VISTA GOLD CORP - 10-Q Quarterly Report

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

FORM 10-Q

(Mark One)
ý		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the quarterly period ended March 31, 2004
		OR
o		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, Canada		None
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)
7961 Shaffer Parkway Suite 5 Littleton, Colorado (Address of principal executive offices)		80127 (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 ý No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act)

Yes o No ý

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:

15,549,048

Common Shares, without par value, outstanding at May 17, 2004

VISTA GOLD CORP.
(An Exploration Stage Enterprise)
FORM 10-Q
For the Quarter Ended March 31, 2004

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	16
ITEM 4.	CONTROLS AND PROCEDURES	16
	PART II — OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	17
ITEM 2.	CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES	17
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	17
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	17
ITEM 5.	OTHER INFORMATION	17
ITEM 6.	EXHIBITS AND REPORTS ON FORM 8-K	17
	SIGNATURES	18

In this Report, unless otherwise indicated, all dollar amounts are expressed in United States dollars.

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

VISTA GOLD CORP. (An Exploration Stage Enterprise)
CONSOLIDATED BALANCE SHEETS — UNAUDITED

(U.S. dollars in thousands)			March 31, 2004			December 31, 2003
Assets:
Cash and cash equivalents			$	4,838		$	5,520
Marketable securities				46			31
Accounts receivable — Note 12				186			642
Supplies inventory, prepaids and other				283			292

	Current assets			5,353			6,485
Restricted cash — Note 3				3,971			1,684
Mineral properties — Note 4				16,711			16,598
Plant and equipment — Note 5				1,491			1,513

				18,202			18,111

Total assets			$	27,526		$	26,280

Liabilities and Shareholders' Equity:
Accounts payable			$	55		$	26
Accrued liabilities and other				384			382

	Current liabilities			439			408
Accrued reclamation and closure costs — Note 9				4,171			4,169

Total liabilities				4,610			4,577

Capital stock, no par value: — Note 6
	Preferred — unlimited shares authorized; no shares outstanding
	Common — unlimited shares authorized; shares outstanding:
		2004 — 15,171,018 and 2003 — 14,561,832		140,993			138,458
Warrants — Note 7				270			456
Options — Note 8				1,022			41
Contributed surplus				13			13
Deficit				(119,382	)		(117,265	)

	Total shareholders' equity			22,916			21,703

Total liabilities and shareholders' equity			$	27,526		$	26,280

Nature of operations and going concern — Note 2
Commitments and contingencies — Note 9
Subsequent event — Note 13

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

VISTA GOLD CORP. (An Exploration Stage Enterprise)
CONSOLIDATED STATEMENTS OF LOSS — UNAUDITED

		Three Months Ended March 31						Cumulative during Exploration Stage
(U.S. dollars in thousands, except share data)		2004			2003			Cumulative during Exploration Stage
Costs and expenses:
Exploration, property evaluation and holding costs		$	484		$	342		$	2,116
Corporate administration and investor relations			522			418			3,380
Depreciation, depletion and amortization			52			13			338
Provision for reclamation and closure costs			—			—			1,048
Interest (income)/expense			(17	)		—			(3	)
Gain on disposal of assets			(8	)		—			(91	)
Other expense (income)			(43	)		(10	)		(345	)
Stock based compensation — Note 1			156			—			210
Loss on currency translation			—			19			44
Gain on disposal of marketable securities			—			—			(149	)
Write-down of marketable securities			—			33			118

	Total costs and expenses		1,146			815			6,666

Net loss		$	(1,146	)	$	(815	)	$	(6,666	)

Weighted average number of shares outstanding			14,728,665			11,337,979
Basic and diluted loss per share		$	(0.08	)	$	(0.07	)

VISTA GOLD CORP. (An Exploration Stage Enterprise)
CONSOLIDATED STATEMENTS OF DEFICIT — UNAUDITED

	Three Months Ended March 31
(U.S. dollars in thousands)	2004			2003
Deficit, beginning of period, as previously reported	$	(117,265	)	$	(114,520	)
Stock-based compensation — Note 1		(971	)		—

Deficit, beginning of period, as restated		(118,236	)		(114,520	)
Net loss		(1,146	)		(815	)

Deficit, end of period	$	(119,382	)	$	(115,335	)

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

VISTA GOLD CORP. (An Exploration Stage Enterprise)
CONSOLIDATED STATEMENTS OF CASH FLOWS — UNAUDITED

		Three Months Ended March 31
		Three Months Ended March 31						Cumulative during Exploration Stage
(U.S. dollars in thousands)		2004			2003			Cumulative during Exploration Stage
Cash flows from operating activities:
Loss for the period		$	(1,146	)	$	(815	)	$	(6,666	)
Adjustments to reconcile loss for the period to cash provided by / (used in) operations:
Depreciation, depletion and amortization			52			13			338
Provision for reclamation and closure costs			—			—			1,048
Reclamation and closure costs accrued/(paid), net			2			—			(11	)
Stock based compensation			156			—			210
Gain on disposal of assets			(8	)		—			(91	)
Cost recoveries related to USF&G lawsuit			—			—			(240	)
Write-down of marketable securities			—			33			118
Gain on sale of marketable securities			—			—			(149	)
Loss on currency translation			—			19			44
Other non-cash items			—			30			120
Change in operating assets and liabilities:
Accounts receivable			456			(86	)		(6	)
Supplies inventory and prepaid expenses			9			108			18
Accounts payable and accrued liabilities			31			19			(1,036	)

	Net cash used in operating activities		(448	)		(679	)		(6,303	)
Cash flows from investing activities:
Restricted cash — Note 3			(2,287	)		(443	)		(3,971	)
Acquisition of marketable securities			(15	)		(40	)		(55	)
Proceeds from sale of marketable securities			—			—			260
Additions to mineral properties, net			(113	)		(245	)		(3,047	)
Additions to plant and equipment			(30	)		(47	)		(91	)
Proceeds on disposal of fixed assets and supplies			8			—			254

	Net cash used in investing activities		(2,437	)		(775	)		(6,650	)
Cash flows from financing activities:
Net proceeds from private placements			—			2,902			8,646
Proceeds from exercise of warrants — Note 6			2,186			370			8,081
Proceeds from the exercise of stock options — Note 6			17			37			390

	Net cash provided by financing activities		2,203			3,309			17,117
Net increase/(decrease) in cash and cash equivalents			(682	)		1,855			4,164

Cash and cash equivalents, beginning of period			5,520			3,443			674

Cash and cash equivalents, end of period		$	4,838			5,298		$	4,838

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

VISTA GOLD CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(U.S. dollars unless specified otherwise)

1. General

The consolidated interim financial statements of Vista Gold Corp. (an Exploration Stage Enterprise) (the "Corporation"), as of March 31, 2004, and for the three month period ended March 31, 2004, 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, 2003.

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, 2004, the Corporation adopted the fair value based method of accounting for stock-based compensation. Previously, the Corporation did not record any compensation cost on the granting of stock options to employees and directors as the exercise price was equal to or greater than the market price at the date of the grants. The adoption of the fair value method resulted in a cumulative increase of $971,000 to the opening deficit at January 1, 2004 and increases of $139,000 and $832,000 to common share capital and stock options, respectively, at January 1, 2004.

2. Nature of operations and going concern

(a): Nature of operations

The Corporation evaluates, acquires and explores gold exploration and potential development projects. As such, the Corporation is considered an Exploration Stage Enterprise and has been since January 1, 2002. 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 the 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.

(b): Going concern

These unaudited consolidated financial statements have been prepared on a going concern basis, which assumes that the Corporation will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business. At March 31, 2004, the Corporation holds working capital of $4.9 million which is not sufficient to satisfy current general and administrative activities, bonding requirements (Note 9) and property obligations for the remaining fiscal periods for 2004, aggregating $6.4 million. Therefore, there is substantial doubt about the Corporation's ability to continue as a going concern.

The Corporation is investigating the possibility of raising additional capital through private placements and, although management has been successful in the past, there can be no assurance that it will be able to raise additional capital in the future. The Corporation continues to actively pursue alternatives to monetize its assets and attract other investors. Additional liquid cash assets have been obtained since the balance sheet date through to April 30, 2004, consisting of approximately $628,443 from the exercise of warrants issued during previous private placements.

The ability of the Corporation to continue as a going concern and to realize the carrying values of its assets and discharge its liabilities and obligations when due is dependent upon the successful completion of the planned actions or other alternatives noted above. Management believes successful completion of raising additional capital will mitigate the adverse conditions and events which raise doubt about the validity of the going concern assumption used in preparing these financial statements. These financial statements do not give effect to any adjustments, which may be necessary should the Corporation be unable to continue as a going concern and such adjustments may be material.

3. Restricted cash

The Corporation has paid $2.3 million and assigned collateralized letters of credit for $1.7 million, for an aggregate amount of $4.0 million, for a new bonding instrument provided by member companies of American International Group, Inc. which includes an insurance component and covers all existing reclamation liabilities at the Hycroft mine (Note 9).

4. Mineral properties

	2003		2004
($000's)	December 31, net balance		Acquisition costs		Option payments		Exploration & land costs		Cost recovery			Year to date activity			March 31, Ending Balance
Maverick Springs, United States	$	1,143	$	—	$	—	$	12	$	(12	)	$	—		$	1,143
Mountain View, United States		460		—		—		3		—			3			463
Long Valley, United States		193		—		—		—		—			—			193
Wildcat, United States		593		—		—		15		—			15			608
Hasbrouck and Three Hills, United States		353		—		—		—		—			—			353
Yellow Pine, United States		192		100		—		1		—			101			293
Paredones Amarillos, Mexico		2,443		—		—		5		—			5			2,448
Guadalupe de los Reyes, Mexico		511		—		—		—		—			—			511
Amayapampa, Bolivia		10,710		—		—		3		(20	)		(17	)		10,693
Other		—		6		—		—		—			6			6

	$	16,598	$	106	$	—	$	39	$	(32	)	$	113		$	16,711

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

	March 31, 2004						December 31, 2003
($000's)	Cost		Accumulated Depreciation and Write-downs		Net		Cost		Accumulated Depreciation and Write-downs		Net
Hycroft mine, United States	$	12,031	$	10,577	$	1,454	$	12,031	$	10,528	$	1,503
Corporate, United States		373		336		37		343		333		10

	$	12,404	$	10,913	$	1,491	$	12,374	$	10,861	$	1,513

6. Capital stock

Common Shares issued and outstanding

		Number of shares issued	Capital stock ($000's)
As of December 31, 2003, as previously reported		14,561,832	$	138,458
Stock-based compensation — Note 1		—		139

As of January 1, 2004, as restated		14,561,832		138,597

Warrants exercised, for cash — Note 7		604,186		2,186
Warrants exercised, fair value — Note 7		—		186
Stock options exercised, for cash — Note 8		5,000		17
Stock options exercised, fair value — Note 8		—		7

	Issued during 2004	609,186		2,396

As of March 31, 2004		15,171,018	$	140,993

7. Warrants

Warrants granted, exercised and outstanding during the period are summarized in the following table:

		Warrants granted⁽¹⁾	Valuation (000's)			Warrants exercised		Warrants outstanding		Weighted average exercise prices (U.S. $)			Expiry date	Weighted average remaining life (yrs)
As of December 31, 2003		7,023,679	$	456		(2,781,162	)	4,242,518		$	2.46			—
Private placement February 2003		—		—		(190,000	)	(190,000	)		3.32	⁽¹⁾	Feb-07	2.9
Private placement February- March 2002		—		—		(118,400	)	(118,400	)		1.50		Feb - Mar-07	3.0
Private placement December 2002		—		—		(70,786	)	(70,786	)		3.45	⁽²⁾	Dec-04	0.7
Acquisition of Paredones Amarillos		—		(186	)	(225,000	)	(225,000	)		5.17		Aug-04	0.4

	Total 2004	—		(186	)	(604,186	)	(604,186	)		3.62

As of March 31, 2004		7,023,679	$	270		(3,385,348	)	3,638,332		$	2.44

(1): The exercise price increasd to $3.56 from $3.14 in February 2004
(2): The exercise price increased to $3.45 in December 2003

8. Stock options

The total number of options outstanding at the end of the quarter is 760,125 with exercise prices ranging from approximately $1.86 to $4.76 and remaining lives of 1.9 to 4.9 years. The total number of options outstanding represents 5.0% of issued capital.

Under the Corporation's Stock Option Plan, 30,000 stock options were issued to non-employees of the Corporation in March 2004 and have been recorded at an estimated fair value of $93,387 using the Black-Scholes option pricing model. In addition, compensation expense of $62,417 was recognized during the three-months ended March 31, 2004, for options previously granted and vesting over time.

	Number of Shares		Value
Outstanding — December 31, 2003	735,125		$	41
Stock-based compensation — Note 1	—			832

As of January 1, 2004, as restated	735,125			873

Granted	30,000			93
Exercised	(5,000	)		(7	)
Vested, Fair Value	—			63


Outstanding — March 31, 2004	760,125		$	1,022

Effective January 1, 2004, the Corporation adopted the fair value method of accounting for stock-based compensation (Note 1). Had compensation expense been recorded using the fair value method for the three months ended March 31, 2003, the Corporation's loss and loss per share would have been adjusted to the pro forma amounts indicated below:

	March 31, 2003
Net Loss — as reported (000's)	$	(815	)
Stock-based compensation		(77	)
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