UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2002
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 (Not Applicable)
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)
7961 Shaffer Parkway
Suite 5
Littleton, Colorado 80127
(Address of principal executive offices) (Zip Code)
(720) 981-1185
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
116,640,965
-----------
Common Shares, without par value, outstanding at May 10, 2002
VISTA GOLD CORP.
FORM 10-QSB
FOR THE QUARTER ENDED MARCH 31, 2002
INDEX
Page
----
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (Unaudited) 3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 12
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 14
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 16
In this Report, unless otherwise indicated, all dollar amounts are expressed in
United States dollars.
2
PART I - FINANCIAL STATEMENTS
ITEM 1. FINANCIAL STATEMENTS
VISTA GOLD CORP.
CONSOLIDATED BALANCE SHEETS
(U.S. DOLLARS IN THOUSANDS) MARCH 31, 2002 DECEMBER 31, 2001
--------------------------- -------------- -----------------
(UNAUDITED)
ASSETS:
Cash and cash equivalents - Note 3 $ 1,274 $ 674
Restricted cash - Note 4 2,774 -
Accounts receivable 153 180
Supplies and other 253 301
--------- ---------
Current assets 4,454 1,155
Property, plant and equipment - Note 5 12,457 12,734
--------- ---------
Total assets $ 16,911 $ 13,889
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Accounts payable $ 102 $ 145
Accrued liabilities and other - Note 8 1,045 1,209
--------- ---------
Current liabilities 1,147 1,354
--------- ---------
Accrued reclamation and closure costs 3,126 3,134
--------- ---------
Total liabilities 4,273 4,488
--------- ---------
Capital stock, no par value per share: - Note 6
Preferred-unlimited shares authorized; no shares outstanding
Common-unlimited shares authorized; shares outstanding:
2002 - 112,315,040 and 2001 - 90,715,040 122,063 121,146
Convertible debentures - Note 4 2,774 -
Deficit (110,714) (110,260)
Currency translation adjustment (1,485) (1,485)
--------- ---------
Total shareholders' equity 12,638 9,401
--------- ---------
Total liabilities and shareholders' equity $ 16,911 $ 13,889
========= =========
Nature of operations and going concern - Note 2
Commitments and contingencies - Note 7
Approved by the Board of Directors
/s/ John M. Clark /s/ C. Thomas Ogryzlo
----------------- ---------------------
John M. Clark C. Thomas Ogryzlo
Director Director
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS.
3
VISTA GOLD CORP.
CONSOLIDATED STATEMENTS OF LOSS
Three Months Ended
March 31
(U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) 2002 2001
---------------------------------------------- ---- ----
(UNAUDITED) (Unaudited)
REVENUES:
Gold sales - Note 9 $ - $ 351
------------ -----------
COSTS AND EXPENSES:
Production costs - Note 9 - 321
Depreciation, depletion and amortization 20 53
Exploration, property evaluation and holding costs 241 254
Corporate administration and investor relations 278 268
Interest expense - 18
Loss (gain) on disposal of assets (87) (27)
Other expense (income) 2 (7)
------------ -----------
Total costs and expenses 454 880
------------ -----------
Net loss $ (454) $ (529)
============ ===========
Weighted average shares outstanding 105,115,040 90,715,040
Basic and diluted loss per share $ (0.00) $ (0.01)
VISTA GOLD CORP.
CONSOLIDATED STATEMENTS OF DEFICIT
Three Months Ended
March 31
(U.S. DOLLARS IN THOUSANDS) 2002 2001
--------------------------- ---- ----
(UNAUDITED) (Unaudited)
Deficit, beginning of period $(110,260) $(106,985)
Net Loss (454) (529)
--------- ---------
Deficit, end of period $(110,714) $(107,514)
========= =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS.
4
VISTA GOLD CORP.
CONSOLIDATED STATEMENTS OF CASH FLOW
Three Months Ended
March 31
(U.S. DOLLARS IN THOUSANDS) 2002 2001
--------------------------- ---- ----
(UNAUDITED) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Loss for the period $ (454) $ (529)
ADJUSTMENTS TO RECONCILE LOSS FOR THE PERIOD TO CASH
PROVIDED BY (USED IN) OPERATIONS:
Depreciation, depletion and amortization 20 53
Reclamation and closure costs paid in the period (8) (56)
Loss (gain) on disposal of assets (87) (27)
Gain on currency translation - (1)
Other non-cash items - (3)
------- ------
(529) (563)
CHANGE IN OPERATING ASSETS AND LIABILITIES:
Accounts receivable 27 (149)
Supplies inventory and prepaid expenses 48 (32)
Accounts payable and accrued liabilities (104) (151)
------- ------
Net cash used in operating activities (558) (895)
------- ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds on disposal of fixed assets and supplies 241 2,595
------- ------
Net cash provided by investing activities 241 2,595
------- ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt - (619)
Net proceeds from private placement - Note 6 917 -
Net proceeds from convertible debentures - Note 4 2,774 -
Convertible debenture proceeds placed in escrow - Note 4 (2,774) -
------- ------
Net cash provided by (used in) investing activities 917 (619)
------- ------
Net increase in cash and cash equivalents 600 1,081
------- ------
Cash and cash equivalents, beginning of period 674 96
------- ------
Cash and cash equivalents, end of period $ 1,274 $1,177
======= ======
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS.
5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands unless specified otherwise)
1. General
The consolidated interim financial statements of Vista Gold Corp. (the
"Corporation") for the three months ended March 31, 2002, 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. In the opinion of management, all of the adjustments necessary to
fairly present the interim financial information set forth herein have been
made. 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,
filed on Form 10-KSB, for the year ended December 31, 2001.
These interim financial statements follow the same accounting policies and
methods of their application as the most recent annual financial statements. On
January 1, 2002, the Corporation adopted the new recommendations of the Canadian
Institute of Chartered Accountants, CICA 3870 for the recognition, measurement
and disclosure of stock-based compensation and other stock-based payments made
in exchange for goods and services. The Corporation has chosen not to apply the
fair value based method of accounting for employee stock-based compensation
plans. Awards granted to non-employees will be accounted for using the fair
value method. This new standard was adopted prospectively for awards granted on
or after January 1, 2002.
2. Nature of operations and going concern
(a) NATURE OF OPERATIONS
The Corporation is in the business of gold property acquisition, development and
exploration.
Mining activities were suspended at the Hycroft mine in 1998. Currently,
solution is being circulated over the heap leach pads at the mine to enhance
evaporation. As the solution is circulated, it is passed through a carbon plant,
where small amounts of gold are adsorbed onto activated carbon. The gold is
subsequently stripped from the carbon, refined and sold to defray the property
holding costs. The amount of gold recovered from the heap leach pads has
declined gradually, as expected, since 1998.
Amayapampa, in Bolivia, is being held for development, pending higher gold
prices.
(b) GOING CONCERN
These consolidated financial statements have been prepared on the basis of
accounting principles applicable to a going concern that assume the realization
of assets and the discharge of liabilities in the normal course of business. At
the Annual and Special General Meeting of the Shareholders held on April 26,
2002, the private placement of $2.77 million of convertible debentures (Note 4)
to various investors was approved. The total $2.77 million proceeds from the
convertible debentures are held in escrow pending the settlement and dismissal
of the USF&G lawsuit (Note 7). Management is confident that this settlement and
dismissal will be effected timely, however, in the event that this settlement
and dismissal is not effected timely, there will be substantial doubt about the
Corporation's ability to continue as a going concern. 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.
6
3. Cash and cash equivalents
The Corporation received $1,026,000 on February 1, 2002 in connection with the
closing of the first step of the private placement (the "Unit Offering"), as
more particularly described in "Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Recent Developments." $814,087
of this was held in trust and must be used for the settlement of the claim
against the Corporation and other defendants by USF&G, as disclosed in Note 7.
4. Restricted cash and convertible debentures
Convertible debentures for the face amount of $2,774,000 were issued on March
19, 2002 upon the closing of the second step of the private placement (the
"Debenture Offering") as more particularly described in "Item 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Recent Developments". These debentures will automatically be converted into
units comprised of one common share and one warrant to purchase one common share
of the Corporation on the date a registration statement filed under the
"Securities Act of 1933" relating to the securities issued in connection with
the Unit Offering and the Debenture Offering is declared effective by the United
States Securities and Exchange Commission (the "SEC"). The debentures will
become due and payable, in cash, at the option of the holder at any time after
September 20, 2002, if by such date the SEC has not declared the registration
statement effective. As consideration for its services as agent in connection
with the Debenture Offering, the Corporation issued to Global Resource
Investments Ltd. special warrants convertible into 4,325,925 units with the same
terms as the Debenture Units.
For accounting purposes the debentures and the related special warrants have
been treated as components of equity.
Pursuant to the conditions of the closing the Debenture Offering the $2,774,000
received by the Corporation on March 19, 2002, was placed in escrow pending
shareholder approval and settlement and dismissal of the USF&G lawsuit (Note 7).
5. Property, plant and equipment
Property, plant and equipment is comprised of the following:
MARCH 31, 2002 DECEMBER 31, 2001
ACCUMULATED ACCUMULATED
DEPRECIATION, DEPRECIATION,
AMORTIZATION AMORTIZATION
AND AND
COST WRITE-DOWNS NET COST WRITE-DOWNS NET
MINERAL PROPERTIES
Hycroft mine, United States $ 21,917 $ 21,917 $ - $ 21,917 $ 21,917 $ -
Amayapampa, Bolivia 57,624 46,894 10,730 57,624 46,894 10,730
-------- --------- -------- -------- --------- --------
$ 79,541 $ 68,811 $ 10,730 $ 79,541 $ 68,811 $ 10,730
-------- --------- -------- -------- --------- --------
PLANT & EQUIPMENT
Hycroft mine, United States $ 30,048 $ 28,335 $ 1,713 $ 31,278 $ 29,397 $ 1,881
Amayapampa, Bolivia 181 181 - 181 181 -
Corporate, United States 332 318 14 467 344 123
-------- --------- -------- -------- --------- --------
$ 30,561 $ 28,834 $ 1,727 $ 31,296 $ 29,922 $ 2,004
-------- --------- -------- -------- --------- --------
TOTAL PROPERTY, PLANT AND
EQUIPMENT $110,102 $ 97,645 $ 12,457 $111,467 $ 98,733 $ 12,734
======== ========= ======== ======== ========= ========
The recoverability of the carrying values of the Hycroft mine and the Amayapampa
project is dependent upon the successful start-up or the sale of these
properties. The Corporation is investigating the economic
7
feasibility of restarting the Hycroft mine and developing the Amayapampa project
in Bolivia. The plans to restart the Hycroft mine and develop the Amayapampa
project will also depend on management's ability to raise additional capital for
these purposes. Although management 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.
6. Capital stock
COMMON SHARES ISSUED AND OUTSTANDING
Number of shares Value
---------------- -----
At December 31, 2001, outstanding 90,715,040 $121,146
February 1, 2002 21,600,000 917
----------- --------
112,315,040 $122,063
----------- --------
On February 1, 2002, in a private transaction (the "Unit Offering"), the
Corporation issued 20,000,000 units (the "Offered Units") to Stockscape.com
Technologies Inc., at a price of $0.0513 per unit, for an aggregate purchase
price of $1,026,000. The Corporation also issued 1,600,000 units (the "Agent's
Units") to Global Resource Investments Ltd. as consideration for its services as
agent in connection with the Unit Offering. Each Offered Unit and each Agent's
Unit consisted of one common share and one common share purchase warrant (a
"Warrant"). Subject to shareholder approval, each Warrant entitles the holder to
purchase one common share of the Corporation at $0.075 until February 1, 2007.
The Corporation incurred $109,000 in direct costs connected with the Unit
Offering.
At the Corporation's Annual and Special General Meeting, held on April 26, 2002,
shareholders approved the issuance by the Corporation of the 21,600,000 Warrants
issued in connection with the Unit Offering.
The Corporation applies the recommendations of the Canadian Institute of
Chartered Accountants ("CICA") Handbook Section 3870 in accounting for Stock
Based Compensation. Under the Corporation's Stock Option Plan, 200,000 stock
options were issued to directors of the Corporation during the three months
ending March 31, 2002. Had compensation cost consistent with the provisions of
CICA Handbook Section 3870 been recorded for the stock options granted since
January 1, 2002, the Corporation's loss and loss per share on a Canadian basis
would have been adjusted to the pro forma amounts indicated below:
Three Months Ended
March 31, 2001
Net loss - as reported (000's) $ (454)
Net loss - pro forma (000's) (467)
Loss per share - as reported (0.00)
Loss per share - pro forma (0.00)
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:
Three Months Ended
March 31, 2001
Expected volatility 50.0%
Risk-free interest rate 3.50%
Expected lives 5 years
Dividend yield 0%
7. Commitments and contingencies
(a) USF&G LAWSUIT
On August 25, 2000, United States Fidelity & Guarantee Company ("USF&G") filed
an action in the United States District Court against Vista Gold Corp., Vista
Gold Holdings, Inc., Stockscape.com Technologies, Inc., Cornucopia Resources,
Inc., Red Mountain Resources, Inc. and Touchstone Resources, Inc. This action
8
involves a General Contract of Indemnity in connection with the posting of a
reclamation bond for mining activities by Mineral Ridge Resources Inc., the
Corporation's wholly owned subsidiary that held the investment in the Mineral
Ridge mine, at Silver Peak, Nevada. In the action, USF&G seeks to compel all of
the defendants to post additional collateral for the bond in the total amount of
$793,583. Neither Vista Gold Corp. nor Vista Gold Holdings, Inc. was a party to
the General Contract of Indemnity and both have denied any liability in
connection therewith.
In November 2000, the parties stipulated to an agreed upon discovery plan and
scheduling order. On March 12, 2001 Stockscape.com Technologies, Inc.,
Cornucopia Resources, Inc., and Red Mountain Resources, Inc. (collectively the
"Stockscape defendants") filed a cross-claim against the Corporation relating to
the same issues but referring to the Share Purchase and Sale Agreement between
Cornucopia Resources Ltd. and Vista Gold Corp. In July 2001, USF&G filed for a
summary judgment requesting the court to compel the Stockscape defendants to
post $902,819 in additional collateral. The increase from $793,583 accounts for
additional expenses incurred by USF&G. At the same time, the Stockscape
defendants moved for partial summary judgment on cross-claim against the
Corporation.
In 2001, the Corporation estimated its exposure to be $814,087 with respect to
this claim, and established a provision for this amount.
(b) HYCROFT SURETY BOND
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.
8. Accrued liabilities and other
2002 2001
------ ------
Provision for USF&G settlement (Note 7) $ 814 $ 814
Trade payables and other accruals 231 395
------ ------
$1,045 $1,209
9. Gold sales and production costs
Gold production has gradually declined since mining activities were suspended at
the Hycroft mine in 1998. Effective at the beginning of fiscal 2002, gold
production is considered incidental to the activities at the Hycroft mine, and
reporting the associated sales proceeds as revenue is no longer warranted.
Accordingly, proceeds from gold sales, are netted against `Exploration, property
evaluation and holding costs.' Similarly, gold production costs, which
approximately offset the proceeds from gold sales, are included in `Exploration,
property evaluation and holding costs.'
10. Geographic and segment information
The Corporation operates in the gold mining industry in the United States, has a
property being held for development in Latin America, and has exploration
properties in the United States, Canada and Latin America. Its major product and
only identifiable segment is gold, and all gold revenues and operating costs are
derived in the United States. All revenues are earned in the United States and
geographic segmentation of capital assets is provided in Note 5.
9
11. Differences between Canadian and United States generally
accepted accounting principles
The Corporation prepares its financial statements in accordance with accounting
principles generally accepted in Canada which differ in some respects from those
in the United States. The measurement effect of these GAAP differences on the
consolidated statements of loss were as follows:
CONSOLIDATED STATEMENTS OF LOSS
Three Months Ended
March 31
(U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) 2002 2001
---------------------------------------------- ---- ----
(UNAUDITED) (Unaudited)
Net loss - Canadian GAAP $ (454) $ (529)
Revenue recognition 150 (40)
------ ------
Net loss - U.S. GAAP (304) (569)
Unrealized foreign currency loss - (1)
------ ------
Comprehensive loss - U.S. GAAP $ (304) $ (570)
====== ======
Basic loss per share - U.S. GAAP $(0.00) $(0.01)
-------------------------------------------------------------------------------
In 2001, the Corporation recognized revenue upon adsorption of gold onto carbon.
In accordance with US GAAP, revenue is not recorded before title is passed.
The effect of GAAP differences on the consolidated balance sheets were as
follows:
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2002 December 31, 2001
------------------------------- --------------------------------
PER CDN. CDN./U.S. PER U.S. Per Cdn. Cdn./U.S. Per U.S.
GAAP ADJ. GAAP GAAP Adj. GAAP
------------------------------- --------------------------------
(UNAUDITED)
Current assets $ 4,454 $ 222 $ 4,676 $ 1,155 $ (150) $ 1,005
Property, plant and equipment 12,457 (7,637) 4,820 12,734 (7,637) 5,097
Current liabilities 1,147 2,774 3,921 1,354 - 1,354
Capital stock 122,063 76,754 198,817 121,146 76,754 197,900
Convertible debentures 2,774 (2,774) - - - -
Special warrants - 222 222 - - -
Contributed surplus - 2,786 2,786 - 2,786 2,786
Deficit (110,714) (87,177) (197,891) (110,260) (87,327) (197,587)
For U.S. GAAP purposes the Corporation has accounted for the convertible
debentures (Note 4) as a current liability. The special warrants issued to the
agent as consideration for the its services in connection with the debenture
offering are valued and included as a financing cost of the related debentures.
10
12. Subsequent events
At the Annual and Special General Shareholders Meeting of the Corporation on
April 26, 2002 the shareholders of the Corporation voted in favor of:
i) The issuance of 21,600,000 common share purchase warrants in connection
with the private placement to Stockscape.com Technologies Inc. as more
particularly described in "Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Recent Developments"
below, and in Note 6. Additional discussion is included in the
Corporation's Notice of Meeting and Management Information and Proxy
Circular dated March 19, 2002 (the "2002 Proxy Statement"), as filed
with the SEC on March 22, 2002;
ii) The issuance of convertible debentures in an aggregate principal amount
of $2,774,000 to various investors, and the issuance of 4,325,925
special warrants to Global Resource Investments Ltd., all as more
particularly described in "Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Recent Developments"
below, and in the 2002 Proxy Statement; and
iii) The consolidation all of the Corporation's issued and outstanding common
shares on the basis of every twenty issued and outstanding common shares
without par value being consolidated into one common share without par
value.
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(U.S. dollars in thousands, unless specified otherwise)
RECENT DEVELOPMENTS
On January 22, 2002, the Corporation announced that it had finalized an agency
agreement for a private placement financing of $3.8 million to be arranged by
Global Resource Investments Ltd. ("Global") of Carlsbad, California. This
private placement, which was subject to regulatory and shareholder approval, has
been effected in two steps.
On February 1, 2002, in the first step of the private placement (the "Unit
Offering"), the Corporation issued 20,000,000 units (the "Offered Units") to
Stockscape.com Technologies Inc., at a price of $0.0513 per unit, for an
aggregate purchase price of $1,026,000. The Corporation also issued 1,600,000
units (the "Agent's Units") to Global as consideration for its services as agent
in connection with the Unit Offering. Each Offered Unit and each Agent's Unit
consisted of one common share and one common share purchase warrant (a
"Warrant"). Subject to shareholder approval, each Warrant entitles the holder to
purchase one common share of the Corporation at $0.075 until February 1, 2007.
At the Corporation's Annual and Special General Meeting, held on April 26, 2002,
shareholders approved issuance by the Corporation of the 21,600,000 Warrants
issued in connection with the Unit Offering.
The closing of the Unit Offering provided the Corporation with net proceeds of
$1,026,000 and the potential for an additional $1,500,000, if all Warrants
issued as part of the Unit Offering are exercised. Of these proceeds, $814,087
has been reserved and must be used for settlement and dismissal of the lawsuit
initiated by United States Fidelity & Guarantee Company ("USF&G"). (see also
"Part II -- Other Information -- Item 1. Legal Proceedings"). Such use of
proceeds was a condition to release from escrow of the funds received by the
Corporation in the Debenture Offering (as defined below).
On March 19, 2002, in the second step of the private placement (the "Debenture
Offering"), the Corporation issued $2,774,000 aggregate principal amount of
convertible debentures (the "Debentures") to various investors, all of whom were
"accredited investors" as such term is defined in Rule 501 of Regulation D under
the "Securities Act of 1933", as amended (the "Securities Act"). Subject to
conditions including shareholder approval of the Debenture Offering, the
Debentures are convertible into units (the "Debenture Units") at a price of
$0.0513 per Debenture Unit, each consisting of one common share and one common
share purchase warrant (collectively, "Debenture Warrants") entitling the holder
to purchase one common share at a price of $0.075 per share until March 18,
2007. The Debentures bear interest at a rate of 1% per annum and will mature on
September 20, 2003 unless they are converted or otherwise become due and payable
prior to that date.
As consideration for its services as agent in connection with the Debenture
Offering, the Corporation issued to Global special warrants (the "Agent's
Special Warrants") convertible into 4,325,925 units ("Agent's Units"), with the
same terms as the Debenture Units. Issuance of the Debentures and of the Agent's
Special Warrants were subject to shareholder approval. The gross proceeds raised
by issuance of the Debentures were placed in escrow, pending shareholder
approval of the issuance.
The Debentures will automatically be converted into Debenture Units on the date
a registration statement filed under the Securities Act (a "Registration
Statement") relating to the securities issued in connection with the Unit
Offering and the Debenture Offering is declared effective by the United States
Securities and Exchange Commission (the "SEC"). Also, the Debentures will become
due and payable, in cash, at the option of the holder at any time after
September 20, 2002, if by such date the SEC has not declared the Registration
Statement effective.
At the Corporation's Annual and Special General Meeting, held on April 26, 2002,
shareholders approved the issuance by the Corporation of the Debentures and the
Agent's Special Warrants.
On April 26, 2002, the debenture holders nominated, and the Corporation's Board
of Directors appointed Robert Quartermain to the Corporation's Board of
Directors. Mr. Quartermain is the President and Chief Executive Officer of
Silver Standard Resources Inc.
12
RESULTS OF OPERATIONS
Operating activities for the three months ended March 31, 2002 were similar to
the activities for the three months ended March 31, 2001. Accordingly, the net
loss of $0.5 million for the three months ended March 31, 2002 was similar, as
expected, to the net loss of $0.5 million for the same period in 2001.
The Hycroft mine is on care and maintenance. Mining activities were suspended at
Hycroft in 1998 and, as expected, gold production has declined steadily since
that time. Currently, solution is being circulated over the heap leach pads to
enhance evaporation. As the solution is circulated over the heap leach pads, it
is passed through a carbon plant, where small amounts of gold are adsorbed onto
activated carbon. Subsequently the gold is stripped from the carbon, refined and
sold. As discussed in Note 9 of the Financial Statements, gold sales are no
longer recorded as such, but are accounted for as an offset to exploration,
property evaluation and holding costs. Accordingly, gold revenues in the three
months ended March 31, 2002 were nil, compared to $0.4 million for the same
period in 2001. The 2001 gold revenues were a result of 1,387 ounces of gold
production. Similarly, production costs were nil for the three months ended
March 31, 2002 compared to production costs of $0.3 million for the same period
in 2001.
Depreciation, depletion and amortization for the three months ended March 31,
2002 totalled $20,000, similar to the depreciation, depletion and amortization
expense in the same period in 2001. 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.
Disposals of Hycroft equipment during the three months ended March 31, 2002
resulted in a gain of $34,000 compared to a similar gain of $27,000 for same
period in 2001. An additional gain of $53,000 was realized in 2002 from the
disposal of Canadian exploration claims.
Exploration, property evaluation and holding costs for the three months ended
March 31, 2002 totaled $0.2 million, and were comprised principally of Hycroft
property holding costs. Total 2002 exploration, property evaluation and holding
costs are down from the $0.3 million in exploration, property evaluation and
holding costs incurred for the same period in 2001, mainly as a result of cost
reduction efforts in Bolivia.
Corporate administration costs for the period ended March 31, 2002 are similar,
as expected, to the costs incurred for the same period in 2001.
Net cash flow used in operations was $0.6 million for the three months ended
March 31, 2002. This $0.3 million improvement from the same period in 2001 is a
result of lower severance payments in 2002, a slightly lower operating loss in
2002, and the timing of gold sales in 2001. $0.2 million was provided from the
sale of equipment and mining claims during the three months ended March 31,
2002, compared to $2.6 million provided in the same period in 2001, which
involved the sale of four haul trucks and one shovel from the Hycroft mine. The
Corporation made no capital expenditures in either year. The Corporation raised
$0.9 million, net of associated costs, by way of a private placement as
discussed in Note 6 of the Financial Statements. $0.6 million was used in
financing activities to repay a long-term equipment loan in the same period
in 2001.
FINANCIAL CONDITION
The Corporation's consolidated cash balance at March 31, 2002 was $1.3 million,
$0.8 million of which must be used for the settlement of the USF&G lawsuit,
compared to a cash balance of $0.7 million at December 31, 2001; and working
capital was $3.3 million as of March 31, 2002 compared to a working capital
deficit of $0.2 million at December 31, 2001. This improvement resulted from the
closing of the private placement financing discussed in Note 6 of the Financial
Statements, and includes cash in escrow as discussed in Note 4 of the Financial
Statements.
As discussed above in "Recent Developments", on April 26, 2002, the shareholders
of the Corporation approved the issuance of $2.77 million of convertible
debentures. The total $2.77 million proceeds from the convertible debentures are
held in escrow pending the settlement and dismissal of the USF&G lawsuit (Note
7). Management is confident that this settlement and dismissal will be effected
timely, however, in
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the event that this settlement and dismissal is not effected timely, there will
be substantial doubt about the Corporation's ability to continue as a going
concern.
Management believes that this addition of $2.77 million to the Corporation's
existing working capital will provide the Corporation with adequate capital to
effectively pursue the acquisition of additional gold exploration and
development properties, while maintaining and improving its existing gold
reserves in Nevada and Bolivia.
OUTLOOK
Management believes that the Corporation's recent private placement financing,
together with the potential for raising additional funds upon the exercise of
the Warrants issued in the private placement, significantly improve the
Corporation's short-term outlook. This funding will allow the Corporation to
fully apply its technical expertise to acquire and enhance gold exploration and
development properties, while maintaining and improving its existing gold
reserves in Nevada and Bolivia.
Although management believes that the resumption of mining at Hycroft would be
economic at current gold prices, with the benefit of this new funding the
Corporation is under no pressure to make any short-term production decisions
which could prematurely deplete this potentially valuable gold resource. Hycroft
is a large epithermal gold system with multiple targets for high-grade
mineralization, it remains one of the most under-explored gold systems in
Nevada. There is good potential to add oxide reserves and to discover high-grade
zones.
In Bolivia, holding costs have been reduced to a minimum and, the project will
be held pending improved gold prices. Development of Amayapampa will require
initial capital of $25 million and a gold price of more than $325 per ounce.
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.
On December 10, 1999, Mineral Ridge Resources Inc. ("MRRI"), a wholly owned
subsidiary of Vista Gold, voluntarily filed for protection under the U.S.
Bankruptcy Code.
Early in 2000, a trustee was appointed by the court to dispose of the assets of
MRRI. At the end of 2000, all assets of MRRI had been disposed of and in January
2001, the MRRI Chapter 11 case was dismissed.
On August 25, 2000, United States Fidelity & Guarantee Company ("USF&G") filed
an action in the United States District Court against Vista Gold Corp., Vista
Gold Holdings, Inc., Stockscape.com Technologies, Inc., Cornucopia Resources,
Inc., Red Mountain Resources, Inc. and Touchstone Resources, Inc. This action
involves a General Contract of Indemnity in connection with the posting of a
reclamation bond for mining activities by Mineral Ridge Inc., the Corporation's
wholly owned subsidiary that held the investment in the Mineral Ridge mine, at
Silver Peak, Nevada. In the action, USF&G seeks to compel all of the defendants
to post additional collateral for the bond in the total amount of $793,583.
Neither Vista Gold Corp. nor Vista Gold Holdings, Inc. was a party to the
General Contract of Indemnity and both have denied any liability in connection
therewith.
In November 2000, the parties stipulated to an agreed upon discovery plan and
scheduling order. On March 12, 2001 Stockscape.com Technologies, Inc.,
Cornucopia Resources, Inc., and Red Mountain Resources, Inc. (collectively the
"Stockscape defendants") filed a cross-claim against the Corporation relating to
the same issues but referring to the Share Purchase and Sale Agreement between
Cornucopia Resources Ltd. and Vista Gold Corp. In July 2001, USF&G filed for a
summary judgment requesting the court to compel the Stockscape defendants to
post $902,819 in additional collateral. The increase from $793,583 accounts
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for additional expenses incurred by USF&G. At the same time, the Stockscape
defendants moved for partial summary judgment on cross-claim against the
Corporation.
The Corporation has reserved $814,087 which must be used for settlement and
dismissal of this lawsuit, as discussed in Note 7 of the Financial Statements.
In April 1998, a legal dispute was initiated in Bolivia by a Mr. Estanislao
Radic ("Radic") who brought legal proceedings in the lower penal court against
Mr. Raul Garafulic ("Garafulic") and the Corporation, questioning the validity
of the 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-KSB for the year ended December 31, 2001, filed with the SEC on March
22, 2002, for information about this matter.
ITEM 2. CHANGES IN SECURITIES
Please refer to "Part I -- Financial Information -- Item 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Recent Developments" for additional information about the Unit Offering and the
Debenture Offering described below.
On February 1, 2002, in the first step of a two-step private placement as
previously described (the "Unit Offering"), the Corporation issued 20,000,000
units (the "Offered Units") to Stockscape.com Technologies Inc., at a price of
$0.0513 per unit, for an aggregate purchase price of $1,026,000. The Corporation
also issued 1,600,000 units (the "Agent's Units") to Global as consideration for
its services as agent in connection with the Unit Offering. Each Offered Unit
and each Agent's Unit consists of one common share and one common share purchase
warrant (a "Warrant"). The Offered Units and Agent's Units were issued in
reliance upon the exemption from the registration requirements of the Securities
Act specified by the provisions of Section 4(2) of such Act.
On March 19, 2002, in the second step of the private placement (the "Debenture
Offering"), the Corporation issued $2,774,000 aggregate principal amount of
convertible debentures (the "Debentures") to several investors, all of whom were
"accredited investors" as such term is defined in Rule 501 of Regulation D under
the Securities Act. As consideration for its services as agent in connection
with the Debenture Offering, the Corporation issued to Global special warrants
(the "Agent's Special Warrants") convertible into 4,325,925 units ("Agent's
Units"), with each unit consisting of one common share and one warrant,
exercisable prior to March 18, 2007 with the same terms as the Debenture Units.
The Debentures and Agent's Special Warrants were issued in reliance upon the
exemption from the registration requirements of the Securities Act specified by
the provisions of Section 4(2) of the Securities Act and Rule 506 of Regulation
D promulgated thereunder.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
15
(b) Reports on Form 8-K
The following documents were filed under cover of Form 8-K during
the quarter ended March 31, 2002
1. Report dated January 22, 2002 regarding a Private Placement.
2. Report dated February 1, 2002 regarding the close of the first
tranche of the Private Placement.
3. Report dated March 19, 2002 regarding the close of the second
tranche of the Private Placement.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VISTA GOLD CORP.
(Registrant)
Date: May 10, 2002 By: /s/ Ronald J. McGregor
-------------------------------------------
Ronald J. McGregor
President and Chief Executive Officer
Date: May 10, 2002 By: /s/ John F. Engele
-------------------------------------------
John F. Engele
Vice President Finance and
Chief Financial Officer
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