<PAGE>

                     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 December 31, 2001

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

     For the transition period from        to
                                   --------  --------

                         Commission file number 0-27845

                            VEGA-ATLANTIC CORPORATION
         ---------------------------------------------------------------
        (Exact name of small business issuer as specified in its charter)

           COLORADO                                              84-1304106
 ------------------------------                               -----------------
(State or other jurisdiction of                              (I.R.S. Employer
 incorporation of organization)                              Identification No.)

                              4600 South Ulster St.
                                    Suite 240
                             Denver, Colorado 80237
                     --------------------------------------
                    (Address of Principal Executive Offices)

                                 (800) 721-0016
                            -------------------------
                           (Issuer's telephone number)

                                       N/A
               ---------------------------------------------------
              (Former name, former address and former fiscal year,
                          if changed since last report)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.

         Yes  X    No
            -----    -----

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:

Class                                       Outstanding as of February 14, 2002
-------                                     ------------------------------------

Common Stock, $.00001 par value             15,213,405

Transitional Small Business Disclosure Format (check one)

         Yes       No  X
            -----    -----

<PAGE>

PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

         CONSOLIDATED BALANCE SHEETS                                          2

         INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS                        3

         INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS                        4

         NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS                   5

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION           10

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

<PAGE>

PART 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS
----------------------------



                            VEGA-ATLANTIC CORPORATION
                         (AN EXPLORATION STAGE COMPANY)

                    INTERIM CONSOLIDATED FINANCIAL STATEMENTS

                                DECEMBER 31, 2001
                                   (Unaudited)





CONSOLIDATED BALANCE SHEETS

INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

<PAGE>
<TABLE>

                                      VEGA-ATLANTIC CORPORATION

                                   (AN EXPLORATION STAGE COMPANY)

                                     CONSOLIDATED BALANCE SHEETS
<CAPTION>

                                                                           December 31,         March 31,
                                                                                   2001              2001
==========================================================================================================
                                                                             (Unaudited)
                                               ASSETS
<S>                                                                          <C>             <C>
CURRENT ASSETS
   Cash                                                                      $        972    $      1,442
   Accounts receivable                                                                  -           1,500
----------------------------------------------------------------------------------------------------------

                                                                             $        972    $      2,942
==========================================================================================================


                           LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES
   Accounts payable and accrued liabilities                                  $    156,136    $    219,986
   Advances from related parties (Note 7)                                         208,318         145,286
   Notes payable - Technology sublicense (Notes 4 and 6)                                -         600,000
   Directors' fees payable (Note 7)                                                     -          61,267
----------------------------------------------------------------------------------------------------------

                                                                                  364,454       1,026,539
----------------------------------------------------------------------------------------------------------

STOCKHOLDERS' EQUITY (DEFICIT)
   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
      15,213,405 (March 31, 2001 - 14,588,405) shares issued and outstanding          339             344
   Additional paid-in capital                                                   9,367,586       9,217,581
   Deficit accumulated during the exploration stage                            (9,731,407)    (10,241,522)
----------------------------------------------------------------------------------------------------------

   Total stockholders' equity (deficit)                                          (363,482)     (1,023,597)
----------------------------------------------------------------------------------------------------------

                                                                             $        972    $      2,942
==========================================================================================================

</TABLE>

CONTINGENCIES (Note 1)

                    The accompanying notes are an integral part of these interim
                                 consolidated financial statements

                                                 2
<PAGE>
<TABLE>

                                           VEGA-ATLANTIC CORPORATION
                                        (AN EXPLORATION STAGE COMPANY)
                                 INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
                                                  (Unaudited)
<CAPTION>
                                                             Three        Three         Nine         Nine    December 3,
                                                            months        months      months       months           1997
                                                             ended         ended       ended        ended    (inception)
                                                          December      December    December     December    to December
                                                          31, 2001      31, 2000    31, 2001     31, 2000       31, 2001
=========================================================================================================================
<S>                                                   <C>           <C>            <C>         <C>          <C>
EXPLORATION EXPENSES
  Joint venture acquisition costs                     $         -   $    13,050    $        -  $ 1,105,787  $  1,278,439
  Claims staking and exploration                                -             -             -            -       112,384
  Research and development                                      -             -             -            -       783,182
-------------------------------------------------------------------------------------------------------------------------

  Total exploration expenses                                    -        13,050             -    1,105,787     2,174,005
-------------------------------------------------------------------------------------------------------------------------

GENERAL AND ADMINISTRATIVE EXPENSES
  Consulting fees                                               -             -             -       36,675       132,751
  Directors' fees (Note 7)                               (33,000)         3,000       (61,266)       9,000             -
  Office and general                                       77,962       244,236       194,264      845,118     3,427,090
  Interest expense                                          5,375         9,130        21,131       31,931       217,683
  Professional fees                                        13,413        45,969        42,821      134,190       282,469
  Stock-based compensation                                      -             -             -      262,247       262,247
  Gain on sale of joint venture interest                        -                     (50,000)           -       (69,318)
  Gain on settlement of lawsuit (Notes 4 and 6)                 -             -      (657,066)           -      (657,066)
  Loss on settlement of convertible promissory notes            -     1,754,917             -    1,754,917     1,754,917
-------------------------------------------------------------------------------------------------------------------------

  Total general and administrative expenses                63,750     2,057,252      (510,116)   3,074,078     5,350,773
-------------------------------------------------------------------------------------------------------------------------

INCOME (LOSS) FROM CONTINUING
   OPERATIONS                                             (63,750)   (2,070,302)      510,116   (4,179,865)   (7,524,778)

DISCONTINUED OPERATIONS
  Loss from discontinued operations of
      Century Manufacturing, Inc.                               -             -             -            -    (2,206,629)
-------------------------------------------------------------------------------------------------------------------------

NET INCOME (LOSS) FOR THE PERIOD                      $   (63,750)  $(2,070,302)   $  510,116  $(4,179,865) $ (9,731,407)
=========================================================================================================================


BASIC INCOME (LOSS) PER SHARE                         $    (0.004)  $    (0.298)   $    0.035  $    (0.674)
===========================================================================================================

WEIGHTED AVERAGE COMMON SHARES
   OUTSTANDING                                         14,861,503      6,958,322   14,679,768    6,202,836
===========================================================================================================

                               The accompanying notes are an integral part of these interim
                                            consolidated financial statements
</TABLE>
                                                            3
<PAGE>
<TABLE>
                                      VEGA-ATLANTIC CORPORATION
                                   (AN EXPLORATION STAGE COMPANY)
                            INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
                                             (Unaudited)
<CAPTION>

                                                                                              December 3,
                                                                 Nine months   Nine months            1997
                                                                       ended         ended  (inception) to
                                                                December 31,  December 31,    December 31,
                                                                       2001          2000             2001
==========================================================================================================
<S>                                                             <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income (loss) for the period                              $   510,116    $(4,179,865)   $(9,731,407)
  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                          -        821,044      1,303,611
  - stock-based compensation                                              -        262,247        262,247
  - loss on settlement of convertible promissory notes                    -      1,754,917      1,754,917
  - gain on settlement of lawsuit                                  (657,066)             -       (657,066)
  - net changes in working capital items                            148,363          4,830        560,518
----------------------------------------------------------------------------------------------------------

CASH FLOWS FROM OPERATING ACTIVITIES                                  1,413     (1,336,827)    (3,939,506)
----------------------------------------------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
  Advances from (repayments to) related parties - net                (1,883)        44,661      1,207,023
  Interest paid                                                           -         (1,433)        (1,433)
  Convertible notes                                                       -         99,500         99,500
  Sale of common stock                                                    -        970,000      3,357,000
----------------------------------------------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES                                 (1,883)     1,112,728      4,662,090
----------------------------------------------------------------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES
  Mineral property acquisition and exploration                            -              -       (622,567)
  Purchase of subsidiaries, net of cash acquired                          -            955        (99,045)
----------------------------------------------------------------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES                                      -            955       (721,612)
----------------------------------------------------------------------------------------------------------

INCREASE (DECREASE) IN CASH                                            (470)      (223,144)           972

CASH, BEGINNING OF PERIOD                                             1,442        240,328              -
----------------------------------------------------------------------------------------------------------

CASH, END OF PERIOD                                             $       972    $    17,184    $       972
==========================================================================================================
</TABLE>

OTHER NON-CASH TRANSACTIONS:
1. In connection with the settlement of the lawsuit described in Note 6, during
the nine month period ended December 31, 2001, the Company wrote off its notes
payable and accrued interest resulting in a gain of $657,066.
2. The Company issued 1,000,000 shares in settlement of debt of $150,000.

                    The accompanying notes are an integral part of these interim
                                 consolidated financial statements

                                                 4
<PAGE>

                           VEGA-ATLANTIC CORPORATION
                         (AN EXPLORATION STAGE COMPANY)
             NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                               DECEMBER 31, 2001
--------------------------------------------------------------------------------
                                  (Unaudited)


NOTE 1:  NATURE AND CONTINUANCE OF OPERATIONS

The Company is an exploration 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 with the exception of those interests which are subject to a
legal dispute. Refer to Note 3.

At December 31, 2001, the Company had a working capital deficiency of $363,482
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 consolidated 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 has been no material changes in the
information disclosed in the notes to the financial statements for the year
ended March 31, 2001 included in the Company's Annual Report on Form 10-KSB
filed with the Securities and Exchange Commission. The interim unaudited
consolidated 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 nine
months ended December 31, 2001 are not necessarily indicative of the results
that may be expected for the year ending March 31, 2002.


NOTE 2:  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION
The consolidated financial statements for the period ended December 31, 2001
include the accounts of the Company and its 100% owned subsidiary, Polar
Explorations Ltd. incorporated in Belize to act as the joint venture partner in
future mineral property acquisitions. This subsidiary has had no operations to
date.

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.

INTEREST IN MINERAL PROPERTIES
The Company expenses all mineral property acquisition costs, capital
contributions and exploration costs until such time as proven economically
recoverable reserves are established.

                                       5
<PAGE>

VEGA-ATLANTIC CORPORATION
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
--------------------------------------------------------------------------------
(Unaudited)


NOTE 2:  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CON'T)

NET LOSS PER COMMON SHARE
Basic earnings 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 per share reflect the potential
dilution of securities that could share in the earnings of the Company. Because
the Company does not have any potentially dilutive securities outstanding, the
accompanying presentation is only of basic loss per share.

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.

STOCK-BASED COMPENSATION
The Company accounts for stock-based compensation in respect to stock options
granted to employees and officers using the intrinsic value based method in
accordance with APB 25. Stock options granted to non-employees are accounted for
using the fair value method in accordance with SFAS No. 123. In addition, with
respect to stock options granted to employees, the Company provides pro-forma
information as required by SFAS No. 123 showing the results of applying the fair
value method using the Black-Scholes option pricing model.

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. 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
earliest of a performance commitment or completion of performance by the
provider of goods or services as defined by EITF 96-18.

RECENT ACCOUNTING PRONOUNCEMENTS
On March 31, 2000, the Financial Accounting Standards Board ("FASB") issued FASB
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. The Company has determined that the implementation of this
standard does not have a material impact on its financial statements.


NOTE 3:  INTEREST IN MINERAL PROPERTIES

TUN RESOURCES INC.: 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.

Tun Resources is the major stakeholder in a gold exploration and development
joint venture in the Yunnan Province of China. Tun Resources entered into the
Yuntong JV agreement, which has the rights to four separate gold exploration and
mining development properties, on August 8, 1994 with Yunnan Province Dianxi
Geological Engineering Exploration Development Company in China. The Yuntong
joint venture is in the process of exploring its mineral properties and has not
yet determined whether these properties contain proven reserves. Accordingly,
the Company has expensed acquisition costs and JV capital contributions incurred
to date.

                                       6
<PAGE>

VEGA-ATLANTIC CORPORATION
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
--------------------------------------------------------------------------------
(Unaudited)


NOTE 3:  INTEREST IN MINERAL PROPERTIES (CON'T)

On May 2, 2000, the Company executed a definitive closing agreement to purchase
the 80% interest in Tun Resources Inc. 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
400,000 restricted shares in the capital of the Company valued at $672,000. At
the date of acquisition, Tun Resources had a stockholders' deficit of $149,044.
The Company accounted for its acquisition of Tun Resources using the purchase
method and allocated the stockholder's deficit of Tun Resources as well as the
$672,000 cost of acquisition to the carrying value of the underlying joint
venture interests to which a full impairment provision was recorded.

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 400,000 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 Resources, Inc. have voted to accept or reject
the amended offer dated February 9, 2001. The amended offer has not been
presented to the shareholders of Golden Thunder or the CDNX for approval.
Consequently, the Company has initiated legal proceedings against Golden Thunder
and Tun Resources for breaches of the Acquisition Agreement and other causes of
action, and seeks damages of in excess of $800,000. Golden Thunder and Tun
Resources have filed a statement of defense alleging that the Company breached
the acquisition agreement. Accordingly, for accounting purposes effective March
31, 2001 the Company ceased consolidating the assets, liabilities and operations
of Tun Resources in its financial statements.

LEMACHANG SILVER MINE JOINT VENTURE PROPOSAL: Effective July 26, 2000, the
Company, through its 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
meets 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:  NOTES PAYABLE

Pursuant to a Technology Sub-license agreement with Geneva Resources, Inc.
("Geneva"), the Company issued promissory notes to both Geneva and AuRIC
Metallurgical Laboratories LLC ("AuRIC") in the amount of $250,000 to each
company. These were 3% interest bearing notes and were payable upon the transfer
of the technology. Pursuant to the agreement, the Company had issued a
convertible promissory note to Geneva in the amount of $100,000 that was
convertible to 125,000 restricted common shares upon demand, and bore interest
at the rate of 8% per annum and issued 250,000 restricted common shares to
AuRIC. These promissory notes were due and payable upon the transfer of the
technology. Upon the settlement of the lawsuit described in Note 6, the
promissory notes to AuRIC and Geneva totaling $600,000 were cancelled during the
quarter as well as $57,066 in accrued interest resulting in a gain of $657,066
from the write-off of these debts.

                                       7
<PAGE>

VEGA-ATLANTIC CORPORATION
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
--------------------------------------------------------------------------------
(Unaudited)


NOTE 5:  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 plan extends for a 10-year term
and consists of 500,000 share options priced at $1.00 per share.

All options granted expire on April 30, 2010. Shares which may be acquired
through the plan 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
plan will not be in lieu of salary of other compensation for services.

As of December 31, 2001, 487,500 share options with an exercise price of $1.00
per share of common stock are outstanding and during the period, no options had
been exercised or forfeited, and no options had expired.

NOTE 6:  SETTLEMENT OF LAWSUIT

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 period ended September 30, 2001 a settlement was reached and the
parties agreed to have the lawsuit dismissed. As part of the settlement, the
promissory notes totaling $600,000 to AuRIC and Geneva were cancelled, and
250,000 post consolidation shares issued to AuRIC and 125,000 post consolidation
shares issued to Geneva were returned 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 law suit
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 to 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 law suit funding agreement between the
plaintiffs and Tristar Financial Services, Inc.

NOTE 7: RELATED PARTY TRANSACTIONS

During the period ended December 31, 2001 $9,000 in directors fees were accrued
and $70,266 of previously accrued fees were written off to current and former
directors. At December 31, 2001, there are no directors fees owing.

                                       8
<PAGE>

VEGA-ATLANTIC CORPORATION
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
--------------------------------------------------------------------------------
(Unaudited)


During the period ended December 31, 2001 the Company incurred managerial,
administrative and investor relation services of $194,650 to Investor
Communications International, Inc. ("ICI") under a consulting services and
management agreement dated April 1, 1999. At December 31, 2001 the Company had
made net cash repayments of $5,333 to ICI, issued 1,000,000 common shares for
$150,000 in debt, and at December 31, 2001 $164,103 plus $18,034 accrued
interest is owing to ICI.

In addition, at December 31, 2001 $23,500 plus $2,681accrued interest is owing
to certain shareholders for cash advances. These are unsecured and without any
terms of repayment.


NOTE 8:  COMMON STOCK

On October 31, 2001 the Company cancelled 250,000 post consolidation shares in
the name of AuRIC Metallurgical Laboratories and 125,000 post consolidation
shares in the name of Geneva Resources Inc. See Note 6.

On November 13, 2001 the Company converted $150,000 of debt owing to Investors
Communications for 1,000,000 common shares of the Company's stock at $0.15 per
share.

The weighted average number of shares outstanding for the periods ended in 2000
has been restated to reflect the 4:1 share consolidation on December 22, 2000.


NOTE 9: INCOME TAXES

The Company has recorded no tax provision for the period ended December 31, 2001
as it has sufficient loss carryforwards available to offset the income in the
period. Also, due to the uncertainty of realization the Company has provided a
full valuation allowance against the deferred tax assets resulting from its
additional unutilized loss carryforwards.

                                       9

<PAGE>

         Statements made in this Form 10-QSB 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 Securities Exchange Act of 1934. 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 acquisition and exploration, 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.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

GENERAL

         Vega-Atlantic Corporation, a Colorado corporation (the "Company"),
which currently trades on the OTC Bulletin Board under the symbol "VATL", and
the Frankfurt Stock Exchange under the symbol "VGA" (WKN: 936303). The Company
is primarily engaged in the business of minerals and oil and gas exploration,
acquisition, and development.

CURRENT BUSINESS OPERATIONS

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 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
agreed to (i) provide a total of $1,180,000 by February 15, 2001 to fund current
Tun Resources joint venture projects, (ii) issue 1,600,000 shares of its
restricted common stock to Golden Thunder in exchange for the eighty percent
(80%) of the issued and outstanding shares of common stock of Tun Resources and
an option to purchase the remaining twenty percent (20%), and (iii) be solely
responsible for the future funding of Tun Resources and its joint ventures.

         As of the date of this Quarterly Report, the Company has issued
1,600,000 shares of its restricted common stock to Golden Thunder (400,000
shares after the reverse stock split) and has provided approximately $604,500 of
funds to Tun Resources. During the past fiscal year, the Company has been unable
to timely provide the required aggregate amount of $1,180,000 by February 15,
2001.

                                       10
<PAGE>

         On December 12, 2000 and as amended February 9, 2001, the Company
provided a letter of 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 400,000 (post-split) shares of common stock from Golden Thunder (the
"Letter Offer"). The Company obtained verbal agreement from three of the four
board members of Golden Thunder that the Letter Offer would be provided to the
shareholders of Golden Thunder at their next annual meeting and to the CDNX
(Canadian Stock Exchange) for approval. On February 9, 2001, the Company 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 voted to accept or reject the Letter Offer.

         As of the date of this Quarterly Report, the Company has received an
extension to the funding commitment requirement in the Acquisition Agreement to
the date of the next annual meeting of the shareholders of Golden Thunder. As of
the date of this Quarterly Report, the Letter Offer has not been presented to
the shareholders of Golden Thunder for their approval nor to the CDNX for its
approval.

         On July 8, 2001, the Company filed a Statement of Claim in the Supreme
Court of British Columbia naming Golden Thunder Resources Ltd. and Tun Resources
Inc. as defendants. The Company alleges in its Statement of Claim that certain
representations were made by the defendants to the Company which were untrue and
upon which the Company detrimentally relied thus suffering loss and damages, and
that amounts provided to Tun Resources by the Company were refundable debt
advances until the Company's funding requirement of providing a total of
$1,180,000 to Tun Resources was complete. See "Part II. Item 1. Legal
Proceedings" for further disclosure. Accordingly, for accounting purposes
effective March 31, 2001 the Company ceased consolidating the assets,
liabilities and operations of Tun Resources in its financial statements.

         As previously reported, Tun Resources is the major stakeholder in one
gold exploration and development Sino Foreign joint venture in the Yunnan
Province of China named the Yuntong Sino Foreign Joint Venture

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 has the right to acquire an approximate 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. Management
plans to conduct future due diligence on the gold resource to provide the basis
for negotiation of the final terms of the joint venture agreement, should the
due diligence warrant continuing such negotiations. According to the terms of
the Letter Agreement, the Company must invest up to $2,500,000 to expand the
gold resource and increase mine production, and that the No. 1 Geological
Brigade will contribute the property, exploration and mining rights, permits,
land use rights and other work to date completed on the gold resource.

         Management of the Company believes that exploration work conducted by
the No. 1 Geological Brigade may indicate peripheral gold occurrences, which
could increase future gold resources. Until the completion of all due diligence,
the Company will not consider the acquisition of the Ailaoshang gold concession
probable and any further involvement is subject to funding availability.

                                       11
<PAGE>

         The Company has formed Polar Explorations Ltd., a Belize corporation
and the wholly-owned subsidiary of the Company ("Polar Explorations"), to act as
the joint venture partner on behalf of the Company. The Ailaoshan/Xiaoshuijing
Gold Project is subject to obtaining adequate financing to proceed with the
project.

The Vega Property and Settlement of Litigation

         As previously disclosed, on September 27, 1999, Geneva Resources, Inc.
("Geneva") and International Gold Corporation, a subsidiary of Intergold
Corporation ("INGC"), on behalf of Intergold Corporation ("IGCO"), initiated
legal proceedings against AuRIC Metallurgical Laboratories Inc. ("AuRIC") for
multiple breaches of contract stemming from an Agreement for Services and a
License Agreement and against Dames & Moore in a declaratory relief cause of
action (the "Lawsuit").

         The Company suspended exploration of the Vega Property due to (i)
independent assessment information which did not support the claims of AuRIC and
Dames & Moore; (ii) the existence of multiple breaches of contract by AuRIC and
Dames & Moore under the Agreement for Services and the License Agreement; and
(iii) the pending Lawsuit and further claims of action against AuRIC and Dames &
Moore. Moreover, the Company deemed the probability of commercial grade gold or
silver located in the Vega Property claims to be nil.

         On approximately September 25, 2001, Geneva, IGCO, INGC, and others
entered into settlement agreements and releases with Dames & Moore, et. al., and
AuRIC in which the parties agreed to settle in order to diminish the continuous
burden, cost and expense of protracted ongoing litigation. See "Part II. Other
Information Item 1. Legal Proceedings" for further disclosure.

Investment in Other Ventures

         As of the date of this Quarterly Report, management seeks to develop a
diversified international resources exploration, development and production
program. Management intends to focus the Company's business activities on
resource-based diversification to other commodities and opportunities under
consideration and evaluation. Management believes that it is in the best
interests of the Company to diversify the Company's business activities to avoid
reliance on a single commodity. In addition, activities in China have been
difficult to attract investment to fund exploration and development of
initiatives; various divestitures have resulted.

RESULTS OF OPERATION

Nine-Month Period Ended December 31, 2001 Compared to Nine-Month Period Ended
December 31, 2000

         The Company's net income for the nine-month period ended December 31,
2001 was approximately $510,116 compared to a net loss of approximately
$4,179,865 for the nine-month period ended December 31, 2000 resulting from the
gain on the settlement of the lawsuit. See "Part II. Other Information. Item 1.
Legal Proceedings".

                                       12
<PAGE>

         During the nine-month period ended December 31, 2001, the Company
recorded operating expenses of approximately $258,216, which were offset by
recognized gains totaling $768,332, resulting in a recognized income from
continuing operations of $510,116. During the nine-month period ended December
31, 2000, the Company recorded operating expenses of $4,179,865 (a decrease of
$3,669,749).

         During the nine-month period ended December 31, 2001, the Company did
not incur any exploration expenses as compared to exploration expenses of
$1,105,787 incurred during the nine-month period ended December 31, 2000. The
decrease in exploration expenses during the nine-month period ended December 31,
2001 was primarily due to decreased investment relating to its Chinese joint
venture projects as compared to the payments made by the Company during the
nine-month period ended December 31, 2000 pertaining to the acquisition costs of
Tun Resources and related joint venture capital contributions.

         During the nine-month period ended December 31, 2001, the Company
incurred general and administrative expenses of $258,216, which primarily
consisted of $194,264 as office and general expenses. During the nine-month
period ended December 31, 2000, the Company incurred general and administrative
expenses of $3,074,078, which consisted primarily of $1,754,917 in loss on
settlement of convertible promissory notes, $845,118 in office and general
expenses and $262,247 in stock-based compensation. The decrease in
administrative expenses during the nine-month period ended December 31, 2001
compared to the nine-month period ended December 31, 2000 was primarily due to a
decrease in overhead and administration expenses, which related to the scale and
scope of overall business activity during such period, and the recording of the
loss on settlement of convertible promissory notes during the nine-month period
ended December 31, 2000. Administrative expenses generally include corporate
overhead, financial and administrative contracted services, consulting costs and
professional fees.

         Although the Company actually incurred $258,216 of general and
administrative expenses during the nine-month period ended December 31, 2001,
such expenses were offset by the recognition of $768,332 resulting from (i)
$61,266 decreased directors' fee liability; (ii) $50,000 realized as gain on the
sale of Alaskan Explorations Corp. and related Lemachang silver deposit
Sino-Foreign joint venture interest; and (iii) $657,066 realized as a gain on
the settlement of the Lawsuit. During the nine-month period ended December 31,
2001, these resulted in a recognized income from continuing operations of
$510,116.

         Of the $258,216 incurred as general and administrative expenses, the
Company incurred approximately $194,650 to Investor Communications
International, Inc. ("ICI") for amounts due and owing for managerial,
administrative and financial services rendered and/or advances made by ICI.
During the nine-month period ended December 31, 2001, the Company had made net
cash repayments of $5,333 to ICI and issued 1,000,000 shares of restricted
common stock for partial settlement of an aggregate principal of $164,103 plus
$18,034 in accrued interest due and owing ICI. One of the directors of the
Company is contracted by ICI and is part of the management team provided by ICI
to the Company. See "Part II. Other Information. Item 2. Changes in Securities
and Use of Proceeds".

                                       13
<PAGE>

         The Company and ICI entered into a two-year consulting services and
management agreement dated April 1, 1999 whereby 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. On April 1, 2001, the
Company and ICI renewed its consulting services and management agreement for an
additional two-year period.

         As the Company has not and currently is not in the operational stage of
generating revenues, the services provided by ICI decreased during the six-month
period ended December 31, 2001 as compared to the same period during 2000. As of
the date of this Quarterly Report, such services provided by ICI include not
only those services listed above related to exploration, administration, public
company operations and maintenance of the Company, but also involve the
negotiation of the Letter Offer and addendums thereto relating to Tun Resources
and the negotiation and due diligence of the Letter Agreement relating to the
Ailaoshan joint venture and other joint venture projects that the Company has
divested. Moreover, with commencement of the legal proceedings against Tun
Resources and Golden Thunder, and the ongoing and ultimate finalization of the
legal proceedings involving INGC/Geneva and AuRIC/Dames & Moore, ICI is
continuously sourcing, identifying, investigating and negotiating new business
opportunities to present to the board of directors of the Company. Other
services provided by ICI include securing of short-term advance financing and
sourcing of private placement funding.

         As discussed above, the recognition of net income during the nine-month
period ended December 31, 2001 as compared to the net loss incurred during the
nine-month period ended December 31, 2000 is attributable primarily to the (i)
realization of a gain on the settlement of the Lawsuit, and (ii) the decreased
exploration expenses and general and administrative expenses incurred during the
nine-month period ended December 31, 2001. The Company's net income during the
nine-month period ended December 31, 2001 was approximately $510,116 or $0.035)
per common share compared to a net loss of approximately ($4,179,865) or
($0.674) per common share during the nine-month period ended December 31, 2000.
The weighted average number of diluted shares outstanding were 14,679,768 for
the nine-month period ended December 31, 2001 (which have been restated to take
into account the reverse stock split of 4 to 1) compared to 6,202,836 for the
nine-month period ended December 31, 2000.

Three-Month Period Ended December 31, 2001 Compared to Three-Month Period Ended
December 31, 2000

         The Company's net loss for the three-month period ended December 31,
2001 was approximately $63,750 compared to a net loss of approximately
$2,070,302 for the three-month period ended December 31, 2000. During both
three-month periods ended December 31, 2001 and 2000, respectively, the Company
recorded no income.

         During the three-month period ended December 31, 2001, the Company
recorded operating expenses of approximately $63,750. During the three-month
period ended December 31, 2000, the Company recorded operating expenses of
$2,070,302 (a decrease of $2,006,552).

                                       14
<PAGE>

         During the three-month period ended December 31, 2001, the Company did
not incur any exploration expenses as compared to exploration expenses of
$13,050 incurred during the three-month period ended December 31, 2000. The
decrease in exploration expenses during the three-month period ended December
31, 2001 was primarily due to the decreased investment by the Company to Tun
Resources of its funding commitments due to the extensions obtained as compared
to the payments made by the Company during the three-month period ended December
31, 2000 pertaining to the acquisition costs of Tun Resources and related joint
venture capital contributions.

         During the three-month period ended December 31, 2001, the Company
actually incurred general and administrative expenses of $96,750, which
primarily consisted of $77,962 as office and general expenses. During the
three-month period ended December 31, 2000, the Company incurred general and
administrative expenses of $2,057,252, which consisted primarily of $1,754,917
in loss on settlement of convertible promissory notes, $244,236 in office,
consulting and general expenses and $45,969 in professional fees. The decrease
in administrative expenses during the three-month period ended December 31, 2001
as compared to the three-month period ended December 31, 2000 was primarily due
to a decrease in overhead, consulting and administration expenses, which related
to the decreased scale and scope of overall business activity during such
period, and the recording of the loss on settlement of convertible promissory
notes during the three-month period ended December 31, 2000.

         Although the Company actually incurred $96,750 of general and
administrative expenses during the three-month period ended December 31, 2001,
such expenses were offset by the recognition of $33,000 resulting from a
write-down in directors' fees. During the three-month period ended December 31,
2001, this resulted in a loss from continuing operations of $63,750.

         As discussed above, the decrease in net loss during the three-month
period ended December 31, 2001 as compared to the three-month period ended
December 31, 2000 is attributable primarily to the decreased general and
administrative expenses incurred during the three-month period ended December
31, 2001. The Company's net loss during the three-month period ended December
31, 2001 was approximately $63,750 or ($0.004) per common share compared to a
net loss of approximately ($2,070,302) or ($0.298) per common share during the
three-month period ended December 31, 2000. The weighted average number of
diluted shares outstanding were 14,861,503 for the three-month period ended
December 31, 2001 (which have been restated to take into account the reverse
stock split of 4 to 1) compared to 6,958,322 for the three-month period ended
December 31, 2000.

LIQUIDITY AND CAPITAL RESOURCES

For Nine-Month Period Ended December 31, 2001

         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.

                                       15
<PAGE>

         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 develop new business
prospects under consideration, joint ventures, and the continuing ability to
generate capital financing. Management is optimistic that the Company will be
successful in its capital raising efforts; however, there can be no assurance
that the Company will be successful in raising additional capital. The failure
to raise additional capital may have a material and adverse effect upon the
Company and its shareholders.

         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 Quarterly Report, management believes that the Company can satisfy
its cash requirements for approximately the next six months based on its ability
to successfully litigate its claims against Tun Resources and Golden Thunder and
to obtain advances from certain investors and related parties, as necessary.

         As of December 31, 2001, the Company's current assets were $972 and its
current liabilities were $364,454. As of December 31, 2001, the current
liabilities exceeded current assets by $363,482. As of fiscal year ended March
31, 2001, the Company's current assets were $2,942 and its current liabilities
were $1,026,539. As of March 31, 2001, the current liabilities exceeded current
assets by $1,023,597.

         The decrease in current liabilities in the nine-month period ended
December 31, 2001 from fiscal year ended March 31, 2001 was due primarily to a
decrease in notes payable due to settlement of the Lawsuit and a decrease in
directors' fees payable. See "Part II. Other Information. Item 1. Legal
Proceedings".

         Stockholders' deficit decreased from ($1,023,597) for fiscal year ended
March 31, 2001 to ($363,482) for the nine-month period ended December 31, 2001.

PART II. OTHER INFORMATION

ITEM 1. 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 Resources Ltd. and Tun Resources
Inc. as defendants. The Company alleges in its Statement of Claim that certain
representations were made by the defendants to the Company 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 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 alleges 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

                                       16
<PAGE>

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 could not be raised in the manner agreed upon by the Company
and defendants; and (iv) the board 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
alleges 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
are breaches of material terms of the Acquisition Agreement and have caused the
Company loss and damages. The Company is seeking general and special damages in
excess of $800,000.00.

         On August 2, 2001, Tun Resources and Golden Thunder filed its Statement
of Defense in which it alleges that the Company breached the Acquisition
Agreement by its failure to provide funding in the amount of $1,180,000 to Tun
Resources and that such failure to provide the required funding adversely
affected the value of assets to be purchased by the Company.

         As of the date of this Quarterly Report, management intends to
aggressively pursue all such legal actions and review further legal remedies
against Golden Thunder and Tun Resources.

Vega Property Litigation and Settlement

         On September 27, 1999, Geneva and INGC, on behalf of IGCO, initiated
legal proceedings against AuRIC and Dames & Moore by filing its complaint in the
District Court of the Third Judicial District for Salt Lake City, State of Utah,
for: (i) multiple breaches of contract relating to the Agreement for Services
and the License Agreement, respectively, including, but not limited to,
establishment and facilitation of the proprietary technology and fire assay
procedures developed by AuRIC at an independent assay lab and failure to deliver
the proprietary technology and procedures to IGCO and Geneva; (ii) breach of the
implied covenant of good faith and fair dealing; (iii) negligent
misrepresentation; (iv) specific performance, (v) non-disclosure injunction;
(vi) failure by AuRIC to repay advances, and (vii) quantum meruit/unjust
enrichment. INGC, on behalf of IGCO, also named Dames & Moore in the legal
proceeding in a declaratory relief cause of action (collectively, the
"Lawsuit").

         On October 8, 1999, Geneva and INGC, on behalf of IGCO, amended its
complaint by naming as defendants AuRIC, Dames & Moore, Ahmet Altinay, General
Manager of AuRIC, and Richard Daniele, Chief Metallurgist for Dames & Moore and
specifying damages in excess of $10,000,000. The damages sought by Geneva and
INGC, on behalf of IGCO, were based on the general claims and causes of action
set forth in the amended complaint relating to reliance on the assays and
representations made by AuRIC, the actions and engineering reports produced by
Dames & Moore and, specifically, the negligent misrepresentations and
inaccuracies contained within some or all of those Dames & Moore reports and
breaches of contract by AuRIC and Dames & Moore.

                                       17
<PAGE>

         On or about November 17, 1999, AuRIC, Dames & Moore, Richard Daniele
and Ahmet Altinay filed separate answers to the amended complaint, along with
counterclaims and a third party complaint against Geneva, INCG, IGCO and Brent
Pierce for breach of contract against Geneva, breach of contract against INCG
and others, defamation against IGCO, INCG, Geneva and others, injunctions
against IGCO, INCG, Geneva and others, amongst other claims. In their defamation
claim against IGCO, the plaintiffs sought damages and punitive damages in an
amount to be determined at trial, as well as attorney's fees and costs. In
connection with the cause of action for preliminary and permanent injunctions
against IGCO, AuRIC and Ahmet Altinay sought attorney's fees and costs.

         On approximately June 14, 2000, Dames & Moore filed an action against
IGCO, INGC and others in the District Court of the Fifth Judicial District of
the State of Idaho, in and for the County of Lincoln (the "Idaho Lawsuit"). In
the Idaho Lawsuit, Dames & Moore sought foreclosure of a lien against IGCO
and/or INGC which purportedly arose in favor of Dames & Moore. INGC dropped the
bulk of its mining claims, except for a small group related to this litigation,
as IGCO and INGC believed that the mining claims contain no commercial
quantifies of gold and silver. Dames & Moore sought to have the mining claims
sold to compensate Dames & Moore for its services, materials and equipment.
Dames & Moore also sought its fees and costs incurred in enforcing its claimed
lien. IGCO and INGC filed an answer on or about August 8, 2000.

         On June 21, 2000, Geneva and INGC, on behalf of IGCO, filed a second
amended complaint in the District Court of the Third Judicial District for Salt
Lake City, State of Utah. The second amended complaint increased detail
regarding the alleged breaches of contract and increased causes of action
against other parties involved by adding two new defendants, MBM Consulting, and
Dr. Michael B. Merhtens, who provided consulting services to INGC. The amendment
also added certain claims of other entities involved through Geneva against the
defendants. The proprietary technology formed the basis of claims made by Geneva
and INGC, on behalf of IGCO, in the complaints as filed with the District Court.
Geneva and INGC, on behalf of IGCO, alleged that the proprietary technology does
not exist and that Geneva and INGC were fraudulently, recklessly and/or
negligently deceived by AuRIC, Dames & Moore, and other parties to the lawsuit.

         Geneva and INGC subsequently obtained an order from the District Court
to grant its Motion to Compel. The Order required that AuRIC and Dames & Moore
produce the proprietary technology for Geneva's and INGC's restricted use by its
legal counsel and industry experts. Geneva and INGC, on behalf of IGCO, obtained
an expert opinion as to the absence of validity and ineffectiveness of the
proprietary technology.

         On November 10, 2000, Geneva and INGC filed motions for partial summary
judgment against Dames & Moore and AuRIC. Subsequently, on March 19, 2001, the
motions for partial summary judgment were denied. The court, however, provided a
ninety-day period during which both parties were required to prepare for trial,
and after such period the court would set a date for trial. At a scheduling
conference held on July 31, 2001, the court set trial for a period of fifteen
days commencing October 16, 2001. The court date was subsequently changed to
October 26, 2001 pursuant to mutual consent of the parties in an attempt to
mediate the dispute. Such mediation was unsuccessful.

         Agreements Relating to Litigation

         The Company and Geneva entered into an assignment agreement dated May
9, 2000 (the "Assignment Agreement") that transferred and conveyed to Geneva the
potential claims and causes of action that the Company may have under the
Sub-License Agreement with Geneva.

                                       18
<PAGE>

         On June 22, 2001, IGCO, INGC, Geneva, Brent Pierce, MBM Consultants,
Inc. and Michael B. Mehrtens entered into a settlement agreement (the "Mehrtens
Settlement Agreement"). Pursuant to the terms of the Mehrtens Settlement
Agreement, the parties agreed to treat the contents of the Mehrtens Settlement
Agreement as strictly confidential and to not disclose such terms and
provisions.

         As IGCO has not generated revenues and has no liquid assets to commit
to fund the significant estimated future expenses associated with ongoing
litigation, on June 28, 2001, Geneva, IGCO, INGC, Tristar Financial Services,
Inc. ("Tristar") and Alexander Cox ("Cox") entered into a funds sharing
agreement (the "Funds Sharing Agreement"). Pursuant to the terms of the Funds
Sharing Agreement, (i) Tristar would fund the direct costs of the litigation on
a best efforts basis relating to the Lawsuit for the period from April 1, 2001
to the date that the Lawsuit was settled; (ii) as consideration therefore,
Tristar would receive thirty percent (30%) of the gross proceeds received by
Geneva, IGCO and INGC from any and all settlements relating to the Lawsuit, plus
the repayment of all payments and advances made by Tristar (the "Tristar
Payment"); and (iii) the Tristar Payment would be shared with Cox in proportion
to (a) the funds advanced and paid by Cox to Tristar for the purpose of funding
the costs of the litigation, (b) divided by the total amount of funds advanced
by and paid by Tristar, (c) times the amount of the Tristar Payment. Cox is a
shareholder of IGCO and as of the date of this Quarterly Report, holds an
approximate 17.12% equity interest in IGCO.

         On September 21, 2001, Geneva, IGCO, INGC and others entered into a
settlement agreement with AuRIC and Ahmet Altinay (the "AuRIC Settlement
Agreement"). Pursuant to the terms of the AuRIC Settlement Agreement, the
parties agreed that: (i) significant additional expense and time would be
incurred to proceed with and resolve the Lawsuit and therefore desired to settle
the Lawsuit; (ii) AuRIC would pay $10,000; (iii) AuRIC would return three
promissory notes in the principal amounts of $250,000 marked cancelled payable
to AuRIC by the Company, Goldstate Corporation and IGCO, respectively; (iii)
AuRIC would return all stock certificates received from the Company, Goldstate
Corporation and IGCO, respectively; (iv) the parties would execute and jointly
file a motion to dismiss the parties' respective claims and counterclaims in the
Lawsuit; (v) the parties would release one another from any and all claims and
liabilities, whether known or unknown, arising from or based upon the Lawsuit;
and (vi) the Agreement for Services, the License Agreement and the related
Sub-License Agreement would be deemed null, void and without further force or
effect.

         On September 25, 2001, Geneva, IGCO, INGC, and others entered into a
settlement agreement and release with Dames & Moore, et. al. (the "Dames & Moore
Settlement Agreement"). Pursuant to the terms of the Dames & Moore Settlement
Agreement, the parties agreed that: (i) solely to save the burden, cost and
expense of continued litigation, the Lawsuit and the Idaho Lawsuit would be
settled without any admission of liability by any party; (ii) the parties would
execute and jointly file a motion to dismiss the parties' respective claims and
counterclaims in the Lawsuit and the Idaho Lawsuit with prejudice; (iii) the
parties would release one another from any and all claims and liabilities,
whether known or unknown, arising from or based upon the Lawsuit and the Idaho
Lawsuit, including those arising from or related to the Blackhawk projects,
mining claims and property; (iv) each party would bear its own respective
attorneys' fees and costs incurred in connection with the Lawsuit, the Idaho
Lawsuit and the Dames & Moore Settlement Agreement; and (v) Dames & Moore would
pay $798,000.

                                       19
<PAGE>

         Results of Settlement

         Pursuant to the Assignment Agreement, the Company transferred and
conveyed to Geneva the potential claims and causes of action that the Company
may had under the Sub-License Agreement with Geneva. The amount of damages to be
recovered by Geneva and INGC pursuant to the Dames & Moore Settlement Agreement
and the AuRIC Settlement Agreement were primarily used for payment of attorneys
fees, expert witness fees, and associated costs of litigation. The Company,
therefore, was not in a position to retain any portion of the cash settlement
damages.

         IGCO and INGC had paid an aggregate of $938,805 in cash to AuRIC and
Dames & Moore for services before the litigation commenced. IGCO and INGC also
owed $219,469 to Dames & Moore for disputed but unpaid services. Prior to the
litigation, (i) AuRIC received 1,000,000 pre-consolidation shares of Common
Stock from the Company and a promissory note in the principal amount of
$250,000, and (ii) Geneva received 500,000 pre-consolidation shares of Common
Stock from the Company, a promissory note in the principal amount of $250,000
and a promissory note in the principal amount of $100,000.

         As of the date of this Quarterly Report, the Company has received: (i)
the share certificate issued to AuRIC representing 1,000,000 shares of Common
Stock, which has been returned to the Company and cancelled; (ii) the share
certificate issued to Geneva representing 500,000 shares of Common Stock, which
has been returned to the Company and cancelled; (iii) the promissory note in the
principal amount of $250,000 payable by the Company to AuRIC, which has been
cancelled; (iv) the promissory note in the principal amount of $250,000 payable
by the Company to Geneva, which has been cancelled; and (v) the promissory note
in the principal amount of $100,000 payable by the Company to Geneva, which has
been cancelled.

         Geneva, IGCO, INGC and other parties also received an aggregate of
$808,000 in settlement proceeds. An aggregate in excess of approximately
$2,000,000 was incurred as legal fees and associated direct costs relating to
the litigation. Of the $808,000 in settlement proceeds, $345,000 was paid for
outstanding amounts due and owing to legal counsel relating to the litigation,
$10,000 was paid to GDSA, and the remaining $453,000 was paid to Tristar to
provide a partial recovery in excess of $900,000 paid by Tristar pursuant to the
provisions of the Funds Sharing Agreement.

         At the time the respective settlement agreements were entered into,
after incurring in excess of $2,000,000 in legal fees and associated direct
costs relating to the litigation, management of IGCO estimated that future
litigation costs to continue through the trial stage could have reached an
additional $1,000,000, with no guarantee of either outcome or award. Management
of IGCO further believed that if the litigation proceeded to trial, any positive
future monetary award in favor of IGCO and INGC could have been subjected to a
lengthy appeals process and further legal costs. While Dames & Moore, currently
a subsidiary of URS Corporation, has approximately $2 billion in annual revenues
representing a formidable resource for future legal expenses, IGCO has not
generated revenues and has no liquid assets to commit to such significant
estimated future expenses associated with ongoing litigation. Management of IGCO
believes, therefore, that settlement of the litigation and execution of the
respective settlement agreements was in the best interests of IGCO, the Company
and respective shareholders.

                                       20
<PAGE>

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

         In conjunction with the Dames & Moore Settlement Agreement, certain
stock certificates evidencing an aggregate of 1,500,000 pre-consolidation shares
of Common Stock were returned to the Company and cancelled. Aggregate issued and
outstanding shares of Common Stock were reduced by 375,000 (taking into effect
the reverse stock split of 4 for 1 shares on February 13, 2001) when the stock
certificates were cancelled and the shares returned to treasury.

         On December 27, 2001, the board of directors of the Company approved
and authorized the execution of a settlement agreement between the Company and
ICI (the "Settlement Agreement"). Pursuant to the terms of the Settlement
Agreement, the Company issued 1,000,000 shares of its Common Stock at
approximately $0.15 per share for an aggregate consideration of $150,000 as
payment and partial settlement of an aggregate principal of $164,103 plus
$18,034 in accrued interest due and owing ICI.

         As of the date of this Quarterly Report, there are 15,213,405 shares of
Common Stock issued and outstanding. The following table sets forth the name and
address, as of the date of this Quarterly 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.

--------------------------------------------------------------------------------
Title of Class    Name and Address of        Amount and Nature     Percent of
                   Beneficial Owner              of Class             Class
--------------------------------------------------------------------------------

Common Stock      Alexander W. Cox               4,323,300            28.42%
                  428 - 755 Burrard Street
                  Vancouver, British Columbia
                  Canada V6Z 1X6

Common Stock      Newport Capital Corp.            934,975             6.16%
                  P.O. Box W-960
                  St. Johns, Antigua

Common Stock      Pacific Rim Financial, Inc.    1,133,300             7.45%
                  60 Market Square
                  P.O. Box 364
                  Belize City, Belize

Common Stock      Calista Capital Corp.            916,700             6.03%
                  P.O. Box W-961
                  St. Johns, Antigua

Common Stock      Investor Communications        1,375,000             9.04%
                  International, Inc.
                  435 Martin Street
                  Suite 2000
                  Blaine, Washington 98230

Common Stock      All officers and directors         5,000            .003%
                  as a group (3 persons)
--------------------------------------------------------------------------------

                                       21
<PAGE>

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

         No report required.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         No report required.

ITEM 5. OTHER INFORMATION

         No report required.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

         No report required.

                                       22
<PAGE>

SIGNATURES

     In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                            VEGA-ATLANTIC CORPORATION

Dated: February 14, 2002                     By:  /s/  Grant Atkins
                                            ---------------------------------
                                             Grant Atkins, President


Dated: February 14, 2002                    By:  /s/  Herb Ackerman
                                            ----------------------------------
                                             Herb Ackerman, Secretary


                                       23