U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended March 31, 2003
[ ] 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.)
435 Martin Street, Suite 2000
Blaine, Washington 98230
________________________________________
(Address of Principal Executive Offices)
(360) 332-3823
___________________________
(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 [ ]
Check here if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this Form, and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
State the issuer's revenues for its more recent fiscal year (ending March
31, 2003): $ -0-.
State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was sold, or the average bid and asked prices of such common equity, as
of March 31, 2003: $88,286.20.
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the most practicable date:
Class Outstanding as of June 23, 2003
Common Stock, $.00001 par value 1,106,778*
*Total issued and outstanding shares of Common Stock has been reduced in
accordance with a reverse stock split of one-for-twenty effected on
approximately April 2, 2003.
INDEX
Page
ITEM 1. DESCRIPTION OF BUSINESS 3
ITEM 2. DESCRIPTION OF PROPERTIES 18
ITEM 3. LEGAL PROCEEDINGS 18
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 20
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER 21
MATTERS
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN 25
OF OPERATION
ITEM 7. FINANCIAL STATEMENTS 33
BALANCE SHEET F-2
STATEMENTS OF OPERATIONS AND F-3
COMPREHENSIVE LOSS
STATEMENT OF STOCKHOLDERS' DEFICIENCY F-4 - F-5
STATEMENTS OF CASH FLOWS F-6 - F-7
NOTES TO FINANCIAL STATEMENTS F-8
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS OF 34
ACCOUNTING AND FINANCIAL DISCLOSURE
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND 35
CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a)
OF THE EXCHANGE ACT
ITEM 10.EXECUTIVE COMPENSATION 37
ITEM 11.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS 39
AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
ITEM 12.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 40
ITEM 13.EXHIBITS AND REPORTS ON FORM 8-K 41
ITEM 14. CONTROLS AND PROCEDURES 41
SIGNATURES 42
ITEM 1. DESCRIPTION OF BUSINESS
Vega-Atlantic Corporation, a Colorado corporation (the "Company"),
currently trades on the OTC Bulletin Board under the symbol "VGAC" and the
Frankfurt Stock Exchange under the symbol "VGA" (WKN: 936302). The Company has
previously sought to develop a diversified international resources exploration,
development and production program, and was previously engaged in the business
of minerals exploration, acquisition and development within the United States
and worldwide. Management of the Company currently has an investment opportunity
and business acquisition under review and the Company may, subject to due
diligence, consummate the transaction. Depending on the outcome of the
investment opportunity and acquisition under review, the Company may continue to
assess, or proceed into business opportunities outside the resource sector.
The Company's principal place of business is located at 435 Martin
Street, Suite 2000, Blaine, Washington 98230. Its telephone number is
360.332.3823 and its facsimile number is 360.332.1643.
CURRENT BUSINESS OPERATIONS
POTENTIAL ACQUISITION OF TRANSAX LIMITED
The Board of Directors of the Company recently approved the
execution of an Agreement in Principle dated June 19, 2003 (the "Agreement"), as
entered into among the Company, Transax Limited, a Colorado corporation
("Transax"), and certain shareholders of Transax. The Agreement, which is
presently subject to standard conditions precedent including, without
limitation, prior Board of Directors' and shareholders' ratification, due
diligence and the negotiation and execution of a formal agreement evidencing the
same, among others, is expected to be formalized and consummated before the end
of August of 2003.
In accordance with the terms and conditions of the proposed Agreement,
and again subject to numerous conditions precedent: (i) Transax is expected to
become a wholly-owned subsidiary of the Company through the merger of Transax
with a wholly-owned subsidiary of the Company; (ii) the Company is expected to
change its name and, as a result, its trading symbol, to reflect the business
concerns of Transax; and (iii) the Company is expected to adopt and implement a
new stock option plan for key personnel of the Company. In conjunction with the
terms and conditions of the proposed Agreement, the Company's resulting
business, upon consummation of the Agreement, will be comprised of Transax's
business assets at that time, which shall include all of the then business
assets of Transax's wholly-owned subsidiaries.
PRIOR OPERATIONAL HISTORY
TUN RESOURCES, LTD.
On May 2, 2000, the Company entered into a share purchase and sale
agreement 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 Ltd., 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 "Acquisition
Agreement"). Pursuant to the terms of the Acquisition Agreement, and extensions
thereto, the Company issued 1,600,000 (400,000 post-Reverse Stock Split) shares
of its restricted Common Stock to Golden Thunder and provided approximately
$604,500 of funds to Tun Resources.
During the prior fiscal year, and in accordance with the terms of the
Acquisition Agreement, the Company was unable to provide the required aggregate
amount of $1,180,000 by February 15, 2001. On February 9, 2001, the Company
provided an amended letter of offer to Golden Thunder that outlined an offer to:
(i) purchase the remaining twenty percent (20%) of Tun Resources; (ii)
repurchase all of the Company's 1,600,000 shares of Common Stock from Golden
Thunder; and (iii) request an extension to the funding commitment requirement
outlined in the Acquisition Agreement until such time as the shareholders of
Golden Thunder voted to accept or reject the offer (the "Letter Offer"). The
Letter Offer was presented to the shareholders of Golden Thunder for their
approval and such approval was not received.
TUN RESOURCES LITIGATION
On November 1, 2002, the Company, Tun Resources and Golden Thunder
entered into a settlement agreement and release of all claims (the "Settlement
Agreement"). Pursuant to the terms of the Settlement Agreement: (i) Tun
Resources and Golden Thunder paid to the Company $150,000.00; (ii) the Company
released Tun Resources and Golden Thunder from any and all claims arising
directly or indirectly from Action No. 5013872; and (iii) Golden Thunder
returned to the Company its stock certificate evidencing the 1,600,000 (400,000
post-Reverse Stock Split) shares of restricted Common Stock, which were
cancelled. See "ITEM 3. LEGAL PROCEEDINGS."
THE AILAOSHAN/XIAOSHUIJING GOLD PROJECT
On May 4, 2000, the Company entered into a letter agreement with the
No. 1 Geological Brigade of the Yunnan Bureau of Geology and Mineral Resources
of Qujing City, Yunnan Province, China (the "Letter Agreement"), whereby the
Company acquired the right to acquire an approximate seventy percent (70%)
interest in the Ailaoshang gold concession and prospect with claims that include
the Xiaoshuijing gold resource located in the Chuxion Prefecture, Yunnan
Province, China.
As of the date of this Annual Report management of the Company does not
believe that a definitive agreement will be consummated or that any other
China-based venues will be pursued.
ITEM 2. DESCRIPTION OF PROPERTIES
The Company does not own any real estate or other properties. The
Company leases office space and its offices are located at 435 Martin Street,
Suite 2000, Blaine, Washington 98230.
ITEM 3. LEGAL PROCEEDINGS
TUN RESOURCES LITIGATION
On July 8, 2001, the Company filed a Statement of Claim in the Supreme
Court of British Columbia naming Golden Thunder and Tun Resources as defendants
("Action No. 5013872"). The Company alleged in its Statement of Claim that
certain representations were made by the defendants to the Company under the
Acquisition Agreement and otherwise as follows: (i) Tun Resources had good and
marketable title to its assets; (ii) the consideration paid by the Company was
good and valuable consideration for the acquisition of the shares in Tun
Resources; (iii) the intercorporate loan financing, which was to be provided by
financing arranged by private investments and, therefore, the joint ventures,
were marketable; and (iv) the control of Tun Resources would be transferred to
the Company upon closing of the Acquisition Agreement. The Company alleged in
its Statement of Claim that such representations were false and untrue and that
the defendants made the representations fraudulently or negligently knowing them
to be untrue, or recklessly without caring whether they were true or false, and
that: (i) the title Tun Resources had to the assets was not good and marketable
and was considerably lower in value than represented to the Company; (ii) the
consideration paid by the Company to acquire the shares of Tun Resources was
excessive and not good and valuable consideration; (iii) the intercorporate loan
financing could not be raised in the manner agreed upon by the Company and the
defendants; and (iv) the boards of directors of Golden Thunder and Tun Resources
refused or neglected to replace the board of directors of Tun Resources with the
board of directors of Golden Thunder. The Company further alleged in its
Statement of Claim that: (i) the defendants made such representations to the
Company in order to induce the Company to enter into the Acquisition Agreement;
(ii) the Company reasonably relied upon the representations made to it by the
Defendants; and (iii) such misrepresentations were breaches of material terms of
the Acquisition Agreement and have caused the Company loss and damages. The
Company sought general and special damages in excess of $800,000.00.
On August 2, 2001, Tun Resources and Golden Thunder filed their
Statement of Defense in which they alleged that the Company breached the
Acquisition Agreement by its failure to provide funding in the amount of
$1,180,000 and that such failure to provide the required funding adversely
affected the value of assets to be purchased by the Company.
On November 1, 2002, the Company, Tun Resources and Golden Thunder
entered into a settlement agreement and release of all claims (the "Settlement
Agreement"). Pursuant to the terms of the Settlement Agreement: (i) Tun
Resources and Golden Thunder paid to the Company $150,000.00; (ii) the Company
released Tun Resources and Golden Thunder from any and all claims arising
directly or indirectly from Action No. 5013872; and (iii) Golden Thunder
returned to the Company its stock certificate evidencing the 1,600,000 (400,000
post-Reverse Stock Split) shares of restricted Common Stock, which were
cancelled.
Except as disclosed above, management is not aware of any other 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
INFORMATION STATEMENT
The Board of Directors of the Company, at a previous meeting,
authorized and approved, subject to shareholder approval, a reverse stock split
of up to one-for-twenty of the Company's issued and outstanding shares of Common
Stock (the "Reverse Stock Split"). As a result an Information Statement pursuant
to Section 14(c) of the Exchange Act (the "Information Statement") was prepared
and filed with the Securities and Exchange Commission on October 17, 2002 and
amended December 16, 2002.
The Information Statement was circulated to the shareholders of the
Company in connection with the taking of corporate action without a meeting upon
the written consent of ten (10) or less shareholders holding of record a
majority of the outstanding shares of the Company's Common Stock (the "Written
Consent"). As of November 30, 2002 (the "Record Date"), there were 22,132,110
shares of the Company's Common Stock issued and outstanding. The names of the
shareholders who signed the Written Consent approving the Reverse Stock Split
and their respective equity ownership of the Company were as follows: (i)
TriStar Financial Services, Inc. ("TriStar") holding of record 1,216,214 shares
of Common Stock (5.40%); (ii) Investor Communications International, Inc.
("ICI") holding of record 6,071,244 shares of Common Stock (26.94%); (iii)
Alexander W. Cox holding of record 4,323,300 shares of Common Stock (19.19%);
and (iv) Brent Pierce holding of record 1,406,247 shares of Common Stock
(6.24%).
The matters upon which action was taken pursuant to the Written Consent
by the shareholders dated March 25, 2003 included the approval and authorization
for the Board of Directors to effect the Reverse Stock Split, which was effected
by NASDAQ on approximately April 2, 2003.
Subsequent to effectuation of the Reverse Stock Split, the Board of
Directors of the Company determined that applicable Colorado law requires the
written consent of all shareholders in the event that written consents are
utilized to obtain shareholder approval in lieu of a shareholders' meeting. As a
result the Board of Directors decided that it would be prudent to have the
shareholders of the Company ratify the prior actions of the shareholders taken
pursuant to the Written Consent approving the Reverse Stock Split and, as a
result, directed the filing of a proxy statement and a meeting of the
shareholders.
PROXY STATEMENT
On June 16, 2003, the Board of Directors, pursuant to written consent
in lieu of a special meeting, approved and authorized certain corporate action,
including an amendment to the Company's Articles of Incorporation to effect a
proposed change in name and adoption of a stock option plan for the Company. The
Board of Directors further authorized and directed the filing with the
Securities and Exchange Commission, and subsequent distribution to the
shareholders of record as of May 30, 2003, a notice of special shareholders'
meeting and a proxy statement pursuant to Section 14(a) of the Exchange Act (the
"Proxy Statement"). The Company anticipates that its proposed Proxy Statement
will be distributed to all shareholders of the Company on or about July 3, 2003
or as soon thereafter, upon the Securities and Exchange Commissions review of
filing.
Pursuant to the Proxy Statement a special meeting of shareholders is
expected to be held on or about July 23, 2003 for the following purposes: (i) to
approve a proposed amendment (the "Amendment") to the Company's Articles of
Incorporation, as amended (the "Articles"), to effectuate a proposed name change
of the Company (the "Name Change") to such name as may be approved by the Board
of Directors of the Company in its sole and absolute discretion; (ii) to approve
a proposed stock option plan for key personnel of the Company (the "Stock Option
Plan"); and (iii) to ratify the prior actions by shareholders of the Company
taken pursuant to Written Consent dated March 25, 2003 approving the Reverse
Stock Split effectuated on approximately March 31, 2003.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
The Company's Common Stock is traded on the OTC Bulletin Board under
the symbol "VGAC" and on the Frankfurt Stock Exchange in the Euro currency under
the symbol "VGA". The market for the Company's Common Stock is limited, volatile
and sporadic. The following table sets forth the high and low sales prices
relating to the Company's Common Stock for the last two fiscal years. These
quotations reflect inter-dealer prices without retail mark-up, mark-down or
commissions, and may not reflect actual transactions.
FISCAL YEARS ENDED
__________________________________________________
MARCH 31, 2003 MARCH 31, 2002
__________________________________________________
HIGH BID LOW BID HIGH BID LOW BID
__________________________________________________
First Quarter* $0.80 $0.07 $0.11 $0.05
Second Quarter $0.24 $0.03 $0.28 $0.035
Third Quarter $0.35 $0.10 $0.75 $0.15
Fourth Quarter $0.26 $0.12 $0.87 $0.46
*Figures represent first quarters ended as of June 30, 2002 and 2001, second
quarters ended as of September 30, 2002 and 2001, third quarters ended as of
December 31, 2002 and 2001 and fourth quarters ended as of March 31, 2003 and
2002.
HOLDERS
As of June 23, 2003, the Company had approximately 183 shareholders of
record.
DIVIDENDS
No dividends have ever been declared by the Board of Directors of the
Company on its Common Stock. The Company's losses do not currently indicate the
ability to pay any cash dividends, and the Company does not indicate the
intention of paying cash dividends on its common stock in the foreseeable
future.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
Equity Compensation Plan Information
_________________________________________________________________________________________________________
Number of Securities Weighted-Average Exercise Number of Securities
To be Issued Upon Price of Outstanding Remaining Available for
Plan Category Exercise of Outstanding Options, Warrants Future Issuance Under
Options, Warrants and Rights Equity Compensation Plans
and Rights (excluding column (a))
(a) (b) (c)
_________________________________________________________________________________________________________
Equity Compensation n/a n/a n/a
Plans Approved by
Security Holders
Equity Compensation n/a n/a n/a
Plans Not Approved by
Security Holders
Total -0-
_________________________________________________________________________________________________________
In the event the proposed Agreement is consummated, and pursuant to its
proposed terms, the Company will be required to issue up to an aggregate of
4,100,000 non-transferable stock purchase warrants to the holders of all
existing stock purchase warrants of Transax then outstanding, on an equal
exchange basis and on the same exercise and pricing terms and conditions.
Pursuant to the terms and provisions of the proposed stock purchase warrants
under the Agreement, the holders thereof will have the right to convert such
warrants into shares of Common Stock on a one-to-one basis at certain rates.
RECENT SALES OF UNREGISTERED SECURITIES AND CHANGES IN CONTROL OF THE COMPANY
As of the date of this Annual Report and during fiscal year ended March
31, 2003, and to provide capital, the Company sold stock in private placement
offerings, issued stock in exchange for debts of the Company or pursuant to
contractual agreements as set forth below. Therefore, there was a change in
control of the Company. See "Item 11. Security Ownership of Certain Beneficial
Owners and Management and Related Stockholder Matters."
On August 22, 2002, the Board of Directors of the Company authorized
the execution of settlement agreements between the Company and certain creditors
of the Company, and the subsequent issuance of 7,318,705 pre-Reverse Stock Split
shares of its restricted Common Stock as follows:
(a) The Company had incurred a debt inclusive of accrued interest in
the aggregate amount of $140,887.31 to ICI for prior services rendered by ICI on
behalf of the Company including, but not limited to, financial, administrative,
investor relations and minerals, oil and gas acquisition, exploration and
management. Therefore, the Company and ICI entered into a settlement agreement
dated August 22, 2002 (the "ICI Settlement Agreement"). Pursuant to the terms of
the ICI Settlement Agreement: (i) the Company agreed to settle the $140,887.31
debt due and owing ICI by the issuance of 4,696,244 pre-Reverse Stock Split
shares of its restricted Common Stock at the rate of $0.03 per share (which is
the average of the open and close price of the Company's Common Stock trading on
the OTC Bulletin Board on August 22, 2002); and (ii) ICI agreed to accept the
issuance of the 4,696,244 pre-Reverse Stock Split shares of restricted Common
Stock as settlement and full satisfaction of the aggregate debt due and owing it
as of the date of the ICI Settlement Agreement.
(b) The Company had incurred a debt inclusive of accrued interest in
the aggregate amount of $36,486.42 to TriStar pursuant to prior advances made by
TriStar to the Company. Therefore, the Company and TriStar entered into a
settlement agreement dated August 22, 2002 (the "TriStar Settlement Agreement").
Pursuant to the terms of the TriStar Settlement Agreement: (i) the Company
agreed to settle the $36,486.42 debt due and owing TriStar by the issuance of
1,216,214 pre-Reverse Stock Split shares of its restricted Common Stock at the
rate of $0.03 per share (which is the average of the open and close price of the
Company's Common Stock trading on the OTC Bulletin Board on August 22, 2002);
and (ii) TriStar agreed to accept the issuance of the 1,216,214 pre-Reverse
Stock Split shares of restricted Common Stock as settlement and full
satisfaction of the aggregate debt due and owing it as of the date of the
TriStar Settlement Agreement.
(c) The Company had incurred a debt inclusive of accrued interest in
the aggregate amount of $42,187.41 to Brent Pierce, an individual ("Pierce"),
pursuant to prior advances made by Pierce to the Company. Therefore, the Company
and Pierce entered into a settlement agreement dated August 22, 2002 (the
"Pierce Settlement Agreement"). Pursuant to the terms of the Pierce Settlement
Agreement: (i) the Company agreed to settle the $42,187.41 debt due and owing
Pierce by the issuance of 1,406,247 pre-Reverse Stock Split shares of its
restricted Common Stock at the rate of $0.03 per share (which is the average of
the open and close price of the Company's common stock trading on the OTC
Bulletin Board on August 22, 2002); and (ii) Pierce agreed to accept the
issuance of the 1,406,247 pre-Reverse Stock Split shares of restricted Common
Stock as settlement and full satisfaction of the aggregate debt due and owing
him as of the date of the Pierce Settlement Agreement.
As a result of the issuance of the 7,318,705 pre-Reverse Stock Split
shares of restricted Common Stock pursuant to the ICI Settlement Agreement, the
TriStar Settlement Agreement and the Pierce Settlement Agreement, there was a
change in control of the Company. The following table sets forth the name and
address, as of the date of this Annual Report, and the approximate number of
shares of Common Stock 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. As of the
date of this Annual Report there are 1,106,778 shares of the Company's Common
Stock issued and outstanding.
________________________________________________________________________________
Title of Class Name and Address of Amount and Nature Percent of
Beneficial Owner of Class Class
________________________________________________________________________________
(1)(2)
Common Stock Alexander W. Cox 216,165 19.53%
428-755 Burrard St.
Vancouver, British Columbia
V6Z 1X6 Canada
(2)(3)
Common Stock Pacific Rim Financial Inc. 56,665 5.12%
84 Brook Street
Mayfair, London W1K 5EH
(1)(2)(4)
Common Stock Investor Communications 303,562 27.43%
International, Inc.
435 Martin Street
Suite 2000
Blaine, Washington 98320
(1)(2)
Common Stock TriStar Financial 60,811 5.49%
Services, Inc.
435 Martin Street
Suite 2000
Blaine, Washington 98230
(2)(5)
Common Stock Brent Pierce 73,312 6.62%
16377 Lincoln Woods Court
Surrey, British Columbia
Canada V3S 0J8
(1)(2)
Common Stock All officers and directors 250 .02%
as a group (1 person)
_______________________________
(1) These are restricted shares of Common Stock.
(2) Shares held of record have been adjusted to take into account the
Reverse Stock Split effected on approximately April 2, 2003.
(3) Of the 56,665 shares of Common Stock held of record by Pacific Rim
Financial Inc., approximately 15,000 are free-trading.
(4) The Company and ICI entered into a two-year consulting services and
management agreement dated April 1, 1999 and renewed on April 1, 2001
for an additional two-year period (the "Consulting Agreement"),
pursuant to which ICI performs a wide range of management,
administrative, financial, marketing and public company services. ICI
continues to provide services on a month to month basis.
(5) Of the 70,312 shares of Common Stock held of record by Brent Pierce,
approximately 3,000 are free-trading.
Moreover, and pursuant to the terms and conditions of the proposed Agreement,
and again subject to numerous conditions precedent, the Company anticipates that
it will (i) acquire, through a proposed merger with a wholly-owned subsidiary of
the Company, all of the issued and outstanding shares of common stock of Transax
in exchange for issuance to the Transax Shareholders of an aggregate of up to
11,066,207 shares of the Company's restricted Common Stock; (ii) grant and
exchange 4,500,000 stock options in and to the Company in order to replace all,
and an equivalent number of, stock options presently issued and outstanding in
Transax; (iii) grant and exchange 4,100,000 non-transferable common stock
purchase warrants to replace all, and an equivalent number of, common stock
purchase warrants presently outstanding in and to Transax; and (iv) issue up to
300,000 shares of the Company's restricted Common Stock as a finder's fee. In
the event the transaction is consummated and the Company issues the
above-referenced shares of its restricted Common Stock, there will be a change
in control of the Company.
There are no arrangements or understandings among the entities and
individuals referenced above or their respective associates concerning election
of directors or any other matters which may require shareholder approval.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Statements made in this Form 10-KSB that are not historical or current
facts are "forward-looking statements" made pursuant to the safe harbor
provisions of Section 27A of the Securities Act of 1933 (the "Act") and Section
21E of the Exchange Act. These statements often can be identified by the use of
terms such as "may," "will," "expect," "believe," "anticipate," "estimate,"
"approximate" or "continue," or the negative thereof.
The Company intends that such forward-looking statements be subject to the safe
harbors for such statements. The Company wishes to caution readers not to place
undue reliance on any such forward-looking statements, which speak only as of
the date made. Any forward-looking statements represent management's best
judgment as to what may occur in the future. However, forward-looking statements
are subject to risks, uncertainties and important factors beyond the control of
the Company that could cause actual results and events to differ materially from
historical results of operations and events and those presently anticipated or
projected. These factors include adverse economic conditions, highly speculative
nature of mineral and oil and gas acquisition, exploration and development,
risks of foreign operation, entry of new and stronger competitors, inadequate
capital and unexpected costs. The Company disclaims any obligation subsequently
to revise any forward-looking statements to reflect events or circumstances
after the date of such statement or to reflect the occurrence of anticipated or
unanticipated events.
The following discussions of the results of operations and financial
position of the Company should be read in conjunction with the financial
statements and notes pertaining to them that appear elsewhere in this Form
10-KSB.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
FOR FISCAL YEAR ENDED MARCH 31, 2003 COMPARED WITH FISCAL YEAR ENDED MARCH 31,
2002
The Company's net loss for the fiscal year ended March 31, 2003 was
approximately ($261,243) compared to a net income of approximately $418,824 for
the fiscal year ended March 31, 2002.
During the fiscal year ended March 31, 2003 and 2002, the Company did
not incur any property exploration expenses primarily due to the decrease in
investment relating to its Chinese joint venture projects.
During the fiscal year ended March 31, 2003, the Company incurred
general and administrative expenses of $423,243 compared to general and
administrative expenses of $354,509 incurred during the fiscal year ended March
31, 2002 (an increase of $68,734). Although the Company incurred $423,243 of
general and administrative expenses during the fiscal year ended March 31, 2003,
such expenses were offset by $162,000 realized as a gain from settlement of the
litigation with Tun Resources and Golden Thunder, resulting in a net loss of
($261,243). In addition, although the Company actually incurred $354,509 of
general and administrative expenses during the fiscal year ended March 31, 2002,
such expenses were offset by $66,267 as a gain from settlement of debt, $50,000
as a gain from the sale of Alaskan Explorations Corp., and its related Lemachang
silver deposit Sino-Foreign joint venture interest, and $657,066 realized as a
gain from settlement of the litigation with Tun Resources and Golden Thunder,
resulting in net income of $418,824.
The increase in general and administrative expenses during the fiscal
year ended March 31, 2003 compared to the fiscal year ended March 31, 2002 was
primarily due to an increase in consulting fees relating to identification and
negotiation of potential investment opportunities in other ventures. During the
fiscal year ended March 31, 2003, the Company's general and administrative
expenses consisted of: (i) $128,121 in consulting fees; (ii) $226,890 in office
and general expenses; (iii) $35,501 in professional fees; and (iv) $32,731 in
interest expense. During the fiscal year ended March 31, 2002, the Company's
general and administrative expenses consisted of (i) $268,830 in office and
general expenses; (ii) $58,307 in professional fees; and (iii) $27,372 in
interest expense. General and administrative expenses generally include
corporate overhead, financial and administrative contracted services, consulting
costs and professional fees.
Of the $423,243 incurred as general and administrative expenses, the
Company incurred to ICI approximately: (i) $375,250 for amounts due and owing
for managerial, administrative, financial and consulting services rendered by
ICI; (ii) $27,483 as accrued interest; and (iii) $19,957 as advances payable.
During the fiscal year ended March 31, 2003, the Company repaid $133,200 to ICI.
Furthermore, the Company and ICI entered into the ICI Settlement Agreement on
pursuant to which: (i) the Company agreed to settle an aggregate debt of
$140,887.31 due and owing to ICI as of August 22, 2002, including accrued
interest, by the issuance of 4,696,244 pre-Reverse Stock Split shares of its
restricted Common Stock at the rate of $0.03 per share (which was the average of
the opening and the closing price of the Company's Common Stock trading on the
OTC Bulletin Board from July 1, 2002 through August 22, 2002, discounted by
25%); and (ii) ICI agreed to accept the issuance of the 4,696,244 pre-Reverse
Stock Split shares of restricted Common Stock as settlement and full
satisfaction of the aggregate debt due and owing it. "Item 5. Market for Common
Equity and Related Stockholder Matters - Recent Sales of Unregistered Securities
and Changes in Control of the Company."
The sole director of the Company is contracted by ICI and is part of
the management team provided by ICI to the Company. During the fiscal year ended
March 31, 2003, Grant Atkins received an aggregate of $17,325 from ICI for
services provided to the Company.
The Company and ICI entered into a two-year Consulting Agreement dated
April 1, 1999 and on April 1, 2001 renewed for an additional two-year period.
Pursuant to the terms of the Consulting Agreement ICI performs a wide range of
management, administrative, financial, marketing and public company services
including, but not limited to, the following: (i) international business
relations and strategy development, (ii) investor relations and shareholder
liaison, (iii) corporate public relations, press release and public information
distribution, (iv) administration, including auditor and legal liaison, media
liaison, corporate minutebook maintenance and record keeping, corporate
secretarial services, printing and production, office and general duties, and
(v) financial and business planning services, including capital and operating
budgeting, banking, bookkeeping, documentation, database records, preparation of
financial statements and creation of annual reports.
As of the date of this Annual Report such services provided by ICI
include not only those services listed above related to administration, public
company operations and maintenance of the Company, but also involve the
negotiation and due diligence of certain contractual agreements, including the
Agreement, relating to proposed investment opportunities in other ventures and
the negotiation and settlement of the litigation with Tun Resources and Golden
Thunder. Other services provided by ICI include the securing of short-term
advance financing and the sourcing of private placement funding.
As discussed above, the incurrence of a net loss during the fiscal year
ended March 31, 2003 compared to net income realized during the fiscal year
ended March 31, 2002 is attributable primarily to the gain of $657,066 realized
from the settlement of the litigation with Tun Resources and Golden Thunder, the
gain of $50,000 realized from the sale of the joint venture interest and the
gain of $66,267 realized from settlement of debt during the fiscal year ended
March 31, 2002. The Company's net loss during the fiscal year ended March 31,
2003 was approximately ($261,243) or ($0.28) per common share compared to net
income of approximately $418,824 or $0.57 per common share during the fiscal
year ended March 31, 2002. The weighted average number of shares outstanding
were 933,164 for the fiscal year ended March 31, 2003 compared to 738,924 for
the fiscal year ended March 31, 2002.
LIQUIDITY AND CAPITAL RESOURCES
FOR THE FISCAL YEAR ENDED MARCH 31, 2003
The Company's financial statements have been prepared assuming that it
will continue as a going concern and, accordingly, do not include adjustments
relating to the recoverability and realization of assets and classifications of
liabilities that might be necessary should the Company be unable to continue in
operations.
As of March 31, 2003, the Company's current assets were $89 and its
current liabilities were $508,545, which resulted in a working capital deficit
of $508,456. As of the fiscal year ended March 31, 2002, the Company's current
assets were $1,196 and its current liabilities were $455,969, which resulted in
a working capital deficit of $454,773.
The increase in current liabilities during the fiscal year ended March
31, 2003 from the fiscal year ended March 31, 2002 was due primarily to an
increase in advances from related parties.
Stockholders' deficit increased from ($454,773) for the fiscal year
ended March 31, 2002 to ($508,456) for the fiscal year ended March 31, 2003.
For the fiscal year ended March 31, 2003, net cash flows provided by
operating activities was $81,474 compared to ($363,312) net cash flows used in
operating activities for the fiscal year ended March 31, 2002. As noted above,
the increase in cash provided by operating activities was primarily comprised
of: (i) a net loss of ($261,243) incurred during the fiscal year ended March 31,
2003 compared to net income of $418,824 realized during the fiscal year ended
March 31, 2002; (ii) consulting and administration fees accrued of $375,250
during the fiscal year ended March 31, 2003 compared to $-0- during the fiscal
year ended March 31, 2002; and (iii) adjustment of ($12,000) from the settlement
of the litigation with Tun Resources and Golden Thunder during the fiscal year
ended March 31, 2003 compared to adjustment of ($651,316) during the fiscal year
ended March 31, 2002.
Net cash flows used in financing activities during the fiscal year
ended March 31, 2003 were ($82,581) resulting primarily from advances repaid to
related parties compared to net cash flows from financing activities of $313,066
during the fiscal year ended March 31, 2002 resulting from advances received
from related parties.
Net cash flows from investing activities was $-0- during the fiscal
year ended March 31, 2003 compared to net cash flows from investing activities
of $50,000 during the fiscal year ended March 31, 2002 resulting from proceeds
from sale of joint venture interest.
PLAN OF OPERATION
FUNDING
As of the date of this Annual Report there is substantial doubt
regarding the Company's ability to continue as a going concern as the Company
has not generated sufficient cash flow to funds its business operations and
material commitments. The Company's future success and viability, therefore, may
be dependent upon the Company's ability to consummate the Agreement and its
ongoing ability to continue to generate capital financing.
In the event the Agreement is consummated, management of the Company
anticipates an increase in operating expenses over the next three years to pay
expenses associated with the business operations. The Company must raise
additional funds. The Company may finance these expenses with further issuances
of Common Stock of the Company. The Company believes that any anticipated
private placements of equity capital and debt financing, if successful, may be
adequate to fund the Company's operations over the next twelve months.
Thereafter, the Company expects it will need to raise additional capital to meet
long-term operating requirements. If the Company raises additional funds through
the issuance of equity or convertible debt securities other than to current
shareholders, the percentage ownership of its current shareholders would be
reduced, and such securities might have rights, preferences or privileges senior
to its existing Common Stock. In addition, additional financing may not be
available upon acceptable terms, or at all. If adequate funds are not available,
or are not available on acceptable terms, the Company may not be able to conduct
its proposed business operations successfully, which could significantly and
materially restrict the Company's overall business operations.
Based upon a twelve-month work plan proposed by management, it is
anticipated that such a work plan would require approximately $1,000,000 of
financing designed to fund various commitments and business operations. >From
the date of this Annual Report management believes that the Company can satisfy
its cash requirements for approximately the next six months based on its ability
to successfully raise capital and to obtain advances from certain investors and
related parties, as necessary. The Company must, however, raise additional
capital. Furthermore, the Company has not generated sufficient cash flow in the
past to fund its operations and activities. Historically, the Company has relied
upon internally generated funds, funds from the sale of shares of stock and
loans from its shareholders and private investors to finance its operations and
growth. The Company's future success and viability are primarily dependent upon
the Company's current management to consummate the Agreement, generate revenues
from business operations and raise additional capital through further private
offerings of its stock or loans from private investors. There can be no
assurance, however, that the Company will be able to raise additional capital.
The Company's failure to successfully raise additional capital will have a
material and adverse affect upon the Company and its shareholders.
MATERIAL COMMITMENTS
A significant and estimated commitment for the Company for its fiscal
year April 1, 2003 through March 31, 2004 pertaining to contractual arrangements
and work orders is an amount not greater than $900,000 to ICI. The contractual
arrangement between the Company and ICI regarding 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.
OFF-BALANCE SHEET ARRANGEMENTS
As of the date of this Annual Report the Company does not have any
off-balance sheet arrangements that have or are reasonably likely to have a
current or future effect on the Company's financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that are material to investors. The
term "off-balance sheet arrangement" generally means any transaction, agreement
or other contractual arrangement to which an entity unconsolidated with the
Company is a party, under which the Company has: (i) any obligation arising
under a guarantee contract, derivative instrument or variable interest; or (ii)
a retained or contingent interest in assets transferred to such entity or
similar arrangement that serves as credit, liquidity or market risk support for
such assets.
AUDIT COMMITTEE
As of the date of this Annual Report the Company has not appointed
members to an Audit Committee and, therefore, the respective role of an Audit
Committee has been conducted by the Board of Directors of the Company. When
established, the Audit Committee's primary function will be to provide advice
with respect to the Company's financial matters and to assist the Board of
Directors in fulfilling its oversight responsibilities regarding finance,
accounting, tax and legal compliance. The Audit Committee's primary duties and
responsibilities will be to: (i) serve as an independent and objective party to
monitor the Company's financial reporting process and internal control system;
(ii) review and appraise the audit efforts of the Company's independent
accountants; (iii) evaluate the Company's quarterly financial performance as
well as its compliance with laws and regulations; (iv) oversee management's
establishment and enforcement of financial policies and business practices; and
(v) provide an open avenue of communication among the independent accountants,
management and the Board of Directors.
The Board of Directors has considered whether the regulatory provision
of non-audit services is compatible with maintaining the principal independent
accountant's independence.
AUDIT FEES
During the fiscal year ended March 31, 2003, the Company incurred
approximately $13,000 in fees to its principal independent accountant for
professional services rendered in connection with preparation and audit of the
Company's financial statements for the fiscal year ended March 31, 2003 and for
the review of the Company's financial statements for the quarters ended June 30,
2002, September 30, 2002 and December 31, 2002.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
During the fiscal year ended March 31, 2003, the Company did not incur
any fees for professional services rendered by its principal independent
accountant for certain information technology services which may include, but is
not limited to, operating or supervising or managing the Company's information
or local area network or designing or implementing a hardware or software system
that aggregate source data underlying the financial statements.
ALL OTHER FEES
During the fiscal year ended March 31, 2003, the Company did not incur
any other fees for professional services rendered by its principal independent
accountant for all other non-audit services which may include, but is not
limited to, tax-related services, actuarial services or valuation services.
ITEM 7. FINANCIAL STATEMENTS
The information required under Item 310(a) of Regulation S-B is
included in this Annual Report as set forth in the "Index to Consolidated
Financial Statement".
Index to Financial Statements
Independent Auditor's Report dated June 3, 2003.
Balance Sheets for fiscal years ended March 31, 2003 and
March 31, 2002.
Statements of Operations for fiscal years ended March 31, 2003 and
March 31, 2002, and from inception (January 28, 1987) to March 31,
2003.
Statements of Cash Flows for fiscal years ended March 31, 2003 and
March 31, 2002, and from inception (January 28, 1987) to March 31,
2003.
Statements of Stockholders' Equity for the period from January 28, 1987
(inception) to March 31, 2003.
Notes to Financial Statements for March 31, 2003 and 2002.
VEGA-ATLANTIC CORPORATION
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
MARCH 31, 2003
AUDITORS' REPORT
BALANCE SHEETS
STATEMENTS OF OPERATIONS
STATEMENT OF STOCKHOLDERS' EQUITY
STATEMENTS OF CASH FLOWS
NOTES TO FINANCIAL STATEMENTS
LABONTE & CO. 610 - 938 HOWE STREET
________________________________________ VANCOUVER, BC CANADA
C H A R T E R E D A C C O U N T A N T S V6Z 1N9
________________________________________ TELEPHONE (604) 682-2778
FACSIMILE (604) 689-2778
EMAIL INFO@LABONTECO.COM
INDEPENDENT AUDITORS' REPORT
________________________________________________________________________________
To the Stockholders and Board of Directors of Vega-Atlantic Corporation
We have audited the balance sheets of Vega-Atlantic Corporation (a Development
Stage Company) as at March 31, 2003 and 2002 and the statements of operations,
stockholders' equity and cash flows for the years then ended. 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 audit.
We conducted our audits in accordance with Canadian and United States 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. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at March 31, 2003 and 2002
and the results of its operations and its cash flows and the changes in
stockholders' equity for the years then ended in accordance with United States
generally accepted accounting principles.
"LABONTE & CO."
CHARTERED ACCOUNTANTS
Vancouver, B.C.
June 3, 2003 (except for Note 9 which is dated June 25, 2003)
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 conditions and events that cast substantial
doubt on the Company's ability to continue as a going concern, such as those
described in Note 1. Our report to the stockholders and Board of Directors dated
June 3, 2003 is expressed in accordance with Canadian reporting standards which
do not permit a reference to such conditions and events in the auditors' report
when these are adequately disclosed in the financial statements.
"LABONTE & CO."
CHARTERED ACCOUNTANTS
Vancouver, B.C.
June 3, 2003 (except for Note 9 which is dated June 25, 2003)
VEGA-ATLANTIC CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
March 31, 2003 March 31, 2002
________________________________________________________________________________
ASSETS
CURRENT ASSETS
Cash $ 89 $ 1,196
________________________________________________________________________________
$ 89 $ 1,196
================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY)
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 62,557 $ 142,284
Due to related parties (Note 5) 445,988 313,685
________________________________________________________________________________
508,545 455,969
________________________________________________________________________________
STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY) (Note 8)
Preferred stock, no par value; 20,000,000 shares
authorized, nil shares issued and outstanding - -
Common stock, $.00001 par value, 100,000,000
shares authorized 1,106,778 (March 31, 2002
- 760,670) post reverse-split shares issued
and outstanding 408 339
Additional paid-in capital 9,575,077 9,367,586
Deficit accumulated during the development stage (10,083,941) (9,822,698)
________________________________________________________________________________
Total stockholders' equity (capital deficiency) (508,456) (454,773)
________________________________________________________________________________
$ 89 $ 1,196
================================================================================
CONTINGENCIES (Note 1)
The accompanying notes are an integral part of these financial statements.
VEGA-ATLANTIC CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
January 28,
1987
Year ended Year ended (inception) to
March 31, March 31, March 31,
2003 2002 2003
_____________________________________________________________________________________________________________________
GENERAL AND ADMINISTRATIVE EXPENSES
Consulting fees $ 128,121 $ - $ 260,872
Directors' fees - - 49,500
Office and general 226,890 268,830 3,740,311
Interest expense 32,731 27,372 256,655
Professional fees 35,501 58,307 333,456
Stock-based compensation - - 262,247
Gain on settlement of debt - (66,267) (66,267)
Gain on sale of joint venture interest (Note 3) - (50,000) (69,318)
_____________________________________________________________________________________________________________________
Total general and administrative expenses 423,243 238,242 4,767,456
_____________________________________________________________________________________________________________________
LOSS BEFORE THE FOLLOWING (423,243) (238,242) (4,767,456)
Mineral property acquisition and exploration costs - - (2,174,005)
Gain on settlement of lawsuit (Note 6) 162,000 657,066 819,066
Loss on settlement of convertible promissory notes - - (1,754,917)
_____________________________________________________________________________________________________________________
INCOME (LOSS) FROM CONTINUING OPERATIONS (261,243) 418,824 (7,877,312)
DISCONTINUED OPERATIONS
Loss from discontinued operations of Century Manufacturing, Inc. - - (2,206,629)
_____________________________________________________________________________________________________________________
NET INCOME (LOSS) FOR THE YEAR $(261,243) $ 418,824 $(10,083,941)
=====================================================================================================================
BASIC INCOME (LOSS) PER SHARE $ (0.28) $ 0.57
=====================================================================================================================
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 933,164 738,924
=====================================================================================================================
The accompanying notes are an integral part of these financial statements.
VEGA-ATLANTIC CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM JANUARY 28, 1987 (INCEPTION) TO MARCH 31, 2003
Deficit
Accumulated
Common Stock Additional During
___________________________ Paid - in Development
Shares Amount Capital Stage Total
____________ ___________ __________ _____________ __________
Stock issued for services performed,
February 25, 1987 ($.0125 per share) 20,000 $ 1 $ 249 $ - $ 250
Stock issued for services performed,
February 25, 1987 ($.02 per share) 5,000 - 100 - 100
Stock issued for services performed,
February 25 ($.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, 1998 - - - (1,000) (1,000)
____________ ___________ __________ _____________ __________
Balance, December 31, 1988 750,000 8 842 (9,791) (8,941)
Stock issued for services performed,
July 20, 1989 ($.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)
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
Stock issued for cash, May 8, 1995
($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
____________ ___________ __________ _____________ __________
The accompanying notes are an integral part of these financial statements.
VEGA-ATLANTIC CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM JANUARY 28, 1987 (INCEPTION) TO MARCH 31, 2003
(Continued)
Deficit
Accumulated
Common Stock Additional During
___________________________ Paid - in Development
Shares Amount Capital Stage Total
____________ ___________ __________ _____________ __________
Balance, December 31, 1995 5,100,000 $ 51 $ 131,100 (124,725) $ 6,426
Issuance of stock to purchase subsidiary,
March 28, 1996 ( $1.687 per share) 1,000,000 10 1,686,990 - 1,687,000
Net loss, quarter ended March 31, 1996 - - - (23,357) (23,357)
____________ ___________ __________ _____________ __________
Balance, March 31, 1996 6,100,000 61 1,818,090 (148,082) 1,670,069
Stock issued for cash, May 6, 1996 ($1.00
per share) 50,000 1 49,999 50,000
Stock issued for cash, May 8, 1996 ($1.00
per share) 120,000 1 119,999 120,000
Stock issued for cash, May 13, 1996
($1.00 per share) 35,000 35,000 35,000
Stock issued for cash, March 12, 1997
($.25 per share) 1,800,000 18 449,982 450,000
Stock issued for cash, April 15, 1997
($.20 per share) 250,000 3 49,997 50,000
Issuance of stock in repayment of
advances, March 12, 1997 ($.25 per share) 200,000 2 49,998 50,000
Net loss, year ended March 31, 1997 (2,776,800) (2,776,800)
____________ ___________ __________ _____________ __________
Balance, March 31, 1997 8,555,000 86 2,573,065 (2,924,882) (351,731)
Stock issued for cash, March 13, 1998
($15 per share) 3,000,000 30 449,970 450,000
Stock issued for cash, March 24, 1998
($.15 per share) 1,333,333 13 199,987 200,000
Stock issued for cash, March 25, 1998
($.15 per share) 1,306,667 13 195,987 196,000
Stock issued for cash, March 26, 1998
($.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 $5,841 of accounts payable, Jan. 15,
1999 ($.195 per share) 30,000 - 5,841 - 5,841
Issuance of common shares in exchange
for technology license agreement, Mar.
15, 1999 ($.14 per share) 1,000,000 10 139,990 - 140,000
Issuance of common shares in exchange
for profit sharing interest, March 28,
1999 ($.15 per share) 500,000 5 74,995 - 75,000
Issuance of SEC Reg D-504 common
shares for cash, March 31, 1999
($.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 these financial statements.
VEGA-ATLANTIC CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM JANUARY 28, 1987 (INCEPTION) TO MARCH 31, 2003
(Continued)
Deficit
Accumulated
Common Stock Additional During
___________________________ Paid - in Development
Shares Amount Capital Stage Total
____________ ___________ __________ _____________ __________
Balance, March 31, 1999 17,585,000 $ 176 $3,993,816 (4,851,040) $ (857,048)
Stock issued in settlement of
advances payable, March 29, 2000
($.50 per share) 2,061,000 20 1,030,443 - 1,030,463
Stock subscription for Reg S common
shares ($.25 per share) 560,000 6 139,994 - 140,000
Net loss, Year ended March 31, 2000 - - - (1,091,711) (1,091,711)
____________ ___________ __________ _____________ __________
Balance, March 31, 2000 20,206,000 202 5,164,253 (5,942,751) (778,296)
Stock issued for interest in Tun
Resources Inc., May 1, 2000 ($.42 per
share) 1,600,000 16 671,984 672,000
Stock issued in settlement of debt,
May 30, 2000 ($.075 per share) 200,000 2 14,998 - 15,000
Stock issued for cash, June 30, 2000
($.25 per share) 2,900,000 29 724,971 - 725,000
Stock subscription for Reg S common
shares ($.25 per share) (560,000) (6) (139,994) - (140,000)
Stock issued for cash, July 7, 2000
($.25 per share) 100,000 1 24,999 - 25,000
Stock issued for cash, July 11, 2000
($.25 per share) 800,000 8 199,992 - 200,000
Stock issued for cash, August 17, 2000
($.25 per share) 1,200,000 12 299,988 - 300,000
Stock based compensation - - 262,247 - 262,247
4:1 Reverse stock-split, December 22,
2000 (19,834,495) - - - -
Stock issued in settlement of debt,
December 27, 2000 ($.03 per share) 7,976,900 80 239,226 - 239,306
Loss on settlement of debt - - 1,754,917 - 1,754,917
Net loss, Year ended March 31, 2001 - - - (4,298,771) (4,298,771)
____________ ___________ __________ _____________ __________
Balance, March 31, 2001 14,588,405 344 9,217,581 (10,241,522) (1,023,597)
Return of stock to treasury and
cancellation, October 31, 2001 (375,000) (15) 15 - -
Stock issued in settlement of debt,
November 13, 2001 ($.15 per share) 1,000,000 10 149,990 - 150,000
Net income, Year ended March 31, 2002 - - - 418,824 418,824
____________ ___________ __________ _____________ __________
Balance, March 31, 2002 15,213,405 $ 339 $9,367,586 (9,822,698) $ (454,773)
____________ ___________ __________ _____________ __________
The accompanying notes are an integral part of these financial statements.
VEGA-ATLANTIC CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM JANUARY 28, 1987 (INCEPTION) TO MARCH 31, 2003
(Continued)
Deficit
Accumulated
Common Stock Additional During
___________________________ Paid - in Development
Shares Amount Capital Stage Total
____________ ___________ __________ _____________ __________
Balance, March 31, 2002 15,213,405 $ 339 9,367,586 $(9,822,698) $ (454,773)
Stock issued in settlement of debt,
October 3, 2002 7,318,705 73 219,487 - 219,560
Return of stock to Treasury and
cancellation, October 3, 2002 (400,000) (4) (11,996) - (12,000)
20:1 Reverse stock-split, March 31, 2003 (21,025,332) - - - -
Net loss, Year ended March 31, 2003 (261,243) (261,243)
____________ ___________ __________ _____________ __________
Balance, March 31, 2003 1,106,778 $ 408 9,575,077 $(10,083,941) $ (508,456)
============ =========== =========== ============= ==========
The accompanying notes are an integral part of these financial statements.
VEGA-ATLANTIC CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
Year ended Year ended January 28, 1987
March 31, 2003 March 31, 2002 (inception) to
March 31, 2003
_________________________________________________________________________________________________________________________________
CASH FLOWS PROVIDED BY (USED IN)
OPERATING ACTIVITIES
Net income (loss) for the year $ (261,243) $ 418,824 $ (10,083,941)
Adjustments to reconcile net income (loss) to net cash from
operating activities:
- non-cash loss on sale of subsidiary - - 1,687,000
- non-cash gain on sale of joint venture - - (19,318)
- non-cash research and development expense - - 783,182
- non-cash interest recognized through discount adjustment - - 31,818
- common stock issued in settlement of debt - - 84,992
- impairment of interest in mineral properties - - 1,303,611
- stock-based compensation - - 262,247
- loss on settlement of convertible promissory notes - - 1,754,917
- gain on settlement of debt, net of current period accrual - (61,267) (61,267)
- gain on sale of joint venture interest - (50,000) (50,000)
- non-cash gain on settlement of lawsuit (12,000) (651,316) (663,316)
- consulting and administration fees accrued 375,250 - 375,250
- net changes in other working capital items (20,533) (19,553) 372,068
_________________________________________________________________________________________________________________________________
CASH FLOWS USED IN OPERATING ACTIVITIES 81,474 (363,312) (4,222,757)
_________________________________________________________________________________________________________________________________
CASH FLOWS FROM FINANCING ACTIVITIES
Advances from (repaid to) related parties - net (82,581) 313,066 1,439,391
Interest paid - - (1,433)
Convertible notes - - 99,500
Sale of common stock - - 3,357,000
_________________________________________________________________________________________________________________________________
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES (82,581) 313,066 4,894,458
_________________________________________________________________________________________________________________________________
CASH FLOWS FROM INVESTING ACTIVITIES
Mineral property acquisition and exploration - - (622,567)
Purchase of subsidiaries, net of cash acquired - - (99,045)
Proceeds from sale of joint venture interest - 50,000 50,000
_________________________________________________________________________________________________________________________________
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES - 50,000 (671,612)
_________________________________________________________________________________________________________________________________
INCREASE (DECREASE) IN CASH (1,107) (246) 89
CASH, BEGINNING OF YEAR 1,196 1,442 -
_________________________________________________________________________________________________________________________________
CASH, END OF YEAR $ 89 $ 1,196 $ 89
=================================================================================================================================
SUPPLEMENTAL CASH FLOW INFORMATION:
During the year ended March 31, 2003, the Company issued 365,935 common shares
in settlement of debt of $219,561. (See Notes 5 and 8.)
During the year ended March 31, 2002, the Company issued 50,000 common shares in
settlement of debt of $150,000.
During the year ended March 31, 2002, in connection with the settlement of the
lawsuit described in Note 6, the Company wrote off its notes payable and accrued
interest resulting in a gain of $657,066.
The accompanying notes are an integral part of these financial statements.
VEGA-ATLANTIC CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
________________________________________________________________________________
MARCH 31, 2003
NOTE 1: NATURE AND CONTINUANCE OF OPERATIONS
________________________________________________________________________________
The Company is a development stage company and to date has not commenced any
commercial operations or generated any revenues. Due to the inability to raise
sufficient capital, the Company has either sold or disposed of its interests in
mineral properties. The Company is continuing to assess new business ventures
for possible acquisition or merger and such businesses may or may not be in the
minerals exploration or oil and gas industries. Subsequent to year end the
Company entered into an Agreement in Principle to acquire Transax Limited, a
telecommunications technology company. Refer to Note 9 - Subsequent Events.
At March 31, 2003, the Company had a working capital deficiency of $508,456 and
has incurred substantial losses to date and further losses are anticipated in
the future. These factors raise substantial doubt regarding the Company's
ability to continue as a going concern. The Company's future operations are
dependent on its ability to raise additional working capital, settling its
outstanding debts and ultimately on generating profitable operations from a new
business venture.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
________________________________________________________________________________
USE OF ESTIMATES AND ASSUMPTIONS
Preparation of the Company's 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.
CASH AND CASH EQUIVALENTS
The Company considers all liquid investments, with an original maturity of three
months or less when purchased, to be cash equivalents.
FOREIGN CURRENCY TRANSLATION
The financial statements are presented in United States dollars. In accordance
with Statement of Financial Accounting Standards No. 52, "Foreign Currency
Translation", foreign denominated monetary assets and liabilities are translated
to their United States dollar equivalents using foreign exchange rates which
prevailed at the balance sheet date. Revenue and expenses are translated at
average rates of exchange during the year. Related translation adjustments are
reported as a separate component of stockholders' equity, whereas gains or
losses resulting from foreign currency transactions are included in results of
operations.
MINERAL PROPERTIES
Mineral property acquisition costs, capital contributions and exploration costs
are expensed as incurred until such time as proven economically recoverable
reserves are established.
NET EARNINGS (LOSS) PER COMMON SHARE
Basic earnings (loss) per share includes no dilution and is computed by dividing
income available to common stockholders by the weighted average number of common
shares outstanding for the period. Dilutive earnings (loss) per share reflects
the potential dilution of securities that could share in the earnings of the
Company. The accompanying presentation is only of basic earnings (loss) per
share as the potentially dilutive factors are anti-dilutive to basic earnings
(loss) per share. The comparative net earnings (loss) per share figures have
been restated to give effect to the reverse split of common shares as described
in Note 8.
INCOME TAXES
The Company follows the liability method of accounting for income taxes. Under
this method, deferred income tax assets and liabilities are recognized for the
estimated tax consequences attributable to differences between the financial
statement carrying values and their respective income tax basis (temporary
differences). The effect on deferred income tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
VEGA-ATLANTIC CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
________________________________________________________________________________
MARCH 31, 2003
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
________________________________________________________________________________
STOCK-BASED COMPENSATION
In December 2002, the Financial Accounting Standards Board issued Financial
Accounting Standard No. 148, "Accounting for Stock-Based Compensation -
Transition and Disclosure" ("SFAS No. 148"), an amendment of Financial
Accounting Standard No. 123 "Accounting for Stock-Based Compensation" ("SFAS No.
123"). The purpose of SFAS No. 148 is to: (1) provide alternative methods of
transition for an entity that voluntarily changes to the fair value based method
of accounting for stock-based employee compensation, (2) amend the disclosure
provisions to require prominent disclosure about the effects on reported net
income of an entity's accounting policy decisions with respect to stock-based
employee compensation, and (3) to require disclosure of those effects in interim
financial information. The disclosure provisions of SFAS No. 148 were effective
for the Company for the year ended December 31, 2002.
The Company has elected to continue to account for stock-based employee
compensation arrangements in accordance with the provisions of Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees",
("APB No. 25") and comply with the disclosure provisions of SFAS No. 123 as
amended by SFAS No. 148 as described above. In addition, in accordance with SFAS
No. 123 the Company applies the fair value method using the Black-Scholes
option-pricing model in accounting for options granted to consultants. Under APB
No. 25, compensation expense is recognized based on the difference, if any, on
the date of grant between the estimated fair value of the Company's stock and
the amount an employee must pay to acquire the stock. Compensation expense is
recognized immediately for past services and pro-rata for future services over
the option-vesting period.
The Company accounts for equity instruments issued in exchange for the receipt
of goods or services from other than employees in accordance with SFAS No. 123
and the conclusions reached by the Emerging Issues Task Force in Issue No.
96-18, "Accounting for Equity Instruments That Are Issued to Other Than
Employees for Acquiring or in Conjunction with Selling Goods or Services" ("EITF
96-18"). Costs are measured at the estimated fair market value of the
consideration received or the estimated fair value of the equity instruments
issued, whichever is more reliably measurable. The value of equity instruments
issued for consideration other than employee services is determined on the
earlier of a performance commitment or completion of performance by the provider
of goods or services as defined by EITF 96-18.
The Company has also adopted the provisions of the Financial Accounting
Standards Board Interpretation No.44, Accounting for Certain Transactions
Involving Stock Compensation - An Interpretation of APB Opinion No. 25 ("FIN
44"), which provides guidance as to certain applications of APB 25. FIN 44 is
generally effective July 1, 2000 with the exception of certain events occurring
after December 15, 1998.
RECENT ACCOUNTING PRONOUNCEMENTS
In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 141 ("SFAS 141"), "Business Combinations",
which eliminates the pooling method of accounting for business combinations
initiated after June 30, 2001. In addition, SFAS 141 addresses the accounting
for intangible assets and goodwill acquired in a business combination. This
portion of SFAS 141 is effective for business combinations completed after June
30, 2001. The adoption of SFAS 141 has not had a material impact on the
Company's financial position or results of operations.
In July 2001, the FASB issued Statement of Financial Accounting Standards No.
142 ("SFAS 142"), "Goodwill and Intangible Assets", which revises the accounting
for purchased goodwill and intangible assets. Under SFAS 142, goodwill and
intangible assets with indefinite lives will no longer be amortized and will be
tested for impairment annually or whenever events or circumstances indicate that
the estimated fair value is less than the related carrying value as determined
on a reporting unit basis. SFAS 142 is effective for fiscal years beginning
after December 15, 2001, with earlier adoption permitted. The adoption of SFAS
142 has not had a material impact on the Company's financial position or results
of operations.
VEGA-ATLANTIC CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
________________________________________________________________________________
MARCH 31, 2003
NOTE 3: INTEREST IN MINERAL PROPERTIES
________________________________________________________________________________
LEMACHANG SILVER MINE JOINT VENTURE PROPOSAL: Effective July 26, 2000, the
Company, through its then wholly-owned subsidiary Alaskan Explorations
Corporation, a British West Indies Corporation ("Alaskan"), entered into a
Sino-Foreign Cooperative Joint Venture whereby the Company had agreed to joint
venture with the No. 1 Geological Brigade of Yunnan Bureau of Geology and
Mineral Resources and acquire majority control in the producing Lemachang silver
mine, located in the Ludian County Seat, of the Yunnan Province, PRC.
Subject to the completion of its due diligence, the Company committed to spend
$8,000,000 to increase production, expand reserves and improve overall silver
recovery in return for an 85% interest in the silver mine and deposit areas. The
Board of Directors of the Company determined that the Company was unable to meet
it's funding obligations and consequently by agreement dated May 11, 2001, sold
100% of its interest in Alaskan and forfeited all of the rights and obligations
under the JV Contract in consideration of $50,000, resulting in a gain of
$50,000.
NOTE 4: EMPLOYEE STOCK OPTION PLAN
________________________________________________________________________________
On May 1, 2000, the shareholders of the Company as represented by 51% of the
issued and outstanding common shares of the Corporation voted to approve the
creation of an employee stock option plan (the "Old SOP"). The plan extended for
a 10-year term and consisted of 500,000 pre reverse-split share options priced
at $1.00 per share. The Company's Old SOP was cancelled and the options issued
thereon were cancelled on March 25, 2003.
By Directors' Resolution dated November 19, 2002 and effective March 25, 2003,
the Company adopted a New Stock Option Plan ("New SOP"). The New SOP shall be
deemed to be effective as of March 25, 2003. The New SOP provides authority for
the Board to grant Options, for the purchase of a total number of shares of the
Company's post reverse-split common stock, not to exceed 3,000,000 post
reverse-split shares. The New SOP also provides that in no event may the maximum
number of shares reserved for any one individual exceed 15% of the issued and
outstanding share capital of the Company. The option period of options granted
under the New SOP shall be up to 10 years and the option price per share shall
be no less than the fair market value of a share of common stock on the date of
grant of the stock option.
As at March 31, 2003 no options have been granted under the New SOP and no
options are outstanding. All options to be granted will expire on or before
April 30, 2010. Shares which may be acquired through the New SOP may be
authorized but unissued shares of common stock or issued shares of common stock
held in the Company's treasury. Options granted under the New SOP will not be in
lieu of salary or other compensation for services.
Refer to Note 9 - Subsequent Events.
NOTE 5: RELATED PARTY TRANSACTIONS
________________________________________________________________________________
During the year ended March 31, 2003 the Company incurred expenses for
managerial, administrative, consulting and investor relation services in the
amount of $375,250 (2002 - $260,675) to Investor Communications International,
Inc. ("ICI") under a consulting services and management agreement dated April 1,
1999 which provides for compensation for services rendered in an amount not
greater than $75,000 per month or $900,000 per year. The Company accrued $27,483
in interest payable, received advances of $19,957 and repaid $133,200 to ICI
during 2003. A director of the Company provides consulting services to ICI and
was paid approximately $17,325 during the year ended March 31, 2003 (2002 -
$12,500). Additionally, the Company issued 234,812 common shares to ICI in
satisfaction of $140,887 in debts. As at March 31, 2003, $409,410 plus $13,829
in accrued interest at 10% per annum is owed to ICI (2002 - $251,128 plus
$23,508 accrued interest). The balance of amounts owing to ICI is unsecured and
without any specified terms of repayment.
VEGA-ATLANTIC CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
________________________________________________________________________________
MARCH 31, 2003
NOTE 5: RELATED PARTY TRANSACTIONS (CONT'D)
________________________________________________________________________________
During the year ended March 31, 2003, the Company received cash advances of
$3,603 and accrued $5,074 in interest due to certain shareholders. Additionally,
the Company issued 131,123 common shares to these certain shareholders in
satisfaction of $78,674 in outstanding debts. As at March 31, 2003, $22,749 is
owing to certain shareholders for cash advances and accrued interest at 10% per
annum (2002 - $92,746). The balance of amounts owing to certain shareholders are
unsecured and without any specified terms of repayment.
________________________________________________________________________________
NOTE 6: LITIGATION
AURIC, DAMES & MOORE, ET AL
On September 27, 1999, Intergold Corporation ("IGCO"), its wholly owned
subsidiary, International Gold Corporation ("IGC"), and Geneva initiated a legal
complaint against AuRIC, Dames & Moore, Ahmet Altinay, General Manager of AuRIC,
and Richard Daniele, Chief Metallurgist for Dames & Moore. The damages sought by
IGCO/IGC/Geneva were to be determined in court.
The damages incurred stemmed from reliance on assays and representations made by
AuRIC and upon actions and engineering reports produced by Dames & Moore related
to the Blackhawk claims. IGCO/IGC/Geneva also alleged there were breaches of
contract by AuRIC and Dames and Moore, as well as other causes of action. This
legal proceeding affected the timing of alleged technology to be transferred
from Geneva to the Company that was scheduled initially before the end of 2000.
On May 8, 2000, the Company executed an assignment agreement that transferred
and conveyed the potential claims and causes of action that the Company may have
in connections with the Sub-license Agreement with Geneva. If amounts were
recovered by the lawsuit initiated by International Gold Corporation and Geneva,
the Company would receive the equivalent pro rata share of the Claims in
relation to all other claims and causes of action for which any damages of
settlement amounts were recovered.
During the year ended March 31, 2002 a settlement was reached and the parties
agreed to have the lawsuit dismissed. As part of the settlement, the promissory
notes totaling $600,000 plus accrued interest of $57,066 that were payable by
the Company to AuRIC and Geneva were cancelled, and 12,500 shares issued to
AuRIC and 6,250 common shares issued to Geneva were returned to the Company for
subsequent cancellation. All cash recovered through the settlement was paid to
Tristar Financial Services, Inc. as partial repayment for legal fees and direct
litigation costs it had incurred on behalf of the plaintiffs according to the
terms of a lawsuit funding agreement between the plaintiffs and Tristar
Financial Services, Inc. As total litigation costs incurred by Tristar Financial
Services, Inc. exceeded the cash recovered through the settlement, there was no
surplus available for application to the losses incurred by the Company with
respect to the litigation. The plaintiff's settlement included $808,000 in cash,
of which $345,000 was paid for outstanding legal costs, $10,000 was paid to
Goldstate Corporation, and $453,000 was paid to Tristar Financial Services, Inc.
Cash paid to Tristar Financial Services, Inc. was less than costs incurred by
Tristar Financial Services, Inc. under the lawsuit funding agreement between the
plaintiffs and Tristar Financial Services, Inc.
GOLDEN THUNDER RESOURCES LTD.
On January 12, 2000, the Company entered into a letter of intent with Golden
Thunder Resources Ltd. ("Golden Thunder"), a Canadian public company, to
purchase from Golden Thunder 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 20% of the issued and outstanding shares of Tun
Resources at fair market value.
On May 2, 2000, the Company executed a definitive closing agreement to purchase
the 80% interest in Tun Resources. The 80% interest in Tun Resources was
purchased in exchange for the funding commitment of $1,180,000 by August 15,
2000 (subsequently extended to February 15, 2001, and further extended to the
date of the vendor's next annual shareholder meeting) and the issuance of 20,000
restricted common shares in the capital of the Company valued at $672,000.
VEGA-ATLANTIC CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
________________________________________________________________________________
MARCH 31, 2003
NOTE 6: LITIGATION (CONT'D)
________________________________________________________________________________
On December 12, 2000, as amended on February 9, 2001, the Company provided an
offer to Golden Thunder that outlined a revised offer to purchase the remaining
20% of Tun Resources and to repurchase all of the Company's 20,000 common shares
owned by Golden Thunder in consideration for $113,750. The Company also issued a
letter to Golden Thunder requesting an extension to the funding commitment
requirement outlined in the Acquisition Agreement until such time as the
shareholders of Golden Thunder have voted to accept or reject the amended offer
dated February 9, 2001. Subsequently, the amended offer was rejected by the
shareholders of Golden Thunder. The Company then initiated legal proceedings
against Golden Thunder and Tun Resources for breaches of the Acquisition
Agreement and other causes of action, and sought damages of in excess of
$800,000. Golden Thunder and Tun Resources then filed a statement of defense
alleging that the Company breached the acquisition agreement.
During the year ended March 31, 2003 for consideration of $150,000 and the
return to Treasury of the 20,000 common shares owned by Golden Thunder with a
fair value of $12,000, the Company entered into an agreement in settlement of
its lawsuit with Golden Thunder and Tun Resources resulting in a gain on
settlement of $162,000. Effective November 1, 2002, upon receipt of the final
$25,000, the Company released all of its claims against Golden Thunder and Tun
Resources. On October 3, 2002, the 20,000 common shares were returned to
Treasury and cancelled.
________________________________________________________________________________
NOTE 7: INCOME TAXES
Income taxes are provided pursuant to SFAS No. 109, Accounting for Income Taxes.
The statement requires the use of an asset and liability approach for financial
reporting for income taxes. If it is more likely than not that some portion or
all of a deferred tax asset will not be realized, a valuation allowance is
recognized. Accordingly, as the realization and use of the net operating loss
carryforward is not probable, the tax benefit of the loss carryforward has been
offset by a valuation allowance of the same amount.
NOTE 8: STOCKHOLDERS' EQUITY
________________________________________________________________________________
COMMON STOCK
On May 1, 2000, the Company issued 20,000 shares of common stock with a fair
value of $672,000, for the purchase of an 80% interest in Tun Resources, Inc.
(Refer to Note 3)
On May 29, 2000, the Company issued 2,500 shares of common stock for the
settlement of accounts payable of the Corporation in the amount of $15,000.
Pursuant to a Reg S private placement offering memorandum dated March 1, 2000,
the Company offered 62,500 post reverse-split shares of common stock for total
proceeds of $1,250,000. This offering was intended to be used for continued
financing of the exploration, development and expansion programs being conducted
on the Company's joint venture projects in China, consulting fees, and to
provide working capital. As of March 31, 2001, 100% of the offering was
completed and the 62,500 shares of common stock had been issued.
On December 27, 2000 the Company issued 398,845 shares of common stock with a
fair value of $1,994,226 on the conversion of convertible promissory notes of
$239,309, including accrued interest, resulting in a loss on conversion of
$1,754,917. The 398,845 shares of common stock represented 54.7% of the
outstanding shares of common stock of the Company at March 31, 2001 and
accordingly the conversion of the promissory notes resulted in a change in
control of the Company.
On October 31, 2001 the Company cancelled 12,500 shares of common stock in the
name of AuRIC Metallurgical Laboratories and 6,250 shares of common stock in the
name of Geneva Resources Inc. (Refer to Note 6)
VEGA-ATLANTIC CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
________________________________________________________________________________
MARCH 31, 2003
NOTE 8: STOCKHOLDERS' EQUITY (CONT'D)
________________________________________________________________________________
On November 13, 2001 the Company converted $150,000 of debt owing to Investors
Communications for 50,000 shares of common stock.
On October 3, 2002 the Company converted $42,187 of debt owing to a Shareholder
of the Company for 70,312 shares of common stock. (Refer to Note 5)
On October 3, 2002 the Company converted $140,887 of debt owing to Investors
Communications for 234,812 shares of common stock. (Refer to Note 5)
On October 3, 2002 the Company converted $36,487 or debt owing to Tri Star
Financial for 60,811 shares of common stock. (Refer to Note 5)
On October 3, 2002, as part of the lawsuit settlement, the 20,000 shares of
common stock issued to Tun Resources were returned to Treasury and cancelled.
(Refer to Note 6)
REVERSE STOCK SPLITS
Effective December 22, 2000 the Company completed a reverse stock split of
one-for-four of the Company's outstanding common stock, resulting in a reduction
of the then outstanding common stock from 26,446,000 to 6,611,500. In addition,
authorized common stock was reduced from 500,000,000 to 100,000,000.
Effective March 31, 2003, the Company completed a reverse stock split of
one-for-twenty of the Company's outstanding common stock, resulting in a
reduction of the outstanding common stock from 22,132,110 to 1,106,778 with no
change in the authorized common stock.
The par value of the Company's common stock was not changed as a result of
either of the above reverse stock splits.
Except for in the Statement of Stockholders' Equity, unless otherwise noted, all
references to common stock, common shares outstanding, average numbers of common
shares outstanding and per share amounts in these Financial Statements and Notes
to Financial Statements prior to the effective date of the reverse stock splits
have been restated to reflect the one-for-four and the one-for-twenty common
stock splits on a retroactive basis.
NOTE 9: SUBSEQUENT EVENTS
________________________________________________________________________________
On June 19, 2003 the Company entered into an Agreement in Principle ("AIP") with
Transax Limited ("Transax"), a private Colorado corporation engaged in the
business of providing information network solutions for healthcare providers and
insurance companies. The AIP is subject to a number of conditions precedent
including satisfactory completion of due diligence, Board of Directors and
shareholder approvals and execution of a formal agreement. The AIP proposes that
Transax will be acquired through the merger of Transax with a newly formed
wholly-owned subsidiary of the Company.
The proposed terms of acquisition of all of the issued and outstanding shares of
the common stock of Transax include the issuance of up to 11,066,207 shares of
the Company's restricted common stock, the grant and exchange of 4,500,000 stock
options, the grant and exchange of 4,100,000 non-transferable common stock
purchase warrants and the issuance of 300,000 shares of the Company's restricted
common stock as a finder's fee. In the event the transaction is consummated
there will be a change in control of the Company.
The Company has also agreed to use its commercially reasonable efforts to
advance up to $250,000 to Transax by way of a loan bearing interest at the rate
of 10% per annum.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The Company's principal independent accountant from October 20, 2000 to
the present is LaBonte & Co., Chartered Accountants, 610 - 938 Howe Street,
Vancouver, British Columbia V6Z 1N9.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT
IDENTIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS
As of the date of this Annual Report, the directors and executive officers
of the Company are as follows:
Name Age Position with VGAC
____________ ___ _______________________
Grant Atkins 43 Director and President/CEO
Secretary and Treasurer/CFO
GRANT ATKINS has been a director and the President/Chief Executive
Officer and Treasurer/Chief Financial Officer of the Company since October 15,
1998. For the past five years Mr. Atkins has been self-employed and has 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. Mr. Atkins is a consultant
through the private management consulting company, Investor Communications
International, Inc. Mr. Atkins is also a member of the Board of Directors of
Intergold Corporation, a publicly traded corporation formerly engaged in the
exploration of gold and silver, a member of the Board of Directors of Petrogen
Corp., a public traded corporation specializing in domestic oil and gas
production, and a member of the Board of Directors of GeneMax Corp., a publicly
traded corporation specializing in immunotherapies for cancer.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the 1934 Exchange Act requires the Company's directors
and officers, and the persons who beneficially own more than ten percent (10%)of
the Common Stock of the Company, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. Copies of all filed
reports are required to be furnished to the Company pursuant to Rule 16a-3
promulgated under the Exchange Act. Based solely on the reports received by the
Company and on the representations of the reporting persons, the Company
believes that these persons have complied with all applicable filing
requirements during the fiscal year ended March 31, 2003.
ITEM 10. EXECUTIVE COMPENSATION
COMPENSATION OF OFFICERS AND DIRECTORS
As of the date of this Annual Report none of the officers or directors
of the Company are compensated for their roles as directors or executive
officers of the Company as the Company is only in the development stage and has
not yet realized substantial revenues from business operations. Officers and
directors, however, are reimbursed for any out-of-pocket expenses incurred by
them on behalf of the Company. None of the Company's directors or executive
officers are party to employment agreements with the Company. The Company
presently has no pension, health, annuity, insurance, stock options, profit
sharing or similar benefit plans.
Grant Atkins, the current President/Chief Executive Officer, Treasurer/
Chief Financial Officer and director of the Company, derives remuneration from
the Company indirectly through ICI, which provides a wide range of financial,
consulting, administrative and management services to the Company on a
month-to-month basis as needed. During the fiscal year ended March 31, 2003, Mr.
Atkins received approximately $17,325 from ICI for work conducted relating to
the management and administration of the Company.
SUMMARY COMPENSATION TABLE
Annual Compensation Awards Payouts
___________________ ____________ _______
$ $ $ $ # $ $
Name and Position Salary Bonus Other RSA Options LTIP Other
_________________ ______ _____ _____ ___ _______ ____ _____
(1)
Grant Atkins 2001 0 0 $30,000 0 0 0 0
Pres./CEO 2002 0 0 $12,000 0 0 0 0
Director 2003 0 0 $17,325 0 0 0 0
John Bowles 2001 0 0 $ 0 0 0 0 0
Prior Director 2002 0 0 0 0 0 0 0
2003 0 0 0 0 0 0 0
Herb Ackerman 2001 0 0 0 0 0 0 0
Prior Director 2002 0 0 0 0 0 0 0
2003 0 0 0 0 0 0 0
(1)
Gary Powers 2001 0 0 $30,000 0 0 0 0
Prior Director 2002 0 0 0 0 0 0 0
2003 0 0 0 0 0 0 0
(1) Annual compensation based on the fiscal year of April 1st to March
31st and paid according to individual contractual arrangements.
STOCK OPTION PLAN
On June 16, 2003, the Board of Directors of the Company unanimously
approved and adopted a Stock Option Plan. The purpose of the Stock Option Plan
is to advance the interests of the Company and its shareholders by affording key
personnel of the Company an opportunity for investment in the Company and the
incentive advantages inherent in stock ownership in the Company. Pursuant to the
provisions of the Stock Option Plan stock options (the "Stock Options") will be
granted only to key personnel of the Company; generally defined as a person
designated by the Board of Directors upon whose judgment, initiative and efforts
the Company may rely including any director, officer, employee or consultant of
the Company.
The Stock Option Plan is to be administered by the Board of Directors
of the Company, which shall determine: (i) the persons to be granted Stock
Options under the Stock Option Plan; (ii) the number of shares subject to each
Stock Option and the exercise price of each Stock Option; and (iii) whether the
Stock Option shall be exercisable at any time during the option period of up to
ten years or whether the Stock Option shall be exercisable in installments or by
vesting only. The Stock Option Plan provides authorization to the Board of
Directors to grant Stock Options to purchase a total number of shares of Common
Stock of the Company, not to presently exceed 4,500,000 shares (post-Reverse
Stock Split), as at the date of adoption by the Board of Directors of the Stock
Option Plan. At the time a Stock Option is granted under the Stock Option Plan
the Board of Directors shall fix and determine the exercise price at which
shares of Common Stock of the Company may be acquired; provided, however, that
any such exercise price shall not be less than that permitted under the rules
and policies of any stock exchange or over-the-counter market which is
applicable to the Company at that time.
In the event that a Stock Option optionee, who is a director or officer
of the Company, ceases to serve in that position, any Stock Option held by such
optionee generally may be exercisable within up to 90 calendar days after the
effective date that such position ceases, and after such 90-day period any
unexercised Stock Option shall expire. In the event that an optionee, who is an
employee or consultant of the Company, ceases to be employed by the Company, any
Stock Option held by such optionee generally may be exercisable within up to 60
calendar days (or up to 30 calendar days where the optionee provided only
investor relations services to the Company) after the effective date that such
employment ceases, and after such 60- or 30-day period any unexercised Stock
Option shall expire.
No Stock Options granted under the Stock Option Plan will be
transferable by an optionee, and each Stock Option will be exercisable during
the lifetime of the optionee subject to the option period of up to ten years and
the limitations described above. Any Stock Option held by an optionee at the
time of his death may be exercised by his estate within one year of his death or
such longer period as the Board of Directors may determine.
The exercise price of a Stock Option granted pursuant to the Stock
Option Plan shall be paid in cash or certified funds upon exercise of the Stock
Option.
Incentive Stock Options
The Stock Option Plan further provides that, subject to the provisions
of the Stock Option Plan and prior shareholder approval, the Board of Directors
may grant to any key personnel of the Company who is an employee eligible to
receive Stock Options one or more incentive Stock Options to purchase the number
of shares of Common Stock allotted by the Board of Directors (the "Incentive
Stock Options"). The option price per share of Common Stock deliverable upon the
exercise of an Incentive Stock Option shall be not less than fair market value
of a share of Common Stock on the date of grant of the Incentive Stock Option.
In accordance with the terms of the proposed Stock Option Plan, "fair market
value" of an Incentive Stock Option as of any date shall not be less than the
closing price for the shares of Common Stock on the last trading day preceding
the date of grant. The option term of each Incentive Stock Option shall be
determined by the Board of Directors, which shall not commence sooner than from
the date of grant and shall terminate no later than up to ten years from the
date of grant of the Incentive Stock Option, subject to possible earlier
termination as described above.
As of the date of this Annual Report no Stock Options or Incentive
Stock Options under the Stock Option Plan have been granted (which does not
include those stock options previously granted). See " - Non-Qualified Stock
Option Plan" below. In accordance with the Company's proposed Stock Option Plan,
and subject to approval by the shareholders, the Company anticipates filing with
the Commission registration statements on "Form S-8 - For Registration Under the
Securities Act of 1933 of Securities to Be Offered to Employees Pursuant to
Employee Benefit Plans" (each an "S-8") registering Stock Options and Incentive
Stock Options under its proposed Stock Option Plan in the amount of up to
4,500,000 post-Reverse Stock Split shares at various exercise prices. Upon
approval by the shareholders of the proposed Stock Option Plan the Board of
Directors will be authorized, without further Shareholder approval, to grant
such Stock Options from time to time to acquire up to an aggregate of up to
4,500,000 shares of the Company's Common Stock.
NON-QUALIFIED STOCK OPTION PLAN
On May 1, 2000, the then Board of Directors of the Company adopted a
Non-Qualified Stock Option Plan (the "Non-Qualified SOP"), which provided for
the grant of 500,000 options to purchase an aggregate of 500,000 shares of
restricted Common Stock at $1.00 per share.
During the prior fiscal years 2001 and 2002, the then Board of
Directors granted 487,500 stock options pursuant to the Non-Qualified SOP to
acquire up to an aggregate of 487,500 shares of restricted Common Stock at $1.00
per share. No stock options granted under the Non-Qualified SOP were exercised
by the optionees thereof.
Subsequent to December 31, 2002, and as of the date of the Proxy
Statement, the Board of Directors of the Company voted to terminate the
Non-Qualified SOP and to unilaterally cancel the 487,5000 stock options as
granted. The Board of Directors based its decision regarding cancellation of the
stock options on the fact that the Non-Qualified SOP and subsequent grants of
stock options were done at a time when management anticipated that the Company
would have a viable and ongoing business development venture relating to certain
mining claims. The then optionees did not perform the services intended as the
mining claims did not contain any gold and associated business operations
failed. The business venture was subject to litigation (as described above) and
is no longer being pursued by the Company.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of the date of this Annual Report there are 1,106,778 shares of
Common Stock issued and outstanding. The following table sets forth information
as of the Record Date concerning: (i) each person who is known by the Company to
own beneficially more than five percent (5%) of the Company's outstanding Common
Stock; (ii) each of the Company's executive officers, directors and key
employees; and (iii) all executive officers and directors as a group. Common
Stock not outstanding but deemed beneficially owned by virtue of the right of an
individual to acquire shares within 60 days is treated as outstanding only when
determining the amount and percentage of Common Stock owned by such individual.
Except as noted, each person or entity has sole voting and sole investment power
with respect to the shares of Common Stock shown.
NAME POSITION AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNERSHIP OWNERSHIP
________________________________________________________________________________
(1)(2)
Alexander W. Cox Shareholder 216,165 19.53%
428-755 Burrard St.
Vancouver, British Columbia
V6Z 1X6 Canada
(2)(3)
Pacific Rim Financial Inc. Shareholder 56,665 5.12%
84 Brook Street
Mayfair, London W1K 5EH
(1)(2)(4)
Investor Communications Shareholder 303,562 27.43%
International, Inc.
435 Martin Street, Suite 2000
Blaine, Washington 98320
(1)(2)
TriStar Financial Shareholder 60,811 5.49%
Services Inc.
435 Martin Street, Suite 2000
Blaine, Washington 98230
(2)(5)
Brent Pierce Shareholder 73,312 6.62%
16377 Lincoln Woods Court
Surrey, British Columbia
Canada V3S 0J8
(1)(2)
All officers and directors Shareholder 250 .02%
as a group (1 person)
_______________________________
(6) These are restricted shares of Common Stock.
(7) Shares held of record have been adjusted to take into account the
Reverse Stock Split effected on approximately April 2, 2003.
(8) Of the 56,665 shares of Common Stock held of record by Pacific Rim
Financial Inc., approximately 15,000 are free trading.
(9) The Company and ICI entered into a two-year Consulting Agreement dated
April 1, 1999, and renewed on April 1, 2001 for an additional two-year
period, pursuant to which ICI performs a wide range of management,
administrative, financial, marketing and public company services for
the Company. ICI continues to provide services on a month to month
basis.
(10) Of the 73,312 shares of Common Stock held of record by Brent Pierce,
approximately 3,000 are free trading.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
With the exception of the current contractual relations between the
Company and ICI, as of the date of this Annual Report the Company has not
entered into any contractual arrangements with related parties other than those
transactions resulting primarily from advances made by related parties to the
Company. Mr. Atkins is a director and the President, Secretary and Treasurer of
the Company, and is a member of the management team provided by ICI. The Board
of Directors of the Company has not adopted or approved any policy regarding
possible future transactions with related third parties.
Mr. Atkins is engaged in other businesses, either individually or
through partnerships and corporations in which he may have an interest, hold an
office or serve on the Boards of Directors. The sole director of the Company,
Mr. Atkins, has other business interests to which he may devote a major or
significant portion of his time. Certain conflicts of interest, therefore, may
arise between the Company and its directors. Such conflicts can be resolved
through the exercise by such directors of judgment consistent with their
fiduciary duties to the Company. The directors intend to resolve such conflicts
in the best interests of the Company. Moreover, the directors will devote their
time to the affairs of the Company as they deem necessary.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
None.
(b) Reports.
None.
ITEM 14. CONTROLS AND PROCEDURES
The Company, under the supervision of the President, has conducted an
evaluation of the effectiveness of the design and operation of the Company's
disclosure controls and procedures within ninety (90) days of the filing date of
this Annual Report. Based upon the results of this evaluation, the Company
believes that they maintain proper procedures for gathering, analyzing and
disclosing all information in a timely fashion that is required to be disclosed
in its reports under the Securities Exchange Act of 1934, as amended. There have
been no significant changes in the Company's controls subsequent to the
evaluation date.
There were no significant changes in the Company's internal control or
in other factors that could significantly affect the Company's internal controls
subsequent to the evaluation date.
Grant Atkins, a member of the Board of Directors and executive officer,
is signing this Annual Report in his capacity as the President/Chief Executive
Officer and as the Treasurer/Chief Financial Officer.
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: June 23, 2003 By: /s/ GRANT ATKINS
___________________________
Grant Atkins, President and
Chief Executive Officer
By: /s/ GRANT ATKINS
___________________________
Grant Atkins, Treasurer and
Chief Financial Officer
CERTIFICATION
I, Grant Atkins, certify that:
1. I have reviewed this annual report on Form 10-KSB of Vega-Atlantic
Corporation;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15 d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
(c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors:
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
/s/ GRANT ATKINS
___________________________
Grant Atkins
President/Chief Executive Officer and
Treasurer/Chief Financial Officer
Date: June 23, 2003