SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 6 TO
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
VEGA-ATLANTIC CORPORATION
(Name of Small Business Issuer in its charter)
State of Colorado
(State or other jurisdiction of incorporation or organization)
84-1304106
(I.R.S. Employer Identification No.)
4600 South Ulster St.
Suite 240
Denver, CO 80237
(Address of Principal Executive Offices)
(800) 721-0016
(Issuer's telephone number)
Securities to be registered pursuant to Section 12(b) of the Act: NONE
Securities to be registered pursuant to Section 12(g) of the Act: COMMON STOCK,
$.00001 PAR VALUE
FORM 10-SB/A Vega-Atlantic Corporation
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TABLE OF CONTENTS
PART I Page
Glossary
Item 1. Description of Business. . . . . . . . . . . . . . . . . . . . . . 3
Item 2. Management's Discussion and Analysis or Plan of Operation. . . . . 16
Item 3. Description of Property. . . . . . . . . . . . . . . . . . . . . . 19
Item 4. Security Ownership of Certain Beneficial Owners
and Management . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Item 5. Directors, Executive Officers, Promoters and Control Persons . . . 20
Item 6. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . 21
Item 7. Certain Relationships and Related Transactions . . . . . . . . . . 22
Item 8. Description of Securities. . . . . . . . . . . . . . . . . . . . . 22
PART II
Item 1. Market Price and Dividends on the Registrant's Common
Equity and Other Shareholder Matters . . . . . . . . . . . . . . . 26
Item 2. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . 27
Item 3. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure. . . . . . . . . . . . . . . . 27
Item 4. Recent Sales of Unregistered Securities. . . . . . . . . . . . . . 27
Item 5. Indemnification of Directors and Officers. . . . . . . . . . . . . 30
Item 6. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 32
PART III
Item 1. Index to Exhibits. . . . . . . . . . . . . . . . . . . . . . . . . 33
Item 2. Description of Exhibits. . . . . . . . . . . . . . . . . . . . . . 33
FORM 10-SB/A Vega-Atlantic Corporation
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GLOSSARY
Chain of Custody: The complete charge and control of samples from subject
exploration site to testing facility by an independent party
Claim staking &
maintenance: - Claim staking process of locating claims and placing
monuments on the claim
- Claim maintenance fulfilling the annual requirements to
continue to hold claims per the correct regulations
Classic veins/lode: Narrow widths of valuable mineral within barren wall rocks
Core hole: A hole drilled to provide a sample of rock by means of a
diamond impregnated bit which produces a solid cylinder of
the rock being cored
Discontinuous ring: In the context used means - semi-continuous outcrops that,
if connected, would form a circle
Drill hole geology: The geology of the sub-surface as determined from drill
holes
Eruptive Center: Major volcanic center
Ferrolatite: A moderately acidic volcanic rock having a high iron
content.
Fire assay testing: The process whereby the gold and silver content of a rock is
determined by fusion of a measured quantity of crushed rock
with a flux composed primarily of lead oxide, sodium
carbonate, borax, silica, flour and other chemicals and the
precious metals collected in molten lead. The lead button is
then oxidized in the furnace to remove the lead leaving a
tiny bead of gold and silver, which is parted and weighed
Flux: In fire assay usage, flux denotes a chemical or mix of
chemicals added to a charge to promote the fusing of metals
Leach analysis: Measurement of the concentration of an element within a rock
by a chemical leach procedure that is capable of selectively
extracting the element in question.
Lode mining claim: A staked mining location not exceeding 1500 ft X 600 ft
where the character of the deposit is veins or lodes of
quartz or other rock in place bearing gold, silver,
cinnabar, lead, tin, copper, or other valuable deposits
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Molten crustal &
mantle derived
materials: A hybid melt formed by mixing melted crust with basic magma
derived from the mantle of the earth
Primary vs
secondary deposits: Primary deposits of valuable minerals are those that formed
by relatively deep earth processes; whereas secondary
deposits are those formed at or near the earth's surface by
the action oxidation, weathering and water
Proven/Measured
reserves: - Reserves for which (a) quantity is computed from
dimensions revealed in outcrops, trenches, workings or drill
holes; grade and/or quality are computed from the results of
detailed sampling and (b) the sites for inspection, sampling
and measurement are spaced so closely and the geological
character is so well defined that size, shape, depth and
mineral content of reserves are well-established,
Vega-Atlantic does not yet have reserves
Reserve: That part of a mineral deposit which could be economically
and legally extracted or produced at the time of the reserve
determination
Quartzite: A sedimentary rock consisting mostly of silica sand grains
that have been welded together by heat and compaction
Rhyolite lava
flows: A volcanic rock containing greater than/= 65% silica
Tenor: Grade or concentration of a valuable mineral in rock,
particularly in reference to gold and silver
Unequilibrated
mineral assemblage: The occurrence of incompatible minerals in the same igneous
rock
Vent area: Location of eruptive activity
Volcanic depression/
caldera: Depression in the earth's surface caused by volcanic
explosive activity and subsequent collapse
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PART I
As used in this Registration Statement, the term "Company" refers to
Vega-Atlantic Corporation. The term "IGCO" refers to Intergold Corporation, a
Nevada corporation. The term "INGC" refers to International Gold Corporation,
the wholly owned subsidiary of Intergold Corporation.
Item 1. Description of Business.
Overview
Vega-Atlantic Corporation was incorporated on January 28, 1987 under the
laws of the State of Colorado to engage in the exploration of gold and precious
metals within the United States and worldwide.
The Company's principal executive offices are located at 4600 South Ulster
St., Suite 240, Denver, Colorado 80237. Its telephone number is (800)721-0016
and its facsimile number is (800) 713-5349.
The Company is engaged in the exploration of gold and silver within the
United States and worldwide. The Company is participating in a joint venture
whereby the Company owns a fifty-one percent (51%) interest in profits to be
realized from the exploration of 213 unpatented lode mining claims located in
Camus County, in south-central Idaho (the "Vega Property"). The Company entered
into a joint venture agreement with Geneva Resources, Inc., a Nevada corporation
("Geneva"), pertaining to the joint exploration of gold and silver on the Vega
Property (the "Joint Venture Agreement"). Under the terms of the Joint Venture
Agreement, the Company issued 500,000 restricted shares of common stock to
Geneva in exchange for the sale of a profit sharing interest. Since the venture
does not own or control anything other than future profits to be realized from
the exploration of the Vega Property, the issuance of the 500,000 restricted
shares of common stock by the Company to Geneva has been characterized as an
exchange for the sale of an interest in profits.
The provisions of the Joint Venture Agreement provide that the Company
conduct work programs on an annual basis involving exploration of the mining
claims on the Vega Property in amounts commensurate with those minimum budgeted
amounts mutually agreed upon between the Company and Geneva. The Company is
responsible solely for contribution of all future capital as is required by the
annual budgeted amounts for the further exploration of the Vega Property. Under
the terms of the Joint Venture Agreement, Geneva is generally not responsible
for payment of any costs or other fiscal obligations associated with the Vega
Property. See "Item 1. Description of Business-Joint Venture Agreement Regarding
Vega Property".
The Company recently entered into a letter of intent regarding acquisition
of Golden Cycle De Panama Inc., a corporation organized under the laws of the
Republic of Panama ("Golden Cycle"), pertaining to a gold exploration and
development project. Golden Cycle owns a gold concession of approximately 11.58
square miles located in the northern province of Veraguas, Conception River
Area, in the Republic of Panama. As of the date of this Registration Statement,
the Company has terminated discussions with Golden Cycle regarding its
acquisition due to the results of the Company's due diligence. See "Item 1.
Description of Business - Investment in Other Ventures".
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The Company also recently entered into a letter of intent regarding
acquisition of an approximate eighty percent (80%) interest in Tun Resources,
Inc., a corporation organized under the laws of British Columbia ("Tun
Resources"), pertaining to a gold exploration and development project. The
letter of intent represents the essential terms of the agreement between the
Company and Golden Thunder Resources Ltd, a corporation organized under the laws
of British Columbia ("Golden Thunder") regarding the Company's acquisition, and
is binding upon the Company and Golden Thunder. Tun Resources is the major
stakeholder in two gold exploration and development joint ventures in the Yunnan
Province of China. See "Item 1. Description of Business-Investment in Other
Ventures".
With regards to the Vega Property, an unpatented mining claim is a parcel
of federal land with respect to which there has been asserted a right of
possession under the General Mining Law of 1872 for purposes of developing and
extracting the minerals discovered on such property. Although title under a
valid unpatented mining claim is not "legal title" in the usual sense of that
term, the possessory title has been recognized by the Supreme Court of the
United States as a valid property right. Only when a mining claim is patented is
there an affirmative government grant pursuant to which legal title vests
according to usual concepts of real property ownership. See "Item 1. Description
of Business - Government Regulation".
AS OF THE DATE OF THIS REGISTRATION STATEMENT, THE COMPANY IS IN THE
EXPLORATORY STAGE AND HAS NOT DISCOVERED ANY RESERVES ON THE VEGA PROPERTY.
MOREOVER, THE COMPANY HAS NOT MADE ANY PHYSICAL IMPROVEMENTS NOR CONDUCTED ANY
MINING OPERATIONS ON THE VEGA PROPERTY. THE COMPANY IS IN THE EXPLORATION STAGE
AND HAS NOT, AS OF THE DATE OF THIS REGISTRATION STATEMENT, GENERATED REVENUES
FROM OPERATIONS.
Business Strategy Regarding Vega Property
The Vega Property is comprised of 213 contiguous unpatented lode mining
claims in Camus County, Idaho, comprising approximately 7 square miles. The Vega
Property is accessible from Highway 75 by a gravel side road (Thorn Creek
Reservoir Road), then turning left at the Y in the road, and traveling
approximately 7 miles. All roads to the Vega Property are ungated. This site is
approximately 4 miles west of Highway 75 and roughly 38 miles north of Twin
Falls, a small city of approximately 28,000 people.
The Company holds possessory title to the unpatented lode mining claims on
the Vega Property, which is public land under the jurisdiction of the Shoshone
District Office of the Bureau of Land Management ("BLM"). Geneva transferred the
213 unpatented lode mining claims located on the Vega Property to the Company
via a quit claim on April 5, 1999. [A quit claim deed is generally defined as a
"deed intended to pass any title, interest or claim that the grantor may have in
the property but not warranting that such titles is valid".] All such mining
claims are subject to regulation under the Federal Land Policy and Management
Act of 1976 (the "Act"), and surface management is vested with the BLM for such
mining claims. In general, the effect of the Act provides that such mining
claims would be conclusively deemed void and forfeited in the event the Company
or Geneva failed to timely pay the Federal annual mining claim maintenance fees
for each assessment year. Annual Federal mining claim maintenance fees are
approximately $50,000 and annual county fees are approximately $1,000 for the
213 unpatented lode mining claims comprising the Vega Property. Pursuant to the
terms of the Joint Venture Agreement, the Company is responsible solely for
payment of such fees.
Surface Work and Analysis
The Vega Property lies within the Magic Reservoir eruptive center - a
volcanic depression (or caldera) that has been filled with rhyolite lava flows
which are dated at between five to six million years before present and known as
Moonstone Rhyolite. This eruptive center occupies an area of approximately one
hundred square miles. This broad region indicates that rhyolite lavas would have
issued from multiple vents given the short distance that viscous rhyolite lava
can flow before cooling to an immobile mass. Accordingly, management believes
that certain rhyolite vent areas may be the locus for possible mineralization in
this volcanic formation.
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Initial Stage of Exploration.
Pursuant to a sub-license agreement, the Company acquired from Geneva
Resources, Inc. ("Geneva") the right to utilize proprietary fire and chemical
assay technology and related precious metals recovery processes, developed by
AuRIC Metallurgical Laboratories LLC, of Salt Lake City, Utah ("AuRIC"),to carry
out assay testing and chemical leach analysis of core samples to be derived from
any drilling on the Vega Property. Management of the Company deems the
Proprietary Technology crucial with respect to the successful exploration of the
Vega Property. As of the date of this Registration Statement, the Proprietary
Technology has not been transferred from AuRIC to Geneva pursuant to certain
contractual terms. Therefore, legal proceedings have been initiated generally by
Geneva against AuRIC regarding the validity and transfer of the Proprietary
Technology. Management has temporarily suspended exploration of the Vega
Property indefinitely until resolution of the legal proceedings. If, during the
legal proceedings, the Proprietary Technology is proven to be valid and
transferable, management intends to proceed at a future date with exploration of
the Vega Property which address the following work programs.
If, during the legal proceedings, the Proprietary Technology is proven to
be valid and transferable, the Company will ultimately receive from Geneva its
contractual benefits under the sub-license agreement and management intends to
proceed at a future date with exploration of the Vega Property which address the
following work programs. If the Proprietary Technology is not transferable, and
Geneva is successful in the outcome of the litigation and damages are awarded,
management believes that the Company will be entitled to a pro-rata portion of
the awarded damages for potential losses incurred due to the breach of the
sub-license agreement. This belief is based upon discussions with
representatives of Geneva and the resulting mutual understanding that a portion
of the monetary damages received by Geneva may be returned to the Company as
compensation for the material breach by Geneva of the sub-license agreement. If
the Proprietary Technology is not transferable, and Geneva is unsuccessful in
the outcome of the litigation and damages are not awarded, the Company may not
be able to recover its potential losses and expenses incurred due to the breach
of the sub-license agreement. As of the date of this Registration Statement, the
legal proceedings have not evolved to the point where potential damages have
been evaluated, estimated or proven. See " - Employees and Consultants".
The Company is currently addressing possible future work programs to begin
geological survey by an initial mapping of the area for exploration. Such a map
will note surface features and the various types of surface rock, as well as
estimations of the depth of rock formations and structural features. The Company
may engage the services of a geologist, who specializes in the mapping field of
work. As of the date of this Registration Statement, the Company has not entered
into any contractual agreements with any geologist regarding performance of such
services. See "Item 1. Description of Business - Employees and Consultants".
The Company is also currently addressing possible future work programs
involving assay testing and preliminary financial research and analysis.
An assay test is an analysis of rock samples conducted to determine the
amount of valuable material they contain. The average assay of an mineralization
deposit, referred to as the tenor or grade of the mineralization , is ordinarily
expressed as a percentage or in units of weight per ton. When mineralization
contains more than one commercially important chemical element, each element is
assayed to determine the total value of the mineralization. Moreover, when the
tenor of an mineralization deposit decreases regularly or irregularly into
worthless rock, numerous closely spaced assays may be needed to distinguish
mineralization from undesirable impurities or waste that has no potential value.
The width of the mineralization zone may be as important as its tenor and,
hence, tenors may be expressed in "percent meters". Although the size, tenor,
shape, depth and other geological characteristics of the deposit are important,
nongeological factors are also equally important in the economic definition of
mineralization. Nongeological factors include prices, geography, climate,
availability of transportation, labor contracts, and governmental policies
(especially those dealing with environmental considerations, property rights and
taxation). See "Risk Factors" below.
Management may address the commencement of a drilling program on the Vega
Property. If such drilling is warranted, management intends to engage the
services of a qualified assay laboratory to carry out fire assay testing and
chemical leach analysis of core samples to be derived from such drilling.
Management is currently addressing its requirement for the provision of such
services with assay labs and independent engineering consultants regarding work
programs involving assay testing and drilling.
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From inception (January 28, 1987) to December 31, 1999, the Company has
spent approximately $3,208,269 (100%) of total operating expenses on research
and exploration of the mining claims on the Vega Property, and associated public
company management and administrative costs relating thereto. The Company has
incurred approximately $72,004 on expenses paid to the BLM and $38,443 for
mining claims staking and management costs. From April 1, 1998 to December 31,
1999, the Company has spent approximately $783,182 (60%) of total operating
expenses on research and exploration and $2,024,852 (31%) of total operating
expenses on management and administrative costs relating to the exploration of
the Vega Property and public company related administration and finance.
As of the date of this Registration Statement, the Company has not
conducted any mining operations on the Vega Property, nor has the Company made
any physical improvements on the Vega Property, surface or subsurface.
The Vega Property is without known reserves, and the proposed program for
the Vega Property is exploratory in nature.
During fiscal years 1987 through 1998, the Company has not generated any
revenues from operations. The Company's financial operations and movement into
an operating basis are contingent, in part, on the successful exploration of the
mining claims on the Vega Property, the identification and consummation of other
business opportunities, and the continuing ability to generate capital
financing.
Joint Venture Agreement Regarding Vega Property
The Company owns a fifty-one percent (51%) interest in profits to be
realized from the development of the 213 unpatented lode mining claims on the
Vega Property. On March 28, 1998, the Company entered into a joint venture
agreement with Geneva pertaining to the joint exploration of gold and silver on
the Vega Property (the "Joint Venture Agreement"). Subsequent to the Joint
Venture Agreement, Geneva transferred title to the mining claims located on the
Vega Property via quitclaim deed to the Company. Under the terms of the Joint
Venture Agreement, the Company issued 500,000 shares of its restricted Common
Stock to Geneva in exchange for the purchase of a future profit sharing interest
in profits.
The terms of the Joint Venture Agreement provide that the Company
conductwork programs involving exploration of the mining claims on the Vega
Property in amounts commensurate with the adopted minimum annual budget totals
mutually agreed upon between the Company and Geneva. Management of the Company
is solely responsible for compilation of the annual budget. As of the date of
this Registration Statement, and assuming successful transfer of the Proprietary
Technology, a twelve-month budget for the Vega Property is proposed in the
amount of $250,000, of which substantially all is subject to financing.
Management of the Company has designed this budget to fund the work programs for
the Vega Property through preliminary exploration stage and will cover the
following major areas of activity:
o Claim Maintenance
o Regional Exploratory Drilling and Assay
o Preliminary Geological/Environmental Study and Consulting Reports
o Site Survey and Geological Mapping
The Company is responsible solely for the payment of such annual
obligations and for all project funding. In the event the Company fails to make
such annual required contributions, the terms and provisions of the Joint
Venture Agreement provide that Geneva may advance such amount on behalf of the
Company and deem such advanced amount as a demand loan bearing interest from the
date of the advance. Any subsequent failure by the Company to repay such loan
upon demand will be considered a default and grant Geneva a lien upon the
Company's future profit sharing interest as a security interest. Moreover, if
the Company's interest is reduced to less than 40% by its potential incapacity
to fund the approved minimum annual budget, Geneva may exercise its rights to
assume the operational role of the Vega Property.
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The Company is solely responsible for the planned exploration of the Vega
Property. Geneva's duties and obligations are primarily limited to providing to
the Company the proprietary fire and chemical assay technology and related
precious metals recovery processes, in accordance with the terms and provisions
of a sub-license agreement between the Company and Geneva. See " - Employees and
Consultants."
In accordance with the terms of the Joint Venture Agreement, the Company
will receive eighty percent (80%) of all net profits realized from the joint
venture until its invested capital is repaid, and Geneva will receive twenty
percent (20%) of all net profits. After the invested capital of the Company has
been repatriated, the Company will then receive fifty-one percent (51%) of the
net profits realized from the joint venture and Geneva will retain forty-nine
percent (49%) of the net profits realized from the joint venture. Under the
terms of the Joint Venture Agreement, Geneva is not responsible for payment of
any costs of obligations associated with the Vega Property. See "Item 7. Certain
Relationships and Related Transactions".
Costs and Effects of Compliance with Environmental Laws Regarding the Vega
Property
At the appropriate point in the exploration process, it is anticipated that
a qualified consulting company will be retained to perform environmental
studies, reports, required governmental submissions, and provide environmental
cost estimates for the future development of the Vega Property in order to
ensure that the Company complies with all environmental laws. As of the date of
this Registration Statement, the Company cannot reasonably estimate the costs
and effects of compliance with environmental laws due to the preliminary nature
of the exploration of the Vega Property. Moreover, the Company does not know if
such costs will be material to its business. The Company is currently in
compliance with environmental laws for the current state of its exploration of
the Vega Property.
The Company expects that no costs relating to environmental compliance will
be incurred before June 2000 (although such estimate is preliminary and requires
verification commensurate with future stages of development of the Vega
Property). The Company may be in a position, however, to incur such costs at
each stage of exploration. Anticipation of the timing of incurring such costs in
the future is dependent on the outcome of detailed assay information pertaining
to an exploratory drilling program. Moreover, future costs of compliance with
environmental laws are also dependent on the nature and impact of future unknown
events and the outcome of development not yet conducted.
Investment in Other Ventures
As of the date of this Registration Statement, management has identified an
additional business opportunity that it plans to pursue pertaining to the
exploration of gold and silver. Management intends to continue its search for
other business opportunities in any geographical area involving the exploration
of gold and silver.
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Tun Resources
On January 12, 2000, the Company entered into a letter of intent with
Golden Thunder Resources Ltd. ("Golden Thunder") to purchase from Golden Thunder
approximately eighty percent (80%) of the issued and outstanding shares of
common stock of Tun Resources Inc., a Canadian corporation ("Tun Resources"),
with an option to purchase the remaining twenty percent (20%) of the issued and
outstanding shares of Tun Resources (the "Letter Agreement"). Tun Resources is
the major stakeholder in two gold exploration and development joint ventures in
the Yunnan Province of China. Tun Resources owns an approximate eighty-two
percent (82%) joint venture interest in the Yuntong Project, which consists of a
gold concession comprising approximately 30 square kilometers. Tun Resources
also owns an approximate eighty percent (80%) joint venture interest in the
Lutong Project, which consists of a gold concession comprising approximately 100
square kilometers in the same province.
The terms of the Letter Agreement provide that the Company will (i) pay
$1,180,000 and issue 1,600,000 shares of its restricted common stock to Golden
Thunder in exchange for the approximate eighty percent (80%) of the issued and
outstanding shares of common stock of Tun Resources and option to purchase the
remaining twenty percent (20%), and (ii) be solely responsible for the funding
of Tun Resources and its joint ventures. The provisions of the Letter Agreement
further provide that as a precondition to closing such acquisition, (i) the
Company may conduct due diligence investigations and be satisfied with the
results of its due diligence investigations which include, but are not limited
to, confirmation of title, status and ownership of the joint venture interests
owned by Tun Resources and compliance with tax and applicable regulatory
filings, (ii) Golden Thunder may conduct due diligence investigations and be
satisfied with the results of its due diligence investigations regarding the
Company, and (iii) necessary approvals regarding the transaction are obtained as
may be required from shareholders, the Canadian Venture Exchange, and/or other
regulatory and statutory authorities.
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The provisions of the Letter Agreement further provide that the Company and
Golden Thunder agree that the Letter Agreement incorporates all of the essential
terms of their agreement, is binding upon the Company and Golden Thunder, and
that the Company and Golden Thunder may negotiate prior to execution of a formal
agreement such further terms and conditions that are reasonably necessary to
carry out and give effect to the terms and provisions of the Letter Agreement.
As of the date of this Registration Statement, the Company has
substantially completed its due diligence investigation to its satisfaction, and
is engaged in final negotiations with Golden Thunder regarding the terms and
provisions of the formal agreement among the Company, Golden Thunder and Tun
Resources. Management contemplates that execution of the formal agreement and
consummation of the acquisition will be completed by approximately April 30,
2000.
From approximately October 1, 1999 to the date of this Registration
Statement, the Company has spent approximately $140,000 of total operating
expenses on advances relating to the proposed acquisition of Tun Resources.
Management believes that a substantial portion of funding required for its
commitments relating to the proposed acquisitions will be made pursuant to a
series of future private placement offerings. The Company's financial operations
and movement into an operating basis are contingent, in part, on its ability to
develop new large-scale gold exploration and development projects in a
cost-effective manner, including Tun Resources.
Competition
The Company is aware of direct competition by major and independent mining
companies for its planned business of exploration of gold and silver, and
assumes that potential long-term competition will develop. Such potential
competitors may have more experience and greater technical, financial and
marketing resources than the Company to, among others, (i) increase magnitude of
mineralized zones; (ii) develop new mining techniques to extract ores from
uneconomic rock, and (iii) improve geophysical techniques and geochemical
prospecting.
Moreover, in the event reserves are located on the Vega Property, it may
take several years from the initial phases of drilling until production is
possible, during which time the economic feasibility of certain methods of
production may change. In order to successfully compete with other mining
companies, the Company may be required to make substantial expenditures relating
to methods (i) establishing proven and probable reserves through drilling, (ii)
determining metallurgical processes to extract the ores, and (iii) constructing
mining and processing facilities.
Employees and Consultants
As of the date of this Registration Statement, the Company does not employ
any persons on a full-time or on a part-time basis. All services for the Company
are provided either by verbal commitment, contract, work orders or letter
agreements on an "as needed" basis. Generally, any services provided to the
Company relating to the Vega Property will be pursuant to verbal commitments,
valued at less than $10,000, and include staking, drill hole survey and
flagging, geological, obtainment of water for drilling, aerial photograph,
volcanist work, core cutting and general labor. The following lists and
describes certain services performed for the Company. See "Item 5. Directors,
Executive Officers, Promoters and Control Persons".
(i) The Company and Geneva Resources, Inc. of Nevada ("Geneva") entered
into a technology sub-license agreement dated March 18, 1999 (the
"Sub-License Agreement"). Pursuant to the Sub-License Agreement, the
Company has acquired from Geneva a sub-license to utilize AuRIC's
proprietary fire and chemical assay technology and related precious
metals recovery processes to carry out assay testing and chemical
leach analysis of core samples to be derived from any subsequent
drilling on the Vega Property developed by AuRIC Metallurgical
Laboratories, Inc. of Salt Lake City, Utah ("AuRIC"). Pursuant to the
terms of the Sub-License Agreement, the minimum time period for access
by the Company to such proprietary information is forty (40) years.
Thereafter, so long as the Company continues to operate under the
sub-licenses granted to it under the Sub-License Agreement by actively
engaging in the use of the precious metals recovery process, the
Company will continue to have access to such proprietary information.
As of the date of this Registration Statement, Geneva does not perform
any services on behalf of the Company other than those duties and
obligations set forth in the Sub-License Agreement in the Joint
Venture Agreement.
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(ii) The Company entered into a contract dated April 1, 1999 with Investor
Communications International, Inc. ("ICI") whereby ICI will perform a
wide range of management, administrative, financial, marketing, and
public company operational services for a two-year period. Such
services will include, but are not limited to the following: (i)
international business relations and strategy development, (ii)
investor relations, (iii) press release and public information
disclosure, (iv) corporate public relations and information
distribution, (v) media liaison, (vi) shareholder liaison, (vii)
business planning, capital and operating budgeting, (viii) general
financial services including banking, bookkeeping and preparation of
financial statements, (ix) creation of annual reports, (x) auditor and
legal liaison, and (xi) general record keeping and documentation.
On September 27, 1999, however, International Gold Corporation, a Nevada
corporation ("INGC") and Geneva initiated legal proceedings against AuRIC by
filing a complaint in the District Court of the Third Judicial District for Salt
Lake City, State of Utah. The complaint alleges breach of contract of: (i) the
Agreement of Services dated March 18, 1999 whereby AuRIC agreed to perform
certain services, including the development of proprietary techniques relating
to fire and chemical assay analysis techniques and metallurgical extraction
procedures developed specifically for mining claims located on properties of
INGC, and (ii) the Technology License Agreement dated March 17, 1999 whereby
AuRIC agreed to supply the proprietary technology to Geneva and grant to Geneva
the right to sub-license the proprietary technology. The damages sought are
alleged to exceed $10,000,000 and stem from reliance on assays and
representations made by AuRIC.
On October 8, 1999, INGC and Geneva filed an amended complaint in the
District Court of the Third Judicial District for Salt Lake City, State of Utah.
The amended complaint increased detail regarding the alleged breaches of
contract and increased causes of action against AuRIC, and extended the scope of
the proceedings to include Dames and Moore, an internationally recognized
engineering and consulting firm, and certain individuals involved. See "Item 2.
Management's Discussion and Analysis or Plan of Operation".
Pursuant to the Sub-License Agreement, the Company acquired from Geneva the
right to utilize AuRIC's proprietary fire and chemical assay technology and
related precious metals recovery processes to carry out assay testing and
chemical leach analysis of core samples to be derived from any subsequent
drilling on the Vega Property (the "Proprietary Technology"). Management deemed
the Proprietary Technology crucial with respect to successful exploration of the
Vega Property. The legal proceedings between INGC/Geneva and AuRIC/Dames & Moore
stem primarily from the inability of AuRIC and Dames & Moore to transfer the
Proprietary Technology to an independent source. As of the date of this
Registration Statement, the transfer of the Proprietary Technology is in
question, and may never be transferred depending on the outcome of the legal
proceedings.
Management believes that the legal proceedings will prove that the
Proprietary Technology is either valid or invalid. If the Proprietary Technology
is proven to be invalid and not transferable, and INGC/Geneva are successful in
the outcome of the litigation, INGC/Geneva may then receive damages from AuRIC
and Dames & Moore. Geneva's damages result primarily from its inability to
transfer the Proprietary Technology to the Company in accordance with the
provisions of the Sub-License Agreement. Management believes that the Company
may, under these circumstances, be entitled to receive a pro-rata portion of the
awarded damages for potential losses incurred due to the breach of the
Sub-License Agreement by Geneva. Management's belief that the Company may
receive such a proportionate amount of the awarded damages is based upon
discussions with representatives of Geneva and the mutual understanding that a
portion of the monetary damages received by Geneva may be returned to the
Company as compensation for the material breach by Geneva of the Sub-Licens
Agreement. If the Proprietary Technology is proven to be invalid and not
transferable, and INGC/Geneva are not successful in the outcome of the
litigation and damages are not awarded, the Company may not be able to recover
its potential losses and expenses incurred due to the breach of the Sub-License
Agreement by Geneva.
10
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If, during the legal proceedings, the Proprietary Technology is proven to
be valid and transferable, then the Company will ultimately receive from Geneva
its contractual benefits under the Sub-License Agreement and proceed with
exploration of the Vega Property at a future date.
Patents, Licenses, Trademarks, Concessions and Royalty Agreements
The Company has no patents, trademarks, licenses, franchises, concessions
or royalty agreements that are material to its business as a whole, other than
the Company's Sub-License Agreement with Geneva for technology.
Government Regulation
General. The Company's business operations regarding the Vega Property are
subject to substantial governmental regulation including federal, state and
local laws concerning, but not limited to, such factors as safety, land use and
environmental protection. The Company must also comply with local, state and
federal requirements regarding exploration and drilling operations, public
safety, air quality, water pollution, reclamation, solid waste, hazardous waste
and wildlife protection, as well as laws protecting the rights of other property
owners and the public. The Company must also obtain and comply with local, state
and federal permits, including waste discharge requirements, other environmental
permits, use permits, plans of operation and other authorizations. Although the
Company intends to fully comply with all such laws, regulations and
requirements, failure to do so would have a materially adverse effect on the
Company including substantial penalties, fees and expenses, and could result in
significant delays in the Company's operations or a potential shutdown of some
of the operations. Amendments to current laws and regulations governing
operations and activities of an exploration, development and mining company or
more stringent implementation of such laws are actively considered at all times
and could have a material adverse impact on the Company. There can be no
assurance that future changes in existing laws or new legislation will not limit
or adversely impact the Company's business operations.
Moreover, proposed business operations of the Company in China or other
foreign countries would be subject to regulation under the laws of the
respective foreign country. Management believes that such laws continue to
develop in most foreign countries. Generally such existing laws, but not
regulatory procedures, may be well established in such foreign countries.
Therefore, regulations may be adopted in the future in the respective foreign
countries that may result in high costs and project delays.
Mining Claims. The Vega Property is located on federal lands, managed by
the Bureau of Land Management (the "BLM"). Title to mineral interests on such
land is usually less certain than is the case with privately owned property, and
activity on such land is usually subject to more stringent controls than is the
case with privately owned property. The following is a description of mining
claims on federal land and the requirements established by law which must be met
to obtain or keep a valid mining claim.
An unpatented mining claim is a parcel of federal land with respect to
which there has been asserted a right of possession under the General Mining Law
of 1872 for purposes of developing and extracting the minerals discovered on
such property. The possessory rights which represent title under any valid
unpatented mining claim do not arise by any instrument of grant from the United
States or out of any action by any officer or agency of the federal government
or any state government. Instead, the possessory title arises as a matter of law
out of the performance by the locator(s) of certain acts in compliance with the
requirements of federal and state law. Such acts may generally include, at a
minimum, (i) performance of development work to determine if claimed mineral
deposit is economically recoverable, (ii) filing of a patent application for
title to surface and mineral rights, and (iii) ongoing payment of annual federal
and/or state fees. Such possessory title, when validly initiated and maintained,
endures unless lost through abandonment or through a forfeiture, which may
result from failure to comply with filing and recording requirements or a
default with respect to performance.
Although title under a valid unpatented mining claim is not "legal title"
in the usual sense of that term, the possessory title has been recognized by the
Supreme Court of the United States as a valid property right. Only when a mining
claim is patented is there an affirmative government grant pursuant to which
legal title vests according to usual concepts of real property ownership.
11
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Lode claims are a class of mining claims. Lode claims relate to a primary
Mineralization deposit located within definite boundaries including classic
veins or lodes.
In order to maintain a valid unpatented mining claim, it is necessary to
pay BLM and county levies for such claims on an annual basis. Failure to pay
such levies for any year may subject the claim to possible title relocation by
third parties and argument by the federal government that the claim is invalid.
In general, in order for a mining claim to be eligible for patent, there
must be discovery of a valuable mineral deposit. The general standard for
determination of existence of a valuable mineral deposit is whether it is
economically viable to mine and extract. If such a discovery has been made, the
owners of the claim may institute patent proceedings with respect to the claim
in the BLM land office for the state in which the land is located. After the
application for patent is filed, it is subject to challenge, protest or contest
by the government or third parties on any ground tending to show that the
applicant has failed to comply with legal requirements for valid mineral entry
or to challenge by adverse claimants. Contests by the government are generally
resolved through administrative proceedings; adverse claims by other claimants
are usually resolved by judicial proceedings. If the contest or adverse claim is
sustained, the application for patent would be denied.
The Company has acquired the right to explore for minerals on unpatented
claims on the Vega Property through its joint venture agreement with Geneva, and
until such time as patent applications are filed and granted, the claims may be
subject to challenge. The challenge of unpatented mining claims by private
individuals or entities or various agencies of the federal government is not
uncommon.
Risk Factors Relating to the Business of the Company
The shares of the Company are highly speculative and involve an extremely
high degree of risk. Shareholders of the Company should consider the following
risk factors.
Lack of Substantial Operating History and Revenues.
---------------------------------------------------
The Company is in the exploratory stage, and has no substantial history of
operations. Therefore, the Company does not have any prior financial results
upon which an assessment of the Company's potential for success may be based.
Accordingly, the success of the Company is dependent, in part, on management's
ability to continue financing the research and exploration programs for the Vega
Property in order to quantify the magnitude of the mineralized zone and,
ultimately, if warranted, the drilling, assay, metallurgical and geostatistical
studies to define a commercially viable recovery process. The success of the
Company is also dependent, in part, on management's ability to develop new
large-scale gold and silver exploration projects in a cost-effective manner. The
Company faces all of the risks specifically inherent in the type of business in
which the Company engages. There can be no assurance that a commercially viable
recovery process will be defined or engaged on the Vega Property, that the
Company will be successful at identifying and developing major new gold projects
in the future, including Tun Resources, or that the Company will be able to
operate successfully or profitably. In addition, the Company faces substantial
uncertainties related to remote locations of gold and silver exploration and
development in China or other foreign countries.
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Highly Speculative Nature of Mineral Acquisition and Exploration.
-----------------------------------------------------------------
Exploration for minerals is highly speculative, even when conducted on
properties which are believed to contain significant deposits of minerals.
Overall, most exploration projects undertaken do not result in the discovery of
commercially minable deposits of mineralization. The financial success of the
Company may depend to a large extent upon the ability of the Company to find
third parties to successfully mine the Vega Property. The total amount required
in order to develop a mineral deposit and place it into commercial production
including, in some cases, the construction and operation of milling or refining
facilities is significantly greater than the cost of exploration. It is possible
that any reserves discovered by the Company on the Vega Property may not exist
in sufficient quantities to justify the expense of development and production.
Uncertainty of Title to Mining Claims.
--------------------------------------
The Company's unpatented lode mining claims located on the Vega Property
are on federal land. It should be understood that there is a degree of
uncertainty with respect to the validity of any unpatented mining claim. Title
problems could impair the Company's ability to conduct mining activities and
potentially negate what might otherwise constitute encouraging results from
exploration or prevent the Company from acquiring any interest in minerals
discovered as a result of its exploration. See "Government Regulation".
Foreign Operations in China.
----------------------------
Following consummation of the acquisition of Tun Resources, approximately
80% of the Company's business operations will be located in the Yunnan Province
of the People's Republic of China. Foreign operations and investments are
subject to the risks normally associated with conducting business in foreign
countries, including foreign exchange controls and currency fluctuations in the
event that Chinese currency becomes more valuable than the U.S. currency,
potential future limitations on repatriation of earnings if current policies are
changed by the government of China, foreign investment taxation, changes in the
current policies for joint venture investments, uncertainty in the current or
future legal system and policies of China, including negotiation or
nullification of existing licenses, mining permits, joint venture administration
rule, or other contracts, labor disputes and uncertain political and economic
environments as well as risks of war with Taiwan or other civil disturbances, or
other risks which would cause business interruptions, restrict movement of funds
or result in the deprivation or loss of contract right. Certain risks of foreign
operations can be offset by insurance coverage. The Company has not obtained
political risk insurance coverage for its potential equity investment in the
People's Republic of China.
Dependence on Key Personnel.
----------------------------
The Company is in the exploratory stages with no substantial prior
operating history. The success of the Company will depend to a significant
extent upon the efforts and abilities of its directors/officers, Messrs. Atkins,
Bowles and Ackerman, and contractors. Therefore, the loss of the Company's
officers/directors or any of its contractors could be detrimental to the
operations of the Company. The Company has not entered into any long-term
employment agreements with nor has it purchased "key man" life insurance for
Messrs. Atkins, Bowles and Ackerman.
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Messrs Atkins, Bowles and Ackerman may engage in other businesses for their
own accounts. Messrs. Atkins, Bowles and Ackerman will each devote such time to
the affairs of the Company as they respectively deem necessary.
Limited Mining Industry Experience.
-----------------------------------
Messrs. Atkins and Ackerman have limited experience in mining and mineral
exploration and analysis. However, both Mr. Atkins and Mr. Ackerman have
considerable experience in the development, management and finance of start-up
companies. Moreover, Mr. Bowles has experience in mining and mineral exploration
and analysis, and management anticipates that certain future contractors of the
Company will have considerable experience in mining and mineral exploration and
analysis upon which the Company will rely upon in the future. See "Item 1.
Description of Business - Management's Discussion and Analysis or Plan of
Operation".
Dependence on Existing Contractual Relations.
---------------------------------------------
The Company's success may depend on the continued existence of favorable
contractual relations with Geneva. The Company's operations would be materially
and adversely affected by the failure of the Company to fulfill its obligations
and duties pursuant to the terms of the Joint Venture Agreement, which include
establishment of the work programs within the annual budgeted amounts and
contribution of all future capital requirements for the further exploration and
mining operation costs of the claims on the Vega Property. The Company is
responsible solely for payment of these obligations under the Joint Venture
Agreement and there is no assurance that the Company will meet and continue to
meet such obligations through fiscal year ending March 31, 2000. Moreover, there
is no assurance that favorable contractual relations will continue with Geneva
and, if so, that they will be in the best interests of the Company.
Need for Additional Financing.
------------------------------
The Company's business activities will be designed to explore the Vega
Property and consummate the acquisition of Tun Resources. If mineralization does
exist on the Vega Property in commercially minable quantities and the
acquisitions of Tun Resources is consummated, substantial additional financing
may be needed to fund further evaluation work and mining processes on the Vega
Property and the Company's financial commitments pursuant to the proposed terms
of the acquisitions. The Company may not have sufficient funds to cover such
expenses and, therefore, substantial additional funds will be required. The
Company will attempt to raise such funds from future advances and additional
offerings of shares of stock, however, there can be no assurance that the
Company will be successful in raising additional capital. If the Company is not
successful in obtaining additional funds, the Company may resort to cost-sharing
arrangements and could be required to give up a significant portion of its
interest in the Vega Property.
General Conflicts of Interest.
------------------------------
Messrs. Atkins, Bowles and Ackerman may engage in other business interests
for their own account in which they may devote a certain amount of their
attention. As a result, there may be potential conflicts of interest including,
among other things, time, effort and corporate opportunity, which may result
from participation by either Mr. Atkins, Mr. Bowles or Mr. Ackerman in
potentially competing business ventures. Such conflicts can be resolved through
the exercise by the individual of judgment consistent with his fiduciary duties
to the Company. Messrs. Atkins, Bowles and Ackerman intend to resolve such
conflicts in the best interests of the Company. Moreover, Messrs. Atkins, Bowles
and Ackerman will each devote their time to the Company as they respectively
deem necessary.
Future Sales of Common Stock.
-----------------------------
As of the date of this Registration Statement, the Company has 19,646,000
shares of its Common Stock issued and outstanding. Of the 19,646,000 of the
Company's current outstanding shares of Common Stock, 15,830,500 shares are free
trading and 3,815,500 shares are restricted as that term is defined in Rule 144
promulgated under the Securities Act of 1933, as amended (the "Securities Act").
The Securities Act and Rule 144 promulgated thereunder place certain
prohibitions on the sale of such restricted securities. Such restricted shares
will not be eligible for sale in the open market without registration except in
reliance upon Rule 144 under the Securities Act. In general, a person who has
beneficially owned shares acquired in a non-public transaction for at least one
year, including persons who may be deemed "affiliates" of the Company as that
term is defined under the Securities Act, would be entitled to sell within any
three month-period a number of shares that does not exceed the greater of 1% of
the then outstanding shares or the average weekly trading volume on all national
securities exchanges and through NASDAQ during the four calendar weeks preceding
such sale, provided that certain current public information is then available.
If a substantial number of the shares owned by the existing shareholders were
sold pursuant to Rule 144 or a registered offering, the market price of the
Company's Common Stock could be adversely affected.
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<PAGE>
Volatility of Stock Price.
--------------------------
The markets for equity securities have been volatile and the price of the
Company's Common Stock could be subject to wide fluctuations in response to
quarter to quarter variations in operating results, news announcements, trading
volume, sales of Common Stock by officers, directors and principal shareholders
of the Company, general trends, changes in the supply and demand for the
Company's shares, the price of gold or silver, and other factors.
Broker-Dealer Sales of the Company's Shares.
--------------------------------------------
It is likely that the common shares of the Company will be defined as
"penny stocks" under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") until the Company's common shares are quoted on the NASDAQ
system operated by the National Association of Securities Dealers, Inc. or
listed on a national securities exchange. The Exchange Act and such penny stock
rules and regulations promulgated thereunder generally impose additional sales
practice and disclosure requirements upon broker-dealers who sell the Company's
Common Stock to persons other than "accredited investors" (generally, defined as
institutions with assets in excess of $5,000,000 or individuals with net worth
in excess of $1,000,000 or an annual income exceeding $200,000 ($300,000 jointly
with a spouse)) or in transactions not recommended by the broker-dealer.
For transactions covered by the penny stock rules, the broker-dealer must
make a suitability determination for each purchaser and receive the purchaser's
written agreement prior to the sale. In addition, the broker-dealer must make
certain mandated disclosures in penny stock transactions, including the actual
sale or purchase price and actual bid and offer quotations, the compensation to
be received by the broker-dealer and certain associated persons, and deliver
certain disclosures required by the Securities and Exchange Commission.
Consequently, the penny stock rules may affect the willingness of broker-dealers
to make a market in or trade the common shares of the Company and thus may also
affect the ability of shareholders of the Company's Common Stock to resell those
shares in the public markets.
General Risks of the Mining Industry
Nature of Mineral Exploration and Development.
----------------------------------------------
The business of exploring for and developing mineral deposits is highly
speculative and involves greater risks than many other businesses. Mineral
properties, including those which may have encouraging exploratory results, may
not lend themselves to engineering, geological or other recognized appraisal
procedure, or mining. The Company's operations will be subject to all of the
operating hazards and risks normally incident to exploring or developing mineral
properties, such as encountering unusual or unexpected geologic faults or
conditions, periodic interruptions due to inclement weather conditions and
environmental constraints. The Company intends to carry liability insurance on
an as needed basis covering the Company's activities and properties. However,
there can be no assurance that such insurance will protect the Company from
significant loss or liability. In the event the Company should sustain an
uninsured loss or liability, its ability to operate may be materially adversely
affected.
Availability of Water.
----------------------
Water is usually required in all phases of the exploration of mineral
properties. It is used in certain activities in which the Company is or maybe
involved, such as exploratory drilling and testing. There can be no assurance
that sufficient water will be available or continue to be available or that
necessary water rights will be granted by regulatory authorities or obtained
from private sources. All water disposal or discharge, if any, will be subject
15
<PAGE>
to regulation pursuant to federal, state and local water quality standards. If
sufficient water is not available or if the cost of complying with water quality
regulations is too high, large scale exploration of the Vega Property may become
economically unfeasible and adversely affect the value of such properties.
Fluctuation in and Regulation of Prices for Precious Metals.
------------------------------------------------------------
If gold or silver are recoverable on the Vega Property, the success of the
Company will depend to a degree on the price which may be realized upon the sale
of such metals. The prices of gold and silver, as well as other precious metals,
have been quite volatile. For example, at the time the United States government
began allowing its citizens to hold gold in 1970, the price of gold was $35.00
per Troy ounce. The price has been as high as $875.00 per ounce and as low as
$125.00 per ounce since that date. As of March 31, 2000, the New York spot price
for gold was bid at $278.40 per ounce and offered at $279.40 per ounce. Among
other factors affecting the price of gold are (i) the supply of and demand for
gold, (ii) world economic conditions, (iii) the confidence or lack of confidence
in various mediums of exchange (including the dollar), and (iv) governmental
regulation. Although the price of gold and silver have fluctuated substantially
over the years, the costs of exploration and development have also increased. It
can be expected that such costs will continue to rise in accordance with
inflationary trends, while there is no assurance that gold and silver prices
will rise proportionately or remain at current levels.
Item 2. Management's Discussion and Analysis or Plan of Operation.
Results of Operation
For Fiscal Year Ended March 31, 1999 compared with Fiscal Year Ended March 31,
1998
The Company's net losses for fiscal year ended March 31, 1999 were
approximately $1,213,701 compared to a net loss of approximately $712,457 for
fiscal year ended March 31, 1998. During both fiscal years ended March 31, 1999
and 1998, respectively, the Company recorded no income.
During fiscal year ended March 31, 1999, the Company recorded operating
expenses of $1,180,597 compared to $712,458 of operating expenses recorded
during fiscal year ended March 31, 1998. The increase in operating expenses
during fiscal year ended March 31, 1999 was primarily due to the expensing of
$783,182 the Company paid pursuant to the Sub-License Agreement as research and
development and payment of claims maintenance fees in the amount of $50,704.
Overhead and administration expenses decreased approximately $313,000
during fiscal year ended March 31, 1999 compared to fiscal year ended March 31,
1998; mining claims staking and management expenses also decreased approximately
$11,432. Approximately $300,000 was incurred as overhead and administrative
expenses during fiscal year ended March 31, 1999 as compared to $613,000
incurred in the fiscal year ended March 31, 1998. Of the $300,000 incurred as
overhead and administrative expenses, approximately $300,000 was paid to
Amerocan Marketing Inc. ("Amerocan") for amounts due and owing for services
rendered including, but not limited to, financial, administrative, and metals
exploration management. The consulting services and management arrangement with
Amerocan commenced on April 1, 1998 and terminated on March 31, 1999.
Six Month Period Ended September 30, 1999 compared to September 30, 1998
For the six-month period ended September 30, 1999, the Company recorded a
net loss of $498,111 compared to a net loss of $253,190 in the corresponding
period of 1998. During the six-month period ended September 30, 1999 and
September 30, 1998, the Company recorded no income.
During the six-month period ended September 30, 1999, the Company recorded
operating expenses of $445,382 compared to $240,797 of operating expenses
recorded in the same period for 1998. Overhead and administration expenses
increased approximately $240,585 in the six-month period ended September 30,
1999 compared to six-month period ended September 30, 1998. This increase
resulted primarily from the increasing scale and scope of the overall
exploration and business activity. Of the $412,035 incurred as overhead and
administration expenses, no funds were paid to ICI for services rendered. ICI
provided net loans to the Company of $426,135 during the six month period ended
September 30, 1999. The consulting services and management agreement with ICI
commenced on April 1, 1999 and will terminate on March 31, 2001.
16
<PAGE>
Liquidity and Capital Resources
For fiscal year ended March 31, 1999 and 1998
As of March 31, 1999, the Company's current assets were $404 and its
current liabilities were $857,452. As of March 31, 1999, the current liabilities
exceeded current assets by $857,048. As of March 31, 1998, the Company's current
assets were $1,284 and its current liabilities were $165,472. As of March 31,
1998, the current liabilities exceeded current assets by $164,188.
The increase in current liabilities in fiscal year ended March 31, 1999 was
due primarily to notes payable to AuRIC and Geneva pursuant to the Sub License
Agreement and advances in the approximate amount of $197,492 from related
parties. During fiscal year ended March 31, 1999, such advances increased by
approximately $114,800 from $82,692 as of fiscal year ended March 31, 1998
compared to $197,492 for fiscal year ended March 31, 1999. Advances received
during fiscal year ended March 31, 1999 were from the entities and in the
amounts as follows: (i) $140,918 from Tristar Financial Services, Inc., (ii)
$10,400 from Investor Communications International, Inc., and (iii) $32,710 from
Amerocan Marketing, Inc.
Stockholders' equity (deficit) decreased from ($164,188) for fiscal year
ended March 31, 1998 to ($857,048) for the fiscal year ended March 31, 1999. To
provide capital, the Company sold stock in private placement offerings, issued
stock in exchange for debts of the Company or received advances from related
parties. See "Part II. Item 4. Recent Sales of Unregistered Securities".
Six Month Period Ended September 30, 1999
As of the six-month period ended September 30, 1999, the Company's total
assets were $790. As of the six-month period ended September 30, 1999, the
Company's total liabilities were $1,355,949. This increase from fiscal year
ended March 31, 1999 is due primarily to an increase in advances received from
related parties. During the six-month period ended September 30, 1999, such
advances were made from the entities and in the amounts as follows: (i) $3,000
from Tristar Financial Services, Inc. (ii) $426,135 from Investor Communications
International, Inc., and (iii) $21,000 from Amerocan Marketing, Inc.
Stockholders' Equity (deficit) decreased from ($757,048) for fiscal year
ended March 31, 1999 to ($1,355,159) for the six-month period ended September
30, 1999.
Material Commitments
A significant and estimated commitment for the Company for fiscal year
April 1, 2000 through March 31, 2001 pertaining to contractual arrangements and
work orders is an amount not greater than $900,000 to ICI. The contractual
arrangements between the Company and ICI pertaining to compensation for services
rendered for the day-to-day operations of the Company are based on a fee not to
exceed $75,000 per month based upon the performance of actual services rendered
by ICI on an ongoing basis commensurate with the needs and requirements of the
Company for that particular month, including services related to exploration,
administrative, public company operations, and maintenance. For a detailed
description of such services, see "Item 1. Description of Business. Employees
and Consultants".
Although the Company has not and currently is not in the operational stage
of generating revenues, the services provided by ICI during fiscal year ended
March 31, 1999 and to date of this Registration Statement included not only
those services related to exploration, administration, public company operations
and maintenance of the Company, but also involved negotiation and consummation
of the Joint Venture Agreement and the Sub-License Agreement. Management deemed
the Proprietary Technology to be crucial to the successful exploration of the
Vega Property, and determination of a fixed price for and securing usage of such
Proprietary Technology required considerable resources and time. With
commencement of the legal proceedings involving INGC/Geneva and AuRIC/Dames &
Moore, ICI has sourced, identified, investigated, and negotiated new business
opportunities to present to the Board of Directors of the Company. Moreover,
other services currently provided by ICI include securing of short-term advance
financing and sourcing of private placement funding.
A significant and estimated commitment for the Company for fiscal year 2000
are the promissory notes issued pursuant to the Sub-License Agreement. Pursuant
to the terms and provisions of the Sub-License Agreement, the Company issued
promissory notes to both Geneva and AuRIC in the amount of $250,000,
respectively. These are 3% interest bearing notes and are payable upon the
transfer of the technology.
17
<PAGE>
A significant and estimated commitment for the Company for fiscal year 2000
is the promissory note in the amount of $100,000 issued to Geneva pursuant to
the Sub-License Agreement. The promissory note is convertible into 500,000
shares of the Company's restricted Common Stock at the option of Geneva after
October 15, 1999 at the rate of $0.20 per share. There are no conditions that
will prevent or trigger the conversion of the promissory note by Geneva into
shares of Common Stock nor is there any expiration date. As of the date of this
Registration Statement, the Company has not made any payments of either
principal or interest on the promissory note, nor has Geneva exercised its
conversion rights.
A significant and estimated commitment for the Company for fiscal year 2000
are payment of the Federal annual mining claims maintenance fees in the
approximate amount of $50,000 and the annual county fees in the approximate
amount of $1,000.
Sources of Funding for Material Commitments and Working Capital
Based upon a twelve-month plan proposed by management, it is anticipated
that such a work plan would require approximately $2,000,000 of additional
financing, designed to fund the various material commitments described above and
business operations, which include the possible work programs designed for
exploration of the Vega Property and the financial contractual commitments
arising pursuant to acquisition of Tun Resources.
Management believes that no other material commitments for capital
expenditures will be incurred by the Company over the next twelve-month period .
It is anticipated that any other expenditures to be incurred by the Company will
be operational, including preliminary drilling and assay, metallurgical research
and costs associated with consummation of the agreement relating to the
acquisition of Tun Resources. Management anticipates that a substantial portion
of the initial budget of $2,000,000 for the twelve-month work plan, which
includes such expenditures, will be funded pursuant to public or private
offerings, including private placement offerings under Regulation S and/or
Regulation D, Rule 506, of its debt or equity securities and future
advancements. The Company may not be able to raise such funds and, therefore,
the successful acquisition of Tun Resources may not be consummated and further
exploration of the Vega Property may not be possible.
From the date of this Registration Statement, management believes that the
Company can satisfy its cash requirements for approximately the next three
months based on its ability to obtain advances from certain investors and
related parties. From the net proceeds received in the approximate amount of
$285,000 pursuant to the Private Placement Memorandum dated March 17, 1999,
management utilized all of the funding for payment of advances.
Legal Proceedings Relating to Agreement of Services/Technology License Agreement
The legal proceedings between INGC/Geneva and AuRIC/Dames & Moore stem
primarily from the inability of AuRIC and Dames & Moore to transfer the
Proprietary Technology to an independent source, including Geneva. Management
believes that the legal proceedings initiated by INGC/Geneva against AuRIC/Dames
& Moore relating to the Agreement of Services and the Technology License
Agreement may present a material uncertainty for the Company pertaining to the
planned exploratory operations of the Company on the Vega Property. Management
deems the Proprietary Technology crucial with respect to the successful
exploration of the Vega Property. As of the date of this Registration Statement,
the transfer of the Proprietary Technology is in question, and may never be
transferred depending on the outcome of the legal proceedings.
As of the date of this Registration Statement, there is substantial doubt
regarding the Company's ability to continue as a "going concern" as the Company
has not generated any revenues from operations, has a working capital deficit
and a stockholder's deficit. Therefore, the Company has been deemed a "going
concern" by its independent auditors, Johnson, Holscher & Co., P.C. as noted in
the financial statements attached hereto. There is substantial doubt that the
Company will be able to retain its status as a "going concern", that is
assumption of the continuity of operations of the Company in the absence of
evidence to the contrary. Management believes that it can maintain its status as
a "going concern" based on its ability to raise funds pursuant to future public
and private offerings and to obtain advances and minimize operating expenses by
not duplicating expenses or incurring needless expenses.
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The Company does not own any plant and/or equipment. Management does not
anticipate any purchases of plant and/or significant equipment. The Company will
be primarily dependent upon its contractors for use of equipment necessary for
the exploration of gold and silver. Any equipment purchases by the Company will
be based on results of preliminary drilling and assay, and other elements of
exploration development including logistics, estimated extraction procedures,
availability of labor, and price of gold. As of the date of this Registration
Statement, the Company has not entered into any such contractual arrangements.
Many existing computer programs use only two digits to identify a year in
the date field. These programs were designed without considering the impact of
the upcoming change in the century. If not corrected, these computer
applications and systems could fail or create erroneous results by, at, or after
the year 2000. Based on the Company's investigations to date, management does
not anticipate that the Company will incur material operating expenses or be
required to incur material costs to be year 2000 compliant. Moreover, management
believes that the Company's systems are fully year 2000 compliant. As of the
date of this Registration Statement, the Company has not incurred failure of any
computer applications and/or systems due to Y2K. There can be no assurance,
however, that potential systems interruptions or the cost necessary to update
software would not have some effect on the Company's business, results or
operations. In addition, in the event that Geneva does not successfully and
timely achieve year 2000 compliance, the Company's business or operations may be
affected. Management of the Company believes, however, that any such potential
systems interruptions or costs incurred to update software will not be material.
Item 3. Description of Property.
Except as described above, the Company does not own any other real estate
or other properties. Management believes that the Company's offices are adequate
for its reasonable foreseeable needs. The Company does not intend to acquire any
properties at the current date.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth the name and address, as of the date of this
Registration Statement, and the approximate number of shares of Common Stock of
the Company owned of record or beneficially by each person who owned of record,
or was known by the Company to own beneficially, more than five percent (5%) of
the Company's Common Stock, and the name and shareholdings of each officer and
director, and all officers and directors as a group.
- --------------------------------------------------------------------------------
Title of Class Name and Address Amount and Nature Percent
of Beneficial Owner of Class of Class
- --------------------------------------------------------------------------------
Common Stock (1) AuRIC Metallurgical Laboratories (2) 1,500,000 7.6%
3260 West Directors Row
Salt Lake City, Utah 84104
Common Stock Rising Sun Capital Corporation (3) 1,000,000 5%
5000 Birch Street, Suite 4000
Newport Beach, CA 92660
Common Stock Newport Capital Corporation (4) 1,005,000 5.1%
P.O. Box 120
Cockburn Town, Grand Turk
Turks & Caicos Islands, BWI
Common Stock Clip Foundation (5) 1,030,000 5.2%
P. O. Box 4368
Blaine, Washington 98231
Common Stock Calista Capital Corporation (6) 1,100,000 5.6%
P.O. Box 120
Cockburn Town, Grand Turk
Turks & Caicos Islands, BWI
Common Stock All officers and directors -0- 0%
as a group (1 person)
- --------------------------------------------------------------------------------
(1) These are restricted shares of Common Stock.
(2) The beneficial owners of AuRIC Metallurgical Laboratories LLC are (i) Ahmet
Altinay 56%; (ii) David Lamberson 20%; (iii) John Merrinton 12%; and Noble
Larson 12%.
(3) The beneficial owner of Rising Sun Capital Corporation is the sole
beneficiary to Four Winds Trust, Pelican House, James Street, Grand Turk, Turks
& Caicos Islands, British West Indies as follows: Tom Ingaberg, 2306 - 1011
Beach Avenue, Vancouver, British Columbia.
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(4) The beneficial owner of Newport Capital Corporation is the sole beneficiary
to Emerald Trust, Grand Arise, Seaview Building, 269 Morne Rouge Road, Grand
Arise, St. George, Grenada, West Indies as follows: Stephen Jewett, 1201 West
8th Avenue, Vancouver, British Columbia.
(5) The beneficial owner of Clip Foundation is the sole beneficiary to Hornback
Trust, 60 Market Square, P.O. Box 364, Belize City, Belize, Central America as
follows: Donald Scoretz, 1293 16th Street, North Vancouver, British Columbia.
(6) The beneficial owner of Calista Capital Corporation is the sole beneficiary
to Ocean & Sea Empire Trust, 12 The Green, Stoford, Somerset, England BZ229UD as
follows: Dana Peddle, 148 Gariepy Crescent, Edmonton Alberta T6M1A1.
Item 5. Directors, Executive Officers, Promoters and Control Persons.
The directors, executive officers and significant contractors to the
Company are as follows:
Name Age Position with the Company
- ---- --- -------------------------
Grant Atkins 39 Director and President
John Frederick 58 Director
William Bowles
Herb Ackerman 69 Secretary/Treasurer
GRANT ATKINS has been a Director and the President of the Company since
October 15, 1998. Mr. Atkins has also been a director and the
secretary/treasurer of IGCO since September of 1998. For the past five years,
Mr. Atkins has been self-employed and had acted as a financial and project
coordination consultant to clients in government and private industry. He has
extensive multi-industry experience in the fields of finance, administration and
business development. Industry experience includes a one-year role in 1998-99 as
interim Chief Financial Officer of Emergency Communications for Southwest
British Columbia ("E-Comm"). E-Comm is a $150 to $200 million (Canadian Dollar)
radio and tri-service dispatch initiative and deployment for police, fire and
ambulance for Southwest British Columbia, which has federal, provincial and
municipal shareholders. During his tenure at E-Comm during its start-up phase,
E-Comm raised in excess of $146,000,000 (Canadian Dollar) through debt financing
from the Municipal Finance Authority in British Columbia. During 1998 and 1999,
Mr. Atkins was a consultant through the private management consulting companies
of Tristar Financial Services, Inc. and Investor Communications International,
Inc. Mr. Atkins was retained to conduct financial consulting and project
coordination services for the British Columbia Ambulance Service on a part-time
basis through 1999. Mr. Atkins has provided organization and controller duties
to the Company since October of 1998.
JOHN FREDERICK WILLIAM BOWLES, BSc., Ph.D, FGS, FIMM, CEng., CGeol.,
EurGeol. Dr. Bowles has been a director of the Company since November 23, 1999,
and is a Mineralogist and Economic Geologist. Mr. Bowles graduated from the
University of London with honors and earned both Bachelor and Doctorate degrees.
In addition, Mr. Bowles has Chartered Engineer, Chartered Geologist, and
European Geologist designations and has memberships and active association with
the Mineralogical Society, the Mineralogical Society of America, and the Irish
Association for Economic Geology. Mr. Bowles is a Fellow of the Mineralogical
Society, the Geological Society, and the Institution of Mining and Metallurgy.
Mr. Bowles retains honorary senior research fellowships with the Geology
Department of Manchester University and the Department of Earth Sciences of
Kingston University, both located in the United Kingdom. Mr. Bowles has authored
over fifty scientific research papers during the past 25 years for numerous
trade and industry publications worldwide. For the past 14 years, Mr. Bowles has
acted as the managing director of Mineral Science Ltd. of Chesham, UK. Mineral
Science Ltd. is an international geological and mineralogical consultancy
specializing in the assessment of metalliferous minerals in relation to
commercial mining operations.
HERB ACKERMAN has been the secretary-treasurer of the Company since
February 10, 2000. Mr. Ackerman has considerable minerals exploration
experience. From April 1995 to September 1997, Mr. Ackerman was a self-employed
businessman who consulted with various enterprises primarily in the mineral
resources exploration fields on fundraising. From September 1997 to the present,
Mr. Ackerman acts as the President of Montoro Resources Inc. listed on the
Canadian Venture Exchange (CDNX), a company involved in exploration of gold,
zinc and copper. In his capacity as President of Montoro Resources Inc., Mr.
Ackerman administers the day-to-day operations, provides investor relations
duties, arranges various financings, and seeks and evaluates general business
prospects of interest.
The directors of the Company serve until their respective successor takes
office or until death, resignation or removal. The executive officers serve at
the pleasure of the Board of Directors of the Company.
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As of the date of this Registration Statement, no director or executive
officer of the Company is or has been involved in any legal proceeding
concerning (i) any bankruptcy petition filed by or against any business of which
such person was a general partner or executive officer either at the time of the
bankruptcy or within two years prior to that time; (ii) any conviction in a
criminal proceeding or being subject to a pending criminal proceeding (excluding
traffic violations and other minor offenses) within the past five years; (iii)
being subject to any order, judgment or decree permanently or temporarily
enjoining, barring, suspending or otherwise limiting involvement in any type of
business, securities or banking activity; or (iv) being found by a court, the
Securities and Exchange Commission or the Commodity Futures Trading Commission
to have violated a federal or state securities or commodities law (and the
judgment has not been reversed, suspended or vacated).
Item 6. Executive Compensation.
As of the date of this Registration Statement, directors of the Company
accrue $500 per month in directors' fees for their roles as directors. Mr.
Atkins accrued $6,000 during fiscal year 1998 as compensation for his role as
director of the Company. Officers and directors of the Company are reimbursed
for any out-of-pocket expenses incurred by them on behalf of the Company.
As of fiscal year ended March 31, 1999, the Company has accrued since
inception approximately $28,500 in directors' fees and paid approximately
$16,500 to its directors as executive compensation. As of fiscal year ended
March 31, 1999, the Company has accrued approximately $613,000 to Amerocan for
managerial and administrative services rendered. During the fiscal quarter ended
September 30, 1999, the Company has accrued approximately $169,485 to ICI for
management and administrative services rendered.
Pursuant to the consulting services and management agreement with Amerocan,
which was dated January 1, 1998 and terminated March 31, 1999, and ICI dated
April 1, 1999, respectively, services rendered or to be rendered pursuant to the
terms and provisions of the respective agreements are (i) financial, such as
business planning, capital and operating budgeting, banking, record keeping and
documentation, database records, (ii) property exploration management, such as
administration of metallurgical development, metallurgical liaison, BLM liaison,
engineering company liaison, drilling administration, geologist liaison,
mapping, survey and catalogue, geostatistical liaison, environmental research,
geological reports compilation, (iii) administration, such as legal liaison,
corporate minutebook maintenance, and record keeping, corporate secretarial
services, printing and production, office and general duties, international
business relations, corporate information distribution and public relations, and
media liaison.
Directors and officers of the Company are reimbursed for any out-of-pocket
expenses incurred by them on behalf of the Company. Executive compensation is
subject to change concurrent with Company requirements. Neither Mr. Grant Atkins
nor Mr. Bowles is a director or officer of either Amerocan or ICI, nor does the
Company own of record capital stock of either Amerocan or ICI. As of March 29,
2000, the Company issued 149,300 shares of restricted Common Stock to Amerocan
for settlement of debt in the aggregate amount of $74,635.42 and issued
1,500,800 shares of restricted Common Stock to ICI for settlement of debt in the
aggregate amount of $750,389.38. See "Part II. Item 4. Recent Sales of
Unregistered Securities".
Summary Compensation Table
(1)
Annual Compensation Awards Payouts
--------------------- ---------- -------
$ $ $ $ # $ $
Name and Position Salary Bonus Other RSA Options LTIP Other
- ----------------- ------ ----- ----- --- ------- ---- -----
Harold Gooding 1997 0 0 $4,500 0 0 0 0
Pres./Director
Tim Ryan 1997 0 0 $4,500 0 0 0 0
Secy./Director
Steven Anderson 1997 0 0 $1,500 0 0 0 0
Pres./Director 1998 0 0 $3,000 0 0 0 0
Grant Atkins 1998 0 0 $3,000 0 0 0 0
Pres./Director
(1) Annual compensation based on fiscal year of April 1st to March 31st and
paid according to individual contractual arrangements.
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The Board of Directors has not adopted any stock option plans.
Item 7. Certain Relationships and Related Transactions.
As of the date of this Registration Statement, the Company has not entered
into any contractual arrangements with related parties. The board of directors
of the Company has not adopted or approved any policy regarding possible future
transactions with related third parties.
Messrs. Atkins, Bowles and Ackerman are engaged in other businesses, either
individually or through partnerships and corporations in which they may have an
interest, hold an office or serve on the boards of directors. The directors of
the Company, Messrs. Atkins and Bowles have other business interests to which
they may devote a major or significant portion of their time. Certain conflicts
of interest, therefore, may arise between the Company and its directors. Such
conflicts can be resolved through the exercise by Messrs. Atkins and Bowles of
judgment consistent with their fiduciary duties to the Company. Messrs. Atkins
and Bowles intend to resolve such conflicts in the best interests of the
Company. Moreover, Messrs. Atkins and Bowles will devote their time to the
affairs of the Company as they deem necessary.
Item 8. Description of Securities.
The Company is authorized to issue 500,000,000 shares of $.00001 par value
Common Stock and 20,000,000 shares of no par value Preferred Stock.
Common Stock
Holders of shares of Common Stock are entitled to one vote per share on all
matters submitted to a vote of the stockholders of the Company. Except as may be
required by law, holders of shares of Common Stock will not vote separately as a
class, but will vote together with the holders of outstanding shares of other
classes or capital stock. There is no right to cumulate votes for the election
of directors. A majority of the issued and outstanding Common Stock constitutes
a quorum at any meeting of stockholders and the vote by the holders of a
majority of the outstanding shares is required to effect certain fundamental
corporate changes such as liquidation, merger or an amendment to the Articles of
Incorporation.
Holders of shares of Common Stock are entitled to receive dividends if, as
and when, declared by the Board of Directors out of funds legally available
therefore, after payment of dividends required to be paid on outstanding shares
of Preferred Stock. The Company's agreement with its bank lender may prohibit
payment of Common Stock dividends without the consent of the lender. Upon
liquidation of the Company, holders of shares of Common Stock are entitled to
share ratably in all assets of the Company remaining after payment of
liabilities, subject to the liquidation preference rights of any outstanding
shares of Preferred Stock. Holders of shares of Common Stock have no conversion,
redemption or preemptive rights. The rights of the holders of Common Stock will
be subject to, and may be adversely affected by, the rights of the holders of
Preferred Stock. The outstanding shares of Common Stock are fully paid and
nonassessable. The shares of Common Stock issued upon conversion of Preferred
Stock, Preferred Stock Dividends, or exercise of Warrants and payment therefore,
will be validly issued, fully paid and nonassessable.
Preferred Stock
Under the Company's Articles of Incorporation, as amended (the "Articles"),
the Board of Directors has the power, without further action by the holders of
the Common Stock, to designate the relative rights and preferences of the
Company's Preferred Stock, when and if issued. Such rights and preferences could
include preferences as to liquidation, redemption and conversion rights, voting
rights, dividends or other preferences, any of which may be dilutive of the
interest of the holders of the Common Stock. The issuance of the Preferred Stock
may have the effect of delaying or preventing a change in control of the Company
and may have an adverse effect on the rights of the holders of Common Stock.
As of the date of this Registration Statement, a total of 2,000,000 shares
of the authorized Preferred Stock have been designated as Series A Cumulative
Convertible Preferred Stock; however, no shares of the Series A Cumulative
Convertible Preferred Stock have been issued. Additional classes of Preferred
Stock may be designated and issued from time to time in one or more series with
such designations, voting powers or other preferences and relative rights or
qualifications as are determined by resolution of the Board of Directors of the
Company.
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<PAGE>
Series A Preferred Stock
The Series A Preferred Stock has been authorized by the Board of Directors
of the Company. So long as any Series A Preferred Stock is outstanding, the
Company is prohibited from issuing any series of stock having rights senior to
the Series A Preferred Stock ("Senior Stock") without the approval of the
holders of 66 2/3% of the outstanding Series A Preferred Stock. Additionally, so
long as any Series A Preferred Stock is outstanding, the Company may not,
without the approval of the holders of at least 50% of the outstanding Series A
Preferred Stock, issue any series of stock ranking on parity with the Series A
Preferred Stock ("Parity Stock") as to dividend or liquidation rights, or having
a right to vote on matters as to which the Series A Preferred Stock is not
entitled to vote, or if the Company's stockholder equity is less than the total
liquidation preferences of all outstanding Series A Preferred Stock.
Dividends. Holders of shares of Series A Preferred Stock will be entitled
to receive when, as, and if declared by the Board of Directors out of funds at
the time legally available therefore, cash dividends at an annual rate of 20%
and no more, payable annually in arrears, commencing January 1, 1999. Dividends
will accrue and be cumulative from the date of first issuance of the Series A
Preferred Stock and will be payable to holders of record as they appear on the
stockbooks of the Company on such record dates as are fixed by the Board of
Directors.
Unless a class or series of Senior Stock or Parity Stock is authorized as
described above, the Series A Preferred Stock will be senior as to dividends to
any series or class of the Company's stock hereafter issued, and if at any time
the Company has failed to pay or declare and set apart for payment accrued and
unpaid dividends on the Series A Preferred Stock, the Company may not pay any
other dividends. The Series A Preferred Stock will have priority as to dividends
over the Common Stock and any series or class of the Company's stock hereafter
issued, and no dividend (other than dividends payable solely in Common Stock or
any other series or class of the Company's stock hereafter issued that ranks
junior as to dividends to the Series A Preferred Stock) may be declared, paid or
set apart for payment on, and no purchase, redemption or other acquisition may
be made by the Company of any Common Stock or other stock unless all accrued and
unpaid dividends on the Series A Preferred Stock have been paid or declared and
set apart for payment, or contemporaneously pays or declares and sets apart for
payment, all accrued and unpaid dividends for all prior periods on the Series A
Preferred Stock; and the Company may not pay dividends on the Preferred Stock
unless it has paid or declared and set apart for payment, or contemporaneously
pays or declares and sets apart for payment, all accrued and unpaid dividends
for all prior periods on any outstanding Parity Stock. Whenever all accrued
dividends are not paid in full on the Preferred Stock or any Parity Stock, all
dividends declared on the Preferred Stock and any such Parity Stock will be
declared or made pro rata so that the amount of dividends declared per share on
the Preferred Stock and any such Parity Stock will bear the same ratio amount of
dividends declared per share on the Preferred Stock, and any such Parity Stock
will bear the same ratio that accrued and unpaid dividends per share on the
Preferred Stock and such Parity Stock bear to each other.
The amount of dividends payable for the initial dividend period and any
period shorter than a full dividend period will be computed on the basis of a
360 day year. No interest will be payable in respect of any dividend payment on
the Series A Preferred Stock which may be in arrears.
Liquidation Rights. In the event of any liquidation, dissolution or winding
up of the Company, holders of shares of Series A Preferred Stock are entitled to
receive the liquidation preference of $.50 per share, plus an amount equal to
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<PAGE>
any accrued and unpaid dividends to the payment date, and no more, before any
payment or distribution is made to the holders of Common Stock, or any series or
class of the Company's stock hereafter issued that ranks junior as to
liquidation rights to the Series A Preferred Stock. The holders of Preferred
Stock and any Parity Stock hereafter issued that rank on a parity as to
liquidation rights with the Series A Preferred Stock will be entitled to share
ratably, in accordance with the respective preferential amounts payable on such
stock, in any distribution which is not sufficient to pay in full the aggregate
of the amounts payable thereon. After payment in full of the liquidation
preference of the shares of Series A Preferred Stock, the holders of such shares
will not be entitled to any further participation in any distribution of assets
by the Company. Neither a consolidation, merger or other business combination of
the Company with or into another corporation or other entity nor a sale or
transfer of all or part of the Company's assets for cash, securities or other
property will be considered a liquidation, dissolution or winding up of the
Company.
Voting Rights. The holders of the Series A Preferred Stock will have no
voting rights except as described below or as required by law. In exercising any
such vote, each outstanding share of Series A Preferred Stock will be entitled
to one vote, excluding shares held by the Company or any entity controlled by
the Company, which shares will have no voting rights.
So long as any Series A Preferred Stock is outstanding, the Company will
not, without the affirmative vote of the holders of at least 66 2/3% of all
outstanding shares of Series A Preferred Stock, voting separately as a class,
(i) amend, alter or repeal any provision of the Articles or by Bylaws of the
Company so as to adversely affect the relative rights, preferences,
qualifications, limitations or restriction of the Series A Preferred Stock, (ii)
authorize or issue, or increase the authorized amount of, any additional class
or series of stock, or any security convertible into stock of such class or
series, ranking senior to the Series A Preferred Stock as to dividends or upon
liquidation, dissolution or winding up of the Company, or (iii) effect any
reclassification of the Series A Preferred Stock.
So long as any Series A Preferred Stock is outstanding, the Company will
not, without the affirmative vote of the holders of at least 50% of all
outstanding shares of Series A Preferred Stock, voting separately as a class,
(i) authorize, issue or increase the authorized amount of any additional class
or series of stock, or any security convertible into stock of such class or
series, ranking on parity with the Series A Preferred Stock as to dividends or
liquidation and having superior voting rights, or (ii) incur indebtedness or
authorize or issue, or increase the authorized amount of, any additional class
or series of stock, or any security convertible into stock of such class or
series, ranking on parity with the Series A Preferred Stock as to dividend or
liquidation rights if, immediately following such event, Adjusted Stockholder's
Equity is less than the aggregate liquidation preferences of all Series A
Preferred Stock and stock ranking senior to or on parity with the Series A
Preferred Stock as to liquidation. Adjusted Stockholder's Equity is the
Company's stockholder's equity as shown on its most recent balance sheet,
increased by (a) any amount of any liability or other reduction in stockholder's
equity attributable to the Series A Preferred Stock and each series of stock
24
<PAGE>
senior to or on parity with the Series A Preferred Stock as to liquidation, and
(b) the net proceeds of any equity financing since the date of the balance
sheet, reduced by any reduction in stockholder's equity resulting from certain
dispositions of assets since the date of the balance sheet.
Redemption. The Series A Preferred Stock is redeemable at any time after
April 6, 2001 for cash, in whole or in part, at the option of the Company, at
$.50 per share plus any accrued and unpaid dividends, whether or not declared.
If fewer than all of the outstanding shares of Series A Preferred Stock are
to be redeemed, the Company will select those to be redeemed pro rata or by lot
or in such other manner as the board of Directors may determine. There is no
mandatory redemption in sinking fund obligation with respect to the Series A
Preferred Stock. In the event that the Company has failed to pay accrued
dividends on the Series A Preferred Stock, it may not redeem any of the then
outstanding shares of the Series A Preferred Stock until all such accrued and
unpaid dividends and (except with respect to shares to be redeemed) the then
current dividends have been paid in full.
Notice of redemption will be mailed at least thirty (30) days but not more
than sixty (60) days before the redemption date to each holder of record of
shares of Series A Preferred Stock to be redeemed at the holder's address shown
on the stock transfer books of the Company. After the redemption date, unless
there shall have been a default in payment of the redemption price, dividends
will cease to accrue on the shares of Series A Preferred Stock called for
redemption and all rights of the holders of such shares will terminate, except
the right to receive the redemption price without interest.
Conversion Rights of Series A Preferred Stock
Optional Conversion. At any time after the initial issuance of the Series A
Preferred Stock and prior to the redemption thereof, the holder of any shares of
Series A Preferred Stock will have the right, at the holder's option, to convert
any or all such shares into restricted Common Stock on a one for one basis and
all accrued and unpaid dividends thereon into shares of Common Stock at a rate
of $.50 per share. If the Series A Preferred Stock has been called for
redemption, the conversion right will terminate at the close of business on the
last business day prior to the date fixed for redemption (unless the Company
defaults in the payment of the redemption price). Fractional shares of Common
Stock will be rounded to the nearest full share upon conversion.
In case of any reclassification of the Common Stock, any consolidation of
the Company with, or merger of the Company into, any other person, any merger of
any person into the Company (other than a merger that does not result in any
reclassification, conversion, exchange or cancellation of outstanding shares of
Common Stock), any sale or transfer of all or substantially all of the assets of
the Company or any compulsory share exchange whereby the Common Stock is
converted into other securities, cash or other properties, then provisions will
be made that the holder of such share of Series A Preferred Stock then
outstanding will have the right thereafter, during the period such share of
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<PAGE>
Series A Preferred Stock shall be convertible, to convert such share into the
kind and amount of securities, cash or other property receivable upon such
reclassification, consolidation, merger, sale, transfer or share exchange by a
holder of the number of shares of Common Stock into which such share of Series A
Preferred Stock might have been converted immediately prior to such
reclassification, consolidation, merger, sale transfer or share exchange.
Other Provisions. The shares of Series A Preferred Stock, when issued as
described herein, will be duly and validly issued, fully paid and nonassessable.
PART II
Item 1. Market for Common Equity and Related Stockholder Matters
The Company's Common Stock is traded only in the United States on the
over-the-counter Bulletin Board, under the trading symbol, VGAA.
The table set forth below presents the range, on a quarterly basis, of high
and low closing bid prices per share of Common Stock as reported for the last
two fiscal years. The quotations represent prices between dealers and do not
include retail markup, markdown or commissions and may not necessarily represent
actual transactions.
Common Stock
- --------------------------------------------
Quarter Ended High Low
- --------------------------------------------
Fiscal Year Ended
March 31, 1998
June 30, 1997 $0.68 $0.15
September 30, 1997 $0.36 $0.12
December 31, 1997 $0.31 $0.12
March 31, 1998 $1.00 $0.12
Fiscal Year Ended
March 31, 1999
June 30, 1998 $1.00 $0.34
September 30, 1998 $0.36 $0.10
December 31, 1998 $0.19 $0.12
March 31, 1999 $0.16 $0.08
Fiscal Year Ended
March 31, 2000
June 30, 1999 $0.23 $0.08
September 30, 1999 $0.12 $0.04
December 31, 1999 $0.12 $0.10
March 31, 2000 $1.00 $0.12
- --------------------------------------------
The 19,646,000 shares of Common Stock outstanding as of the date of this
Registration Statement were held by approximately 76 holders of record
worldwide, including approximately 39 holders of record in the United States.
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The Board of Directors has never authorized or declared the payment of any
dividends on the Company's Common Stock and does not anticipate the declaration
or payment of cash dividends in the foreseeable future. The Company intends to
retain future earnings, if any, to finance the exploration of its business.
Future dividend policies will be subject to the discretion of the Board of
Directors and will be contingent upon, among other things, future earnings, the
Company's financial condition, capital requirements, general business
conditions, level of debt, restrictions with respect to payment of dividends
with respect to Series A Preferred Stock, and other relevant factors.
Transfer Agent
The transfer agent and registrar for the Common Stock is First American
Stock Transfer, 610 East Bell Road, Suite 2-155 PMB, Phoenix, AZ 85022-2393,
telephone number (602) 485-1346.
Item 2. Legal Proceedings.
Management is not aware of any legal proceedings contemplated by any
governmental authority or other party involving the Company or its properties.
No director, officer or affiliate of the Company is (i) a party adverse to the
Company in any legal proceedings, or (ii) has an adverse interest to the Company
in any legal proceedings. Management is not aware of any other legal proceedings
pending or that have been threatened against the Company or its properties.
Item 3. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
The Company's principal independent accountants have audited the Company's
financial records from inception of the Company (January 28, 1987) to date and
is Johnson, Holscher & Company, P.C. of 5975 Greenwood Plaza Blvd., Suite 140,
Greenwood Village, CO 80111. Since the inception of the Company to date, the
Company's principal independent accountant has not resigned or declined to stand
for re-election or were dismissed.
Moreover, the Company's current principal independent accountant has not
provided an adverse opinion or disclaimer of opinion to the Company's financial
statements, nor modified its opinion as to uncertainty, audit scope or
accounting principles.
Item 4. Recent Sales of Unregistered Securities.
To provide capital, the Company has sold stock in private placement
Offerings, issued stock in exchange for debts of the Company or pursuant to
contractual agreements as follows:
(i) On May 8, 1995, the Company completed an offering in which it raised
$102,000 under Rule 504 of Regulation D pursuant to which it sold
100,000 shares of Common Stock at $1.02 per share. The per share price
of the offering was arbitrarily determined by the Board of Directors
based upon potential future earnings, assets and net worth of the
Company. The Company issued shares of Common Stock to nine investors.
All of the investors were accredited investors as that term is defined
under Regulation D. The investors executed subscription agreements and
acknowledged that the securities to be issued have not been registered
under the Securities Act of 1933, as amended (the "Securities Act"),
that the investors understood the economic risk of an investment in
the securities, and that the investors had the opportunity to ask
questions of and receive answers from the Company's management
concerning any and all matters related to the acquisition of
securities. No underwriter was involved in the transaction, and no
commissions or other remuneration were paid in connection with the
offer and sale of the securities.
27
<PAGE>
(ii) On March 28, 1996, the Company acquired one hundred percent (100%) of
the issued and outstanding shares of common stock of Century
Manufacturing, Inc. ("CMI") in exchange for $100,000 and the issuance
of 1,000,000 shares of the Company's restricted shares of Common
Stock. The issuance of the Common Stock herein was made in connection
with a contractual arrangement not involving a public offering to a
single corporate investor, and is exempt from registration pursuant to
Section 4(2) of the Securities Act. The certificate representing
issuance of such shares of Common Stock to CMI has a legend indicating
that the shares of Common Stock cannot be resold without registration
under the Securities Act or in compliance with an available exemption
from registration. No underwriter was involved in the transaction, and
no commissions or other remuneration were paid in connection with the
offer and sale of the securities.
(iii)On March 12, 1997, the Company completed an offering in which it
raised $705,000 under Rule 504 of Regulation D pursuant to which it
sold 2,255,000 shares of Common Stock at $0.31 per share. The per
share price was arbitrarily determined by the Board of Directors based
upon an average of the high and low price of the Company's Common
Stock as quoted on the Bulletin Board, the potential future earnings,
assets and net worth of the Company. The Company issued shares of
Common Stock to thirteen investors. All of the investors were
accredited investors as that term is defined under Regulation D. The
investors executed subscription agreements and acknowledged that the
securities to be issued have not been registered under the Securities
Act, that the investors understood the economic risks of an investment
in the securities, and that the investors had the opportunity to ask
questions of and receive answers from the Company's management
concerning any and all matters related to the acquisition of
securities. No underwriter was involved in the transaction, and no
commissions or other remuneration were paid in connection with the
offer and sale of the securities.
(iv) On March 12, 1997, the Company entered into a settlement agreement
with a creditor whereby the Company agreed to issue 200,000 shares of
Common Stock at $0.25 per share pursuant to Section 4(2) of the
Securities Act. The per share price was determined by arms-length
negotiation between the Company and the creditor which was discounted
to provide for the restrictive nature of the shares of Common Stock.
Under the terms of the settlement agreement, the creditor agreed to
accept the 200,000 shares of Common Stock as payment for the
approximate $50,000 debt owed to such creditor. The Company issued the
shares in reliance upon the exemption from registration provided by
Section 4(2) of the Securities Act. The creditor represented to the
Company that he acquired the shares for his own account, and not with
a view to distribution, and that the Company made available to him all
material information concerning the Company.
(v) On March 26, 1998, the Company completed an offering in which it
raised $900,000 under Rule 504 of Regulation D pursuant to which it
sold 6,000,000 shares of Common Stock at $0.15 per share. The per
share price was arbitrarily determined by the Board of Directors based
upon an average of the high and low price of the Company's Common
Stock as quoted on the Bulletin Board, the results of past operational
performance of the Company, the potential future earnings, assets and
net worth of the Company. The Company issued shares of Common Stock to
12 investors. Ten of the investors were accredited investors as that
term is defined under Regulation D. The investors executed
subscription agreements and acknowledged that the securities to be
issued have not been registered under the Securities Act, that the
investors understood the economic risk of an investment in the
securities, and that the investors had the opportunity to ask
questions of and receive answers from the Company's management
concerning any and all matters related to the acquisition of
securities. No underwriter was involved in the transaction, and no
commissions or other remuneration were paid in connection with the
offer and sale of the securities.
28
<PAGE>
(vi) On March 18, 1999, the Company entered into a technology sub-license
agreement with Geneva whereby the Company issued 1,000,000 shares of
its restricted Common Stock to AuRIC Metallurgical Laboratories and a
convertible promissory note to Geneva dated March 18, 1999 in the
amount of $100,000 that is convertible into 500,000 shares of the
Company's restricted Common Stock at the option of Geneva at the rate
of $0.20 per share. Pursuant to the terms of the convertible
promissory note, Geneva may elect to convert the promissory note after
October 15, 1999. There are no conditions that will prevent or trigger
the conversion of the promissory note by Geneva into shares of Common
Stock nor is there any expiration date. The issuance of the Common
Stock described herein was made in connection with the technology
sub-license agreement not involving a public offering to corporate
investors, and is exempt from registration pursuant to Section 4(2) of
the 1933 Securities Act. The certificates representing issuances of
such shares of Common Stock by the Company to AuRIC have a legend
indicating that the shares of Common Stock cannot be resold without
registration under the 1933 Securities Act or in compliance with an
available exemption from registration. No underwriter was involved in
the transaction, and no commissions or other remuneration were paid in
connection with the offer and sale of the Common Stock.
(vii)On March 28, 1999, the Company entered into a joint venture agreement
with Geneva whereby the Company issued 500,000 shares of its
restricted Common Stock to Geneva. The issuance of the Common Stock
described herein was made in connection with a joint venture agreement
in profits not involving a public offering to a single corporate
investor, and is exempt from registration pursuant to Section 4 (2) of
the Securities Act. The certificate representing issuance of such
shares of Common Stock to Geneva has a legend indicating that the
shares of Common Stock cannot be resold without registration under the
1933 Securities Act of in compliance with an available exemption from
registration. No underwriter was involved in the transaction, and no
commissions or other remuneration were paid in connection with the
offer and sale of the securities.
(viii)On April 7, 1999, the Company completed an offering in which it
raised $300,000 under Rule 504 of Regulation D pursuant to which it
sold 1,500,000 shares of Common Stock at $.20 per share. The per share
price was arbitrarily determined by the Board of Directors based upon
the high and low price of the Company's Common Stock as quoted on the
Bulletin Board, the potential future earnings, assets and net worth of
the Company based on consummation of the Joint Venture Agreement and
the Sub-License Agreement. The Company issued shares of Common Stock
to three investors. All of the investors were accredited investors as
that term is defined under Regulation D. The investors executed
subscription agreements and acknowledged that the securities to be
issued have not been registered under the 1933 Securities Act, that
the investors understood the economic risk of an investment in the
securities, and that the investors had the opportunity to ask
questions of and receive answers from the Company's management
concerning any and all matters related to the acquisition of
securities. No underwriter was involved in the transaction, and no
commissions or other remuneration were paid in connection with the
offer and sale of the securities.
(ix) On March 29,2000, the Company entered into four separate settlement
agreements with creditors whereby the Company agreed to issue an
aggregate of 2,061,000 shares of its Common Stock at $0.50 per share
pursuant to Section 4(2) of the Securities Act. Under the terms of the
settlement agreement, the creditors agreed to accept their
proportionate number of shares of Common Stock as payment for the
aggregate debt of $1,030,462.78 owed to such creditors. The Company
issued the shares in reliance upon the exemption from registration
provided by Section 4(2) of the Securities Act. The creditors
represented to the Company that they acquired the shares for their own
respective accounts, and not with a view to distribution, and that
they Company made available to them all material information
concerning the Company.
29
<PAGE>
As of the date of this Registration Statement, the Company has 19,646,000
shares of its Common Stock issued and outstanding. Of the 19,646,000 of the
Company's current outstanding shares of Common Stock, 15,830,500 shares are free
trading. At such time, the holders may offer and sell these shares of Common
Stock at such times and in such amounts as they may respectively determine in
their sole discretion.
The holders of free trading Common Stock in the capital of the Company may
offer these shares of Common Stock through market transactions at prices
prevailing in the OTC market or at negotiated prices which may be fixed or
variable and which may differ substantially from OTC prices. The holders have
not advised the Company that they anticipate paying any consideration, other
than the usual and customary broker's commission, in connection with the sales
of these free trading shares of Common Stock. The holders are acting
independently of the Company making such decisions with respect to the timing,
manner and size of each sale.
Of the 19,646,000 of the Company's current outstanding shares of Common
Stock, 3,815,500 shares are "restricted shares" as that term is defined in the
Securities Act of 1933 and the rules and regulations thereunder. To be eligible
for sale in the public market, the holders must comply with Rule 144. In
general, Rule 144 allows a person holding restricted shares for a period of at
least one year to sell within any three month period that number of shares which
does not exceed the greater of 1% of the Company's then outstanding shares or
the average weekly trading volume of the shares during the four calendar weeks
preceding such sale. Rule 144 also permits, under certain circumstances, sale of
shares by a person who is not an affiliate of the Company and who has satisfied
a two year holding period without any volume limitations, manner of sale
provisions or current information requirements. As defined in Rule 144, an
affiliate of an issuer is a person who, directly or indirectly, through one or
more intermediaries, controls or is controlled by, or is under common control
with, such issuer, and generally includes members of the Board of Directors.
Sales pursuant to Rule 144 or otherwise, if in sufficient volume, could have a
depressive effect on the market price of the Company's securities. Moreover, the
possibility of such sales may have a depressive effect on market prices.
To date, no subsequent sales of restricted shares of Common Stock have been
made.
Item 5. Indemnification of Officers and Directors.
The Colorado Corporation Code contains provisions for indemnification of
the officers and directors of the Company. The Bylaws require the Company to
indemnify such persons to the full extent permitted by Colorado law. The Bylaws
with certain exceptions, eliminate any personal liability of a director to the
Company or its shareholders for monetary damages to the Company or its
30
<PAGE>
shareholders for gross negligence or lack of care in carrying out the director's
fiduciary duties as such. Colorado law generally permits such indemnification if
a director or officer acts in good faith in a manner reasonably believed to be
in, or not opposed to, the best interests of the Company. A director or officer
must be indemnified as to any matter in which he successfully defends himself.
The officers and directors of the Company are accountable to the
shareholders of the Company as fiduciaries, which means such officers and
directors are required to exercise good faith and integrity in handling the
Company's affairs.
A shareholder may be able to institute legal action on behalf of himself
and all other similarly situated shareholders to recover damages where the
Company has failed or refused to observe the law. Shareholders may, subject to
applicable rules of civil procedure, be able to bring a class action or
derivative suit to enforce their rights, including rights under certain federal
and state securities laws and regulations. Shareholders who have suffered losses
in connection with the purchase or sale of their interest in the Company due to
a breach of a fiduciary duty by an officer or director of the Company in
connection with such sale or purchase including, but not limited to, the
misapplication by any such officer or director of the proceeds from the sale of
any securities, may be able to recover such losses from the Company.
The Company and its affiliates may not be liable to its shareholders for
errors in judgment or other acts or omissions not amounting to intentional
misconduct, fraud or a knowing violation of the law, since provisions have been
made in the Articles of Incorporation and By-laws limiting such liability. The
Articles of Incorporation and By-laws also provide for indemnification of the
officers and directors of the Company in most cases for any liability suffered
by them or arising out of their activities as officers and directors of the
Company if they were not engaged in intentional misconduct, fraud or a knowing
violation of the law. Therefore, purchasers of these securities may have a more
limited right of action than they would have except for this limitation in the
Articles of Incorporation and By-laws. In the opinion of the Securities and
Exchange Commission, indemnification for liabilities arising under the
Securities Act of 1933 is contrary to public policy and, therefore,
unenforceable.
The Company may also purchase and maintain insurance on behalf of directors
and officers insuring against any liability asserted against such person
incurred in the capacity of director or officer or arising out of such status,
whether or not the Company would have the power to indemnify such person.
The Company will not acquire assets from its current management or any
entity in which such management has a five percent (5%) or greater equity
interest unless the Company has first received an independent opinion as to the
fairness of the terms of the acquisition. In negotiating the terms of the
acquisition of the assets, management may be influenced by the possibility of
future personal benefit from unrelated business dealings with such persons or
entities. Management believes that any such conflict will be resolved in favor
of the Company and its shareholders. The officers and directors are required to
exercise good faith and integrity in handling the Company's affairs. Management
of the Company has agreed to abide by this fiduciary duty.
31
<PAGE>
Item 6. Financial Statements.
Reference is made to Part III, Item 1 and 2 - Index to and Description of
Exhibits for a list of all financial statements filed as part of this
Registration Statement on Form 10-SB.
PART III
Item 1 & 2. Index to and Description of Exhibits.
(a) The following Financial Statements are filed as a part of this
Registration Statement:
Vega-Atlantic Corporation
-------------------------
1. Independent Auditors' Report dated October 7, 1999.
2. Balance Sheets for fiscal year ended March 31, 1999 and March 31,
1997.
3. Statements of Operation for period from April 1, 1998 to March 31,
1999, period from April 1, 1997 to March 31, 1998, and from inception
(January 28, 1987) to March 31, 1999.
4. Statements of Cash Flow for period from April 1, 1998 to March 31,
1999, period from April 1, 1997 to March 31, 1998, and from inception
(January 28, 1987) to March 31, 1999.
5. Statements of Stockholders' Equity (Deficit) for years ended March 31,
1987 through fiscal year ended March 31, 1999.
6. Notes to Financial Statements for March 31, 1999 and 1998.
7. Balance Sheet for quarter ended September 30, 1999.
8. Statements of Operation for six months ended September 30, 1999 and
1998, and from inception (January 28, 1987) to September 30, 1999.
9. Statement of Cash Flow for six months ended September 30, 1999 and
1998, and from inception (January 28, 1987) to September 30, 1999.
10. Notes to Financial Statements for six months ended September 30, 1999.
Vega-Atlantic Corporation
Unaudited Proforma Condensed Financial Statements
-------------------------------------------------
11. Unaudited Proforma Condensed Balance Sheet for period ended December
31, 1999.
12. Unaudited Proforma Condensed Statements of Operations for fiscal year
ended March 31, 1999 and period ended December 31, 1999.
13. Unaudited Proforma Condensed Financial Statements Schedule of
Assumptions and Explanatory Notes.
Tun Resources Inc.
------------------
14. Independent Auditor's Report dated April 12, 2000.
15. Balance Sheet for the 4-month period ended March 31, 2000, the years
ended November 30, 1999 and 1998 and the period January 16, 1997 to
November 30, 1997.
16. Statements Of Operations and Deficit for the 4-month period ended
March 31, 2000, the years ended November 30, 1999 and 1998, the period
January 16, 1997 to November 30, 1997, and the period January 10, 1994
(inception) to March 31, 2000.
17. Statement of Stockholders' Equity (Deficiency) for the period from
January 10, 1994 (inception) to March 31, 2000.
18. Notes to Financial Statements for March 31, 2000 and November 30,
1999, 1998 and 1997.
32
<PAGE>
(b) The following Exhibits are filed as part of this Registration
Statement:
- --------------------------------------------------------------------------------
Exhibit No. Description
- --------------------------------------------------------------------------------
2 Not applicable.
3 Articles of Incorporation for the Company
By-laws of the Company
4 Not Applicable
9 Not Applicable
10.1 Joint Venture Agreement between the Company and Geneva Resources,
Inc. dated March 28, 1999
10.2 Technology Sub-License Agreement between Geneva Resources, Inc.
and the Company dated March 18, 1999
10.3 Consulting Services and Management Agreement between Investor
Communications International, Inc. and the Company dated April 1,
1999
10.4 Letter of Intent between the Company and Golden Thunder Resources
Ltd. and Tun Resources Inc. dated January 12, 2000.
10.5 Letter from Geneva Resources, Inc. dated April 27, 2000
11 Not Applicable
16 Not Applicable
21 Not Applicable
24 Not Applicable
- --------------------------------------------------------------------------------
The following additional Exhibits are filed as part of this Registration
Statement:
- --------------------------------------------------------------------------------
Exhibit No. Description
- --------------------------------------------------------------------------------
99.1 BLM Claims Listing
- --------------------------------------------------------------------------------
33
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
VEGA-ATLANTIC CORPORATION,
a Colorado corporation
By: /s/ Grant Atkins
-----------------------------
Grant Atkins , President
DATE: April 27, 2000
34
<PAGE>
VEGA-ATLANTIC CORPORATION
(An Exploration Stage Company)
FINANCIAL STATEMENTS
March 31, 1999 and 1998
TABLE OF CONTENTS
-----------------
Page
----
Independent Auditors' Report F-1
Balance Sheet F-2
Statements of Operations F-3
Statements of Cash Flows F-4
Statement of Stockholders' Equity F-5 - F-7
Notes to Financial Statements F-8 - F-13
<PAGE>
Johnson, Holscher & Company, P.C.
Certified Public Accountants
Stockholders and
Board of Directors
Vega-Atlantic Corporation
Newport Beach, California
INDEPENDENT AUDITORS' REPORT
----------------------------
We have audited the balance sheets of Vega-Atlantic Corporation (an exploration
stage company) as of March 31, 1999 and 1998, and the related statements of
operations, stockholders' equity (deficit) and cash flows for the period from
inception (January 28, 1987) to March 31, 1999. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Vega-Atlantic Corporation as of
March 31, 1999 and 1998, and the results of its operations and its cash flows
for the period from inception (January 28, 1987) to March 31, 1999, in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has not generated revenues from operations,
which raises substantial doubt about its ability to continue as a going concern.
The Company has established a plan to continue operations through additional
stock offerings and advances as outlined in Note 1. The financial statements do
not include any adjustments that might result if management's plan is
unsuccessful.
/s/ Johnson, Holscher & Company, P.C.
- -------------------------------------
Johnson, Holscher & Company, P.C.
Greenwood Village, Colorado
October 7, 1999
Member of the American Institute of Certified Public Accountants
Member of the Private Companies Practice Section
Member of the SEC Practice Section
5975 Greenwood Plaza Blvd., Suite 140
Greenwood Village, CO 80111
(303)694-2727
Fax (303)694-3172
F-1
<PAGE>
<TABLE>
<CAPTION>
VEGA-ATLANTIC CORPORATION
(An Exploration Stage Company)
Balance Sheets
March 31, 1999 and 1998
March 31, March 31,
1999 1998
---- ----
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 279 $ 1,159
OTHER
Deposits 125 125
Interest in unpatented mining claims -- --
----------- -----------
Total Assets $ 404 $ 1,284
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
CURRENT LIABILITIES
Accounts payable - trade $ 18,407 $ 48,513
Advances from related parties 197,492 82,692
Notes payable - Technology sublicense 569,446 --
Directors fees payable 40,267 34,267
Accrued interest payable 31,840 --
----------- -----------
Total Current Liabilities 857,452 165,472
----------- -----------
STOCKHOLDERS' EQUITY
Preferred stock, no par value;
20,000,000 shares authorized at March 31, 1999 and 1998;
0 shares issued and outstanding at March 31, 1999 and 1998 -- --
Common stock $.00001 par value; 500,000,000 shares authorized as of
March 31, 1999 and 1998; issued and outstanding at March 31, 1999 -
17,585,000 shares and at March 31, 1998 -14,555,000 shares 176 146
Paid - in capital 3,993,816 3,473,005
Accumulated deficit through exploration stage (4,851,040) (3,637,339)
----------- -----------
Total Stockholders' Equity (857,048) (164,188)
----------- -----------
Total Liabilities and Stockholders' Equity $ 404 $ 1,284
=========== ===========
The accompanying notes are an integral part of the financial statements.
F-2
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
VEGA-ATLANTIC CORPORATION
(An Exploration Stage Company)
Statements of Operations
Inception
Period from Period from (January 28,
April 1, 1998 April 1, 1997 1987) to
to March 31 to March 31, March 31,
1999 1998 1999
------------ ------------ ------------
REVENUES
<S> <C> <C> <C>
Sales $ -- $ -- $ --
------------ ------------ ------------
Total Revenues -- -- --
COST OF SALES -- -- --
------------ ------------ ------------
Gross Profit -- -- --
------------ ------------ ------------
OPERATING EXPENSES
Overhead and administration 300,000 613,000 1,475,082
Research and development 783,182 -- 783,182
Claims maintenance fees 50,704 -- 50,704
Legal and accounting 21,097 32,529 65,205
Mining claims staking and mangement 8,698 27,810 36,508
Transfer agent fees 6,085 4,156 12,570
Director's fees 6,000 10,500 28,500
Other administrative costs 4,831 8,122 32,596
Consultants -- 15,841 81,076
Printing and stationary -- 500 45,886
------------ ------------ ------------
Total Operating Expenses 1,180,597 712,458 2,611,309
------------ ------------ ------------
Loss from Continued Operations (1,180,597) (712,458) (2,611,309)
------------ ------------ ------------
Discontinued Operations:
Loss from discontinued operations of subsidiary
Century Manufacturing, Inc. -- -- (1,787,000)
Loss from Loan Advances to subsidiary, Century
Manufacturing, Inc. written off -- -- (590,773)
Gain on Disposal of subsidiary Century
Manufacturing, Inc. -- -- 171,144
------------ ------------ ------------
Net Loss from Discontinued Operations -- -- (2,206,629)
------------ ------------ ------------
Net Loss from Operations (1,180,597) (712,458) (4,817,938)
------------ ------------ ------------
OTHER INCOME (EXPENSE)
Interest Income -- 1 2
Interest Expense (33,104) -- (33,104)
------------ ------------ ------------
Total Other Income (Expense) (33,104) 1 (33,102)
------------ ------------ ------------
NET (LOSS) $ (1,213,701) $ (712,457) $ (4,851,040)
============ ============ ============
Earnings (Loss) Per Share - Basic $ (0.083) $ (0.081) $ (0.898)
============ ============ ============
Weighted Average Number of
Common Shares Outstanding 14,600,890 8,749,995 5,403,358
============ ============ ============
The accompanying notes are an integral part of the financial statements.
F-3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
VEGA-ATLANTIC CORPORATION
(An Exploration Stage Company)
Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
Inception
Period from Period from (January 28,
April 1, 1998 April 1, 1997 1987) to
to March 31, to March 31, March 31,
1999 1998 1999
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net (loss) $(1,213,701) $ (712,457) $(3,164,050)
Adjustments to reconcile net (loss) to cash
Non-cash loss on sale of subsidiary 1,687,000
Non-cash research and development expenses 783,182 -- 783,182
Non-cash interest recognized through discount adjustment 1,264 -- 1,264
Non-cash stock issued in settlement of payables and for
services -- -- 84,992
Changes in Assets and Liabilities
Deposits -- -- (125)
Accounts payable (24,265) 34,985 18,407
Directors fees payable 6,000 10,501 40,267
Accrued interest payable 31,840 -- 31,840
----------- ----------- -----------
Net Cash Flows Used for Operating Activities (415,680) (666,971) (2,204,213)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Advances from affiliates - net 114,800 (232,244) 197,492
Purchase of subsidiary -- -- (100,000)
Sale of stock, net of offering costs 300,000 900,000 2,107,000
----------- ----------- -----------
Net Cash Flows Provided by Financing Activities 414,800 667,756 2,204,492
----------- ----------- -----------
Net increase in cash (880) 785 279
Cash and cash equivalents - Beginning of period 1,159 374 --
----------- ----------- -----------
Cash and cash equivalents - End of period $ 279 $ 1,159 $ 279
=========== =========== ===========
NON-CASH ACTIVITIES
During 1987, 750,000 shares of common stock with a value of $850 were issued for services performed.
During 1989, 4,250,000 shares of common stock with a value of $1,000 were issued for services performed.
During 1996, Century Manufacturing, Inc. was purchased for $100,000 through an advance to Century and the
issuance of 1,000,000 shares of common stock valued at $1,687,000.
During 1997, a $50,000 advance from an affiliate was repaid through issuance of stock.
During 1997, Century Manufacturing, Inc. was sold to related parties in exchange for reductions in advances
from those parties.
During the 1999 fiscal year, the Company issued 500,000 common shares in exchange for $75,000 in mining claims.
During the 1999 fiscal year, the Company entered into $600,000 of loan agreements in exchange for a technology
sub-license.
During the 1999 fiscal year, the Company issued 1,000,000 shares of common stock worth $140,000 pursuant to a
tehcnology sub-license agreement.
The accompanying notes are an integral part of the financial statements.
F-4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
VEGA-ATLANTIC CORPORATION
(An Exploration Stage Company)
Statements of Stockholders' Equity
Deficit
Accumulated
Common Stock During
--------------------- Paid - in Exploration
Shares Amount Capital Stage Total
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Issued for services performed,
February 25 ($.0125 per share) 20,000 $ 1 $ 249 $ -- $ 250
Issued for services performed,
February 25 ($.02 per share) 5,000 -- 100 -- 100
Issued for services performed,
February 25 ($.0007 per share) 725,000 7 493 -- 500
Net Loss, Year ended December 31, 1987 -- -- -- (8,791) (8,791)
--------- --------- --------- --------- ---------
Balance, December 31, 1987 750,000 8 842 (8,791) (7,941)
Net loss, Year ended December 31, 1988 -- -- -- (1,000) (1,000)
--------- --------- --------- --------- ---------
Balance, December 31, 1988 750,000 8 842 (9,791) (8,941)
Issued for services performed,
July 20 ($.0002 per share) 4,250,000 42 958 -- 1,000
Net loss, Year ended December 31, 1989 -- -- -- (2,700) (2,700)
--------- --------- --------- --------- ---------
Balance, December 31, 1989 5,000,000 50 1,800 (12,491) (10,641)
Net loss, Year ended December 31, 1990 -- -- -- (875) (875)
--------- --------- --------- --------- ---------
Balance, December 31, 1990 5,000,000 50 1,800 (13,366) (11,516)
Net loss, Year ended December 31, 1991 -- -- -- (2,900) (2,900)
--------- --------- --------- --------- ---------
Balance, December 31, 1991 5,000,000 50 1,800 (16,266) (14,416)
Net loss, Year ended December 31, 1992 -- -- -- (1,235) (1,235)
--------- --------- --------- --------- ---------
Balance, December 31, 1992 5,000,000 50 1,800 (17,501) (15,651)
Net loss, Year ended December 31, 1993 -- -- -- (6,775) (6,775)
--------- --------- --------- --------- ---------
Balance, December 31, 1993 5,000,000 50 1,800 (24,276) (22,426)
--------- --------- --------- --------- ---------
(Continued)
The accompanying notes are an integral part of the financial statements.
F-5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
VEGA-ATLANTIC CORPORATION
(An Exploration Stage Company)
Statements of Stockholders' Equity
(Continued)
Deficit
Accumulated
Common Stock During
-------------------------- Paid - in Exploration
Shares Amount Capital Stage Total
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1993 5,000,000 $ 50 $ 1,800 $ (24,276) $ (22,426)
Net loss, Year ended December 31, 1994 -- -- -- (4,875) (4,875)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1994 5,000,000 50 1,800 (29,151) (27,301)
Capital Contribution from Shareholder,
April 17, 1995 -- -- 27,301 -- 27,301
Sale of stock, May 8, 1995
($.00001 par per share, $1.02 per share) 100,000 1 101,999 -- 102,000
Net loss, year ended December 31, 1995 -- -- -- (95,574) (95,574)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1995 5,100,000 51 131,100 (124,725) 6,426
Issuance of stock to purchase
subsidiary, March 28, 1996 ($.00001 par per
share, $1.687 per share) 1,000,000 10 1,686,990 -- 1,687,000
Net loss, quarter ended March 31, 1996 -- -- -- (1,710,347) (1,710,347)
----------- ----------- ----------- ----------- -----------
Balance, March 31, 1996 6,100,000 61 1,818,090 (1,835,072) (16,921)
Sale of Stock, May 6, 1996 ($.00001 par per
share, total $1.00 per share) 50,000 1 49,999 50,000
Sale of Stock, May 8, 1996 ($.00001 par per
share, total $1.00 per share) 120,000 1 119,999 120,000
Sale of Stock, May 13, 1996 ($.00001 par per
share, total $1.00 per share) 35,000 35,000 35,000
Sale of Stock, March 12, 1997 ($.00001 par per
share, total $.25 per share) 1,800,000 18 449,982 450,000
Sale of Stock, April 15, 1997 ($.00001 par per
share, total $.20 per share) 250,000 3 49,997 50,000
Issuance of Stock in repayment of $50,000 in
Advances, March 12, 1997 ($.00001 par per
share, total $.25 per share) 200,000 2 49,998 50,000
Net loss, year ended March 31, 1997 (1,089,810) (1,089,810)
----------- ----------- ----------- ----------- -----------
Balance, March 31, 1997 8,555,000 $ 86 $ 2,573,065 $(2,924,882) $ (351,731)
=========== =========== =========== =========== ===========
The accompanying notes are an integral part of the financial statements.
F-6
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
VEGA-ATLANTIC CORPORATION
(An Exploration Stage Company)
Statements of Stockholders' Equity
(Continued)
Deficit
Accumulated
Common Stock During
-------------------------- Paid - in Exploration
Shares Amount Capital Stage Total
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance, March 31, 1997 8,555,000 $ 86 $ 2,573,065 $(2,924,882) $ (351,731)
Sale of Stock, March 13, 1998 ($.00001 par per
share, total $.15 per share) 3,000,000 30 449,970 450,000
Sale of Stock, March 24, 1998 ($.00001 par per
share, total $.15 per share) 1,333,333 13 199,987 200,000
Sale of Stock, March 25, 1998 ($.00001 par per
share, total $.15 per share) 1,306,667 13 195,987 196,000
Sale of Stock, March 26, 1998 ($.00001 par per
share, total $.15 per share) 360,000 4 53,996 54,000
Net loss, year ended March 31, 1998 (712,457) (712,457)
----------- ----------- ----------- ----------- -----------
Balance, March 31, 1998 14,555,000 146 3,473,005 (3,637,339) (164,188)
Issuance of common shares in exchange
for $5,841 ofaccounts payable, Jan. 15, 1999
($.00001 par per share, total $.195 per share) 30,000 -- 5,841 -- 5,841
Issuance of common shares in exchange
for technology license agreement, Mar. 15, 1999
($.00001 par per share, total $.14 per share)
valued at market price at date of issuance 1,000,000 10 139,990 -- 140,000
Issuance of common shares in exchange
for profit sharing interest, March 28, 1999
($.00001 per share, total $.15 per share)
valued at market price at date of issuance 500,000 5 74,995 -- 75,000
Issuance of SEC Reg D-504 common
shares for cash, March 31, 1999 ($.00001 par
per share, total $.20 per share) 1,500,000 15 299,985 -- 300,000
Net loss, Year ended March 31, 1999 -- -- -- (1,213,701) (1,213,701)
----------- ----------- ----------- ----------- -----------
Balance, March 31, 1999 17,585,000 $ 176 $ 3,993,816 $(4,851,040) $ (857,048)
=========== =========== =========== =========== ===========
The accompanying notes are an integral part of the financial statements.
F-7
</TABLE>
<PAGE>
VEGA-ATLANTIC CORPORATION
Notes to Financial Statements
March 31, 1999 and 1998
- --------------------------------------------------------------------------------
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Vega-Atlantic Corporation (the Company) was incorporated on January 28,
1987 under the laws of the State of Colorado. The Company is an exploration
stage company.
During 1998 the Company exchanged 500,000 restricted common shares for a
profit sharing interest in 213 unpatented lode-mining claims located in the
State of Idaho. The exploration of these claims now represents the basis of
the Company's operations.
Basis of Accounting
-------------------
The Company utilizes the accrual basis of accounting. Financial statements
have been prepared using generally accepted accounting principles.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Research, Development and Exploration Costs
-------------------------------------------
Research, development and exploration costs are expensed as incurred.
Cash Equivalents
----------------
For purposes of the Statement of Cash Flows, cash equivalents are defined
as investments with original maturities of three months or less.
Valuation of Stock Issued for Third Party Services
--------------------------------------------------
The Company values stock issued for services at the fair value of the
services provided, if known, or at the fair value of the equity instruments
issued.
Going Concern and Continued Operations
--------------------------------------
At March 31, 1999 and 1998, there is substantial doubt regarding the
Company's ability to continue as a going concern as the Company has not
generated any revenues from operations, has a working capital deficit of
$857,173, and a stockholders' deficit of $857,408. The Company's successful
financial operations and movement into an operating basis are contingent on
the development of the lode mining claims and the continuing ability of
generating capital financing. The Company intends to finance operations for
the next twelve months through the March 17, 1999 private placement
discussed in Note 2, subsequent offerings and additional advances. The
March 17, 1999 offering would generate approximately $300,000.
Earnings Per Share
------------------
As of March 31, 1999, there were no warrants or stock options granted that
would affect the earnings per share calculation. The Company had notes
payable that could be converted into 500,000 shares of common stock. The
conversion of the notes would have an anti-dilutive effect, therefore, the
Company has presented only the basic earnings per share calculation. The
basic earnings per share calculation has been adjusted for the one for two
reverse stock split occurring in 1995.
F-8
<PAGE>
VEGA-ATLANTIC CORPORATION
Notes to Financial Statements
March 31, 1999 and 1998
- --------------------------------------------------------------------------------
NOTE 2: STOCKHOLDERS' EQUITY
Common Stock
------------
During 1987 and 1989, the Company issued 10,000,000 shares of common stock
to then officers and directors in exchange for services performed. Amounts
representing the services were expensed in the years performed.
Effective May 1, 1995, the Company adopted a reverse split of the
outstanding shares of common stock. Authorized shares and par value
remained unchanged.
On May 8, 1995, the Company sold 100,000 shares of common stock for
$102,000.
On March 28, 1996, the Company acquired 100 percent of the issued and
outstanding shares of Century Manufacturing, Inc., in exchange for the
Company issuing 1,000,000 shares of common stock. The Company's shares were
valued at $1,687,000 based on the market value of the common stock as of
the date of issuance. The Company also provided an additional $100,000 in
cash in the transaction. The Company later transferred this ownership
interest in Century with a related party in partial repayment of advances
from the related party.
On March 12, 1997, the Company issued 200,000 shares of common stock valued
at $50,000 as partial repayment of an advance.
On March 12, 1997 the, the Company issued 2,255,000 shares of common stock
for $705,000 pursuant to a private placement offering.
On March 26, 1998, the Company issued $6,000,000 shares of common stock for
$900,000 pursuant to a private placement offering.
In March 1998 the Company entered into an agreement to issue 15,000,000
restricted shares of common stock in exchange for the rights to 173
unpatented lode-mining claims located in Camas County, Idaho. The agreement
was between Vega-Atlantic Corporation and Geneva Resources, Inc. ("Geneva")
This agreement was subsequently rescinded and a subsequent joint venture
agreement between the same two parties was signed in March of 1999 (Note
3). The second agreement required the issuance of 500,000 common shares to
Geneva.
In January of 1999, the Company settled a $5,841 accounts payable balance
with the issuance of 30,000 shares of common stock.
Pursuant to a private placement memorandum dated March 17, 1999, the
Company offered 3,000,000 shares of common stock at $.20 per share. This
offering will be used for continued financing of the exploration,
development and expansion programs currently being conducted on the
Company's mining claims, for management consulting fees and to provide
working capital. On March 31, 1999, the Company received payment for and
issued 1,500,000 shares of the offering. As of the date of issuance of
these statements, the remaining shares had not been subscribed.
F-9
<PAGE>
VEGA-ATLANTIC CORPORATION
Notes to Financial Statements
March 31, 1999 and 1998
- --------------------------------------------------------------------------------
NOTE 2: STOCKHOLDERS' EQUITY (Continued)
On March 18, 1999, the Company also entered into a Technology Sub-License
Agreement with Geneva and AuRIC Metallurgical Laboratories, Inc. ("AuRIC")
(Note 4). This agreement required the issuance of 1,000,000 common shares
to AuRIC and a $100,000 convertible note payable to Geneva. The shares
issued to AuRIC were valued at the trading value as of the date of
issuance, or $140,000.
On March 28, 1999, the Company entered into a Joint Venture Agreement with
Geneva (Note 3). This agreement required the issuance of 500,000 common
shares to Geneva.
Dividends may be paid on outstanding shares as declared by the Board of
Directors. Each share of common stock is entitled to one vote.
NOTE 3: INVESTMENT IN PROFIT SHARING INTEREST
On March 28,1999, Geneva Resources, Inc. entered into a profit sharing
agreement with the Company. Under terms of the agreement, Geneva received
500,000 restricted shares of common stock in the Company in exchange for
the sale of a future profit sharing interest. The Company will be
responsible to provide all funding and will be the operating partner. The
Company will initially retain 80% of the profits resulting from the
agreement. After the Company is repaid all of its invested capital, the
profit distribution will be 51% to the Company and 49% to Geneva Resources,
Inc. There are 213 unpatented lode-mining claims that form the subject of
this arrangement known as the Vega Claims. As of March 31, 1999 there were
no jointly controlled assets pursuant to the agreement.
The Company now owns a profit sharing interest in 213 unpatented
lode-mining claims. As the 500,000 shares of common stock cannot be
marketed for a period of twelve months from the date of issuance, the
Company has valued the profit sharing interest at the trading value as of
the date of issuance, $75,000. This profit sharing interest has been
included as a research and development expense for the year ended March 31,
1999.
As the lode mining claims are developed, the equity method of accounting
will be utilized to account for the joint venture agreement with Geneva.
The Company will have majority accounting control over the development of
the claims. As of March 31, 1999, no profit had been generated by the
development of the claims.
F-10
<PAGE>
VEGA-ATLANTIC CORPORATION
Notes to Financial Statements
March 31, 1999 and 1998
- --------------------------------------------------------------------------------
NOTE 4: TECHNOLOGY SUBLICENSE AGREEMENT
In March of 1999, the Company entered into a definitive sub-license
agreement with Geneva Resources, Inc. ("Geneva"), to utilize assay and
metallurgical technology, know-how, and rights to technological processes
developed for the Blackhawk mineralization by AuRIC Metallurgical
Laboratories, Inc. ("AuRIC"). This sub-license is for non-exclusive use in
the Company's Vega Claim area in the State of Idaho for a period not less
than 40 years. Pursuant to this agreement, the Company issued a $100,000
convertible promissory note to Geneva Resources, Inc. and the Company also
issued 1,000,000 restricted common shares to AuRIC. The promissory note
bears interest at 8% per annum and is convertible into 500,000 common
shares at the sole option of the payee at any time after October 15, 1999.
Pursuant to the same agreement the Company also issued non-convertible
promissory notes to both Geneva and AuRIC in the amount of $250,000 to each
company. These are 3% interest bearing notes and are payable upon the
transfer of the technology. As these notes bear interest below market
value, the Company has used an imputed interest rate of 10%. The imputed
value of these notes at issuance was $234,091 to each company.
As of March 31, 1999 the promissory notes and common stock have been issued
to the various parties, however, the related technology has not been
transferred. These promissory notes become due and payable upon the
transfer of the technology. Transfer of the technology will occur after
completion of pilot scale testing. The technology is scheduled for transfer
during 1999. The Company has expensed the amounts paid pursuant to the
agreement as research and development expense
NOTE 5: ADVANCES AND NOTES PAYABLE
Advances and Notes Payable are comprised of the following:
Advances
--------
1999 1998
-------- --------
Investor Communications Int'l, Inc. $ 10,400 $ 8,100
Tri-Star Financial Services, Inc. 140,918 36,918
Amero-can Marketing, Inc. 32,710 24,210
Newport Capital Corporation 13,464 13,464
-------- --------
Total Advances $197,492 $ 82,692
======== ========
All advances are payable on demand and bear 10% simple interest. There is
$31,298 of accrued interest on the advances as of March 31, 1999.
F-11
<PAGE>
VEGA-ATLANTIC CORPORATION
Notes to Financial Statements
March 31, 1999 and 1998
- --------------------------------------------------------------------------------
NOTE 5: ADVANCES AND NOTES PAYABLE (Continued)
Notes Payable
-------------
To Geneva Resources, Inc., bearing interest at 8% per
annum. The note is convertible into 500,000 shares of
common stock at the sole option of the holder at any
time after October 15, 1999. The note is payable on
demand. $ 100,000
To AuRIC Metallurgical Laboratories, LLC, bearing
interest at 3% per annum, simple interest on the
average monthly balance outstanding. The note is dated
March 18, 1999 and has no stated maturity date. $ 250,000
Discount on AuRic note payable to imput interest at 10% (15,277)
To Geneva Resources, Inc., bearing interest at 3% per
annum, simple interest on the average monthly balance
outstanding. The note is dated March 18, 1999 and has
no stated maturity date. 250,000
Discount on Geneva note payable to imput interest at
10% (15,277)
------------
Total Notes Payable $ 569,446
============
Accrued interest on the notes payable as of March 31, 1999 amounted to
$542. The Company has also recognized an additional $1,264 of imputed
interest on the notes as of March 31, 1999.
NOTE 6: INCOME TAXES
The Company has incurred financial losses for each year since inception. At
March 31, 1998 and 1999, the Company had accumulated losses of $1,950,549
and $2,954,050, respectively. As a result of these operating loss carry
forwards, the Company generated deferred tax assets of approximately
$663,119 and $995,586, respectively, which expire between the years 1998
and 2008. The Company had $8,791 of previously incurred losses that could
not be carried over to 1999. Deferred tax assets resulting from these
carryforwards were as follows:
1998 1999
---- ----
Deferred tax assets $ 663,119 $ 995,586
Less: Valuation allowance (663,119) (995,586)
--------- ---------
$ -0- $ -0-
========= =========
NOTE 7: RELATED PARTY TRANSACTIONS
The Company and its subsidiary have had various transactions with related
parties which have been recorded in the financial statements. These
transactions have resulted primarily in notes or advances payable to the
various related parties.
F-12
<PAGE>
VEGA-ATLANTIC CORPORATION
Notes to Financial Statements
March 31, 1999 and 1998
- --------------------------------------------------------------------------------
NOTE 8: MANAGEMENT SERVICES AGREEMENT
The Company has entered into a management services agreement with Investor
Communications International, Inc. ("Investor Communications") to provide
management of the day-to-day operations of the Company. The management
services agreement requires an average monthly payment of $75,000 for
services rendered. This contract runs from April 1, 1999 through September
30, 2000.
The sole director and officer of the Company is a part of the management
team provided by Investor Communications.
F-13
<PAGE>
VEGA-ATLANTIC CORPORATION
(An Exploration Stage Company)
FINANCIAL STATEMENTS
(Unaudited)
September 30, 1999
F-14
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
Table of Contents F-15
Balance Sheet F-16
Statements of Operations F-17
Statements of Cash Flows F-18
Statements of Stockholders' Equity F-19-F-21
Notes to Financial Statements F-22-F-27
F-15
<PAGE>
<TABLE>
<CAPTION>
VEGA-ATLANTIC CORPORATION
(An Exploration Stage Company)
Balance Sheet
September 30,
1999
-----------
ASSETS
CURRENT ASSETS
<S> <C>
Cash and cash equivalents $ 665
OTHER
Deposits 125
-----------
Total Assets $ 790
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
CURRENT LIABILITIES
Accounts payable - trade $ 11,039
Advances from related parties 647,627
Notes payable - Technology sublicense 586,946
Directors fees payable 43,267
Accrued interest payable 67,070
-----------
Total Current Liabilities 1,355,949
-----------
STOCKHOLDERS' EQUITY
Preferred stock, no par value;
20,000,000 shares authorized at September 30, 1999
0 shares issued and outstanding at September 30, 1999 --
Common stock $.00001 par value;
500,000,000 shares authorized at September 30, 1999;
17,585,000 shares issued and outstanding at September 30, 1999 176
Paid - in capital 3,993,816
Accumulated deficit through exploration stage (5,349,151)
-----------
Total Stockholders' Equity (1,355,159)
-----------
Total Liabilities and Stockholders' Equity $ 790
===========
The accompanying notes are an integral part of the financial statements.
F-16
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
VEGA-ATLANTIC CORPORATION
(An Exploration Stage Company)
Statements of Operations
Inception
(January 28,
For the 3 Months For the 6 Months 1987) to
Ended Sept. 30, Ended Sept. 30, September 30,
1999 1998 1999 1998 1999
------------ ------------ ------------ ------------ ------------
REVENUES
<S> <C> <C> <C> <C> <C>
Sales $ -- $ -- $ -- $ -- $ --
------------ ------------ ------------ ------------ ------------
Total Revenues -- -- -- -- --
COST OF SALES -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Gross Profit -- -- -- -- --
------------ ------------ ------------ ------------ ------------
OPERATING EXPENSES
Research and development -- -- -- -- 783,182
Claims maintenance fees 21,300 21,300 21,300 50,704 72,004
Claims exploration services 1,360 -- 1,360 -- 1,360
Claims staking and mangement 1,935 -- 1,935 8,698 38,443
Overhead and administration 169,485 75,000 412,035 150,000 1,887,117
Legal and accounting 2 141 3,567 10,649 68,772
Transfer agent fees 75 605 295 7,472 12,865
Director's fees 1,500 1,500 3,000 3,000 31,500
Other administrative costs 202 3,007 1,890 6,266 34,486
Consultants -- -- -- -- 81,076
Printing and stationary -- -- -- 4,008 45,886
------------ ------------ ------------ ------------ ------------
Total Operating Expenses 195,859 101,553 445,382 240,797 3,056,691
------------ ------------ ------------ ------------ ------------
Loss from Continued Operations (195,859) (101,553) (445,382) (240,797) (3,056,691)
------------ ------------ ------------ ------------ ------------
Discontinued Operations:
Loss from discontinued operations of subsidiary
Century Manufacturing, Inc. -- -- -- -- (1,787,000)
Loss from Loan Advances to subsidiary, Century
Manufacturing, Inc. written off -- -- -- -- (590,773)
Gain on Disposal of subsidiary Century
Manufacturing, Inc. -- -- -- -- 171,144
------------ ------------ ------------ ------------ ------------
Net Loss from Discontinued Operations -- -- -- -- (2,206,629)
------------ ------------ ------------ ------------ ------------
Net Loss from Operations (195,859) (101,553) (445,382) (240,797) (5,263,320)
------------ ------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE)
Interest Income -- -- -- -- 2
Interest Expense (29,175) (7,609) (52,729) (12,393) (85,833)
------------ ------------ ------------ ------------ ------------
Total Other Income (Expense) (29,175) (7,609) (52,729) (12,393) (85,831)
------------ ------------ ------------ ------------ ------------
NET (LOSS) $ (225,034) $ (109,162) $ (498,111) $ (253,190) $ (5,349,151)
============ ============ ============ ============ ============
Earnings (Loss) Per Share - Basic $ (0.013) $ (0.007) $ (0.028) $ (0.017) $ (0.908)
============ ============ ============ ============ ============
Weighted Average Number of
Common Shares Outstanding 17,585,000 14,555,000 17,585,000 14,555,000 5,889,063
============ ============ ============ ============ ============
The accompanying notes are an integral part of the financial statements
F-17
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
VEGA-ATLANTIC CORPORATION
(An Exploration Stage Company)
Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
Inception
(January 28,
For the 3 Months For the 6 Months 1987) to
Ended Sept. 30, Ended Sept. 30, June 30,
1999 1998 1999 1998 1999
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C> <C> <C>
Net (loss) $ (225,034) $ (109,162) $ (498,111) $ (253,190) $(3,662,161)
Adjustments to reconcile net (loss) to cash
Non-cash loss on sale of subsidiary -- -- -- -- 1,687,000
Non-cash research and development expenses -- -- -- -- 783,182
Non-cash interest recognized through discount
adjustment 8,750 -- 17,500 -- 18,764
Non-cash stock issued in settlement of payables
and for services -- -- -- -- 84,992
Changes in Assets and Liabilities
Deposits -- -- -- -- (125)
Accounts payable (10,102) -- (7,368) (25,203) 11,039
Directors fees payable 1,500 1,500 3,000 3,000 43,267
Accrued interest payable 20,426 7,608 35,230 12,392 67,070
----------- ----------- ----------- ----------- -----------
Net Cash Flows Used for Operating Activities (204,460) (100,054) (449,749) (263,001) (2,653,962)
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Advances from affiliates - net 204,085 99,000 450,135 262,500 647,627
Purchase of subsidiary -- -- -- -- (100,000)
Sale of stock, net of offering costs -- -- -- -- 2,107,000
----------- ----------- ----------- ----------- -----------
Net Cash Flows Provided by Financing Activities 204,085 99,000 450,135 262,500 2,654,627
----------- ----------- ----------- ----------- -----------
Net increase in cash (375) (1,054) 386 (501) 665
Cash and cash equivalents - Beginning of period 1,040 1,712 279 1,159 --
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents - End of period $ 665 $ 658 $ 665 $ 658 $ 665
=========== =========== =========== =========== ===========
NON-CASH ACTIVITIES
During 1987, 750,000 shares of common stock with a value of $850 were issued for services performed.
During 1989, 4,250,000 shares of common stock with a value of $1,000 were issued for services performed.
During 1996, Century Manufacturing, Inc. was purchased for $100,000 through an advance to Century and the issuance of 1,000,000
shares of common stock valued at $1,687,000.
During 1997, a $50,000 advance from an affiliate was repaid through issuance of stock.
During 1997, Century Manufacturing, Inc. was sold to related parties in exchange for reductions in advances from those parties.
During the 1999 fiscal year, the Company issued 15,000,000 common shares in exchange for $75,000 in mining claims.
During the 1999 fiscal year, the Company entered into $600,000 of loan agreements in exchange for a technology sub-license.
During the 1999 fiscal year, the Company issued 1,000,000 shares of common stock worth $140,000 pursuant to a technology
sub-license agreement.
The Company has accrued interest expense of $67,070 on advances and notes, has recognized an additional $18,764 of interest
through discount adjustments and has paid interest of $0.
The accompanying notes are an integral part of the financial statements.
F-18
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
VEGA-ATLANTIC CORPORATION
(An Exploration Stage Company)
Statements of Stockholders' Equity
Deficit
Accumulated
Common Stock During
--------------------- Paid - in Development
Shares Amount Capital Stage Total
------ ------ ------- ----- -----
<S> <C> <C> <C> <C> <C>
Issued for services performed,
February 25 ($.0125 per share) 20,000 $ 1 $ 249 $ -- $ 250
Issued for services performed,
February 25 ($.02 per share) 5,000 -- 100 -- 100
Issued for services performed,
February 25 ($.0007 per share) 725,000 7 493 -- 500
Net Loss, Year ended December 31, 1987 -- -- -- (8,791) (8,791)
--------- --------- --------- --------- ---------
Balance, December 31, 1987 750,000 8 842 (8,791) (7,941)
Net loss, Year ended December 31, 1988 -- -- -- (1,000) (1,000)
--------- --------- --------- --------- ---------
Balance, December 31, 1988 750,000 8 842 (9,791) (8,941)
Issued for services performed,
July 20 ($.0001 per share) 4,250,000 42 958 -- 1,000
Net loss, Year ended December 31, 1989 -- -- -- (2,700) (2,700)
--------- --------- --------- --------- ---------
Balance, December 31, 1989 5,000,000 50 1,800 (12,491) (10,641)
Net loss, Year ended December 31, 1990 -- -- -- (875) (875)
--------- --------- --------- --------- ---------
Balance, December 31, 1990 5,000,000 50 1,800 (13,366) (11,516)
Net loss, Year ended December 31, 1991 -- -- -- (2,900) (2,900)
--------- --------- --------- --------- ---------
Balance, December 31, 1991 5,000,000 50 1,800 (16,266) (14,416)
Net loss, Year ended December 31, 1992 -- -- -- (1,235) (1,235)
--------- --------- --------- --------- ---------
Balance, December 31, 1992 5,000,000 50 1,800 (17,501) (15,651)
Net loss, Year ended December 31, 1993 -- -- -- (6,775) (6,775)
--------- --------- --------- --------- ---------
Balance, December 31, 1993 5,000,000 50 1,800 (24,276) (22,426)
--------- --------- --------- --------- ---------
(Continued)
The accompanying notes are an integral part of the financial statements.
F-19
<PAGE>
VEGA-ATLANTIC CORPORATION
(An Exploration Stage Company)
Statements of Stockholders' Equity
(Continued)
Deficit
Accumulated
Common Stock During
-------------------------- Paid - in Development
Shares Amount Capital Stage Total
------ ------ ------- ----- -----
Balance, December 31, 1993 5,000,000 50 1,800 (24,276) (22,426)
Net loss, Year ended December 31, 1994 -- -- -- (4,875) (4,875)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1994 5,000,000 50 1,800 (29,151) (27,301)
Shareholder forgiveness of accounts
payable, April 17, 1995 -- -- 27,301 -- 27,301
Sale of stock, May 8, 1995 100,000 1 101,999 -- 102,000
Net loss, year ended December 31, 1995 -- -- -- (95,574) (95,574)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1995 5,100,000 51 131,100 (124,725) 6,426
Issuance of stock to purchase
subsidiary, March 28, 1996 1,000,000 10 -- -- 10
Net loss, quarter ended March 31, 1996 -- -- -- (23,357) (23,357)
----------- ----------- ----------- ----------- -----------
Balance, March 31, 1996 6,100,000 61 131,100 (148,082) (16,921)
Sale of Stock, May 6, 1996 50,000 1 49,999 50,000
Sale of Stock, May 8, 1996 120,000 1 119,999 120,000
Sale of Stock, May 13, 1996 35,000 35,000 35,000
Sale of Stock, March 12, 1997 1,800,000 18 449,982 450,000
Sale of Stock, April 15, 1997 250,000 3 49,997 50,000
Issuance of Stock in repayment of
Advances, March 12, 1997 200,000 2 49,998 50,000
Net loss, year ended March 31, 1997 (1,089,810) (1,089,810)
----------- ----------- ----------- ----------- -----------
Balance, March 31, 1997 8,555,000 86 886,075 (1,237,892) (351,731)
Sale of Stock, March 13, 1998 3,000,000 30 449,970 450,000
Sale of Stock, March 24, 1998 1,333,333 13 199,987 200,000
Sale of Stock, March 25, 1998 1,306,667 13 195,987 196,000
Sale of Stock, March 26, 1998 360,000 4 53,996 54,000
Net loss, year ended March 31, 1998 (712,457) (712,457)
----------- ----------- ----------- ----------- -----------
Balance, March 31, 1998 14,555,000 $ 146 $ 1,786,015 $(1,950,349) $ (164,188)
=========== =========== =========== =========== ===========
The accompanying notes are an integral part of the financial statements.
F-20
<PAGE>
VEGA-ATLANTIC CORPORATION
(An Exploration Stage Company)
Statements of Stockholders' Equity
(Continued)
Deficit
Accumulated
Common Stock During
------------------------ Paid - in Development
Shares Amount Capital Stage Total
------ ------ ------- ----- -----
Balance, March 31, 1998 14,555,000 146 1,786,015 (1,950,349) (164,188)
Issuance of common shares in exchange 30,000 -- 5,841 -- 5,841
for accounts payable ($.00001
par per share, total $.195 per share
Issuance of common shares in exchange
for technology license agreement ($.00001
par per share, total $.07 per share 1,500,000 15 104,985 -- 105,000
Issuance of common shares in exchange
for profit sharing interest($.00001 par
per share, total $.075 per share) 500,000 5 37,495 -- 37,500
Issuance of SEC Reg D-504 common
shares for cash ($.00001 par per share,
total $.20 per share) 1,500,000 15 299,985 -- 300,000
Net loss, Year ended March 31, 1999 -- -- -- (1,003,701) (1,003,701)
----------- ----------- ----------- ----------- -----------
Balance, March 31, 1999 18,085,000 $ 181 $ 2,234,321 $(2,954,050) $ (719,548)
=========== =========== =========== =========== ===========
The accompanying notes are an integral part of the financial statements.
F-21
</TABLE>
<PAGE>
VEGA-ATLANTIC CORPORATION
Notes to Unaudited Financial Statements
September 30, 1999
- --------------------------------------------------------------------------------
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Vega-Atlantic Corporation (the Company) was incorporated on January 28,
1987 under the laws of the State of Colorado. The Company is an exploration
stage company.
During 1999, the Company exchanged 500,000 restricted common shares for a
profit sharing interest in 213 unpatented lode-mining claims located in the
State of Idaho (Note 2). The exploration and development of these claims
now represents the basis of the Company's operations.
Basis of Accounting
-------------------
The Company utilizes the accrual basis of accounting. Financial statements
have been prepared using generally accepted accounting principles.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Research, Development and Exploration Costs
-------------------------------------------
Research, development and exploration costs are expensed as incurred.
Cash Equivalents
----------------
For purposes of the Statement of Cash Flows, cash equivalents are defined
as investments with original maturities of three months or less.
Valuation of Stock Issued for Third Party Services
--------------------------------------------------
The Company values stock issued for services at the fair value of the
services provided, if known, or at the fair value of the equity instruments
issued.
Going Concern and Continued Operations
--------------------------------------
As of September 30, 1999, there is substantial doubt regarding the
Company's ability to continue as a going concern as the Company has not
generated any revenues from operations, has a working capital deficit of
$1,355,284, and has a stockholders' deficit of $1,355,159. The Company's
successful financial operations and movement into an operating basis are
contingent on the development of the lode mining claims and the continuing
ability of generating capital financing. The Company intends to finance
operations for the next twelve months through additional common stock
offerings and advances.
Earnings Per Share
------------------
As of September 30, 1999, there were no warrants or stock options granted
that would affect the earnings per share calculation. The Company had notes
payable that could be converted into 500,000 shares of common stock. The
conversion of the notes would have an anti-dilutive effect, therefore, the
Company has presented only the basic earnings per share calculation. The
basic earnings per share calculation has been adjusted for the one for two
reverse stock split occurring in 1995.
F-22
<PAGE>
VEGA-ATLANTIC CORPORATION
Notes to Unaudited Financial Statements
September 30, 1999
- --------------------------------------------------------------------------------
NOTE 2: STOCKHOLDERS' EQUITY
Common Stock
------------
During 1987 and 1989, the Company issued 10,000,000 shares of common stock
to then officers and directors in exchange for services performed. Amounts
representing the services were expensed in the years performed.
Effective May 1, 1995, the Company adopted a reverse split of the
outstanding shares of common stock. Authorized shares and par value
remained unchanged.
On May 8, 1995, the Company sold 100,000 shares of common stock for
$102,000.
On March 28, 1996, the Company acquired 100 percent of the issued and
outstanding shares of Century Manufacturing, Inc., in exchange for the
Company issuing 1,000,000 shares of common stock. The Company's shares were
valued at $1,687,000 based on the market value of the common stock as of
the date of issuance. The Company also provided an additional $100,000 in
cash in the transaction. The Company later transferred this ownership
interest in Century with a related party in partial repayment of advances
from the related party.
On March 12, 1997, the Company issued 200,000 shares of common stock as
partial repayment of an advance.
On March 12, 1997, the Company issued 2,255,000 shares of common stock for
$705,000 pursuant to a private placement offering.
On March 26,1998, the Company issued $6,000,000 shares of common stock for
$900,000 pursuant to a private placement offering.
In March 1998 the Company entered into an agreement to issue 15,000,000
restricted shares of common stock in exchange for the rights to 173
unpatented lode-mining claims located in Camas County, Idaho. The agreement
was between Vega-Atlantic Corporation and Geneva Resources, Inc.
("Geneva"). This agreement was subsequently rescinded and a subsequent
joint venture agreement between the same two parties was signed March
28,1999 (Note 3). The second agreement required the issuance of 500,000
common shares to Geneva.
In January of 1999, the Company settled a $5,841 accounts payable balance
with the issuance of 30,000 shares of common stock.
Pursuant to a private placement memorandum dated March 17, 1999, the
Company offered 3,000,000 shares of common stock at $.20 per share. This
offering was used for continued financing of the exploration, development
and expansion programs currently being conducted on the Company's mining
claims, for management consulting fees and to provide working capital. As
of March 31, 1999, the Company had received payment for 1,500,000 shares of
the offering. No further shares were subscribed as part of the offering.
F-23
<PAGE>
VEGA-ATLANTIC CORPORATION
Notes to Unaudited Financial Statements
September 30, 1999
- --------------------------------------------------------------------------------
NOTE 2: STOCKHOLDERS' EQUITY (Continued)
On March 18,1999, the Company also entered into a Technology Sub-License
Agreement with Geneva and AuRIC Metallurgical Laboratories, Inc. ("AuRIC")
(Note 4). This agreement required the issuance of 1,000,000 common shares
to AuRIC and a $100,000 convertible note payable to Geneva. The shares were
valued at the trading value as of the date of issuance, or $140,000.
On March 28, 1999, the Company entered into a Joint Venture Agreement with
Geneva (Note 3). This agreement required the issuance of 500,000 common
shares to Geneva.
Dividends may be paid on outstanding shares as declared by the Board of
Directors. Each share of common stock is entitled to one vote.
NOTE 3: INVESTMENT IN PROFIT SHARING INTEREST
On March 28,1999, Geneva Resources, Inc. entered into a profit sharing
agreement with the Company. Under terms of the agreement, Geneva received
500,000 restricted shares of common stock in the Company in exchange for
the sale of a future profit sharing interest. The Company will be
responsible to provide all funding and will be the operating partner. The
Company will initially retain 80% of the profits resulting from the
agreement. After the Company is repaid all of its invested capital, the
profit distribution will be 51% to the Company and 49% to Geneva Resources,
Inc. There are 213 unpatented lode-mining claims that form the subject of
this arrangement known as the Vega Claims. As of March 31, 1999 there were
no jointly controlled assets pursuant to the agreement.
The Company now owns a profit sharing interest in 213 unpatented
lode-mining claims. As the 500,000 shares of common stock cannot be
marketed for a period of twelve months from the date of issuance, the
Company has valued the profit sharing interest at the trading value as of
the date of issuance, $75,000. The profit sharing interest was recorded as
a research and development expense for the year ended March 31, 1999.
As the lode mining claims are developed, the equity method of accounting
will be utilized to account for the joint venture agreement with Geneva.
The Company will have majority accounting control over the development of
the claims. As of September 30, 1999, no profit had been generated by the
development of the claims.
NOTE 4: TECHNOLOGY SUBLICENSE AGREEMENT
In March of 1999, the Company entered into a definitive sub-license
agreement with Geneva Resources, Inc. ("Geneva"), to utilize assay and
metallurgical technology, know-how, and rights to technological processes
developed for the Blackhawk mineralization by AuRIC Metallurgical
Laboratories, Inc. ("AuRIC"). This sub-license is for non-exclusive use in
the Company's Vega Claim area in the State of Idaho for a period not less
than 40 years. Pursuant to this agreement,
F-24
<PAGE>
VEGA-ATLANTIC CORPORATION
Notes to Unaudited Financial Statements
September 30, 1999
- --------------------------------------------------------------------------------
the Company issued a $100,000 convertible promissory note to Geneva
Resources, Inc. and the Company also issued 1,000,000 restricted common
shares to AuRIC. The promissory note bears interest at 8% per annum and is
convertible into 500,0000 common shares at the sole option of the holder at
any time after October 15, 1999. Pursuant to the same agreement the Company
also issued non-convertible promissory notes to both Geneva and AuRIC in
the amount of $250,000 to each company. These are 3% interest bearing notes
and are payable upon the transfer of the technology. As these notes bear
interest below market value, the Company has used an imputed interest rate
of 10%. The imputed value of these notes at issuance was $234,091 to each
company.
As of September 30, 1999 the promissory notes and common stock have been
issued to the various parties, however, the related technology has not been
transferred. These promissory notes become due and payable upon the
transfer of the technology. Transfer of the technology will occur after
completion of pilot scale testing. The technology is scheduled for transfer
during 1999. The Company has expensed the amounts paid pursuant to the
agreement as research and development expense.
NOTE 5: ADVANCES AND NOTES PAYABLE
Advances and Notes Payable are comprised of the following:
Advances
--------
1999
----
Investor Communications Int'l, Inc. $436,535
Tri-Star Financial Services, Inc. 143,918
Amero-can Marketing, Inc. 53,710
Newport Capital Corporation 13,464
--------
Total Advances $647,627
========
All advances are payable on demand and bear 10% simple interest. There is
$54,732 of accrued interest on the advances as of September 30,1999.
Notes Payable
-------------
To Geneva Resources, Inc. bearing interest at 8% per
annum. The note is convertible into 500,000 shares of
common tock at the sole option of the holder at any
time after October 15, 1999. The note is payable on
demand. $ 100,000
To AuRIC Metallurgical Laboratories, LLC, bearing
interest at 3% per annum, simple interest on the
average monthly balance outstanding. The note is dated
March 18, 1999 and has no stated maturity date. 250,000
F-25
<PAGE>
VEGA-ATLANTIC CORPORATION
Notes to Unaudited Financial Statements
September 30, 1999
- --------------------------------------------------------------------------------
NOTE 5: ADVANCES AND NOTES PAYABLE (Continued)
Discount on AuRIC note payable to impute interest at 10% (6,527)
To Geneva Resources, Inc., bearing interest at 3% per
annum, simple interest on the average monthly balance
outstanding. The note is dated March 18, 1999 and has
no stated maturity date. 250,000
Discount on Geneva note payable to impute interest at
10% (6,527)
-----------
Total Notes Payable $ 586,946
===========
Accrued interest on the notes payable as of September 30, 1999
amounted to $12,338. The Company has also recognized an additional
$18,764 of imputed interest on the notes as of September 30, 1999.
NOTE 6: INCOME TAXES
The Company has incurred financial losses for each year since inception. At
March 31, 1998 and 1999, the Company had accumulated losses of $1,950,349
and $2,954,050, respectively. As a result of these operating loss carry
forwards, the Company generated deferred tax assets of approximately
$663,119 and $995,586, respectively, which expire between the years 1998
and 2008. The Company had $8,791 of previously incurred losses that could
not be carried over to 1999. Deferred tax assets resulting from these
carryforwards were as follows:
1998 1999
---- ----
Deferred tax assets $ 663,119 $ 995,586
Less: Valuation allowance (663,119) (995,586)
--------- ---------
$ -0- $ -0-
========= =========
NOTE 7: RELATED PARTY TRANSACTIONS
The Company and its subsidiary have had various transactions with related
parties, which have been recorded in the financial statements. These
transactions have resulted primarily in notes or advances payable to the
various related parties.
NOTE 8: MANAGEMENT SERVICES AGREEMENT
The Company has entered into a management services agreement with Investor
Communications International, Inc. ("Investor Communications") to provide
management of the day-to-day operations of the Company. The management
services agreement requires an average monthly payment of $75,000 for
services rendered. This contract runs from April 1, 1999 through September
30, 2000.
The sole director and officer of the Company is a part of the management
team provided by Investor Communications.
F-26
<PAGE>
VEGA-ATLANTIC CORPORATION
Notes to Unaudited Financial Statements
September 30, 1999
- --------------------------------------------------------------------------------
NOTE 9: SUBSEQUENT EVENTS
On November 11, 1999, the Company entered into a letter of intent with
Golden Cycle De Panama Inc., a corporation organized under the laws of the
Republic of Panama ("Golden Cycle") regarding acquisition of one hundred
percent (100%) of the issued and outstanding shares of common stock of
Golden Cycle. Under the terms of the proposed agreement, the Company would
pay to $100,000 and issue 200,000 shares of its restricted common stock to
Golden Cycle. Golden Cycle owns a gold concession consisting of
approximately 11.58 square miles in the northern province of Veraguas,
Conception River Area, in the Republic of Panama. Management believes that
the concession contains both hard rock and alluvial gold prospects. Upon
consummation of a definitive agreement, management intends to conduct
detailed historic research in conjunction with geological and engineering
research to initiate an exploration program on placer and hard rock gold
occurrences.
On January 12, 2000, the Company entered into a letter of intent with
Golden Thunder Resources Ltd. ("Golden Thunder") to purchase from Golden
Thunder approximately eighty percent (80%) of the issued and outstanding
shares of common stock of Tun Resources Inc., a Canadian corporation ("Tun
Resources"), with an option to purchase the remaining twenty percent (20%)
of the issued and outstanding shares of Tun Resources. Under the terms of
the proposed agreement, the Company would pay $1,180,000 and issue
1,600,000 shares of its restricted common stock to Golden Thunder. Tun
Resources is the major stakeholder in two gold exploration and development
joint ventures in the Yunnan Province of China. Tun Resources owns an
approximate eighty-two percent (82%) joint venture interest in the Yuntong
Project, which consists of a gold concession comprising approximately 30
square kilometers. Tun Resources also owns an approximate eighty percent
(80%) joint venture interest in the Lutong Project, which consists of a
gold concession comprising approximately 100 square kilometers in the same
province.
F-27
<PAGE>
VEGA-ATLANTIC CORPORATION
(An Exploration Stage Company)
UNAUDITED CONDENSED
PROFORMA FINANCIAL STATEMENTS
TABLE OF CONTENTS
Page
----
Unaudited Condensed Proforma Balance Sheet - December 31, 1999 F-29
Unaudited Condensed Proforma Statements of Operations:
For the Nine Months Ended December 31, 1999 F-30
For the Year Ended March 31, 1999 F-31
Schedule of Assumptions and Explanatory Notes F-32 - F-34
F-28
<PAGE>
<TABLE>
<CAPTION>
VEGA ATLANTIC CORPORATION
(An Exploration Stage Company)
UNAUDITED PROFORMA CONDENSED BALANCE SHEETS
December 31, 1999
Vega Tun Consolidated
Atlantic Resources Proforma Balance
Corporation Inc. Adjustments Sheet
----------- ---- ----------- -----
<S> <C> <C> <C> <C>
Assets
Current Assets
Cash and Cash Equivalents $ 238 $ -- $ -- $ 238
Other Assets
Advances Receivable 10,000 -- -- 10,000
Other Assets 125 1 -- 126
----------- ----------- ----------- -----------
Total Assets $ 10,363 $ 1 $ -- $ 10,364
=========== =========== =========== ===========
Liabilities and Stockholders' Equity
Liabilities
Current Liabilities $ 1,550,266 $ 83,000 $ -- $ 1,633,266
Minority Interest (41,880) (41,880)
Stockholders' Equity
Common Stock 176 2,505,862 (2,505,856) 182
Paid in Capital 2,306,826 1,825,000 (1,765,006) 2,366,820
Accumulated Deficit through
Exploration Stage (3,846,905) (4,413,861) 4,312,742 (3,948,024)
----------- ----------- ----------- -----------
Total Liabilities and Stockholders' Equity $ 10,363 $ 1 $ -- $ 10,364
=========== =========== =========== ===========
See Schedule of Assumptions and Explanatory Notes.
F-29
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
VEGA ATLANTIC CORPORATION
(An Exploration Stage Company)
UNAUDITED PROFORMA CONDENSED STATEMENTS OF OPERATIONS
For the Nine Months Ended December 31, 1999
Vega Tun Consolidated
Atlantic Resources Proforma Operating
Corporation Inc. Adjustments Statement
----------- ---- ----------- ---------
<S> <C> <C> <C> <C>
Operating Expenses $ (596,960) $ (53,000) $ (101,999) $ (751,959)
------------ ------------ ------------ ------------
Operating Loss (596,960) (53,000) (101,999) (751,959)
Other Expenses
Interest Expense (85,895) -- -- (85,895)
------------ ------------ ------------ ------------
Net Loss $ (682,855) $ (53,000) $ (101,999) $ (837,854)
============ ============ ============ ============
Distribution of Net Loss:
To Controlling Interest $ (682,855) $ (42,400) $ (81,599) $ (806,854)
To Minority Interest -- (10,600) (20,400) (31,000)
------------ ------------ ------------ ------------
Net Loss $ (682,855) $ (53,000) $ (101,999) $ (837,854)
============ ============ ============ ============
Earnings (Loss) Per Share - Basic $ (0.039) $ (26,500) $ (0.044)
============ ============ ============
Weighted Average Number of
Common Shares Outstanding 17,585,000 2 599,998 18,185,000
============ ============ ============ ============
See Schedule of Assumptions and Explanatory Notes.
F-30
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
VEGA ATLANTIC CORPORATION
(An Exploration Stage Company)
UNAUDITED PROFORMA CONDENSED STATEMENT OF OPERATIONS
For the Year Ended March 31, 1999
Vega Tun Consolidated
Atlantic Resources Proforma Operating
Corporation Inc. Adjustments Statement
----------- ---- ----------- ---------
<S> <C> <C> <C> <C>
Operating Expenses $ (1,180,597) $ (82,000) $ (2,479,088) $ (3,741,685)
------------ ------------ ------------ ------------
Operating Loss (1,180,597) (82,000) (2,479,088) (3,741,685)
Other Expenses
Interest Expense (33,104) -- -- (33,104)
------------ ------------ ------------ ------------
Net Loss $ (1,213,701) $ (82,000) $ (2,479,088) $ (3,774,789)
============ ============ ============ ============
Distribution of Net Loss:
To Controlling Interest $ (1,213,701) $ (65,600) $ (1,983,270) $ (3,262,571)
To Minority Interest -- (16,400) (495,818) (512,218)
------------ ------------ ------------ ------------
Net Loss $ (1,213,701) $ (82,000) $ (2,479,088) $ (3,774,789)
============ ============ ============ ============
Earnings (Loss) Per Share - Basic $ (0.083) $ (82,000) $ (0.215)
============ ============ ============
Weighted Average Number of
Common Shares Outstanding 14,600,890 1 599,999 15,200,890
============ ============ ============ ============
See Schedule of Assumptions and Explanatory Notes.
F-31
</TABLE>
<PAGE>
VEGA ATLANTIC CORPORATION
(An Exploration Stage Company)
UNAUDITED PROFORMA FINANCIAL STATEMENTS
SCHEDULE OF ASSUMPTIONS AND EXPLANTORY NOTES
NOTE 1: PROPOSED ACQUISITION
Pursuant to a letter of intent dated January 10,2000, Vega Atlantic
Corporation ("the Company") has agreed to a proposed acquisition from
Golden Thunder Resources, Ltd. ("Golden Thunder") an 80% interest in Tun
Resources, Inc. ("Tun"). The Company will also receive a two year option to
purchase the remaining 20% of Tun at fair market value. In exchange for the
acquisition, the Company is required to issue to Golden Thunder 600,000 144
common shares of the Company as of the closing date of the acquisition and
an additional 1,000,000 144 common shares upon payment of the final capital
contribution. The Company is required to make a total of $1,180,000 is
capital contributions to Tun by August 15, 2000. The proposed acquisition,
if it is consummated, will be shown using the purchase method.
NOTE 2: SIGNIFICANT ASSUMPTIONS
The December 31, 1999 balance sheets and Statements of Operations for the
nine months ended December 31, 1999 are management prepared. The Statement
of Operations presented for the Company for the year ended March 31, 1999
has been audited. The Statement of Operations presented for Tun Resources,
Inc. for the year ended March 31, 1999 is management prepared. All
management prepared financial statements contain all normal and recurring
adjustments required to present the financial information on a basis
consistant with the presentation of the Companies' annual audited financial
statements.
Proforma Balance Sheets
-----------------------
The pro forma balance sheets reflect the balance sheets of the Company and
Tun Resources, Inc. as of December 31, 1999. The consolidated balance sheet
is presented as if the acquisition had occurred on December 31, 1999.
Proforma Statements of Operations
---------------------------------
The pro forma statements of operations for the nine months ended December
31, 1999 and the year ended March 31, 1999 reflect the statements of
operations of the Company and of Tun Resources, Inc. Pro forma adjustments
have been made to give effect to these transactions as if they had occurred
as of April 1, 1999 and April 1, 1998, respectively.
F-32
<PAGE>
VEGA ATLANTIC CORPORATION
(An Exploration Stage Company)
UNAUDITED PROFORMA FINANCIAL STATEMENTS
SCHEDULE OF ASSUMPTIONS AND EXPLANTORY NOTES
NOTE 3: PROFORMA ADJUSTMENTS
Proforma Balance Sheets
-----------------------
The Company has adjusted the balance sheet for the issuance of 600,000
common shares to Golden Thunder for the acquisition of the 80% interest in
Tun. The proforma balance sheet assumes the closing occurred effective
December 31, 1999. The Company's $.00001 par common stock was valued at
$60,000 based on the market price of $.10 per share on December 31, 1999.
At December 31, 1999, Tun Resources had assets of $1, current liabilities
of $83,000 and a stockholders' deficit of $82,999. Twenty percent of the
stockholders' deficit ($16,600) is attributable to the minority interest.
The Company has recorded a joint venture investment of $126,399. As any
future profits related to Tun's joint venture interests cannot be estimated
until additional exploration is performed, the Company has fully impaired
the value of its joint venture investment.
The $126,399 impairment loss has been allocated $25,280 to the minority
interest and $101,119 to "Deficit Accumulated During the Exploration
Stage".
Proforma Statement of Operations
--------------------------------
The Company has adjusted the December 31, 1999 statement of operations for
the impairment of its joint venture interests. The Company initially
recorded its joint venture interests at $101,999 on the acquisition of Tun
Resources, Inc. As any future profits related to Tun's joint venture
interests cannot be estimated until additional exploration is performed,
the value of the joint venture interests has been impaired. An adjustment
for the $101,999 impairment loss has been recorded as an operating expense.
Assuming the acquisition took place April 1, 1999 for the December 31, 1999
statement of operations, the Company would have an additional 600,000
shares outstanding for the entire period. The two Tun shares outstanding
would be eliminated due to the consolidation. The earnings per share of the
consolidated company reflect only the net losses applicable to the
controlling interest.
The Company has adjusted the March 31, 1999 statement of operations for the
impairment of its joint venture interests. The Company initially recorded
its joint venture interests at $2,479,088 on the acquisition of Tun
Resources, Inc. As any future profits related to Tun's joint venture
interests cannot be estimated until additional exploration is performed,
the value of the joint venture interests has been impaired. An adjustment
for the $2,479,088 impairment loss has been recorded as an operating
expense.
F-33
<PAGE>
VEGA ATLANTIC CORPORATION
(An Exploration Stage Company)
UNAUDITED PROFORMA FINANCIAL STATEMENTS
SCHEDULE OF ASSUMPTIONS AND EXPLANTORY NOTES
NOTE 3: PROFORMA ADJUSTMENTS (Continued)
Assuming the acquisition took place April 1, 1998 for the March 31, 1999
statement of operations, the Company would have an additional 600,000
shares outstanding for the entire period. The only Tun share outstanding
would be eliminated due to the consolidation. The earnings per share of the
consolidated company reflect only the net losses applicable to the
controlling interest.
F-34
<PAGE>
TUN RESOURCES INC.
(An exploration stage company)
FINANCIAL STATEMENTS
FOR THE FOUR MONTH PERIOD ENDED MARCH 31, 2000
FOR THE YEARS ENDED NOVEMBER 30, 1999 AND 1998
FOR THE PERIOD JANUARY 16, 1997 TO NOVEMBER 30, 1997
FOR THE PERIOD JANUARY 10, 1994 (INCEPTION) TO MARCH 31, 2000
AUDITORS' REPORT F-36
BALANCE SHEETS F-33
STATEMENTS OF OPERATIONS AND DEFICIT F-38
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) F-39
STATEMENTS OF CASH FLOW F-40
NOTES TO FINANCIAL STATEMENTS F-41 - F-44
F-35
<PAGE>
1205 - 1095 West Pender Street
LABONTE & CO. Vancouver, BC Canada
CHARTERED ACCOUNTANTS V6E 2M6
--------------------- Telephone (604) 682-2778
Facsimile (604) 689-2778
Email: [email protected]
AUDITORS' REPORT
- --------------------------------------------------------------------------------
To the Director of Tun Resources Inc.
We have audited the balance sheets of Tun Resources Inc. (an exploration stage
company) as at March 31, 2000 and November 30, 1999, 1998 and 1997 and the
statements of loss and deficit, stockholders' equity (deficiency) and cash flows
for the four months ended March 31, 2000 each of the years in the two year
period ended November 30, 1999, the period from January 16, 1997 to November 30,
1997 and the period from January 10, 1994 (inception) to March 31, 2000. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at March 31, 2000 and
November 30, 1999, 1998 and 1997 and the statements of loss and deficit for the
four months ended March 31, 2000, each of the years in the two year period ended
November 30, 1999, the period from January 16, 1997 to November 30, 1997 and the
period from January 10, 1994 (inception) to March 31, 2000 in accordance with
generally accepted accounting principles in the United States.
/s/ CHARTERED ACCOUNTANTS
-------------------------
CHARTERED ACCOUNTANTS
Vancouver, B.C.
April 12, 2000
COMMENTS BY AUDITORS FOR U.S. READERS ON CANADA-UNITED STATES
REPORTING DIFFERENCES
In the United States, reporting standards for auditors' would require the
addition of an explanatory paragraph following the opinion paragraph when the
financial statements are affected by a significant uncertainty such as referred
to in Note 1 regarding the Company's ability to continue as a going concern. Our
report to the directors dated April 12, 2000 is expressed in accordance with
Canadian reporting standards which do not permit a reference to such
uncertainties in the auditors' report when the uncertainties are adequately
disclosed in the financial statements.
/s/ CHARTERED ACCOUNTANTS
-------------------------
CHARTERED ACCOUNTANTS
Vancouver, B.C.
April 12, 2000
F-36
<PAGE>
<TABLE>
<CAPTION>
TUN RESOURCES INC.
(An exploration stage company)
BALANCE SHEETS
March 31, November 30, November 30, November 30,
2000 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------
ASSETS
CURRENT
<S> <C> <C> <C> <C>
Cash $ 4,675 $ -- $ -- $ --
MINERAL PROPERTY JOINT VENTURES (Note 3) 1 1 1 1
- -----------------------------------------------------------------------------------------------------------
$ 4,676 $ 1 $ 1 $ 1
===========================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Due to DiamondWorks Ltd. (Note 4) $ -- $ -- $ 2,505,861 $ 2,453,861
Due to Golden Thunder Resources Ltd. (Note 5) -- 83,000 30,000 --
Due to Vega-Atlantic Corporation (Note 6) 140,000 -- -- --
140,000 83,000 2,535,861 2,453,861
CONTINGENCIES AND COMMITMENTS (Note 10)
STOCKHOLDERS' EQUITY (DEFICIENCY)
Capital stock (Note 7) 1 2,505,862 1 1
Contributed surplus (Note 8) 4,428,861 1,825,000 1,825,000 1,825,000
Deficit accumulated during the exploration stage (4,564,186) (4,413,861) (4,360,861) (4,278,861)
(135,324) (82,999) (2,535,860) (2,453,860)
$ 4,676 $ 1 $ 1 $ 1
===========================================================================================================
Approved by the director:
- --------------------------------
Director
The accompanying notes are an integral part of these financial statements
F-37
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TUN RESOURCES INC.
(An exploration stage company)
STATEMENTS OF OPERATIONS AND DEFICIT
January 16,
Four months Year ended Year ended 1997 to January 10, 1994
ended March November 30, November 30, November 30, (inception) to
31, 2000 1999 1998 1997 March 31, 2000
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EXPLORATION EXPENSES $ -- $ -- $ 2,000 $ 721,503 $1,460,862
WRITE-DOWN OF MINERAL
PROPERTY JOINT VENTURES (Note 3) 125,000 53,000 80,000 420,000 3,077,999
GENERAL AND ADMINISTRATION 25,325 -- -- -- 25,325
- ----------------------------------------------------------------------------------------------------------------------------------
NET LOSS FOR THE PERIOD 150,325 53,000 82,000 1,141,503 4,564,186
DEFICIT ACCUMULATED DURING THE
EXPLORATION STAGE, beginning of the period 4,413,861 4,360,861 4,278,861 3,137,358 --
DEFICIT ACCUMULATED DURING THE
EXPLORATION STAGE, end of period $4,564,186 $4,413,861 $4,360,861 $4,278,861 $4,564,186
==================================================================================================================================
The accompanying notes are an integral part of these financial statements
F-38
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TUN RESOURCES INC.
(An exploration stage company)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR THE PERIOD FROM JANUARY 10, 1994 (INCEPTION) TO MARCH 31, 2000
Deficit
Accumulated
Common Stock During
Number of Contributed Exploration
shares Amount Surplus Stage Total
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A common share issued on inception
for cash 1 $ 1 $ -- $ -- $ 1
Class B common share issued January 15,
1996 for settlement of debt 1 710,000 -- -- 710,000
Class B common share gifted back to Company
on January 15, 1996 and cancelled (1) (710,000) 710,000 -- --
Net loss for the period from January 10,
1994 (inception) to January 15, 1997 -- -- -- (3,137,358) (3,137,358)
Class B common share issued November 30,
1997 for settlement of debt 1 1,115,000 -- -- 1,115,000
Class B common share gifted back to Company
on November 30, 1997 and cancelled (1) (1,115,000) 1,115,000 -- --
Net loss for the period ended
November 30, 1997 -- -- -- (1,141,503) (1,141,503)
Balance, November 30, 1997 1 1 1,825,000 (4,278,861) (2,453,860)
Net loss for the year -- -- -- (82,000) (82,000)
Balance, November 30, 1998 1 1 1,825,000 (4,360,861) (2,535,860)
Class B common share issued November 29,
1999 for settlement of debt 1 2,505,861 -- -- 2,505,861
Net loss for the year -- -- -- (53,000) (53,000)
Balance, November 30, 1999 2 2,505,862 1,825,000 (4,413,861) (82,999)
Class B common share issued December 17,
1999 for settlement of debt 1 83,000 -- -- 83,000
Class B common share gifted back to Company
on December 17, 1997 and cancelled (2) (2,588,861) 2,588,861 -- --
Other contributed surplus -- -- 15,000 -- 15,000
Net loss for the period -- -- -- (150,325) (150,325)
Balance, March 31, 2000 1 $ 1 $ 4,428,861 $(4,564,186) $ (135,324)
======================================================================================================================
The accompanying notes are an integral part of these financial statements
F-39
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TUN RESOURCES INC.
(An exploration stage company)
STATEMENTS OF CASH FLOWS
January
January 16, 10, 1994
Four months Year ended Year ended 1997 to (inception) to
ended March November 30, November November 30, March 31,
31, 2000 1999 30, 1998 1997 2000
-------- ---- -------- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C> <C> <C>
Net loss for the period $ (150,325) $ (53,000) $ (82,000) $(1,141,503) $(4,564,186)
----------- ----------- ----------- ----------- -----------
Adjustments to reconcile net loss to net cash from
operating activities
- advances from affiliates 155,000 53,000 82,000 1,141,503 4,568,861
----------- ----------- ----------- ----------- -----------
NET CASH FROM OPERATING ACTIVITIES 4,675 -- -- -- 4,675
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES -- -- -- -- --
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES -- -- -- -- --
----------- ----------- ----------- ----------- -----------
INCREASE IN CASH 4,675 -- -- -- --
----------- ----------- ----------- ----------- -----------
CASH, BEGINNING OF PERIOD -- -- -- -- --
----------- ----------- ----------- ----------- -----------
CASH, END OF PERIOD $ 4,675 $ -- $ -- $ -- $ 4,675
=========== =========== =========== =========== ===========
Non-cash transactions:
1. Advances from affiliates - refer to Notes 4, 5 and 6
2. Settlement of advances for shares - refer to Note 7 and Statement of
Stockholders' Equity (Deficiency)
The accompanying notes are an integral part of these financial statements
F-40
</TABLE>
<PAGE>
TUN RESOURCES INC.
(An exploration stage company)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000, NOVEMBER 30, 1999, 1998 AND 1997
- --------------------------------------------------------------------------------
NOTE 1 - NATURE AND CONTINUANCE OF OPERATIONS
The Company was incorporated on October 10, 1989 under the laws of British
Columbia, Canada and commenced operations on January 10, 1994. The Company is an
exploration stage company with interests in mineral property joint ventures
located in the People's Republic of China. To date, the Company has not
generated any revenues and has been financed solely from funds invested by its
former parent companies and proposed acquirer Vega-Atlantic Corporation
("Vega"). The Company currently holds interests in two Chinese joint ventures
and has committed to invest an additional $1,717,000 for further exploration
work. Vega has agreed to raise sufficient capital to meet these commitments as a
condition of acquiring control of the Company.
The ability of the Company to continue as a going concern is dependent upon
raising additional capital for its joint ventures and ultimately on generating
profitable operations.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared using generally accepted accounting
principles in the United States and are expressed in United States dollars. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from these estimates.
Mineral property joint ventures
The Company has contractual rights to co-operative joint venture agreements with
Chinese partners. All capital investments are recorded at cost until such time
as the required joint venture contributions have been paid in full. Direct
exploration costs incurred by the Company are expensed as incurred. When
uncertainty of realization of the investment in the joint ventures exists, the
Company records an impairment provision for all contributions to date and the
investment is carried at a nominal value.
Earnings (loss) per share
Earnings (loss) per share information has not been disclosed as it is not
considered meaningful at this stage of the Company's operations.
NOTE 3 - MINERAL PROPERTY JOINT VENTURES
During 1994 the Company entered into four Sino-Foreign co-operative joint
venture agreements with Chinese companies for the exploration and development of
mineral properties located in Yunnan Province of the People's Republic of China.
The Company has made capital contributions to the joint ventures as follows:
F-41
<PAGE>
TUN RESOURCES INC.
(An exploration stage company)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000, NOVEMBER 30, 1999, 1998 AND 1997
- --------------------------------------------------------------------------------
NOTE 3 - MINERAL PROPERTY JOINT VENTURES (con't)
<TABLE>
<CAPTION>
Yuntong JV Lutong JV Datong JV Hongtong JV Total
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Carrying value, January 16, 1997 $ 1 $ 1 $ 1 $ 1 $ 1
Contributions 75,000 145,000 50,000 150,000 420,000
Impairment provision (75,000) (145,000) (50,000) (150,000) (420,000)
Carrying value, November 30, 1997 1 1 1 1 1
Contributions 30,000 35,000 -- 15,000 80,000
Impairment provision (30,000) (35,000) -- (15,000) (80,000)
-------------------------------------------------------------
Carrying value, November 30, 1998 1 1 1 1 1
Contributions 53,000 -- -- -- 53,000
Impairment provision (53,000) -- -- -- (53,000)
Carrying value, November 30, 1997 1 1 1 1 1
Contributions 110,000 15,000 -- -- 125,000
Impairment provision (110,000) (15,000) -- -- (125,000)
Carrying value, March 31, 2000 $ 1 $ 1 $ 1 $ 1 $ 1
=============================================================
</TABLE>
Yuntong Joint Venture
- ---------------------
The Company entered into the Yuntong JV agreement on August 8, 1994 with Yunnan
Province Dianxi Geological Engineering Exploration Development Company. The
agreement was amended on September 18, 1999 and February 12, 2000 whereby the
Company agreed to provide additional investment capital in consideration for an
increase in its interest in the JV and additional properties were added to the
JV. The Company now has the right to acquire a 90% interest for a total
investment of $1,940,000 of which $733,000 has been contributed to date.
Lutong Joint Venture
- --------------------
The Company entered into the Lutong JV agreement on August 12, 1994 with China
National Nuclear Corporation. The agreement was amended on October 26, 1999 and
the Company has the right to acquire up to an 80% interest for a total
investment of $1,290,000 of which $780,000 has been contributed to date.
The Yuntong and Lutong joint ventures are in the process of exploring their
mineral properties and have not yet determined whether these properties contain
reserves that are economically recoverable. Accordingly, the Company is carrying
its interest in the joint ventures at a nominal value of $1 due to the
uncertainty of recovery of the capital contributed to date.
Datong Joint Venture and Hongtong Joint Venture
- -----------------------------------------------
During August 1999 the Datong JV and the Hongtong JV were terminated by mutual
consent of the parties due to poor exploration results and the inability of the
Company to raise additional capital.
NOTE 4 - DUE TO DIAMONDWORKS LTD. ("DIAMONDWORKS")
The Company's former parent, DiamondWorks, provided all the operating and
investing capital for the Company during 1997 through 1999. At November 30, 1998
these advances totalled $2,505,861 and were settled in 1999 by the issuance of
one class B common share.
F-42
<PAGE>
TUN RESOURCES INC.
(An exploration stage company)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000, NOVEMBER 30, 1999, 1998 AND 1997
- --------------------------------------------------------------------------------
NOTE 5 - DUE TO GOLDEN THUNDER RESOURCES LTD. ("GOLDEN THUNDER")
By agreement dated August 4, 1998 the Company granted Golden Thunder, the
current parent company (a public company listed on the Canadian Venture
Exchange), an option to acquire its interest in the Yuntong Joint Venture in
consideration for the issuance of 50,000 common shares of Golden Thunder and the
commitment to make staged payments of $260,000 to be contributed to the joint
venture. Golden Thunder contributed a total of $83,000 to the joint venture but
did not issue any shares. By agreement dated October 14, 1999 Golden Thunder
acquired 100% of the issued and outstanding shares of the Company from
DiamondWorks in consideration for the issuance of 50,000 common shares valued at
$5,000. The outstanding debt of $83,000 was settled by the issuance of one Class
B common share on December 17, 1999 which was gifted back to the Company for no
consideration and returned to treasury and cancelled.
NOTE 6 - DUE TO VEGA-ATLANTIC CORPORATION ("VEGA")
By letter of intent dated January 12, 2000 between the Company, Vega, and Golden
Thunder, Vega agreed to acquire a 80% interest in the Company with a two year
option to purchase the remaining 20% at fair market value. Vega has agreed to
issue 1,600,000 restricted common shares and provide funding of $1,180,000 on or
before August 15, 2000. The closing of the sale is subject to the execution of a
formal agreement and the approval of the British Columbia regulatory authorities
and the shareholders of Golden Thunder. To March 31, 2000 Vega has advanced
$140,000 by way of a loan which is unsecured, non-interest bearing and will be
contributed as capital on closing.
NOTE 7 - CAPITAL STOCK
<TABLE>
<CAPTION>
Authorized:
1,200 Class A common shares, no par value
11,998 Class B common shares, non-voting, no par value
100,000 preferred shares, no par value
Class A common Class B common
Shares Value Shares Value
------ ----- ------ -----
Issued:
<S> <C> <C> <C> <C>
Balance, January 16, 1997 1 $ 1 -- $ --
-------------------------------------------------
Issued during the period -- -- 1 1,115,000
Reacquired by the Company for no consideration and cancelled -- -- (1) (1,115,000)
Balance, November 30, 1997 and 1998 1 1 -- --
Issued during the period -- -- 1 2,505,861
Balance, November 30, 1999 1 1 1 2,505,861
Issued during the period -- -- 1 83,000
Reacquired by the Company for no consideration and cancelled -- -- (2) (2,588,861)
Balance at March 31, 2000 1 $ 1 -- $ --
=================================================
</TABLE>
NOTE 8 - CONTRIBUTED SURPLUS
The Company issued Class B common shares to its former parent companies for
capital provided. These shares were gifted back to the Company for no
consideration and returned to the treasury for cancellation resulting in
contributed surplus.
F-43
<PAGE>
TUN RESOURCES INC.
(An exploration stage company)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000, NOVEMBER 30, 1999, 1998 AND 1997
- --------------------------------------------------------------------------------
NOTE 9 - RELATED PARTY TRANSACTIONS
During the period ended March 31, 2000 the Company paid a management fee of
$25,000 to Golden Thunder, which has a common director.
Refer to Note 6.
NOTE 10 - CONTINGENCIES AND COMMITMENTS
Fair Value of Financial Instruments
- -----------------------------------
The following disclosure of the estimated fair value of financial instruments is
made in accordance with the requirements of SFAS No. 107. Disclosures about Fair
Value of Financial Instruments. The estimated fair value amounts have been
determined by the Company, using available market information and appropriate
valuation methodologies. The fair value of financial instruments classified as
current assets or liabilities including cash and cash equivalents and notes and
accounts payable approximate carrying value due to the short-term maturity of
the instruments.
Uncertainty Due to the Year 2000 Issue
- --------------------------------------
The Year 2000 issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information using
year 2000 dates is processed. In addition, similar problems may arise in some
systems which use certain dates in 1999 to represent something other than a
date. Although the change in date has occurred, it is not possible to conclude
that all aspects of the Year 2000 issue that may affect the Company have been
fully resolved.
Joint Venture Contributions
- ---------------------------
The Company is committed to provide an additional $1,717,000 of investment
capital to maintain its interest in the Yuntong and Lutong joint ventures.
F-44
ARTICLES OF INCORPORATION OF
----------------------------
VEGA-ATLANTIC CORPORATION
-------------------------
The undersigned natural person, being more than eighteen (18) years of age,
hereby establishes a corporation pursuant to the Statutes of Colorado, and
adopts the following Articles of Incorporation:
FIRST: The name of the corporation is VEGA-ATLANTIC CORPORATION.
SECOND: The corporation shall have perpetual existence.
THIRD: (a) Authorized Shares. The aggregate number of shares which the
corporation shall have the authority to tissue is Five Hundred Twenty Million
(520,000) shares. Five Hundred Million (500,000) shares shall be designated
"Common Stock", and shall have a par value of $.00001. Twenty Million
(20,000,000) shares shall be designated "Preferred Stock", and shall be without
par value, and shall be issued for such consideration, expressed in dollars, as
the Board of Directors may, from time to time, determine.
(b) Consideration for Shares. All shares of Common Stock and Preferred
Stock shall be issued by the corporation for cash, property, property, or
services actually performed, for no less than the par value of $.00001 per share
for Common Stock, and no less than the consideration per share authorized by the
Board of Directors for Preferred Stock. All shares shall be fully paid, and
non-assessable.
(c) Issuance of Preferred Stock. The Board of Directors of the Corporation
is authorized to dived the Preferred Stock into as many series, as the Board of
Directors from time to time may determine, and to issue the preferred stock in
such series. The Board of Directors shall determine the number of shares
comprising each series, which number may, unless otherwise provided by the Board
of Directors in creating such series, be increases or decreased from time to
time by action of the Board of Directors. Each series shall be so designated, as
to distinguish the shares thereof, from the shares of all other series. The
Board of directors shall have the authority to fix and determine the following
relative rights and preferences of the shares of any such series of Preferred
Stock:
(i) the rate of dividend, if any;
(ii) whether shares can be redeemed, and if so, the redemption price and
the terms and conditions of the redemption.
(iii) the amount payable upon shares in the event of voluntary, or
involuntary liquidation;
<PAGE>
(iv) sinking fund provision, if any, for redemption or purchase of shares;
(v) the terms and conditions, if any, under which shares may be converted
to common stock; and,
(vi) the voting powers, if any.
(d) Dividends. Dividends in cash, property or shares of the corporation may
be paid upon the Common and Preferred Stock, as and when declared by the Board
of Directors, out of funds of the corporation to the extent, and in the manner
permitted by law.
(e) Voting Rights & Cumulative Voting. Each outstanding share of Common
Stock shall be entitled to one vote, and each fractional share of Common Stock
shall be entitled to a corresponding fractional vote on each matter submitted to
a vote of shareholders. The voting rights of Preferred Stock, if any, shall be
established by the Board of Directors at the time such stock is issued in
series. Cumulative voting shall not be allowed in the election of directors of
the corporation.
(f) Denial of Preemptive Rights. No holder of any shares of the
corporation, whether now or hereafter authorized, shall have any preemptive or
preferential right to acquire any share or securities of the corporation,
including shares or securities held in the treasury of the corporation.
(g) Distribution in Liquidation. Upon any liquidation, dissolution, or
winding up of the corporation, and after paying or adequately providing for the
payment of all its obligations, including any preferences granted to Preferred
Stock, the remainder of the assets of the corporation shall be distributed
either in cash, or in kind, pro-rate to the holders of the Commons Stock and, if
not previously provided for, to the holders of the Preferred stock, without
regard to par value.
(h) Partial Liquidation. The Board of Directors may, from time to time,
distribute to the shareholders in partial liquidation, out of stated capital, or
capital surplus of the corporation, a portion of its assets in cash or property,
subject to the limitations contained in the statutes of Colorado.
FOURTH: One director shall constitute the initial Board, until two additional
directors are appointed by him upon the First Meeting of the Incorporator(s),
his name and address being as follows:
Reed A. Hatkoff
3011 S. Chester Ct.
Denver, Colorado 80231
<PAGE>
FIFTH: The address of the register office of the corporation shall be 3011 S.
Chester Ct., Denver, Colorado 80231. The name of its' initial registered agent
at such address is Reed A. Hatkoff. The corporation may conduct all or part of
its' business, in any other part of Colorado, the United states, or nay other
place in the world it so desires. It may hold, purchase, mortgage, lease, and
convey real and personal property in any of such places.
SIXTH: The corporation shall be entitled to treat the registered holder of any
shares of the corporation as the owner thereof for all purposes, including the
rights deriving from such shares, and not be bound to recognize any equitable or
other claim to, or interest in, such shares or rights deriving from such shares,
unless and until such purchaser, assignee, transferee or other person becomes
the registered holder of such shares, whether or not the corporation shall have
either actual or constructive notice of the interests of such purchaser,
assignee, transferee or other person. The purchaser, assignee, or transferee of
any of the shares of the corporation shall not be entitled to 1) receive notice
of the meetings of the shareholders; 2) to be paid dividends or other sums
payable to the shareholders; 3) or to own, enjoy and exercise any other property
or rights deriving from such shares against the corporation, until the
purchaser, assignee, or transferee has become a registered holder of such
shares.
SEVENTH: The following provisions are inserted for the management of the new
business, and for the conduct of the affairs of the corporation, and the same
are in furtherance of and not in limitation or exclusion of the powers conferred
by law.
(a) Right of Directors to Contract with Corporation. No contract or other
transaction between the corporation and one or more of its' directors, or any
other corporation, firm, association, or entity in which one or more of its'
directors, are directors or officers, or are financially interested, shall be
either void or voidable solely because of such relationship or interest, or
solely because such directors are present at the meeting of the Board of
Directors, or a committee thereof, which authorizes, approves, or ratifies such
contract or transaction, or solely because their votes are counted for such
purpose, if;
(i) The fact of such relationship or interest is disclosed, or known to the
Board of Directors or committee, which authorizes, approves, or ratifies
the contract or transaction by a vote or consent sufficient for the purpose
without counting the votes or consents of such interested directors; or,
(ii) The fact of such relationship or interest is disclosed or known to the
shareholders entitled to vote, and they authorize, approve, or ratify such
contract or transaction by vote or written consent; or,
(iii) The contract or transaction is fair and reasonable to the
corporation.
<PAGE>
Common or interested directors may be counted in determining the presence
of a quorum at the meeting of the Board of Directors or a committee thereof,
which authorizes, approves, or ratifies such contract or transaction.
(b) Corporate Opportunity. The officers, directors, and other members of
management of this corporation, shall be subject to the doctrine of "corporate
opportunities" only insofar as it applies to business opportunities in which
time corporation has expressed an interest as determined from time to time as
determined by this corporation's Board of Directors as evidenced by resolutions
appearing in the corporation's minutes. Once such areas of interest are
delineated, all such business opportunities within such areas of interest, which
come to the attention of the officers, directors, and other members of
management of this corporation, shall be disclosed promptly to this corporation
and made available to it. The Board of Directors may reject any business
opportunity presented to it, and thereafter, any officer, director, or other
member of management may avail himself of such opportunity. Until such time as
this corporation, through its' Board of Directors, has designated an area of
interest, the officers, directors, and other members of management of this
corporation shall be free to engage in such areas of interest on their own, and
this doctrine shall not limit the rights of any officer, director, or other
member of management of this corporation to continue a business existing prior
to that time, that such area of interest is designated by the corporation. This
provision shall not be construed to release any employee of this corporation
(other than an officer, director, or member of management), from any duties
which he may have to this corporation.
(c) Indemnification of Directors & Others
(i) The corporation shall indemnify any person who was, or is a party, or
is threatened to be made a party to any impending, prospective, imminent,
pending, or completed action, suit, or proceeding, whether, civil,
criminal, administrative, or investigative (other than an action by, or in
the right of the corporation), by reason of the fact that he was, or is a
director, officer, employee, or agent of the corporation, or is or was
serving at the request of the corporation as an officer, director,
employee, or agent of another corporation, partnership, joint-venture,
trust, or other enterprise, against expenses (including attorneys' fees),
judgements, fines, and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit, or proceeding if he
acted in good faith, and, in case of conduct in his official capacity with
the corporation, in a manner he reasonable believed to be in the best
interests of the corporation, or in all other cases that his conduct was at
least not opposed to the corporations' best interests. In the case of any
criminal proceedings, he must have no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit, or proceeding by
judgement, order, settlement, conviction, or upon a plea of nolo contendre
or its' equivalent, shall not of itself, determine that the individual did
not meet the standard of conduct set forth in this paragraph.
<PAGE>
(ii) The corporation shall indemnify any person who was, or is a party, or
is threatened to be made a party to any impending, prospective, imminent,
pending, or completed action or suit, or in the right of the corporation to
procure a judgement in its' favor, by reason of the fact that he is or was
a director, officer, employee, or agent of the corporation, or is or was
serving at the request of the corporation, s an officer, director,
employee, or agent of another corporation, partnership, joint-venture,
trust, or enterprise against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection with the defense, or
settlement of such action or suit if he acted in good faith, and, in the
case of conduct in his official capacity with the corporation, in a manner
he reasonably believed to be in the best interests of the corporation, and,
in all other cases, that his conduct was at least not opposed to the
corporations' best interest; but no indemnification shall be made in
respect of any claim, issue or matter, as to which such person has been
adjudged to be liable for negligence or misconduct in the performance of
his duty to the corporation, or where such person was adjudged liable on
the basis that personal benefit was improperly received by him, unless, and
only to the extent that the court in which such action or suit was brought,
determines upon application, that, despite the adjudication of liability,
but in the view of all the circumstances of the case, such person is fairly
and reasonably entitled to indemnification for such expenses which such
court deems proper.
(iii) To the extent that a director, officer, employee, or agent of the
corporation has been successful on the merits in defense of any action,
suit, or proceeding referred to in this section, or in defense of any
claim, issue, or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
(iv) Any indemnification under (I) or (ii) of this section (unless ordered
by a court), shall be made by the corporation only as authorized in the
specific case upon a determination that indemnification of the director,
officer, employee, or agent is proper in the circumstances because he has
met the applicable standard of conduct as set forth in paragraphs (I) or
(ii) of this Article. Such determination shall be made by the Board of
Directors by a majority vote of a quorum consisting of directors who were
not parties to such action, suit, or proceeding, or, if such a quorum is
not obtainable, or even if obtainable, a quorum of disinterested directors
so directs, by independent legal counsel in a written opinion, or by the
shareholders.
<PAGE>
(v) Expenses (including attorney's fees) incurred in defending a civil or
criminal action, suit, or proceeding, may be paid by the corporation in
advance of the final disposition of such action, suit or proceeding, as
authorized by the Board of Directors as provided in paragraph (iv) of this
section, upon receipt of a written affirmation by the director, officer,
employee, or agent, of his good faith belief that he has met the standard
of conduct described in paragraphs (I) and (ii) of this section, and an
undertaking by, or on behalf of the director, officer, employee, or agent
to repay such amount unless it is ultimately determined that he is entitled
to be indemnified by the corporation as authorized in this section.
(vi) The indemnification provided by this section shall not be deemed
exclusive of any other rights to which those indemnified may be entitled
under the Articles of Incorporation, any by-law, agreement, vote of the
shareholders, or disinterested directors, or otherwise, and any procedure
provided for by any of the foregoing, both as to action in his official
capacity while holding such office, and shall continue as to a person who
has ceased to be a director, officer, employee, or agent, and shall inure
to the benefit of heirs, executors, and administrators of such a person.
(vii) The corporation may purchase and maintain insurance on behalf of any
person who is, or was a director, officer, employee, or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership,
joint-venture, trust, or other enterprise, against any liability asserted
against him, and incurred by him in any such capacity, or arising out of
his status as such, whether or not the corporation would have the power to
indemnify him against such liability under the provisions of this section.
(d) Shareholder Voting.
(i) One-third of the shares entitled to vote represented in person or by
proxy, shall constitute a quorum at any meeting of the shareholders.
(ii) When, with respect to any action to be taken by the shareholders of
this corporation, the laws of the State of Colorado require the vote or
concurrence of the holders of two-thirds of the issued and outstanding
shares entitled to vote thereon, or of any class or series, such action may
be taken by the vote, or concurrence of a majority of such shares, or class
or series thereof.
(e) Adoption and Amendment of Bylaws. The initial bylaws of the corporation
shall be adopted by its' Board of Directors. The power to alter, amend, or
repeal the bylaws, or adopt new bylaws, shall be vested in the Board of
Directors, but the holders of Common Stock may also alter, amend, or repeal the
bylaws or adopt new bylaws. The bylaws may contain any provisions for the
regulation and management of the affairs of the corporation not inconsistent
with law, or these Articles of Incorporation.
EIGHT: The name and address of the incorporator is:
Reed A. Hatkoff
3011 S. Chester Ct.
Denver, Colorado 80231
Dated this 25th of January, 1987;
/s/ Reed A. Hatkoff
-------------------
Reed A. Hatkoff
<PAGE>
STATE OF COLORADO
Department of [Seal] CERTIFICATE
State
I, NATALIE MEYER, Secretary of State of the State of Colorado hereby
certify that the prerequisites for the issuance of this certificate have been
fulfilled in compliance with law and are found to conform to law.
Accordingly, the undersigned, by virtue of the authority vested in me by
law, hereby issues A CERTIFICATE OF INCORPORATION TO VEGA-ATLANTIC CORPORATION.
/s/ Natalie Meyer
-----------------
Secretary of State
DATED: JANUARY 28, 1987
<PAGE>
BYLAWS
of
VEGA-ATLANTIC CORPORATION
(A Colorado Corporation)
ARTICLE I
General
1.01 Applicability. These Bylaws provide rules for conducting the business
of this corporation (the "Company"). Every shareholder and person who
subsequently becomes a shareholder, the Board of Directors, Committees and
Officers of the Company shall comply with these Bylaws, as amended from time to
time. All bylaws and resolutions heretofore adopted by the Board of Directors
are hereby repealed, to the extent in conflict with the provisions of these
Bylaws.
1.02 Offices. The principal office of the Company shall be selected by the
Board of Directors from time to time and may be within or without the State of
Colorado. The Company may have such other offices, within or without the State
of Colorado, as the Board of Directors may, from time to time, determine. The
registered office of the Company required by the Colorado Corporation Code to be
maintained in Colorado may be, but need not be, identical with the principal
office if in Colorado, and the address of the registered office may be changed
from time to time by the Board of Directors.
1.03 Definition of Terms. All undefined terms used in these Bylaws shall
have the meanings given to them in the Company's Articles of Incorporation, as
they may be amended or restated (the "Articles).
ARTICLE II
Stock and the Transfer Thereof
2.01 Stock Certificates. The shares of the Company's capital stock shall be
represented by consecutively numbered certificates signed by the President or a
Vice President and the Secretary or Assistant Secretary of the Company, and
sealed with the seal of the Company, or a facsimile thereof. If certificates are
signed by a transfer agent and registrar other than the Company or an employee
thereof, the signatures of the officers of the Company may be facsimile. In case
any officer who has signed (by real or facsimile signature) a certificate shall
have ceased to hold such office before the certificate is issued, it may be
issued by the Company with the same effect as if he continued to hold such
office on the date of issue. Each certificate representing shares shall state
upon the face thereof: (i) that the Company is organized under the laws of the
State of Colorado; (ii) the name of the person to who issued; (iii) the number,
class and series (if any) of shares which such certificate represents; and (iv)
the par value, if any, of the shares represented by such certificate, or a
statement that the share have no par value.
If any class or series of shares is subject to special powers,
designations, preferences or relative, participating or other special rights,
then such (together with all qualifications, limitations or restrictions of such
preferences or rights) shall be set forth in full or summarized on the
certificate representing such class or series. Moreover, each certificate shall
sate that the Company will furnish, without charge, to the registered holder of
the shares represented by such certificate who so requests a statement setting
forth such information in full.
Each certificate also shall set forth restrictions upon transfer, if any,
or a reference thereto, as shall be adopted by the Board of Directors or by the
shareholders, or as may be contained in this Article II. Any shares issued
without registration under the Securities Act of 1933, as amended, shall bear a
legend restricting transfer unless such shares are registered under such act or
an exemption from registration is available for a proposed transfer.
2.02 Consideration for Shares. Shares of the Company shall be issued, and
treasury shares held by the Company may be disposed, for such consideration or
considerations as shall be fixed from time to time by the Board of Directors. No
shares shall be issued for less than the par value thereof. The consideration
for the issuance of shares may be paid, in whole or in part, in money, in other
property, tangible or intangible, or in labor or services actually received by
performed for the Company or fore its benefit in its formation or
reorganization, or as otherwise permitted by law.
<PAGE>
2.03 Lost Certificates. The Board of Directors may direct a new certificate
or certificates to be issued in place of any certificate or certificates
theretofore issued by the Company alleged to have been lost or destroyed, upon
the making of an affidavit of that fact by the person claiming the certificate
of stock to be lost, and the Board of Directors when authorizing such issue of a
new certificate or certificates may in its discretion, and as a condition
precedent to the issuance thereof, require the owner of such lost or destroyed
certificate or certificates or his legal representative to advertise the same in
such manner as it shall require and/or furnish to the Company a bond in such sum
as it may direct, as indemnity against any claim that may be made against the
Company. Except as hereinabove in this section provided, no new certificate or
certificates evidencing shares of stock shall be issued unless and until the old
certificate or certificates, in lieu of which the new certificate or
certificates are issued, shall be surrendered for cancellation.
2.04 Registered Holder as Owner. The Company shall be entitled to treat the
registered holder of any shares of the Company as the owner of such shares, and
shall not be bound to recognize any equitable or other claim to, or interest in,
such shares or rights deriving from such shares, unless and until such
purchaser, assignee, transferee or other person becomes the registered holder of
such shares, whether or not the Company shall have ether actual or constructive
notice of the interests of such purchaser, assignee, or transferee or other
person. The purchaser, assignee, or transferee of any of the shares of the
Company shall not be entitled: to receive notice of the meetings of the
shareholders; to vote at such meetings; to examine a list of the shareholder; to
be paid dividends or other sums payable to shareholder; or to own, enjoy and
exercise any other property or rights deriving from such shares against the
Company, until such purchaser, assignee, or transferee has become the registered
holder of such shares.
2.05 Reversions. Cash, property or share dividends, shares issuable to
shareholders in connection with a reclassification of stock, and the redemption
price of redeemed shares, which are not claimed by the shareholders entitled
thereto within TWO years after the dividend or redemption price became payable
or the shares became issuable, despite reasonable efforts by the Company to pay
the dividend or redemption price or deliver the certificate(s) for the share to
such shareholders within such time shall, at the expiration of such time, revert
in full ownership to the Company, and the Company's obligation to pay any such
dividend or redemption price or issue share shares, as the case may be, shall
thereupon cease; provided, that the Board of Directors may at any time and for
any reason satisfactory to it, but need not, authorize (i) payment of the amount
of cash or property dividend or (ii) issuance of any shares, ownership of which
has reverted to the Company pursuant to this Section of Article II, to the
person or entity who or which would be entitled thereto had such reversion not
occurred.
2.06 Returned Certificates. All certificates for shares changed or returned
to the Company for transfer shall be marked by the Secretary or Assistant
Secretary "CANCELLED", with the date of cancellation, and the transaction shall
be immediately recorded in the certificate book opposite the memorandum of their
issue. The returned certificate may be inserted in the certificate book.
2.07 Transfer of Shares. Upon surrender to the Company or to a transfer
agent of the Company of a certificate of stock endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, and such
documentary stamps as may be required by law, it shall be the duty of the
Company to issue a new certificate, upon payment by the transferee of such
nominal charge therefore as the Company or its transfer agent may impose. Each
such transfer of stock shall be entered on the stock book of the Company.
Respecting any securities issued in reliance upon Rule 903 of Regulation S of
the Securities and Exchange Commission at any time when the Company is not a
"reporting issuer" as defined in Regulation S, no transfer of such securities
shall be registered unless made in accordance with the provisions of Regulation
S. At any time when the Company has appointed a transfer agent for its shares,
the remainder of this paragraph shall apply. A transfer of shares evidenced by a
certificate bearing a standard form of legend which restricts transfer of the
shares (except in the event of registration or the availability of an exemption
under the Securities Act of 1933) shall not require the Company's consent if the
shares to be sold are proposed to be sold in compliance with either Rule 144,
Rule 701 or Rule 904 of Regulation S of the Securities and Exchange Commission
and the transfer is accompanied by an opinion of counsel (which need not be the
Company's counsel) which states that the proposed transfer will comply with the
applicable rule or regulation being relied upon for transfer. In view of
potential liability to the Company and its officers and directors for
interfering without firm and clear legal grounds in the making of, or delaying,
any sale of the Company's shares pursuant to Rules 144, 701, or 904, it is
declared to be the Company's policy not to interfere with or hinder, in any way,
any transfer proposed to be made pursuant to any of such rules, if accompanied
by an opinion of counsel satisfactory to the Company and its counsel in light of
surrounding facts. The Company shall be deemed automatically to have consented
to any transfer which complies with the immediately preceding sentence.
2.08 Transfer Agents. The Board may, in its discretion, appoint one or more
transfer agents or registrars for making payment upon any class of stock, bond,
debenture or security of the Company. They shall have such right and duties and
shall be paid such compensation as may be agreed.
<PAGE>
ARTICLE III
Shareholders and Meetings Thereof
3.01 Annual Meeting. The annual meeting of the shareholders shall be held
between MARCH 15th and JUNE 15th, at such date and time and at such place,
within or without the State of Colorado, as is designated form time to time by
the Board of Directors and stated in the notice of the meeting. At each annual
meeting the shareholders shall elect a Board of Directors in accordance with the
Articles and shall transact such other business as my properly be brought before
the meeting.
3.02 Special Meetings. Unless otherwise proscribed by law, the Articles or
these Bylaws, special meetings of the shareholders may be called by the Chairman
of the Board, the President, or a majority of the Board of Directors. The
President shall call a special meeting upon the Secretary's receipt of written
demand therefore by the holders of not less than ten percent (10%) of the total
voting power. Request for special meetings shall state the purpose or purposes
of the proposed meeting.
3.03 Notice of Meetings. Except as otherwise provided by law, the Articles
or these Bylaws, written notice of any annual or special meeting of the
shareholders shall state the place, date, and time thereof and, in the case of a
special meeting, the purpose or purposes for which the meeting is called, shall
be given to each shareholder of record entitle to vote at such meeting not fewer
than 10 nor more than 60 days prior to the meeting by any means permitted in
Section 9.01 hereof. No business other than that specified in the notice of a
special meeting shall be transacted at any such special meeting.
3.04 Record Date. In order that the Company may determine shareholders of
record who are entitled (i) to notice of or to vote at any shareholders meeting
or adjournment thereof, (ii) to express written consent to corporate action in
lieu of a meeting, (iii) to receive payment of any dividend or other
distribution, or (iv) to allotment of any rights or to exercise any rights in
respect of any change, conversion or exchange of stock, or in order that the
Company may make a determination of shareholders of record for any other lawful
purpose, the Board of Directors may fix in advance a date as the record date for
any such determination. Such date shall not be more than 60 days, and in case of
a meeting of shareholders, not less than 10 days prior to the date on which the
particular action, requiring such determination of shareholders, is to be taken,
and in no event may the record date precede the date upon which the Directors
adopt a resolution fixing the record date.
If no record date is fixed for the determination of shareholders entitled
to notice of or to vote at a meeting of shareholders, or shareholders entitled
to receive payment of a dividend, the date on which notice of the meeting is
given (as defined in Section 9.01 hereof) or the date on which the resolution of
the Board of Directors declaring such dividend is adopted, as the case may be,
shall be the record date for such determination of the shareholders. When a
determination of shareholders entitled to vote at any meeting of shareholders
has been made as provided in this Section such determination shall apply to any
adjournment thereof, unless the Board of Directors fixes a new record date for
the adjournment. The record date for determining shareholders entitled to
consent to corporate actions without a meeting shall be fixed as provided in
Section 3.12 hereof.
3.05 Voting List. At least 10 days but not more than 60 days before any
meeting of shareholders, the officer or transfer agent in charge of the
Company's stock transfer books shall prepare a complete alphabetical list of the
shareholders entitled to vote at such meeting, which list shows the address of
each shareholder and the number of shares registered in his or her name. The
list so prepared shall be maintained at the corporate offices of the Company and
shall be open to inspection by any shareholder, for any purpose germane to the
meeting, at any time during usual business hours during a period of no fewer
than 10 days prior to the meeting. The list shall also be produced and kept open
at shareholders meeting and, except as otherwise provided by law, any be
inspected by any shareholder or proxy of a shareholder who is present in person
at the meeting. The original stock transfer books shall be prima facie evidence
as to who are the shareholders entitled to examine the list of shareholders and
to vote at any meeting of shareholder.
<PAGE>
3.06 Quorum; Adjournments. (a) The holders of a majority of the total
voting power at any shareholders meeting present in person or by proxy shall be
necessary to and shall constitute a quorum for the transaction of business at
all shareholders meetings, except as otherwise provide by law or by the
Articles.
(b) If a quorum is not present in person or by proxy at any shareholders
meeting, a majority of the voting shares present or represented shall have the
power to adjourn the meeting from time to time to the same or another place
within 30 days thereof and no further notice of such adjourned meeting need be
given if the time and place thereof are announced at the meeting at which the
adjournment is taken.
(c) Even if a quorum is present in person or by proxy at any shareholders
meeting, a majority of the voting share present or represented shall have the
power to adjourn the meeting from time to time, for good cause, without notice
of the adjourned meeting if the time and place thereof are announced at the
meeting at which the adjournment is taken, until a new date which is not more
than 30 days after the date of the original meeting.
(d) Any business which might have been transacted at a shareholders meeting
as originally called may be transacted at any meeting held after adjournment as
provided in this Section 3.06 at which reconvened meeting a quorum is present in
person or by proxy. Anything in paragraph (b) of this Section to the contrary
notwithstanding, if an adjournment is for more than 30 days, or if after an
adjournment a new record date is fixed for the adjourned meeting, notice of the
adjourned meeting shall be given to each shareholder of record entitled to vote
thereat.
(e) The shareholders present at a duly called meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
3.07 Proxies. At all meetings of shareholders, a shareholder may note by
proxy, executed in writing by the shareholder or by his duly authorized attorney
in fact. Such proxy shall be filed with the Secretary of the Company before or
at the time of the meeting. No proxy shall be valid after eleven (11) months
from the date of its execution, unless otherwise provided in the proxy.
3.08 Voting of Shares. At any shareholders meeting every shareholder having
the right to vote shall be entitled to vote in person or by proxy. Except as
otherwise provided by law, by the Articles or in the Board resolution
authorizing the issuance of share, each shareholder of record shall be entitled
to one vote (on each matter submitted to a vote) for each share of capital stock
registered in his, her or its name on the Company's books. Except as otherwise
provided by law or by the Articles, all matters submitted to the shareholders
for approval shall be determined by a majority of the votes cast (not counting
abstentions) at a legal meeting commenced with a quorum.
3.09 Voting of Shares by Certain Holders. Neither treasury shares, nor
shares of its own stock held by the Company in a fiduciary capacity, nor shares
held by another corporation if the majority of the shares entitled to vote for
the election of directors of such other corporation is held by the Company,
shall be voted at any meeting or counted in determining the total number of
outstanding shares at any given time.
Shares standing in the name of another corporation, domestic or foreign,
may be voted by such officer, agent, or proxy as the bylaws of such corporation
may prescribe, or, in the absence of such provision, as the board of directors
of such corporation may determine.
Shares held by an administrator, executor, personal representative,
guardian, or conservator may be voted by him, either in person or by proxy,
without a transfer of such shares into his name. Shares standing in the name of
a trustee may be voted by him, either in person or by proxy, but no trustee
shall be entitled to vote shares held by him without a transfer of such shares
into his name.
Shares standing in the name of receiver may be voted by such receiver, and
shares held by or under the control of a receiver may be voted by such receiver
without the transfer thereof into his name if authority so to do be contained in
an appropriate order of the court by which such receiver was appointed.
A shareholder whose share are pledged shall be entitled to vote such shares
until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
<PAGE>
3.10 Chairman. The Chairman of the Board of Directors of the Company, or in
his absence, the President, shall act as chairman at all meetings of
shareholders.
3.11 Manner of Shareholder Voting. Voting at any shareholders' meeting
shall be oral or by show of hands; provided, that voting shall be by written
ballot if such demand is made by any shareholder present in person or by proxy
and entitled to vote.
3.12 Action by Shareholders Without a Meeting. Any action required or
permitted to be taken at a meeting of the shareholders may be taken without a
meeting if one or more consents in writing, setting forth the action so taken,
shall be signed by all of the shareholders entitled to vote with respect to the
subject matter thereof. No written consent will be effective unless written
consents signed by all of the shareholders entitled to vote with respect to the
subject matter thereof are delivered to the Company within sixty (60) days of
the date of the earliest such consent. Such consent shall have the same force
and effect as a vote of the shareholders, and may be stated as such in any
document filed with the Secretary of State of Colorado under the Colorado
Corporation Code. The record date for determining shareholders entitled to
consent to corporate actions in writing without a meeting shall be the date upon
which the first shareholder signs the consent. Any such consent shall be
effective upon the date it is signed by the last shareholder, unless the consent
specifies a different effective date.
3.13 Presiding Officers; Order of Business. (a) Shareholders meetings shall
be presided over by the Chairman of the Board; or if the Chairman (and Vice
Chairman) is not present, by the President; or if the President is not present,
by a Vice President; or if a Vice President is not present, by such person
chosen by the board of Directors; or if none, by a chairperson to be chosen at
the meeting by shareholders present in person or by proxy who own a majority of
the voting power present. The Secretary of a shareholders meeting shall be the
Secretary of the Company; or if the Secretary is not present, an Assistant
Secretary; or if an Assistant Secretary is not present, such person as may be
chosen by the Board of Directors; or if none, by such person who is chosen by
the chairperson at the meeting.
(b) The following order of business, unless otherwise ordered at the
shareholders meeting by the chairperson thereof, shall be observed as far as
practicable and consistent with the purposes of the meeting:
1. Calling of the shareholders' meeting to order.
2. Presentation of proof of mailing of the notice of the meeting and, if
a special meeting, the call thereof.
3. Presentation of proxies.
4. Determination and announcement that a quorum is present.
5. Reading and approval (or waiver thereof) of the minutes of the
previous meeting of shareholders.
6. Reports, if any, of officers.
7. Election of directors, if the meeting is an annual meeting or a
meeting called for such purpose.
8. Consideration of the specific purpose or purposes for which the
meeting has been called, other than election of directors.
9. Transaction of such other business as may properly come before the
meeting.
10. Adjournment.
3.14 Annual Report. The President of the Company shall prepare an annual
report which will set forth a statement of affairs of the Company as of the end
of its last fiscal year, including a balance sheet, an income statement and a
statement of changes in financial position, which need not be audited, and
present them at the annual meeting of shareholders. Failure to prepare or
present an annual report shall not affect the validity of any shareholder
meeting. No such report need be prepared or presented for any fiscal year in
which the Company was inactive, beyond a statement reflecting the inactive
status. This Section shall not apply as to any fiscal year if the Company (i)
was at the year end subject to the reporting requirements of Section 13 or 15(d)
of the Securities Exchange Act of 1934, and subsequently furnishes to the
shareholders an annual report or report on Form 10-K under such Act covering
such fiscal year, or (ii) furnishes to shareholders an Information Statement
which conforms to the requirements of Rule 15c2-11 of the Securities and
Exchange Commission.
<PAGE>
ARTICLE IV
Directors, Powers and Meetings
4.01 General Powers. All corporate powers shall be exercised, and the
business and affairs of the Company shall be managed, by or under the authority
of its Board of Directors, except as otherwise provided in the Colorado
Corporation Code or the Articles.
4.02 Number, Tenure and Qualifications. The number of Directors of the
Company shall be no less than three (3) nor more than seven (7), as fixed by
resolution of the Board of Directors. In default of any such resolution, the
Company shall have THREE Directors. However, at any time when the Company has
fewer than three shareholders, there need only be as many Directors as there are
shareholders. Directors shall be elected at each annual meeting of shareholders.
Each Director shall hold office until the next annual meeting of shareholders
and thereafter until his successor shall have been elected and qualified.
Directors need not be residents of Colorado or shareholders of the Company.
Directors shall be elected by plurality vote. No decrease in the number of
Directors shall shorten the term of any incumbent Director.
4.03 Vacancies; Resignation. (a) Any vacancy occurring in the Board of
Directors, except resulting from an increase in the number of directors, may be
filled by the affirmative vote of a majority of the remaining Directors, though
less than a quorum, or by a sole remaining Director. A Director elected to fill
a vacancy shall be elected for the unexpired term of his predecessor in office.
Any directorship to be filled by reason of an increase in the number of
Directors shall be filled by the affirmative vote of a majority of the entire
board or by a majority of the total voting power at any annual meeting or at a
special meeting of shareholders called for that purpose, or by means of written
shareholder consents taken in lieu of a meeting. Every director chosen to fill a
vacancy as provided in this Section shall hold office until the next annual
meeting of shareholders or until his successor has been elected and qualified.
(b) Any Director may resign at any time by giving written notice to the
Board, the Chairman of the Board, the President or the Secretary of the Company.
Unless otherwise specified in such written notice, a resignation shall take
effect upon delivery to the Board or the designated officer. A resignation need
not be accepted in order for it to be effective.
4.04 Removal of Directors. Any Director may be removed only by the
shareholders in the manner provided in the Company's Articles and, if no such
provision appears therein, then as provided by law. Such action may be taken at
any special meeting called for that purpose or by means of written shareholder
consents. In case any vacancy so created shall not be filled by the shareholders
at such meeting or in the written consent effecting removal, such vacancy may be
filled by a majority of the Board of Directors.
4.05 Place of Meetings. The Board of Directors may hold both regular and
special meetings either within or without the State of Colorado, at such place
as the Board of Directors from time to time deems advisable.
4.06 Regular Meetings. A regular meeting of the Board of Directors shall be
held without other notice than these Bylaws immediately after and at the same
place as the annual meeting of shareholders. The Board of Directors may provide
by resolution the time and place for the holding of additional regular meetings
without other notice than such resolution; provided, that any Director not
present when any such resolution is passed is given notice of the resolution.
4.07 Special Meetings. A special meeting of the Board of Directors shall be
held without other notice than these Bylaws immediately after and at the same
place as every special meeting of shareholders. Special meetings of the Board of
Directors also may be called by or at the request of the Chairman of the Board,
the President, or any two Directors upon two days' notice to each director if
such notice is delivered personally or sent by telegram, or upon five days'
notice if sent by mail.
4.08 Telephonic Meetings. One or more members of the Board of Directors or
any committee designated by the Board may participate in a meeting of the Board
of Directors or committee by means of conference telephone or similar
communications equipment by which all persons participating in the meeting can
hear one another at the same time. Such participation shall constitute presence
in person at the meting. All participants in any meeting of Directors, by virtue
of their participation and without further action on their part, shall be deemed
to have consented to the recording of such meeting by electronic device or
otherwise, and to the making of a written transcript thereof, in order that
minutes thereof shall be available for the Company's records.
<PAGE>
4.09 Notice. Except as otherwise provided above, notice of the time, date
and place, of every special meeting of Directors or any committee thereof shall
be given. Any Director may waive notice of any meeting. The attendance of a
Director at a meeting shall constitute a waiver of notice of such meeting,
except where a Director attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting.
4.10 Quorum; Adjournments. A majority of the number of directors then in
office, present in person or by means of conference telephone or similar
equipment, shall constitute a quorum for the transaction of business at every
Board meeting, and the act of the majority of the Directors present at a meeting
at which a quorum is present shall be the act of the Board of Directors, except
as may otherwise specifically be provided by law, the Articles or these Bylaws.
If a quorum is not present at any Board meeting, the directors present may
adjourn the meeting, from time to time, without notice other than announcement
of the meeting, until a quorum is present.
4.11 Compensation. Directors shall be entitled to such compensation for
their services as directors as from time to time may be fixed by the Board and
shall be entitled to reimbursement of all reasonable expenses incurred by them
in attending Board meetings. A director may waive compensation for any Board
meeting. No director who receives compensation as a director shall be barred
from serving the Company in any other capacity or from receiving compensation
and reimbursement of reasonable expenses for any or all such other services.
4.12 Presumption of Assent. Ad Director of the Company who is present at a
meeting of the Board of Directors at which action on any corporate matter is
taken shall be presumed to have assented to the action taken unless his dissent
shall be entered in the minutes of the meeting or unless he shall file his
written dissent to such action with the person acting as the Secretary of the
meeting before the adjournment thereof, or shall forward such dissent by
registered or certified mail, first class, postage prepaid, to the Secretary of
the company, provides such mailing is postmarked within ten calendar days after
the adjournment of the meeting. Such right to dissent shall not apply to a
Director who voted in favor of such action.
4.13 Action by Directors Without Meeting. Any action required to be taken
at a meeting of the Directors of the Company or of a committee of Directors or
any action which may be taken at such a meeting, may be taken without a meeting
if a consent in writing, setting forth the action so taken, shall be signed by
all of the Directors entitled to vote with respect to the subject matter
thereof. A consent shall be sufficient for this Section if it is executed in
counterparts, in which event all of such counterparts, when taken together,
shall constitute one and the same consent.
4.14 Bank Accounts, etc. Anything herein to the contrary notwithstanding,
the Board of Directors may, except as may otherwise be required by law,
authorize any officer or officers, agent or agents, in the name of and on behalf
of the Company, to sign checks, drafts, or other orders for the payment of money
or notes or other evidences of indebtedness, to endorse for deposit, deposit to
the credit of the Company at any bank or trust company or banking institution I
which the Company may maintain an account or to cash checks, notes, drafts, or
other bankable securities or instruments, and such authority may be general or
confined to specific instances, as the Board of Directors may elect.
4.15 Inspection of Records. Every Director shall have the absolute right at
any reasonable time to inspect all books, records, documents of every kind, and
the physical properties, of the Company and of its subsidiaries. Such inspection
may be made personally or by an agent and includes the right to make copies and
extracts.
4.16 Executive Committee. (a) The Board of Directors may, by resolution
adopted by a majority of the whole Board, appoint two or more of its members to
constitute an Executive Committee. One of such directors shall be designated as
Chairman of the Executive Committee. Each member of the Executive Committee
shall continue as a member thereof until the expiration of his term as a
director, or until his earlier resignation from the Executive Committee, in
either case unless sooner removed as a director or member of the Executive
Committee by any means authorized by the Articles or herein.
(b) The Executive Committee shall have and may exercise, to the extent
provide in such resolution and except as prohibited by law, all of the rights,
power and authority of the Board of Directors.
<PAGE>
(c) The Executive Committee shall fix its own rules of procedure and shall
meet at such times and at such place or places as may be provided by its rules.
The Chairman of the Executive Committee, or in the absence of the Chairman, a
member of the Executive Committee chosen by a majority of the members present,
shall preside at all meetings of the Executive Committee, and another member
thereof chosen by the Executive Committee shall act as Secretary. A majority of
the Executive Committee shall constitute a quorum for the transaction of
business, and the affirmative vote of a majority of the members thereof shall be
required for any action of the Executive Committee. The Executive Committee
shall keep minutes of its meetings and deliver such minutes to the Board of
Directors.
4.17 Other Committees. The Board of Directors may, by resolution duly
adopted by a majority of directors at a meeting at which a quorum is present,
appoint an audit committee, compensation committee, and such other committee or
committees as it shall deem advisable and with such limited authority as the
Board of Directors shall from time to time determine.
4.18 Other Provisions Regarding Committees. (a) The Board of Directors
shall have the power at any time to fill vacancies in, change the membership of,
or discharge any committee. The members of any committee present at any meeting
of a committee, whether or not they constitute a quorum, may appoint a director
to act in the place of an absent member.
(b) Members of any committee shall be entitled to such compensation for
their services as such as from time to time may be fixed by the Board of
Directors and in any event shall be entitled to reimbursement of all reasonable
expenses incurred in attending committee meetings. Any member of a committee may
waive compensation for any meeting. No member of a committee who receives
compensation as a member of one or more committees shall be barred from serving
the Company in any other capacity or from receiving compensation and
reimbursement of reasonable expenses for any or all such other services.
(c) Unless otherwise prohibited by law, the provisions above concerning
action by written consent of directors and meetings of directors by telephonic
or similar means shall apply to all committees from time to time created by the
Board of Directors.
ARTICLE V
Officers and Agents
5.01 Positions. The Company's officers generally shall be chosen by the
Board of Directors and shall consist of a Chairman of the Board, a President,
one or more Vice Presidents if desired, a Secretary and a Treasurer. The Board
of Directors may appoint one or more other officers, assistant officers and
agent as it from time to time deems necessary or appropriate, who shall be
chosen in such manner and hold their offices for such terms and have such
authority and duties as from time to time may be determined by the Board of
Directors. The Board may delegate to the Chairman of the Board the authority to
appoint any officer or agent of the Company and to fill a vacancy other than the
Chairman of the board or President. Any two or more offices may be held by the
same person, except that no person may simultaneously hold the offices of
President and Secretary and of President and Vice President. In all cases where
the duties of any officer, agent or employee are not prescribed by these bylaws
or by the Board of Directors, such officer, agent or employee shall follow the
orders and instructions of the President.
5.02 Term of Office; Removal. Each officer of the Company shall hold office
at the pleasure of the Board and any officer may be removed, with or without
cause, at any time by the affirmative vote of a majority of the directors then
in office; provided, that any officer appointed by the Chairman of the Board
pursuant to authority delegated by the Board may be removed, with or without
cause, at any time by the Chairman whenever the Chairman in his or her absolute
discretion shall consider that the Company's best interests shall be served by
such removal. Removal of an officer by the Board (or the Chairman, as the case
may be) shall not prejudice the contract rights, if any, of the person so
removed. Election or appointment of an officer or agent shall not in itself
create contract rights.
5.03 Vacancies. A vacancy in any office, however occurring, may be filled
by the Board or the Executive Committee, for the unexpired portion of the term
by majority vote of its members, or by the Chairman of the Board in the case of
a vacancy occurring in an office to which the Chairman has been delegated
authority to make appointments.
<PAGE>
5.04 Compensation. The salaries of all officers of the Company shall be
fixed from time to time by the board, and no officer shall be presented from
receiving a salary by reason of the fact that he also receives compensation from
the Company in any other capacity.
5.05 Chairman of the Board. The Chairman of the Board ("Chairman"), if such
officer shall be chosen by the Board of Directors, shall preside at all meetings
of the Board of Directors and meetings of shareholder at which he is present and
shall exercise general supervision and direction over the implementation of
Board policy affecting the affairs of the Company. Any act which may be
performed by the Chief Executive Officer or President may be performed by the
Chairman.
5.06 Chief Executive Officer; Chief Operating Officer. The Chairman of the
Board shall, unless the Board determines otherwise, serve as the Chief Executive
Officer ("CEO") of the Company. If the Chairman is not designated the CEO, then
the President shall serve as CEO. The Board may, from time to time, designate
from among the executive officers of the Company an officer to serve as Chief
Operating Officer ("COO") of the Company. If the Chairman serves as the CEO,
then the President shall serve as COO. If the President is designated CEO, then
the Executive Vice President (or if there is none, then the next most senior
Vice President) shall serve as COO. A person designated to serve in the capacity
of CEO or COO shall serve at the pleasure of the Board.
A person designated Chief Executive Officer (CEO) shall have primary
responsibility for and active charge of the management and supervision of the
Company's business and affairs. The CEO may execute in the name of the Company
authorized corporate obligations and other instruments, shall perform such other
duties as may be prescribed by the Board (or Chairman, as the case may be) from
time to time and, in the absence or disability of the President, shall exercise
all of the duties and powers of the President. In the event that the President
is not the CEO, then the CEO shall supervise the performance of the President
and shall be responsible for the execution of the policies and directives of the
Board. The CEO shall report directly to the Board. The CEO shall perform such
other duties as may be assigned by the Board (or Chairman, as the case may be).
The CEO may perform any act which might be performed by the President.
A person designated Chief Operating Officer (COO) shall be responsible for
the day-to-day management of the Company's operations, subject to the authority
of the CEO. The COO shall report directly to the CEO of the Company and shall
consult with the CEO on all matters of corporate policy and material business
activities of the Company. The COO shall perform such other duties as may be
assigned by the Board or the CEO.
5.07 President. The President shall have general active management of the
business of the Company, subject to the authority of the Chief Executive Officer
if the President is not designated as such, and general supervision of its
officers, agents and employees. In the absence of the Chairman and Chief
Executive Officer, he shall preside at all meetings of the shareholders and of
the Board. In the absence of a designated Chief Executive Officer he shall see
that all policies and directives of the Board are carried into effect.
He shall, unless otherwise directed by the Board of Directors, attend in
person or by substitute appointed by him, or shall execute in behalf of the
Company written instruments appointing a proxy or proxies to represent the
company, at all meetings of the stockholders of any other company in which the
Company shall hold any stock. He may, on behalf of the Company, in person or by
substitute or by proxy, execute written waivers of notice and consents with
respect to any such meetings. At all such meetings and otherwise, the President,
in person or by substitute or proxy as aforesaid, may vote the stock so held by
the Company and may execute written consent and other instruments and power
incident to the ownership of said stock, subject however to the instructions, if
any, of the Chairman or the Board of Directors. The President shall have custody
of the Treasurer's bond, if any.
<PAGE>
5.08 Executive Vice President. The Executive Vice President shall assist
the President in the discharge of supervisory, managerial and executive duties
and functions. In the absence of the President or in the event of his death, or
inability or refusal to act, the Executive Vice President shall perform the
duties of the President and when so acting shall have the duties and powers of
the President. He shall perform such other duties as from time to time may be
assigned to him by the President, Chairman or Board of Directors.
5.08 Vice Presidents. The Vice Presidents, if any, shall assist the
President and Executive Vice President and shall perform such duties a may be
prescribed by the Board, the Chairman or the President. Vice Presidents in the
order of their seniority shall, in the absence or disability of the Chairman and
President, exercise all of the duties and powers of such officers. The Executive
Vice President, if any, shall be the most senior of Vice Presidents, and the
Senior Vice President, if any shall be the next most senior of Vice Presidents.
In regard to other Vice Presidents, they shall have the respective ranks
designated by the board of Directors, or if none has been so designated, as
designated by the Chairman, or if none has been so designated by the Chairman,
they shall rank in the order of their respective elections to such office. The
execution of any instrument on the Company's behalf by a Vice President shall be
conclusive evidence, as to third parties, of his authority to act in the stead
of the President and Executive Vice President.
5.09 Secretary. The Secretary shall: (i) keep the minutes of the
proceedings of the shareholders and the Board of Directors and record all votes
and proceedings thereof in a book kept for that purpose; (ii) see that all
notices are duly given in accordance with the provisions of these Bylaws or as
required by law; (iii) be custodian of the corporate records and of the seal of
the Company and affix the seal to all documents when authorized by the Board of
Directors; (iv) keep at its registered office or principal place of business
within or outside Delaware a record containing the names and addresses of all
shareholders and the number and class of shares held by each, unless such a
record shall be kept at the office of the Company's transfer agent or registrar;
(v) sign with the President, or a Vice President, certificates for shares of the
Company, the issuance of which shall have been authorized by resolution of the
Board of Directors; (vi) in general, perform all duties incident to the office
of Secretary and such other duties as from time to time may be assigned to him
by the President or the Board of Directors. The Board of Directors may give
general authority to officers other than the Secretary or any Assistant
Secretary to affix the Company's seal and to attest the fixing thereof by his or
her signature.
5.10 Assistant Secretary. The Assistant Secretary, if any (or if there is
more than one, the Assistant Secretaries in the order designated, or in the
absence of any designation, in the order of their appointment), in the absence
or disability of the Secretary, shall perform the duties and exercise the powers
of the Secretary. The Assistant Secretary(ies) shall perform such other duties
and have such other powers as from time to time may be prescribed by the board,
the Chairman or the Chief Executive Officer. The Chairman may appoint one or
more Assistant Secretary(ies) to office.
5.11 Treasurer. The Treasurer shall, unless the Board otherwise resolves,
be the principal financial officer and principal accounting officer of the
Company and shall have the care and custody of all funds, securities, evidence
of indebtedness and other valuable effects of the Company, shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
Company and shall deposit all money and other valuable effects of the Company in
the name and to the credit of the Company in such depositories as from time to
time may be designated by the board. The Treasurer shall disburse the funds of
the Company in such manner as may be ordered by the Board from time to time and
shall render to the Chairman of the Board, the President and the Board, at
regular Board meetings or whenever any of them may so require, an account of all
transactions and of the Company's financial condition.
5.12 Assistant Treasurer. The Assistant Treasurer, if any (or if there is
more than one, the Assistant Treasurers in the order designated, or in the
absence of any designation, in the order of their appointment), in the absence
or disability of the Treasurer, shall perform the duties and exercise the powers
of the Treasurer. The Assistant Treasurer(s) shall perform such other duties and
have such other powers as from time to time may be prescribed by the Board, the
Chairman or the Chief Executive Officer. The Chairman may appoint one or more
Assistant Treasurer(s) to office.
5.13 Resignations. Any officer may resign at any time by giving written
notice to the Board or to the Chairman. Such resignation shall take effect at
the time specified therein and, unless specified therein, no acceptance of the
resignation shall be required for the resignation to be effective.
<PAGE>
5.14 Delegation of Duties. In the event of the absence or disability of any
officer of the company, or for any other reason the Board shall deem sufficient,
the Board may temporarily designate the powers and duties, or particular powers
and duties, of such officer to any other officer, or to any director. The
persons holding the offices of Assistant Secretary or Assistant Treasurer shall
not be deemed "executive officers" of the Company by virtue thereof.
5.13 Fidelity Bonds. The Board of Directors shall have the power, to
the extent permitted by law, to require any officer, agent or employee of the
company to give bond for the faithful discharge of his duties in such form and
with such surety or sureties as the Board deems advisable.
ARTICLE VI
Indemnification
Each Director, officer, employee and agent of this Company, and each person
who shall serve at its request as a director, officer (or in a position
functionally equivalent to that of officer or director), agent or employee of
another entity shall be indemnified by the Company to the extent and in the
manner provided in the Company's Articles, as they may be amended, and in the
absence of any such provision therein, in accordance with the Colorado
Corporation Code.
ARTICLE VII
Miscellaneous
7.01 Declaration of Dividends. The Board of Directors at any regular of
special meeting may declare dividends payable, whenever in the exercise of its
discretion it may deem such declaration advisable and such is permitted by law.
Such dividends may be paid in cash, property, or share of the Company.
7.02 Benefit Programs. The Board of Directors shall have the power to
install and authorize any pension, profit sharing, stock option, insurance,
welfare, educational, bonus, health and accident or other benefit program which
the Board deems to be in the interest of the Company, at the expense of the
Company, and to amend or revoke any plan so adopted.
7.03 Corporate Seal. The corporate seal of the Company shall be circular in
form and shall contain the name of the Company, the year incorporated and the
words "Seal, Colorado."
7.04 Captions. The captions herein are inserted only as a matter of
convenience and for reference, and in no way define, limit, or describe the
scope of these by-laws, or the intent of any provision hereof.
7.05 Fiscal Year. The Board of Directors shall have the power to fix, and
from time to time change, the fiscal year of the Company. Any such adoption of
or change in a fiscal year shall not constitute nor require any amendment to
these Bylaws.
ARTICLE VIII
Amendments to Bylaws
8.01 Manner of Amendment. These Bylaws may be amended or repealed in the
manner provided for in the Articles, or if none is there provided: by majority
vote of the Board of Directors, taken at any meeting or by written consent of
all Directors, subject to the shareholders' right to change or repeal any Bylaws
so made or adopt new Bylaws by vote of at least a majority of the total voting
power. Bylaws amendments may be proposed by any shareholder or Director. Any
action duly taken by the Board or the shareholders which conflicts or is
inconsistent with these Bylaws (as they may be amended) shall constitute an
amendment of the Bylaws, if the action was taken by such number of directors or
share voting as would be sufficient for amendment of the Bylaws.
ARTICLE IX
Notices
9.01 Giving of Notice. Except as otherwise provided by the Colorado
Corporation Code, these Bylaws, the Company's Articles, or resolution of the
Board of Directors, every meeting notice or other notice, demand, bill,
statement or other communication (collectively, "Notice") to or from the Company
from or to a Director, Officer or shareholder shall be duly given if it is
written or printed and is (a) sent by first class or express mail, postage
prepaid, (b) sent by any commercial overnight air courier service, such as DHL,
Federal Express, Emery, Airborne, UPS or any similar company, (c) sent by
telegraph, cablegram, telex, teleprinter, telecopier, facsimile ("fax") or other
facsimile transmission, (d) delivered by any commercial messenger service which
regularly retains its receipts, or (e) personally delivered, provided a receipt
is obtained reflecting the date of delivery. Notice shall not be duly given
unless all delivery or postage charges are prepaid. Notice shall be given to an
addressee's most recent address as it appears on the Company's records or to
such other address as has been provided in writing to the Secretary. A Notice
shall be deemed "given" when dispatched for delivery or personally delivered, or
if mailed, on the date postmarked, or if given by any means specified in clause
(c) above, when transmitted. This Section shall not have the effect of
shortening any notice period provided for in these Bylaws.
<PAGE>
9.02 Waiver of Notice. Any Notice required by the Colorado Corporation
Code, the Articles or these Bylaws may be waived in writing at any time by the
person entitled to the Notice, and such waiver shall be equivalent to the giving
of Notice. Notice of any shareholder meeting shall be waived by attendance, in
person or by proxy, at the meeting, unless lack of notice or defective notice is
objected to at the beginning of the meeting, or, if the objection is to a matter
not provided for in a notice of a special meeting, by objection to such matter
when it is presented for consideration.
APPROVED AND ADOPTED by the Board of Directors of this corporation on
November 5, 1992.
SECRETARY'S CERTIFICATION
I, the undersigned Secretary of this corporation, hereby certify that the
foregoing Bylaws were duly adopted by its Board of Directors on the date above
indicated and that the foregoing text of the Bylaws is currently in full force
and effect and has not been revoked or suspended, nor amended except as may be
noted in brackets to indicate date(s) of amendment, and that all amendments to
such Bylaws are duly reflected in the foregoing text.
Dated: September 12, 1989 VEGA-ATLANTIC CORPORATION
By: /s/ signature
-----------------
John D. Brasher Jr., Secretary
(Seal)
JOINT VENTURE AGREEMENT
THIS AGREEMENT dated for reference March 28, 1999 is made
BETWEEN:
VEGA-ATLANTIC CORPORATION, a company duly incorporated under the laws
of the State of Colorado, and having its registered office at 5000
Birch Street, West Tower, Suite 4000 Newport Beach, California 92660
(hereinafter called the "Purchaser")
OF THE FIRST PART
AND:
GENEVA RESOURCES, INC., a company duly incorporated under the laws of
the State of Nevada and having its registered office at 219 Broadway,
#505 Laguna Beach, CA 92651
(hereinafter called the "Vendor")
OF THE SECOND PART
WHEREAS:
A. The Vendor is the sole beneficial owners (subject to the paramount interest
of the United States) of 213 (TWO HUNDRED, AND THIRTEEN) unpatented lode mining
claims (hereinafter called "the Vega Claims") located in Camas County in the
State of Idaho as set out in Appendix A to this Agreement. The Vendor has the
right to explore and develop the said Vega Claims subject to obtaining the
necessary State, Federal, and Municipal permits as required by law.
B. The Vendor has agreed to sell and the Purchaser has agreed to purchase 51% of
the rights to the Vega Claims for 500,000 restricted 144 shares in the capital
of Vega-Atlantic Corporation.
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of 500,000
restricted 144 shares in the capital of Vega-Atlantic Corporation and other good
and valuable consideration the receipt and adequacy of which is hereby
acknowledged, the parties hereto agree as follows:
<PAGE>
1. PURCHASE AND SALE
On the basis of the warranties and representations of the Vendor set forth in
paragraph 3 and subject to the general terms of this Agreement as set forth in
paragraph 2, the Purchaser agrees to buy from the Vendor and on the basis of the
warranties and representations of the Purchaser set forth in paragraph 4 and
subject to the general terms of this Agreement as set forth in paragraph 2, the
Vendor agrees to sell to the Purchaser on the Closing Date a 51% interest in 213
(TWO HUNDRED, AND THIRTEEN) 18-20 acre unpatented lode mining claims
(hereinafter called "the Vega Claims") located in Camas County in the State of
Idaho as set out in Appendix A to this Agreement.
2. JOINT VENTURE TERMS
(a) The Purchaser agrees to contribute all future capital required in the
further exploration, and if required, mining operations of the said herebefore
mentioned Idaho claims as is required by annual budgeted property exploration
and development work programs.
(b) It is the understanding of both the Purchaser and the Vendor that the
Purchaser and the Vendor shall participate jointly in net mining profits after
all expenses are deducted according to their pro-rata ownership of the claims
after all invested capital by the Purchaser has been repatriated. It is further
the understanding of both the Purchaser and the Vendor that the Purchaser and
the Vendor agree that until all invested capital of the Purchaser is repaid,
that the joint participation in net mining profits will be 80% to the Purchaser
and 20% to the Vendor.
(c) The Purchaser and the Vendor warrant the ownership percentages of the Vega
claims by the Purchaser and the Vendor shall change where the annual calendar
year work program contributions made by the Purchaser are less than the adopted
minimum budget totals mutually agreed upon between parties to this agreement. If
the Purchaser defaults in making an agreed contribution required by the approved
work program outlined in this agreement, the non-defaulting party may advance
the defaulted contribution on behalf of the defaulting participant and treat the
same, together with any accrued interest, as a demand loan bearing interest from
the date of the advance at prime plus 3% per annum. The failure by the
defaulting party to repay said loan upon demand shall be default. The Purchaser
hereby grants to the Vendor a lien upon its interest in the Vega claims as a
security interest. The non-defaulting party may elect the transfer of the
defaulting party's ownership interest as a remedy in direct proportion to the
magnitude of default. The defaulting party's interest of the Vega claims to be
transferred shall be the defaulting party's current interest times the following
calculation: (the sum of the defaulting party's work program contribution
default to any annual budget date divided by all of the Vendor work program
contributions since the date of this agreement to the date of the default
calculation.
<PAGE>
The Purchaser acknowledges that if and when the Purchaser's working interest is
reduced to less than 40% by its potential incapacity to fund the approved
minimum annual work programs and budgets, the Vendor may exercise its rights to
assume the operators role.
(d) The Purchaser agrees to fund according to a minimum budget mutually agreed
upon by the parties to this agreement for each year commensurate with the
exploration prospect results. If the Purchaser and Vendor do not obtain mutual
agreement with regard to the annual minimum work program budget for succeeding
years, or the Purchaser is unable to provide the desired work program budget,
the Purchaser shall not be prevented from assigning this agreement and its then
ownership position in the Vega claims to a third party who is able to reach
agreement with the Vendor regarding minimum work program budget funding, such
agreement is subject to agreement of the Purchaser, but may not be reasonably
withheld.
3. VENDOR REPRESENTATIONS, WARRANTIES AND COVENANTS
The Vendor represents and warrants to the Purchaser as representations and
warranties which are true and correct as of the date hereof that:
3.1 The Vendor is a resident of Nevada for matters relating to jurisdiction of
taxation. Geneva Resources, Inc. is a non-reporting private company duly
incorporated under the laws of Nevada, validly existing, and is in good standing
to carry on business in its intended place(s) of business.
3.2 The performance of this agreement will not be in violation of the
Memorandums or Articles of the Vendor or of any agreement to which the Vendor
are a party and will not give any person or company any right to terminate or
cancel any agreement or any right enjoyed by the Vendor and will not result in
the creation or imposition of any lien, encumbrance or restriction of any nature
whatsoever in favor of a third party upon or against the assets of the Vendor.
3.3 The business of the Vendor now and until the Closing Date will be conducted
and maintained in the manner that is normal to that business.
3.4 The representations, warranties, covenants and agreements by the Vendor in
this agreement or any certificates or documents delivered pursuant to the
provisions hereof or in connection with the transaction contemplated hereby
shall be true at and as of the time of closing as though such representations
and warranties were made at and as of such time. Notwithstanding any
investigations or enquiries made by the Purchaser prior to the closing or the
waiver of any condition by the Purchaser, the representations, warranties,
covenants and agreements of the Vendor shall survive the closing date and
notwithstanding the closing of the purchase and sale herein provided for, shall
continue in full force and effect.
<PAGE>
3.5 There is no basis for and there are no actions, suits, judgments,
investigations or proceedings outstanding or pending or to the knowledge of the
Vendor threatened against or affecting the Vendor at law or in equity or before
or by any federal, provincial, state, municipal or other governmental
department, commission, board, bureau or agency.
4. PURCHASER REPRESENTATIONS, WARRANTIES AND COVENANTS
The Purchaser represents and warrants to the Vendor as representations and
warranties which are true and correct as of the date hereof that:
4.1 The Purchaser is a resident of Colorado for matters relating to jurisdiction
of taxation. The Purchaser is a non-reporting public company duly incorporated
under the laws of Colorado, validly existing, and is in good standing to carry
on business in its intended place(s) of business.
4.2 There is no basis for and there are no actions, suits, judgments,
investigations or proceedings outstanding or pending or to the knowledge of the
Purchaser threatened against or affecting the Purchaser at law or in equity or
before or by any federal, provincial, state, municipal or other governmental
department, commission, board, bureau or agency.
4.3 The Purchaser holds all permits, licenses, and consents issued by any
Federal, Provincial, Regional or Municipal Government or Agency thereof that are
necessary or desirable in connection with the operations of the Company.
4.4 The performance of this agreement will not be in violation of the Memorandum
or Articles of the Purchaser or of any agreement to which the Vendor is a party
and will not give any person or company any right to terminate or cancel any
agreement or any right enjoyed by the Purchaser and will not result in the
creation or imposition of any lien, encumbrance or restriction of any nature
whatsoever in favor of a third party upon or against the assets of the
Purchaser.
4.5 The business of the Purchaser now and until the Closing Date will be
conducted and maintained in the manner that is normal for that business.
4.6 The Purchaser is not aware of any adverse claim or claims that may affect
title to or exclusive possession and use of the assets of the Purchaser.
4.7 The representations, warranties, covenants and agreements by the Purchaser
in this Agreement or any certificates or documents delivered pursuant to the
provisions hereof or in connection with the transaction contemplated hereby
shall be true at and as of the time of closing as though such representations
and warranties were made at and as of such time. Notwithstanding any
investigations or enquiries made by the Vendor prior to closing or the waiver of
any condition by the Vendor, the representations, warranties, covenants and
agreements of the Purchaser shall survive the Closing Date and notwithstanding
the closing of the purchase and sale herein provided for, shall continue in full
force and effect.
<PAGE>
5. GENERAL PROVISIONS
5.1 Time shall be of the essence in this Agreement.
5.2 This Agreement contains the whole agreement between the Vendor and the
Purchaser in respect of the purchase and sale contemplated hereby and there are
no warranties, representations, terms and conditions or collateral agreements
expressed, implied or statutory, other than as expressly set forth in this
Agreement.
5.3 This Agreement shall enure to the benefit of and be binding upon the parties
hereto and their respective heirs, executors, administrators, successors and
assigns.
5.4 This Agreement shall be construed in accordance with the laws of the State
of Nevada. All references to sums of money shall be deemed to refer to the legal
tender of the United States.
6. CLOSING DATE
6.1 The closing of the Purchase & Sale contemplate by this Agreement will take
place in the offices of Mr. Max Tanner at 2950 East Flamingo, Suite G, Las
Vegas, Nevada 89121 on May 18, 1999.
6.2 At the closing, or at an alternative date mutually agreed to by the parties
to this Agreement, the Vendor deliver shall deliver 500,000 common restricted
shares of Vega-Atlantic Corporation registered in the name of the Vendor, such
share certificate executed for free and unencumbered transfer to the Vendor by
the Purchaser as at the date of the closing.
<PAGE>
IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the day
and year first above written.
VEGA-ATLANTIC CORPORATION
By:
/s/ Grant Atkins
----------------
Grant Atkins, President
GENEVA RESOURCES, INC.
By:
/s/ Marcus Johnson
------------------
Marcus Johnson, Director
Share Purchase Agreement, March 28, 1999
<PAGE>
APPENDIX A - THE VEGA CLAIMS LISTING - 213 CLAIMS - IDAHO
Vega BLM
Claim #'s IMC#'s
1 181514 41 181554 81 181594
2 181515 42 181555 82 181595
3 181516 43 181556 83 181596
4 181517 44 181557 84 181597
5 181518 45 181558 85 181598
6 181519 46 181559 86 181599
7 181520 47 181560 87 181600
8 181521 48 181561 88 181601
9 181522 49 181562 89 181602
10 181523 50 181563 90 181603
11 181524 51 181564 91 181604
12 181525 52 181565 92 181605
13 181526 53 181566 93 181606
14 181527 54 181567 94 181607
15 181528 55 181568 95 181608
16 181529 56 181569 96 181609
17 181530 57 181570 97 181610
18 181531 58 181571 98 181611
19 181532 59 181572 99 181612
20 181533 60 181573 100 181613
21 181534 61 181574 101 181614
22 181535 62 181575 102 181615
23 181536 63 181576 103 181616
24 181537 64 181577 104 181617
25 181538 65 181578 105 181618
26 181539 66 181579 106 181619
27 181540 67 181580 107 181620
28 181541 68 181581 108 181621
29 181542 69 181582 109 181622
30 181543 70 181583 110 181623
31 181544 71 181584 111 181624
32 181545 72 181585 112 181625
33 181546 73 181586 113 181626
34 181547 74 181587 114 181627
35 181548 75 181588 115 181628
36 181549 76 181589 116 181629
37 181550 77 181590 117 181630
38 181551 78 181591 118 181631
39 181552 79 181592 119 181632
40 181553 80 181593 120 181633
<PAGE>
121 181634 158 181671 195 181708
122 181635 159 181672 196 181709
123 181636 160 181673 197 181710
124 181637 161 181674 198 181711
125 181638 162 181675 199 181712
126 181639 163 181676 200 181713
127 181640 164 181677 201 181714
128 181641 165 181678 202 181715
129 181642 166 181679 203 181716
130 181643 167 181680 204 181717
131 181644 168 181681 205 181718
132 181645 169 181682 206 181719
133 181646 170 181683 207 181720
134 181647 171 181684 208 181721
135 181648 172 181685 209 181722
136 181649 173 181686 210 181723
137 181650 174 181687 211 181724
138 181651 175 181688 212 181725
139 181652 176 181689 213 181726
140 181653 177 181690
141 181654 178 181691
142 181655 179 181692
143 181656 180 181693
144 181657 181 181694
145 181658 182 181695
146 181659 183 181696
147 181660 184 181697
148 181661 185 181698
149 181662 186 181699
150 181663 187 181700
151 181664 188 181701
152 181665 189 181702
153 181666 190 181703
154 181667 191 181704
155 181668 192 181705
156 181669 193 181706
157 181670 194 181707
TECHNOLOGY SUB-LICENSE AGREEMENT
THIS AGREEMENT is made this 18th day of March, 1999
BETWEEN:
Geneva Resources, Inc., a Nevada corporation having an office at 219 Broadway,
Suite 505 Laguna Beach, CA 92651 (hereinafter "GENEVA");
and
Vega-Atlantic Corporation, a Colorado corporation having an office at 5000 Birch
Street, Suite 3000 West Tower, Newport Beach, CA 92660 (hereinafter
"Sub-Licensee" or "VGAA");
1. DEFINITIONS
"AURIC" a limited liability company duly organized in accordance
with the laws of Utah, USA with its principal place of
business being located at 3260 West Directors Row, Salt Lake
City, Utah 84104;
"GENEVA" a corporation duly incorporated in accordance with the laws
of Nevada, USA, with its principal place of business being
located at 219 Broadway, Suite 505 Laguna Beach, CA 92651;
"Sub-Licensee"
or "VGAA" Vega-Atlantic Corporation, a corporation duly incorporated
in accordance with the laws of Colorado, USA, with its
principal place of business being located at 5000 Birch
Street, Suite 4000 West Tower, Newport Beach, CA 92660
"Technology" that technology licensed by GENEVA and developed by AURIC
which is used in the design, and operation of Precious
Metals Recovery Process and Assay Process with all
developments, modifications and improvements to it from time
to time;
"Know-How" all AURlC's proprietary information, both technical and
otherwise, including all its know-how and specifications,
drawings, plans and designs, and documentation which in any
way relates to the design, manufacture and operation of the
Precious Metal's Recovery Process and Assay Process and
which it may possess at the Effective Date, or later acquire
licensed by GENEVA;
<PAGE>
"Precious Metals
Recovery Process" the precious metals recovery process invented and developed
by AURIC and licensed by GENEVA, and which may be applied,
using the Technology and the Know-how in the commercial
recovery of precious metals in the Territory;
"Assay Process" the fire assay process invented and developed by AURIC and
licensed by GENEVA, and which may be applied, using the
Technology and the Know- how in the determination of
precious metals content in the mineralized rock in the
Territory;
"Services" Those services provided by AURIC to VGAA as a Sub-Licensee
of GENEVA that are additional to the Technology and Know-how
relating to the Precious Metals Recovery Process and Assay
Process in this agreement, such as repetitive assay work,
site or Sub-Licensee specific recovery modifications, or
further contracted work beyond the scope of this agreement.
"Territory" the geographical acres of unpatented lode mining claims
possessed or obtained through joint venture or assignment by
VGAA in Lincoln, Camus, and Gooding counties in the State of
Idaho in the United States of America;
"Effective Date" the date on which the parties finally sign this Agreement
and all named attachments;
"Agreement
this Agreement" the agreement recorded in this document.
2. RECORDIAL:
2.1 AURIC shall develop and refine the Precious Metals Recovery Process and
Assay Process by applying the Technology and the Know-how to the design of
assay and metallurgical recovery systems relating to mineralized areas
located in Lincoln, Camus, and Gooding counties in the State of Idaho.
2.2 GENEVA has acquired the sole and exclusive license to use items referred to
in subsection 2.1 of this Agreement in all locations in Camas, Gooding,
Blame, and Lincoln Counties in the State of Idaho, and the right to
sub-license the Precious Metals Recovery Process and Assay Process and
relating
<PAGE>
Technology in Camas, Gooding, Blame, and Lincoln Counties in the State of
Idaho.
2.3 VGAA wishes to:
2.3.1 acquire a sub-license to utilize the Precious Metals Recovery Process
and Assay Process and relating Technology and Know-how from GENEVA;
2.3.2 acquire a non-exclusive sub-license to use it in the Territory;
2.4 GENEVA is prepared to grant VGAA a non-exclusive sub-license to use the
Precious Metals Recovery Process and Assay Process and relating Technology
in the Territory.
2.5 VGAA agrees to maintain strict technology usage guidelines and protocols
outlined by the Sub-License Agreement and issued by AURIC or GENEVA from
time to time pursuant to this Agreement to ensure proper application and
following of standards set for the Precious Metals Recovery Process and
Assay Process and technology developed according to directives and
documentation provided.
2.6 VGAA does not obtain the right to sub-license the Precious Metals Recovery
Process and Assay Process and relating Technology and Know-how in the
Territory or any other location.
2.7 The parties now wish to record their agreement in the above regards, as is
set out below.
3. GRANT OF SUB-LICENCE
3.1 In consideration for the payment of 1,500,000 common voting restricted
shares in the capital of Vega-Atlantic Corporation to be issued in
denominations of 500,000 shares to GENEVA and 1,000,000 shares to AURIC or
its designate, plus Promissory Notes payable to AURIC and GENEVA in the
amount of $250,000 each, copies of which are attached, and
All shares of Vega-Atlantic Corporation pursuant to this agreement are to
be issued at the Effective Date of this Agreement. The Promissory Note will
be due and payable at the date that the Technology and Know-how are to be
transferred from GENEVA to VGAA, after the date that the development and
refinement of the Precious Metal $ Recovery Process and Assay Process
according to BLACKHAWK ORE EXTRACTION PROCEDURES DEVELOPMENT (Level 2), and
Further, other good and valuable consideration the receipt and adequacy of
which is hereby acknowledged, and the mutual covenants and conditions set
out in this Agreement, GENEVA hereby grants VGAA the:
<PAGE>
3.2 non-exclusive sub-license to use the Precious Metals Recovery Process and
Assay Process in the Territory.
4. TERM I TERMINATION
4.1 This Agreement shall commence on the Effective Date and subject to earlier
termination in accordance with any of its provisions, shall continue for an
initial fixed period of forty (40) years. Thereafter, it shall remain in
effect as long as VGAA continues to operate under the sub-licenses granted
to it in section 3 by actively engaging in the use of the Precious Metals
Recovery Process and, or Assay Process in the Territory.
4.2 Should either party believe the other has engaged in a material breach of
this Agreement, it may notify the other party accordingly in writing,
setting out this nature and extent of the breach. The party asserted to be
in breach shall then have a period of ninety (90) days after receiving a
notification of breach to cure the breach. Should the party asserted to be
in breach fail to cure the breach within the ninety (90) day period, the
other party shall, subject to the provisions of sub-section 4.3, have the
right to terminated this Agreement forthwith.
4.3 Should the party asserted to be in breach in terms of sub-section 4.2 be
VGAA, and should VGAA fail to cure any asserted breach timeously, GENEVA
shall not be entitled to cancel this agreement without first giving any
third party to whom VGAA may be involved with due to joint venture or
assignment pursuant to this Agreement an opportunity to cure the breach
concerned within a further period of thirty (30) days. Should any such
third party elect to cure the breach. VGAA shall then be deemed to have
agreed to assign its rights under this Agreement to such third party should
such third party wish to accept such assignment, and GENEVA shall be deemed
to have consented to such assignment and to have accepted such third party
as a party to this Agreement in place of VGAA.
4.4 The termination of this Agreement shall not affect any in process activity
or orders which may have been placed with VGAA to process materials using
the Precious Metals Recovery Process and, or, Assay Process, and which may
be outstanding as at such termination date. VGAA shall be entitled to
complete these orders using the Precious Metals Recovery Process and Assay
Process.
4.5 Upon termination of the Agreement, or upon a deemed assignment of VGAA's
rights under this Agreement to a third party, VGAA shall, save to the
extent necessary to give effect to the provisions of sub-section 4.4,
return to GENEVA all documents, drawings, materials, specifications and the
like in any way concerned with the Technology, the Precious Metals Recovery
Process and Assay Process and the Know-how which may then be in its
possession or under its control.
4.6 Upon termination of this Agreement, or upon a deemed assignment of VGAA's
rights under this Agreement to a third party, all rights and sub-licenses
granted to VGAA shall cease, save to the extent necessary to give effect to
the provisions of sub-section 4.4, but all VGAA's obligations to GENEVA or
AURIC, including payment and confidentiality obligations, shall remain in
force.
<PAGE>
5. PROVISION OF KNOW HOW, AND TECHNICAL ASSISTANCE
5.1 Within sixty (60) days of the Effective Date, AURIC shall make the Know-how
existing as at the Effective Date available to GENEVA on a confidential
basis and for use solely in connection with the rights and sub-licenses
granted by previous agreement. Should AURIC acquire any additional Know-how
after the Effective Date, it shall make it available to GENEVA as soon as
possible after receiving it. If the additional Know-how is applicable to
the sub-license granted to VGAA, GENEVA shall make it available to VGAA as
soon as possible thereafter.
GENEVA or its designate shall also furnish VGAA, upon reasonable request,
with its recommendations and advice to the operation of the Precious Metals
Recovery Process and Assay Process and its application in the Precious
Metals Recovery Process and Assay Process.
5.2 In fulfillment of its obligations set out in sub-section 5.1, GENEVA or its
designate shall instruct a reasonable number of employees of VGAA or their
designate according to sub-section 5.3 in the application and use of the
Precious Metals Recovery Process and Assay Process. VGAA shall pay for the
costs of such instruction, if any. Such instruction shall be given as many
times as VGAA may reasonably require, at such times and for periods and at
such locations as may be mutually agreed upon.
5.3 Custodian of Technology. Prior to the completion of all tasks in all phases
in the development of the Precious Metals Recovery Process and Assay
Process of this Agreement, all information developed by AURIC during each
task in each phase including any and all detail relating to the Precious
Metals Recovery Process and Assay Process shall be transferred in trust to
Dames and Moore as subcontractor to AURIC for the purposes of retaining a
detailed backup record of developed technologies by AURIC. The transfer of
information from AURIC to Dames and Moore shall be complete in detail and
all aspects of each task in each phase, and AURIC shall ensure that Dames
and Moore fully understand all elements and aspects of any proprietary
information, techniques, the Technology and the Know-how, and any other
aspects required for complete understanding.
5.4 Any information made available by GENEVA to VGAA or the designate of VGAA
in terms of this section 5 shall be maintained in confidence by VGAA in
accordance with the provisions of the non-disclosure agreement to be
executed by the parties in the form of the draft attached as "Exhibit A"
simultaneously with their signature of this agreement and as a condition
precedent to this Agreement.
<PAGE>
In exercising its right to sub-license the use of the Precious Metals
Recovery Process and Assay Process in the Territory, GENEVA shall be
entitled to make all information furnished it in terms of this section 5
available to any sub- licenses but provided that in doing so, it shall
procure a written undertaking of confidentiality from such sub-licensee in
the form of the draft attached as "A".
6. IMPROVEMENTS
6.1 GENEVA or its designate undertakes to keep VGAA informed of all
developments, modifications and/or improvements which it may develop or
become possessed of during the currency of this Agreement, and which relate
to the Technology, the Know-how and, or, the Precious Metals Recovery
Process and Assay Process. Any such developments, modifications and/or
improvements shall fall under the sub-licenses and rights granted in terms
of this Agreement.
6.2 VGAA undertakes to notify GENEVA of any developments, modifications and/or
improvements which it may make or discover during the currency of this
Agreement with regard to the Technology, the Know-how and /or the Precious
Metals Recovery Process and Assay Process. Any such development,
modification and/or improvement shall be and remain VGAA's exclusive
property and as a result, VGAA shall have the right to use any such
development, modifications and/or improvement free of any royalty as its
owner.
6.3 Should a joint invention be made by the employees of both VGAA and GENEVA
or its designate, the invention and the rights to it and any patents on it
shall be owned by GENEVA or its designate, but VGAA shall have an
irrevocable, royalty-free and non-exclusive license to use the invention,
including the right to sub-license in the Territory.
7. INFRINGEMENT OF TECHNOLOGY
7.1 Each party undertakes to notify the other in writing as soon as possible
after becoming aware of the occurrence thereof, of:
7.1.1 any infringement or threatened infringement of, or challenge to the
validity of any of the intellectual property rights sub-licensed or granted
in terms of this Agreement;
7.1.2 any alleged infringement, by reason of the use of the Technology, the
Know-how and, or, the Precious Metals Recovery Process and Assay Process,
or common law right or alleged common law right of any other person.
<PAGE>
7.2 Upon any such notice being given, GENEVA shall, at its own cost, take all
such proceedings as are in law available to it to procure the termination
of such infringement or challenge. Should GENEVA fail to do so within a
period reasonable in the circumstances, or should AURIC and GENEVA
mutually agree otherwise, VGAA shall be entitled to take appropriate steps,
as its cost, to procure the termination of such infringement or challenge,
and GENEVA agrees to assist VGAA in doing so to the best of its ability,
including to make available to VGAA all relevant records, papers,
information specimens and the like.
8. WARRANTIES
8.1 GENEVA warrants to VGAA that as at the Effective Date:
8.1.1 it is the owner of the rights to the Technology, the Know-how and the
Precious Metals Recovery Process and Assay Process, that it has executed
proper License agreements with AURIC and confidentiality agreements with
its employees, agents and contractors and these rights and agreements are
in good standing.
8.1.2 the Technology and the Know-how are proprietary to it via license
agreement, and it therefore has the right to grant the sub-licenses and
rights set out in this Agreement to VGAA;
8.1.3 it has not granted, nor will it during the currency of this Agreement
grant to any other person, directly or indirectly, any right or option to
use the Technology, the Know-how and/or the Precious Metals Recovery
Process and Assay Process in the VGAA Territory.
8.1.4 GENEVA hereby warrants to VGAA that there are currently no liens or
encumbrances of any nature outstanding against, filed or perfected in
respect of, or secured through the Technology or the Know-how, and GENEVA
covenants to keep the Technology and the Know-how free from any such liens
or encumbrances during the currency of this Agreement.
9. REFERRAL OF ENQUIRIES
GENEVA undertakes promptly to refer to VGAA any queries directed to it
regarding the use of the Precious Metals Recovery Process and Assay Process
in the Territory in the Metals Recovery Process.
10. PURCHASE OF SERVICES ADDITIONAL TO THE PRECIOUS METALS RECOVERY PROCESS AND
ASSAY PROCESS
In order for VGAA to properly to exploit the sub-license and rights granted
to it in terms of this Agreement, it requires Services in addition to the
Precious Metals Recovery Process and Assay Process. VGAA hereby agrees to
purchase its requirements pursuant to ongoing Services with regard to the
Precious Metals Recovery Process and Assay Process from AURIC or per the
designate of AURIC, which hereby agrees to supply them to VGAA, in
accordance with and subject to the following provisions:
<PAGE>
10.1 The prices and terms quoted by AURIC to VGAA or any sub-Licensee heretofore
for Services in addition to the Technology, Know-how, and the Precious
Metals Recovery Process and Assay Process shall be negotiated specifically
between AURIC and VGAA, or between AURIC and any sub- Licensee.
10.2 VGAA shall place all its orders for Services in addition to Precious Metals
Recovery Process and Assay Process with AURIC in writing. Upon receiving
any written order for Services in addition to Precious Metals Recovery
Process and Assay Process, AURIC shall notify VGAA of the estimated time
and cost that it will take to deliver the Services forming the subject
matter of the order. In order to assist AURIC in fulfilling VGAA's orders
for Services, VGAA shall, with effect from the Effective Date, give AURIC
six-monthly forward estimates of its estimated Services requirements. VGAA
shall not be liable to AURIC in damages or otherwise should any estimate be
inaccurate;
10.3 AURIC undertakes to make every reasonable possible attempt to supply VGAA,
with effect from the Effective Date, with such quantities of Services as
VGAA may from time to time require and to have Services ordered by VGAA
delivered to VGAA as expeditiously as possible; and
10.4 Save as may specifically be approved in writing by AURIC, VGAA shall not
mortgage, pledge, charge, hypothecate or otherwise encumber the Precious
Metals Recovery Process and Assay Process.
10.5 Sub-Licensees granted by GENEVA shall obtain competitive quotation for
Services from AURIC or the designate of AURIC, and AURIC will be awarded
contract for Services subject to AURIC providing competitive industry
pricing for such Services, and subject to AURIC being able to provide the
same quality, value, and timeliness of service. Sub-Licensees granted by
GENEVA obtaining Services from competing providers or other companies will
not be unreasonably withheld by AURIC.
11. DOMICILIUM
The parties hereby choose DOMICILIUM citandi et executandi for all purposes
under this agreement at the addresses set out below, and either party may
at any time change its DOMICILIUM to any other address (not being a post
office box or poste restante) on not less than ten (10) days written notice
to such effect to the other party;
<PAGE>
11.1 GENEVA
219 Broadway, Suite 505,
Laguna Beach, CA 92651
11.2 VGAA
5000 Birch Street, Suite 3000 West Tower,
Newport Beach, CA 92660
12. NOTICES
Any notice by or to either party or to AURIC in terms of this agreement
shall be given in writing and shall be delivered by hand to a responsible
person present at or sent by prepaid registered post or facsimile
transmission to the DOMICILIUM chosen by the addressee in terms of this
agreement and whereupon it shall be deemed to have been received when so
delivered or four (4) days after being so sent.
13. NO VARIATION
No variation of, or addition or agreed cancellation to this Agreement shall
be of any force or effect unless it is reduced to writing and signed by or
on behalf of the parties.
14. GENERAL
14.1 This Agreement, including any attachments, constitutes the entire agreement
between the parties with respect to its subject matter. No agreements,
guarantees or representations, whether verbal or in writing, have been
concluded, issued or made, upon which either party is relying in concluding
this Agreement, save to the extent set out in this Agreement.
14.2 The headings appearing in this Agreement have been used for reference
purposes only and shall not affect its interpretation.
14.3 No indulgence, leniency or extension of time which a party (the "Grantor")
may grant or show to the other, will in any way prejudice the Grantor or
preclude the Grantor from exercising any of its rights in the future.
14.4 Each party shall pay all taxes (including sales and value-added taxes)
imposed on it by the Government of any jurisdiction in which such party is
doing business in respect of the sub-licenses or rights granted under this
Agreement.
14.5 If any provision of this Agreement is held to be illegal or unenforceable
for any reason, such provision shall be deemed severable from the remaining
<PAGE>
provisions of this Agreement and shall in no way effect or impair the
validity or enforceability of the remaining provisions of this Agreement.
If any provision of this Agreement conflicts with any other provision of
any other agreement between the parties, including any confidentiality
agreement, the provisions of this Agreement shall prevail.
14.6 Nothing contained in this Agreement shall modify or effect the provisions
of the principal License Agreement between GENEVA and AURIC. Should there
be any conflict of any term or provision between such Agreements, the
AURIC/GENEVA Agreement shall be given primary definition and control. AURIC
shall remain a third party beneficiary of this Agreement.
14.7 The restricted common shares in the capital of Vega-Atlantic Corporation
referred to in section 3.1 of this Agreement will be included in any share
registration process undertaken by VGAA if and when any such registration
shall occur, subject only to any regulatory authority.
14.8 This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original but all of which shall constitute one and the
same instrument.
14.9 This Agreement shall be binding upon or inure to the benefit of the heirs,
assigns, or successors in interest of each party hereto.
14.10 Each person signing this Agreement represents that he has been fully and
duly authorized to enter into this Agreement by the governing Board of each
business entity.
14.11 This Agreement shall be given reasonable interpretation and applied so far
as possible.
15. GOVERNING LAW
This Agreement and all matters arising hereunder shall be governed by, and
construed in accordance with the Laws of the State of Nevada.
16. ASSIGNMENT
VGAA may transfer or assign this Agreement with the written consent of
GENEVA and AURIC, which consent may not be arbitrarily withheld.
<PAGE>
SIGNED by GENEVA at Bellingham, WA on the 18th day of March, 1999 in the
presence of the undersigned witnesses:
AS WITNESSES:
1. /s/ Pamela Fislick
2. /s/ Stephanie Ebert
/s/ Marcus Johnson
------------------
per. Marcus Johnson, President
SIGNED by VGAA at Bellingham, WA on the 18th day of March, 1999 in the presence
of the undersigned witnesses:
AS WITNESSES:
1. /s/ Pamela Fislick
2. /s/ Stephanie Ebert
/s/ Grant Atkins
----------------
per: Grant Atkins, President
THIS CONSULTING SERVICES and MANAGEMENT AGREEMENT is made effective the 1st day
of April, 1999
BETWEEN:
INVESTOR COMMUNICATIONS INTERNATIONAL, INC.
having an office located at
3926 Irongate Road, Unit D
Bellingham, Washington 98226
(hereinafter called " Investor Comm")
OF THE FIRST PART
AND:
VEGA-ATLANTIC CORPORATION
having an office located at
4600 South Ulster Street
Suite 240
Denver, Colorado 80237
(hereinafter called " Vega-Atlantic")
OF THE SECOND PART
WHEREAS:
A. Vega-Atlantic is engaged in the business of precious metals exploration and
development.
B. By the consensus of the officer of Vega-Atlantic, Investor Comm was engaged
to provide a wide range of administrative, financial, marketing, international
services, and other services with respect to the ongoing and full time operation
of Vega-Atlantic as of the date of this agreement.
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the premises
and mutual covenants and agreements herein contained, and other good and
valuable consideration the receipt and adequacy of which is hereby acknowledged,
Vega-Atlantic hereby grants Investor Comm as the parties hereto covenant and
agree each with the other as follows:
ARTICLE I - Duties and Devotion of Time
(a) Investor Comm shall provide Vega-Atlantic with specific financial,
administrative, marketing, promotional, and international services.
Investor Comm shall have the obligation, and duties to conduct business
related acts on behalf of Vega-Atlantic as directed by the officer and
director of Vega-Atlantic, such services as are customarily done or deemed
necessary for the full and complete operation of Vega-Atlantic; such
services shall include but are not limited to the following:
o International Business Relations o Investor Relations
o International Business Strategy
<PAGE>
o Press Release and Public Disclosure o Legal Liaison
o Corporate Information Distribution o Corporate Minute Book Maintenance
o Corporate ID and Public Relations o Corporate Record Keeping
o Media Liaison o Corporate Secretarial
o Shareholder Liaison o Secretarial Services
o Business Planning o Office and General Duties
o Capital Budgeting o Printing and Production
o Operating Budgeting o Internet Maintenance and Content
o Bookkeeping o Transfer Agent Liaison
o Financial Statement Generation o General Administration
o Financial Services - General
o Annual Report Creation and Production o Funding Services
o Auditor Liaison o Private Offering Structuring
o Banking
o Record Keeping and o Travel for above items as required
Documentation- General
o Database Records
(b) Investor Comm shall provide for the full and complete functioning of
business services as outlined in ARTICLE I, item (a) (hereinafter "the
Consulting Services") above relating to the business of Vega-Atlantic and
its ability to provide for its ongoing development and growth commensurate
with that required in the circumstances, such requirement to be determined
by ongoing circumstances. Investor Comm shall provide for all acts and
duties as are reasonable necessary for the efficient and proper operation
and development of Vega-Atlantic operations but, without limiting the
generality of the foregoing, shall include all matters related directly or
indirectly to the general functioning business operations of Vega-Atlantic.
(c) Vega-Atlantic agrees that Investor Comm may have or acquire business,
financial, or consulting services interests in other companies or
properties and agrees that Investor Comm may devote reasonable time to such
other outside companies and affairs so long as these duties do not affect
Investor Comm's ability to perform its duties under this Agreement in
accordance with the requirement in each area of the Consulting Services to
be provided.
ARTICLE II - Remuneration and Term
(a) Investor Comm shall provide the Consulting Services to Vega-Atlantic as set
out herein in consideration for which Vega-Atlantic shall pay Investor Comm
an amount not greater than the average of $75,000 US funds per calendar
month during the term of this Agreement. The fees charged by Investor Comm
to Vega-Atlantic shall be based on work conducted and variable levels of
work required in any month. The maximum monthly fee charged to
Vega-Atlantic by Investor Comm for the calendar year following that
evidenced by the effective date of this Agreement will be renegotiated no
later than September 30, 2000.
<PAGE>
(b) The effective date of this Agreement shall be April 1,1999 and the
Agreement shall continue for a term of 24 months from such date.
(c) In conducting its duties under this Agreement, Investor Comm shall report
to the Vega-Atlantic Board of Directors or appointed officer or agents as
directed by Vega-Atlantic.
ARTICLE III - Reimbursement for Expenses
Vega-Atlantic shall bear all expenses where the costs incurred are for the sole
and exclusive benefit of Vega-Atlantic. Vega-Atlantic shall provide
reimbursement expenses incurred by Investor Comm where Investor Comm incurs
expenses that are for the sole and exclusive benefit of Vega-Atlantic.
ARTICLE IV - Termination of Agreement
Notwithstanding any other provision contained herein, it is understood and
agreed between the parties hereto that either party may terminate this Agreement
with or without cause and for any reason whatsoever by providing twelve (12)
months written notice to the other party.
ARTICLE V - Indemnity
Vega-Atlantic shall indemnify Investor Comm, its directors, officers and agents
and hold them harmless from any claims, expenses and damages arising out of this
Agreement.
ARTICLE VI - Entire Agreement
This Agreement represents the entire agreement between the parties and
supersedes any and all prior agreements and understandings, whether written or
oral, between the parties.
ARTICLE VII - Applicable Law
This Agreement shall be construed under and governed by the laws of the State of
Colorado.
ARTICLE VIII - Enurement
The provisions of this Agreement shall ensure to the benefit of and binding upon
the parties hereto and their respective heirs, executors, administrators,
successors and assigns.
<PAGE>
Agreed at Bellingham, Washington, this 1st day of April, 1999.
IN WITNESS WHEREOF the parties hereto executed this Agreement as of the day and
year first above written.
VEGA-ATLANTIC CORPORATION
Grant Atkins
Name
/s/ Grant Atkins
----------------
Signature
Secretary, Director
Title
INVESTOR COMMUNICATIONS INTERNATIONAL, INC.
Marcus Johnson
Name
/s/ Marcus Johnson
------------------
Signature
President
Title
January 12, 2000
Golden Thunder Resources ltd.
Tun Resources Inc.
Suite 402, 938 Howe Street
Vancouver, BC V6Z 1N9
Attention: Tun Ave Sai
Dear Sirs:
RE: LETTER OF INTENT FOR PURCHASE OF SHARES OF TUN RESOURCES INC.
This letter (the "letter of Intent") sets forth the general terms and condition
of an agreement whereby Vega-Atlantic Corporation ("Vega") will purchase the
right, title and interest in and to 80% of the issued and outstanding shares in
Tun Resources Inc. ("Tun") from Golden Thunder Resources Ltd. ("Golden
Thunder"), with an option to purchase the remaining 20% of the shares of Tun
held by Golden Thunder.
BACKGROUND:
A. Vega is a Colorado corporation, listed and trading on the OTC Bulletin
Board in the United States.
B. Golden Thunder is a B.C. corporation, listed on the CDNX for trading.
C. Golden Thunder owns 100% of the issued and outstanding shares of Tun.
D. Tun holds an interest in two mineral prospect joint ventures in the
Republic of China: the Yuntong Joint Venture in the Yunnan Province, P.R.C.
(82% interest), and the Lutong Project in the Yunnan Province, P.R.C. (80%
interest), and may also hold an interest in other properties by way of
joint venture or other form of interest (collectively, the "Tun Joint
Venture Interest").
E. Vega wishes to purchase from Golden Thunder 80% of the issued and
outstanding shares of Tun (the "Shares"), with an option to purchase the
remaining 20% of the shares (the "Option").
In consideration of the sum of $10.00 paid to Golden Thunder, the receipt and
sufficiency of which is hereby acknowledged, and for other good and valuable
consideration, the parties hereto agree as follows;
1. PURCHASE AND SALE OF THE SHARES
1.1 Golden Thunder will sell to Vega, and Vega will purchase from Golden
Thunder, the Shares in consideration of the following:
<PAGE>
a. a commitment to provide funding to Tun on or before the dates and in the
amounts set out below:
Amount of
Date of Investment Investment ($U.S.)
------------------ ------------------
January 31, 2000 50,000
February 15, 2000 250,000
March 15, 2000 300,000
April 15, 2000 200,000
May 15, 2000 200,000
August 15, 2000 (the 180,000
"Completion Date")
Total $1,180,000
(collectively, the "Tun Investment Funds").
b. 600,000 Rule 144 common shares in the capital of Vega transferred to Golden
Thunder on or about the Closing Date set out in clause 3.1 below;
c. 1,000,000 Rule 144 common shares in the capital of Vega transferred to
Golden Thunder on or about the Completion Date;
d. 500,000 employee share options in the capital of Vega at $0.10 U.S. per
share, which will be made available to employees and directors of Tun, such
option plan to be entered into after the Closing Date set out in clause 3.1
below; AND
e. Vega acknowledges that it shall be soley responsible for the funding of Tun
and the Tun Joint Venture Interests, and that Golden Thunder's minority
ownership interest will not require Golden Thunder to provide funding in
the future. The funding of Tun and the Tun Joint Venture Interests includes
costs and expenses associated with day to day operation.
1.2 If the Tun Investment Funds are not forwarded on or about the dates set out
above, or if Vega does not transfer the Tun Investment Funds or Vega Shares
by on or about the Closing Date or on or about the Completion Date, as set
out above, the agreement contemplated herein will be null and void, unless
otherwise agreed by the parties hereto.
1.3 The Investment Funds to be provided by Vega shall be deemed to be loans to
Tun, until the completion of the total advance of all the Investment Funds,
the terms of such deemed loans to be further detailed in the Formal
Agreement referred to in Clause 7.
1.4 The Vega Shares will be, when issued, fully paid and non-assessable
exchangeable common shares in the capital of Vega and will be free and
clear of all liens, charges and encumbrances save and except for hold
periods or resale restrictions imposed by applicable securities laws,
regulations and statutes of all applicable jurisdictions.
<PAGE>
2. THE OPTION
2.1 Golden Thunder will provide Vega with an option to purchase the remaining
20% of the issued and outstanding shares (the "Optioned Shares") of Tun on
the following terms:
a. upon the request of Vega, the Optioned Shares will be assessed at fair
market value by qualified independent evaluator(s), the cost of such
evaluation to be divided equally between Golden Thunder and Vega;
b. Golden Thunder shall offer the Optioned Shares to Vega at the fair market
value price determined in the evaluation;
c. the option will be exercisable from the Completion Date for two years
following such date, or until August 15, 2002;
d. Vega must provide notice in writing to Golden Thunder that it wishes to
exercise the option, and upon receiving such notice, Golden Thunder will
transfer the Optioned Shares to Vega;
e. if Vega does not exercise the Option by August 15, 2002, the Option will be
null and void.
3. CLOSING
3.1 The closing of the Formal Agreement as defined in Section 7 of this Letter
of Intent shall occur no later than April 15, 2000 (the "Closing Date")
after the receipt of final regulatory approval and Tun shareholders
approval, unless otherwise agreed by the parties hereto.
3.2 On Completion Date, Tun Aye Sai shall be appointed to the Board of
Directors of Vega.
3.3 Also on the Closing Date, a designate of Vega shall be made a signatory to
the banking documents and accounts of Tun.
3.4 On or before the Closing Date, Tun Aye Sai agrees to enter into a
management contract with Tun whereby be shall continue in the day-to-day
operation and management of Tun until August 15, 2002.
4. DUE DILIGENCE AS A PRE-CONDITION TO CLOSING
4.1 The transaction contemplated herein is subject to Vega conducting due
diligence investigations and being satisfied with the results of same prior
to the Closing Date. The due diligence investigations of Vega may include,
but shall not be limited to, confirmation and review of:
a. Title, status and ownership of the Tun Joint Venture Interests;
b. The Tun Joint Venture Costs, which may include a detailed listing of same;
c. Corporate status, tax filings, regulatory filing in all applicable
jurisdictions, employee withholding and payroll filings, republic levies,
taxes and other charges;
<PAGE>
d. A listing of legal proceedings to which Tun may be a party;
e. The minute books and corporate records of Tun;
f. The outstanding liabilities of Tun, which liabilities shall remain
substantially unchanged at the Closing Date;
g. The most recent financial statements of Tun, including any audited
statements, which shall be prepared in accordance with Canadian GAAP,
current to Tun's most recently completed financial quarter, and all
subsequently updated financials;
h. The date of Tun's fiscal year end; and
i. Any other information which Vega reasonable my request from Tun.
4.2 Golden Thunder and Tun may also conduct due diligence investigations and
request from Vega any information that they reasonable require in order to
conduct such investigation, including, but not limited to, minute books,
corporate documents, financial statements, regulatory and tax filings,
records of legal proceedings, and outstanding liabilities.
4.3 The closing of the transaction contemplated in this Letter of Intent will
be subject to the parties being satisfied with the results of their
respective due diligence investigations.
5. REPRESENTATIONS AND WARRANTIES
5.1 Vega represents and warrants to Golden Thunder that:
(a) Vega is a valid and subsisting corporation duly incorporated and in good
standing under the laws of the State of Colorado; and it is a "reporting
issuer" on the OTC Bulletin Board as that term is normally defined in that
exchange's rules and regulations;
(b) entering into this Letter of Intent does not and will not conflict with,
and does not and will not result in a breach of, any of the terms of its
incorporating documents or any agreement or instrument to which Vega is a
party;
(c) this Letter of Intent has been or will be authorized by all necessary
corporate action on the part of Vega;
(d) Vega's common shares are listed and posted for trading through the OTC
Bulletin Board, and it is in good standing with all regulatory and
statutory bodies having jurisdiction over its business affairs.
5.2 Golden Thunder represents and warrants to Vega that:
(a) Golden Thunder is a valid and subsisting corporation duly incorporated and
in good standing under the laws of the Province of British Columbia; and it
is both a "reporting issuer" and an "exchange issuer" listed on the
Canadian Venture Exchange (the "CDNX") as those terms are normally defined
in the securities industry in British Columbia;
<PAGE>
(b) entering into this Letter of Intent does not and will not conflict with,
and does not and will not result in a breach of, any of the terms of its
incorporating documents or any agreement or instrument to which Golden
Thunder is a party;
(c) this Letter of intent has been or will be authorized by all necessary
corporate action on the part of golden Thunder.
5.3 Tun represents and warrants to Vega that:
(a) Tun is a valid and subsisting privately-held corporation duly incorporated
and in good standing under the laws of the Province of British Columbia.
(b) entering into this Letter of Intent does not and will not conflict with,
and does not and will not result in a breach of, any of the terms of its
incorporating documents or any agreement or instrument to which Vega is a
party;
(c) this Letter of Intent has been or will be authorized by all necessary
corporate action on the part of Vega;
6. RIGHTS AND OBLIGATIONS OF THE PARTIES
6.1 Upon execution of this Letter of Intent, Vega shall take all reasonable
steps to:
(a) gain, prior to the Closing Date, such approvals to this Letter of Intent as
may be required from its shareholders, from regulatory and statutory
authorities having jurisdiction if required including, without limiting the
generality of the foregoing, the written consent of the directors and
officers of Vega to the terms of this Letter of Intent (in form required by
corporate legislation in Colorado or by the corporate counsel of Vega);
(b) at any time prior to the Closing Date, not do or permit to be done any act
or thing which would or might in any way adversely affect the rights of
Golden Thunder and Tun hereunder; and
(c) provide to Golden Thunder and Tun any and all reasonable requested
agreements, documents, records, data and files (in written or electronic
form) relating to Vega and in the care, control and possession of Vega.
6.2 Upon execution of this Letter of Intent, Golden Thunder and Tun shall take
all reasonable steps to:
(a) gain, prior to Closing, such approvals to the purchase and sale of the
Shares as may be required from their shareholders, from the CDNX, and from
regulatory and statutory authorities having jurisdiction including, without
limiting the generality of the foregoing, the written consent of the
directors and officers of Golden Thunder and Tun to the terms of this
Letter of Intent (in form required by the Company Act of British Columbia
or by the corporate counsel of the companies);
(b) at any time prior to Closing, not do or permit to be done any act or thing
which would or might in any way adversely affect the rights of Vega
hereunder; and
<PAGE>
(c) provide to Vega any and all reasonable requested agreements, documents,
records, data and files (in written or electronic form) relating to Vega
and in the care, control and possession of Vega.
7. FORMAL AGREEMENT
7.1 The parties agree that this Letter of Intent incorporates all of the
essential terms of their agreement and that is shall be binding upon them.
However, the parties will negotiate, on or before April 15, 2000 an
agreement, or agreements, (the "Formal Agreement") which may incorporate
such further terms and conditions as are reasonable necessary to carry out,
and give effect in, the general terms and conditions of this Letter of
Intent.
7.2 The parties agree that upon execution of the Formal Agreement that all
prior understandings and agreements, whether verbal or written, shall be
superseded by the terms of the Formal Agreement and that such prior
understandings and agreements, including this Letter of Intent, shall be
superseded and terminated by the terms of the Formal Agreement.
8. MISCELLANEOUS
8.1 Any notice to be required or permitted hereunder will be in writing and
sent by delivery, facsimile transmission, or prepaid registered mail
addressed to the party entitled to receive the same, or delivered to such
party at the address specified above, or to such other address as either
party may give to the other for that purpose. The date of receipt of any
notice, demand or other communication hereunder will be the date of
delivery, the date of transmission if sent by facsimile, or, if given by
registered mail as aforesaid, will be the date on which the notice, demand
or other communication is actually received by the addressee.
8.2 This Letter of Intent shall enure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, successors and
permitted assigns.
8.3 Vega agrees that it shall be responsible for its own legal expenses and
disbursements relating to this Letter of Intent and their expenses related
to negotiation and preparation of the Final Agreement.
8.4 This Letter of Intent and the Final Agreement shall be interpreted and
construed in accordance with the laws of British Columbia and the parties
agree to attorn to the courts thereof.
8.5 All dollar figures in this Letter of Intent are given in valid currency of
Canada unless otherwise specified.
8.6 This Letter of Intent may be executed by facsimile and in counterpart.
8.7 All amendments to this Letter of Intent must be in writing and signed by
all of the parties hereto.
8.8 The performance of the covenants and obligations are subject to Golden
Thunder's shareholders' approval and the acceptance for filing of this
Letter of Intent and the Formal Agreement by the CDNX and regulatory
authorities.
<PAGE>
If the above terms and conditions accurately record your understanding of our
agreement, please so acknowledge by signing a copy of this Letter of Intent in
the pace provide below turning the same to us at your earliest convenience. Upon
your execution thereof, this Letter of Intent will constitute a legal and
binding agreement subject to its terms.
Yours truly,
VEGA-ATLANTIC CORPORATION
/s/ Grant Atkins
- ----------------
Grant Atkins, President
I/We the undersigned hereby accept the terms and conditions of this Letter of
Intent.
GOLDEN THUNDER RESOURCES LTD.
/s/ Marie Joan Lai-Soskin
- -------------------------
Authorized Signatory
Director
- --------
Position with Golden Thunder Resources Ltd.
January 14, 2000
- ----------------
Date Accepted
TUN RESOURCES INC.
/s/ Tun Aye Sai
- ---------------
Authorized Signatory
Director
- --------
Position with Tun Resources Inc.
January 14, 2000
- ----------------
Date Accepted
Geneva Resources, Inc.
Suite 505
219 Broadway
Laguna Beach, CA 92651
- --------------------------------------------------------------------------------
April 27, 2000
Securities and Exchange Commission
450 Fifth Street N. W.
Washington, D.C. 20549
Attn: Mr. H. Roger Schwall, Assistant Director
Ms. Kim Calder, Assistant Chief Accountant
Ms. Jill Davis
Ms. Jennifer Bowes
RE: Vega-Atlantic Corporation
File No. 0-27845
Dear Mr. Schwall:
We submit the following representations which respond to comment number 1 and
the request from the Securities and Exchange Commission in its letter dated
April 26, 2000 addressed to Vega-Atlantic Corporation (the "Company").
I, Marcus Johnson, am the President of Geneva Resources, Inc. ("Geneva"), and
represent that the following are true and correct statements:
1. During the week of April 10th through April 14th, 2000,
representatives of Intergold Corporation, Geneva and the Company met
in Salt Lake City, Utah, with counsel regarding the pending litigation
between Intergold Corporation/Geneva and AuRIC Metallurgical
Laboratories LLC ("AuRIC") and Dames & Moore.
2. On approximately April 10th and April 11th, representatives of
Intergold Corporation, Geneva and the Company met to discuss the
potential damages incurred by Intergold Corporation and Geneva arising
from the various breaches of contract by AuRIC and Dames & Moore.
Subsequently, representatives of Geneva and the Company discussed the
material breach of the sub-license agreement by Geneva and the
resulting damages incurred by the Company.
3. Representatives of Geneva and The Company further discussed the
entitlement of the Company to receive a proportionate amount of any
damages awarded to Geneva.
<PAGE>
Securities and Exchange Commission
Page Two
April 27, 2000
4. Representatives of Geneva and the Company reached a mutual
understanding and verbal agreement that the Company will be entitled
to receive a proportionate amount of any damages awarded to Geneva as
compensation for the material breach by Geneva of the sub-license
agreement. I have reviewed the disclosure contained in the Form 10SB
registration statement of the Company regarding such mutual
understanding and agree that the disclosure therein is accurate.
Sincerely,
/s/ Marcus Johnson
- ------------------
Marcus Johnson, President
UNITED STATES DEPARTMENT OF THE INTERIOR
Bureau of Land Management
Idaho State Office
1387 South Vinneli Way
Boise, ID 83709
Tel: (208) 373-3890
Fax: (208)373-3899
VEGA-ATLANTIC CORPORATION
-------------------------
Vega BLM
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<PAGE>
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