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, 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 August 11, 2001
-------                                     ------------------------------------

Common Stock, $.00001 par value             14,588,405

Transitional Small Business Disclosure Format (check one)

         Yes          No  X
            -----       -----
<PAGE>


                            VEGA-ATLANTIC CORPORATION
                         (An Exploration Stage Company)


PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS                                            3

         CONSOLIDATED BALANCE SHEETS                                     3

         INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS                   4

         INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS                   5

         NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS            6 to 10

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION       11

PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS                                               20

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS                       23

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES                                 23

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS             23

ITEM 5.  OTHER INFORMATION                                               24

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K                                24

SIGNATURES                                                               24


                                       2

<PAGE>
<TABLE>
<CAPTION>



                                                     VEGA-ATLANTIC CORPORATION

                                                  (An Exploration Stage Company)

                                                    CONSOLIDATED BALANCE SHEETS




                                                                                                 June 30, 2001    March 31, 2001
--------------------------------------------------------------------------------------------------------------------------------
                                                                                                   (Unaudited)
                                                             ASSETS

CURRENT ASSETS
   <S>                                                                                            <C>               <C>
   Cash                                                                                           $      2,063      $      1,442
   Accounts receivable                                                                                                     1,500
--------------------------------------------------------------------------------------------------------------------------------

                                                                                                  $      2,063      $      2,942
================================================================================================================================


                                               LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
   Accounts payable and accrued liabilities                                                       $    154,262      $    163,336
   Advances from related parties (Note 5)                                                              188,153           145,286
   Notes payable - Technology sublicense (Note 4)                                                      600,000           600,000
   Directors' fees payable                                                                              65,766            61,267
   Accrued interest payable                                                                             66,796            56,650
--------------------------------------------------------------------------------------------------------------------------------

                                                                                                     1,074,977         1,026,539
--------------------------------------------------------------------------------------------------------------------------------

STOCKHOLDERS' EQUITY (DEFICIT) (Note 5)
   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
      14,588,405 shares issued and outstanding                                                             344               344
   Additional paid-in capital                                                                        9,217,581         9,217,581
   Deficit accumulated during the exploration stage                                                (10,290,839)      (10,241,522)
--------------------------------------------------------------------------------------------------------------------------------

   Total stockholders' equity (capital deficiency)                                                  (1,072,914)       (1,023,597)
--------------------------------------------------------------------------------------------------------------------------------

                                                                                                  $      2,063      $      2,942
================================================================================================================================


CONTINGENCIES  (Notes 1 and 7)


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

                                                             3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>


                                                      VEGA-ATLANTIC CORPORATION

                                                   (An Exploration Stage Company)

                                            INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS

                                                             (Unaudited)


                                                                                                                       December 3,
                                                                                   Three months     Three months              1997
                                                                                 ended June 30,   ended June 30,    (inception) to
                                                                                          2001             2000     June 30, 2001
----------------------------------------------------------------------------------------------------------------------------------

EXPLORATION EXPENSES
   <S>                                                                                  <C>            <C>             <C>
   Joint venture acquisition costs                                                      $    --        $ 928,635       $ 1,278,439
   Claims staking and exploration                                                            --             --             112,384
   Research and development                                                                  --             --             783,182
----------------------------------------------------------------------------------------------------------------------------------

   Total exploration expenses                                                                --          928,635         2,174,005
----------------------------------------------------------------------------------------------------------------------------------

ADMINISTRATIVE EXPENSES
   General and administrative                                                            61,029          256,808         3,305,620
   Professional fees                                                                     23,643           61,100           263,291
   Directors' fees                                                                        4,500            3,000            54,000
   Interest expense                                                                      10,145           16,965           206,697
   Stock-based compensation                                                                --               --             262,247
   Gain on sale of joint venture interest                                              (50,000)             --             (69,318)
   Loss on settlement of convertible promissory notes                                      --               --           1,754,917
   Consulting fees                                                                         --             27,960           132,751
----------------------------------------------------------------------------------------------------------------------------------

   Total administrative expenses                                                         49,317          365,833         5,910,205
----------------------------------------------------------------------------------------------------------------------------------

LOSS FROM CONTINUING OPERATIONS                                                          49,317      (1,294,468)         8,084,210

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

NET LOSS FOR THE PERIOD                                                               $  49,317       $1,294,468      $ 10,290,839
==================================================================================================================================




LOSS PER SHARE - basic and fully diluted                                                $ 0.003          $ 0.062
================================================================================================================

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING                                           14,588,405       20,792,978
================================================================================================================


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

                                                              4
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                                                   VEGA-ATLANTIC CORPORATION

                                                 (An Exploration Stage Company)

                                          INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                           (Unaudited)

                                                                                                                   December 3,
                                                                              Three months      Three months              1997
                                                                            ended June 30,    ended June 30,    (inception) to
                                                                                     2001              2000     June 30, 2001
-------------------------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM OPERATING ACTIVITIES
  <S>                                                                        <C>                <C>               <C>
  Net loss for the period                                                    $     (49,317)     $  (1,294,468)    $ (10,290,839)
  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                                         --               15,000            84,992
  - impairment of interest in mineral properties                                      --              672,000         1,303,611
  - stock-based compensation                                                          --                 --             262,247
  - loss on settlement of convertible promissory note                                 --                 --           1,754,917
  - minority interest                                                                 --              (29,809)             --
  - net changes in assets and liabilities                                           67,121             58,189           479,275
-------------------------------------------------------------------------------------------------------------------------------

CASH USED IN OPERATING ACTIVITIES                                                   17,804           (579,088)       (3,923,115)
-------------------------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
  Advances from (repayments to) affiliates - net                                   (17,183)           246,050         1,191,723
  Interest paid                                                                       --                 --              (1,433)
  Convertible notes                                                                   --                 --              99,500
  Sale of common stock                                                                --                 --           3,357,000
-------------------------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES                                               (17,183)           246,050         4,646,790
-------------------------------------------------------------------------------------------------------------------------------


CASH FLOWS FROM INVESTING ACTIVITIES
  Interest in mineral properties                                                      --                 --            (622,567)
  Purchase of subsidiaries, net of cash acquired                                      --                 --             (99,045)
-------------------------------------------------------------------------------------------------------------------------------

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


INCREASE (DECREASE) IN CASH                                                            621             41,433             2,063

CASH, BEGINNING OF PERIOD                                                            1,442            100,328              --
------------------------------------------------------------------------------------------------------------------------------

CASH, END OF PERIOD                                                          $       2,063      $     141,761     $       2,063
===============================================================================================================================


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

                                                          5
</TABLE>

<PAGE>


                           VEGA-ATLANTIC CORPORATION
                         (An Exploration Stage Company)
             Notes to the Interim Consolidated Financial Statements
                                 June 30, 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. During the current year the
Company acquired interests in certain co-operative joint ventures to develop
mineral properties in the People's Republic of China. Due to the inability to
raise sufficient capital to meet funding commitments the Company has either sold
or disposed of certain of its interests in the joint ventures. Refer to Note 3.

At June 30, 2001, the Company had a working capital deficiency of $1,072,914 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 three
months ended June 30, 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 year ended June 30, 2001 include
the accounts of the Company and its 100% owned subsidiary, Polar Explorations
Ltd. All significant intercompany transactions and account balances have been
eliminated.

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 has contractual rights to co-operative joint venture agreements with
Chinese partners. All acquisition costs, capital contributions and exploration
costs are expensed as incurred until such time as proven economically
recoverable reserves are established.

                                       6

<PAGE>


                           VEGA-ATLANTIC CORPORATION
                         (An Exploration Stage Company)
             Notes to the Interim Consolidated Financial Statements
                                 June 30, 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 net
loss by the weighted average number of common shares outstanding for the period.
There are no dilutive securities outstanding.

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.

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS
133"), which establishes accounting and reporting standards for derivative
instruments, including instruments embedded in other contracts, and hedging
activities. It requires that an entity recognize all derivatives; as either
assets or liabilities and measure those instruments at fair value. SFAS 133 is
effective for financial statements for fiscal years beginning after June 15,
1999. The Company 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.

                                        7

<PAGE>


                           VEGA-ATLANTIC CORPORATION
                         (An Exploration Stage Company)
             Notes to the Interim Consolidated Financial Statements
                                 June 30, 2001
--------------------------------------------------------------------------------
                                  (Unaudited)


NOTE 3:  INTEREST IN MINERAL PROPERTIES (con't)

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.

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 the issuance of 1,600,000
pre-consolidation restricted shares in the capital of the Company valued at
$672,000. At the date of acquisition, Tun 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 post-split
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. Golden Thunder and Tun Resources have filed a statement of defense.
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 has 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 its 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.

                                       8

<PAGE>


                           VEGA-ATLANTIC CORPORATION
                         (An Exploration Stage Company)
             Notes to the Interim Consolidated Financial Statements
                                 June 30, 2001
--------------------------------------------------------------------------------
                                  (Unaudited)


NOTE 4:  NOTES PAYABLE

Pursuant to the Technology Sub-license agreement with Geneva Resources, Inc.,
the Company issued promissory notes to both Geneva and AuRIC in the amount of
$250,000 to each company. These are 3% interest bearing notes and are payable
upon the transfer of the technology. Pursuant to the agreement, the company has
issued a convertible promissory note to Geneva in the amount of $100,000 that is
convertible to 500,000 restricted common shares upon demand, and bears interest
at the rate of 8% per annum and issued 1,000,000 restricted common shares to
AuRIC. These promissory notes become due and payable upon the transfer of the
technology. Transfer of the technology or any settlement thereto will be
contingent on the outcome of the lawsuit described in Note 6.


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 at $1.00 per share.

All options granted expire 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 June 30, 2001, 487,500 share options with an exercise price of $1.00 per
share of common stock had been granted, no options had been exercised or
forfeited, and no options had expired.


NOTE 6:  CONTINGENCIES

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 are
recovered by the lawsuit initiated by International Gold Corporation and Geneva,
the Company will 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 are recovered. The Company has made this assignment to Geneva. On
September 27, 1999, Intergold Corporation ("IGCO"), its wholly owned subsidiary,
International Gold Corporation ("IGC"), and Geneva initiated a legal complaint
against AuRIC Metallurgical Laboratories, LLC ("AuRIC"), Dames & Moore, Ahmet
Altinay, General Manager of AuRIC, and Richard Daniele, Chief Metallurgist for
Dames & Moore. The damages sought by IGCO/IGC/Geneva are to be determined in
court.

The damages incurred stem 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 alleges 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.

                                       9

<PAGE>


                           VEGA-ATLANTIC CORPORATION
                         (An Exploration Stage Company)
             Notes to the Interim Consolidated Financial Statements
                                 June 30, 2001
--------------------------------------------------------------------------------
                                  (Unaudited)


NOTE 7: RELATED PARTY TRANSACTIONS

During the period ended June 30, 2001 the Company incurred directors fees of
$4,500 to two directors. At June 30, 2001 $65,766 is owing to directors and
former directors for accrued fees.

During the period ended June 30, 2001 the Company incurred managerial,
administrative and investor relation services of $60,050 to Investor
Communications International, Inc. ("ICI") under a consulting services and
management agreement dated April 1, 1999. A director of the Company provides
consulting services to ICI and was paid approximately US$3,400 during the
period ended June 30, 2001. At June 30, 2001 ICI had made net advances of $3,317
and $188,153 plus $7,749 accrued interest is owing to ICI.


NOTE 8: INCOME TAXES

As at June 30, 2001 the Company had net operating loss carryforwards; however,
due to the uncertainty of realization the Company has provided a full valuation
allowance for the deferred tax assets resulting from these loss carryforwards.


                                       10

<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", is primarily
engaged in the business of minerals exploration and development concentrating on
gold, silver and zinc within the United States and worldwide. The Company also
trades on the Frankfurt Stock Exchange under the symbol "VGA" (WKN: 936303).

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 was
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. The provisions of the Acquisition Agreement, however,
required that the Company would provide certain amounts of funding by certain

                                       11

<PAGE>


dates with an aggregate of amount of $1,180,000 due by February 15, 2001. During
the past fiscal year, the Company has been unable to timely provide certain
funding amounts by such dates and, therefore, has received extensions pursuant
to addendums to the Acquisition Agreement. The prior addendum required that the
Company provide the required aggregate amount of $1,180,000 by February 15,
2001.

     On December 12, 2000, 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. On or about the same date, the Company
presented the letter of offer at a meeting of the board of directors of Golden
Thunder who were all in attendance. In subsequent meetings, the Company had
obtained the agreement of three of the four board members of Golden Thunder, who
asked the Company to increase its revised offer to $113,750.

     On February 9, 2001, the Company provided an amended letter of offer
regarding the revised offer (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 Agrement 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. Therefore, Tun Resources is no longer considered a subsidiary of the
Company and, effective in the fourth quarter of its fiscal year ended March 31,
2001, the Company has not been consolidating the financial records of Tun
Resources into its financial statements.

     In addition, 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. See "Part II. Item 1. Legal Proceedings" for further disclosure.

     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 as follows.

     Yuntong Sino Foreign Joint Venture

     On August 8, 1994, Tun Resources and Yunnan Province Dianxi Geological
Engineering Exploration Development Company entered into the Yuntong Sino
Foreign JV agreement, which has the rights to four separate gold exploration and
mining development properties (the "Yuntong Joint Venture"). The agreement was
amended on September 18, 1999 and February 12, 2000, whereby Tun Resources
agreed to provide additional investment capital in consideration for an increase
in its interest in the Yuntong Joint Venture, and additional properties were
added to the Yuntong Joint Venture. Tun Resources now has the right to acquire a
90% interest for a total investment of $1,940,000, of which $1,060,000 has been
contributed to date.

                                       12

<PAGE>


     The Yuntong Joint Venture consists of gold concessions comprising
approximately 30 square kilometers. As of the date of this Quarterly Report, the
Yuntong Joint Venture projects consist of (i) the Shangzia gold deposit ("SZ
Gold"); (ii) the Bianfushan gold deposit ("BF Gold"); (iii) the Lannitang gold
deposit ("LNT Gold"); and (iv) the Daqiaoqing gold deposit ("DQQ Gold"). During
the fiscal year ended March 31, 2001, the various projects have undergone due
diligence and analysis by the Company of mining potential based upon receipt of
detailed geological reports, including column leach testing, concerning the gold
deposits on certain properties. Small scale mining operations have been
developed on the SZ Gold project.

     The Lutong Sino Foreign Cooperative Joint Venture

     Tun Resources owns an approximate eighty percent (80%) joint venture
interest in the Lutong Sino Foreign Cooperative Joint Venture, which consists of
a gold exploration concession comprising approximately 100 square kilometers in
the same province (the "Lutong Joint Venture"). Based upon current geological
reports, no defined reserves have been identified. Tun Resources has decided to
end funding obligations that are required for this joint venture due to negative
exploration results. As a result, Tun Resources is planning to organize the
current dissolution of the Lutong Sino Foreign Cooperative 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 may be subject to funding availability.

     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 Lemachang Silver Project

     On March 27, 2000, the Company entered into an agreement with the No. 1
Geological Brigade of Yunnan Bureau of Geology and Mineral Resources of Qujing
City, Yunnan Province, China, whereby the Company would have the right to
acquire a majority interest in the Lemachang silver mine located in the Ludian

                                        13

<PAGE>


County Seat, Yunnan Province. On July 26, 2000, the Company completed
negotiations and executed a joint venture agreement with the No. 1 Geological
Brigade of Yunnan Bureau of Geology and Mineral Resources of Qujing City (the
"Lemachang Agreement").

     The Company formed Alaskan Explorations Corp., a Turks & Caicos corporation
and a wholly-owned subsidiary of the Company ("Alaskan"), to act as the joint
venture partner on behalf of the Company.

     Pursuant to the terms of the Lemachang Agreement, the Company was to (i)
form a new joint venture company and provide funding in the amount of $4,000,000
to accelerate the drilling on the Lemachang silver mine to increase production,
expand resources and improve overall silver recovery, (ii) undertake feasibility
studies to ultimately increase production and output to an annual target of
1,000,000 ounces of metallic silver, and (iii) receive an approximate 85%
interest in the silver mine and deposit areas. Pursuant to the terms of the
Lemachang Agreement, the Company was to further provide an additional $4,000,000
over a five-year period from its portion of operating profits to repay existing
silver project capital loans currently outstanding to the Chinese banks.

     On May 11, 2001, the board of directors of the Company determined that the
Company was unable to fund its obligations under the Lemachang Agreement and,
therefore, it was in the best interests of the Company and its shareholders to
sell its equity interest in Alaskan. Therefore, the Company and a corporation
organized under the laws of the United Kingdom (the "Purchaser") entered into an
agreement dated May 11, 2001 (the "Lemachang Purchase Agreement"), which
generally provided for the sale by the Company of Alaskan, its wholly-owned
subsidiary. Pursuant to the general terms of the Lemachang Purchase Agreement,
the Purchaser (i) acquired all of the issued and outstanding shares of common
stock of Alaskan, and (ii) paid $50,000.00 to the Company.

     As of the date of this Quarterly Report and as a result of consummation of
the Lemachang Purchase Agreement, the Company no longer is able to control or
manage, directly or indirectly, the exploration and development directives and
methods concerning exploration of the Lemachang silver mine.

The Baotong Zinc and Lead Project

     On June 8, 2000, the Company entered into an agreement with the No. 4
Geological Brigade of Yunnan Bureau of Geological Exploration and Development to
cooperatively explore two separate zinc and lead deposits located in the
southwestern Yunnan Province. On July 19, 2000, the Company completed its
negotiations and executed a joint venture agreement (the "Baotong Agreement").
The Company formed Epicon Resources Group, Ltd., a Belize corporation and a
wholly-owned subsidiary of the Company ("Epicon"), to act as the joint venture
partner on behalf of the Company.

     Pursuant to the terms of the Baotong Agreement, the Company was to (i) form
a limited liability joint venture company (the "Baotong Mineral Exploration and
Development Co."), (ii) acquire an approximate 70% interest in the Baotong
Mineral Exploration and Development Co., (iii) conduct limited risk exploration
and development of the two possible zinc and lead deposits, and (iv) have rights
to acquire up to an 85% interest in the Baotong Mineral Exploration and
Development Co. In accordance with the terms of the Baotong Agreement, the
Company was also required to provide up to $1,000,000 over a two year period for
exploration, drilling and tunneling of the possible zinc and lead deposits and
conduct further risk exploration.

                                        14

<PAGE>


     On March 15, 2001, the board of directors of the Company determined that
the Company was unable to fund its obligations under the Baotong Agreement and,
therefore, it was in the best interests of the Company and its shareholders to
sell its equity interest in Epicon. Therefore, the Company and a corporation
organized under the laws of the United Kingdom (the "Purchaser") entered into an
agreement dated March 23, 2001 (the "Baotong Purchase Agreement"), which
generally provided, upon completion and satisfaction of technical evaluation and
due diligence, for the sale by the Company of Epicon, its wholly-owned
subsidiary.

     The Company and the Purchaser completed their respective technical
evaluation and due diligence and consummated the Baotong Purchase Agreement.
Pursuant to the terms of the Baotong Purchase Agreement, the Purchaser (i)
acquired all of the issued and outstanding shares of common stock of Epicon,
(ii) paid $1,500.00 to the Company, (iii) assumed the Company's funding
commitment under the Baotong Agreement, and (iv) assumed certain other
contractual debts and liabilities relating to the Baotong Zinc and Lead project.

     As a result of consummation of the Baotong Purchase Agreement, the Company
no longer holds its joint venture interest in the Baotong Mineral Exploration
and Development Co. and, therefore, is unable to control or manage, directly or
indirectly, the exploration and development directives and methods concerning
exploration of the two separate zinc and lead deposits.

The Vega Property

     On March 28, 1999, the Company entered into a joint venture agreement with
Geneva Resources, Inc., a Nevada corporation ("Geneva") pertaining to the joint
exploration of gold and silver on 213 unpatented lode mining claims in Camus
County, Idaho (the "Vega Property") and (the "Joint Venture Agreement"). Under
the terms of the Joint Venture Agreement, the Company issued 500,000 shares of
its restricted Common Stock to Geneva in exchange for the purchase of a future
profit sharing interest in profits. Subsequent to the Joint Venture Agreement,
Geneva transferred title to the mining claims located on the Vega Property via
quitclaim deed to the Company.

     Pursuant to the Joint Venture Agreement, the Company was to conduct any
work programs involving exploration of the mining claims on the Vega Property in
amounts commensurate with the adopted minimum annual budget totals mutually
agreed upon between the Company and Geneva. Management of the Company was to be
solely responsible for compilation of the annual budget. Furthermore, in
accordance with the terms of the Joint Venture Agreement, the Company was to
receive eighty percent (80%) of all net profits realized from the joint venture
until its invested capital is repaid, and Geneva was to receive twenty percent
(20%) of all net profits. After the invested capital of the Company had been
repatriated, the Company was to then receive fifty-one percent (51%) of the net
profits realized from the joint venture and Geneva was to retain forty-nine
percent (49%) of the net profits realized from the joint venture. Under the
terms of the Joint Venture Agreement, Geneva was not responsible for payment of
any costs of obligations associated with the Vega Property.

     On March 18, 1999, Intergold Corporation, a Nevada corporation ("IGCO") and
its wholly-owned subsidiary, International Gold Corporation, a Nevada
corporation ("INGC") entered into an agreement for services ("Agreement for
Services") with AuRIC Metallurgical Laboratories, LLC., of Salt Lake City, Utah
("AuRIC"). Pursuant to the terms of the Agreement for Services, AuRIC agreed to

                                        15

<PAGE>


perform certain services, including the development of proprietary technology
and know-how relating to fire and chemical assay analysis techniques and
metallurgical ore extraction procedures developed specifically for the
exploration of properties of IGCO. Dames & Moore subsequently verified the fire
and chemical assay techniques and procedures developed by AuRIC, their
repeatability, and confirmed preliminary metallurgical recovery testing. AuRIC
and Geneva entered into a technology license agreement dated March 17, 1999 (the
"Technology License Agreement"), whereby AuRIC agreed to supply the proprietary
technology to Geneva and grant to Geneva the right to sub-license the
proprietary technology to the Company for use on the Vega Property.

     On March 18, 1999, the Company entered into a technology sub-license
agreement with Geneva (the "Sub-License Agreement"). Pursuant to the Sub-License
Agreement, the Company acquired from Geneva a sub-license to utilize proprietary
fire and chemical assay technology and related precious metals recovery
processes, developed by AuRIC to carry out assay testing and chemical leach
analysis of core samples to be derived from any drilling on the Vega Property.

     On September 27, 1999, however, INGC, on behalf of IGCO, and Geneva
initialized legal proceedings against AuRIC by filing a complaint in the
District Court of the Third Judicial District for Salt Lake City, State of Utah,
alleging (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 THE COMPANY, Geneva and Dames &
Moore; (ii) breach of the implied covenant of good faith and fair dealing; (iii)
negligent misrepresentation; (iv) specific performance; (v) non-disclosure
injunction; (vi) failure by AuRIC to repay advances; and (vii) quantum
meruit/unjust enrichment. INGC, on behalf of IGCO, also named Dames & Moore in
the legal proceeding in a declaratory relief cause of action.

     The proprietary technology forms 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 allege 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. Management deems the
proprietary technology crucial with respect to successful exploration of the
Vega Property. Management, therefore, has suspended exploration of the Vega
Property indefinitely until resolution of the legal proceedings. Further
evidence provided in the legal proceedings form management's opinion that there
are no commercial quantities of gold or silver on the Vega Property. As a
result, the Company holds no claims relating to the Joint Venture Agreement or
the Vega Property. See "Part II. Item 1. Legal Proceedings" for additional
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.

                                        16

<PAGE>


RESULTS OF OPERATION

Three-Month Period Ended June 30, 2001 Compared to Three-Month Period Ended June
30, 2000

     The Company's net losses for the three-month period ended June 30, 2001
were approximately $49,317 compared to a net loss of approximately $1,294,468
for the three-month period ended June 30, 2000. During both three-month periods
ended June 30, 2001 and 2000, respectively, the Company recorded no income.

     During the three-month period ended June 30, 2001, the Company recorded
operating expenses of $49,317 compared to $1,294,468 of operating expenses
recorded during the three-month period ended June 30, 2000. During the
three-month period ended June 30, 2001, the Company did not incur any
exploration expenses as compared to exploration expenses of $928,635 incurred
during the three-month period ended June 30, 2000. The decrease in exploration
expenses during the three-month period ended June 30, 2001 was primarily due to
the non-payment by the Company to Tun Resources of any of its funding
commitments as compared to the payments made by the Company during the
three-month period ended June 30, 2000 pertaining to the acquisition costs of
Tun Resources and related joint venture capital contributions.

     During the three-month period ended June 30, 2001, the Company incurred
administrative expenses of $49,317 as compared to administrative expenses of
$365,833 incurred during the three-month period ended June 30, 2000 (a decrease
of $316,516 or 642%). Administrative expenses generally include corporate
overhead, administrative salaries, consulting costs and professional fees.

     Although the Company actually incurred $99,317 of administrative expenses
during the three-month period ended June 30, 2001 consisting of (i) $61,029 in
general and administrative expenses; (ii) $23,643 in professional fees; (iii)
$4,500 in directors' fees; and (iv) $10,145 in interest expense, such aggregate
amount of administrative expenses was offset by the realization of a gain of
$50,000 due to the sale of its interest in the Lemachang silver project. The
decrease in administrative expenses during the three-month period ended June 30,
2001 was also due to a decrease in overhead and administration expenses to
$61,029 compared to $256,808 incurred during the three-month period ended June
30, 2000 (which related to the scale and scope of overall business activity
during such period).

     Of the $61,029 incurred as general and administrative expenses, the Company
incurred approximately $60,050 to Investor Communications International, Inc.
("ICI") for amounts due and owing for managerial, administrative and financial
services rendered and/or advances made by ICI which, as of June 30, 2001, such
total advances were $188,153. During the three-month period ended June 30, 2001,
the Company paid $12,783 to ICI towards an aggregate of $200,936 due and owing.
One of the directors of the Company is contracted by ICI and is part of the
management team provided by ICI to the Company.

     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) property exploration management, including administration of

                                        17

<PAGE>


metallurgical development, metallurgical liaison, BLM liaison, engineering
company liaison, drilling administration, geologist liaison, mapping, survey and
catalogue, geostatistical liaison, environmental research, geological reports
compilation and due diligence efforts, (v) 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 (vi) 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.

     Although the Company has not and currently is not in the operational stage
of generating revenues, the services provided by ICI increased during fiscal
years ended March 31, 2001 and 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
the Lemachang joint venture. Moreover, with commencement of the legal
proceedings against Tun Resources and the continuing 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 decrease in net loss during the three-month period
ended June 30, 2001 as compared to the three-month period ended June 30, 2000 is
attributable primarily to the decreased exploration expenses and general and
administrative expenses incurred during the three-month period ended June 30,
2001. The Company's net losses during the three-month period ended June 30, 2001
were approximately ($49,317) or ($0.003) per common share compared to a net loss
of approximately ($1,294,468) or ($0.062) per common share during the
three-month period ended June 30, 2000. The weighted average number of diluted
shares outstanding were 14,588,405 for the three-month period ended June 30,
2001 (which have been restated to take into account the reverse stock split of 4
to 1) compared to 20,792,978 for the three-month period ended June 30, 2000.

LIQUIDITY AND CAPITAL RESOURCES

For Three-Month Period Ended June 30, 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.

     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

                                       18

<PAGE>


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 four months based on its
ability to successfully negotiate with Tun Resources regarding the Letter Offer
and to obtain advances from certain investors and related investors, if
necessary.

     As of June 30, 2001, the Company's current assets were $2,063 and its
current liabilities were $1,074,977. As of June 30, 2001, the current
liabilities exceeded current assets by $1,072,914. As of 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 assets in the three-month period ended June 30,
2001 from fiscal year ended March 31, 2001 was due primarily to a decrease in
accounts receivable. The increase in current liabilities in the three-month
period ended June 30, 2001 from fiscal year ended March 31, 2001 was due
primarily to an increase in advances from related parties, directors' fees
payable and accrued interest payable.

     Stockholders' deficit increased from ($1,023,597) for fiscal year ended
March 31, 2000 to ($1,072,914) for the three-month period ended June 30, 2001.

MATERIAL COMMITMENTS

     A significant and estimated commitment for the Company for fiscal year
April 1, 2001 through March 31, 2002 pertaining to contractual arrangements and
work orders in an amount not greater than $900,000 to ICI. The contractual
arrangement between the Company and ICI regarding compensation for services
rendered for the day-to-day operations of the Company are based on a fee not to
exceed $75,000 per month based upon the performance of actual services rendered
by ICI on an ongoing basis commensurate with the needs and requirements of VATL
for that particular month, including services related to exploration,
administrative, public company operations, financial and funding services, and
maintenance.

     A significant and estimated commitment for the Company for fiscal year
April 1, 2001 through March 31, 2002 are the promissory notes issued pursuant to
the Sub-License Agreement. Pursuant to the terms and provisions of the
Sub-License Agreement, the Company issued promissory notes to both Geneva and
AuRIC in the amount of $250,000, respectively. These are 3% interest bearing
notes and are payable upon the transfer of the technology. However, management
believes that the technology pursuant to the Sub-license Agreement will never be
transferred, in which case, the INGC/Geneva legal proceedings may create a
situation, if damages are awarded, whereby the outcome of said legal proceedings
may lead to future possible awards for damages to the Company.

     A significant and estimated commitment for the Company for fiscal year
April 1, 2001 through March 31, 2002 is the promissory note in the amount of
$100,000 issued to Geneva pursuant to the Sub-License Agreement. The promissory

                                       19

<PAGE>


note is convertible into 500,000 shares of the Company's restricted Common Stock
at the option of Geneva after October 15, 1999 at the rate of $0.20 per share.
There are no conditions that will prevent or trigger the conversion of the
promissory note by Geneva into shares of Common Stock nor is there any
expiration date. As of the date of this Quarterly Report, the Company has not
made any payments of either principal or interest on the promissory note, nor
has Geneva exercised its conversion rights.


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
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 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 $1,800,000 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 Tun
Resources.

Vega Property Litigation

     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.

     INGC and AuRIC entered into the Agreement for Services whereby AuRIC agreed
to perform certain services, including the development of proprietary technology
and know-how relating to fire and chemical assay analysis techniques and
metallurgical ore extraction procedures developed specifically for the Blackhawk
Property. Dames & Moore verified the fire and chemical assay techniques and
procedures developed by AuRIC and their repeatability, and metallurgical
recovery procedures. IGCO subsequently entered into multiple work orders with

                                       20

<PAGE>


Dames & Moore relating to a variety of services. Geneva and AuRIC entered into
the License Agreement whereby AuRIC agreed to (i) supply the proprietary
technology to Geneva, (ii) grant to Geneva a license to use such technology on
its claims located adjacent to the Blackhawk Property and the right to
sub-license the proprietary technology to IGCO for use on the Blackhawk
Property. The Company and Geneva entered into the Sub-License Agreement whereby
the Company acquired from Geneva a sub-license to utilize AuRIC's proprietary
information, assay technology and related precious metals recovery processes on
the Vega Property.

     On September 27, 1999, Geneva and INGC, on behalf of IGCO, initiated legal
proceedings against AuRIC for: (i) multiple breaches of contract relating to the
Agreement for Services and the License Agreement, respectively, including, but
not limited to, establishment and facilitation of the proprietary technology and
fire assay procedures developed by AuRIC at an independent assay lab and failure
to deliver the proprietary technology and procedures to 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.

     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, are 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.

     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,
breach of contract against Pierce, defamation against IGCO, INCG, Geneva and
Pierce, injuctions against IGCO, INCG, Geneva and Pierce, amongst other claims.
In their defamation claim against IGCO, the plaintiffs seek 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 seek attorney's fees and
costs.

     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 forms 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, allege 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.

                                       21

<PAGE>


     Geneva and INGC subsequently obtained an order from the District Court to
grant its Motion to Compel. The Order requires 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, have
obtained an expert opinion as to the validity or 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. All dispositive motions will
be head by September 14, 2001 and discovery must be completed by October 5,
2001. The court has denied Geneva's and INGC's motion for leave to amend the
Complaint to assert an action against Dames & Moore for fraud. Geneva and INGC
are considering the possibility of an appeal. As of the date of this Quarterly
Report, trial preparation and discovery are continuing.

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

     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 seeks foreclosure of a lien against IGCO and/or
INGC which purportedly arose in favor of Dames & Moore. INGC has dropped the
bulk of its mining claims, except for a small group related to this litigation,
as IGCO and INGC believe that the mining claims contain no commercial quantifies
of gold and silver. Dames & Moore seeks to have the mining claims sold to
compensate Dames & Moore for its services, materials and equipment. Dames &
Moore also seeks its fees and costs incurred in enforcing its claimed lien. IGCO
and INGC filed an answer on or about August 8, 2000. IGCO intends to vigorously
contest the claims and allegations of Dames & Moore.

     Due to the Company's belief that the Vega Property's unpatented lode mining
claims do not contain commercial quantities of gold or silver and that
management deems the proprietary technology purported to be developed by AuRIC
and verified by Dames & Moore crucial with respect to successful exploration of
the Vega Property, management has suspended exploration of the Vega Property. As
a result, the Company holds no lode mining claims relating to the Joint Venture
Agreement or the Vega Property. Management of the Company believes the legal
proceedings will prove that the alleged proprietary technology is invalid.

     If the proprietary technology is proven to be invalid and not transferable,
and INGC/Geneva are not successful in the outcome of the litigation and damages
are not awarded, the Company may not be able to recover its potential losses and
expenses incurred due to the breach of the Sub-License Agreement by Geneva.
However, if the proprietary technology is proven to be invalid and not
transferable, and INGC/Geneva are successful in the outcome of the litigation,
INGC/Geneva may receive damages from AuRIC and Dames & Moore. Geneva's damages
result primarily from its inability to transfer the proprietary technology to

                                       22

<PAGE>


the Company in accordance with the provisions of the Sub-License Agreement.
Management believes that the Company will, under these circumstances, be
entitled to receive a pro-rata portion of the awarded damages for potential
losses incurred due to the breach of the Sub-License Agreement by Geneva.

     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. If damages are recovered in the lawsuit
initiated by Geneva and INGC, on behalf of IGCO, the Company will receive a pro
rata share of such damages relating to its claims and causes of action in
relation to all other claims and causes of action for which damages are
recovered. Thus, Geneva will receive any such pro rata share of the damages
recovered pursuant to the terms and provisions of the Assignment Agreement.
Management believes that VATL will, under these circumstances, be entitled to
receive a pro-rata portion of the awarded damages for potential losses incurred
due to the breach of the Sub-License Agreement by Geneva.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

     No report required.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

     No report required.

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

     Pursuant to a Definitive Proxy Statement dated November 6, 2000, a
shareholders' special meeting was held on December 15, 2000 in which the
shareholders of the Company voted and approved certain proposals as follows:

     (i)  the adoption of an amendment to the Company's Articles of
          Incorporation, as amended, which reduced the number of authorized
          shares of common stock from 500,000,000 shares of common stock to
          100,000,000 shares of common stock (19,224,851 votes for and -0- votes
          against);

     (ii) the authorization of the board of directors of the Company to effect a
          reverse stock split of one-for-four (the "Reverse Stock Split") of the
          Company's outstanding common stock, which the board of directors
          authorized and effectuated in the best interests of the Company and
          its Shareholders (19,229,851 votes for and 1,000 votes against);

     (ii) the election of the following three (3) persons to serve as directors
          of the Company until their successor shall have been elected and
          qualified: Grant Atkins (19,224,851 votes for and -0- votes against),
          John Frederick William Bowles (19,224,851 votes for and -0- votes
          against), and Gary Powers (19,224,851 votes for and -0- votes
          against); and

    (iii) the ratification of the selection of LaBonte & Co. as the independent
          public accountants of the Company for the fiscal year ending March 31,
          2001 (19,224,851 votes for and -0- votes against).

                                       23

<PAGE>


ITEM 5. OTHER INFORMATION

     No report required.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

     (a) Report on Form 8-K filed June 1, 2001.

     (b) Report on Form 8-K filed on April 5, 2001.


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, 2001                      By:  /s/  Grant Atkins
                                                 ------------------------------
                                                      Grant Atkins, President


Dated: August 13, 2001                      By:  /s/  Herb Ackerman
                                                 ------------------------------
                                                      Herb Ackerman, Secretary



                                       24