U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 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
(proposing to change its name to "Transax International Limited")
_________________________________________________________________
(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
___ ___
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Class Outstanding as of August 7, 2003
_______________________________ ________________________________
Common Stock, $.00001 par value 1,106,701*
*Total issued and outstanding shares of Common Stock has been reduced in
accordance with reverse stock split of one-for-twenty effected approximately
April 2, 2003.
Transitional Small Business Disclosure Format (check one)
Yes No X
___ ___
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEETS
INTERIM STATEMENTS OF OPERATIONS
INTERIM STATEMENTS OF CASH FLOWS
NOTES TO INTERIM FINANCIAL STATEMENTS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 10
ITEM 3. CONTROLS AND PROCEDURES
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 16
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 21
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 22
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 22
ITEM 5. OTHER INFORMATION 22
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 22
SIGNATURES 23
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
____________________________
VEGA-ATLANTIC CORPORATION
(AN EXPLORATION STAGE COMPANY)
INTERIM FINANCIAL STATEMENTS
JUNE 30, 2003
(Unaudited)
BALANCE SHEETS
INTERIM STATEMENTS OF OPERATIONS
INTERIM STATEMENTS OF CASH FLOWS
NOTES TO INTERIM FINANCIAL STATEMENTS
VEGA-ATLANTIC CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
June 30, March 31,
2003 2003
_________________________________________________________________________________________________________
(Unaudited)
ASSETS
CURRENT ASSETS
Cash $ 4,159 $ 89
_________________________________________________________________________________________________________
$ 4,159 $ 89
=========================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY)
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 48,585 $ 62,557
Due to related parties (Note 4) 556,406 445,988
_________________________________________________________________________________________________________
604,991 508,545
_________________________________________________________________________________________________________
STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY) (Note 6)
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
1,106,701 (March 31, 2003 - 1,106,701) post reverse-split shares
issued and outstanding 408 408
Additional paid-in capital 9,575,077 9,575,077
Deficit accumulated during the development stage (10,176,317) (10,083,941)
_________________________________________________________________________________________________________
Total stockholders' equity (capital deficiency) (600,832) (508,456)
_________________________________________________________________________________________________________
$ 4,159 $ 89
=========================================================================================================
CONTINGENCIES (Note 1)
The accompanying notes are an integral part of these interim consolidated financial statements.
VEGA-ATLANTIC CORPORATION
(A DEVELOPMENT STAGE COMPANY)
INTERIM STATEMENTS OF OPERATIONS
(UNAUDITED)
January 28,
1987
Three months Three months (inception) to
ended June ended June June 30,
30, 2003 30, 2002 2003
_________________________________________________________________________________________________________________________________
GENERAL AND ADMINISTRATIVE EXPENSES
Consulting fees $ - $ - $ 260,872
Directors' fees - - 49,500
Office and general 51,982 30,046 3,792,293
Interest expense 12,208 9,484 268,863
Professional fees 28,186 11,560 361,642
Stock-based compensation - - 262,247
Gain on settlement of debt - - (66,267)
_________________________________________________________________________________________________________________________________
Total general and administrative expenses 92,376 51,090 4,929,150
_________________________________________________________________________________________________________________________________
LOSS BEFORE THE FOLLOWING (92,376) (51,090) (4,929,150)
Mineral property acquisition and exploration costs - - (2,174,005)
Gain on sale of joint venture interest - - 69,318
Gain on settlement of lawsuit - - 819,066
Loss on settlement of convertible promissory notes - - (1,754,917)
_________________________________________________________________________________________________________________________________
LOSS FROM CONTINUING OPERATIONS (92,376) (51,090) (7,969,688)
DISCONTINUED OPERATIONS
Loss from discontinued operations of Century Manufacturing, Inc. - - (2,206,629)
_________________________________________________________________________________________________________________________________
LOSS FOR THE PERIOD $ (92,376) $ (51,090) $(10,176,317)
=================================================================================================================================
BASIC LOSS PER SHARE $ (0.08) $ (0.07)
================================================================================================================
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 1,106,701 760,670
================================================================================================================
The accompanying notes are an integral part of these interim consolidated financial statements.
VEGA-ATLANTIC CORPORATION
(A DEVELOPMENT STAGE COMPANY)
ITERIM STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three months Three months January 28, 1987
ended ended (inception) to
June 30, 2003 June 30, 2002 June 30, 2003
_______________________________________________________________________________________________________________________
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period $ (92,376) $ (51,090) $ (10,083,941)
Adjustments to reconcile net 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)
- gain on sale of joint venture interest - - (50,000)
- non-cash gain on settlement of lawsuit - - (663,316)
- consulting and administration fees accrued 47,800 - 423,050
- net changes in other working capital items (13,972) (27,035) 358,096
_______________________________________________________________________________________________________________________
CASH FLOWS USED IN OPERATING ACTIVITIES (58,548) (78,125) (4,281,305)
_______________________________________________________________________________________________________________________
CASH FLOWS FROM FINANCING ACTIVITIES
Advances from related parties 62,618 77,179 1,502,009
Interest paid - - (1,433)
Convertible notes - - 99,500
Sale of common stock - - 3,357,000
_______________________________________________________________________________________________________________________
CASH FLOWS FROM FINANCING ACTIVITIES 62,618 77,179 4,957,076
_______________________________________________________________________________________________________________________
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
_______________________________________________________________________________________________________________________
CASH FLOWS USED IN INVESTING ACTIVITIES - - (671,612)
_______________________________________________________________________________________________________________________
INCREASE (DECREASE) IN CASH 4,070 (946) 4,159
CASH, BEGINNING OF PERIOD 89 1,196 -
_______________________________________________________________________________________________________________________
$ 4,159 $ 250 $ 4,159
=======================================================================================================================
The accompanying notes are an integral part of these interim consolidated financial statements.
VEGA-ATLANTIC CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE INTERIM FINANCIAL STATEMENTS
________________________________________________________________________________
JUNE 30, 2003
(Unaudited)
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, an
electronic data transaction based solutions provider. Refer to Note 7 -
Subsequent Events.
At June 30, 2003, the Company had a working capital deficiency of $600,832 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.
UNAUDITED INTERIM FINANCIAL STATEMENTS
The accompanying unaudited interim financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB of Regulation S-B. They do
not include all information and footnotes required by generally accepted
accounting principles for complete financial statements. However, except as
disclosed herein, there have been no material changes in the information
disclosed in the notes to the financial statements for the year ended March 31,
2003 included in the Company's Annual Report on Form 10-KSB filed with the
Securities and Exchange Commission. The interim unaudited financial statements
should be read in conjunction with those financial statements included in the
Form 10-KSB. In the opinion of Management, all adjustments considered necessary
for a fair presentation, consisting solely of normal recurring adjustments, have
been made. Operating results for the three months ended June 30, 2003 are not
necessarily indicative of the results that may be expected for the year ending
March 31, 2004.
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.
VEGA-ATLANTIC CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE INTERIM FINANCIAL STATEMENTS
________________________________________________________________________________
JUNE 30, 2003
(Unaudited)
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
________________________________________________________________________________
MINERAL PROPERTIES
The Company's resource property acquisition, exploration and development costs
are expensed as incurred. Once the Company has determined that a property can be
economically developed, further exploration and development costs are
capitalized. The capitalized costs are depleted on a property by property basis
over the estimated useful lives of the properties upon commencement of
commercial production using the unit-of-production method. Capitalized costs
relating to mineral properties which are sold or abandoned are written off when
such events occur. The proceeds received from property options granted are
applied against the costs of the related property and any excess is included in
earnings for the period. The Company reviews the carrying value of resource
properties whenever events or changes in circumstances indicate that the
carrying value may not be recoverable, at which time a write-down is recorded.
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.
INCOME TAXES
The Company follows the liability method of accounting for income taxes, in
accordance with SFAS No. 109, 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.
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.
VEGA-ATLANTIC CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE INTERIM FINANCIAL STATEMENTS
________________________________________________________________________________
JUNE 30, 2003
(Unaudited)
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
________________________________________________________________________________
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.
NOTE 3: 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.
On July 22, 2003, the Board of Directors of the Company unanimously approved and
adopted a Stock Option Plan (SOP) to replace the New SOP which was cancelled. In
all respects the SOP is identical to the New SOP, described above, except that
the SOP 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. The SOP has been
adopted pursuant to the terms of the Transax Merger Agreement. (Refer to Note
7.)
As at June 30, 2003 no options have been granted under the New SOP or the 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 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 SOP will not be in
lieu of salary or other compensation for services.
VEGA-ATLANTIC CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE INTERIM FINANCIAL STATEMENTS
________________________________________________________________________________
JUNE 30, 2003
(Unaudited)
NOTE 4: RELATED PARTY TRANSACTIONS
________________________________________________________________________________
During the three month period ended June 30, 2003 the Company incurred expenses
for managerial, administrative, consulting and investor relation services in the
amount of $47,800 (2002 - $59,550) 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 $11,421
in interest payable to ICI for the three months ended June 30, 2003. At June 30,
2002 ICI had made net cash advances of $28,600. A director of the Company
provides consulting services to ICI and was paid approximately $6,250 during the
three month period ended June 30, 2003 (2002 - $0). As at June 30, 2003,
$485,810 plus $25,250 in accrued interest at 10% per annum is owed to ICI (2002
- $315,393 plus $30,809 accrued interest). The balance of amounts owing to ICI
is unsecured and payable on demand.
During the three months ended June 30, 2003, the Company received cash advances
of $21,810 and accrued $787 in interest due to certain shareholders. As at June
30, 2003, $45,346 is owing to certain shareholders for cash advances and accrued
interest at 10% per annum (2002 - $98,358). The balance of amounts owing to
certain shareholders are unsecured and without any specified terms of repayment.
________________________________________________________________________________
NOTE 5: INCOME TAXES
As of June 30, 2003 the Company had net operating loss carry forwards of
approximately $6,700,000 that may be available to reduce future years' taxable
income and will expire between the years 2003 and 2023. Due to the uncertainty
of realization the Company has provided a full valuation allowance for deferred
tax assets resulting from these loss carryforwards.
NOTE 6: 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.
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.
On November 13, 2001 the Company converted $150,000 of debt owing to ICI 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.
On October 3, 2002 the Company converted $140,887 of debt owing to ICI for
234,812 shares of common stock.
VEGA-ATLANTIC CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE INTERIM FINANCIAL STATEMENTS
________________________________________________________________________________
JUNE 30, 2003
(Unaudited)
NOTE 6: STOCKHOLDERS' EQUITY (CONT'D)
________________________________________________________________________________
On October 3, 2002 the Company converted $36,487 or debt owing to Tri Star
Financial Services, Ltd. for 60,811 shares of common stock.
On October 3, 2002, as part of a lawsuit settlement, the 20,000 shares of common
stock issued to Tun Resources were returned to Treasury and cancelled.
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 1,106,701 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 7: SUBSEQUENT EVENT
________________________________________________________________________________
On June 19, 2003 the Company entered into an Agreement in Principle, which was
superceded by a formal Merger Agreement dated July 22, 2003 (the "Merger
Agreement"), with Transax Limited ("Transax"), a private Colorado corporation
engaged in the business of providing electronic data transaction based,
information network solutions for healthcare providers and insurance companies.
The Merger Agreement is subject to a number of conditions precedent including
satisfactory completion of due diligence, Board of Directors and shareholder
approval. The Merger Agreement proposes that Transax will be acquired through
the merger (the "Merger") of Transax with a newly formed wholly-owned subsidiary
of the Company, with Transax being the surviving and resulting company from the
completion of the Merger.
The proposed terms of Merger provide for the acquisition by the Company's
subsidiary of all of the issued and outstanding shares of the common stock of
Transax in consideration of the issuance by the Company, through its subsidiary,
of an aggregate of 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 Merger is consummated there will be a change in control of the
Company and the acquisition will be accounted for as a reverse merger with
Transax being treated as the accounting acquirer and the Company being treated
as the accounting subsidiary.
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.
Statements made in this Form 10-QSB (the "Quarterly Report") 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. as
amended (the "Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended. 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. Vega-Atlantic Corporation (proposing to
change its name to "Transax International Limited"; 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, 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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
GENERAL
Vega-Atlantic Corporation (proposing to change its name to "Transax
International Limited"), is a corporation organized under the laws of the State
of Colorado. The Company currently trades on the OTC Bulletin Board under the
symbol "VGAC" and on the Frankfurt Stock Exchange (FWB) in Germany under the
symbol "VGA1".
As of the date of this Quarterly Report, the Company is expected to be
a provider of information network solutions for the healthcare providers and
health insurance companies, using proprietary software trademarked as "MedLink".
See "Part II. Other Information. Item 4. Submission of Matters to a Vote of
Security Holders."
CURRENT BUSINESS OPERATIONS
ACQUISITION OF TRANSAX LIMITED
The Board of Directors of the Company (the "Board of Directors"), at a
special meeting, approved the execution of an agreement in principle dated June
19, 2003 and a subsequent merger agreement and its ancillary documents dated
July 22, 2203 (collectively, the "Merger Agreement") among the Company,
Vega-Atlantic Acquisition Corporation, the Company's wholly-owned subsidiary
(Vega-Atlantic"), Transax Limited, a Colorado corporation ("Transax"), and
certain selling shareholders of Transax. The Merger Agreement and the Company's
anticipated acquisition of Transax is expected to be consummated by
approximately August 14, 2003, but in any event no later than August 31, 2003.
THE MERGER AGREEMENT
In accordance with the terms and conditions of the Merger Agreement:
(i) Vega-Atlantic is expected to merge with Transax so that Transax shall become
a wholly-owned subsidiary of the Company and, correspondingly, the shareholders,
warrantholders and optionholders of Transax will become shareholders,
warrantholders and optionholders of the Company; (ii) the Company's business
operations would become that of Transax, primarily consisting of the
development, acquisition, provider and marketing of information network
solutions for healthcare providers and health insurance companies world-wide;
(iii) the Company plans to change its name to "Transax International Limited"
and its trading symbol; and (iv) the Company shall adopt and implement its
current "Stock Option Plan" for key personnel of the Company.
Pursuant to the terms and conditions of the Merger Agreement and a
corresponding contribution agreement, as entered into between the Company and
Vega-Atlantic, on the closing date of the Merger Agreement: (i) the Company will
contribute to Vega-Atlantic 11,066,207 shares of its restricted common stock
(the "Common Stock") and 4,500,000 stock options and 4,100,000 share purchase
warrants to acquire any equivalent number of shares of Common Stock of the
Company; (ii) Vega-Atlantic will exchange therefore with all Transax
shareholders an aggregate of 11,066,207 shares of the Company's restricted
Common Stock (on the basis of each two Transax shares of common stock exchanged
into the right to receive one share of Common Stock of the Company); (iii)
Vega-Atlantic will exchange therefore with all Transax optionholders an
aggregate of 4,500,000 stock options to acquire up to 4,500,000 shares of the
Company's Common Stock to replace all stock options presently outstanding in
Transax (on the basis of each two Transax stock options exchanged into the right
to receive one stock option of the Company); and (iv) Vega-Atlantic will
exchange therefore with all Transax warrantholders an aggregate of 4,100,000
share purchase warrants to acquire up to a further 4,100,000 shares of the
Company's Common Stock to replace all share purchase warrants presently
outstanding in Transax (on the basis of each two Transax share purchase warrants
exchanged into the right to receive one share purchase warrant of the Company.
In the event certain Transax Shareholders, but not more than 9.5%,
demand in writing payment for such shares of common stock of Transax held of
record, in accordance with applicable Colorado law, such shares of common stock
of Transax will not be converted into shares of restricted Common Stock of the
Company and such Transax Shareholders will be entitled to receive payment for
the value of the shares of common stock of Transax held of record. The Company
is informed that no shareholders of Transax exercised their dissent rights prior
to Transax's annual and general meeting on August 8, 2003 at which the Merger
Agreement was approved.
TRANSAX - CORPORATE PROFILE
Transax is the holding company of TDS Telecommunications Data Systems
Ltds. ("TDS") (being renamed "Transax Brazil Ltds"). TDS is a solutions
provider. Through a licensing agreement from Transax, TDS is using proprietary
software trademarked "MedLink", which is currently operating in Brazil, and
employs approximately 40 staff and contract personnel.
The MedLink solution has been specifically designed for the healthcare
and health insurance industry to allow insurance companies to connect to
healthcare providers and electronically undertake authorization of health claims
in real time. A transaction fee is charged to the insurer for use of the MedLink
system. MedLink has been developed as a "total connectivity" solution where
Transax is able to provide an insurer with the ability to cost effectively
process all of the transactions generated regardless of location of method of
generation.
An in-house authorization system for approximately 1300 healthcare
provider locations was developed by MedLink's software development team and sold
to Sul America/Aetna Life. Management of the Company believes that Sul
America/Aetna Life is the second largest private health insurance company in
Brazil. This stand-alone system is currently in use and processes approximately
350,000 claims monthly.
The strategic focus of Transax is to become a premier international
provider of information network solutions for the healthcare providers and
health insurance companies, enabling the real time automation of routine patient
eligibility verifications, authorization, claims processing and payment
functions that are currently performed manually.
OFFICERS AND DIRECTORS
In accordance with the terms and provisions of the Merger Agreement the
Board of Directors will: (i) appoint Stephen Walters as a director and as the
President and Chief Executive Officer of the Company effective on August 14,
2003; (ii) appoint Nathalie Pilon, CMA, as the Chief Financial Officer and
Secretary of the Company effective on August 14, 2003; (iii) nominate and
appoint the following additional persons effective approximately on August 22,
2003 to serve as directors of the Company until the next annual meeting of the
Company's shareholders or until their successors have been elected and
qualified; and (iv) nominate and appoint the following additional persons
effective approximately on August 22, 2003 to serve as officers of the Company.
Name Age Position with the Company
__________________ ___ _________________________________
Stephen Walters 44 President/Chief Executive Officer
and Director
Graeme Smith 42 Vice President and Director
Nathalie Pilon CMA 35 Chief Financial Officer/Secretary
Laurie Bewes BBA 51 Director
David M. Bouzaid 49 Director
Grant Atkins 43 Director
STEPHEN WALTERS will be appoint as the President, Chief Executive
Officer and a director of the Company effective on August 14, 2003. Mr. Walters
currently is the President, Chief Executive Officer and a director of Transax.
Mr. Walters has more than 15 years of business experience in the Asia-Pacific
Region. He is responsible for corporate development initiatives that have seen a
successful restructuring of the predecessor company. Mr. Walters is also the
founder and principal of the Carlingford Group of companies based in Singapore.
In the past twenty-four months, Mr. Walters has raised over $6,000,000 for
investment in promising early stage technology companies principally from North
America and to expand their operations to the Asia-Pacific region through the
establishment of joint ventures with strategic partners and licensing
arrangements. The Carlingford Group focuses on companies in the biomedical,
computer network and wireless telecommunications industries. Mr. Walters
possesses an in depth knowledge of the public markets having previously acted as
President and Chief Executive Officer of a US public company. Mr. Walters
currently is a director of a number of private companies in Canada and
Singapore.
GRAEME SMITH has been nominated to be appointed as a Vice President and
a director of the Company effective on approximately August 22, 2003. Mr. Smith
currently is a Vice President and a director of Transax. During the past several
years, Mr. Smith was a former general manager of Telstra Technologies of
Australia and managing director of Telstra Corporation's customer premises
equipment business with a responsibility for a workforce of over 5,500 staff and
a cash flow of over $1 billion. Mr. Smith's principal expertise is related to
business development, marketing and strategic planning within the
telecommunications industry. More recently, Mr. Smith co-founded a private
telecommunications company and successfully raised over $100 million in the
capital markets for mergers and acquisition purposes. Currently, Mr. Smith is
also Chairman and President of an organization that specializes in assisting
telecommunication companies seeking entry into the global marketplace.
NATHALIE PILON will be appointed as the Chief Financial Officer and
Secretary of the Company effective on August 14, 2003. Ms. Pilon currently is
the Chief Financial Officer and secretary of Transax. Over the past several
years, Ms. Pilon has gained significant experience in finance, international
accounting, management and strategic planning while acting as Controller for
development stage corporations, such as Lorus Therapeutics, Inc. (formerly
Imutec Corporation Inc.). Ms. Pilon was also formerly Chief Financial Officer
for MIV Therapeutics Inc., an OTCBB listed company. Over the past few years, Ms.
Pilon consulted with various biotech and high tech companies, including Chromos
Molecular Systems and International Hydro Cut. Ms. Pilon holds a CMA designation
and obtained her bachelor's degree in Business Administration from Sherbrooke
University in 1990.
LAURIE BEWES has been nominated to be appointed as a director of the
Company effective on approximately August 22, 2003. Mr. Bewes currently is a
director of Transax. Mr. Bewes has a Bachelor of Business Administration (RMIT)
and is a member of the Australian Institute of Company Directors (MAICD). His
business background over the past 20 years includes joint ventures, business
development, mergers, infrastructure privatization and start-ups across South
America (Argentina and Brazil), Asia (Indonesia, Singapore and Malaysia) and
Australia/New Zealand. Mr. Bewes has worked in various senior executive
positions for companies such as P & O, ANL and TNT.
DAVID BOUZAID has been nominated to be appointed as a director of the
Company effective on approximately August 22, 2003. Mr. Bouzaid currently is a
director of Transax. Mr. Bouzaid has accumulated 27 years' experience in the
health insurance industry within Asia and the Australasia region. Mr. Bouzaid
specializes in New Business Development within the health insurance industry and
over the past four years he has gained a wealth of experience in Global
Healthcare Insurance. Mr. Bouzaid is currently regional director (Asia-Pacific)
for Interglobal Insurance Services Ltd. based in Bangkok, Thailand.
GRANT ATKINS is a director of the Company and has been the
President/Chief Executive Officer, Secretary, Treasurer/Chief Financial Officer
since October 15, 1998. For the past six 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.
During 1998 and 1999 Mr. Atkins was a consultant through the private management
consulting companies of TriStar Financial Services, Inc. and Investor
Communications International, Inc. Mr. Atkins 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, and a member of the board of
directors of GeneMax Corp., a publicly traded corporation.
As of the date of this Statement no director or Executive Officer of the
Company is or has been involved in any legal proceeding concerning: (i) any
bankruptcy petition filed by or against any business of which such person was a
general partner or executive officer either at the time of the bankruptcy or
within two years prior to that time; (ii) any conviction in a criminal
proceeding or being subject to a pending criminal proceeding (excluding traffic
violations and other minor offenses) within the past five years; (iii) being
subject to any order, judgment or decree permanently or temporarily enjoining,
barring, suspending or otherwise limiting involvement in any type of business,
securities or banking activity; or (iv) being found by a court, the Securities
and Exchange Commission or the Commodity Futures Trading Commission to have
violated a federal or state securities or commodities law (and the judgment has
not been reversed, suspended or vacated).
AUDIT COMMITTEE
As of the date of this Quarterly Report the Company has not appointed
members to an Audit Committee. As of the date of this Quarterly Report no Audit
Committee exists. Therefore, the role of an Audit Committee has been conducted
by the Board of Directors.
The Company intends to establish an Audit Committee with additional
appointments to the Board of Directors, as the case may be. When established,
the Audit Committee will be comprised of at least two disinterested members of
the Board of Directors. 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: (i) to serve as an independent and
objective party to monitor the Company's financial reporting process and
internal control system; (ii) to review and appraise the audit efforts of the
Company's independent accountants; (iii) to evaluate the Company's quarterly
financial performance as well as its compliance with laws and regulations; (iv)
to oversee management's establishment and enforcement of financial policies and
business practices; and (v) to provide an open avenue of communication among the
independent accountants, management and the Board of Directors.
The Board of Directors has considered whether the provision of such
non-audit services would be compatible with maintaining its principal
independent accountant's independence. The Board of Directors considered whether
the Company's principal independent accountant was independent and concluded
that its principal independent accountant for the previous fiscal years ended
March 31, 2002 and March 31, 2003, was independent.
EXECUTIVE COMPENSATION
As of the date of this Quarterly Report none of the Executive 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 of the Company, 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, or similar benefit plans.
Grant Atkins, the current President, Secretary, Treasurer and director of the
Company, derives remuneration from the Company indirectly through Investor
Communications International, Inc., which provides a wide range of financial,
consulting, administrative and management services to the Company on a
month-to-month basis as needed.
RESULTS OF OPERATION
THREE-MONTH PERIOD ENDED JUNE 30, 2003 COMPARED TO THREE-MONTH PERIOD ENDED JUNE
30, 2002
The Company's net loss for the three-month period ended June 30, 2003
was approximately ($92,376) compared to a net loss of approximately ($51,090)
for the three-month period ended June 30, 2002 (an increase of approximately
$41,286).
During the three-month periods ended June 30, 2003 and 2002, the
Company did not incur any property exploration expenses due to the cessation of
investment relating to its resource industry based operational projects.
During the three-month period ended June 30, 2003, the Company incurred
general and administrative expenses of approximately $92,376 compared to general
and administrative expenses of approximately $51,090 incurred during the
three-month period ended June 30, 2002 (an increase of $41,286).
The increase in general and administrative expenses during the
three-month period ended June 30, 2003 compared to the three-month period ended
June 30, 2002 was primarily due to an increase in office and general expense and
professional fees relating to identification and negotiation of potential
investment opportunities in other ventures, including the acquisition of
Transax. During the three-month period ended June 30, 2003, the Company's
general and administrative expenses consisted of: (i) $51,982 in office and
general expenses; (ii) $28,186 in professional fees; and (iii) $12,208 in
interest expense. During the three-month period ended June 30, 2002, the
Company's general and administrative expenses consisted of (i) $30,046 in office
and general expenses; (ii) $11,560 in professional fees; and (iii) $9,484 in
interest expense. General and administrative expenses generally include
corporate overhead, financial and administrative contracted services, consulting
costs and professional fees.
Of the $92,376 incurred as general and administrative expenses, the
Company incurred to Investor Communications International, Inc. ("ICI")
approximately: (i) $47,800 for amounts due and owing for managerial,
administrative, financial and consulting services rendered by ICI; and (ii)
$11,421 as accrued interest. As of June 30, 2003, the Company owes an aggregate
of $485,810 plus $25,250 in accrued interest to ICI.
The current and sole director of the Company is presently contracted by
ICI and is part of the management team provided by ICI to the Company. During
the three-month period ended June 30, 2003, Grant Atkins received an aggregate
of $6,250 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 performed 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) 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 Quarterly
Report it is expected that the Company's present consulting agreement with ICI
will be terminated in favor of a revised consulting services arrangement to be
entered into with the completion of the Merger Agreement.
Pursuant to the terms and provisions of the Merger Agreement, the
Company and ICI are expected to enter into a new consulting services agreement
to be effective with the closing thereof (the "Consulting Services Agreement").
Pursuant to the provisions of the Consulting Services Agreement: (i) ICI will
provide to the Company such finance and general managerial services as may be
determined by the Board of Directors, from time to time, and in its sole and
absolute discretion, in order to develop the various business interests of the
Company in the information network solutions industry, including the MedLink
solution; and (ii) the Company will pay to ICI a fee commensurate with the
services provided by ICI on a monthly basis, but not to exceed $10,000.00
monthly, plus direct expenditures incurred on behalf of the Company. Grant
Atkins, the current and sole director of the Company, will continue to consult
directly to ICI and form part of the management team provided by ICI to the
Company, and may continue to derive remuneration from ICI for such services
rendered to the Company.
As discussed above, the increase in net loss during the three-month
period ended June 30, 2003 compared to net loss during the three-month period
ended June 30, 2002 is attributable primarily to an increase in office and
general expense and professional fees relating to identification and negotiation
of potential investment opportunities in other ventures, including some costs
relating to the acquisition of Transax. The Company's net loss during the
three-month period ended June 30, 2003 was approximately ($92,376), or ($0.08)
per share, compared to a net loss of approximately ($51,090), or ($0.07) per
share, during the three-month period ended June 30, 2002. The weighted average
number of shares outstanding were 1,106,701 for the three-month period ended
June 30, 2003 compared to 760,670 for the three-month period ended June 30, 2002
(which were restated to take into account the "Reverse Stock Split" discussed
below).
LIQUIDITY AND CAPITAL RESOURCES
FOR THREE-MONTH PERIOD ENDED JUNE 30, 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 June 30, 2003, the Company's current assets were $4,159 and its
current liabilities were $604,991, which resulted in a working capital deficit
of $600,832. As of fiscal year ended 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.
The increase in current liabilities during the three-month period ended
June 30, 2003 from fiscal year ended March 31, 2003 was due primarily to an
increase in advances from related parties.
Stockholders' deficit increased from ($508,456) for fiscal year ended
March 31, 2003 to ($600,832) for the three-month period ended June 30, 2003.
For the three-month period ended June 30, 2003, net cash flows used in
operating activities was ($58,548) compared to ($78,125) of net cash flows used
in operating activities for the three-month period ended June 30, 2002. As noted
above, the change in cash flows used in operating activities was primarily
comprised of: (i) a net loss of ($92,376) incurred during the three-month period
ended June 30, 2003 compared to a net loss of ($51,090) incurred during the
three-month period ended June 30, 2002; (ii) net changes in working capital
items of ($13,972) during the three-month period ended June 30, 2003 compared to
net changes in working capital items of ($27,035) for the three-month period
ended June 30, 2002; and (iii) $47,800 in consulting and administration fees
accrued during the three-month period ended June 30, 2003 compared to $-0-
accrued during the three-month period ended June 30, 2002.
Net cash flows from financing activities during the three-month period
ended June 30, 2003 was $62,618 resulting primarily from advances from related
parties compared to net cash flows from financing activities of $77,179 during
the three-month period ended June 30, 2002.
Net cash flows from investing activities were $-0- during the three-
month periods ended June 30, 2003 and 2002.
PLAN OF OPERATION
Notwithstanding the Transax proposed merger (the "Merger") process, and
as of the date of this Quarterly 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, are
dependent upon the Company's ability to successfully complete the Merger
transaction, and subsequently develop, provide and market its anticipated
information network solutions to healthcare provides, health insurance companies
and other end-users, and the continuing ability to generate capital financing.
Management is optimistic that the Company will be successful in its business
operations and capital raising efforts; however, there can be no assurance that
the Company will be successful in generating revenue or raising additional
capital. The failure to generate sufficient revenues or raise additional capital
may have a material and adverse effect upon the Company and its shareholders.
Based upon anticipated consummation of the Merger, management of the
Company anticipates an increase in operating expenses over the next three years
to pay expenses associated with such 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 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. As at
the date of this Quarterly 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's future success and
viability are primarily dependent upon the Company's current management to
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.
ITEM III. CONTROLS AND PROCEDURES
(a) The Company, under the supervision of its President, has conducted
an evaluation of the effectiveness of the design and operation of the Company's
disclosure controls and procedures within 90 days of the filing date of this
Quarterly Report. Based upon the results of this evaluation, the Company
believes that it maintains 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.
(b) 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.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
No report required.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
THE MERGER AGREEMENT
Pursuant to the terms and conditions of the Merger Agreement and a
corresponding contribution agreement, as entered into between the Company and
Vega-Atlantic, on the closing date of the Merger Agreement: (i) the Company will
contribute to Vega-Atlantic 11,066,207 shares of its restricted Common Stock and
4,500,000 stock options and 4,100,000 share purchase warrants to acquire any
equivalent number of shares of Common Stock of the Company; (ii) Vega-Atlantic
will exchange therefore with all Transax shareholders an aggregate of 11,066,207
shares of the Company's restricted Common Stock (on the basis of each two
Transax shares of common stock exchanged into the right to receive one share of
Common Stock of the Company); (iii) Vega-Atlantic will exchange therefore with
all Transax optionholders an aggregate of 4,500,000 stock options to acquire up
to 4,500,000 shares of the Company's Common Stock to replace all stock options
presently outstanding in Transax (on the basis of each two Transax stock options
exchanged into the right to receive one stock option of the Company); and (iv)
Vega-Atlantic will exchange therefore with all Transax warrantholders an
aggregate of 4,100,000 share purchase warrants to acquire up to a further
4,100,000 shares of the Company's Common Stock to replace all share purchase
warrants presently outstanding in Transax (on the basis of each two Transax
share purchase warrants exchanged into the right to receive one share purchase
warrant of the Company.
REVERSE STOCK SPLIT
The Board of Directors of the Company, at a special meeting, authorized
and approved, subject to shareholder approval, a Reverse Stock Split of
one-for-twenty of the Company's issued and outstanding shares of Common Stock.
As a result an Information Statement pursuant to Section 14(c) of the Securities
Exchange Act of 1934, as amended (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 10 or less shareholders then
holding of record a majority of the outstanding shares of the Company's Common
Stock (the "Written Consent"). The matters upon which action was taken pursuant
to the Written Consent by shareholders dated March 25, 2003 included the
approval and authorization for the Board of Directors to effect the Reverse
Stock Split, which was effected on approximately April 2, 2003. The Reverse
Stock Split reduced the Company's issued and outstanding shares of Common Stock
from 22,532,110 shares to 1,106,701 shares of Common Stock.
Subsequent to the completion of the Reverse Stock Split, the Company
determined that applicable Colorado law required the written consent of all
shareholders in the event that a written consent was utilized to obtain
shareholder approval in lieu of a shareholders' meeting. Therefore, 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 the meeting of the shareholders consequent
thereon.
On August 8, 2003, the shareholders of the Company voted either in
person or through proxy ratification of the prior actions of the shareholders
taken pursuant to the Written Consent approving the Reverse Stock Split. See
"Part II. Item 4. Submission of Matters to a Vote of Security Holders."
CHANGE IN CONTROL
As a result of the proposed issuance of restricted shares of Common
Stock and the grant of common stock options and purchase warrants pursuant to
the Merger Agreement, there will be a change in control of the Company. As of
the date of consummation of the Merger Agreement it is anticipated that the
Company will issue an aggregate of 11,066,207 shares of its restricted Common
Stock to the Transax Shareholders and will grant an aggregate of 4,100,000
warrants and 4,500,000 options to the existing Transax warrantholders and
optionholders. The table below reflects ownership assuming all issuance of
Common Stock have been made and all grants of options and warrants have been
made in accordance with the terms of the Merger Agreement.
The Board of Directors hereby set forth the names and addresses, and
the approximate number of shares of Common Stock owned of record, or to be owned
of record, or beneficially by each person who owned, or is 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 of the Company as a group.
After completion of the issuances of Common Stock and options and
warrants as required by the Merger Agreement, management of the Company
anticipates that the total estimated capitalization of the Company will be
12,172,908 shares of Common Stock issued and outstanding on a non-fully diluted
basis.
________________________________________________________________________________
Title of Class Name and Address Amount and Nature Percent of
of Beneficial Owner of Beneficial Ownership of Class
________________________________________________________________________________
(1)(2)
Common Stock Carlingford 11,427,425 76.83%
Investments Limited
80 Raffles Place
#16-20 UOB Plaza II
Singapore 048624
(1)(3)
Common Stock Cardlink Worldwide Inc. 1,191,870 9.79%
Flat 3, Elstree Court
61 Bisham Road
Bonsucesso Rio de Janeiro
Brazil
(1)(4)
Common Stock Stephen Walters 1,000,000 7.59%
Bali View Block A4/7
Jl. Cirendeu Raya 40
Jakarta Seletan 13419
Indonesia
(1)(5)
Common Stock Graeme Smith 150,000 1.22%
25 South Harper's Rd.
Woodend
Victoria, Australia
3442
(1)(6)
Common Stock Nathalie Pilon 100,000 0.08%
2919 Ontario Street
Vancouver, British Columbia
Canada V5T 2Y3
(1)(7)
Common Stock Laurie Bewes 200,000 0.16%
429 Willarong Road
Caringbah, Australia
N5W 2229
(1)(8)
Common Stock David Bouzaid 200,000 0.16%
Jl. Bangka 7
Dalam No. 3A
Kemang
Jakarta Selata 12730
Indonesia
(1)
Common Stock Grant Atkins -0- 0%
435 Martin Street
Suite 2000
Blaine, Washington 98230
(9)
Common Stock All officers and 1,425,000 10.48%
directors
as a group (6 persons)
________________________________________________________________________________
(1)
These are restricted shares of Common Stock.
(2)
This figure includes (a) an aggregate of 8,727,425 shares of Common Stock of
which 4,039,079 shares held of record by Carlingford Investments Limited as
trustee on behalf of approximately eighty-five investors will be issued directly
to such investors upon the closing of the Merger Agreement; and (b) an
assumption of the exercise of an aggregate of 2,700,000 warrants, to be issued
by the Company upon the closing of the Merger Agreement, exercisable by
Carlingford Investments Limited as trustee on behalf of several investors into
2,700,000 shares of Common Stock at the rate of $1.00 per share expiring on
August 14, 2008. Mr. Walters is, at present, the sole director of Carlingford
Investments Limited.
(3)
The 1,191,870 shares of Common Stock will be held of record by Cardlink
Worldwide Inc. as trustee on behalf of several underlying shareholders of
Cardlink Worldwide Inc.
(4)
Represents an assumption of the exercise by Mr. Walters of an aggregate of
1,000,000 options to be granted by the Company upon the closing of the Merger
Agreement, to acquire 1,000,000 shares of Common Stock at $0.50 per share
expiring August 14, 2008.
(5)
Represents an assumption of the exercise by Mr. Smith of an aggregate of
150,000 options to be granted by the Company upon the closing of the Merger
Agreement, to acquire 150,000 shares of Common Stock at $0.50 per share expiring
August 14, 2008.
(6)
This figure includes 50,000 shares of Common Stock presently held by
Carlingford Investments Limited on behalf of Ms. Pilon which will be issued
directly to Ms. Pilon upon the closing of the Merger Agreement. This figure also
represents an assumption of the exercise by Ms. Pilon of an aggregate of 100,000
options to be granted by the Company upon the closing of the Merger Agreement,
to acquire 100,000 shares of Common Stock at $0.50 per share expiring August 14,
2008.
(7)
Represents an assumption of the exercise by Mr. Bewes of an aggregate of
200,000 options to be granted by the Company upon the closing of the Merger
Agreement, to acquire 200,000 shares of Common Stock at $0.50 per share expiring
August 14, 2008.
(8)
Represents an assumption of the exercise by Mr. Bouzaid of an aggregate of
200,000 Stock Options to acquire 200,000 shares of common stock at $0.50 per
share expiring December 31, 2007.
(9)
This figure includes the assumption of the exercise of an aggregate of
1,650,000 options into 1,650,000 shares of Common Stock.
There are no arrangements or understandings among the entities and
individuals referenced above or their respective associates concerning election
of directors or other any other matters which may require shareholder approval.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
No report required.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On July 22, 2003, the Board of Directors 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 (collectively, the "Proxy
Statement"). On approximately July 20, 2003, the Proxy Statement was distributed
to all shareholders of the Company.
Pursuant to the Proxy Statement a special meeting of shareholders was
held on August 8, 2003 (the "Meeting") for the following purposes: (i) to
approve a proposed amendment to the Company's Articles of Incorporation, as
amended (the "Amendment"), to effectuate a proposed name change of the Company
(the "Name Change") to such name as may be approved by the Board of Directors 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 a written
consent of shareholders dated March 25, 2003 approving a reverse stock split
effectuated approximately April 2, 2003 (the "Reverse Stock Split").
Only shareholders of record at the close of business on June 9, 2003
(the "Record Date") were entitled to notice of and to vote the shares of Common
Stock, $0.00001 par value, of the Company held by them on such date at the
Meeting or any and all adjournments thereof. As of the Record Date an aggregate
1,126,606 shares of Common Stock were outstanding. There was no other class of
voting securities outstanding at that date.
Each share of Common Stock held by a shareholder entitled such shareholder
to one vote on each matter that was voted upon at the Meeting. The presence, in
person or by proxy, of the holders of a majority of the outstanding shares of
Common Stock was necessary to constitute a quorum at the Meeting. Assuming that
a quorum was present: (i) the affirmative vote of the holders of a majority of
the shares of Common Stock outstanding was required to approve the proposed
Amendment to effectuate the proposed Name Change to such name as may be approved
by the Board of Directors in its sole and absolute discretion; (ii) the
affirmative vote of the holders of a majority of the shares of Common Stock
outstanding was required to approve the proposed Stock Option Plan; and (iii)
the affirmative vote of the holders of a majority of the shares of Common Stock
outstanding was required to ratify the prior actions of the shareholders taken
pursuant to the written consent of shareholders dated March 25, 2002 approving
the Reverse Stock Split.
On August 8, 2003, the Meeting of shareholders was held with the
resulting votes cast either in person or proxy as follows: (i) 822,251 votes FOR
approval of the Name Change and 93 votes AGAINST approval of the Name Change;
(ii) 732,782 votes FOR approval of the Stock Option Plan and 126 votes AGAINST
approval of the Stock Option Plan; and (iii) 822,201 votes FOR ratification of
the Reverse Stock Split and 118 votes AGAINST ratification of the Reverse Stock
Split.
Moreover, on August 8, 2003, the shareholders of Transax holding
approximately 92.16% of the issued and outstanding shares of common stock of
Transax approved the terms and conditions of the Merger Agreement and its
related materials.
It is anticipated that consummation of the Merger Agreement will be
effective approximately on August 14, 2003. Commensurate with consummation of
the Merger Agreement, the Board of Directors shall appoint Stephen Walters as
the President, Chief Executive Officer and a director of the Company, and
Nathalie Pilon, CMA, as the Chief Financial Officer and Secretary of the
Company, both effective on August 14, 2003. Commensurate with the effectiveness
of this Statement the following additional officers and directors shall be
appointed to their respective positions with the Company effective approximately
on August 22, 2003.
STOCK OPTION PLAN
On July 22, 2003, the Board of Directors of the Company unanimously
approved and adopted a Stock Option Plan. The purpose of the proposed 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. This Stock Option Plan replaces the stock
option plan adopted by the Company effective March 25, 2003 and its terms are
identical to such stock option plan, except that 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).
The Stock Option Plan is to be administered by the Board of Directors
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 an 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 Quarterly Report, and in accordance with the
terms of the anticipated Merger Agreement, the Company plans to grant
approximately 4,500,000 Stock Options to all Transax optionholders to replace
all stock options presently outstanding in Transax (on the basis of each two
Transax stock options exchanged into the right to receive one Stock Option of
the Company). In accordance with the Company's Stock Option Plan, the Company
anticipates filing with the Securities and Exchange 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 Stock
Option Plan in the amount of up to 4,500,000 post-Reverse Stock Split shares at
various exercise prices. In accordance with receipt of shareholder approval of
the Stock Option Plan, the Board of Directors is 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 restricted Common
Stock.
ITEM 5. OTHER INFORMATION
No report required.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
31.1 Form 302 Certification - CEO
31.2 Form 302 Certification - CFO
32.1 Form 906 Certification - CEO
32.2 Form 906 Certification - CFO
99.1 Stock Option Plan.
(b) Reports
Report on Form 8-K filed on July 28, 2003.
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: August 13, 2003 By: /s/
____________________________________
Grant Atkins, President and Chief
Executive Officer
Dated: August 14, 2003 By: /s/
____________________________________
Grant Atkins, Treasurer and Chief
Financial Officer