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EX-31.2 - CERTIFICATION OF CFO - VISTA GOLD CORPex31-2.htm
EX-10.1 - NOTE REPURCHASE AGREEMENT - VISTA GOLD CORPex10-1.htm
EX-32.1 - SECTION 906 CERTIFICATION OF CEO - VISTA GOLD CORPex32-1.htm
EX-31.1 - CERTIFICATION OF CEO - VISTA GOLD CORPex31-1.htm
EX-32.2 - SECTION 906 CERTIFICATION OF CFO - VISTA GOLD CORPex32-2.htm



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, 2010
   
OR
   
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ___________ to ______________

Commission File Number 1-09025


VISTA GOLD CORP.
(Exact name of registrant as specified in its charter)

Yukon Territory, Canada
 
98-0542444
(State or other jurisdiction of incorporation or organization)
 
(IRS Employer Identification No.)
     
Suite 5, 7961 Shaffer Parkway
   
     
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 the filing requirements for the past 90 days:   Yes  x  No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  o  No  o  

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

Large accelerated filer o
 
Accelerated filer x
     
Non-accelerated filer o
 
Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes o  No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:  46,581,708 common shares, without par value, outstanding at August 4, 2010.





 
 
 
 



VISTA GOLD CORP.
(An Exploration Stage Enterprise)
FORM 10-Q
For the Quarter Ended June 30, 2010


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

 


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

   
June 30,
   
December 31,
 
(U.S. dollars in thousands)
 
2010
   
2009
 
             
Assets:
           
Cash and cash equivalents
  $ 16,726     $ 28,408  
Marketable securities - Note 4
    925       1,150  
Short-term investments
    -       250  
Other current assets
    943       509  
    Current assets
    18,594       30,317  
                 
Mineral properties - Note 5
    46,522       38,696  
Plant and equipment - Note 6
    18,796       18,747  
Amayapampa disposal consideration - Note 3
    4,813       4,813  
      70,131       62,256  
                 
Total assets
  $ 88,725     $ 92,573  
                 
Liabilities and Shareholders' Equity:
               
Convertible notes - Note 7
  $ 21,176     $ -  
Accounts payable
    341       63  
Accrued liabilities and other
    729       863  
    Current liabilities
    22,246       926  
                 
Convertible notes - Note 7
    -       24,939  
Other long-term liabilities
    228       228  
    Total liabilities
    22,474       26,093  
                 
Capital stock, no par value:
               
    Common - unlimited shares authorized; shares outstanding:
               
         2010 - 46,581,708 and 2009 - 44,679,024 - Note 8
    252,059       245,964  
Warrants
    336       336  
Options - Note 9
    5,027       4,818  
Contributed surplus - Note 10
    2,634       1,848  
Equity component of convertible notes - Note 7
    4,721       5,998  
Accumulated other comprehensive income - Note 11
    384       575  
Deficit
    (198,910 )     (193,059 )
     Total shareholders' equity
    66,251       66,480  
                 
 Total liabilities and shareholders' equity
  $ 88,725     $ 92,573  

Nature of operations, Liquidity risk and Recent accounting pronouncements – Note 2

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


 
VISTA GOLD CORP. (An Exploration Stage Enterprise)
CONSOLIDATED STATEMENTS OF EARNINGS AND (LOSS) AND COMPREHENSIVE LOSS - UNAUDITED

   
Three Months Ended June 30,
   
Six Months Ended June 30,
   
Cumulative during Exploration
 
(U.S. dollars in thousands, except share data)
 
2010
   
2009
   
2010
   
2009
   
Stage
 
                               
Income:
                             
Interest income
  $ 35     $ 21     $ 89     $ 49     $ 2,721  
Other income
    77       (2 )     96       -       (2,332 )
    Total other income
  $ 112     $ 19     $ 185     $ 49     $ 389  
                                         
Costs and expenses:
                                       
Exploration, property evaluation and holding costs
  $ (475 )   $ (268 )   $ (869 )   $ (601 )   $ (5,194 )
Corporate administration and investor relations
    (1,076 )     (974 )     (2,067 )     (1,986 )     (26,607 )
Depreciation and amortization
    (60 )     (62 )     (132 )     (114 )     (764 )
Interest expense
    (535 )     (584 )     (1,091 )     (1,163 )     (5,415 )
Gain/(loss) on currency translation
    (130 )     68       (82 )     45       (357 )
Write-down of marketable securities
    -       (11 )     -       (123 )     (849 )
Loss on early extinguishment of convertible notes - Note 7
    (1,981 )     -       (1,981 )     -       (1,444 )
Gain/(loss) on disposal of marketable securities
    -       6,822       213       6,815       7,275  
Loss on sale of mineral property
    -       (131 )     -       (131 )     (263 )
    Total costs and expenses
    (4,257 )     4,860       (6,009 )     2,742       (33,618 )
Earnings/(loss) from continuing operations before income taxes
  $ (4,145 )   $ 4,879     $ (5,824 )   $ 2,791     $ (33,229 )
Future income tax benefit/(expense)
    (7 )     (989 )     (27 )     (781 )     74  
Loss from continuing operations after income taxes
  $ (4,152 )   $ 3,890     $ (5,851 )   $ 2,010     $ (33,155 )
Loss from discontinued operations
  $ -     $ -     $ -     $ -     $ (16,879 )
                                         
Net loss
  $ (4,152 )   $ 3,890     $ (5,851 )   $ 2,010     $ (50,034 )
                                         
Other comprehensive income:
                                       
Unrealized gain/(loss) on available-for-sale securities
    (49 )     198       (4 )     1,373          
Realized (gain)/loss on available-for-sale securities
    -       (5,798 )     (187 )     (5,793 )        
      (49 )     (5,600 )     (191 )     (4,420 )        
Comprehensive loss
  $ (4,201 )   $ (1,710 )   $ (6,042 )   $ (2,410 )        
                                         
Weighted average number of shares outstanding
    46,405,227       34,475,829       45,546,894       34,475,829          
                                         
Basic and diluted earnings/(loss) per share from continuing operations
  $ (0.09 )   $ 0.11     $ (0.13 )   $ 0.06          
Basic and diluted earnings/(loss) per share
  $ (0.09 )   $ 0.11     $ (0.13 )   $ 0.06          

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


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

   
Three Months Ended June 30,
   
Six Months Ended June 30,
 
(U.S. dollars in thousands)
 
2010
   
2009
   
2010
   
2009
 
Deficit, beginning of period
  $ (194,758 )   $ (192,997 )   $ (193,059 )   $ (191,117 )
Net loss
    (4,152 )     3,890       (5,851 )     2,010  
Deficit, end of period
  $ (198,910 )   $ (189,107 )   $ (198,910 )   $ (189,107 )

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 June 30,
   
Six Months Ended June 30,
   
Cumulative during Exploration
 
(U.S. dollars in thousands)
 
2010
   
2009
   
2010
   
2009
   
Stage
 
                               
Cash flows from operating activities:
                             
Earnings/(Loss) for the period - continuing operations
  $ (4,152 )   $ 3,890     $ (5,851 )   $ 2,010     $ (33,155 )
                                         
Adjustments to reconcile loss for the period to cash provided by / (used in) operations:
                                       
Depreciation and amortization
    60       62       132       114       787  
Stock-based compensation
    69       115       144       240       6,702  
(Gain)/loss on disposal of marketable securities - Note 7
    -       (6,822 )     (213 )     (6,815 )     (7,537 )
Loss on early extinguishment of convertible notes
    1,981       -       1,981       -       1,444  
Future income tax (benefit)/expense
    7       989       27       781       (74 )
Accretion of convertible notes
    212       265       492       525       2,399  
Accrued interest
    323       322       599       641       3,018  
Write-down of marketable securities
    -       11       -       123       849  
Loss on sale of mineral property
            131               131       263  
Other non-cash items
    -       -       -       -       1,528  
                                         
Change in operating assets and liabilities:
                                       
Interest paid
    (1,150 )     (1,500 )     (1,150 )     (1,500 )     (6,436 )
Other current assets
    (179 )     (188 )     (434 )     (146 )     (1,205 )
Accounts payable, accrued liabilities and other
    168       (318 )     -       (329 )     (838 )
    Net cash used in operating activities
    (2,661 )     (3,043 )     (4,273 )     (4,225 )     (32,255 )
                                         
Cash flows from investing activities:
                                       
Acquisition of marketable securities
    (7 )     -       (7 )     -       (1,072 )
Proceeds from sale of marketable securities
    -       9,016       228       9,034       10,372  
Short-term investments
    -       -       250       -       -  
Additions to mineral properties, net of cost recoveries - Note 6
    (3,415 )     (728 )     (5,467 )     (1,639 )     (34,399 )
Additions to plant and equipment - Note 5
    (110 )     (115 )     (180 )     (324 )     (19,298 )
Proceeds on disposal of mineral properties
    -       188       -       188       188  
Proceeds on disposal of plant and equipment
    -       -       -       -       52  
Cash transferred to Allied Nevada Gold Corp., net of receivable
    -       -       -       -       (24,517 )
    Net cash used in investing activities
    (3,532 )     8,361       (5,176 )     7,259       (68,674 )
                                         
Cash flows from financing activities:
                                       
Net proceeds from equity financings
    -       -       -       -       74,787  
Early extinguishment of convertible notes - Note 7
    (2,233 )     -       (2,233 )     -       (3,099 )
Proceeds from exercise of warrants
    -       -       -       -       39,020  
Proceeds from exercise of stock options
    -       -       -       -       3,039  
Issuance of convertible notes, net of issuance costs
    -       -       -       -       28,345  
Prepaid transaction costs
    -       -       -       -       (1,841 )
    Net cash provided by financing activities
    (2,233 )     -       (2,233 )     -       140,251  
                                         
Increase/(decrease) in cash and cash equivalents - continuing operations
    (8,426 )     5,318       (11,682 )     3,034       39,322  
Increase/(decrease) in cash and cash equivalents - discontinued operations
    -       -       -       -       (23,270 )
Net increase/(decrease) in cash and cash equivalents
    (8,426 )     5,318       (11,682 )     3,034       16,052  
                                         
Cash and cash equivalents, beginning of period - continuing operations
    25,152       10,982       28,408       13,266       674  
                                         
Cash and cash equivalents, end of period
  $ 16,726     $ 16,300     $ 16,726     $ 16,300     $ 16,726  
 
Supplemental cash flow information - Note 14

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


 
- 4 -


VISTA GOLD CORP. (AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
(All amounts in tables are in thousands of US Dollars, except per share amounts and number of shares, unless noted otherwise)

1.           General

The consolidated interim financial statements of Vista Gold Corp. (an Exploration Stage Enterprise) (collectively, “Vista”, the “Corporation”, “we”, “our” or “us”), as of June 30, 2010 have been prepared by us 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 16, 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 our Annual Report on Form 10-K for the year ended December 31, 2009.

2.           Nature of operations, liquidity risk and recent accounting pronouncements

Nature of operations

We evaluate, acquire and explore gold exploration and potential development projects. As such, we are considered an Exploration Stage Enterprise. Our 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, we look for opportunities to improve the value of our gold projects through exploration drilling, and/or reengineering the operating assumptions underlying previous engineering work.

We are continuing to move our more advanced projects through advanced and pre-feasibility studies in preparation for mine development so that production decisions can be made on those projects.

Although we have reviewed and are satisfied with the title for all mineral properties in which we have a material interest, there is no guarantee that title to such concessions will not be challenged or impugned.

Liquidity risk

Our consolidated interim financial statements have been prepared on a going concern basis and contemplate the realization of assets and the settlement of liabilities in the normal course of operations.  Liquidity risk is the risk that we will be unable to meet our financial obligations as and when they fall due.

As of June 30, 2010, we had cash and cash equivalents of $16.726 million.  The principal balance owing on our senior secured convertible notes (the “Notes”) is $23.0 million ($30.0 million prior to the repurchase of $1.333 million with cash in July 2009 and $5.667 million with a combination of cash and Common Shares in May 2010) (see Note 7, below), which is due on March 4, 2011. At present, we do not have sufficient cash and cash equivalents to meet this obligation.  In connection with the issuance of the Notes (as defined in Note 7 to these consolidated interim financial statements), we granted a pledge over the assets and mining concessions related to the Paredones Amarillos gold project (collectively, the “Pledged Assets”).  We are currently examining potential alternatives for raising the additional capital needed to meet our repayment obligations under the Notes, which could include public or private debt or equity financings, or project financing if and when the Change of Forest Land Use Permit (“CUSF”) is obtained for the Paredones Amarillos gold project.  We may also consider potential renegotiation of the terms of the original Notes.  While we have been successful in the past with raising funds through equity and debt financings, and even though the current sustained high gold prices have increased investor interest in the gold market, and we currently have a shelf-registration effective in order to expedite the completion of any public equity offering, no assurances can be given that we will be successful in raising sufficient funds in the future to repay our obligations under the Notes.

In the event that our efforts do not generate adequate additional financing, or the renegotiation of the terms of the Notes does not prove successful, we will not have sufficient cash or cash equivalents to repay the Notes.  However, the Notes are secured only by the Pledged Assets.  In the event that we cannot raise sufficient capital to repay our obligations under the Notes, the holders of the Notes are entitled to require that possession of the Pledged Assets be transferred to them (or a company appointed by them) and to seek court approval for the sale of the Pledged Assets.  Any proceeds received by the holders of the Notes from the sale of the Pledged Assets would be applied to any principal and interest owing by the Corporation under the Notes, with the Corporation continuing to be obligated to repay any remaining balance owing under the Notes on an unsecured basis.  The assets of the Paredones Amarillos gold project have a total carrying value of $36.755 million as at June 30, 2010 (see Notes 5 and 6), of which $17.187 million relates to plant and equipment stored in Canada to be used at the Paredones Amarillos gold project.


 
- 5 -


VISTA GOLD CORP. (AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
(All amounts in tables are in thousands of US Dollars, except per share amounts and number of shares, unless noted otherwise)

Recent accounting pronouncements

In January 2009, the CICA issued Handbook Section 1582, “Business Combinations” (“Section 1582”).  Section 1582 requires all assets and liabilities of an acquired business to be recorded at fair value at acquisition.  Obligations for contingent considerations and contingencies are also to be recorded at fair value at the acquisition date. The standard also states that acquisition–related costs will be expensed as incurred and that restructuring charges will be expensed in the periods after the acquisition date. Section 1582 applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period on or after January 1, 2011.  The adoption of Section 1582 is not expected to impact our financial position or results of operations.

In January 2009, the CICA issued Handbook Section 1601, “Consolidations” (“Section 1601”), and Section 1602, “Non-controlling Interests” (“Section 1602”). Section 1601 establishes standards for the preparation of consolidated financial statements. Section 1602 establishes standards for accounting for a non-controlling interest in a subsidiary in consolidated financial statements subsequent to a business combination. These standards apply to interim and annual consolidated financial statements relating to fiscal years beginning on or after January 1, 2011.  The adoption of Section 1601 is not expected to impact our financial position or results of operations.

3.           Amayapampa disposal consideration

On April 7, 2008, we entered into an agreement to dispose of our wholly-owned subsidiary Vista Gold (Antigua) Corp. (“Vista Gold Antigua”) to Republic Gold Limited (“Republic”). Vista Gold Antigua indirectly held our interest in the Amayapampa gold project in Bolivia. Under the terms of the transaction, Republic agreed to pay to us, $3.0 million in three payments of $1.0 million. The first of these payments will be due and payable upon the start of Commercial Production (as defined in the purchase and sale agreement) at the Amayapampa gold project followed by $1.0 million payments on each of the first and second anniversaries of the start of Commercial Production.  In addition, Republic agreed to pay to us a net smelter return royalty (“NSR”) on the gold produced by or on behalf of Republic from the Amayapampa gold project in varying percentages depending on the price of gold per ounce. When gold is between $500.01 and $650.00 per ounce, a 2% NSR is payable; when the price of gold is between $650.01 and $750.00 per ounce, a 3% NSR is payable; and when the price of gold is $750.01 per ounce and above, an NSR of 3.5% is payable. The NSR is capped at 720,000 gold equivalent ounces and no NSR payments are due to us if the gold price is below $500 per ounce. The fair value of the consideration received on the disposal of the Amayapampa gold project has been estimated at $4.813 million using probability weighted cash flow scenarios and assumptions including future gold prices, estimated gold production and the timing of commencement of Commercial Production. These inputs in the “income approach” valuation model used by us are considered to be level three unobservable inputs as defined by CICA 3862 “Financial Instruments – Disclosures”. These are our own assumptions based on management’s best estimates and the best information available at the time.

4.           Marketable securities


   
At June 30, 2010
   
At December 31, 2009
 
   
Cost
   
Unrealized gain/(loss)
   
Fair value
   
Cost
   
Unrealized gain/(loss)
   
Fair value
 
                                     
 Esperanza Silver Corp.
    10       101       111       10       101       111  
 Black Isle Resources
    12       (1 )     11       12       16       28  
 Nevgold Resources Corp.
    87       154       241       87       69       156  
 Other
    358       204       562       365       490       855  
    $ 467     $ 458     $ 925     $ 474     $ 676     $ 1,150  


 
- 6 -


VISTA GOLD CORP. (AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
(All amounts in tables are in thousands of US Dollars, except per share amounts and number of shares, unless noted otherwise)

5.           Mineral properties

   
2009
   
2010
 
   
December 31, net balance
   
Acquisition costs
   
Option payments
   
Exploration & land costs
   
Capitalized interest
   
Capitalized stock based compensation
   
Year to date activity
   
June 30, ending balance
 
                                                 
 Long Valley, United States
    978       -       -       1       -       -       1       979  
 Yellow Pine, United States
    984       -       -       125       -       -       125       1,109  
 Paredones Amarillos, Mexico
    14,650       -       -       1,805       2,109       61       3,975       18,625  
 Guadalupe de los Reyes, Mexico
    3,275       -       -       -       -       -       -       3,275  
 Awak Mas, Indonesia
    3,975       -       -       2       -       -       2       3,977  
 Mt. Todd, Australia
    14,616       -       -       3,649       -       24       3,673       18,289  
 Other
    218       -       50       -       -       -       50       268  
    $ 38,696     $ -     $ 50     $ 5,582     $ 2,109     $ 85     $ 7,826     $ 46,522  

The recoverability of the carrying values our mineral properties is dependent upon the successful start-up and commercial production from, or the sale or lease of, these properties, and upon economic reserves being discovered or developed on the 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 we have been successful in raising such capital in the past, there can be no assurance that we will be able to do so in the future.

We have determined that no impairment provision is required.  A write-down in the carrying values of one or more of our mineral properties may be required in the future as a result of events and circumstances, such as our inability to obtain all the necessary permits, changes in the legal status of our mineral properties, government actions, the results of technical evaluation and changes in economic conditions including the price of gold and other commodities or input prices.  We regularly evaluate the carrying value of our mineral properties to determine if impairment is required in view of such factors.

6.           Property, plant and equipment

   
June 30, 2010
   
December 31, 2009
 
   
Cost
   
Accumulated Depreciation and Write-downs
   
Net
   
Cost
   
Accumulated Depreciation and Write-downs
   
Net
 
                                     
Paredones Amarillos, Mexico
    18,178       48       18,130       18,173       35       18,138  
Awak Mas, Indonesia
    118       91       27       118       89       29  
Mt. Todd, Australia
    1,005       401       604       833       321       512  
Corporate, United States
    311       276       35       311       243       68  
    $ 19,612     $ 816     $ 18,796     $ 19,435     $ 688     $ 18,747  

7.           Brokered private placement of convertible notes

On March 4, 2008, we completed a private placement in which we issued and sold $30 million in aggregate principal amount of senior secured convertible notes (the “Notes”). The Notes were issued on March 4, 2008 and mature at face value on March 4, 2011 (the “Maturity Date”). The Notes pay interest of 10% per annum. Interest is payable each year in two installments on June 15 and December 15, and the principal is payable on the Maturity Date.

The Notes are convertible at the holder’s or issuer’s discretion in accordance with the terms of the Notes. The holder can convert all or part of the debt underlying the Notes at any time prior to the Maturity Date or the business day immediately preceding the Redemption Date (as defined below) at a price of $6.00 per Common Share (subsequently adjusted to $4.80 per Common Share, as discussed below), subject to adjustment in certain circumstances. The “Redemption Date” represents the date that the Notes will be redeemed in the event that we redeem the Notes.

Pursuant to the terms of the Notes, on March 4, 2009, the conversion price of the Notes was automatically adjusted from $6.00 per Common Share to $4.80 per Common Share.  As of June 30, 2010, our Common Share price was below the $4.80 conversion price.

Simultaneously with the issuance of the Notes, we issued to Casimir Capital LP 200,000 Common Share purchase warrants with an exercise price of $6.00 per warrant and an expiration date of March 4, 2011, as partial consideration for acting as agent for the transaction. We also paid to Casimir Capital a cash fee of $1.2 million, being 4% of the gross proceeds of the offering of the Notes. The warrants provide for cashless exercise if the market price of our Common Shares is above the exercise price of the warrants. In addition, the exercise price is subject to standard anti-dilution adjustment provisions.

 
- 7 -


VISTA GOLD CORP. (AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
(All amounts in tables are in thousands of US Dollars, except per share amounts and number of shares, unless noted otherwise)

The Notes have been accounted for in accordance with Emerging Issues Committee Abstract No. (“EIC”) 164, “Convertible and other Debt Instruments with Embedded Derivatives”. Under EIC 164, the fair value of the conversion feature is recorded as equity. The issuance date fair value of the conversion feature was estimated to be $6.8 million and was classified as the equity component of convertible notes with the residual balance of $23.2 million being recorded as the fair value of our obligation to make principal and interest payments and has been classified as long-term debt.  The total fees of $1,988,000 related to the issuance of the Notes have been allocated pro-rata between debt issuance costs of $1,531,000 and equity issuance costs of $457,000.

On May 20, 2010, we entered into a Notes Repurchase Agreement (the “Agreement”) with Whitebox Advisors LLC (“Whitebox”) whereby we agreed to repurchase Whitebox’s remaining Notes.

Pursuant to the Agreement, we agreed to repurchase Notes in the principal amount of $5,667,000 (carrying value of $5,155,989) and to settle interest payable through maturity on the Notes of $690,572.  We agreed to pay Whitebox $2,232,798 in cash and 1,902,684 in Common Shares in the capital of the Corporation as consideration for the Notes and interest payable of $6,357,572, in aggregate.  The Common Shares issued were based on a share price of $2.15.  We allocated the consideration paid on the repurchase of the Notes to the liability and equity elements of the security based on their relative fair values at the date of the transaction as is required under EIC 96, “Accounting for the Early Extinguishment of Convertible Securities Through (1) Early Redemption or Repurchase and (2) Induced Early Conversion,” ("EIC 96").  A loss of $1,981,000 was recorded in our Consolidated Statement of Earnings and (Loss) as a result of the Notes repurchase.  As a result of the completion of the Agreement, 4.792 million Common Shares are issuable upon conversion of the remaining Notes.

On July 14, 2009, we entered into Note Repurchase Agreements (the “Whitebox Repurchase Agreements”) with each of  Whitebox Combined Partners, LP (“Whitebox Combined Partners”), Whitebox Convertible Arbitrage Partners, LP (“Whitebox Convertible Arbitrage”) and Whitebox Special Opportunities Fund Series B Partners, LP (“Whitebox Special Opportunities”) whereby we agreed to repurchase their respective Notes.

Pursuant to the Whitebox Repurchase Agreements, we agreed to repurchase $1,333,000 (carrying value of $1,102,932) Notes (i) in the principal amount of $504,000 from Whitebox Combined Partners for an aggregate purchase price, including interest, of $331,800; (ii) in the principal amount of $510,000 from Whitebox Convertible Arbitrage for an aggregate purchase price, including interest, of $335,750; and (iii) in the principal amount of $319,000 from Whitebox Special Opportunities for an aggregate purchase price, including interest, of $210,008, based on a settlement date of July 14, 2009.  We allocated the consideration paid on the repurchase of the Notes to the liability and equity elements of the security based on their relative fair values at the date of the transaction as is required under EIC 96.  A gain of $537,000 was recorded in our Consolidated Statement of Earnings and (Loss) as a result of the Notes repurchase.

We capitalize interest and accretion based on expenditures on qualifying assets.  As of June 30, 2010, we had qualifying expenditures of approximately $17.5 million related to the equipment purchase and drilling expenditures for the Paredones Amarillos gold project.  As of December 31, 2009, we had utilized all the cash received for the Paredones Amarillos gold project.

 
- 8 -


VISTA GOLD CORP. (AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
(All amounts in tables are in thousands of US Dollars, except per share amounts and number of shares, unless noted otherwise)

A reconciliation of the carrying value of the long-term liability portion of the Notes is as follows:

Principal amount of the Notes
  $ 30,000  
Issuance costs allocated to long-term liabilities
    (1,531 )
Conversion feature allocated to equity before issuance costs
    (6,755 )
Carrying value of the Notes upon issuance
    21,714  
Repurchase of $1.3 million of convertible notes
    (1,103 )
Repurchase of $5.7 million of convertible notes
    (5,156 )
Accretion expense
    5,721  
Carrying value of the Notes at June 30, 2010
  $ 21,176  

8.           Capital stock

   
Number of shares issued
   
Capital stock
 
As of December 31, 2009
    44,679,024     $ 245,964  
                 
   Early extinguishment of convertible notes
    1,581,488       5,491  
   Interest payment on extinguished convertible notes
    321,196       604  
                 
   Issued during the six months ended June 30, 2010
    1,902,684       6,095  
                 
As of June 30, 2010
    46,581,708     $ 252,059  

On May 20, 2010, we issued an aggregate of 1,902,684 Common Shares as partial consideration for the repurchase of Notes, including interest payable through to the Maturity Date (see Note 7).

9.           Options to purchase Common Shares

Under our Stock Option Plan (the “Plan”), we may grant options to our directors, officers, employees and consultants or our subsidiaries.  The maximum number of our Common Shares that may be reserved for issuance under the Plan is a variable number equal to 10% of the issued and outstanding Common Shares on a non-diluted basis.  Under the Plan, the exercise price of each option shall not be less than the market price of our Common Shares on the date preceding the date of grant, and an option’s maximum term is 10 years or such other shorter term as stipulated in a stock option agreement between us and the optionee.  Options under the Plan are granted from time to time at the discretion of the Board of Directors, with vesting periods and other terms as determined by the Board.

The fair value of stock options granted to employees and directors was estimated at the grant date using the Hull-White trinomial lattice option pricing model, using the following weighted average assumptions:

   
June 2010
   
June 2009
 
             
Expected volatility
    81.86 %     N/A  
Risk-free interest rate
    2.16 %     N/A  
Expected lives (years)
    5       N/A  
Dividend yield
    N/A       N/A  

Option pricing models require the input of highly subjective assumptions including the expected price volatility.  Expected price volatility is based on the historical volatility of our Common Shares.  Changes in the subjective input assumptions can materially affect the fair value estimate, and therefore, the existing models do not necessarily provide a reliable measure of the fair value of our stock options.  The expected term of the options granted is derived from the output of the option pricing model and represents the period of time that the options granted are expected to be outstanding.  The risk-free rate for the periods within the contractual term of the option is based on the U.S. Treasury yield curve in effect at the date of grant.


 
- 9 -


VISTA GOLD CORP. (AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
(All amounts in tables are in thousands of US Dollars, except per share amounts and number of shares, unless noted otherwise)

A summary of option activity under the Plan as of June 30, 2010, and changes during the six-month period then ended is set forth in the following table:

   
Number of Shares
   
Weighted-Average Exercise Price
   
Weighted-Average Remaining Contractual Term
   
Aggregate Intrinsic Value
 
Outstanding - December 31, 2009
    2,788,145     $ 3.75       3.43     $ 534  
                                 
Outstanding - March 31, 2010
    2,788,145     $ 3.75       3.19     $ 170  
                                 
Granted
    60,000     $ 2.24                  
Expired
    (9,484 )     2.15                  
                                 
Outstanding - June 30, 2010
    2,838,661     $ 3.73       2.99     $ -  
                                 
Exercisable - June 30, 2010
    2,403,661     $ 4.07       2.77     $ -  

A summary of the fair-value changes included in stock options within Shareholders’ Equity as of June 30, 2010 is set forth in the following table:

   
Fair Value
 
As of December 31, 2009
  $ 4,818  
         
Expensed
    75  
Capitalized as mineral properties
    22  
         
As of March 31, 2010
  $ 4,915  
         
Expensed
    69  
Capitalized as mineral properties
    63  
Expired
    (20 )
         
As of June 30, 2010
  $ 5,027  

The total number of stock options outstanding at the end of the quarter is 2,838,661 with exercise prices ranging from approximately $1.77 to $7.45 and remaining lives ranging from 0.35 to 4.87 years.  The total number of options outstanding represents 6.1% of our issued and outstanding capital.

A summary of the status of our unvested stock options as of June 30, 2010, is set forth below:

   
Number of Shares
   
Weighted-Average Grant Date Fair Value
 
Unvested - December 31, 2009
    430,000     $ 0.92  
                 
Vested
    (25,000 )     1.06  
                 
Unvested - March 31, 2010
    405,000     $ 0.91  
                 
Granted
    30,000       1.17  
                 
Unvested - June 30, 2010
    435,000     $ 0.93  

As of June 30, 2010, there was $80,065 of unrecognized compensation expense related to the unvested portion of options outstanding.  This expense is expected to be recognized over a weighted-average period of 0.42 years.
 
 
- 10 -


VISTA GOLD CORP. (AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
(All amounts in tables are in thousands of US Dollars, except per share amounts and number of shares, unless noted otherwise)

10.           Contributed surplus

   
June 30,
   
December 31,
 
   
2010
   
2009
 
Balance, beginning of year
  $ 1,848     $ 1,387  
                 
Early extinguishment of convertible notes—Note 7
  $ 766     $ -  
Cancelled options
    -       14  
Expired options—Note 9
    20       447  
                 
Balance, end of period
  $ 2,634     $ 1,848  

On May 20, 2010, we completed the Agreement to repurchase Notes in the principal amount of $5,667,000 and interest payable through maturity of $690,572 (see Note 7).  Upon completion of the Agreement, the carrying value of the equity portion of the extinguished Notes exceeded the fair value of the equity portion by $766,000 resulting in an increase to our contributed surplus account.

11.           Accumulated other comprehensive income

A reconciliation of the amounts contained in accumulated other comprehensive income is as follows:

   
Accumulated other comprehensive income, before tax
   
Accumulated other comprehensive income, net of tax
 
As of December 31, 2009
  $ 676     $ 575  
                 
Increases to fair market value during period
    51       45  
Decreases due to realization of gain
    (213 )     (187 )
                 
As of March 31, 2010
  $ 514     $ 433  
                 
Decreases to fair market value during period
    (56 )     (49 )
                 
As of June 30, 2010
  $ 458     $ 384  

12.           Financial instruments

Financial assets and financial liabilities are classified into one of five categories:  held-to-maturity, available-for-sale, held-for-trading, loans and receivables and other financial liabilities.

All financial instruments classified as available-for-sale or held-for-trading are subsequently measured at fair value.  Changes in the fair value of financial instruments designated as held-for-trading are charged or credited to the statement of loss for the relevant period, while changes in the fair value of financial instruments designated as available-for-sale, excluding impairments, are charged or credited to other comprehensive income until the instrument is realized.  All other financial assets and liabilities are accounted for at cost or at amortized cost depending upon the nature of the instrument.  After their initial fair value measurement, they are measured at amortized cost using the effective interest rate method.

 
- 11 -


VISTA GOLD CORP. (AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
(All amounts in tables are in thousands of US Dollars, except per share amounts and number of shares, unless noted otherwise)

Financial Assets

The carrying amounts and fair values of financial assets are as follows:

     
June 30, 2010
   
December 31, 2009
 
 
Category
 
Estimated
Fair Value
   
Carrying
Value
   
Estimated
Fair Value
   
Carrying
Value
 
Cash and cash equivalents
Loans and receivables
  $ 16,726     $ 16,726     $ 28,408     $ 28,408  
Accounts receivable (1)
Loans and receivables
    562       562       24       24  
Amayapampa disposal consideration
Held-for-trading
    4,813       4,813       4,813       4,813  
Marketable securities (2)
Available-for-sale
    925       925       1,150       1,150  
Total financial assets
    $ 23,026     $ 23,026     $ 34,395     $ 34,395  

 
(1)
Carrying amount is a reasonable approximation of fair value.

 
(2)
The fair value represents quoted market prices in an active market.

Financial liabilities

The carrying amounts and fair values of financial liabilities are as follows:

     
June 30, 2010
   
December 31, 2009
 
 
Category
 
Estimated
Fair Value
   
Carrying
Value
   
Estimated
Fair Value
   
Carrying
Value
 
Accounts payable and accrued liabilities (1)
Other financial liabilities
  $ 1,070     $ 1,070     $ 926     $ 926  
Other long-term liabilities
Other financial liabilities
    228       228       228       228  
Convertible notes (2)
Other financial liabilities
    21,484       21,176       26,678       24,939  
Total financial liabilities
    $ 22,782     $ 22,474     $ 27,832     $ 26,093  

 
(1)
Carrying amount is a reasonable approximation of fair value.

 
(2)
The carrying value of the convertible notes is being accreted to their maturity value over their expected life using the effective interest rate method.

Financial instrument risk exposure and risk management

We are exposed in varying degrees to a variety of financial instrument related risks.  Management approves and monitors the risk management processes.  The types of risk exposure and the way in which such exposures are managed are as follows:

Credit risk

Our credit risk is primarily attributable to our cash and cash equivalents.  We monitor our cash and cash equivalents in order to limit our exposure to credit risk.

Liquidity risk

Our objective is that there is sufficient capital in order to meet short term business requirements, after taking into account our holdings of cash and cash equivalents and cash flows from financing activities.  Our cash and cash equivalents are held in interest-bearing liquid savings accounts.  Please see Note 2 for further discussion regarding our liquidity risk.

Market risk

The significant market risk exposure to which we are exposed is interest rate risk.  Our policy is to invest cash at floating rates of interest in short-term, highly liquid cash savings accounts in order to maintain liquidity.  Fluctuations in interest therefore have little impact on the value of cash equivalents and short term investments.  With respect to financial liabilities, the Notes are not subject to interest rate risk because they bear interest at a fixed rate.
 
 
- 12 -


VISTA GOLD CORP. (AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
(All amounts in tables are in thousands of US Dollars, except per share amounts and number of shares, unless noted otherwise)

13.           Capital disclosures

Our objectives when managing capital are to safeguard our access to sufficient funding as needed to continue our development of mineral properties and to maintain a flexible capital structure which optimizes the costs of capital at an acceptable level of risk.

In the management of capital, we include the components of shareholders’ equity and debt.  We manage our capital structure and make adjustments in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust our capital structure, we may issue new shares, issue new debt, acquire or dispose of assets or adjust the amount of our investments. We had no restrictions or covenants on our capital structure as of June 30, 2010. Please see Note 2 for further discussion regarding our management of capital.

In order to facilitate the management of our capital requirements, we prepare annual expenditure budgets which project expected cash and debt positions over several years and which are updated as necessary depending on various factors, including successful capital deployment and general industry conditions. The annual and updated budgets are approved by the board of directors (the “Board of Directors” or the “Board”).

In order to maximize cash available for our development efforts, we do not pay dividends. Our cash investment policy is to invest our cash in highly liquid short-term interest-bearing investments with maturities of three months or less when acquired, selected with regards to the expected timing of expenditures from operations.

14.           Supplemental cash flow information

Significant non-cash transactions during the six months ended June 30, 2010 include the issuance of 1,902,684 Common Shares as partial consideration for the repurchase of Notes in the principal amount of $5,667,000 and interest payable through to the Maturity Date of $690,572 (Note 7).

There were no other significant non-cash transactions during the six-month period ended June 30, 2009.

15.           Geographic and segment information

We evaluate, acquire and explore gold exploration and potential development projects.  These activities are focused principally in Mexico, Australia, North America and Indonesia. We reported no revenues in the six-month period ended June 30, 2010, or for the same period in 2009.  Geographic segmentation of mineral properties and plant and equipment is provided in Notes 5 and 6.

16.           Differences between Canadian and United States generally accepted accounting principles

We prepare our financial statements in accordance with accounting principles generally accepted in Canada, which differ in some respects from those in the United States.  The significant differences between generally accepted accounting principles (“GAAP”) in Canada and in the United States, as they relate to these financial statements, are as follows:

 
(a)
In accordance with U.S. GAAP, exploration, mineral property evaluation and holding costs are expensed as incurred.  When proven and probable reserves are determined for a property and a bankable feasibility study is completed, then subsequent development costs on the property would be capitalized.   Total capitalized cost of such properties is measured periodically for recoverability of carrying value under Accounting Standards Codification (“ASC”) 360 Property, Plant and Equipment.  Under Canadian GAAP, all such costs are permitted to be capitalized.

 
(b)
Under Canadian corporate law, we underwent a capital reduction in connection with the amalgamation of Granges, Inc. (“Granges”) and Hycroft Resources & Development, Inc. whereby share capital and contributed surplus were reduced to eliminate the consolidated accumulated deficit of Granges as of December 31, 1994, after giving effect to the estimated costs of amalgamation. Under U.S. corporate law, no such transaction is available and accordingly is not allowed under U.S. GAAP.

 
(c)
In accordance with U.S. GAAP (ASC 718 Compensation Stock Expenses), the fair value of all options granted after January 1, 2006 is calculated at the date of grant and expensed over the expected vesting period.  On transition to this new standard, the unvested portion of options granted to employees before January 1, 2006 is expensed over the remaining vesting period using the fair value on the date of grant.  Prior to January 1, 2006, we 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 grants for U.S. GAAP purposes under APB Opinion No. 25.  ASC 718 Compensation Stock Expenses essentially aligns U.S. GAAP with Canadian GAAP for accounting for stock-based compensation.
 
 
- 13 -


VISTA GOLD CORP. (AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
(All amounts in tables are in thousands of US Dollars, except per share amounts and number of shares, unless noted otherwise)

 
(d)
In accordance with U.S. GAAP, the entire amount of convertible debt is classified as a liability and recorded at fair value on the date of issuance. Under Canadian GAAP, the fair value of the conversion feature of the convertible debt is classified as equity and the residual balance is classified as a liability. Under Canadian GAAP a portion of the debt issuance costs were allocated to equity. Under U.S. GAAP all issuance costs were allocated to debt. The liability portion is accreted each period in amounts which will increase the liability to its full face amount of the convertible instrument as of the maturity date.  In accordance with U.S. GAAP (ASC 470 Debt) the early extinguishment of debt was accounted for as an inducement with the full amount of gain or loss calculated upon the date of extinguishment being allocated to the liability portion and accordingly shown on the Consolidated Statements of Loss.  Under Canadian GAAP, the early extinguishment was accounted for under EIC 96 with the gain or loss calculated upon the date of extinguishment being allocated to debt and equity with the equity portion being accounted for as an addition to or reduction of contributed surplus.   

 
(e)
In accordance with U.S. GAAP (ASC 740 Income Taxes), the reversal of a valuation allowance which is directly related to the gain or loss of available-for-sale securities, when a corporation has no expectations of taxable income in future periods, is recorded in other comprehensive income/(loss). Under Canadian GAAP, we adopted EIC 172 “Income Statement Presentation of a Tax Loss Carryforward Recognized Following an Unrealized Gain Recorded in Other Comprehensive Income,” effective September 30, 2008. This standard requires the recognition of the tax benefit or loss of previously unrecognized tax loss carryforwards associated with the unrealized holding gains and losses of available-for-sale securities to be recognized in net income or net loss. This abstract required retrospective restatement of all prior periods beginning with January 1, 2007. The adoption of EIC 172 resulted in a future income tax expense being recorded as part of our Net Loss, whereas under ASC 740 Income Taxes, the future income tax expense would be recorded as part of our Comprehensive Loss.

The significant differences in the consolidated statements of loss and comprehensive loss relative to U.S. GAAP were:

CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS - UNAUDITED

   
Three Months Ended June 30,
   
Six Months Ended June 30,
       
   
2010
   
2009
   
2010
   
2009
   
Cumulative during Exploration Stage
 
                               
 Net earnings/(loss) – Canadian GAAP
  $ (4,152 )   $ 3,890     $ (5,851 )   $ 2,010     $ (50,034 )
Exploration, property evaluation and holding costs - continuing operations(a)
    (3,643 )     (756 )     (5,667 )     (1,698 )     (24,246 )
Exploration, property evaluation and holding costs - discontinued operations(a)
    -       -       -       -       4,016  
Interest accretion on convertible notes (d)
    212       265       492       525       2,398  
Amortization of debt issuance costs (d)
    (51 )     (71 )     (116 )     (133 )     (613 )
Future income tax benefit/(expense) (e)
    7       989       27       781       (74 )
Loss on early extinguishment of convertible notes (d)
    416       -       416       -       294  
Financing costs
    -       -       -       -       (222 )
Stock-based compensation expense (c)
    -       -       -       -       2,251  
Beneficial conversion feature
    -       -       -       -       (2,774 )
Gain on sale of Amayapampa
    -       -       -       -       2,124  
      Net earnings/(loss) – U.S. GAAP
    (7,211 )     4,317       (10,699 )     1,485       (66,880 )
Unrealized gain/(loss) on marketable securities (e)
    (56 )     (6,589 )     (218 )     (5,199 )     (7,127 )
      Comprehensive loss – U.S. GAAP
  $ (7,267 )   $ (2,272 )   $ (10,917 )   $ (3,714 )   $ (74,007 )
                                         
 Basic and diluted loss per share – U.S. GAAP
  $ (0.16 )   $ 0.13     $ (0.23 )   $ 0.04          


 
- 14 -


VISTA GOLD CORP. (AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
(All amounts in tables are in thousands of US Dollars, except per share amounts and number of shares, unless noted otherwise)

The significant differences in the consolidated statements of cash flows relative to U.S. GAAP were:

CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

   
Three Months Ended June 30,
   
Six Months Ended June 30,
   
Cumulative during Exploration
 
   
2010
   
2009
   
2010
   
2009
   
Stage
 
                               
Cash flows from operating activities, Canadian GAAP
  $ (2,661 )   $ (3,043 )   $ (4,273 )   $ (4,225 )   $ (32,255 )
Additions to mineral properties, net (a)
    (3,477 )     (688 )     (5,501 )     (1,630 )     (25,569 )
   Cash flows from operating activities, U.S. GAAP
    (6,138 )     (3,731 )     (9,774 )     (5,855 )     (57,824 )
                                         
Cash flows from investing activities, Canadian GAAP
    (3,532 )     8,361       (5,176 )     7,259       (68,674 )
Additions to mineral properties, net (a)
    3,477       688       5,501       1,630       25,569  
   Cash flows from investing activities, U.S. GAAP
    (55 )     9,049       325       8,889       (43,105 )
                                         
Cash flows from financing activities, Canadian GAAP
    (2,233 )     -       (2,233 )     -       140,251  
    Cash flows from financing activities, U.S. GAAP
    (2,233 )     -       (2,233 )     -       140,251  
                                         
Net increase/(decrease) in cash and cash equivalents - continuing operations
    (8,426 )     5,318       (11,682 )     3,034       39,322  
Net increase/(decrease) in cash and cash equivalents - discontinued operations
    -       -       -       -       (23,270 )
Net increase/(decrease) in cash and cash equivalents
    (8,426 )     5,318       (11,682 )     3,034       16,052  
                                         
Cash and cash equivalents, beginning of period
    25,152       10,982       28,408       13,266       674  
                                         
Cash and cash equivalents, end of period
  $ 16,726     $ 16,300     $ 16,726     $ 16,300     $ 16,726  

The significant differences in the consolidated balance sheets as at June 30, 2010, and December 31, 2009, relative to U.S. GAAP were:

CONSOLIDATED BALANCE SHEETS - UNAUDITED

   
June 30, 2010
   
December 31, 2009
 
   
Per Cdn. GAAP
   
Cdn./U.S. Adj.
   
Per U.S. GAAP
   
Per Cdn. GAAP
   
Cdn./U.S. Adj.
   
Per U.S. GAAP
 
             
Current assets
  $ 18,594       -     $ 18,594     $ 30,317     $ -     $ 30,317  
Property, plant and equipment (a)
    65,318       (33,305 )     32,013       57,443       (26,944 )     30,499  
Other assets
    4,813       -       4,813       4,813       -       4,813  
   Total assets
  $ 88,725     $ (33,305 )   $ 55,420     $ 92,573     $ (26,944 )   $ 65,629  
                                                 
Current liabilities
    1,070       -       1,070       926       -       926  
Convertible notes (d)
    21,176       1,433       22,609       24,939       2,904       27,843  
Other long-term liabilities
    228       -       228       228       -       228  
   Total liabilities
    22,474       1,433       23,907       26,093       2,904       28,997  
                                                 
Capital stock (b,c)
    252,059       74,513       326,572       245,964       75,039       321,003  
Special warrants
    -       222       222       -       222       222  
Warrants and options (c)
    5,363       406       5,769       5,154       386       5,540  
Contributed surplus (b)(d)
    2,634       4,032       6,666       1,848       4,818       6,666  
Equity component of convertible notes (d)
    4,721       (4,721 )     -       5,998       (5,998 )     -  
Other comprehensive income (e)
    384       164       548       575       191       766  
Deficit (a,b,c,d,e)
    (198,910 )     (109,354 )     (308,264 )     (193,059 )     (104,506 )     (297,565 )
   Total shareholders' equity
    66,251       (34,738 )     31,513       66,480       (29,848 )     36,632  
                                                 
  Total liabilities & shareholders' equity
  $ 88,725     $ (33,305 )   $ 55,420     $ 92,573     $ (26,944 )   $ 65,629  


 
 
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VISTA GOLD CORP. (AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
(All amounts in tables are in thousands of US Dollars, except per share amounts and number of shares, unless noted otherwise)

In June 2009, the Financial Accounting Standards Board (the “FASB”) issued amended standards for determining whether to consolidate a variable interest entity. These new standards amend the evaluation criteria to identify the primary beneficiary of a variable interest entity and require ongoing reassessment of whether an enterprise is the primary beneficiary of the variable interest entity. The provisions of the new standards are effective for annual reporting periods beginning after November 15, 2009 and interim periods within those fiscal years. These standards became effective for us in the first quarter of fiscal 2010. The adoption of the new standards will not have an impact on our consolidated financial position, results of operations and cash flows.

In January 2010, the FASB issued Accounting Standards Update No. 2010-06, “Fair Value Measurements Disclosures,” which amends Subtopic 820-10 of the FASB Accounting Standards Codification to require new disclosures for fair value measurements and provides clarification for existing disclosure requirements. More specifically, this update will require (a) an entity to disclose separately the amounts of significant transfers in and out of Levels 1 and 2 fair value measurements and to describe the reasons for the transfers; and (b) information about purchases, sales, issuances and settlements to be presented separately (i.e. present the activity on a gross basis rather than net) in the reconciliation for fair value measurements using significant, unobservable inputs (Level 3 inputs). This update clarifies existing disclosure requirements for the level of disaggregation used for classes of assets and liabilities measured at fair value, and requires disclosure about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements using Level 2 and Level 3 inputs. We do not anticipate that the adoption of this standard will materially expand our consolidated financial statement footnote disclosures.

The three levels of the fair value hierarchy are:

 
·
Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities;

 
·
Level 2 – Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and

 
·
Level 3 – Inputs that are not based on observable market data.

In February 2010, the FASB issued Accounting Standards Update No. 2010-09, “Subsequent Events,” which amends ASC 855 to address certain implementation issues, including: (1) eliminating the requirement for a filer with the United States Securities and Exchange Commission (the “SEC”) to disclose the date through which it has evaluated subsequent events; and (2) refining the scope of the disclosure requirements for reissued financial statements.  The provisions of the update will be effective upon issuance.  The adoption of the update will not have an impact on our consolidated financial position, results of operations and cash flows.

17.           Related party transactions

On April 1, 2009, we entered into an agreement with Sierra Partners LLC (“Sierra”) pursuant to which Sierra agreed to provide us with investor relations and corporate finance consulting services.  The founder and partner of Sierra is also one of our directors. Under the terms of the agreement, Sierra will provide us with consulting services commencing April 1, 2009 and ending on March 31, 2010, with the agreement continuing thereafter on a month-to-month basis beginning April 1, 2010.  Sierra will assist us with our efforts to maintain an investor relations program and provide support and analysis of our general corporate finance and strategy efforts.  As compensation for these services, we agreed to pay to Sierra a monthly retainer fee of $10,000 during the term of the agreement and issue to Sierra 60,000 of our stock options.  As of June 30, 2010, we had made payments to Sierra under the agreement totaling $150,000; of which $60,000 had been paid during the six-month period ended June 30, 2010, and had issued the 60,000 stock options to Sierra with a recorded expense of $50,386.

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

Management’s Discussion and Analysis (“MD&A”) of the consolidated operating results and financial condition of Vista Gold Corp. (“Vista” or the “Corporation”) for the three-month period ended June 30, 2010 has been prepared based on information available to us as of July 27, 2010.  This MD&A should be read in conjunction with the annual consolidated financial statements of the Corporation for the three years ended December 31, 2009 and the related notes thereto, which have been prepared in accordance with generally accepted accounting principles (“GAAP”) in Canada and the accompanying consolidated interim financial statements of the Corporation for the period ended June 30, 2010 (collectively, the “Consolidated Financial Statements”).  Reference to Note 20 to the consolidated annual financial statements and Note 16 to the consolidated interim financial statements for the period ended June 30, 2010 should be made for a discussion of the differences between Canadian and United States GAAP and their effect on the Consolidated Financial Statements.  This MD&A contains “forward-looking statements” within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended, and forward-looking information under Canadian securities laws, that are intended to be covered by the safe harbor created by such legislation.  See “Note Regarding Forward-Looking Statements” below.

All amounts stated herein are in U.S. dollars in thousands, except per share and per ounce amounts, unless otherwise noted.

Results from Operations

Our consolidated net loss for the three-month period ended June 30, 2010, was $4,152 or $0.09 per share compared to consolidated net earnings of $3,890 or $0.11 per share for the same period in 2009.  Our consolidated net loss for the six-month period ended June 30, 2010, was $5,851 or $0.13 per share compared to consolidated net earnings of $2,010 or $0.06 per share for the same period in 2009.  For both the three- and six-month periods, the increases in the consolidated net losses of $8,042 and $7,861 from the respective prior periods are primarily due to decreases in the gain on disposal of marketable securities of $6,822 and $6,602 from the respective prior periods.  The gain during the 2009 periods was the result of the sale of our Allied Nevada Gold Corp. (“Allied”) shares which we retained in connection with the transaction that resulted in the formation of Allied and the transfer of Vista’s Nevada properties to Allied.  Also contributing to the increase in net losses for both the three- and six-month periods was an increase in the loss on early extinguishment of our senior secured convertible notes (the “Notes”) of $1,981 for both the three- and six-month periods ended June 30, 2010.  On May 20, 2010, we entered into a Note repurchase agreement whereby we repurchased $5,667 of outstanding principal Notes in exchange for cash and Common Shares (see Consolidated Financial Statements – Note 7).

Exploration, property evaluation and holding costs

Exploration, property evaluation and holding costs were $475 for the three-month period ended June 30, 2010 and $869 for the six-month period ended June 30, 2010, as compared with $268 and $601 for the same periods in 2009. For both the three-month and six-month periods, there were no significant variances as we continue to move our projects towards development decisions.

Corporate administration and investor relations

Corporate administration and investor relations costs increased to $1,076 during the three-month period ended June 30, 2010, compared with $974 for the same period in 2009.  The increase of $102 from the respective prior period is primarily due to an increase in legal costs of $80 and an increase in audit, tax and other accounting-related fees of $52.  These amounts have been partially offset by a decrease in stock-based compensation expense of $46.

Corporate administration and investor relations costs increased to $2,067 for the six-month period ended June 30, 2010 compared with $1,986 for the same period in 2009.  The increase of $81 from the respective prior period is primarily due to an increase in legal fees of $65, an increase in freight and shipping expenses related to the year end mailing of shareholder materials of $47 and an increase in audit, tax and other accounting-related fees of $42.  These amounts have been partially offset by a decrease in stock-based compensation expense of $96.

Depreciation and amortization

Depreciation and amortization expense was $60 for the three-month period ended June 30, 2010, approximately level with $62 for the same period in 2009.  Depreciation and amortization expense increased to $132 during the six-month period ended June 30, 2010, compared with $114 for the same period in 2009.  The increase of $18 for the six-month period was mostly due to capital expenditures at both the Mt. Todd gold project and the Paredones Amarillos gold project during the latter part of 2009 and the first quarter of 2010 that have begun to be depreciated.

 
- 17 -

 
Interest expense

Interest expense of $535 during the three-month period ended June 30, 2010 and $1,091 during the six-month period ended June 30, 2010 was slightly less than $584 and $1,163 for the same periods in 2009.  This slight decrease is attributable to the repurchase of $1,333 of the Notes in July 2009 and the repurchase of $5,667 of the Notes in May 2010. For the three-month period ended June 30, 2010, $212 is attributable to the accretion of the debt discount and $323 is attributable to interest expense.  For the six-month period ended June 30, 2010, $492 is attributable to the accretion of the debt discount and $599 is attributable to interest expense.  These amounts are approximately 24% of the full interest expense associated with the issuance of the Notes.  We capitalized the remaining 76% as additions to mineral properties in accordance with ASC 835-20 Capitalization of Interest and our accounting policy.

Other income and expense