SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange
Act of 1934.
For the quarterly period ended: June 30th, 2004
[ ] Transition Report Under Section 13 or 15(d) of the Exchange Act.
Commission File Number: 2-90519
VISTA CONTINENTAL CORPORATION
(Exact name of small business issuer as specified in its charter)
Delaware 72-0510027
(State or other jurisdiction (IRS Employer
of incorporation) Identification No.)
6600 W. Charleston Blvd. #118, Las Vegas, NV 89146
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (702)-228-2077
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 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.
[X] Yes [ ] No
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the last practicable date: As of August 10, 2004, the Issuer had
issued and outstanding 45,239,543 shares of common stock $.001.
TABLE OF CONTENTS
Page No.
--------
PART I - FINANCIAL INFORMATION.......................................... 2
Item 1. Financial Statements........................................... 2
Balance Sheets................................................. 2
Statements of Expenses
(three and nine-months ended June 30, 2004 and 2003)........... 3
Statements of Cash Flows
(three and nine-months ended June 30, 2004 and 2003)........... 4
Notes to Financial Statements.................................. 5
Item 2. Management's Discussion And
Plan Of Operations............................................. 8
Item 3. Controls and Procedures........................................ 12
PART II - OTHER INFORMATION............................................. 12
Item 1. Legal Proceedings.............................................. 12
Item 2. Changes in Securities.......................................... 13
Item 3. Defaults Upon Senior Securities................................ 13
Item 4. Submission of Matters to a Vote of Security Holders............ 13
Item 5. Other Information.............................................. 13
Item 6. Exhibits & Reports on Form 8-K................................. 15
SIGNATURES.............................................................. 16
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VISTA CONTINENTAL CORPORATION
(AN EXPLORATION STAGE COMPANY)
BALANCE SHEET
(Unaudited) (Audited)
June 30, 2004 September 30, 2003
------------ ------------
ASSETS
Current assets
Cash $ 48,336 $ 26,419
Prepaid expenses 1,524 3,785
------------ ------------
Total current assets 49,860 30,204
Property and equipment, net 273,505 574,046
Rental properties, net -- 307,595
Mining concessions 99,275 99,275
Deposits 4,575 5,738
------------ ------------
Total assets $ 427,215 $ 1,016,858
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable $ 4,669 $ 201,871
Accrued expenses and other liabilities 179,237 181,907
Loan from related party 633,797 341,355
------------ ------------
Total current liabilities 817,703 725,133
------------ ------------
Total liabilities 817,703 725,133
Minority interest 5,493,821 5,701,077
Stockholders' deficit
Common stock; $.001 par value; 145,000,000 shares
authorized, 45,239,543 shares issued and outstanding 45,239 45,239
Additional paid-in capital 8,349,891 8,349,891
Accumulated deficit (14,279,439) (13,804,482)
------------ ------------
Total stockholders' deficit (5,884,309) (5,409,352)
------------ ------------
Total liabilities and stockholders' deficit $ 427,215 $ 1,016,858
============ ============
See Accompanying Notes to Financial Statements
2
VISTA CONTINENTAL CORPORATION
(AN EXPLORATION STAGE COMPANY)
STATEMENT OF OPERATIONS
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
For the three months For the three months For the nine months For the nine months
ended ended ended ended
June 30, 2004 June 30, 2003 June 30, 2004 June 30, 2003
--------------------------------------------------------------------------------------
Revenue $ -- $ -- $ -- $ --
Operating expenses
Mining exploration expenses 2,739 423,807 35,588 854,310
Depreciation expense 43,172 68,418 201,762 198,236
Loss on disposal of assets -- -- 3,124
General and administrative 207,436 466,134 455,661 1,877,634
--------------------------------------------------------------------------------------
Total operating expenses 253,347 958,359 693,011 2,933,304
--------------------------------------------------------------------------------------
Loss from operations (253,347) (958,359) (693,011) (2,933,304)
Other income (expenses):
Rental property expenses, net (1,250) 12,084 (41,257) 2,907
Other expense -- (430) (3,785) (430)
Interest expense 96 (54,471) (67) (146,607)
Gain on sale of rental property -- 30,870 55,905 30,870
--------------------------------------------------------------------------------------
Total other income (expenses) (1,154) (11,947) 10,796 (113,260)
--------------------------------------------------------------------------------------
Loss before provision for income taxes
and minority interest (254,501) (970,306) (682,215) (3,046,564)
Provision for income taxes -- -- -- --
--------------------------------------------------------------------------------------
Loss before minority interest (254,501) (970,306) (682,215) (3,046,564)
Loss applicable to minority interest 62,553 -- 207,260 92
--------------------------------------------------------------------------------------
Net loss $ (191,948) $ (970,306) $ (474,955) $ (3,046,472)
======================================================================================
Basic and diluted loss per common share $ (0.00) $ (0.02) $ (0.01) $ (0.06)
======================================================================================
Basic and diluted weighted average
common shares outstanding 45,239,543 49,737,621 45,239,543 49,297,057
======================================================================================
See Accompanying Notes to Financial Statements
3
VISTA CONTINENTAL CORPORATION
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited) (Unaudited)
For the nine months For the nine months
ended ended
June 30, 2004 June 30, 2003
----------------------------------------
Cash flows from operating activities:
Net loss $ (474,957) $(3,046,472)
Adjustments to reconcile net loss to
net cash used by operating activities:
Stock based compensation -- 1,145,843
Stock issued in lawsuit settlement -- 42,667
Depreciation 201,762 215,996
Reduction of note payable to shareholder for his share of expenses -- (200,857)
Loss on disposal of assets -- (27,746)
Imputed interest on shareholder loan -- 31,346
Gain on sale of rental properties (202,506)
Changes in operating assets and liabilities:
Change in prepaid expenses 2,261 (738)
Change in deposit 1,163 (1,300)
Change in accounts payable (197,202) 65,730
Change in accrued expenses and other liabilities (2,670) --
Note payable accretion -- 115,565
Change in minority interest (207,255) 338
----------------------------------------
Net cash used by operating activities (879,405) (1,659,628)
Cash flows from investing activities:
Purchase of property and equipment -- (52,541)
Proceeds from sale of fixed assets -- 426
Acquisition of mining concessions -- (9,775)
Proceeds from sale of rental properties 332,000 659,588
----------------------------------------
Net cash used by investing activities 332,000 597,698
Cash flows from financing activities:
Increase (Decrease) in loan from related party 569,321 1,128,482
Repayment of loan from related party -- (46,423)
Repayment of notes payable -- (510,145)
Proceeds from issuance of common stock -- 349,875
----------------------------------------
Net cash provided by financing activities 569,321 921,789
----------------------------------------
Net increase in cash 21,917 (140,141)
Cash, beginning of period 26,419 160,348
----------------------------------------
Cash, end of period $ 48,336 $ 20,207
========================================
Supplementary cash flow information:
Cash payments for income taxes $ -- $ --
========================================
Cash payments for interest $ 67 $ 146,607
========================================
See Accompanying Notes to Financial Statements
4
VISTA CONTINENTAL CORPORATION
(AN EXPLORATORY STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in accordance
with Securities and Exchange Commission requirements for interim financial
statements. Therefore, they do not include all of the information and footnotes
required by accounting principles generally accepted in the United States for
complete financial statements. The financial statements should be read in
conjunction with the Form 10-KSB for the year ended September 30, 2003 of Vista
Continental Corporation (the "Company").
The interim financial statements present the balance sheet, statements of
operations and cash flows of Vista Continental Corporation. The financial
statements have been prepared in accordance with accounting principles generally
accepted in the United States.
The interim financial information is unaudited. In the opinion of management,
all adjustments necessary to present fairly the financial position as of June
30, 2004 and the results of operations and cash flows presented herein have been
included in the financial statements. Interim results are not necessarily
indicative of results of operations for the full year.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Reclassification - Certain prior period balances have been reclassified to
conform to the current period presentation, which have no effect on net income.
Employee stock based compensation - The Company applies Accounting Principles
Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and
Related Interpretations, in accounting for stock options issued to employees.
Under APB No. 25, employee compensation cost is recognized when estimated fair
value of the underlying stock on date of the grant exceeds exercise price of the
stock option. For stock options and warrants issued to non-employees, the
Company applies Statement of Financial Accounting Standards ("SFAS") No. 123,
Accounting for Stock-Based Compensation, which requires the recognition of
compensation cost based upon the fair value of stock options at the grant date
using the Black-Scholes option pricing model.
The Company issued no stock and granted no warrants or options to employees for
compensation for the three months ended June 30, 2004.
In December 2002, the Financial Accounting Standards Board issued SFAS No. 148,
"Accounting for Stock-Based Compensation-Transition and Disclosure". SFAS No.
148 amends the transition and disclosure provisions of SFAS No. 123. The Company
is currently evaluating SFAS No. 148 to determine if it will adopt SFAS No. 123
to account for employee stock options using the fair value method and, if so,
when to begin transition to that method.
5
VISTA CONTINENTAL CORPORATION
(AN EXPLORATORY STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3. LOAN FROM RELATED PARTY
The Company's majority stockholder, Alberto Docouto, has advanced cash to the
Company over time, as needed. As a result of such advances, loan from
stockholder totals $131,228 at June 30, 2004, which are unsecured, due on demand
and bears no interest.
The Company has been advanced monies during the previous year, the loans from
Miranda I, LLC, a Nevada LLC owned and controlled by Alberto DoCouto, total
$502,569 as of June 30, 2004, which are unsecured, due on demand and bears no
interest.
4. LITIGATION
On April 9th, 2002, the Company, then known as Century Laboratories, Inc.,
entered into a Reorganization and Stock Purchase Agreement with Vista
Continental Corporation, a privately owned Nevada corporation, for the purpose
of acquiring 100% of the issued and outstanding shares of Vista-Nevada (the
"Agreement"). Pursuant to the Agreement, the Company was to convey an aggregate
number of 39,837,355 newly issued shares of the Company's $.001 par value common
stock (the "Company Shares") on a one-for-one basis to the shareholders of
Vista-Nevada for 100% of the issued and outstanding shares of Vista-Nevada or an
aggregate 39,837,355 shares of common stock, $.001 par value per share of
Vista-Nevada (the "Nevada Stock"). The Company previously reported that closing
of the Agreement occurred on June 6, 2002 and that the Company Shares were
issued to the shareholders of Vista-Nevada in exchange for the Nevada Stock, in
reliance on Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act") and that Vista-Nevada became a wholly owned subsidiary of the
Company.
The Company has recently discovered, however, that the shares of the Company
were never issued to the shareholders of Nevada Corporation. On or about June 6,
2002 the Nevada Stock was owned by approximately 400 shareholders. Therefore,
the Company believes that the exemption from registration provided by Section
4(2) of the Securities Act is not applicable to the issuance of the Shares in
exchange for the Nevada Stock. Therefore, in order to comply with applicable
securities regulations and to consummate the acquisition of VCC Nevada, the
Company plans to file a registration statement on Form SB-2 or Form S-4 to
register the Shares to be issued in exchange for the Nevada Stock and to
complete the share exchange contemplated by the Agreement.
In connection with the above issues, the Company has been in contact with the
Commission in an attempt to have the Commission approve the Company's corrective
action plan. The commission responded by letter dated December 5, 2003, which
requested additional information from the Company. The Company responded to the
December letter in February of this year and is awaiting a response from the
Commission.
In December 2002, Vista issued 29,630 shares of common stock to settle a
lawsuit. The shares were valued at $1.44 per share or $42,667.
On or about April 1, 2003, a lawsuit was filed in the US District Court for the
Southern District of New York entitled: Deborah Donoghue v. Vista Continental
Corporation and Alberto DoCouto v. Lance N. Kerr Law Office, Lance N. Kerr And
David Lilly, and assigned Civil Case Number: 03-CV-2281. Thecomplaint alleges
that Mr. DoCouto is a ten percent (10%) shareholder of the Company and that he
purchased and sold or sold and purchased securities of the Company within a six
(6) month period in violation of the "short swing trade" rules under Sections
16(b) of the Securities and Exchange Act of 1934. If the plaintiff is
successful, Mr. DoCouto will have to pay to the Company any profits generated by
transactions that violated Section 16(b). Mr. DoCouto has advised the Company
that such allegations arise out of erroneously filed Form 4's and Schedule 13D's
filed on Mr. DoCouto's behalf and that such filings have since been amended and
that Mr. DoCouto intends to vigorously defend the lawsuit. This lawsuit is not
anticipated to have a material effect on the assets or business of the Company.
6
VISTA CONTINENTAL CORPORATION
(AN EXPLORATORY STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
5. SUBSEQUENT EVENTS
On June 30, 2004, the Company entered into a purchase agreement with Miranda
Mining III, Inc. On 7/1/04, the Company filed a Form 8-K report with the
Securities and Exchange Commission detailing the purchase agreement between the
Company and Miranda Mining III Inc., for the Company to purchase a 40% interest
in Miranda I Inc. The purchase price indicated is expected to be 36,000,000
shares of the Company's common stock. On July, 30, 2004, the Company filed an
amendment to this 8-K stating the asset purchase agreement was previously set to
close before July 30, 2004, but this deadline has since been extended until
August 20, 2004. As of August 2, 2004, the purchase agreement has not been
completed. Miranda Mining III, Inc. is 100% owned by Alberto DoCouto who is the
majority shareholder of Vista Continental. Furthermore, Mr. DoCouto owns and
controls the remaining 60% of Miranda Mining I, Inc. not owned by Miranda Mining
III, Inc. It is recommended that the users of these financial statements review
the Form 8-K and 8-K/A filed with the Securities and Exchange Commission related
to this transaction as it will contain more information related to this
subsequent event. As of the date of this report, the transaction has not closed.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
- --------------------------------------------------------------------------------
This report contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. Actual results and events could differ materially from those projected,
anticipated, or implicit, in the forward-looking statements as a result of the
risk factors set forth below and elsewhere in this report. With the exception of
historical matters, the matters discussed herein are forward looking statements
that involve risks and uncertainties. Forward-looking statements include, but
are not limited to, the date of introduction or completion of our products,
projections concerning operations and available cash flow. Our actual results
could differ materially from the results discussed in such forward-looking
statements.
- --------------------------------------------------------------------------------
The following plan of operations provides information which management of
Vista Continental Corporation (the "Company" or "Vista") believes to be relevant
to the Company's plan of operations and an assessment and understanding of the
Company's results of operations and financial condition. This discussion should
be read together with the Company's financial statements and the notes to
financial statements, which are included in this report as well as the Company's
Annual Report on Form 10-KSB for the year ended September 30, 2003, which is
incorporated herein by reference.
THE COMPANY
The Company through its 75% owned subsidiary, Vista Continental Corporation, a
Nevada corporation ("VCC Nevada"), is a U.S.-based gold exploration and
development company with our principal asset being our ownership of three mining
concessions comprising 1326 hectares in Peru through our 99% owned subsidiary
Quillabamba Mining, S.A.C. These rights were obtained in exchange for a 10% of
consolidated net profit royalty and the assumption of Minera Rio Grande's 10%
net profit royalty payable to Sterling 8, LLC, a Company owned and controlled by
Dr. Lawrence Nash, the Vista's President. See Part II, Item 5. Other
Information, below, for discussion of certain issues and risks associated with
the Company's ownership of VCC Nevada.
8
The Company maintains its principal offices at 6600 W. Charleston Blvd. #118,
Las Vegas, Nevada 89146. As of June 30, 2004 the Company had 4 full time
employees and 2 part time employees.
PLAN OF OPERATIONS
VISTA'S MINING CLAIMS IN PERU
- -----------------------------
We completed the Phase 1 drilling program in November of 2002. The Phase 1
mining operations consisted of test drilling of approximately four claims of
which the mining rights are held by Vista. The results of the exploratory
drilling were positive. The presence of gold was found in 75% of the test
samples made. The results did not, however, warrant commercial production at
this time. We also intend at this time to conduct substantially more test mining
programs.
Due to financial constraints, and safety concerns due to recent "Shining Path"
terrorist activities, the Company has postponed its Phase 2 drilling program for
2004. We hope that we will be able to resume our drilling program in 2005 upon
completion of adequate funding activities, though we are unsure whether the
funding will occur.
We have spent four years studying the property, building a base camp, importing
various pieces of mining and processing equipment, conducting test drilling and
mining activities, and raising money for these activities. We are currently
unsure as to when or if commercial production will commence.
At this time, operations at the Peruvian mine have temporarily ceased. The costs
to complete Phase 2 of the drilling will be about $700,000. At this time, the
Company does not have the monies to begin the Phase 2 drilling program. There is
no guarantee, however, that the majority shareholder will have the financial
ability to fund the program.
At the completion of our drilling and test mining programs, we may be in a
position to undertake a first-stage feasibility study to determine the
commercial viability of the property. The drilling program will provide us with
a good indication of our potential reserves, while the test mining program will
enable us to obtain mining and processing cost estimates as well as the
estimates for the recoverability of the gold, zirconium and rare earths that we
believe exist within the gravels located on our claims. The cost to begin
commercial production would range from 12 to 20 million dollars. At this time,
we are not in a position to fund such an operation.
Further, there are no guarantees that any of the claims will eventually yield
enough elements to warrant commercial production.
9
Beginning in October 2002, Vista began sharing its Peruvian mining camp costs
under a verbal agreement with the majority shareholder, who owns separate
Peruvian mineral leases in the same geographic vicinity as Vista's leases. Both
companies agreed to share camp costs equally when both companies are operating
in the camp. If one company is operating in the camp and the other is not, the
operating company must bear 80 percent of the camp costs and the non-operating
company must bear 20 percent of the camp costs. Each party has also agreed that
for any and all costs incurred on their behalf outside the camp, each party
would be solely responsible for these costs. Vista and the majority shareholder
agreed that Vista would pay all costs and Vista would either be reimbursed or
the note payable to shareholder would be reduced in lieu of cash for the portion
of the privately owned company's camp expenses. Beginning in April 2003, Vista's
majority stockholder personally assumed all of Vista's Peruvian payroll and
other expense obligations until operations resume.
Based on Vista's limited resources, and the results of the Phase 1 drilling
program, Vista has elected to focus its operations on those three Peruvian
claims which have been test drilled and whose gold intercepts exhibit practical
recovery. In the last year of activity, the extremist group, Shining Path, has
re emerged within 110 KM of the main Vista camp. Security over the breadth of
Vista claims is difficult and costly.
Vista has elected, as of June 30th 2004, to retain only those 3 concessions
within the drilling program as described above.
Phase 2 of the drilling program over those three claims is expected to cost
approximately $700,000. Further, operational costs are expected to be in the
range of $1,200,000. At this time, we do not have the financial ability to fund
these programs. There can be no assurances that Vista will be able to raise the
funds necessary to cover the costs of the Phase 2 drilling program
Should the claims turn out to be commercially viable, the total costs to bring
the property up to commercial production will range between $20-$40 million. The
Company does not have the funds to start commercial production at this time and
is unsure if it will be able to raise such funds. We are currently seeking
additional sources of funding from private investors and possibly from a
secondary public offering in the future. No definitive plans have been made.
Should the Company ever begin commercial production, there is no assurance that
such operations will be successful.
AGREEMENT TO ACQUIRE INTEREST IN GUYANA CLAIMS
- ----------------------------------------------
On June 30, 2004, Vista Continental Corporation ("Vista") entered into an asset
purchase agreement (the "Agreement") with Miranda Mining III (Guyana) Inc., a
corporation incorporated under the Companies Act of Guyana ("Miranda III")
whereby Vista agreed to purchase from Miranda III 4,000 shares of the issued and
outstanding capital stock of Miranda Mining I (Guyana) Inc., a corporation
incorporated under the Companies Act of Guyana (Miranda I"). The 4,000 shares of
capital stock of Miranda I owned by Miranda III represent a 40% ownership
interest in Miranda I (the "Purchased Assets"). The purchase price for the
Purchased Assets is 36,000,000 restricted shares of Vista's common stock, $.001
par value. Vista disclosed the Agreement in a current report on
10
Form 8K filed on July 1, 2004, which is incorporated hereto by reference. A copy
of the Agreement is attached to the July 1, 2004 Form 8K as Exhibit 10.1 and is
hereby incorporated by reference.
The closing of the transaction contemplated by the Agreement is subject to the
satisfactory completion of a due diligence review of the assets and liabilities
of Miranda III and Miranda I and was scheduled to close on or before July 30,
2004. Both parties have agreed to extend the Agreement to on or before August
20, 2004 in order to facilitate the completion of the due diligence review which
is currently ongoing. A copy of the Amendment to the Asset Purchase Agreement is
attached to the Form 8K/A as Exhibit 10.2 to and is hereby incorporated by
reference. As of the Date of this 10QSB, the transaction has not closed
Through the acquisition of the Purchased Assets, Vista shall become the owner of
a 40% equity interest in Miranda I. Miranda I is the owner, through two deeds of
assignment, of the exclusive rights to mine 31 river claims located along the
Mazaruni River in the interior of the Republic of Guyana (the "River Claims").
Miranda I is also the owner, in addition to other assets, of two 10-inch
Hydraulic Cutterhead Dredges, which are located in the Republic of Guyana.
Currently, Miranda I is using the dredges to mine gold and diamonds out of
certain of the River Claims. There can be no assurances that Miranda I will be
able to profitably mine the River Claims.
Upon completion of the transaction contemplated by the Agreement, Vista will be
subject to numerous risks associated with its ownership interest in Miranda I,
including but not limited to: mining laws and regulations of the Republic of
Guyana and importation and exportation laws and regulations of the Republic of
Guyana that could materially impact Vista's ability to derive revenues from its
ownership interest in Miranda
The 36,000,000 shares of Vista common stock to be issued to Miranda III in
exchange for the Purchased Assets, will be issued pursuant to an exemption from
registration under the Securities Act of 1933, as amended. The purchase price
for the Miranda III shares was determined through negotiations by and between
Vista and Miranda III.
Miranda III is 100% owned by Alberto DoCouto, who is the majority shareholder of
Vista. Furthermore, Mr. DoCouto owns and controls the remaining 60% of Miranda
I.
Assuming the closing of the transaction, Vista believes that the operation will
generate enough revenues so that it will be self-sufficient and will not require
further monies to continue the Guyana operations in its current state. Should
the operations be unprofitable, or require more capital, Vista will attempt to
raise such funds. If they are unsuccessful, Miranda I may seek additional
capital from outside sources, which may cause dilution of Vista's interests.
11
LIQUIDITY AND CAPITAL RESOURCES
During the three month period ended June 30, 2004, the Company satisfied its
working capital needs from cash on hand at the beginning of the period and from
loans from Alberto DoCouto, the Company's majority shareholder. As of June 30,
2004, the Company had cash on hand in the amount of $48,000.
The Company estimates that the costs to maintain the corporate office in Las
Vegas, Nevada will be approximately $600,000 to $800,000, including salaries,
over the next 12 months. The Company believes that the majority shareholder will
continue to loan the Company monies to continue, however there is no guarantee
that he will continue to do so. The Company will need additional funds in order
to effectuate its business strategy. There is no assurance that the Company will
be able to obtain such additional funds, when needed. Even if the Company is
able to obtain additional funds there is no assurance that the Company will be
able to effectuate its plan of operations.
ITEM 3. CONTROLS AND PROCEDURES
Based on the evaluation of the Company's disclosure controls and procedures by
Arthur de Joya, the Company's Chief Financial Officer, and Dr. Lawrence Nash,
the Company's Chief Executive Officer, as of a date within 90 days of the filing
date of this quarterly report, such officers have concluded that the Company's
disclosure controls and procedures are effective in ensuring that information
required to be disclosed by the Company in the reports that it files or submits
under the Securities and Exchange Act of 1934, as amended, is recorded,
processed, summarized and reported, within the time period specified by the
Securities and Exchange Commission's rules and forms.
There were no significant changes in the Company's internal controls or in other
factors that could significantly affect these controls subsequent to the date of
their evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
ITEM II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Deborah Donoghue v. Vista Continental Corporation and Alberto DoCouto
- ---------------------------------------------------------------------
On April 1, 2003, a lawsuit was filed in the United States District Court for
the Southern District of New York entited: Deborah Donoghue v. Vista Continental
Corporation and Alberto Docouto v. Lance N. Kerr Law Office, Lance N. Kerr And
David Lilly, and assigned Civil Case Number: 03-CV-2281. Mr. DoCouto is the
owner of Tamer's Management Ltd. and thus is beneficially the majority
shareholder of VCC Nevada. The complaint alleges that Mr. DoCouto violated the
"short-swing trade" rules under Sections 16(b) of the Exchange Act.
Specifically, the complaint alleges that Mr. DoCouto sold and purchased or
12
purchased and sold shares of the Company within a six (6) month period in
violation of 16(b). In the event that the court finds that Mr. DoCouto's
transactions violated Section 16(b), then Mr. DoCouto will have to pay to the
Company any profits Mr. DoCouto generated as a result of such transactions. Mr.
DoCouto has denied such allegations and has asserted that such allegations arise
out of erroneously filed Form 4's and Schedule 13D's filed on Mr. DoCouto's
behalf and that such filings have since been amended. Mr. DoCouto intends to
vigorously defend the lawsuit to the fullest. The Company does not believe that
this litigation shall have a material effect on the assets or business of the
Company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
N/A
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
N/A
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
N/A
ITEM 5. OTHER INFORMATION
The Reorganization and Stock Purchase Agreement
- -----------------------------------------------
On April 9, 2002, the Company entered into a Reorganization and Stock Purchase
Agreement with VCC Nevada, for the purpose of acquiring 100% of the issued and
outstanding shares of VCC Nevada (the "Agreement"). The Agreement designates the
parties to the Agreement as follows: the Company, then known as Century
Laboratories, Inc. ("Century"), the Shareholders of Century who are or will be
the owners of or otherwise represent at least Fifty-One Percent (51%) of all the
issued and outstanding shares of common stock (the "Century Stockholders") and
VCC Nevada. Pursuant to the Agreement, the Company was to exchange an aggregate
number of 39,837,355 newly issued shares of the Company's $.001 par value common
stock (the "Company Shares") on a one-for-one basis to the shareholders of VCC
Nevada for 100% of the issued and outstanding shares of VCC Nevada or an
aggregate 39,837,355 shares of common stock, $.001 par value per share of VCC
Nevada (the "Nevada Stock"). The Agreement was signed by Robert Bryan, the
president of Century at that time, Bryan Design, the majority shareholder of
Century at that time and Lawrence Nash, the president of VCC Nevada. The
Agreement was also signed by Tamer's Management Ltd., the 75% shareholder of VCC
Nevada. A copy of the Agreement is attached as an exhibit to the Company's
current report on Form 8-K, dated June 12, 2002, and is incorporated herein by
reference.
13
As set forth above, the Company previously reported that on June 6, 2002, the
Company Shares were issued to the shareholders of VCC Nevada in exchange for the
Nevada Stock, in reliance on Section 4(2) of the Securities Act of 1933, as
amended (the "Securities Act"), and that VCC Nevada became a wholly owned
subsidiary of the Company. During the third quarter of 2003, the Company
discovered that the shares of the Company were never issued to the shareholders
of VCC Nevada in exchange for the Nevada Stock, and that VCC Nevada never became
a wholly owned subsidiary of the Company.
On June 6, 2002, the Nevada Stock was owned by approximately 400 shareholders.
Due to the large number of VCC Nevada shareholders, the Company believes that
the exemption from registration provided by Section 4(2) of the Securities Act,
relied upon by the Company in entering the Agreement, was not available for the
issuance of the Shares in exchange for the Nevada Stock. Accordingly, the
Company believes that the Company cannot legally complete the transaction
contemplated by the Agreement without first registering the shares of the
Company to be issued to the shareholders of VCC Nevada in exchange for the
remaining shares of VCC Nevada. In this regard we note that no offer or
solicitation was made to any shareholders of VCC Nevada to exchange their shares
for the Company Shares.
It is the Company's position that since Tamer's Management Ltd. signed the
Agreement, Tamer's Management Ltd. was bound by the Agreement and effectively
exchanged its shares of VCC Nevada for shares of the Company. Accordingly, the
Company believes that as of June 6, 2002, the Company did acquire approximately
75% of VCC Nevada from Tamer's Management Ltd. in exchange for 30,000,000 shares
of the Company. The remaining 25% of VCC Nevada is currently owned by the other
400 shareholders of VCC Nevada. In order to comply with applicable securities
regulations and to complete the acquisition of VCC Nevada, the Company plans to
file a registration statement with the Securities and Exchange Commission (the
"Commission") to register the Shares to be issued to the remaining shareholders
of VCC Nevada in exchange for the remaining issued and outstanding shares of VCC
Nevada.
In connection with the above issues, the Company has been in contact with the
Commission in an attempt to have the Commission approve the Company's proposed
plan of corrective action. To date the Commission has not accepted the Company's
position nor advised the Company whether or not the Company's plan of corrective
action will or will not be approved by the Commission.
As a result of the above, the Company may be exposed to potential liabilities in
connection with the Reorganization and Stock Purchase Agreement, including but
not limited to a violation of Section 5 of the Securities Act of 1933.
Additionally, certain issues exist with respect to the status of the Company's
ownership of VCC Nevada. See Risk Factors disclosed in the Company's Annual
Report on Form 10-KSB for the year ended September 30, 2003, which are expressly
incorporated herein by reference.
14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8K
(a) Exhibits
Exhibit # Document
- --------- --------
2.1 Reorganization and Stock Purchase Agreement by and between
Century Laboratories, Inc. and Vista Continental Corporation. (5)
3.1 Certificate of Incorporation, as amended on August 10, 1977(1)
3.2 Certificate of Amendment of Certificate of Incorporation, dated
April 22, 1983(2)
3.3 Certificate of Reduction of Capital, dated April 22, 1983(2)
3.4 Certificate of Renewal and Revival of Charter (3)
3.5 Amendment of Certificate of Incorporation(4)
3.6 Amendment of Certificate of Incorporation
3.7 By-Laws of the Corporation (3)
10.1 Asset Purchase Agreement Dated June 30th, 2004 (6)
10.2 Amendment to Asset Purchase Agreement Dated June 30, 2004(7)
31.1 302 Certification of Dr. Lawrence Nash
31.2 302 Certification of Arthur de Joya
32.1 906 Certification of Dr. Lawrence Nash
32.2 906 Certification of Arthur de Joya
- --------------------------------------------------------------------------------
(1) Incorporated by reference from the Company's Annual Report on Form 10-K for
the fiscal year ended May 31, 1992
(2) Incorporated by reference from the Company's Annual Report on Form 10-K for
the fiscal year ended May 31, 1983
(3) Incorporated by reference from the Company's Annual Report on Form 10-KSB
for the fiscal year ended May 31, 1999
(4) Incorporated by reference from the Company's Interim Report on Form 8-K
filed on August 2nd, 2002
15
(5) Incorporated by reference from the Company's Interim Report on Form 8-K
filed on June 13th, 2002
(6) Incorporated by reference from the Company's Interim Report on Form 8-K
filed on July 1, 2004
(7) Incorporated by reference from the Company's Interim Report on Form 8-K
filed on July 30, 2004
(b) Reports on Form 8-K
On July 1, 2004, the Company filed a current report on Form 8-K disclosing
the asset purchase agreement between Vista and Miranda Mining III (Guyana) Inc.
On July 30, 2004, the Company filed a current report on Form 8-K/A
disclosing an amendment to the asset purchase agreement between Vista and
Miranda Mining III (Guyana) Inc.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
By: /s/ Lawrence Nash Date: August 13th, 2004
-------------------------------
Dr. Lawrence Nash
President and Chief Executive Officer
By: /s/ Arthur de Joya Date: August 13th, 2004
------------------------------
Arthur de Joya
Chief Financial Officer
16