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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2003
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-9025
VISTA GOLD CORP.
(Exact name of registrant as specified in its charter)
Continued under the laws of the Yukon Territory None
(State or other jurisdiction of incorporation (IRS Employer
or organization) Identification No.)
7961 Shaffer Parkway
Suite 5
Littleton, Colorado 80127
(Address of principal executive offices) (Zip Code)
(720) 981-1185
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act)
Yes No X
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
12,621,819
-----------------
Common Shares, without par value, outstanding at May 14, 2003
VISTA GOLD CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2003
INDEX
PAGE
----
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (Unaudited) 3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 12
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 13
ITEM 4. CONTROLS AND PROCEDURES 13
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 14
ITEM 2. CHANGES IN SECURITIES 14
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 14
ITEM 5. OTHER INFORMATION 15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 15
SIGNATURES 16
In this Report, unless otherwise indicated, all dollar amounts are expressed in
United States dollars.
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VISTA GOLD CORP. (A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS - UNAUDITED
(U.S. DOLLARS IN THOUSANDS) MARCH 31, 2003 December 31, 2002
-------------- -----------------
ASSETS:
Cash and cash equivalents $ 5,298 $ 3,443
Marketable securities 142 135
Accounts receivable 271 185
Supplies and other 234 342
-------------- -----------------
Current assets 5,945 4,105
Restricted cash - Note 3 443 -
Mineral properties - Note 4 15,164 14,919
Plant & equipment - Note 5 1,698 1,664
-------------- -----------------
Property, plant & equipment 16,862 16,583
-------------- -----------------
Total assets $ 23,250 $ 20,688
-------------- -----------------
-------------- -----------------
LIABILITIES AND SHAREHOLDERS' EQUITY:
Accounts payable $ 239 $ 228
Accrued liabilities and other 397 370
-------------- -----------------
Current liabilities 636 598
Payables to be settled with equity - Note 6 510 510
Accrued reclamation and closure costs 4,155 4,155
-------------- -----------------
Total liabilities 5,301 5,263
-------------- -----------------
Capital stock, no par value per share: - Note 7
Preferred - unlimited shares authorized; no shares outstanding
Common - unlimited shares authorized; shares outstanding:
2003 - 12,421,819 and 2002 - 10,744,613 132,914 129,575
Warrants - Note 8 345 345
Options 25 25
Deficit (115,335) (114,520)
-------------- -----------------
Total shareholders' equity 17,949 15,425
-------------- -----------------
Total liabilities and shareholders' equity $ 23,250 $ 20,688
-------------- -----------------
-------------- -----------------
Nature of operations - Note 2
Commitments and contingencies - Note 9
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
3
VISTA GOLD CORP. (A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF LOSS - UNAUDITED
Cumulative
Three Months Ended March 31 during
--------------------------- Development
(U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) 2003 2002 Stage
-------- -------- -----------
COSTS AND EXPENSES:
Exploration, property evaluation and holding costs $ 342 $ 241 $ 984
Corporate administration and investor relations 418 278 1,675
Depreciation, depletion and amortization 13 20 87
Provision for reclamation and closure costs - - 1,048
Interest expense - - 14
Gain on disposal of assets - (87) (83)
Other expense (income) (10) 2 (32)
Cost recoveries related to USF&G lawsuit - - (240)
Loss on currency translation 19 - 19
Write-down of marketable securities 33 - 118
-------- -------- -----------
Total costs and expenses 815 454 3,590
-------- -------- -----------
Net loss $ (815) $ (454) $ (3,590)
-------- -------- -----------
-------- -------- -----------
Weighted average number of shares outstanding
(restated - Note 7) 11,337,979 5,243,752
Basic and diluted loss per share (restated - Note 7) $ (0.07) $(0.09)
VISTA GOLD CORP. (A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF DEFICIT - UNAUDITED
Three Months Ended March 31
----------------------------
(U.S. DOLLARS IN THOUSANDS) 2003 2002
--------- ---------
Deficit, beginning of period $ 114,520 $ 111,745
Net Loss 815 454
--------- ---------
Deficit, end of period $ 115,335 $ 112,199
--------- ---------
--------- ---------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
4
VISTA GOLD CORP. (A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOW - UNAUDITED
Cumulative
Three Months Ended March 31 during
--------------------------- Development
(U.S. DOLLARS IN THOUSANDS) 2003 2002 Stage
-------- -------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Loss for the period $ (815) $ (454) $ (3,590)
ADJUSTMENTS TO RECONCILE LOSS FOR THE PERIOD TO CASH
PROVIDED BY (USED IN) OPERATIONS:
Depreciation, depletion and amortization 13 20 87
Provision for reclamation and closure cost - - 1,048
Reclamation and closure costs paid - (8) (27)
Gain on disposal of assets - (87) (83)
Cost recoveries related to USF&G lawsuit - - (240)
Write-down of marketable securities 33 - 118
Unrealized loss on currency translation 19 - 19
Other non-cash items 30 - 100
CHANGE IN OPERATING ASSETS AND LIABILITIES:
Accounts receivable (86) 27 (91)
Supplies inventory and prepaid expenses 108 48 67
Accounts payable and accrued liabilities 19 (104) (934)
-------- -------- -----------
NET CASH USED IN OPERATING ACTIVITIES (679) (558) (3,526)
CASH FLOWS FROM INVESTING ACTIVITIES:
Restricted cash - Note 3 (443) - (443)
Acquisition of marketable securities (40) - (40)
Additions to mineral properties (245) - (1,702)
Additions to plant & equipment (47) - (47)
Proceeds on disposal of fixed assets and supplies - 241 246
-------- -------- -----------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (775) 241 (1,986)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from private placements - Note 7 2,902 917 9,750
Cost to issue equities for other transactions - - (55)
Proceeds from exercise of warrants - Note 7 370 - 370
Proceeds from the exercise of stock options - Note 7 37 - 71
-------- -------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 3,309 917 10,136
Net increase in cash and cash equivalents 1,855 600 4,624
Cash and cash equivalents, beginning of period 3,443 674 674
-------- -------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 5,298 $ 1,274 $ 5,298
-------- -------- -----------
-------- -------- -----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars unless specified otherwise)
1. GENERAL
The consolidated interim financial statements of Vista Gold Corp. (a Development
Stage Enterprise) (the "Corporation") as of March 31, 2003 and for the three
month period ended March 31, 2003, have been prepared by the Corporation without
audit and do not include all of the disclosures required by generally accepted
accounting principles in Canada for annual financial statements. As described in
Note 11, generally accepted accounting principles in Canada differ in certain
material respects from generally accepted accounting principles in the United
States. In the opinion of management, all of the adjustments necessary to fairly
present the interim financial information set forth herein have been made. These
adjustments are of a normal and recurring nature. The results of operations for
interim periods are not necessarily indicative of the operating results of a
full year or of future years. These interim financial statements should be read
in conjunction with the financial statements and related footnotes included in
the Corporation's Annual Report on Form 10-K for the year ended December 31,
2002.
These interim financial statements follow the same accounting policies and
methods of their application as the most recent annual financial statements,
with the exception that on January 1, 2003, the Corporation adopted SFAS 143
"Accounting for Asset Retirement Obligations," which addresses financial
accounting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. The Corporation has determined
that its liabilities with respect to asset retirement obligations, as reported
in its financial statements for the year ended December 31, 2002, approximated
fair value. Accordingly, adoption of this standard has had no effect on the
Corporation's consolidated financial position or results of operations. The
adoption of SFAS 143 effectively results in the Corporation's early adoption of
CICA 3110 "Asset Retirement Obligations" which is similar to SFAS 143.
2. NATURE OF OPERATIONS
The Corporation operates in the gold mining sector. Gold production has
gradually declined since mining activities were suspended at the Hycroft mine in
1998. Effective January 1, 2002 gold production is considered incidental and the
Corporation stopped reporting the associated sales proceeds as revenue. As the
Corporation does not currently produce gold in commercial quantities, the
Corporation is considered a Development Stage Enterprise. The Corporation
evaluates, acquires and improves gold exploration and potential development
projects. The Corporation's approach to acquisitions of gold projects has
generally been to seek projects within political jurisdictions with well
established mining, land ownership and tax laws, which have adequate drilling
and geological data to support the completion of a third-party review of the
geological data and to complete an estimate of gold mineralization. In addition,
the Corporation looks for opportunities to improve the value of its gold
projects through exploration drilling, and/or reengineering the operating
assumptions underlying previous engineering work.
Management has estimated that the Corporation will have adequate funds from
existing working capital to meet its corporate administrative and property
obligations for the coming year. If the Corporation is to advance or develop its
mineral properties further, it will be necessary to obtain additional funding.
Although in the past the Corporation has been successful in obtaining financing,
there can be no assurance that it will be successful in the future.
The Corporation has provided a surety bond in the amount of $5.1 million to
ensure reclamation obligations under an approved reclamation plan at the Hycroft
mine. In addition, the Corporation has provided an irrevocable standby letter of
credit of $443,279 to the Bureau of Land Management, Nevada State Office (the
"BLM") to ensure interim fluid management. It is probable that the BLM will
request that the Corporation increase the total surety bond amount to an
estimated $6.8 million, inclusive of the interim fluid management letter of
credit. Furthermore, the Corporation has been requested to pledge collateral in
order to provide this surety bond. The amount and the nature of the collateral
are subject to negotiation. Although in the past the Corporation has been
6
successful in arranging bonding, there can be no assurance that the Corporation
will be successful in providing acceptable collateral and thus posting the
surety bond.
3. RESTRICTED CASH
The Corporation has pledged cash as collateral for an irrevocable standby letter
of credit of $443,279 to the BLM to ensure interim fluid management at the
Hycroft mine (Note 9).
4. MINERAL PROPERTIES
2002 2003
------------ -------------------------------------------------------------
Acquisition
costs &
December 31, option Exploration Year's Ending
($ 000'S) net payments & land costs activity Balance
------------ -------------------------------------------------------------
Maverick Springs, United States $ 1,521 $ - $ 20 $ 20 $ 1,541
Mountain View, United States 303 - - - 303
Long Valley, United States 48 122 - 122 170
Paredones Amarillos, Mexico 2,317 - 51 51 2,368
Amayapampa, Bolivia 10,730 - - - 10,730
Other projects - 52 - 52 52
------------ -------------------------------------------------------------
$ 14,919 $ 174 $ 71 $ 245 $ 15,164
------------ -------------------------------------------------------------
------------ -------------------------------------------------------------
The recoverability of the carrying values of the Corporation's mineral
properties is dependent upon the successful start-up and commercial production
from or sale of these properties. Development and/or start-up of any of these
projects will depend, among other things, on management's ability to raise
additional capital for these purposes. Although the Corporation has been
successful in raising such capital in the past, there can be no assurance that
it will be able to do so in the future.
5. PLANT AND EQUIPMENT
March 31, 2003 December 31, 2002
-------------------------------------- -------------------------------------
Accumulated Accumulated
Depreciation Depreciation
and Write- and Write-
($ 000'S) Cost downs Net Cost downs Net
-------------------------------------- -------------------------------------
Hycroft mine, United States $ 12,029 $ 10,331 $ 1,698 $ 11,982 $ 10,318 $ 1,664
Corporate, United States 331 331 - 331 331 -
-------------------------------------- -------------------------------------
$ 12,360 $ 10,662 $ 1,698 $ 12,313 $ 10,649 $ 1,664
-------------------------------------- -------------------------------------
-------------------------------------- -------------------------------------
6. PAYABLES TO BE SETTLED WITH EQUITY
Pursuant to the terms of the acquisition agreement with respect to the Maverick
Springs project, in October, 2003, the Corporation will issue common shares with
an approximate market value of $500,000, together with an equivalent number of
two year warrants. The warrants will be valued at the time of issue.
Pursuant to an agreement with Endeavour Financial Corporation Inc., Endeavour is
to provide financial advisory services to the Corporation for a monthly fee of
$10,000, which is payable by the issuance to Endeavour of a convertible
promissory note, which is automatically converted into common shares of the
Corporation (Note 7). As of March 31, 2003, payment for the month of March, 2003
had not been made.
7
7. CAPITAL STOCK
COMMON SHARES ISSUED AND OUTSTANDING
Number of shares Capital stock
issued ($ 000's)
---------------- --------------
December 31, 2002 10,744,613 $ 129,575
Warrants exercised from February - March 2002 private placement 246,729 370
Private placement February 2003, net 1,400,000 2,902
Shares issued for services 7,352 30
Exercise of stock options 23,125 37
---------------- --------------
Issued in 2003 1,677,206 $ 3,339
---------------- --------------
As of March 31, 2003 12,421,819 $ 132,914
---------------- --------------
---------------- --------------
On June 19, 2002, the Corporation effected a 1-for-20 consolidation of its
common shares and the number of common shares outstanding, on a
pre-consolidation basis was restated, giving effect to the consolidation. All
references in this document to common shares, loss per share and value per share
or value per unit, are on a post-consolidation basis, unless otherwise
indicated.
WARRANTS EXERCISED FROM FEBRUARY - MARCH 2002 PRIVATE PLACEMENT
During the three months ended March 31, 2003, 246,729 of the warrants issued in
the February - March 2002 private placement were exercised for gross proceeds of
$370,094.
PRIVATE PLACEMENT FEBRUARY 2003, NET
On February 7, 2003, the Corporation completed a $3.4 million private placement
financing. The gross proceeds were placed in escrow pending shareholder
approval. On February 27, 2003, at a Special General Meeting of the
Shareholders, shareholders voted in favour of the financing and on February 28,
2003, the gross proceeds were released to the Corporation from escrow. The
private placement consisted of the sale of 1.4 million special warrants, each
priced at $2.43. The special warrants were automatically converted into equity
units upon shareholder approval. Each equity unit consists of one common share
and a warrant, exercisable over a four-year period, to purchase one common share
for $3.14 during the first year, $3.56 during the second year, $3.92 during the
third year and $4.28 during the fourth year. Starting on the second anniversary
of the closing of this private placement (February 7, 2005), if the common
shares of the Corporation trade at a value of 150% or more of the respective
exercise price for a period of 15 consecutive trading days on the American Stock
Exchange, then the Corporation has the option to request that the warrants be
exercised. If the warrants are not exercised within 15 business days following
this request, they will be cancelled. A 10% cash finder's commission totalling
$340,200 was paid in connection with the private placement (Note 12); in
addition, the Corporation incurred $160,000 in direct costs connected with this
private placement.
SHARES ISSUED FOR SERVICES
Pursuant to an agreement with Endeavour Financial Corporation Inc.
("Endeavour"), Endeavour is to provide financial advisory services to the
Corporation for a monthly fee of $10,000. The monthly fee is payable by the
issuance to Endeavour of a non-transferable convertible promissory note, which
is automatically converted into common shares of the Corporation at a price per
share equal to the weighted average closing price of the shares on the American
Stock Exchange on the last 10 trading days of the month prior to the business
day on which the fee becomes due. During the three months ended March 31, 2003,
the Corporation issued 7,352 common shares valued at $30,000 to Endeavour under
the terms of this agreement.
8
STOCK BASED COMPENSATION
Under the Corporation's Stock Option Plan, 20,000 stock options were issued to
officers of the Corporation in March 2003, subject to regulatory and shareholder
approval. All of the options were vested immediately. Compensation expense for
options vesting over time is recognized over the vesting period. Had
compensation been recorded using the fair-value method for the stock options
granted in 2003 and options granted in 2002 which will be fully vested in 2003,
the Corporation's loss and loss per share for Canadian GAAP would have been
adjusted to the pro forma amounts indicated below:
Three months ended March 31, 2003
--------------------------------------------------------------------
Net loss - as reported (000's) $ (815)
Net loss - pro forma (000's) (892)
Loss per share - as reported $ (0.07)
Loss per share - pro forma $ (0.08)
The fair value of each option grant is estimated on the date of the grant using
the Black-Scholes option pricing model with the following weighted average
assumptions used for the grants:
March Options
Expected volatility 50.0%
Risk-free interest rate 3.50%
Expected lives 3 years
Dividend yield 0%
8. WARRANTS
Weighted
average Weighted
exercise average
Warrants Warrants Warrants prices Expiry remaining Valuation
granted(1) exercised outstanding (U.S.$) date life (yrs) (000's)
----------- --------- ----------- -------- ------ ---------- ---------
As of December 31, 2002 5,500,756 (679,736) 4,821,020 $ 2.12 $ 345
Private placement February 2003 1,400,000 - 1,400,000 3.14(2) Feb-07 3.9 -
Private Placement February-March 2002 - (246,729) (246,729) 1.50 -
----------- --------- ----------- ---------
Total 2003 1,400,000 (246,729) 1,153,271 -
----------- --------- ----------- ---------
As of March 31, 2003 6,900,756 (926,465) 5,974,291 $ 2.39 $ 345
----------- --------- ----------- -------- ---------
----------- --------- ----------- -------- ---------
(1) Each warrant entitles the holder to purchase one common share.
(2) The exercise price increases to $3.56 in February 2004, to $3.92 in
February 2005 and $4.28 in February 2006.
9. COMMITMENTS AND CONTINGENCIES
The Corporation has provided a surety bond in the amount of $5.1 million to
ensure reclamation obligations under an approved reclamation plan at the Hycroft
mine. In addition, the Corporation has provided an irrevocable standby letter of
credit of $443,279 to the Bureau of Land Management, Nevada State Office (the
"BLM") to ensure interim fluid management. It is probable that the BLM will
request that the Corporation increase the total surety bond amount to an
estimated $6.8 million, inclusive of the interim fluid management letter of
credit. Furthermore, the Corporation has been requested to pledge collateral in
order to provide this surety bond. The amount and the nature of the collateral
are subject to negotiation. There can be no assurance that the Corporation will
be successful in providing acceptable collateral and thus posting the surety
bond.
9
The $6.8 million surety bond estimate represents an asset retirement obligation,
as defined in SFAS 143 and CICA 3110, with respect to the Hycroft mine. The
Corporation estimates that the related asset retirement expenditures will
commence approximately five years after the start-up of the Hycroft mine (an
event not yet scheduled) and continue for several years after that time. Using a
credit-adjusted rate of 7.75%, the fair value of this obligation is estimated at
$4.1 million, as accrued in these financial statements.
10. GEOGRAPHIC AND SEGMENT INFORMATION
The Corporation's core business is evaluating, acquiring, exploring and
improving gold exploration and potential development projects. These activities
are focused principally in North and South America. Substantially all related
costs are derived in the United States. The Corporation reported no revenues in
the three months ended March 31, 2003 or for the same period in 2002. Geographic
segmentation of capital assets is provided in Notes 4 and 5.
11. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES
The Corporation prepares its financial statements in accordance with accounting
principles generally accepted in Canada, which differ in some respects from
those in the United States. The measurement effect of these GAAP differences on
the consolidated statements of loss were as follows:
CONSOLIDATED STATEMENTS OF LOSS
Three Months Ended March 31
---------------------------
2003 2002
-------- -------
(U.S. $ 000'S, EXCEPT PER SHARE DATA)
Net loss - Canadian GAAP $ (815) $ (454)
Unrealized loss on marketable securities 33 -
Revenue recognition - 150
Exploration, property evaluation and holding cost (245) -
-------- -------
Net loss - U.S. GAAP (1,027) (304)
Unrealized (loss) gain on marketable securities (33) -
-------- -------
Comprehensive loss - U.S. GAAP $ (1,060) $ (304)
-------- -------
-------- -------
Basic and diluted loss per share (restated -
Note 8) - U.S. GAAP $ (0.09) $ (0.06)
In 2002, proceeds from gold sales, which had been recognized in 2001 under
Canadian GAAP, were recognized for U.S. GAAP and credited to "Exploration,
property evaluation and holding costs."
In accordance with U.S. GAAP, exploration, mineral property evaluation, holding
costs, option payments and related acquisition costs for mineral properties
acquired under an option agreement are expensed as incurred. When proven and
probable reserves are determined for a property and a bankable feasibility study
is completed, then subsequent exploration and development costs on the property
would be capitalized. In accordance with U.S. GAAP, the $245,000 "Exploration,
property evaluation and holding costs" expense would be classified as "Cash used
in operations" for cash flow reporting purposes, as opposed to "Cash used in
investing activities" as presented in the Canadian GAAP Statements of Cash flow.
10
The measurement effect of GAAP differences on the consolidated balance sheets
were as follows:
CONSOLIDATED BALANCE SHEETS
March 31, 2003 December 31, 2002
---------------------------------- ----------------------------------
Per Cdn. Cdn./U.S. Per U.S. Per Cdn. Cdn./U.S. Per U.S.
GAAP Adj. GAAP GAAP Adj. GAAP
---------------------------------- ----------------------------------
(U.S. $ 000'S)
Current assets $ 5,945 $ - $ 5,945 $ 4,105 $ - $ 4,105
Restricted cash 443 - 443 - - -
Property, plant and equipment 16,862 (8,119) 8,743 16,583 (7,874) 8,709
---------------------------------- ----------------------------------
Total assets $ 23,250 $ (8,119) $ 15,131 $ 20,688 $ (7,874) $ 12,814
---------------------------------- ----------------------------------
---------------------------------- ----------------------------------
Current liabilities 636 - 636 598 - 598
Long term liabilities 4,665 - 4,665 4,665 - 4,665
---------------------------------- ----------------------------------
Total liabilities 5,301 - 5,301 5,263 - 5,263
Capital stock 132,914 76,754 209,668 129,575 76,754 206,329
Special warrants - 222 222 - 222 222
Contributed surplus - 5,560 5,560 - 5,560 5,560
Warrants and options 370 - 370 370 - 370
Other comprehensive loss - (118) (118) - (85) (85)
Deficit (115,335) (90,537) (205,872) (114,520) (90,325) (204,845)
---------------------------------- ----------------------------------
Total shareholders' equity 17,949 (8,119) 9,830 15,425 (7,874) 7,551
---------------------------------- ----------------------------------
Total liabilities & shareholders' equity $ 23,250 $ (8,119) $ 15,131 $ 20,688 $ (7,874) $ 12,814
---------------------------------- ----------------------------------
---------------------------------- ----------------------------------
12. RELATED PARTY TRANSACTIONS
On February 7, 2003, the Corporation completed a $3.4 million private placement
financing of Special Warrants as discussed in Financial Statements - Note 7. The
Corporation retained Global Resource Investments Ltd. ("Global") to find
investors to purchase the Special Warrants and paid Global a cash commission of
$340,200, equal to 10% of the proceeds of the Special Warrant Offering as
consideration for Global's services as finder. In addition, the Corporation
agreed to pay reasonable legal costs incurred by Global in connection with the
Special Warrant Offering up to a maximum of $15,000. The Corporation understands
that all of the shares of Global are beneficially owned by an individual that
beneficially owned approximately 19.4% of the common shares of the Corporation
as at February 7, 2003, and also beneficially owns more than 10% of the shares
of Quest Investment Corporation (successor by amalgamation to Stockscape.com
Technologies Inc.) ("Quest"). As at February 7, 2003, Quest beneficially owned
approximately 9.9% of the common shares of the Corporation.
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(U.S. dollars in thousands, unless specified otherwise)
RECENT DEVELOPMENTS
On February 7, 2003, the Corporation completed a $3.4 million private placement
financing. The gross proceeds were placed in escrow pending shareholder
approval. On February 27, 2003, at a Special General Meeting of the
shareholders, shareholders voted in favour of the financing and on February 28,
2003, the gross proceeds were released to the Corporation from escrow. The
private placement consisted of the sale of 1.4 million special warrants each
priced at $2.43. Upon shareholder approval, the special warrants were
automatically converted into equity units, each consisting of one common share
and one four-year common share purchase warrant (see Financial Statements -
Note 7).
RESULTS OF OPERATIONS
The Hycroft mine is on care and maintenance. Solution is being circulated over
the heap leach pads to enhance evaporation, consequently small amounts of gold
are recovered from the solutions. The value of the gold recovered is accounted
for as an offset to "Exploration, property evaluation and holding costs". Total
Exploration, property evaluation and holding costs were $342,000 for the three
months ended March 31, 2003, compared to $241,000 for the same period in 2002.
These costs are comprised principally of costs related to holding the Hycroft
mine, but also include the costs to hold the Amayapampa project and costs to
maintain the Corporation's Canadian exploration claims. The increase in cost in
2003 compared to 2002 is principally a result of the declining amount of gold
recovered from the circulating solutions at the Hycroft mine.
Corporate administration costs for the three months ended March 31, 2003 were
$418,000 compared to $278,000 for the same period in 2002. Corporate
administration costs have increased, as expected, as a result of business
development initiatives and an expanded investor relations program. This trend
is expected to continue.
Depreciation, depletion and amortization for the three months ended March 31,
2003 totalled $13,000, compared to $20,000 for the same period in 2002. A
significant portion of the Hycroft property, plant and equipment has been sold
and a substantial portion of the remaining equipment has been fully depreciated.
The Corporation did not dispose of any assets in the three months ended March
31, 2003 and therefore did not realize any related gains or losses. An $87,000
gain from the disposal of assets was realized in the same period in 2002.
The fair value of marketable securities has declined $33,000 for the three
months ended March 31, 2003. The Corporation held no marketable securities at
March 31, 2002.
The Corporation used $679,000 net cash for operating activities during the three
months ended March 31, 2003; this is a $119,000 increase from the $558,000 net
cash used in operating activities during the three months ended March 31, 2002.
The increased cash usage for the three-month period results mainly from
increased costs and differences with respect to the timing of receipt of gold
settlements, partially offset by the timing of payments of prepaid expenses and
accounts payable.
The Corporation used $775,000 in investing activities during the three months
ended March 31, 2003. Investing activities includes: $443,000 restricted cash
invested in a certificate of deposit and subsequently pledged as collateral for
a standby letter of credit (Financial Statements - Note 3); $40,000 invested in
marketable securities; $245,000 reflecting the Corporation's continued focus on
acquisition and improvement of gold projects; and $47,000 for the replacement of
light vehicles at the Hycroft mine. The Corporation had no asset disposal during
the three months ended March 31, 2003. During the three months ended March 31,
2002, the Corporation made no investments and provided $241,000 cash from the
sale of fixed assets and supplies.
12
As discussed in the Financial Statements - Note 7, for the three months ended
March 31, 2003, the Corporation raised $2.9 million, net proceeds, from a
private placement financing which closed on February 7, 2003. In addition,
246,729 warrants issued in a previous private placement financing were exercised
providing the Corporation with $370,000. The Corporation also received $37,000
from the exercise of stock options during the three months ended March 31, 2003.
During the same period in 2002, the Corporation raised net proceeds of $917,000
from a private placement.
FINANCIAL CONDITION
The Corporation's consolidated cash balance at March 31, 2003 was $5.3 million,
compared to a cash balance of $3.4 million at December 31, 2002; working capital
was $5.3 million as of March 31, 2003 compared to $3.5 million at December 31,
2002. This improvement resulted from the private placement financing as
discussed in the Financial Statements - Note 7, and above in RESULTS OF
OPERATIONS.
OUTLOOK
The Corporation does not currently generate operating cash flows. Management has
estimated that the Corporation will have adequate funds, from existing working
capital and from the exercise of warrants subsequent to the period, to meet its
administrative and property obligations for the coming year and to make
additional gold project investments, currently planned at approximately
$500,000.
The Corporation expects that emphasis on gold project acquisition and
improvement will continue in the future. Subject to sustained higher gold
prices, management expects that it can generate revenues and cash flows, in the
future, from its portfolio of gold projects by several means, including, but not
limited to: options or leases to third parties, joint venture arrangements with
other gold producers, outright sale for cash and/or royalties. The Corporation
does not have adequate cash to begin development of any its projects, and would
need to seek additional financing in order to construct and operate a gold mine.
Although the Corporation has been successful in obtaining such financing in the
past, there can be no assurance that it will be able to do so in the future.
The Corporation has provided a surety bond in the amount of $5.1 million to
ensure reclamation obligations under an approved reclamation plan at the Hycroft
mine. In addition, the Corporation has provided an irrevocable standby letter of
credit of $443,279 to the Bureau of Land Management, Nevada State Office to
ensure interim fluid management. It is probable that the State will request that
the Corporation increase the total surety bond amount to an estimated $6.8
million, inclusive of the interim fluid management letter of credit.
Furthermore, the Corporation has been requested to pledge collateral in order to
provide this surety bond. The amount and the nature of the collateral are
subject to negotiation. Although in the past the Corporation has been successful
in arranging bonding, there can be no assurance that the Corporation will be
successful in providing acceptable collateral and thus posting the surety bond.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The registrant is a "small business issuer" as such term is defined in Rule
12b-2 of the Exchange Act, and accordingly is not required to provide the
information under this Item.
ITEM 4. CONTROLS AND PROCEDURES
(a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. Based on their
evaluation as of a date within 90 days prior to the filing date of this
Quarterly Report on Form 10-Q, the Corporation's principal executive officer and
principal financial officer have concluded that the Corporation's disclosure
controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the
Securities Exchange Act of 1934 (the "Exchange Act")) are effective to ensure
that information required to be disclosed by the Corporation in reports that it
files or
13
submits under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in Securities and Exchange Commission rules
and forms.
(b) CHANGES IN INTERNAL CONTROLS. There were no significant changes in
the Corporation's internal controls or in other factors that could significantly
affect these controls subsequent to the date of their evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Except as described below, the Corporation is not aware of any material pending
or threatened litigation or of any proceedings known to be contemplated by
governmental authorities which is, or would be, likely to have a material
adverse effect upon the Corporation or its operations, taken as a whole.
In April 1998, a legal dispute was initiated in Bolivia by a Mr. Estanislao
Radic who brought legal proceedings in the lower penal court against Mr. Raul
Garafulic and the Corporation, questioning the validity of the Mr. Garafulic's
ownership of the Amayapampa property. Please see "Part I - Item 3. Legal
Proceedings" as included in the Corporation's Annual Report on Form 10-K for the
year ended December 31, 2002, for information about this matter.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On February 7, 2003, the Corporation completed a $3.4 million private placement
financing as discussed in Financial Statements - Note 7. The private placement
consisted of the sale of 1.4 million Special Warrants, each priced at $2.43. The
Special Warrants were automatically converted into equity units upon shareholder
approval at the Special General Meeting of the shareholders on February 27,
2003. Each equity unit consists of one common share and a warrant, exercisable
over a four-year period, to purchase one common share for $3.14 during the first
year, $3.56 during the second year, $3.92 during the third year and $4.28 during
the fourth year. Starting on the second anniversary of the closing of this
private placement, if the common shares of the Corporation trade at a value of
150% or more of the respective exercise price for a period of 15 consecutive
trading days on the American Stock Exchange, then the Corporation has the option
to request that the warrants be exercised. If the warrants are not exercised
within 15 business days following this request, they will be cancelled. The
securities were issued in reliance upon the exemption from the registration
requirements of the Securities Act specified by the provisions of Section 4(2)
of the Securities Act and Rule 506 of Regulation D promulgated thereunder.
The Corporation intends to use the net proceeds of the Special Warrant offering
to evaluate and acquire gold exploration and potential development projects, and
to maintain and, where practicable improve, these projects, together with its
existing gold projects.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At a Special General Shareholders' Meeting held on February 27, 2003, the
following matter was submitted to a vote of the shareholders.
The issuance of 1,400,000 Special Warrants, each Special Warrant to be
exercisable into one common share in the capital of the Corporation and one
common share purchase warrant as more particularly described in the
14
Corporation's Notice of Meeting and Management Information and Proxy Circular
dated January 24, 2003, as filed with the SEC on February 3, 2003. The motion
was approved with 3,070,584 votes for, 324,226 votes against and 15,611
withheld, abstentions and broker non-votes.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
99.1 Certification of Chief Executive Officer pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
99.2 Certification of Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K
The following Current Reports on Form 8-K were filed by the
Corporation during the quarter ended March 31, 2003:
1. Report dated December 27, 2002, pursuant to Item 5,
regarding the completion of a $2.3 million private placement
financing.
2. Report dated December 30, 2002, pursuant to Item 5,
regarding a proposed $3.4 million private placement
financing.
3. Report dated January 23, 2003, pursuant to Item 5, regarding
the completion of a resource study for the Long Valley
project.
4. Report dated February 13, 2003, pursuant to Item 5,
regarding the closing of a $3.4 million private placement
financing.
5. Report dated February 28, 2003, pursuant to Item 5,
regarding Shareholders' approval of the $3.4 million private
placement financing.
6. Report dated March 20, 2003, pursuant to Item 5, regarding a
letter of intent to acquire gold projects from Newmont
Mining Corporation.
15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VISTA GOLD CORP.
(Registrant)
Date: May 14, 2003 By: /s/ RONALD J. MCGREGOR
-----------------------
Ronald J. McGregor
President and Chief Executive Officer
Date: May 14, 2003 By: /s/ JOHN F. ENGELE
-------------------
John F. Engele
Vice President Finance and Chief Financial Officer
16
CERTIFICATION
I, Ronald J. McGregor, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Vista Gold Corp.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Dated : May 14, 2003 /s/ RONALD J. MCGREGOR
----------------------
Ronald J. McGregor,
President and Chief Executive Officer
(Principal Executive Officer)
17
CERTIFICATION
I, John F. Engele, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Vista Gold Corp.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Dated: May 14, 2003 /s/ JOHN F. ENGELE
--------------------------------------------
John F. Engele,
Vice President Finance and
Chief Financial Officer
(Principal Financial and Accounting Officer)
18