U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 2 TO
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____ to _______
Commission file number 0-27845
VEGA-ATLANTIC CORPORATION
-------------------------
(Exact name of small business issuer as specified in its charter)
COLORADO 84-1304106
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
4600 South Ulster St.
Suite 240
Denver, Colorado 80237
-------------------------------
(Address of Principal Executive Offices)
(800) 721-0016
--------------
(Issuer's telephone number)
N/A
---
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
State the number of shares outstanding of each of the issuers classes of common
equity, as of the latest practicable date:
Class Outstanding as of February 15, 2000
- ----- ----------------------------------
Common Stock, $.00001 par value 17,585,000
Transitional Small Business Disclosure Format (check one)
Yes No X
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
- ----------------------------
VEGA-ATLANTIC CORPORATION
(An Exploration Stage Company)
FINANCIAL STATEMENTS
(Unaudited)
December 31, 1999
2
<PAGE>
TABLE OF CONTENTS
Page
----
Table of Contents 3
Balance Sheet 4
Statements of Operations 5
Statements of Cash Flows 6
Notes to Financial Statements 7 - 13
3
<PAGE>
<TABLE>
<CAPTION>
VEGA-ATLANTIC CORPORATION
(An Exploration Stage Company)
Balance Sheet
December 31,
1999
-----------
ASSETS
CURRENT ASSETS
<S> <C>
Cash and cash equivalents $ 238
OTHER
Advances receivable 10,000
Deposits 125
-----------
Total Assets $ 10,363
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
CURRENT LIABILITIES
Accounts payable - trade $ 18,926
Advances from related parties 799,392
Notes payable - Technology sublicense 595,696
Directors fees payable 44,767
Accrued interest payable 91,485
-----------
Total Current Liabilities 1,550,266
-----------
STOCKHOLDERS' EQUITY
Preferred stock, no par value;
20,000,000 shares authorized at December 31, 1999
0 shares issued and outstanding at December 31, 1999 --
Common stock $.00001 par value;
500,000,000 shares authorized at December 31, 1999;
17,585,000 shares issued and outstanding at December 31, 1999 176
Paid - in capital 2,306,826
Accumulated deficit through exploration stage (3,846,905)
-----------
Total Stockholders' Equity (1,539,903)
-----------
Total Liabilities and Stockholders' Equity $ 10,363
===========
The accompanying notes are an integral part of the financial statements.
4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
VEGA-ATLANTIC CORPORATION
(An Exploration Stage Company)
Statements of Operations
Inception
(January 28,
For the 3 Months For the 9 Months 1987) to
Ended Dec. 31, Ended Dec. 31, December 31,
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 50,704 72,004
Claims exploration services 2,722 -- 4,082 -- 4,082
Claims staking and mangement -- -- 1,935 8,698 38,443
Overhead and administration 137,765 75,000 549,800 225,000 2,024,882
Legal and accounting 4,827 25,117 8,394 35,766 73,599
Transfer agent fees 505 453 800 7,925 13,370
Director's fees 1,500 1,500 4,500 4,500 33,000
Other administrative costs 4,259 1,464 6,149 7,730 38,745
Consultants -- -- -- -- 81,076
Printing and stationary -- -- -- 4,008 45,886
------------ ------------ ------------ ------------ ------------
Total Operating Expenses 151,578 103,534 596,960 344,331 3,208,269
------------ ------------ ------------ ------------ ------------
Loss from Continued Operations (151,578) (103,534) (596,960) (344,331) (3,208,269)
------------ ------------ ------------ ------------ ------------
Discontinued Operations:
Loss from discontinued operations of subsidiary
Century Manufacturing, Inc. -- -- -- -- (100,010)
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 -- -- -- -- (519,639)
------------ ------------ ------------ ------------ ------------
Net Loss from Operations (151,578) (103,534) (596,960) (344,331) (3,727,908)
------------ ------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE)
Interest Income -- -- -- -- 2
Interest Expense (33,166) (9,722) (85,895) (22,115) (118,999)
------------ ------------ ------------ ------------ ------------
Total Other Income (Expense) (33,166) (9,722) (85,895) (22,115) (118,997)
------------ ------------ ------------ ------------ ------------
NET (LOSS) $ (184,744) $ (113,256) $ (682,855) $ (366,446) $ (3,846,905)
============ ============ ============ ============ ============
Earnings (Loss) Per Share - Basic $ (0.011) $ (0.008) $ (0.039) $ (0.025) $ (0.629)
============ ============ ============ ============ ============
Weighted Average Number of
Common Shares Outstanding 17,585,000 14,555,000 17,585,000 14,555,000 6,118,395
============ ============ ============ ============ ============
The accompanying notes are an integral part of the financial statements.
5
</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 9 Months 1987) to
Ended Dec. 31, Ended Dec. 31, December 31,
1999 1998 1999 1998 1999
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C> <C> <C>
Net (loss) $ (184,744) $ (113,256) $ (682,855) $ (366,446) $(3,846,905)
Adjustments to reconcile net (loss) to cash
Non-cash research and development expenses -- -- -- -- 783,182
Non-cash interest recognized through discount adjustment 8,750 -- 26,250 -- 27,514
Non-cash stock issued in settlement of payables and for
services -- -- -- -- 84,992
Changes in Assets and Liabilities
Deposits -- -- -- -- (125)
Accounts payable 7,887 25,228 519 25 18,926
Directors fees payable 1,500 1,500 4,500 4,500 44,767
Accrued interest payable 24,415 9,723 59,645 22,115 91,485
----------- ----------- ----------- ----------- -----------
Net Cash Flows Used for Operating Activities (142,192) (76,805) (591,941) (339,806) (2,796,164)
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Advances from affiliates - net 151,765 76,300 601,900 338,800 799,392
Purchase of subsidiary -- -- -- -- (100,000)
Advance to Golden Cycle De Panama (10,000) -- (10,000) -- (10,000)
Sale of stock, net of offering costs -- -- -- -- 2,107,010
----------- ----------- ----------- ----------- -----------
Net Cash Flows Provided by Financing Activities 141,765 76,300 591,900 338,800 2,796,402
----------- ----------- ----------- ----------- -----------
Net increase in cash (427) (505) (41) (1,006) 238
Cash and cash equivalents - Beginning of period 665 658 279 1,159 --
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents - End of period $ 238 $ 153 $ 238 $ 153 $ 238
=========== =========== =========== =========== ===========
NON-CASH ACTIVITIES
During 1987, 1,500,000 shares of common stock were issued for services performed.
During 1989, 8,500,000 shares of common stock were issued for services performed.
During 1995, accounts payable of $27,301 to a shareholder were forgiven as part of a stock sale.
During 1995, 10,000 shares of common stock were transferred from a shareholder to a consultant for services performed.
During 1996, Century Manufacturing, Inc. was purchased for $100,000 through an advance from Century.
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 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 pursuant to a technology sub-license agreement
The Company has accrued interest expense of $91,485 on advances and notes, has recognized an additional $27,514 of interest
through discount adjustments and has paid interest of $0.
The accompanying notes are an integral part of the financial statements.
6
</TABLE>
<PAGE>
VEGA-ATLANTIC CORPORATION
(An Exploration Stage Company)
Notes to the Financial Statements
December 31, 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 December 31, 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 $1,550,028, and a stockholders' deficit of $1,539,903. 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 December 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.
7
<PAGE>
VEGA-ATLANTIC CORPORATION
(An Exploration Stage Company)
Notes to the Financial Statements
December 31, 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 par, or $10, and the Company gave up 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.
8
<PAGE>
VEGA-ATLANTIC CORPORATION
(An Exploration Stage Company)
Notes to the Financial Statements
December 31, 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 December 31, 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,
the Company issued a $100,000 convertible promissory note to Geneva
Resources, Inc. and the Company also issued 1,000,000 restricted
9
<PAGE>
VEGA-ATLANTIC CORPORATION
(An Exploration Stage Company)
Notes to the Financial Statements
December 31, 1999
- --------------------------------------------------------------------------------
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 December 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 RECEIVABLE
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. The
Company has advanced $10,000 to Golden Cycle pursuant to this letter
of intent.
NOTE 6: ADVANCES AND NOTES PAYABLE
Advances and Notes Payable are comprised of the following:
Advances
--------
1999
----
Investor Communications Int'l, Inc. $576,300
Tri-Star Financial Services, Inc. 155,918
Amero-can Marketing, Inc. 53,710
Newport Capital Corporation 13,464
--------
Total Advances $799,392
========
10
<PAGE>
VEGA-ATLANTIC CORPORATION
(An Exploration Stage Company)
Notes to the Financial Statements
December 31, 1999
- --------------------------------------------------------------------------------
All advances are payable on demand and bear 10% simple interest. There
is $73,381 of accrued interest on the advances as of December 31,1999.
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
Discount on AuRIC note payable to imput interest at 10% (2,152)
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% (2,152)
----------
Total Notes Payable $ 595,696
==========
Accrued interest on the notes payable as of December 31, 1999 amounted
to $18,104. The Company has also recognized an additional $27,514 of
imputed interest on the notes through December 31, 1999.
NOTE 7: 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 8: 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.
11
<PAGE>
VEGA-ATLANTIC CORPORATION
(An Exploration Stage Company)
Notes to the Financial Statements
December 31, 1999
- --------------------------------------------------------------------------------
NOTE 9: 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 March 31, 2001.
The sole director and officer of the Company is a part of the
management team provided by Investor Communications.
NOTE 10: SUBSEQUENT EVENTS
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 $1,800,000 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. It is probable that the Company will enter into a
final Agreement with Golden Thunder to purchase approximately eighty
percent (80%) of the issued and outstanding shares of common stock of
Tun Resources Inc.
The Company has ceased exploration indefinitely on its 213 unpatented
lode-mining claims in the State of Idaho pursuant to a profit sharing
agreement as discussed in Note 3. Effective February, 2000, the
Company along with its Joint Venture partner Geneva Resources, Inc.
has ceased to explore the claims, until such time as the metallurgical
and assay technology to be obtained from Geneva Resources, Inc.
becomes available.
On March 29, 2000, the Company issued 378,600 shares of restricted
Common Stock to Tristar Financial Services, Inc. for settlement of
debt in the aggregate amount of $189,281, issued 1,500,800 shares of
restricted Common Stock to Investor Communications International, Inc.
for settlement of debt in the aggregate amount of $750,389, issued
149,300 shares of restricted Common Stock to Amerocan Marketing, Inc.
for settlement of debt in the aggregate amount of $74,635, and issued
32,300 shares of restricted Common Stock to Newport Capital for
settlement of debt in the aggregate amount of $16,157.
12
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
General
- -------
The Company is engaged in the exploration of gold and silver within the
United States and worldwide. The Company owns a fifty-one percent (51%) of a
future profit sharing 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"). In addition to the Vega Property, management has
identified other business opportunities that it plans to pursue pertaining to
the exploration and development of gold and silver.
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 (the
"Letter of Intent"). 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.
The terms of the Letter of Intent provide that, in exchange for one hundred
percent (100%) of the issued and outstanding shares of common stock of Golden
Cycle, the Company would (i) pay $100,000 to Golden Cycle, (ii) issue 200,000
shares of its restricted common stock to Golden Cycle, and (iii) pay for the
duration of time that the concession is in production either a six percent (6%)
monthly royalty on gross proceeds realized from all alluvial based mining
conducted on the concession or an annual payment of $25,000. The provisions of
the Letter of Intent further provide that as a pre-condition to closing such
acquisition and the consummation of a definitive final agreement, (i) the
Company conduct to its satisfaction due diligence required for assessment
purposes on both hard rock and alluvial based aspects of the concession, (ii)
the Company receives confirmation that Golden Cycle has complied with all tax
and regulatory filings, (iii) necessary approvals regarding the transaction are
obtained as may be required including shareholder approval, and (iv) delivery of
financial statements from Golden Cycle, including an inventory of all
unencumbered assets and reflecting no liabilities.
As of the date of this Quarterly Report, the Company has terminated
discussions with Golden Cycle regarding its acquisition due to the results of
the Company's due diligence.
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.
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 Quarterly Report, 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.
13
<PAGE>
Results of Operation
- --------------------
Quarter Ended December 31, 1999 compared to December 31, 1998
- ---------------------------------------------------------------
For the three-month period ended December 31, 1999, the Company recorded a
net loss of $184,744 compared to a net loss of $113,256 in the corresponding
period of 1998. During the three-month period ended December 31, 1999 and
December 31, 1998, the Company recorded no income.
During the three-month period ended December 31, 1999, the Company recorded
operating expenses of $151,578 as compared to $103,534 of operating expenses
recorded in the same period for 1998. Overhead and administration expenses
increased in the approximate amount of $62,765 in the three-month period ended
December 31, 1999 compared to the three-month period ended December 31, 1998.
This increase resulted primarily from the increasing scale and scope of the
overall business activity, including expenses associated with the identification
of and ensuing negotiations pertaining to the acquisition of Golden Cycle and
Tun Resources. Of the $137,765 incurred as overhead and administration expenses
during the three-month period ended December 31, 1999, no funds were paid to
Investor Communications International, Inc. ("ICI") for amounts due and owing
for services rendered including, but not limited to, financial, administrative,
and metals exploration management. ICI and Tristar Financial Services, Inc.
provided net loans to the Company of $139,765 and $12,000 respectively during
the three-month period ended December 31, 1999.
Nine Months Ended December 31, 1999 compared to December 31, 1998
- -----------------------------------------------------------------
For the nine-month period ended December 31, 1999, the Company recorded a
net loss of $682,855 compared to a net loss of $366,446 in the corresponding
period of 1998. During the nine-month period ended December 31, 1999 and
December 31, 1998, the Company recorded no income.
During the nine-month period ended December 31, 1999, the Company recorded
operating expenses of $596,960 as compared to $344,331 of operating expenses
recorded in the same period for 1998. Overhead and administration expenses
increased in the approximate of $324,800 in the nine-month period ended December
31, 1999 compared to the nine-month period ended December 31, 1998. This
increase resulted primarily from the increasing scale and scope of the overall
business activity, including expenses associated with the exploration and
administration of the Vega Property and the identification of and ensuing
negotiations pertaining to the acquisition of Golden Cycle and Tun Resources. Of
the $549,800 incurred as overhead and administration expenses during the
nine-month period ended December 31, 1999, $1,800 was paid to ICI for services
rendered. ICI provided advances to the Company in the aggregate amount of
$565,900 during the nine-month period ended December 31, 1999. The consulting
services and management agreement with ICI commenced on April 1, 1999 and will
terminate on March 31, 2001.
Liquidity and Capital Resources
- -------------------------------
As of the nine-month period ended December 31, 1999, the Company's total
assets were $10,363. This increase in assets from fiscal year ended March 31,
1999 was due to the $10,000 advance paid by the Company in connection with the
acquisition of Golden Cycle. The Company's assets currently consist of cash and
cash equivalents. As of the nine-month period ended December 31, 1999, the
Company's total liabilities were $1,550,266. This overall increase from fiscal
year ended March 31, 1999 was due primarily to the $565,900 in advances provided
by ICI, $15,000 provided by Tristar Financial Services, Inc. and $21,000
provided by Amerocan Marketing, Inc.
Stockholders' Deficit increased from $(757,048) for fiscal year ended March
31, 1999 to $(1,539,903) for the nine-month period ended December 31, 1999.
14
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
- -------------------------
On September 27, 1999, International Gold Corporation, a Nevada corporation
and the subsidiary of Intergold Corporation, and Geneva Resources, Inc.
("Geneva") initiated legal proceedings against AuRIC Metallurgical Laboratories,
LLC, a Utah limited liability company ("AuRIC") and Dames & Moore, a Delaware
corporation ("Dames & Moore"), by filing its complaint in the District Court of
the Third Judicial District for Salt Lake City, State of Utah.
International Gold Corporation and AuRIC had previously entered into an
agreement for services dated March 18, 1999 (the "Service Agreement") whereby
AuRIC agreed to perform certain services, including the development of
proprietary technology and know-how relating to fire and chemical assay analysis
techniques and metallurgical ore extraction procedures developed specifically
for mining claims located on properties of International Gold Corporation.
Geneva and AuRIC also entered into a Technology License Agreement dated March
17, 1999 (the "License Agreement") whereby AuRIC agreed to (i) supply the
proprietary technology to Geneva, (ii) grant to Geneva a license to use such
technology on various claims owned by Geneva, and (iii) grant to Geneva the
right to sub-license the proprietary technology to the Company for use on the
Vega Property. Dames & Moore subsequently verified the fire and chemical assay
techniques and procedures developed by AuRIC and their repeatability.
International Gold Corporation subsequently entered into multiple work orders
with Dames & Moore relating to a variety of services, such as professional and
independent project management, project cost control, geological mapping and
studies, permitting and land use, chain of custody drill sample collection,
environmental assessment reports, survey mapping petrographic studies, data
management and data entry, chain of custody assay database, geographic
information systems, development geology, project control, scheduling, geology
support, chain of custody protocols, laboratory evaluations, public involvement,
and field mobilizations.
International Gold Corporation and Geneva initiated legal proceedings
against AuRIC for (i) multiple breaches of contract relating to the Agreement
for Services and the License Agreement, respectively, including, but not limited
to, establishment and facilitation of the proprietary technology and fire assay
procedures developed by AuRIC at an independent assay lab and failure to deliver
the proprietary technology and procedures to International Gold Corporation,
Geneva and Dames & Moore; (ii) breach of the implied covenant of good faith and
fair dealing; (iii) negligent misrepresentation; (iv) specific performance; (v)
non-disclosure injunction; (vi) failure by AuRIC to repay advances; and (vii)
quantum meruit/unjust enrichment. Dames & Moore was subsequently named in the
legal proceeding in a declaratory relief cause of action.
International Gold Corporation and Geneva are reviewing further legal
remedies against AuRIC and Dames & Moore and intend to aggressively pursue any
and all such actions.
Pursuant to the sub-license agreement between the Company and Geneva dated
March 18, 1999 (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
Quarterly Report, 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, then INGC/Geneva may 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, receive recompensation for the remuneration provided to Geneva
under the Sub-License Agreement.
Management has 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, then the Company will ultimate receive from Geneva its contractual
benefits under the Sub-License Agreement and proceed with exploration of the
Vega Property at a future date.
15
<PAGE>
Item 2. Changes in Securities and Use of Proceeds
- -------------------------------------------------
No report required.
Item 3. Defaults Upon Senior Securities
- ---------------------------------------
No report required.
Item 4. Submission of Matters to a Vote of Security Holders
- -----------------------------------------------------------
No report required.
Item 5. Other Information
- -------------------------
No report required.
Item 6. Exhibits and Reports on Form 8-K
- ----------------------------------------
(a) No exhibits required.
(b) Report on 8-K filed February 14, 2000.
16
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
VEGA-ATLANTIC CORPORATION
Dated: April 5, 2000 By: /s/ Grant Atkins
------------------------------
Grant Atkins, President
Dated: April 5, 2000 By: /s/ Herb Ackerman
------------------------------
Herb Ackerman, Secretary
17
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 238
<SECURITIES> 0
<RECEIVABLES> 10,125
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 10,363
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,363
<CURRENT-LIABILITIES> 1,550,266
<BONDS> 0
0
0
<COMMON> 176
<OTHER-SE> 2,199,326
<TOTAL-LIABILITY-AND-EQUITY> 10,363
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 151,578
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 33,166
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (184,744)
<EPS-BASIC> (0.011)
<EPS-DILUTED> (0.011)
</TABLE>
