in the second quarter of 2005, Apollo changed its accounting
      policy under Canadian GAAP and U.S. GAAP with respect to stripping costs to
      be
      consistent with the consensus reached by the EITF, on the basis that the
      consensus results in a more reliable, relevant and consistent application of
      GAAP. This change has been applied retrospectively by restating prior periods.
      The effect of this change was to increase the deficit at January 1, 2005 by
      $36,851,000. The net loss for the three months ended March 31, 2005 increased
      by
      $515,000 ($0.01 per share), as a result of this change.




**CONTRACTUAL
      OBLIGATIONS**




The
      Company has several outstanding equipment leases and financings. As of March
      31,
      2006, there are no material changes from the information presented in the
      Company’s Annual Report on Form 10-K.




**OFF
      BALANCE SHEET ARRANGEMENTS**




None.




**ENVIRONMENTAL**




The
      Company’s only current environmental liability is at Montana Tunnels which is
      included in discontinued operations. As of March 31, 2006, we have accrued
      $12.9
      million related to reclamation, severance and other closure requirements at
      Montana Tunnels, an increase of $0.3 million from December 31, 2005. This
      liability is covered by a combination of surety bonds, restricted cash and
      property totaling $17.5 million at March 31, 2006. We have accrued what
      management believes is the present value of our best estimate of the liability
      as of March 31, 2006.




24




**ITEM
      3.** **QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**




Our
      exposure to market risk includes, but is not limited to, the following risks:
      changes in interest rates on our investment portfolio, changes in foreign
      currency exchange rates and commodity price fluctuations.




**Interest
      Rate Risk**




Other
      than a convertible debenture with a fixed coupon rate of 12% per annum, we
      have
      minimal debt and thus no material interest rate exposure related to debt. When
      appropriate we invest excess cash in short-term debt instruments of the United
      States and Canadian Governments and their agencies on both a fixed and variable
      interest rate basis. Over time the rates received on such investments may
      fluctuate with changes in economic conditions. As a result our investment income
      may fall short of expectations during periods of lower interest rates. We
      estimate that given the cash balances expected during 2006, a one percent change
      in interest rates would result in a $50,000 change in interest income. We may
      in
      the future actively manage our exposure to interest rate risk.




**Foreign
      Currency Exchange Rate Risk**




Most
      of
      the Company’s activities at its Black Fox project are transacted in Canadian
      dollars and some of the Company’s cash balances are therefore maintained in
      Canadian dollars. Since the Company’s reporting currency is the U.S. dollar,
      foreign currency gains and losses on its Canadian dollar cash balances can
      result in volatile net losses and earnings, and adversely affect the Company’s
      financial position and results of operations.




**Commodity
      Price Risk**




The
      profitability of the Company's operations will be dependent upon the market
      price of gold. Gold prices fluctuate widely and are affected by numerous factors
      beyond the control of the Company. The level of interest rates, the rate of
      inflation, the world supply of gold and the stability of exchange rates can
      all
      cause significant fluctuations in prices. Such external economic factors are
      in
      turn influenced by changes in international investment patterns, monetary
      systems and political developments. The price of gold has fluctuated widely
      in
      recent years, and future price declines could cause some projects to become
      uneconomic, thereby having a material adverse effect on the Company's business
      and financial condition.




Furthermore,
      reserve calculations and life-of-mine plans using significantly lower gold
      prices could result in material write-downs of the Company's investment in
      mining properties and increased amortization.




In
      addition to adversely affecting the Company's reserve estimates and its
      financial condition, declining gold prices could require a reassessment of
      the
      feasibility of a particular project. Such a reassessment may be the result
      of a
      management decision or may be required under financing arrangements related
      to a
      particular project. Even if the project is ultimately determined to be
      economically viable, the need to conduct such a reassessment may cause delays
      in
      the implementation of the project.




**ITEM
      4.** **CONTROLS
      AND PROCEDURES**




**Disclosure
      Controls and Procedures**




Apollo
      maintains disclosure controls and procedures that are designed to ensure that
      information required to be disclosed in the reports that we file or submit
      under
      the Exchange Act is recorded, processed, summarized and reported within the
      time
      periods specified in the SEC’s rules and forms, and that such information is
      accumulated and communicated to Apollo’s management, including its Chief
      Executive Officer and Chief Financial Officer, as appropriate, to allow timely
      decisions regarding required financial disclosure.




25




As
      of the
      end of the period covered by this report, we carried out an evaluation, under
      the supervision of our management, including the Chief Executive Officer and
      Chief Financial Officer, of the effectiveness of the design and operation of
      our
      disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b)
      under
      the Exchange Act. Based upon, and as of the date of this evaluation, the Chief
      Executive Officer and Chief Financial Officer concluded that our disclosure
      controls and procedures were not effective, because of the material weaknesses
      discussed below. In light of the material weaknesses described below, we
      performed additional analysis and other post-closing procedures to ensure our
      consolidated financial statements were prepared in accordance with generally
      accepted accounting principles. Accordingly, management believes that the
      financial statements included in this report fairly present in all material
      respects our financial condition, results of operations and cash flows for
      the
      periods presented.




We
      identified a material weakness for the year ended December 31, 2005. A
      material weakness is a significant deficiency, or combination of significant
      deficiencies, that results in more than a remote likelihood that a material
      misstatement of the annual or interim financial statements will not be prevented
      or detected. In January 2006, a major restructuring and streamlining at the
      corporate office significantly changed the design and structure of the internal
      controls and procedures at the corporate level. We lacked appropriate review
      of
      non-routine or complex accounting matters, related accounting entries, and
      appropriate documentation, disclosure and application of Canadian and U.S.
      GAAP,
      primarily due to a lack of sufficient personnel with a level of technical
      accounting expertise commensurate with our reporting requirements. As of this
      date our management has not had sufficient time to evaluate these controls
      and
      therefore believes this material weakness still exists.




**Changes
      in Internal Control**




Related
      to the reduction in staffing at the Montana Tunnels mine in mid October 2005
      and
      an additional reduction in staffing in early May 2006, at which time the mine
      was placed under care and maintenance, our controls at that location are not
      operating as previously designed related to segregation of duties over
      procurement, inventory control and accounting duties. Corporate management
      has
      increased its involvement with day-to-day oversight and management of the
      Montana Tunnels mine, but as of this date, management has not had sufficient
      time to evaluate these controls and therefore believe the change in controls
      is
      significant enough to be reported as a material weakness. In an effort to
      address this material weakness, staffing requirements and other changes in
      control are being evaluated as the future operational requirements of the
      Montana Tunnels mine is being determined.





We
      intend
      to continue to monitor our internal controls, and if further improvements or
      enhancements are identified, we will take steps to implement such improvements
      or enhancements. As a result of the changes disclosed above, there were changes
      in our internal control over financial reporting, which have materially
      affected, or are reasonably likely to materially affect, such internal
      controls.




**PART
      II** **OTHER
      INFORMATION**




**ITEM
      1.** **LEGAL
      PROCEEDINGS**




None




**ITEM
      1A.** **RISK
      FACTORS**




Item
      1A
      of our Annual Report on Form 10-K for the year ended December 31, 2005 sets
      forth information relating to important risks and uncertainties that could
      materially adversely affect our business, financial condition or results of
      operations. Those risk factors continue to be relevant to understanding our
      business, financial condition and operating results. Certain of those risk
      factors have been updated in this Quarterly Report on Form 10-Q to provide
      updated information, as set forth below.




26




**We
      have experienced operational problems at our Montana Tunnels mine and have
      placed the mine on care and maintenance.**





Since
      the
      sale of our Nevada Assets in November 2005, all of our revenues have been
      derived from our milling operations at the Montana Tunnels mine, which is a
      low
      grade mine. Historically, the Montana Tunnels mine has been unprofitable. During
      2004, we experienced problems related to the milling of low-grade ore at the
      Montana Tunnels mine, which negatively affected our revenues and earnings.
      Throughout 2005, we experienced operational problems, particularly in the open
      pit, leading to the suspension of mining on October 21, 2005 for safety reasons
      due to increased wall activity in the open pit. After the suspension of mining
      and until May 12, 2006, we were able to continue to produce gold doré, lead-gold
      and zinc-gold concentrates from milling low grade stockpiled ore. However,
      on
      May 12, 2006, all operations ceased at the mine and it was placed on care and
      maintenance. In addition, in March 2006, we adopted a plan to dispose of the
      Montana Tunnels mine. For so long as we are unable to dispose of the mine,
      we
      continue to bear costs associated with having the mine on care and maintenance,
      which adversely affects our financial condition and results of
      operations.





**ITEM
      2.** **UNREGISTERED
      SALES OF EQUITY IN SECURITIES AND USE OF PROCEEDS**




None




**ITEM
      3.** **DEFAULTS
      UPON SENIOR SECURITIES**




None




**ITEM
      4.** **SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS**




None




**ITEM
      5.** **OTHER
      INFORMATION**




None




**ITEM
      6.** **EXHIBITS**




**Exhibit
                No.**
            
            **Title
                of Exhibit**31.1
            
            Certification
                of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act31.2
            
            Certification
                of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act32.1
            
            Certification
                of Chief Executive Officer and Chief Financial Officer pursuant to
                Section
                906 of the Sarbanes-Oxley Act





27




**SIGNATURES**




In
      accordance with the requirements of the Securities Exchange Act of 1934, the
      registrant caused this report to be signed on its behalf by the undersigned
      thereunto duly authorized.


**APOLLO GOLD
              CORPORATION**Date:May
              12, 2006
            By:
            /s/ R.
              DAVID
              RUSSELLR.
                David Russell, President and
              Chief
                Executive Officer


Date:May
              12, 2006
            By:
            /s/ MELVYN
              WILLIAMSMelvyn
              Williams,Chief
                Financial Officer and Senior Vice President Finance and Corporate
                Development




**Index
      to Exhibits**





**Exhibit
                No.**
            
            **Title
                of Exhibit**31.1
            
            Certification
                of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act31.2
            
            Certification
                of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act32.1
            
            Certification
                of Chief Executive Officer and Chief Financial Officer pursuant to
                Section
                906 of the Sarbanes-Oxley Act





28