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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 JUNE 30, 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 (IRS Employer Identification No.)
incorporation or organization)
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: 12,761,287
----------
Common Shares, without par value, outstanding at August 5, 2003
VISTA GOLD CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 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 13
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK 14
ITEM 4. CONTROLS AND PROCEDURES 14
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 15
ITEM 2. CHANGES IN SECURITIES 15
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 15
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 15
ITEM 5. OTHER INFORMATION 15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 15
SIGNATURES 17
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) June 30, 2003 December 31, 2002
-------------- ------------------
ASSETS:
Cash and cash equivalents $ 5,435 $ 3,443
Marketable securities 62 135
Accounts receivable 130 185
Supplies and other 262 342
---------- ----------
Current assets 5,889 4,105
Restricted cash - Note 3 443 -
Mineral properties - Note 4 15,171 14,919
Plant and equipment- Note 5 1,686 1,664
---------- ----------
Property, plant and equipment 16,857 16,583
---------- ----------
Total assets $ 23,189 $ 20,688
---------- ----------
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY:
Accounts payable $ 429 $ 228
Accrued liabilities and other 423 370
---------- ----------
Current liabilities 852 598
Payables to be settled with equity - Note 6 510 510
Accrued reclamation and closure costs 4,155 4,155
---------- ----------
Total liabilities 5,517 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 - 12,661,287 and 2002 - 10,744,613 133,277 129,575
Warrants - Note 8 345 345
Contributed surplus 13 -
Options 12 25
Deficit (115,975) (114,520)
---------- ----------
Total shareholders' equity 17,672 15,425
---------- ----------
Total liabilities and shareholders' equity $ 23,189 $ 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
Three Months Ended Six Months Ended Cumulative
June 30, June 30, during
(U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) -------------------------- -------------------------- Development
2003 2002 2003 2002 Stage
-------------------------- -------------------------- ------------
COSTS AND EXPENSES:
Exploration, property evaluation and holding costs 258 200 600 441 1,242
Corporate administration and investor relations 445 376 863 654 2,120
Depreciation, depletion and amortization 14 18 27 38 101
Provision for reclamation and closure costs - - - - 1,048
Interest expense - 8 - 8 14
(Gain)/loss on disposal of assets - 4 - (83) (83)
Other expense (income) (9) (1) (19) 1 (41)
Cost recoveries related to USF&G lawsuit - (240) - (240) (240)
Loss on currency translation 6 - 25 - 25
Write-down of marketable securities - - 33 - 118
(Gain)/loss on sale of marketable securities (74) - (74) - (74)
-------------------------- -------------------------- ------------
Total costs and expenses 640 365 1,455 819 4,230
-------------------------- -------------------------- ------------
Net loss $ (640) $ (365) $ (1,455) $ (819) $(4,230)
-------------------------- -------------------------- ------------
-------------------------- -------------------------- ------------
Weighted average shares outstanding 12,610,954 5,852,618 11,977,983 5,549,867
Basic and diluted loss per share $ (0.05) $ (0.06) $ (0.12) $ (0.15)
VISTA GOLD CORP. (A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF DEFICIT - UNAUDITED
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ ------------------------
(U.S. DOLLARS IN THOUSANDS) 2003 2002 2003 2002
------------------------ ------------------------
Deficit, beginning of period $(115,335) $(110,714) $(114,520) $(110,260)
Net Loss (640) (365) (1,455) (819)
------------------------ ------------------------
Deficit, end of period $(115,975) $(111,079) $(115,975) $(111,079)
------------------------ ------------------------
------------------------ ------------------------
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
Three Months Ended Six Months Ended Cumulative
June 30, June 30, during
-------------------- --------------------- Development
(U.S. DOLLARS IN THOUSANDS) 2003 2002 2003 2002 Stage
-------------------- --------------------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Loss for the period $ (640) $ (365) $(1,455) $ (819) $(4,230)
ADJUSTMENTS TO RECONCILE LOSS FOR THE PERIOD TO CASH
PROVIDED BY (USED IN) OPERATIONS:
Depreciation, depletion and amortization 14 18 27 38 101
Provision for reclamation and closure costs - - - - 1,048
Reclamation and closure costs accrued/(paid), net - 12 - 4 (27)
(Gain)/loss on disposal of assets - 4 - (83) (83)
Cost recoveries related to USF&G lawsuit - (240) - (240) (240)
Write-down of marketable securities - - 33 - 118
Gain on sale of marketable securities (74) - (74) - (74)
Unrealized loss on currency translation 6 - 25 - 25
Other non-cash items 30 - 60 - 130
CHANGE IN OPERATING ASSETS AND LIABILITIES:
Accounts receivable 141 (13) 55 14 50
Supplies inventory and prepaid expenses (28) 10 80 58 39
Accounts payable and accrued liabilities 10 (853) 29 (957) (924)
------------------ --------------------- ---------
NET CASH USED IN OPERATING ACTIVITIES (541) (1,427) (1,220) (1,985) (4,067)
CASH FLOWS FROM INVESTING ACTIVITIES:
Restricted cash - Note 3 - - (443) - (443)
Acquisition of marketable securities - - (40) - (40)
Proceeds from sale of marketable securities 154 - 154 - 154
Recovery/(additions) to mineral properties, net 193 - (52) - (1,509)
Additions to plant & equipment (2) - (49) - (49)
Proceeds on disposal of fixed assets and supplies - 5 - 246 246
------------------ --------------------- ---------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 345 5 (430) 246 (1,641)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from (costs of) private placements - Note 7 (28) 2,701 2,874 3,618 9,722
Cost to issue equities for other transactions - - - - (55)
Proceeds from exercise of warrants - Note 7 361 - 731 - 731
Proceeds from the exercise of stock options - Note 7 - 35 37 35 71
------------------ --------------------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 333 2,736 3,642 3,653 10,469
Net increase in cash and cash equivalents 137 1,314 1,992 1,914 4,761
------------------ --------------------- ---------
Cash and cash equivalents, beginning of period 5,298 1,274 3,443 674 674
------------------ --------------------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $5,435 $ 2,588 $ 5,435 $ 2,588 $ 5,435
------------------ --------------------- ---------
------------------ --------------------- ---------
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 June 30, 2003 and for the six month
period ended June 30, 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. The BLM has requested the Corporation
to increase the total surety bond amount to $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
6
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.
3. RESTRICTED CASH
The Corporation has pledged cash as collateral for an irrevocable standby letter
of credit of $443,279 to the BLM to ensure interim fluid management at the
Hycroft mine (Note 9).
4. MINERAL PROPERTIES
2002 2003
----------- ----------------------------------------------------------------------
Acquisition
costs & June 30,
December 31, option Exploration Year to date Ending
($ 000'S) net balance payments & land costs Cost Recovery activity Balance
----------- ----------- ------------ ------------- ------------ ---------
Maverick Springs, United States $ 1,521 $ - $ 53 $(488) $(435) $ 1,086
Mountain View, United States 303 - 34 - 34 337
Hasbrouck and Three Hills, United States - 272 - - 272 272
Long Valley, United States 48 122 8 - 130 178
Paredones Amarillos, Mexico 2,317 - 54 - 54 2,371
Amayapampa, Bolivia 10,730 - - - - 10,730
Other Projects - 197 - - 197 197
-------- ----- ----- ------ ------ --------
$14,919 $591 $149 $(488) $ 252 $15,171
-------- ----- ----- ------ ------ --------
-------- ----- ----- ------ ------ --------
The recoverability of the carrying values of the Corporation's mineral
properties is dependent upon the successful start-up and commercial production
from, or sale or lease of these properties. Development and/or start-up of any
of these projects will depend, among other things, on management's ability to
raise additional capital for these purposes. Although the Corporation has been
successful in raising such capital in the past, there can be no assurance that
it will be able to do so in the future.
5. PLANT AND EQUIPMENT
June 30, 2003 December 31, 2002
--------------------------------- ---------------------------------
Accumulated Accumulated
Depreciation Depreciation
and Write- and Write-
Cost downs Net Cost downs Net
-------- -------- ------- -------- -------- -------
($ 000'S)
Hycroft mine, United States $12,031 $10,345 $1,686 $11,982 $10,318 $1,664
Corporate, United States 331 331 - 331 331 -
-------- -------- ------- -------- -------- -------
$12,362 $10,676 $1,686 $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
$10,000, which is payable by the issuance to Endeavour of a convertible
promissory note, which is automatically converted into common shares of the
Corporation (Note 7- SHARES ISSUED FOR SERVICES).
7
7. CAPITAL STOCK
COMMON SHARES ISSUED AND OUTSTANDING
Number of Capital stock
shares issued ($ 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 during three months ending March 31, 2003 1,677,206 3,339
AS OF MARCH 31, 2003 12,421,819 132,914
Warrants exercised from February - March 2002 private placement 220,428 331
Warrants exercised from December 2002 private placement 10,000 30
Shares issued for services 9,040 30
Cost to issue equities - (28)
----------- ---------
Issued during three months ending June 30, 2003 239,468 363
----------- ---------
AS OF JUNE 30, 2003 12,661,287 $133,277
----------- ---------
----------- ---------
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 six months ended June 30, 2003, 467,157 of the warrants issued in the
February - March 2002 private placement were exercised for gross proceeds of
$700,736.
WARRANTS EXERCISED FROM DECEMBER 2002 PRIVATE PLACEMENT
During the six months ended June 30, 2003, 10,000 of the warrants issued in the
December 2002 private placement were exercised for gross proceeds of $30,400.
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
8
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 $188,000 in direct costs connected with this private placement.
During the six months ended June 30, 2003, no warrants related to this private
placement have been exercised.
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 six months ended June 30, 2003, the
Corporation issued 16,392 common shares valued at $60,000 to Endeavour under the
terms of this agreement.
STOCK BASED COMPENSATION
Under the Corporation's Stock Option Plan, 20,000 stock options were issued to
officers of the Corporation in March 2003. All of the options were vested
immediately. In June 2003, 20,000 stock options were issued to an employee of
the Corporation. Of these employee options 10,000 were vested immediately and
the remaining 10,000 options will vest in one year. 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:
Six months ended Six months ended
June 30, 2003 June 30, 2002
---------------- ----------------
Net loss - as reported (000's) $(1,455) $ (819)
Net loss - pro forma (000's) (1,659) (832)
Loss per share - as reported $ (0.12) $(0.15)
Loss per share - pro forma (0.14) (0.15)
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:
June 2003 March 2003
Options Options
--------- ----------
Expected volatility 50.00% 50.00%
Risk-free interest rate 3.50% 3.50%
Expected lives (years) 3 3
Dividend yield 0% 0%
9
8. WARRANTS
Weighted
average Weighted
exercise average
Warrants Warrants Warrants prices remaining Valuation
granted(1) exercised outstanding (U.S. $) Expiry 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 3.6 -
Private placement February-March 2002 - (246,729) (246,729) 1.50 -
--------- ----------- ---------- ----
For the three months ended March 31, 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
Private placement December 2002 - (10,000) (10,000) 3.04 -
Private placement February-March 2002 - (220,428) (220,428) 1.50 -
--------- ----------- ---------- ----
For the three months ended June 30, 2003 - (230,428) (230,428) -
AS OF JUNE 30, 2003 6,900,756 (1,156,893) 5,743,863 $2.42 $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. The BLM has requested the Corporation
to increase the total surety bond amount to $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 in the future.
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 scheduled) and continue for several years after that time. Using a
credit-adjusted rate of 7.75%, the fair value of the estimated $6.8 million
obligation is $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 six months ended June 30, 2003 or for the same period in 2002. Geographic
segmentation of capital assets is provided in Notes 4 and 5.
10
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:
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."
CONSOLIDATED STATEMENT OF LOSS - UNAUDITED
Cumulative
during
Three Months Ended Six Months Ended Development
(U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) June 30, 2003 June 30, 2002 June 30, 2003 June 30, 2002 Stage
----------------------------- ----------------------------- -----------
Net loss - Canadian GAAP $ (640) $ (365) $(1,455) $ (819) $(4,230)
Unrealized loss on marketable securities - - 33 - 118
Revenue recognition - 77 - 37 -
Exploration, property evaluation and holding costs (34) - (279) - (366)
Financing costs - - - - (222)
Beneficial conversion feature - - - - (2,774)
----------------------------- ----------------------------- -----------
Net loss - U.S. GAAP (674) (288) (1,701) (782) (7,474)
Unrealized gain/(loss) on marketable securities 19 - (14) - (99)
----------------------------- ----------------------------- -----------
Comprehensive loss - U.S. GAAP $ (655) $ (288) $(1,715) $ (782) $(7,573)
----------------------------- ----------------------------- -----------
----------------------------- ----------------------------- -----------
Basic loss per share - U.S. GAAP $(0.05) $(0.05) $ (0.14) $(0.14)
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, cash flows for "Exploration,
property evaluation and holding costs" of $279,000 for the six months ended June
30, 2003 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.
11
The measurement effect of GAAP differences on the consolidated balance sheets
were as follows:
CONSOLIDATED BALANCE SHEETS
June 30, 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 $ 5,889 $ 19 $ 5,908 $ 4,105 $ - $ 4,105
Restricted cash 443 - 443 - - -
Property, plant and equipment 16,657 (8,153) 8,504 16,583 (7,874) 8,709
----------------------------------- -------------------------------------
Total assets $ 22,989 $ (8,134) $ 14,855 $ 20,688 $ (7,874) $ 12,814
----------------------------------- -------------------------------------
----------------------------------- -------------------------------------
Current liabilities 652 - 652 598 - 598
Long term liabilities 4,665 - 4,665 4,665 - 4,665
----------------------------------- -------------------------------------
Total liabilities 5,317 - 5,317 5,263 - 5,263
Capital stock 133,277 76,754 210,031 129,575 76,754 206,329
Special warrants - 222 222 - 222 222
Contributed surplus 13 5,560 5,573 - 5,560 5,560
Warrants and options 357 - 357 370 - 370
Other comprehensive loss - (99) (99) - (85) (85)
Deficit (115,975) (90,571) (206,546) (114,520) (90,325) (204,845)
----------------------------------- -------------------------------------
Total shareholders' equity 17,672 (8,134) 9,538 15,425 (7,874) 7,551
----------------------------------- -------------------------------------
Total liabilities & shareholders' equity $ 22,989 $ (8,134) $ 14,855 $ 20,688 $ (7,874) $ 12,814
----------------------------------- -------------------------------------
----------------------------------- -------------------------------------
12. RELATED PARTY TRANSACTIONS
GLOBAL RESOURCE INVESTMENTS LTD.
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.
MAVERICK SPRINGS
In November 2002, the Corporation entered into a non-binding letter of intent to
grant to Silver Standard Resources Inc., (Silver Standard) an option to acquire
the Corporation's interest in the silver resources hosted in the Maverick
Springs project in Nevada. In June 2003 the transaction was completed. The
Corporation and Silver Standard have a common director. Under the terms of the
agreement, the Corporation will retain its 100% interest in the gold resources,
Silver Standard will pay the Corporation $1.5 million over four years including
a cash payment of $300,000 at closing. The remaining $1.2 million will be used
to fund exploration programs, land holding costs and option payments on the
Maverick Springs project. At the time the transaction was completed, Silver
Standard paid the Corporation $488,891, comprised of the required $300,000
payment due at closing plus $188,891 in exploration costs incurred through
December 31, 2002.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(U.S. dollars in thousands, unless specified otherwise)
RESULTS OF OPERATIONS
Total Exploration, property evaluation and holding costs were $258,000 for the
three months ended June 30, 2003, compared to $200,000 for the same period in
2002. Total Exploration, property evaluation and holding costs were $600,000 for
the six months ended June 30, 2003, compared to $441,000 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
costs in 2003 compared to 2002 are 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 June 30, 2003 were
$445,000 compared to $376,000 for the same period in 2002. Corporate
administration costs for the six months ended June 30, 2003 were $863,000
compared to $654,000 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 June 30,
2003 totalled $14,000, compared to $18,000 for the same period in 2002.
Depreciation, depletion and amortization for the six months ended June 30, 2003
totalled $27,000, compared to $38,000 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 during the three months and six
months ended June 30, 2003 and therefore did not realize any related gains or
losses. A $4,000 loss and $83,000 gain from the disposal of assets was realized
during the same three months and six months ended in 2002.
The Corporation realized a gain of $74,000 on the sale of marketable securities,
during the three month and six month periods ending June 30, 2002. No gain or
loss for marketable securities was realized during the same periods in 2002.
The Corporation used $541,000 net cash for operating activities for the three
months ended June 30, 2003 and $1,220,000 for the six months ended June 30,
2003. This is a decrease of $886,000 and $765,000 from net cash used for
operating activities of $1,427,000 and $1,985,000, respectively, for the same
periods ending June 30, 2002. The decreased cash usage for the six-month period
results primarily from the 2002 settlement of the USF&G lawsuit of $814,000.
For the three months ended June 30, 2003, the Corporation was provided with
$345,000 consisting of proceeds from the sale of marketable securities,
reimbursement of exploration costs from Silver Standard (Financial Statements -
Note 12), net of property acquisition costs and land exploration costs. Cash
provided during the same period in 2002 consisted of $5,000 related to the sale
of Hycroft fixed assets and supplies. For the six months ended June 30, 2003,
the Corporation used a net of $430,000 comprised of restricted cash invested in
a certificate of deposit and subsequently pledged as collateral for a standby
letter of credit (Financial Statements - Note 3); investment in marketable
securities; the acquisition of gold projects and related costs; and the
replacement of light vehicles at the Hycroft mine. The uses of cash noted during
the period have been offset partially by proceeds from the sale of marketable
securities. Cash provided during the same period in 2002 consists of $246,000
related to the sale of Hycroft fixed assets and supplies.
As discussed in the Financial Statements - Note 7, for the six months ended June
30, 2003, the Corporation raised $2.9 million, net proceeds, from a private
placement financing which closed on February 7, 2003. During the three months
ended June 30, 2003, the Corporation incurred $28,000 in further costs related
to this private placement. In addition, warrants issued in previous private
placement financings were exercised during the three months and six months ended
June 30, 2003, respectively. The exercise of the warrants provided the
Corporation with $361,042 and $731,136 for the three months and six months ended
June 30, 2003,
13
respectively. The Corporation also received $37,000 from the exercise of stock
options during the six months ended June 30, 2003 as compared to $35,000 for the
same period in 2002. During the same period in 2002, the Corporation raised net
proceeds of $3.6 million from a private placement.
FINANCIAL CONDITION
The Corporation's consolidated cash balance at June 30, 2003 was $5.4 million,
compared to a cash balance of $3.4 million at December 31, 2002; working capital
was $5.0 million as of June 30, 2003 compared to $3.5 million at December 31,
2002. This improvement resulted from the private placement financing and the
exercise of warrants 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 to meet its administrative and property obligations for the coming year
and to make additional gold project acquisitions and to look for opportunities
to improve these projects, currently projected to be approximately $750,000 for
the remainder of 2003.
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 Bureau of Land Management, Nevada State Office (the "BLM") has requested the
Corporation to increase the total surety bond amount for the Hycroft mine from
$5.1 million to an estimated $6.8 million, inclusive of the interim fluid
management letter of credit of $443,279. 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.
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
An evaluation was performed under the supervision and with the participation of
the Corporation's management, including the principal executive officer and
principal financial officer, of the effectiveness of the design and operation of
the Corporation's disclosure controls and procedures pursuant to Rule 13a-15(e)
of the Securities Exchange Act of 1934 (the "Exchange Act") as of June 30, 2003.
Based upon that evaluation, the Corporation's principal executive officer and
principal financial officer concluded that the Corporation's disclosure controls
and procedures are effective to ensure that information required to be disclosed
by the Corporation in reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in Securities and Exchange Commission rules and forms.
There has been no change in the Corporation's internal control over financial
reporting during the quarterly period ended June 30, 2003, that has materially
affected, or is reasonably likely to materially affect, the Corporation's
internal control over financial reporting.
14
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
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual General Shareholders' Meeting of the Corporation held on May 2,
2003, the following matters were submitted to a vote of the shareholders.
i) Directors elected to the Corporation's Board of Directors, together
with respective votes were: Ronald J. McGregor - 8,159,572 votes for,
19,951 votes abstained and withheld, John M. Clark - 8,159,311 votes
for, 20,212 votes abstained and withheld, C. Thomas Ogryzlo -
8,159,231 votes for, 20,292 votes abstained and withheld, Michael B.
Richings - 8,159,481 votes for, and 20,042 votes abstained and
withheld, Robert A. Quartermain - 8,159,528 votes for, 19,995 votes
abstained and withheld.
ii) Ratification of the appointment of PricewaterhouseCoopers LLP,
Chartered Accountants, as auditor to hold office until the next annual
general meeting. The motion was approved with 8,154,689 votes for,
24,834 votes abstained and withheld.
iii) Amendment to the Corporation's Stock Option Plan to increase the
maximum number of common shares which may be issued under this plan
from 225,000 to 1,000,000. The motion was approved with 1,785,960
votes for, 369,906 votes against, and 5,988,788 not voted.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a)
under the Securities Exchange Act of 1934, as amended
31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a)
under the Securities Exchange Act of 1934, as amended
15
32.1 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.
32.2 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 June 30, 2003:
1. Report dated May 28, 2003, pursuant to Item 5, regarding the
completion of the acquisition of gold projects from Newmont
Mining Corporation and first quarter results.
2. Report dated June 17, 2003, pursuant to Item 5, regarding the
completion of the grant of an option on silver resources at the
Maverick Springs project.
16
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: August 5, 2003 By: /s/ Ronald J. McGregor
----------------------------
Ronald J. McGregor
President and Chief Executive Officer
Date: August 5, 2003 By: /s/ John F. Engele
----------------------------
John F. Engele
Vice President Finance and
Chief Financial Officer
17